Factset Research Systems Inc (FDS) — Q1 2019 Earnings Call Transcript

Thank you, Matthew, and good morning, everyone. Welcome to FactSet's first fiscal quarter 2019 earnings conference call. Before we begin, I would like to point out that the slides we will reference during the course of this presentation can be accessed via the webcast on the Investor Relations section of our website. The slides will be posted on our website at the conclusion of this call. A replay of today's call will be available via phone and on our website. The conference call is being transcribed in real-time and is being broadcast live at factset.com. After our prepared remarks, we will open the call to questions from investors. Before we discuss our results, I encourage all listeners to review the legal notice on Slide 2, which explains the risks of forward-looking statements and the use of non-GAAP financial measures. Additionally, please refer to our Forms 10-K and 10-Q for a discussion of risk factors that could cause actual results to differ materially. Our slide presentation and discussions will include certain non-GAAP financial measures. For such measures, reconciliation to the most directly comparable GAAP measures are in the Appendix to the presentation and in our earnings release issued earlier today. Joining me today are Phil Snow, Chief Executive Officer; and Helen Shan, Chief Financial Officer. Now I'd like to turn the discussion over to Phil.

Thanks, Rima, and good morning to everyone. We began fiscal 2019 with a positive first quarter and are encouraged by the continuing demand for our data and technology offerings. Clients are turning to us for smarter, better connected solutions to drive their investment workflows. Our Wealth business drove higher results than usual for the quarter with strong support from our Content and Technology Solutions, or CTS business. We entered the year with good momentum and a strong product pipeline to execute on our growth strategy but remained cautiously optimistic given the current uncertainty in global markets. This quarter, we delivered ASV and professional services of $11 million. This includes both organic ASV and professional services for a total of $1.42 billion and a growth rate of 6.6%. As we explained last quarter, professional services are a component of our sales goals, and as a reminder, when we give guidance or refer to our top line growth rate, we will be referring to ASV plus professional services. Moving on to other key metrics. Organic revenue grew over 6% and adjusted operating margin for the first quarter came in at 31.5%, 20 basis points better than the fourth quarter of 2018. We continue to target a 100 basis point margin improvement year-on-year as we get benefits from greater productivity from ongoing investment in solutions and infrastructure and tighter expense management. This fiscal year, adjusted diluted EPS increased 15% to $2.35, primarily boosted by the U.S. tax reform and higher revenues this quarter. Wealth and CTS were the two largest drivers of ASV growth this quarter. Last quarter, we mentioned that we expected most of the impact of the Bank of America Merrill Lynch wealth deal to come in the first half of our fiscal 2019 and the majority of the incremental impact to ASV came in this quarter. CTS increased sales of enterprise fees and trials of FactSet data exploration, a cloud-based data platform we launched this past summer. OpenFactSet, our marketplace for unique and diversified datasets, continues to capture growing client interest with ESG and sentiment data feeds garnering the most attention. In research, workstations grew this quarter mainly from adding more buy-side and corporate users, which was partially offset by seasonal churn in banking, which is typical at this point in the year. Analytics started the year with softer results relative to last year, but we're excited about our analytics product pipeline as we head further into 2019. New solutions include opening up our portfolio analytics suite through APIs, a unified risk platform, and the vault. We also see continued success with risk, adding a number of new Multi-Asset Class clients this quarter. We believe our analytics solutions will result in higher growth in the quarters ahead. We were aware of a few larger cancellations coming into the quarter, and outside of these, the rate of churn remained flat and in line with last year. Our sales teams, particularly in the Americas region, have worked hard to minimize the rate of cancellations, and their efforts have improved client retention in our largest region, and our overall client retention remains very high at over 95%. We've enjoyed high client retention for many years, and we're seeing that clients want to partner with us for the next generation of smarter workflow solutions. A recent example of this is within our research group. This quarter, we launched the first of our deep sector strategy solutions by introducing detailed banking industry data and are encouraged by its initial demand. We're excited about this product and plan to go deeper into other sectors over time. Turning to our geographic breakdown. Our Americas organic ASV growth rate improved this quarter to over 6%, EMEA experienced faster growth than the prior quarter at over 5%, and Asia Pacific continued its double-digit growth rate, growing at over 10%. In summary, we're pleased with our performance this quarter and excited about the opportunities we have for the remainder of 2019. We're keeping a close eye on headwinds and client cost pressures but remain very well positioned given our expanding and innovative product suite and industry-leading client service. Our strategy and philosophy of providing open and flexible solutions is resonating with the market and is proving to be a compelling value proposition for our clients. Let me now turn the call over to Helen to talk in more detail about our financial results.

Thank you, Phil, and good morning. It is great to be here with all of you with a full quarter now under my belt. We're off to a solid start in fiscal 2019. We delivered growth in organic ASV plus professional services of over 6%, improved our margin from the fourth quarter by 20 basis points, and grew adjusted EPS by 15%. Beginning with this quarter, we adopted the new accounting rule, ASC 606, revenue from contracts with customers, which did not have a material impact on our financial results. I will now go through how we performed in the first quarter. Revenues increased 7% to $352 million on a GAAP basis and over 6% to $353 million on an organic basis versus the prior year. The growth was driven primarily by wealth and CTS. For our geographic segment, Americas revenue grew above 6% and international increased 7%, organically. Americas was largely driven by wealth through higher cross-selling both to existing and new clients, while international was driven by analytics and CTS. ASV plus professional services increased to $1.42 billion at the end of our first quarter. Organic ASV increased by more than 6% year-over-year and $11 million since the end of the fourth quarter. This increase was primarily driven by wealth and CTS. Our GAAP operating margin increased by 150 basis points over the prior year to 28.6%. Adjusted operating margin was at 31.5%, an improvement from the fourth quarter of 2018, but lower than the prior year by 20 basis points. Operating expenses for the first quarter totaled $251 million, an increase of 5% over the prior year, primarily driven by higher employee benefits, data costs, and infrastructure investments. However, as a percentage of revenue, costs were lower on a year-over-year basis. Breaking this down further, cost of services, expressed as a percentage of revenues, decreased by 170 basis points compared with the prior year as a result of higher revenues and lower compensation expenses. The higher productivity from the restructuring actions last year had a favorable impact in the quarter. These lower expenses were partially offset by increased spend directly related to revenue such as variable data costs and hiring needed for enterprise deals. SG&A expenses, expressed as a percentage of revenues, were in line with the prior year. Lower employee-related costs and marketing expenses were partially offset by increased spend in professional fees, higher bad debt expense, and travel and entertainment costs. Moving on to tax. Our effective tax rate was 12.1% this quarter compared to 18.3% a year ago, largely due to the U.S. tax reform. Our tax liability this quarter was significantly impacted by divesting the restricted stock and the exercises of employee stock options and the refinement of our prior year toll tax charge. Keep in mind that in our annual guidance for our tax rate, we included an estimated amount for our stock-based compensation benefit. There's still uncertainty with regard to the U.S. tax reform and hence we maintain our guidance of 17.5% to 18.5%. GAAP EPS increased 23% to $2.17 this quarter versus $1.77 in the first quarter of 2018. The increase was primarily attributable to the lower tax rate, partially offset by higher interest expense. Excluding intangible asset amortization, the deferred revenue fair value adjustment, and other nonrecurring items, adjusted EPS grew 15% to $2.35. Free cash flow, which we define as cash generated from operations less capital spending, was $37 million for the quarter, a decrease of approximately $18 million over the same period last year. The drivers here include an increase in receivables, timing of payments, higher annual employee bonuses, and higher capital expenditures for the build-out of new office space and technology upgrades. This decrease is partially offset by higher revenue and a lower effective tax rate. Our client and workstation counts were both up this quarter versus our fiscal fourth quarter of 2018. Our client count increased by 155 and was primarily driven by a change in our methodology, whereby we now include clients from the April 2017 acquisition of Interactive Data Management Solutions. We also added new sell-side and corporate clients this quarter. We added over 23,000 users driven by wealth. We now have approximately 5,300 clients and over 115,000 users crossing the 100,000 mark for the first time in the company's history. Looking at our share repurchase program, we repurchased 275,000 shares in the quarter for $60 million at an average share price of $220. We have $181 million remaining in our share repurchase program. We remain confident about our outlook for 2019 and are reaffirming the guidance given on our fourth quarter call. As we look ahead to the remainder of this fiscal year, we continue to make investments to drive business growth, to optimize our cost structure, and to return long-term value to our shareholders. With that, we are now ready for your questions. Matthew, back over to you.

Hi. I wonder if you could start by talking about the market’s recent volatility. How has that impacted demand? It sounded like the buy-side was good, but there is some investment banking churn, and any thoughts on how that activity or that volatility could play out in 2019?

Hi, Joe. It's Phil Snow. Yes, definitely there's been some volatility in the market. I'm not sure we've seen sort of any difference really in the end markets up to this point. That doesn't mean if it continues that we wouldn't see that, but it's not really changed things. I think we're still seeing strong demand for our products and our sell-side business is actually pretty healthy. We saw good addition of new clients on the sell-side. The amount of churn that we saw was actually a little bit better than last year in banking. So overall, we're encouraged by what we're seeing in banking and we continue to build out and release new product to that segment of the market. And we also saw an uptick in the sell-side research users this quarter versus the same quarter last year.

Okay. That's helpful. And then I know you held to this idea of expanding margins by 100 basis points per year. Maybe you can break down the drivers of that 100 basis point margin improvement in '19? And where you're expecting it to come from so we can get a good sense of how achievable the target is? Thanks.

This is Helen. Thanks for your question. Let me talk a bit about Q1 and that hopefully will help lead to talking about what we think for the year. We're executing on growing our business and managing our expenses tightly. The sequential improvement from Q4 reflects those actions. This quarter, we had some expense drivers related to employee-related costs such as medical and upgrades in the technology stack, but there are costs also tied closely to revenue, such as data costs and increased hiring to support new client wins. But for us, it's about really maintaining a tight control on costs. We're seeing, as I said, some positive impact from some of the actions that we took at the end of last year, and that's coming through as well as continued benefits from integrating our acquisitions.

Okay. Thank you.

Good morning. So I know you mentioned that the majority of the BAML contract is now in ASV. Is there any sort of additional contract value that you would expect that's not yet realized? Are all the workstations in there, but maybe not all of the feeds or just any sort of additional color on what we could expect in future quarters?

Yes, the majority is in there. Thanks, Toni, but with any large clients, we always have lots of cross-sell opportunities that are available. So I think it's deepened our relationship with that particular firm and that's our strategy when we work with many other firms. But in terms of the users and so on, you're right that this was an enterprise deal, a multi-year deal, and that most of it has been recognized from an ASV standpoint.

Okay. And just directionally because I know you don't want to give us the actual incremental size of it. But excluding the contract, would your organic ASV have decelerated this quarter or how should we just think about directionally?

So I think the core clients on the buy-side and the sell-side are very healthy. So there were a couple of lumpy items in there this quarter. As I've talked about before, we do have an FP&A business, which we sell FactSet and content and some other pieces of our product offering to other types of firms, and this was one of those quarters where there were some lumpy items in there. But yes, overall, we're very encouraged by the underlying trends that we see on the buy-side and the sell-side, and our product suite across all of our different business lines is resonating.

Great. And just for my follow-up, your employee count increased by just under 2% this quarter. It’s the lowest that we've seen it. Could you just give some additional color on what areas you've slowed in terms of hiring, whether it be sales force or product development or back-office? That would be very helpful. Thank you.

Yes, I don't think there's any one particular area that we're cutting back on. I think we're just sort of looking at our business and trying to be the most efficient that we can across the different lines.

Thank you. Good morning. Phil, I just wanted to clarify, you talked about how you were aware of several closures coming into the quarter, but then the incremental closures were in line with the case of last year. So I'm just trying to - I was just hoping if you could give a little bit more color in terms of maybe what you've assumed in your guidance, I suppose.

Yes, I mentioned earlier that in Q4, we have several multiyear agreements with large firms, and we are currently renegotiating a significant portion of those. We are encouraged by the positive trends, which gives us confidence that we will remain within the top line guidance we provided. As we progress further into Q2 and have more information, we can discuss it in more detail on our next call. Overall, we are optimistic about the situation.

Okay. And then could you also just elaborate on why analytics may be started out softer than you would've thought? And why you're confident that it'll make up the rest of the year?

In Q1, which is typically a lighter quarter, our businesses may not be as impactful as they were the previous year. However, analytics is performing really well, building on a strong Q4 with many deals closing at the end of the fiscal year. We sold eight of our Multi-Asset Class risk solutions in Q1, which we are very excited about, particularly in the area of risk. We launched version two of our MAC model, and it has been well received by clients. This is a broad product suite, and many of our acquisitions fall within this group. We are currently integrating those assets and are optimistic about our product pipeline as we progress through the year and the potential achievements of this group.

Thank you.

Good morning. Thank you. My first question is just any color you can give as to how correlated you think your business is to headcount growth in both buy-side and sell-side relative to the last cycle? And the reason I ask is your mix has shifted to workflows. There's some other stuff probably going on that maybe makes your business more resilient relative to headcount growth, but maybe you want to add some color there?

Yes. Hamzah, thanks for the question. Yes, I think, you're right on the money that our business over time has become less correlated to headcount growth as we move from workstation to workflow. You saw our CTS business do very well this quarter, and CTS typically is not as correlated to headcount as users are, but we did see a great uptick in our users this quarter. We're really encouraged by what we're seeing in wealth. I think the deal that we did there paves the way for us to do more of those types of deals, and we're seeing a lot of interest. All of the work that we're doing to put deeper sector content into the workstation, and all the work that we're doing from a technology standpoint to sort of light up the workstation for FactSet, all of that is really positive, and we're seeing good demand for our products across users as well as on the technology side for workflow. So we're hitting it from both sides.

Okay. Great. And my follow-up question is just around potential client outsourcing opportunities. I think you had mentioned that may be an area that's not baked into your overall addressable market and as well you had talked about potentially some more front-office opportunities as you look at ASV growth long term. So just curious on those two items, outsourcing opportunity and front-office work, what you're seeing there or is that a sort of an early innings? Thank you.

Yes. So I think when you say outsourcing opportunity, maybe you mean FactSet going through other third parties? What we've called SP&A is that right?

Right, right.

Yes. So I think a lot of opportunities do exist. As we unbundle our product offering and go to market with more of an open strategy, we have more than just content feeds to offer now within the marketplace. So I think you're right. The buy-side and the sell-side are looking for innovative ways to consume value. We're delivering that through, by ourselves, by unbundling our offering and going to market in new and interesting ways, but that also gives us the opportunity to work with third parties that historically wouldn't have. So we're a very collaborative firm. We're out there talking to a lot of technology companies and a lot of firms in our space, and our approach is to be open. So I think that is a good opportunity for us as we move forward and one that we're obviously focused on. And then, what was the second part of your question, sorry?

Yes. The second part of the question was just what you're seeing in terms of opportunities in the front office for FactSet?

Yes. That was related to our analytics suite. We will be releasing our portfolio management platform in the second half, which will allow a portfolio manager to transform FactSet from a read-only experience to a read/write experience. This means they can view holdings, model trades, enter trades, and execute trades. Currently, we have different tools in FactSet that allow for some of these functions, but this new solution will be a more elegant and integrated experience through our front end. I believe the response to this will be very positive. We have had a single equity trade option available for a while, but we are rapidly expanding to include multi-asset class and multi-portfolio capabilities. This development presents a great opportunity for us to connect our traditional research with performance and create the comprehensive solution that clients are seeking in today’s market.

Great. Thank you.

Hi, good morning. Thank you for taking my questions. Phil, I'm just trying to reconcile 23,000 incremental users with $5 million of incremental ASV. It's just - if you kind of do the math, it's like $18 a month per user. Is some of the ASV going into the professional services section of the ASV? Or how should I think about that? Is there to be counted as the user a different qualification versus being counted as ASV?

So the organic incremental ASV was more like $11 million. I think Helen can probably explain some things that went on there from an FX standpoint. So I think $5 million is understating it. And yes, within this segment of the wealth market, I think, the price is lower than traditionally what we've captured, but I think the opportunity that we get in terms of just getting a wider footprint of users of our product and the railroad tracks that lay down for us to upsell within that ecosystem is very compelling. Helen, do you want to hit the FX piece of it?

Sure. I think that remember that the $11 million is made up of both ASV and professional services. So it's the combined number. And to Phil's point, that was on an organic basis, which, as you know, excludes the FX impact. With the FX, that's how the $5 million comes through.

And I think we've talked about this a little bit before, but I think looking at our business from an ASV per user metric is a difficult way to analyze our business just because we sell to so many different types of users and so many different types of clients.

Okay. And then I just want to move a little bit towards the open.factset.com. Is the pace of new datasets coming on accelerating particularly from third parties? And is there any update you can give us a little bit more on client response and the opportunities there?

Sure. So there are two parts to that. One is what we call the data exchange. So we continue to add more third parties into that ecosystem. The two areas that I alluded to in my comments earlier were we're seeing a lot of interest in the ESG and sentiment providers, in particular. And the data is also up there with all of FactSet's core content. So the other fees we've launched is something called data exploration. So within that ecosystem, you can come in and you can explore the data, all of it, and you can use products like Tableau, you can code in Python, and certainly it's sort of where a lot of the analysts of the future are going to be doing their research in an ecosystem like that. So we have seen a lot of interest. We've got a lot of people trialing this. It isn't material yet in terms of what it's delivering in ASV, but we're very encouraged by what it means for the future. And just to add on, Shlomo, to your question about the size of that deal and what it means, it's great for us to be in the big banks. It opens doors for us. I think we're creating relationships that traditionally FactSet hasn't had, and it really allows us to cross-sell the suite of solutions that we have. We've traditionally been a little bit more bottoms up in terms of how we sell. But as we develop relationships with these bigger firms at a higher level, I think it means good things for our company.

Thank you very much.

Sure.

Hi, thanks. Good morning. I'd like to drill down into your underlying business, excluding the BAML contract. You've indicated that you saw some lumpiness in the quarter with ASV performance. If you include the impact of the lumpiness, can you discuss whether ASV organic growth was positive or negative in the quarter? And whether you foresee additional lumpiness that could impact organic ASV over the remainder of the year?

So it was positive. If you take out a couple of big things that happened, and as I mentioned, we're feeling encouraged by the negotiations that we're having for the large multi-year contracts that we have for the rest of the year. And just to restate it, feel pretty good about the guidance that we gave at the beginning of the year and can give you more color at the end of Q2.

One thing I would highlight is that we view BAML as part of our organic growth. While you might consider removing it from the conversation, the fact remains that we allocated our resources to that deal, and it's simply part of our standard business operations.

Got it. That's helpful. And just as a follow-up, you've indicated that you have several large deals in the pipeline from both the renewal and new client perspective. Can you elaborate on how much of these large deals are renewals versus new clients? And then what assumptions on the conversion rate of these large deals you're incorporating into your full-year guidance?

I mean, it's a really good mix of both, and our sales team is really good, I think, about weighing these from a probability standpoint. And it just gives us confidence in the guidance that we gave you in terms of what we're going to deliver. So we've got a very broad-based suite of products. We've got a broad-based client mix that we're going into. Some of these are large deals, but we have very good sort of middle market business, and we close a lot of interesting small clients every year as well. So it's very diversified.

Thanks. Thanks for taking the question. Just a question on professional services, ASV that was pretty strong on a year-to-year basis. Should we expect that kind of momentum going forward? Or was that more related to the BAML deal?

You're asking specifically about professional services?

Yes, yes, professional services, ASV, which was...

Yes. So that was a very small piece of our incremental ASV organic this quarter. It was well less than $1 million, and it wasn't material in Q1 of last year either. So most of what you saw in Q1 was subscription-based revenue on a forward-looking basis.

Okay. That's helpful. And then maybe just a follow-up question on the competitive environment. Have you noticed any changes in the competitive landscape, such as Bloomberg becoming more aggressive in research or changes with sell-side firms, or Thomson Reuters with Refinitiv?

No, we're not seeing any material change in the competitive environment. We still feel confident about our performance and believe that we are taking market share from most of our competitors.

And just to clarify your question, there was no professional services revenue from the BAML deal.

Thank you. So Phil, you just mentioned that organic ASV ex-BAML was positive if you take out a few big things that happened. Can you just speak to that? I mean, is it just that lumpiness of those particular projects? Or what else was, I guess, 'these big things in the quarter?'

Yes. I spoke about one earlier; it was some activity within our SP&A business, which is not buy-side or sell-side. If you are defining core as buy-side and sell-side, we're accelerated.

Okay. And then just in terms of margins, how should we think about the cadence of margin expansion over the course of the year? I mean, should we expect sequential improvements? This is Helen. Thanks for your question. I think it depends a bit on the investments that we're making. We have investments that are more in the first half of the year. So we expect to see some greater - that's more of a timing perspective. And so I would say that we should expect steady improvement through the course of the year, but we don't - as you know, we give annual guidance and not quarterly guidance.

Got it. Thanks.

You’re welcome.

Good morning. A question for Helen. On the free cash flow conversion, a little bit depressed in the current quarter, you mentioned receivables and a few other things. I'm wondering if the conversion rate to free cash flow's going to be a little bit different this year or is it going to be consistent with historic?

Right. Thanks for your question. So I think I would look at a number of things that we saw this quarter. We experienced higher levels of client receivables. We had the timing of both vendor and tax payments that came through, higher employee bonuses, which as you know, come through we pay out in the first quarter, and higher capital expenditures as well. And our CapEx is related to the build-out that we've got in outside the U.S. as we really prepare for further growth. So I wouldn't necessarily look at this quarter as something that is different, but we did have things that occurred that provides some of that volatility or seasonality.

Okay. But specifically, you would think that free cash flow conversion - EBITDA out of free cash flow would be similar this year to historic levels?

Yes, I would, but we do have, like I said, some higher CapEx, as we're making investments back into the business.

Okay. And then Phil, you called out a fewer larger cancellations in the first quarter. I'm just wondering if there's any common theme in terms of the clients who choose to not renew? Is it generally about price, is it generally about specific other vendors, any commonality you can cite?

No. We have large deals with some clients that are SP&A related or not, and there's no theme that I can speak to.

And the first quarter – I mean, the cancellation rates in the first quarter, do you view them as unusual or just sort of typical business?

No, I don't. So I think if you look at the majority of our business, I think we did well.

Hey, good morning. Most of my questions have been asked. I just wanted to follow up on one area within OMS, EMS systems on the trading desk. We've seen a bit of consolidation there with all three of your larger competitors changing hands over the last year. Have you seen any change in the competitive dynamics, maybe the buyers trying to bundle those services, be it either for further accounting or funding administration services that might require you to change your marketing approach?

So this is a new area for us. So I think what we're seeing demand for is an integrated solution and consistent data and analytics all the way from research through to performance reporting. So I think that's what we're good at. And when we made the acquisition of EMS and OMS, that's what we were most excited about was getting those integrated. So yes, we're seeing consolidation. I would say that our integration has not gone as quickly as we would have liked, but I feel really good about where it sits now, and the product that we have coming to market. And we are beginning to see more demand for our OMS product, in particular than we had over the last year.

Got it. That's helpful. And then just as a follow-up, and forgive me if I missed it. But in terms of just the timing of the one large Go Live during the quarter, did that happen first, second, or third months of the quarter?

That's a good question. I don't have that exactly, and maybe Rima can answer that one for you later today.

Hi, thanks. Just the numbers one to start. I guess, you said you changed the definitions for the user and client count to include the digital business. So can you give us a clean number perhaps? I'm not sure how much those impacted those two metrics?

Sorry. Keith can you repeat that?

I believe you changed the definition of the client count, and possibly the user account as well, to include an acquisition from the previous year. This makes it difficult to have a clear comparison when looking at the sequential or year-over-year growth rates of those figures. Could you provide a clear number that accounts for that factor?

Yes. So the wealth - the majority of the new clients were wealth related to FDSG. Outside of that, I think our clients that we added were 23 this quarter. And if you look at the mix of those, I think it was heavily weighted towards banking and corporate clients.

Okay. And then, the mention of more renewals this year, and I guess including through the second quarter this year, can you give us any sense how outside of the norm, I guess, is the renewal risk or opportunity, either way you want to look at it this year versus kind of a normal year for you?

I don't think it's that much different. I think we've got a lot of big clients, and a lot of them come up for renewal every year.

Good morning. Just one question for you here, more on the international side of the business. If I look at how the international ASV has grown, I guess, this quarter compared to the, say, the past 8 quarters, it seems that the international growth has been kind of slowing down from the ASV perspective. Any color on that? Are you guys reaching maturity in those markets or are international markets more challenging than U.S. Just any color you can give on that growth?

Yes. Thanks for the question, Keith. So we continue to see double-digit growth in Asia. It was a little bit lighter than I think the previous quarter, but it's still over 10%. And again, Q1 is typically not a big quarter for us. And I think in Europe, we're actually doing pretty well. So I think it might have ticked up in Europe. Despite the environment over there, I think that we're encouraged by the activity and what we're seeing. By no means have we tapped out. I think there's tremendous opportunity for FactSet in general across the markets, and we're very excited about all of our opportunities globally.

Hey. Good morning, everyone. Sorry to come back to the ASV bridge, but quite frankly I am still a little bit confused because I feel like there are a few different ways you've been talking about this. So if I just sit back, I think you said quarter-over-quarter, ASV increased $11 million, but if we look at the stated number, I think it is $5 million to $6 million. So I guess, $5 million-or-so FX headwind. So maybe you just confirm that. But secondly, if I then look at, excluding BAML, would quarter-over-quarter actually have been negative or would have been positive on a stated basis. I know there were some losses, but on a stated basis, would have been positive or negative?

So I think you're right. There were about $5 million or $6 million in headwinds from an FX standpoint. And if you exclude some of the SP&A activity that I spoke about, we would have been positive.

Right, but if the SP&A wasn't there, it would have been negative - forgetting about that impact for a minute, that brought it negative, I guess, is the point.

Yes. I think the thing to focus on is that we grew ASV by $11 million. And I think that's great; we grew. And if you try to think of BAML as non-core, I think that's the wrong way to think about it. Like this is an iteration of our product suite that's opening up a new market for us. So I would focus on the fact that we're growing and that we're getting into new markets, and there's a lot of opportunity for the company.

Yes. Totally agree. I think there was just a confusion, so I just wanted to clear that. Thank you. Secondly, on the wealth side, Phil, I think you made the point that you are getting a lot of incomings, I guess. Anecdotally speaking, we're hearing that too that this definitely raised the bar, the BAML deal. But maybe you can just talk about a little bit more, the detail in terms of where they're coming from, what are you seeing, what are the discussions, but then also maybe talk a little bit more broadly about the go-to strategy on wealth now because BAML is obviously the largest one out there. You have maybe two more firms above 10,000 and maybe less than a handful in the mid-thousands, and then you have a very long tail. So how is the sales approach actually now focused in terms of tapping really into wealth because it's a very diverse market?

Yes. It's a very diverse market, but this deal has provided great visibility for us, and we're seeing a lot of interest. So you're right that there may be only a few firms that have greater than 10,000, but we're seeing very good interest from firms that have thousands of users. I think the product that we went to market with is really a step change in terms of what the functionality that the advisers now have access to. This is a long runway. I mean, these deals take a little while to get through. So I'm not sure I would anticipate big impact from it in FY '19, but I think as you look forward into FY '20, this could be a really positive thing for us in terms of our growth.

Good morning, everyone. So I wanted to ask about the Multi-Asset risk side. Maybe you could talk a little bit about the new wins there, give us some color in terms of the types of clients that are signing up and then also maybe a little color in terms of what competitors are losing the business?

Yes, that's a great question. We are noticing a growing demand for Multi-Asset Class risk from our institutional asset management clients, regardless of their size. There is significant interest from asset owners worldwide. The primary types of firms expressing this interest are both large and small. In a competitive landscape, some firms opt for in-house solutions, while others go with familiar players. People are choosing FactSet because of our integrated solutions and the innovative offerings stemming from our acquisition of the Cognity team during the BISAM acquisition. This is an exciting development for us, and we continue to see strong interest in this area as we keep investing in it.

Excellent. Thank you very much for that color.

Thank you. Thanks, everyone, for joining us on the call today. If you have additional questions, please call Rima Hyder. And we look forward to talking to you next quarter.