Q4 2019 Earnings Call

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Thank you, Chris and good day, everyone welcome to find fourth fiscal quarter 2019 earnings Conference call.

Oh come to you today from London, England, our European headquarters.

Before we begin I would like to point out that the side, we will reference during the course of this presentation can be accessed via the webcast on the Investor Relations actionable insight success.

The slides will be posted on our website at the conclusion of the school.

A replay of today's call will be available via phone and on our website.

After our prepared remarks, we will open the bulk of questions from investors.

To be fair to everyone. Please limit yourself to one plus one follow up.

Before we discuss our results I'd card on listeners to review the legal notice on slide two which explains the rest are forward looking statements and that uses non-GAAP financial measures.

Additionally, please refer to our forms 10-K than Q4 discussion of risks factors that could cause actual results to differ materially from these forward looking statements.

Our slide presentation and discussion on this call will include certain non-GAAP financial measures.

Such measures reconciliation to the most directly comparable GAAP measures on the appendix to the presentation and in our earnings release issued earlier today.

Joining me today are filled snow Chief Executive Officer, and haven't Chen Chief Financial Officer, and now I'd like to turn the discussion over to folks know.

Thanks, Dreamer and good morning, and good afternoon, everyone. I'm pleased to report that we ended fiscal 2019 on solid footing no. Many companies in any industry can say that they have delivered 39 consecutive years of topline growth and 23 years of adjusted diluted EPS growth.

We've been able to deliver consistent growth because we have continually innovated and pivoted when necessary focusing our investments on our content technology and our people.

In fiscal 2019, we successfully launch new products gained new clients and gone. It supports a many of the new initiatives, we are planning to take into 2020.

Additionally, we increased workforce productivity realigned our salesforce improved discretionary expense management and made important operational improvements to enhance our infrastructure.

On slide six you can see our annual breakout for the different businesses at Factset and we're proud to report that all four businesses grew year over year.

Analytics continues to be our largest overall growth contributor we remain confident about the strength of our entire portfolio analytics suite and the further integrated solutions offered across the entire portfolio lifecycle work flow newer products, such as <unk> and portfolio management platform have started to ramp up.

And we are continuing to build out or enterprise risk solutions. We're also encouraged by the analytics second half 2019 momentum going into 2020.

Turning to Cts, we believe this business can accelerate its growth right demand for our core data feeds and the addition of new datasets a big drivers for this business doesn't explosion in the volume of data in our industry as the pendulum swings more towards quantitative and data driven strategies and the search for alpha.

Factset has always served this segment well and we are now perfectly positioned to take advantage of this trend and lead the market with our integrated content and open platform.

Wealth business had a strong yeah with several large opportunities that we have the ability to win we believe we can accelerate the growth in this business. We are quickly innovating our solution for wealth advisors and the client feedback has been outstanding research a largest business had a solid year, we're really pleased to see growth across the majority of client.

Types and we look forward to building on the initial success about deep such a strategy and expanded content that's within the workstation.

In fiscal 19, we grew our workstation double digits within banking corporate and private equity clients and we plan to invest in content to some this this segment of the market during fiscal 20.

As we thought the yeah, we believe in our ability to succeed any changing environment. We operate amid an industry backdrop of continued cost pressures and evolution.

And with more complex than unstructured data and with active and passive investing vying to find an equilibrium clients a constantly evaluating technology transformations and clearly willing to invest in solutions that help them become more efficient and their workflows, we believe that factset smarter connected content will.

You differentiate us in the marketplace.

The key to remaining ahead of the curve is an increasingly open platform that includes more apiay is unique and personalize data and speed to market.

Factsets value proposition, that's always been to help clients be more efficient and uncover more alpha and as you know integrating contact well into facts that ecosystem. That's been one of our biggest strengths and key differentiators in the industry for the last four decades.

Over the next three years, we plan to accelerate our investment to increase the breadth and depth of our content and enhance our technology with the goal of driving higher topline growth.

We're doing this now from a position of strength to reinforce and extend our leadership in the market and capitalize on industry trends, we will take advantage of the shift from public to private investment increased sophistication and the needs of wealth advisors and their clients the need for more automation, an operational efficiency on the buy side and sell side.

And then ever expanding global data universe.

Content and its integration is our greatest asset and is central to our vision and strategy is extending the set of facts available on our platform.

Now turning to slide seven we outlined the two main areas comprising this investment we plan to make investments and content for deep sector private markets and wealth.

With an analytics, we will continue to focus on capitalizing on our investment in risk and the integrated portfolio lifecycle.

First deep stuck to includes detailed data for additional industries and builds upon the proven markets successive a banking regulatory data lunched earlier in fiscal 2019.

We believe this will help improve retention allow us to grow existing relationships and also capture new logos and banking.

We also see an opportunity to monetize monetize this data within culprits, our fastest growing client type selling industry specific data back to companies and those industries.

Second we seek to create industry, leading private market content improving the scope of this data. We believe this opens up a larger opportunity for us at multiple clients in banking private equity venture capitalists and corporates the integration of private and public company data will be a differentiator.

Third we believe we have an opportunity that capture significant market share in the wealth space with increased content investment for example on news product Street account is already a successful in highly valued products.

We plan to invest more in it and make it a global product covering multiple financial markets.

On the technology front, we expect to accelerate our investment in three key areas first we plan to accelerate our Apiay program program, a key piece of our open strategy, which should help us to achieve a higher level of modularity. This is an area that clients are focused on as the embark on their own in house technology transformation.

Second we expect to create a better experience for our clients that should help them be more efficient and uncover alpha through personalization, we plan to bring all content to life by leveraging machine learning and artificial intelligence another techniques to create smart contest.

Third we believe we won't gained significant efficiencies for our clients and ourselves by moving to the public cloud.

Time to market of new products should improve on a scalable foundation with variably priced economics for example, internally, we expect to increase productivity within our Salesforce and brings scale to our content collection and integration processes for our clients. We plan to shorten the coin cell cycle from solution evaluate.

And to purchase.

Evidenced by the success, we have seen in on day to explain data exploration products in Cts.

Longer term, we believe we can reap cost savings versus our current data center model.

Critical to Factset successor, our people our service model and how we collaborate with our clients as we move ahead, we're excited by the opportunity to expand our content sats enhance our technologies and invest in our people.

I'm proud about seems solid performance this year and there's a lot to be excited about as we look ahead to fiscal 2000 beyond we will take every opportunity to pull further ahead of our competitors with our open platform and connected suite of data and analytic solutions led as always by our people who consistently delivered the strongest customer service in the industry.

Let me now turn the call over to Helen who will discuss the specifics of ask why 2019 performance our three year investment plan and that's why 20 guidance.

Thank you, Phil and Hello, Good morning, and good afternoon, everyone. It is great to be here with all of you.

We finished our fiscal 2019.

Operating performing in line with our guidance, but stronger results in operating margin Andy Yep.

For the year improvements were largely driven by higher revenue growth productivity gains and cost management.

We grew organic revenue by 6% an operating income by nearly 20%, resulting in an operational margin increase.

40 basis points to 30.5%.

On adjusted basis, the operating margin grew by 190 basis points over the previous year, 33.2%.

Our adjusted EPS grew over 19% to $10 per share.

I'm pleased that we were able to execute successfully this year on or plan to drive solid topline and bottomline growth.

Additionally, we exceeded our targeted margin expansion.

I will now walk us through the specifics of our fourth quarter.

Fiscal 2020, and our investment plan.

GAAP and organic revenue increased to 364 million and 300.

Million respectively.

It was driven primarily by analytic Cts and well.

Our geographic segments over the last 12 months America's revenue grew 4% and international revenue grew 8% organically.

Americans benefited from increases in well analytics and see yeah.

International revenue was largely driven.

Yes.

As steep as professional services increased to 1.48 billion at the end of our fourth quarter the growth rate of 5.1% and up 35 million since the end of our third quarter.

The gross for the quarter was driven primarily by analytics.

Americas, EMEA, SP, 5%, and 4%, respectively, and Asia Pacific continued to be our fastest growing region at 11%.

GAAP operating expenses for the fourth quarter totaled 253 million, 2% less than last year.

Keep in mind for year over year comparison purposes that we had one time charges related to restructuring costs and those benefits reflected in this quarter.

As a result, our GAAP margin increased 510 basis points to 31%.

Adjusted operating margin increased to 34% 260 basis point improvement in the fourth quarter of 2018.

This improvement continues to reflect disciplined discretionary expense management and lower employee costs through productivity gains.

As a percentage of revenue the expense improvement came largely from across the services, which was 300 basis points lower than last year on a GAAP basis.

Adjusted basis, the improvement was 240 basis points.

Margins were impacted positively by faster growth in revenue versus cost of services year over year.

Contributing factors include decreases and employee compensation from both the continued mix shift from high to low cost location and the timing of hiring as well as contractor fees.

This benefit was partially offset by an increase in computer related expenses as we continue to upgrade our technology.

<unk> expenses expressed as a percentage of revenue experience and improvement of 220 basis point over the prior year period on a GAAP basis.

On adjusted basis. This change was essentially flat.

This result, and this result in driven primarily by expense reductions and travel and entertainment marketing as well as employee compensation offset by increased bad debt expense.

It's actually for the quarter was 16.5%.

Full year, our effective tax rate came in at 16.4%.

Excluding onetime adjustments our annual tax rate was 15.3%.

Keep in mind that when we provided annual guidance for fiscal 2019, we did not include any onetime adjustments in the tax rate.

Bps increase 32% to $2.34 this quarter versus $1.77 in the fourth quarter of 2018.

This increase is attributable to higher revenue improved margin and a lower effective tax rate.

Adjusted diluted EPS grew 19% to $2.61.

A reconciliation of our adjustments to GAAP bps is disclosed at the end our press release.

Free cash flow, which we defined as cash generated from operations. That's capital spending was 95 million for the quarter, an increase of 5% over the same period last year.

<unk> was primarily due to higher net income and an increase in cash collections, partially offset by higher capital expenditures.

As noted on past calls our Capex is higher this year due to new office space filled out for some of our location.

Existing leases have neared expiration and increased investments in technology.

Looking at our share repurchase program for the fourth quarter, we repurchased a little over 221000 shares or 62 million at an average share price of $281.

Over the last 12 month, we returned $320 million try investors in the form of dividends and share repurchases.

For those of you we've known the company for a long time, you know we are very good stewards of capital and investors' interest having increased dividend 14 consecutive years and maintain a balanced capital allocation framework going.

Going forward, we remain committed to creating long term value for shareholders and to buying back our shares at a steady paid in line with the past.

Several years.

As Bill noted earlier topline growth drives long term value.

We made progress this year and operational discipline through productivity such as in the areas of engineering and constant collection.

Cost management.

Greater in time into business leaders to manage budgets and have greater financial accountability.

Focus as reflected in our realignment of our sales force within the matrix organization.

Well you has been realized through our margin improvement.

We've also invested this year in our solutions and infrastructure as reflected in the launch of new products and the implementation of our new HR and finance system and the early movement of our technology to the cloud.

We achieved our to your margin expansion targets faster than projected.

Over the next three years, we plan to capitalize on our F. why 19 performance and take advantage by accelerating investments to grow ASV and revenue.

Given the early successes that we have seen with our investments in deep sector content and based on our enhanced infrastructure for scale and efficiency. We believe that we can achieve our long term objectives.

Our plan incorporates targeted actions that focus on driving growth across all our businesses.

Allowing us.

You scaled to support the new gross and to streamline processes throughout the enterprise to increase productivity.

We believe that this will result in a meaningful acceleration of revenues, particularly in our faster growing Cts and wealth business.

We expect to drive higher rates of revenue retention and expansion in our larger and more mature businesses research and analytics.

As you can see on slide 14 at the end of 2022, we believe we will accelerate ASV growth rate driven by the growth.

In top line from each of our businesses.

Vision of smarter content benefit.

Benefits all facets product.

Continued execution and our deep sector strategy private market and well should directly benefit all of our businesses. We expect that all these initiatives will help improve retention, which is critical to our overall success.

Our technology focused on an additional 80 eyes personalized content and the move to the cloud enhances our ability to serve our clients better and faster.

The returns on the technology spend including anticipated productivity gains for Factset as well so the use of automation and benefits speed through the cloud we're projecting that our adjusted operating margin would be at or above 33% by fiscal 2022 and that adjusted EPS rose will be at or above 10.

<unk>.

Turning now to our investment plan, we intend to reinvest additional hundred basis points around margins.

Arjun into content and technology and each of the next three years.

This acceleration is incremental and will result in some short term margin dilution.

Spend will be almost equally spread across the next three years and split between content and technology.

Given the ramp up time needed, we would expect to see roughly 25% of the revenue benefits to be realized you too and the remaining 75% to build up in your three.

Similarly, we expect to productivity gains faster development and content collection as was the benefits of moving to the cloud through reduction of data centers to be more fully realized in years, two and three.

Well this resulted in margin dilution in the short term, we expect to capture margin growth as revenues realized and productivity comes through.

The investments in progress we've made an f. why 19 have given us the proof points and confident to execute our strategy. We continue to believe that long term value must come from higher top line growth along with productivity gain.

Moving to our annual outlook for fiscal 2020.

We're 2020, we expect SP plus professional services for the year to increase between 65 and $85 million.

GAAP revenue is expected to be between 1.49 and 1.5 billion.

I think our increased investment in 2020, a GAAP operating margin is expected to be 28.5% to 29% and adjusted operating margin to be 31 huh, 32.5%.

Our annual effective tax rate for the full year is expected to be in the range of 17, 17%.

Finally, GAAP diluted EPS is expected to be 870, and $9 and adjusted diluted EPS range is between 985 and 10 15.

In 2019, we have had significant tax benefits from an overall lower corporate rate and other onetime items as well as a large amount of stock option exercises due to the increase in our stock price.

We're pleased with <unk> operating results this quarter and for the fiscal year 2019, including the improvement of our and our operating margin.

Our key competitive advantages, leading analytic solutions and open platform, the breadth and connectivity of our data and best in class client service.

To further differentiate us in the market.

And of course, we look forward to continuing our proven track record is consistently returning value to our shareholders.

With that we're now ready for your questions Chris.

A reminder to ask your question you will need to press star one on your telephone.

To withdraw your question press, the pound or hash key please standby will be compiled acuity roster.

And our first question comes from Manav Patnaik with Barclays. Your line is open.

Thank you. Good morning. My first question is obviously around margins. So in a two years ago, you called out 200 basis points for your guidance, it's going to end up only being 50 or even if you look at Youre at 522 guidance margins. It can be basically flat from 19 to 22 and so my question is you know.

Thanks, a lot of the other names in that space, including a direct competitors all finding ways to expand margins despite investments for growth and a lot of the same investments you guys are talking about to why is it that factsets can do the same.

Hi, its Alan I'll take the ticket first thank you for your question. So I think there's a couple things one when we talked about expansion there on margin, we accelerated and we were able to captured most of that well actually all of that within a one year period and as we looked at as fills discussed the ability to do.

To take what we view as a leadership position more quickly and our view, we're accelerating our margin our investments and from what is a longer time period into now so that's why it's an incremental 1% that we're doing in each of the years and we think afterwards that will bring us back to the level.

That we had given a niche initially which is more into the 33 plus percent area. So for US right now were meeting what we committed to which was the gets what 200 basis points improvement, but we're accelerating that by investing more quickly.

And then Manav, it's Phil I guess I'll add on a little bit to that in that we believe we have a very healthy margin and not business.

And I think I don't know exactly which competitors, you're referring to but many of them have very high margin businesses that are segments within that portfolio.

But the pieces of that businesses that are more comparable to factor.

No I believe that we're doing well again.

I guess you know just the 33% level marks example, I mean, that's kind of being the Mike for a long time, and you sort of move up and down that my question is more broadly like why can't you invest for growth and grow margins beyond that 33%.

Well I think that's all long term plans with the investment that we're making particularly in technology, that's going to allow us to be more efficient, it's going to allow clients to be more efficient and we're not clients a more efficient that should also drive topline growth.

In terms of the products that they're getting from us and I think that's an important point, we're not running the business simply to have a margin running for both operating earnings growth.

And what we want to do is drive topline growth and that's with these investments and then.

Got it and then just one last one from me talking with top lingered on the wealth side, the low teens expectations can you just talk but you know the.

The components day, like I guess that presumably assumes a lot of share gains over time or how much of that as market growth and any color there would be helpful.

Yes, so a wealth business is really split into two pieces part of it is the digital solution that we acquired a couple of years ago and the rest of it is the fact that wealth products you know that we've evolved from workstation to web.

So those have different growth characteristics you know the piece that we believe will grow materially faster is on the heels of the big deal that we did this fiscal year. A you know we have a very healthy pipeline in wealth. These a large deals that take a long time to evaluate and materialize clients have long contracts.

But we're very optimistic about the future for that part of our business.

Your next question is from David Chu with Bank of America. Your line is open.

Great. Thanks, Yes, since we don't have the slides yet so can you just discuss what your topline expectations are for 21 and 22.

Yes so.

The topline expectations for 22, we had in the slides so what we laid out that David was that we believe we will exit 2022 with high single digit topline growth.

Within the analytics segment that we'll be at high single digit growth Cts could be into high teens to low twentys wealth. We believe will be in the low teens and research we believe will be in low single digit growth.

Okay and should we assume like a step up in 21 relative to 20 based on internal expectations or could it be just like roughly in line and 22 is really really where we thought where it's a pickup.

Yeah, I believe that we should see some.

Acceleration from 20 to 21.

So just to kind of keep in mind based on a constant me before the acceleration really does occur in 22.

Target.

Got you and just just a follow up so the timing of spend for 2020. It sounded like it was kind of even does this like all in the first quarter for are you, saying evenly split evenly amongst the quarters. So like one quarter of the incremental spend in each of the quarters or how should we think about the cadence of that.

Now that's a good question I mean, what I was referring to is really the even spend over the year. So cross right. You know each of the each different years I think quarters will vary a bit depending on what it is that we're.

Talking but you would see generally going probably across all four quarters.

So you're saying like incremental quarter higher spend per quarter I.

I think that's right there might be some quarters worth up or down depending on this particular investments.

We'll be managing this pretty tightly so that will be part of the not the way that we have greater operational.

He left of achieving.

Okay. Thank you.

Thank you.

Next question is from Toni Kaplan with Morgan Stanley . Your line is open.

Thanks for taking my question.

I was hoping you could give us a sensitive breakdown of the margin drivers in 2020 so.

Program, obviously have a big hits to margins, but could you talk about how you're viewing in terms of the guidance. The other drivers like efficiency FX et cetera, and also just in terms of the investment program. If you could give us a sense of opex versus capex mix there.

Just thinking about capex over time.

Sure I'll make sure I'll cover all that so I think as we as we think about the productivity gains you know it's fairly the same well we think we captured 190 basis points this year of which lets call. It.

Six yes was from from FX, we're not assuming any FX benefit next year Tony.

Because we don't we're not in the business is trying to project effect you can expect that rest to continue on so really the rest of it quite frankly is in keeping in mind. The investment we're making is on top of what we already have in play where we had been investing in as we talked about before whether it's in deep sector or whether it goes in and.

In the cloud the movement to the cloud so I would I would think that both from a productivity perspective, we should expect to see that's come through the full point the additional points. It really is investment in terms of capex or Capex. This year is around 60 million and that would be essentially as things come off and on a roughly the same.

Going forward of at least it was you see for why 20.

Okay, great and.

Professional services.

Workflow solutions.

Could you give us a sense of would research has been.

You had in included professional services.

You know what what segments have than most professional services.

With.

And if you can give the growth rates ex professional services. So we can comp them to the prior methodology that'd be helpful. But it's not.

So I I think probably that any details around that you can definitely follow up with remote but broadly speaking let me address your question, which is that research would not have been negative without professional services professional services center is largely in the analytics part of our business as well as some and well, but I would not.

Look at research is being impacted by that.

All right. Thank you.

Welcome.

Your next question is from Ashish Sabadra with Deutsche Bank. Your line is open.

Hi.

So a question on that.

Do you see guidance when I look at the high end it seems to be higher compared to what you did.

Thank you benefited from the time on me.

My question is just given the limited visibility beyond when people what kind of some of the challenges.

And the competitive pressure.

What are your assumptions, Florida, the CD issued equal study into interest rate D.

Can you just Kuwait.

Yes. Thanks, Ashish this is Phil so I think overall, we wanted to be realistic in terms of our guidance at least for the midpoint given the continued pressure that we see an active managers and this is a little bit of a wider range of outcomes that we gave you last year.

I think for us to hit the high end of the of the guidance range. The one thing that could really drive us towards that is the wealth business. So we have quite a few large opportunities and the wealth pipeline that a significant.

That will be getting a decision on you know sometime in July 20, a there was a larger deals it's pretty binary you either get it all you don't so those are the things that we think are probably giving us the greatest chance of coming towards the high end.

Okay. That's helpful and maybe just a quick question on flight attrition that has increased.

And she went down.

Thank you want to 89% just can you.

I mean, how should we think that we're still you know I was just.

Yeah sure I'm still very pleased that we're adding clients I think if you look at that were writing clients across a number of different client types and we continue to climb add users across a number of work flow. So factset is gaining market share I think in terms of other people that have the product.

I think what you're seeing there in the calculation is probably the long tail of smaller clients that we have the churn that you see this at the and the in the long tail of clients, we have well over 5000 clients.

Okay.

Thank you.

Your next question is from Alex Kramm with you be yes. Your line is open.

Good morning, everyone, one not come back to the a 2022 kind of a once you laid out there.

Maybe you could talk a little bit of what's your confidence level in two to get there I mean, and what's really needs to happen I mean, I I can appreciate that a lot of it. It is I think coming from execution and any you know hopefully you'll do a good job there, but I remember when you took the job fill a few years ago. You you saw the business.

It has the potential get back to double digit said, we've been decelerating and I know, it's been a tough environment. So I guess I'm wondering if if if the environment gets worse from here. You know do you think you can get to that high single digit again or is this kind of steady state and execution to get you. They only if that makes sense.

Yes. So thanks for question Alex So we believe we can get though it is a tough environment. Our assumption is that it continues to be tough when we look at the investments that we laid out for content gun technology and how they apply to each piece of our business.

We believe there's an opportunity to accelerate the growth rate for each one of them on there's also a lot that we have invested over the last few years in terms of acquisitions getting those integrated building. Our open factset marketplace. Those are just beginning to bear fruit. So I think what you'll begin to see as we move into 20.

As a greater contribution, particularly with analytics for things like our portfolio management platform or Apiay program of the vault product, which is a combination of the by Sam a product that we acquired with P.A. Those are really beginning to take hold them. We saw a very good Q4 for analytics relative to Q4 of last.

Yeah on an improvement in the pipeline moving forward. So you know analytics was our biggest mess this year relative to what we thought we were gonna do I think you can see that you know the growth rate came down.

But we believe strongly in this business. It really is the most differentiated part of facts that in some ways.

And that's going to I think be positive Cts is great that the trends are brought back there in the marketplace clients one data delivered in new ways today, They really just get it in feeds from facts that once we built in Apiay program for Cts, that's going to allow us to get more customers there and as we continue to build more of our own contact.

And then integrate other People's content, we believe that Cts has a very long runway in terms of its growth right I already spoke about wealth and the investments that we're making in research, particularly around private market content and deep sector strategy. We've already seen you know very positive reactions from our clients, particularly.

Around deep sector. So all those things lead us to believe that we what we laid out fit that few is achievable and 2022.

Okay very helpful. Thank you and then just I guess.

So I guess related to that to some degree I think during your tenure over the last years when things got little bit Choppier. You've also got more aggressive on M&A to essentially by faster growing areas in the industry, which I think it's been helpful.

It's been a little bit apps ends of the last couple years. So if I look at it should look this is today and I look at the targets, maybe a little M&A could help so maybe give us an update about your latest latest yeah.

And it also is this all organic by the way you assumptions the 2022 Cornell.

Yes, that's a great question, maybe we should have made that clear. So this is our organic thesis.

We are looking at M&A, we decided to take a little bit of a break to get the software that we acquired integrated and as I mentioned I think were with their it took a little bit longer than I had anticipated, but we are actively looking particularly a content investments that are out there. So maybe we'll look at deep sector. When we look at private markets. Those are all eight by build.

Partner strategy, so if the stuff out there that's attractive to us.

We will execute on it.

Alright, Thanks again.

Your next questions from Bill Warmington with Wells Fargo. Your line is open.

Good morning, everyone.

So you are you recently realigned the Salesforce and I wanted to ask how much is that contributing to the lower ASV growth and how long before the sales productivity improves or is it really more of a function of the industry headwinds intensify.

Yeah, Hey, both fell so thanks for the question. So yeah, we realigned the Salesforce, we have moved the specialists back into the business lines, which has been very helpful.

We think that will really help us with analytics and Cts in particular in driving higher growth rates, we believe that some of the Miss that we saw in analytics was related to.

The specialist not being more closely aligned with the businesses. So thats already happened. We're also aligning sales and consulting in a way where we're going to I think have more of a focus on client retention.

For the for the consultants that support facts and so.

Those are two things that we're positive about and we're also I believe creating.

The team is dedicated to new business to focus on capturing new logos. So all of that's in flight.

And the sales teams excited we just had a couple of a very inspiring sales kick off meetings in Americas in EMEA and I can tell you from speaking to them personally that there's a lot of energy and excitement about what we can achieve moving forward.

And then for my follow up.

Wanted to ask if you could give us some examples of the type of content that you're investing in.

Yes, so were where I think we're already investing in some of the content that we laid out today you are talking about organic investments.

Yes, the ones your as drivers for.

The future revenue growth.

The deep content that you're talking about putting dollars into yes. So let me say deep sector strategy really what we mean is data that goes deeper for particular industry. So we made a small acquisition.

We integrated last year for banking data, that's been very well received on the sell side.

And we look we're looking to look out eight or nine other industries over the next three years that we can integrate.

Hi, Thank you very much.

Your next question is from Peter Hecht with Davidson Your line is open.

Good morning, Thanks for taking my question Alan could you talk about.

What level of share repurchase.

The implied in your annual guidance.

It is any included or not.

Sure. Thanks. Thanks for your question right now, we're looking to repurchase shares in line with what how we've been doing in the past. So if you look at the last several years on average it's right around the two to 300 million. So that's what we've assumed.

Okay, Great and then.

In terms of.

You're up a little bit slower ASV growth.

Was there a portion of that that you would attribute to some of the uncertainties around Brexit or was it just more broad based.

Hi, Phil I would I would say that's more broad base, we actually had a very positive year here in the UK and the UK team grew this market faster than.

The overall EMEA region.

All right. Thank you very much.

Your next question is from Shlomo Rosenbaum with Stifel. Your line is open.

Hi, Thank you for taking my questions, Hey, Phil you've been well doing M&A and looking to kind of repositioned the company from workstation to work flow for last several years and.

Why is this the right time now to make these investments versus maybe what would've been a several years ago or you know kicking the can down the road like what what came to a head right now.

No I think we've learned some things over the years Shlomo. So we've we've had a lot of mines in the fire here attracts up.

And you know the trends have been shifting over the last five years and we've been very consistent as you pointed out in your research report in terms of delivering double digit EPS growth over the years.

And I just sat down with the management team you know about six months ago. A we took a very hard look at all business and decided that the best thing for our clients our employees and our investors in the long term was to make these big about you know in content and particularly technology.

Okay and then what.

Can you just explain a little bit the guidance implies that the topline is continuing to decelerate into fiscal year 20, a deferral is positive commentary you made about changes in the sales force or so can you can you give us some of the thoughts as to what are some of the crosscurrents that you're seeing is it just kind of the can.

Can you trend downward without the ability of some of this investment to reverse some of that or can you give us a little level detail a greater so we can kind of understand how you're thinking about it.

Yeah, when I take that one small more thanks for your question. So I think the way yeah, you're right there are the headwinds out there.

But you also see that Weve, a pretty big range back to the point that that Phil had alluded to before where they are can be things that will drive us one way or the other but yes. We do believe this is with the right time to be accelerating what we had plans in place already a bike celebrating the and into those investments we.

Can drive each of the different components as laid out on that slide to those those particular growth rate. So I think it's but from my perspective, it's the investments that will help us get there.

So why is the topline expected to continue slowing is that like I'm just trying to.

Figure out way going on.

The growth like 3.8% to 4.5% versus what you know been kind of five to six over the last several years.

Yeah, So I guess I'm thinking about as the as the went way to think about that a little bit it's a little bit of on the timing of when the AC comes in as well we are more back half loaded in general in our history. As you are I know well and next year, we expect to see the saying we saw some of that even this year right, which job which is.

Assessing itself so that's why you're seeing that.

Phenomenon.

Alright. Thanks.

Okay.

Your next question is from Joseph Foresi with cancer, where if its girls. Your line is open.

Hi, This is drew coming on for Joe I was wondering if you could talk about the recent market volatility and if you're seeing any impact to demand or anything moving forward.

Hey, drew its Phil so yeah, I wouldn't say that the volatility we've seen recently as anything more than we've experienced over the last number of years, so that does not.

I think.

Superseding the other trends that we see out there in the marketplace.

Okay and then just for my follow up just looking at the U.S. revenue growth looks like it decelerated this quarter.

Just curious if there's anything to point out and the demand you're seeing on that as well. Thank you.

Yeah. The U.S. team I think we grew the U.S. and mid single digits. We did have a one large cancel in Q3 that may have affected the long term growth rate there.

But we believe there's a lot of opportunity in the U.S. moving forward.

Thank you.

Your next question is from Keith who sells with Northcoast Research. Your line is open.

Good morning, guys. Thanks for question. He just I'm not sure if I saw enough in terms of the ASV retention rate did you guys. This goes out and it's not could you do that now.

Hi, just telling I'll take that one no right now so we showed client retention we didn't show assay. This quarter, we're actually looking at ways of how we can provide better information along those fronts. So you'll see that come back in the next quarter.

Okay is it fair to assume that number was below or what's done in previous quarters.

No it's actually it's actually in line, but we wanted to us.

Think about how we're defining that's to provide you actually greater clarity, so that but I would not view that as having come down in any material way.

Okay, and then just a follow up in terms of the investment program is this primarily going to be in personnel or is gonna be mixture of personnel, perhaps technology tools have isn't personnel is going to be more employees or is going to be marker contractor base that will try roll off in a problem for programs Don.

I just telling that thanks for that question. So I think across both it is primarily people and it is primarily Ireland people. So we will see there is in order to accelerate we are using third party for especially on the technology fine. So that will come off and that's what was going to see if it when we see the productivity improvements in year three.

So when we talked about some of that.

Margin expansion that will be a piece of how we're going to realize that.

Alright, thank you.

Your next question is from Kevin Mccarthy with credit Suisse here willingness open.

Great Hey, if you look out to kinda your projected growth rates, how much of that is coming from higher retention or new products because it.

It seems like you know the research has been kind of flat now you're looking for low single digit.

That seems like a pretty high hurdle, given where the business had been trending so just any thoughts around that.

The sales team is definitely focused on retention that will help.

But we believe this will come from the investment that we're making so we accelerated our research.

Growth rate this year now with some pretty small investments and we think the concentrated investments, we're making again, particularly in deep sector and private markets give us an opportunity to move the needle with the biggest piece of our business, which is very exciting in terms of our overall long term growth right. If we can move research up.

A couple of hundred basis points that really helped us achieve a goal.

And then and he said it seems like come to the Cts if I have that right that's up a little bit but it just seems like the mix is shifting around a little bit in terms of where the cut contributions coming from is that the investment or is that the the data would what's driving that.

Yes, Cts had a very good year I mean, it continues to be a fastest growing segment. There was one large council, which I pointed out in Q3 on the last call, which affected that group in particular.

And without that which really was an outlier.

Cts would have grown in line with what they grew up in F. Why 18, so we feel very good about this business.

Data exploration a product that's an open facts up is allowing clients to evaluate our content at a significantly higher rate than they used to and as we build out our platform. We believe that Cts can to continue to accelerate from the current rate that its.

If you think about how the content investments are really going to help all four businesses that you can.

Alluded to going forward, if you're having more content that's clear gonna help Cts. It will help research as we talk about retention. We saw some of that this year, which is how it gave us some greater confidence and why we think the execution will go well as we as we execute across most sectors.

Private.

Thank you.

Well.

Your next question is from the George Tong with Goldman Sachs. Your line is open.

Hi, Thanks. Good morning, you had previously noted a slowdown in monetizing new products to their client alignment issues around functionality in pricing can you discuss what assumptions around new product monetization, you're including in your full year guidance and if you're factoring in benefits from your investment program.

Yeah, Hey, George just fell so why don't I start with analytics. So as I mentioned previously on the call. We're really beginning to see some of the benefits of the new programs within analytics, we had a couple of nice wins with our portfolio management platform.

Cost of the significant milestone in terms of our apiay as for analytics. So those are just two very good. Examples you know another one is vault, which is again the integration of the official performance system with P.A., that's beginning to get a lot of traction and I would point out research again, we did that small acquisition of some other.

Military data that we integrated into Factset, which is what we do exceptionally well go to very positive response from the marketplace. So those are smaller numbers.

But as they begin to get traction, we think that the significant opportunity for them moving forward.

Got it and in recent quarters your competitive refitted of has seen an acceleration in organic revenue growth from flat to the 3% range can you discuss the broader competitive landscape and what trends you're seeing around pricing.

So we continue to take market share from refinish live that 3% is not coming from facts up.

We we see a big opportunity against them moving forward.

And I think we're doing a great job with our competitive everyone's facing a tough environments, particularly in the front office and all the solutions, we have are well positioned for our clients.

To allow us to take market share you know that's a that's an area where we are in but we're not nearly as well penetrated as some of our competitors. So as they look to cut costs and we continue to improve our functionality, we think there's a great opportunity.

Got it thank you.

Your next question is from Andrew Nicolas with William Blair. Your line is open.

Hi, Good morning, it's actually Trevin Romeo and Fran drew thank you for taking my questions here.

Thank you as well for providing the details on the 2022 outlook just wondering what do you see as the main risks that outlook and when you look at the business line breakdown, a which business line would you say has the most upside potential relative to that outlook.

It's good question, you know where our assumptions are that we continue to operate in a tough environments. If there is a massive market correction or a serious recession, obviously, that's going to impact not just facts up.

But all of us.

And I I'm bullish about all of our businesses so that different sizes that are growing at different growth rates.

I would say generally.

Opportunity for Factset is to be an open platform. So currently cts as a sort of paved the way for us in terms of creating an open platform, but as we build out our epi program and each of our businesses have been able to deliver the value to our clients in new and interesting ways that gives each of them a great opportunity to capture more market share.

Okay. Thank you that's helpful and then from a follow up.

Just wondering if you could talk about kind of the importance of analytics to the overall company. If you do see analytics growing continuing to grow high single digits I guess it could be as big as the research business in a couple of years. So just wondering if you could talk about it in those terms and whether you see analytics potentially being the biggest business one Sunday. Thank you.

Yeah analytics could be the biggest line business line someday, it's already half a billion dollars.

And it's continued to be an important piece of our offering.

Analytics for US is really the products that we build around client portfolios that are on Factsets. So you know thousands of clients trust facts up to store that portfolios and we built great functionality around those for our clients. So very often the analytics products can drive other products with them.

And we like I said earlier, it's a very well differentiated part of our product versus our competitors.

Okay. Thank you very much.

Your next question is from Glenn Greene with Oppenheimer. Your line is open.

Thanks, Good morning show, so just sort of which were up this question or similar question first put sort of big picture, you know sort of stepping back when you came in a C. O you sort of felt like you needed to make a strategic shifts and be more of a broader sort of portfolio suite of solutions. So I'm just sort of workstation.

I guess I'm, just trying to understand where we are now when you know when the concept showed significant margin expansion this year, but you're sort of stepping up investments and.

I just want to get a big picture, what's your sort of we're thinking what you saw six months ago that sort of precipitated the sort of accelerating investments was that anything external one of them work or anything that you're hearing from requirements, what you're seeing competitor to wait just more in terms of the internal thinking about why why now one why not do what six months ago or is it just you come through with our quickly.

Yeah, I think we were yeah. We have plans were a bigger ship them. We used to be we wanted to make sure that we were thoughtful about this as we laid out a three year plan and we're not satisfied growing in mid single digits. Factsets always had you know a high topline growth weight rate.

We believe that's the best way to create value for our clients our employees in our investors. So.

Six months is not a big period of time in the big scheme of things.

And we're committed to this three year plan, we're excited about it our employees are excited about it.

I look forward to seeing with the results.

Okay, then just how in just a quick one be this to shift to the public cloud so anyway to quantify or the potential savings when you sort of complete this project and.

Any data security concerns was ridiculous.

Yeah. Thank you for your good question. You know this is we started a this movement starting back up at the end to 2018. So it is a multi year projects.

Well not necessary here to give you that dollars around that but we do expect pretty significant savings again more in the 2021.

Hi, too and we when we are able to really move and aim for a majority of our technology our technology to be in in the public cloud security is definitely always Keith its top of mind for us and part of the spend that we're doing in in the next three years is to ensure that our secure.

He is in line exactly with all of the digital investments we're making.

Okay. Thank you.

Well.

Your next question is from Patrick O'shaughnessy with Raymond James Your line is open.

Hey, good morning, So regarding your 2022 goals do you think it's possible to get back to 33% plus operating margins without returning to high single digit revenue growth or do you have to get that revenue growth in order to get the margins to where you want them be.

I think there a bolus I mean, there are inextricably tied on thank you for your question by the way. They are inextricably tied so yes, I think we have savings already built in as well again as we get to 2021, it will come from the ability for us the scale both on contact again as well as on that on the cloud.

Yes and.

Right now we've put a target out there, we obviously aim to do better, but I think where we felt very comfortable that we can reach that it is not purely a topline play.

Okay, great. Thank you and then a quick follow up in your earnings release today, if I'm reading that correctly, I think you're guiding towards 25.5 million and nonrecurring items that you anticipate excluding from non-GAAP results in fiscal 2020.

If I am reading that correctly can you provide a little bit detailing what those primary components would be within those 25.5 million.

Sure I'll definitely have you a you can follow up with Threem on details, but broadly speaking there in line with how you've seen that delta in the past so its intangible amortization and deferred revenue those of into the biggest pieces between that and then after that there are also other we anticipate some of the the.

Costs related to transformation on that as well.

Okay. Thank you.

Okay.

Our last question comes from Craig Huber with Huber Research Your line is open.

Great. Thank you have a few questions first in the organic revenue number for the quarter, you just finishing mostly organic number it's.

Estimates going forward for next few years, how much of that is priced please.

What's assumed in there as is fairly similar to how we Oh, we recognize in the past about 1% to 2% of that or 1.5% that usually is probably space.

Okay. So no change okay. Thank you and then can you just talk a little bit further about cancellations.

With your products in the marketplace. This quarter that we just finished in the early part of this quarters. It is a trend materially different for your various products in the U.S. hope in Europe than it was the last quarter.

Oh, Hey, it's Phil so that it was a little bit weaker we certainly saw a few more cancels in terms of the number of clients that canceled.

As well as cancellations within the core client base, but what it wasn't a material difference versus Q4 last year.

[noise] then my other question when you think about your your major competitors in the marketplace or you see anything significant out there that they're doing right now that led you to.

Step or your own internal investment spending.

No I think everyone's dealing with the same market environment. The mega trends that are out that we're all.

Dealing with none of us really compete completely with each other we compete with lots of each other's businesses. So I think everyone's probably investing to be more multi asset class.

Make sure that they deliver no.

You know.

Superior technology solutions for their clients, we believe that having you know and open platform and our approach is going to be the winning formula in the market.

Ladies and gentlemen, this does conclude the couponing period, so now I'll turn it back over to fill so for any closing remarks.

Yes. Thank you so I would really like to thank our clients than I would really like to thank all of the employees of facts that we've got a great management team and I want to give us a shout out to how lunch he's only been with US a year, it's hard to believe but she's done a great job of really creating operational efficiency and really creating a strong balance sheet I want to thank everyone for joining us on todays call.

So we're encouraged by the progress we've made this year and are confident in our plans for investment in long term growth as we look forward to 2020 inbound we're confident that the investments, we're making today will strengthen our position in the industry and in doing so create greater long term value for all our stakeholders. If you have additional questions. Please call Rima Hyder we look.

Forward to speaking to next quarter, operator that ends today's call.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation and you may now disconnect.