Factset Research Systems Inc (FDS) — Q3 2020 Earnings Call Transcript

Thank you, Jimmy. Good morning, everyone. Welcome to our third fiscal quarter 2020 earnings call. Like last quarter, we're in various remote locations today. We may have some audio quality issues and we appreciate your patience should we experience a disruption. Before we begin, I would like to point out that the slides we will reference during 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. After our prepared remarks, we will open the call to questions from investors. To be fair to everyone, please limit yourself to one question plus one follow-up. Before we discuss our results, I encourage all listeners to review the legal notice on the slides, 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 from these forward-looking statements. Our slide presentation and discussions on this call 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, our Chief Financial Officer. I'd now like to turn the discussion over to Phil Snow.

Thanks, Rima, and good morning and good afternoon to everyone. To start things off, I'd really like to thank the entire team for its remarkable efforts over the last quarter. It's truly inspiring to see how team members are going above and beyond each day to support our clients and each other, as we all explore new ways of working. We've been positively surprised by how quickly we've been able to adapt to working in new ways and are actively evaluating what this could mean in terms of efficiency, productivity, client experience, talents, and work-life balance for our employees. We've maintained a high level of engagement with both clients and employees over the last quarter, and we show healthy trends in client usage and interactions with our client service team. Our annual Hackathon had a record number of projects submitted this year with some fantastic ideas. And team members around the world continue to support our communities through companywide volunteering and donation efforts. Let me talk a little bit about digital transformation and our investment plan. The events of this year and the uncertainty in what form the recovery might take is likely to put continued pressure on our end markets. There's even more urgency for firms to revamp their legacy platforms and accelerate their digital transformation efforts. Developing next-generation manufacturing capabilities and delivering a more personalized experience is going to be the key to winning for asset managers and asset owners. And the success that firms on both the buy side and sell side have seen in working remotely could be a meaningful catalyst in transforming historically inefficient workflows. The transition to a more digitally driven future, which was already taking place, is accelerating at a pace few would have predicted three months ago. More firms are moving to the public cloud and upgrading their data and technology faster to meet the needs of a virtual workforce, manage volatility, and continue to adapt, evolve, and compete. Our investment plan addresses these trends and is rooted in migration to the cloud, and our longstanding mission of providing clients with actionable data and insights, where, when, and how they want it. Every day, we are supporting our customers with their own digital transformation efforts, delivering personalized and value-added solutions, and as a result of deepening our relationships with them. We remain confident and on track with the programs in our three-year investment plan. Our focus on transforming our technology landscape, creating a new universe of data for private markets, along with our expansion of critical content for banking and wealth positions us well to capture market share. We found this to be a good market for talent and made some key industry hires in the third quarter. Our business model has shown us its resilience and confirmed that our solutions are mission-critical for clients, particularly during times of market stress. We launched many new enhancements in the quarter and added deeper, richer content in finance, insurance, and real estate. Also, we reached an important milestone last week when we had our last VMS install, marking the end of project Next Gen. For those of you that recall this project, it's been a large undertaking for our engineers over many years, and completing this project allows them to focus on some of the new things we're doing, such as the shift to the public cloud. Let me talk a little bit about ASV and the geographic breakdown this quarter. Turning to results, I'm pleased with our performance for the quarter. We executed well on our pipeline and were effective at managing costs. While we remain cautious given the uncertainty in the markets and economy, we remain on track to meet our revised ASV guidance for fiscal 2020, which we have narrowed to $60 million to $75 million. This quarter, our organic ASV plus professional services grew by 5%. Our Americas region had a solid quarter with 5% growth benefiting from a healthy pipeline built earlier in the year. Asia Pacific rebounded with strong growth of 9% and saw an acceleration in new business and the easing of pandemic-related restrictions in key markets. And our EMEA region, which grew at 4%, benefited from an uptick in demand for CTS and the international price increase. ASV growth in our third quarter was largely driven by wealth and research. We continue to expand our wealth pipeline and add wins this year, despite facing some delays due to the pandemic. Research grew thanks to healthy demand from investment and asset management clients, especially in the Americas region, as well as our international price increase and improved client retention. Our deep sector strategy continues to have a positive impact on both retention and our ability to expand our client base beyond the traditional investment space, particularly with corporate clients. Content and technology solutions also performed well, driven by continued strong demand for premium and core data feeds, and a strategic win with GPIF, Japan's largest pension investment fund. Analytics had a slightly weaker quarter, primarily due to some large deals being pushed out to the fourth quarter, but it's been a solid contributor to date and has a healthy pipeline, especially across performance reporting and fixed income. Additionally, we delivered strong results in our adjusted operating margin and EPS, seeing some cost benefits related to the pandemic. Helen will walk you through these in a few minutes. In summary, we're executing well and remain confident in our ability to finish fiscal 2020 on a strong note. At the same time, we're aware that the uncertainty surrounding the coronavirus pandemic makes it more difficult to predict the longer-term impact on our pipeline. We're excited about the pace of innovation at FactSet in our industry and believe we are well-positioned to meet the needs of the virtual workforce. We are pleased with the high levels of engagement and productivity we have seen throughout the quarter. As the world around us changes seemingly daily, I'm proud to say that we are still closing deals, bringing on new clients, and finding new ways to collaborate. Before I turn the call over to Helen, I want to take a moment to talk about the four changes we announced yesterday. I particularly want to thank Phil Hadley, who has decided to retire from our Board and to welcome Robin Abrams as incoming chair. Many of you know Phil, who was FactSet's CEO for 15 years and served as our Board Chair for 20 years. I want to thank him both personally and on behalf of the entire FactSet community for his visionary leadership and profound contributions to FactSet's success. Additionally, I'd like to thank Scott Billeadeau, who will be with us until the end of the calendar year for his years of client perspective, as well as steering the audit committee. And we also look forward to working with Siew Kai Choy and Lee Shavel, both of whom bring a breadth of experience to our Board. You'll now hear from Helen, who will take you through more details for our third quarter.

Thank you, Phil, and hello, everyone. I'm happy to be speaking with you today, and hope you and your loved ones remain safe and well. I want to reiterate my appreciation to the team. Our colleagues continue to show their strength and resilience in partnering with clients and with each other, and the positive outcome is reflected in our results. We entered the third quarter with a solid pipeline, and for the second quarter in a row, we accelerated our growth rate in ASV and professional services. We experienced expansion in our operating margin and an increase in our EPS. Back in March, we noted that the uncertainty of the environment could impact both the top and bottom line in terms of our ability to generate new ASV and the potential to realize savings from lower discretionary costs, such as travel and entertainment. With discipline and execution, we secured new wins and used productivity benefits to help fund our investments in content and technology. I’ll now walk us through the specifics of the third quarter. We increased ASV by $14 million or 5% year-over-year, reflecting solid growth through existing clients with continued strong retention and realization of cross-sell opportunities. Our annual price increase outside the U.S. generated $7 million, a $2 million increase over the prior year, affirming the value clients find in our suite of offerings. GAAP and organic revenue increased by 3% to $374 million and $375 million, respectively. Growth was driven primarily by analytics, CTS, and wealth. Please note that last year we had a one-time sale of data to a corporate client that positively impacted revenue for our third quarter of 2019, specifically in the Americas region. Adjusting for this transaction, the revenue growth rate year-over-year would have been 4%. For the geographic segment, Americas revenue grew by 2%, EMEA by 3%, and Asia Pacific was the highest at 7% year-over-year. The regions primarily benefited from the increases in analytics, wealth, and CTS. GAAP operating expenses for the third quarter totaled $252 million, a 50% uptick over the previous year and in line with revenue growth. Our GAAP operating margin increased by 30 basis points to 32.5%. Adjusted operating margin improved by 150 basis points to 35.5% versus last year. These results also reflect the positive impact of 40 basis points due to favorable foreign exchange rates. Expenses for the quarter include investments in technology and new talent capabilities, offset by net savings and productivity from workforce mix and a reduction in discretionary expenses. The result is an improved operating margin. As a percentage of revenue, our cost of sales was 70 basis points higher than last year on a GAAP basis. On an adjusted basis, the cost of sales was essentially flat. Increased costs were driven by technology spend, which includes our shift to the public cloud as part of our three-year investment plan. This total was partially offset by lower compensation costs driven by more concentrated hiring in low-cost locations. Lower SG&A expenses are largely responsible for the increase in operating margin. When expressed as a percentage of revenue, SG&A decreased by 100 basis points over the prior year period on a GAAP basis. On an adjusted basis, SG&A expenses decreased by 140 basis points year-over-year. The drivers include materially reduced travel and entertainment costs as well as office-related spending. Both reflect the current working environment given closed offices and limited need for travel. We would expect a portion of this spending to resume once we're able to return to the office and operate in a post-pandemic environment. Moving on, our tax rate for the quarter was 15% compared to last year's 19%. This improvement is mainly due to the timing of an income tax expense in the third quarter of 2019, related to finalizing the company's tax returns. There was no similar event for this quarter. GAAP EPS increased 11% to $2.63 this quarter versus $2.37 in the prior year, and adjusted diluted EPS grew 9% to $2.86. Both were driven by higher operating results and lower interest expense, and GAAP EPS was further boosted by the lower tax rate. A reconciliation of our adjustments to GAAP EPS is disclosed at the end of our press release. Free cash flow, which we define as cash generated from operations plus capital spending was $140 million for the quarter, a decrease of 6% over the same period last year. This reduction is primarily due to the timing of certain international tax payments. On a year-to-year basis, free cash flow grew by 4% despite higher capital expenditures on facilities. With the third quarter, our ASV retention continued to be above 95%. We grew the total number of clients by 1% compared to our prior year, reflecting the addition of wealth and corporate clients. Our client retention rate held steady at 89%, demonstrating the value of our offerings to clients, even and perhaps especially during these challenging times. For the third quarter, we bought back 47,000 shares for a total of $12 million, at an average price of $266. We remain disciplined in our buyback program, and the amount repurchased, in part reflects the high performance of our share price this past quarter. Year-to-date, we've repurchased $173 million of our shares. Additionally, over the last 12 months, we've returned over $343 million to our investors in the form of dividends and share repurchases. We recently increased our dividend by 7% to $0.77, marking our 15th consecutive year of dividend increases. We remain committed to returning long-term value to our shareholders. Turning now to our outlook for the remainder of our fiscal year. As Phil mentioned, our performance over the past few months reflects the resiliency and strength of our business model and the mission-critical value of our content. Moreover, our recurring cash flows and strong balance sheet provide stability during times of market volatility. We continue to believe these attributes will allow us to succeed through further challenges and emerge stronger when the economy eventually recovers. Given our solid third quarter performance, we believe we were able to address some of the factors we discussed on our last earnings call. However, we remain cautious for our fourth quarter. First, we had noted that there might be delays in decision-making which could cause longer sales cycles. We've seen examples of trials taking more time and disruption in the internal approval process, especially with larger clients. A number of Q3 deals moved into Q4, but in line with the previous year. Similarly, this same dynamic resulted in benefits as we experienced lower cancellations versus the prior year, hence our retention rate remained high. Second, we’ve cited the potential of delays and implementations due to restrictions on being able to work on-site. While we have some clients who are unable to accommodate our virtual implementation, these deals to date have not impacted our top line in a meaningful way. And third, we had highlighted the uncertainty around seasonal hiring at the investment banks over the summer months. ASV from our banking business is primarily comprised of large investment banks with midsize and boutique firms making up a smaller percentage. To date, over half of these large banking clients have confirmed their new class hiring members, which are in line with or better than 2019. Consistent with the past, many of these decisions are confirmed by mid-August. While we are encouraged by the results thus far, we will likely not have a final view until the end of the summer. So a risk of smaller classes or hiring delays remain. As many of you know, the fourth quarter is typically our largest. With what we know today, we remain guardedly confident in our ability to execute against our pipeline and moderate our spending. Based on these factors, we are bringing up the bottom end of our ASV guidance; the range for our full year is now expected to be $60 million to $75 million. Given how we've performed to date and our control of and visibility into the investment and operating spending in the fourth quarter, we are increasing our guidance range for other key metrics, such as GAAP and adjusted operating margin, and GAAP and adjusted EPS. We are lowering the guidance range for our annual effective tax rate; these revisions are noted on Slide 14. In closing, I want to reiterate our conviction in our business model operating plan and investment strategy. The company's liquidity position remains strong with low leverage and ample cash flow. Our workforce mix continues to generate productivity as we meet the hiring needs of both the core business and investment plan. Our spending in digital offerings and on our own infrastructure has served us well while operating in this pandemic environment. The current situation is generating unplanned savings, but we believe that a more normalized level of activity will return in the future. In the meantime, we will continue to focus on execution and on generating long-term value for all of our stakeholders. With that, we're now ready for your questions.

Thanks very much for taking my question. I just wanted to make sure I understand the expense guidance changes clearly. Is it that you're benefiting from lower travel and entertainment? Is it the productivity that you mentioned? Just trying to get a sense of maybe a breakdown of the pieces that are contributing to the better margins that you're expecting for this year?

Sure. Thanks, Toni, for your question. So I would look at three different areas when we think about what's driving the expense reduction or really margin expansion. The first are expenses that are pandemic-related items. So travel and entertainment, office-related, even U.S. medical costs, which were actually lower as many folks stopped going to the normal doctor or medical activity, so we actually saw a savings on that as well. Then the second bucket I would call operational discipline. So that's our ability to manage third-party content and professional fees, in some cases reducing, in other cases it's more of managing from a timing perspective and the workforce mix, which we've talked about before. As you know, and that has continued to play out where we have, for example, we've hired 7% more in our workforce, but we've actually had 2% higher as a mix of low-cost versus high-cost. And then the last bucket I would say our investments, where we were also adjusting both by using our own employees for some of the needs that we have, and then also hiring in low-cost. So tighter management around third-party costs is really important. The three areas I would say are pandemic-related, operational discipline, and spending investments of which the pandemic piece is largely, I would say, nearly 60 to 70% of the benefit that we're seeing in the quarter.

That's very helpful. And Phil, you mentioned the changes in the industry, basically accelerating the technology changes, given the COVID period. And I know that your investment plan has been sort of a multi-year period where you're investing in content and technology. And just wondering if anything from this period has changed? Where you're planning on spending within the investment plan? Maybe change the weightings or change towards different products, or just anything sort of structural in terms of industry changes changing the way that you're attacking it?

Yes. Thanks, Toni. So I'd say the biggest change and I think that we're really focused on is how our clients are going to be working in the future. So, we quickly sent out a survey to our clients when they were working from home to sort of understand how their lives were changing and try to predict how they may change in the future. So, obviously the plan is very heavily weighted to move into the public cloud, opening up the tech stack and creating a more personalized experience that nothing's going to really change in terms of big buckets. But we do see a great opportunity to streamline workflows that are going to become more digital for our clients, around collaboration tools. We've all been in the industry for a long time, so we sort of know which of our workflows is still pretty manual, where there's a lot of people putting together pitch books or models or what have you. And I do think that now people have been surprised. I mean, I've been surprised by how quickly we were able to adapt and that's what I hear from my clients. So I do think it's sort of really giving people an opportunity to think more boldly. And I just feel like we're in a really great position to kind of meet those needs for our clients.

Terrific. Thank you.

Thank you. Good morning, guys. You talked about the unplanned cost savings, the benefits I guess from COVID and kind of a follow-up to the last question. So we talked about this a little before. But do you think there's a case to be made that maybe you can take some of the savings and accelerate and maybe even spend more in terms of your three-year rollout plan just since the whole world seems to be digitizing so fast as well?

Well, we certainly are taking a look at what we've learned over the last year and new things that we'd be interested in doing. So we do that every year. We've been through that process in the last quarter. So we're looking at what we chose to do. That's solid, we're going to continue to invest in everything we said we were going to. But we do see some potentially new opportunities for us as well. So, I do think there's an opportunity to do more. And I do think there's an opportunity again for us to look at not just the cost savings that we've kind of seen in the last quarter, but just look at how we're working as a company and how we may have been inefficient in terms of how we're servicing clients and doing other things. But it's a much longer process to figure that out. But we're really actively looking at that and seeing what it might mean for us in the future. So, net-net, I'm very excited in terms of what the potential is for the company.

Got it.

And Manav, I think one thing to keep in mind is that costs like U.S. medical are still somewhat uncertain as we enter the quarter, and all of this impacts next year. Additionally, some of the costs we are benefiting from this quarter are somewhat related to timing. However, we are all looking to see how we can best leverage that into, as Phil mentioned, existing investments, if not new ones as well.

Got it. And I was going to ask Helen, like in terms of your comment and we do expect the business to be back to some normalcy from the cost perspective and so forth. I was hoping perhaps you could maybe use Asia as an example and maybe tell us what you're seeing there, in terms of the recovery and so forth?

Yes. I mean, as we think about our thinking as we go forward, I really look at it in kind of two different buckets in terms of the assumptions. So one is operational costs, how do we see going out of Q3. We talked about the fact that we have seen a good market for hiring new talent. You'll see that we increased our total headcount to over 10,000 employees now, I think it's the highest we’ve been. So that's a 7% increase in hiring. So we were able to do a lot of that. We continue to invest as discussed, and so I see some of that picking up and therefore driving higher costs going forward from a people perspective. I think I just mentioned there are some costs as it relates to things that we held back in Q3. 90 days ago, we weren't sure where the world was going to be, so we wanted to also be quite cautious. And some of that now we're showing better having experienced what we had in Q3, so we're seeing that come through. We'll look to spend that in Q4 and some of that maybe even into the following year. As it relates to pandemic-related savings, we also have costs that we see come through. So those would be related to business continuity, equipment, internet, things that we need to make sure that our workforce is properly ready to work remotely, consistently. We have some office re-openings. It's a little bit unclear yet how we'll deal with that. And then medical costs, I would expect would come back as folks are now becoming more comfortable and now that we’re re-opening. So I would look at that Manav as we think about the go-forward rate.

All right. Thank you, guys.

Welcome.

Good morning, everyone.

Good morning.

So, congratulations on the GPIF of Japan win. I was hoping you guys could give us some additional details on that. What were they using previously? Was it an RFP with multiple competitors? And then when does the new contract start?

Hey Bill, it’s Phil. So, we typically don't provide that level of detail around the client wins. We did have a press release around this, which I think is why we’re mentioning it. But what I would point to is just the opportunity that exists with FactSet for asset owners. So we do very well with sovereign wealth funds and plan sponsors. We've got good momentum with insurance companies. And when you think about our analytics suite and its geared for the asset owner and asset manager of the future in terms of what we're able to do. I think that just is a good area for FactSet to grow in the future. That specific win was more CTS-related, so they are taking a good amount of our content essentially to build out some of their own analytics. So I think that also speaks to our platform assets and our ability to deliver content in new and interesting ways.

And in your prepared remarks, you highlighted strengthening corporate clients as being one area. I wanted to ask about the new corporate clients. Is it being driven by new corporate clients or existing corporate clients buying more products? And are you displacing existing vendors or these first-time users, if you will?

So, a lot of our new client wins, I think we would net 55 new clients for the quarter. Many of those came from corporates and a good amount of them came from wealth advisors as well. So, we’re closing a lot of new names. Typically, these aren't huge deals, but they really add up when you put them together. And what we're selling traditionally is mostly into Investor Relations groups and Business Development groups. But as we build out our deep sector content, we started with financials, insurance and we’re beginning to get into real estate, I do think there is an opportunity to sell more to the existing clients and to uncork some corporate clients in industries that traditionally FactSet may not have been as heavily weighted toward. So, we typically do very well in the sectors and industries that are very data and analytics driven and regulatory driven, as you can imagine. But I do think over time, I see a lot of opportunities, particularly as we open up a platform to do more for clients that are not necessarily on the buy side of this offering.

Great. Thank you very much for the insights.

Yes. Thanks, Bill.

Good morning, everyone. Could you just come back and flush out the pipeline and guidance comments for the fourth quarter a little bit? In particular, as it relates to some of the banking comments you made. You made it sound like you have a very strong visibility here. Is that based on talking to all these different banks and really having almost 95%-100% certainty what they’re going to do? Or where is that coming from because you’re obviously reading some of the headlines, like new hires are getting delayed, they’re getting few thousand dollars to sit on the beach for two extra months. So just wondering where that level of confidence is coming from in particular?

Yes. Thanks, Alex. So, I think we typically don't get a final answer from the majority until August. Early indications are that they'll still be hiring their classes. Maybe it will get pushed out into Q1, as you mentioned. But when we're looking at our pipeline for Q4, it's pretty heavily weighted towards analytics and CTS, which shows that more of our platform offerings and less heavily weighted towards the people like the piece of the business that’s very much workstation-driven. So, we've got a good pipeline for Q4, and we certainly have enough in there to support the range that we narrowed this morning in our comments.

Okay. No, very good. Thank you. And then, secondly, I guess this is for Helen. I may have asked this before and maybe a little bit of too detailed question, but like when you look at your adjustments to your numbers these days, obviously some of those adjustments have been getting bigger and bigger. I think it was like $5.5 million this quarter for, I guess, one-time-ish items. But when you look at the footnote, it's kind of related to some of these investment spends that you're doing. So can you just flush out what you think is reasonable to back out some of that stuff? Because quite frankly, if you're backing out a lot of these investments, then you may as well invest more, if it doesn't come towards EPS, if you know what I mean?

Sure. I don’t comment maybe a little bit broadly in any detailed questions, you can obviously get that from Rima directly. So there's a couple of different things that fall into that. Now some, as you know, there's a number in there that is, I would say most of it is not necessarily investment new part of our three-year plan. A lot of that is more infrastructure-related, so things that we're doing, whether it's on a workday or things that are more I'll call it, corporate infrastructure focused. So those were one-time. We also have in there double rent that we have as we've been building out facilities. So some of our facilities, we've got both our existing building and we already have a lease on another one. So that's not really part of the ongoing, so we call that out as well. So that gives you a little bit of what's in there. They're not really directly related to the three-year plan.

Okay. Thanks again.

You're welcome.

Good morning. Thank you. I just had a question around the wealth business. Could you remind us what your market share is this, or what your market share is there? Specifically, if you can’t talk about market share, maybe you could talk about how down-market in wealth you could go? So we all sort of know of a few large firms, right, that have armies of financial advisors. But just curious in terms of thinking about the wealth segment, how far down-market can FactSet go?

Yes. Hey Hamza, it's Phil. Thanks for the question. So our wealth segment is around 10% of FactSet in terms of its size. And I do think we've got a ton of total addressable market that we can look at. The very high end of the market, I think we're suitable for the ultra-high net workflow. You mentioned sort of the armies of financial advisors out there, so obviously we had a big win a couple of years ago that we're very proud of and doing well with. And it's uncorked a lot of opportunities for us. We had a significant wealth win this quarter, so it was a building on an existing relationship, but we really had a good size win, displacing a major competitor at a large firm. And we have a digital business, which really can get to tremendous amounts of users, that are sort of retail users of a bank essentially. So, we've got a full gamut of stuff, I think, particularly for the market data and news segment of the workflow. I think now we're getting to the point where the product can really begin to leverage our analytics suite, where those two can come together when we can begin to do more for existing clients in the risk oversight area and some other areas. So we're really optimistic about our ability to capture more market share in wealth. And as I mentioned just previously, we closed a lot of smaller family offices and wealth advisors each quarter, and we did the same thing in Q3 of this year.

That's very helpful. Just a follow-up question, I'll turn it over. It seems like the EU and U.S. regulators are scrutinizing exchanges buying data businesses quite a bit. And so, we're wondering if that creates an opportunity for you. And what we mean by that is a number of years ago you did quite a bit of M&A, and then you focused on integration. Now, you're sort of focused on this three-year organic growth investment plan. And just curious can you still be opportunistic on M&A while continuing to execute on that investment plan? Or is M&A kind of off the table because you have a lot going on internally?

Yes. We continue to look at things that are opportunistic. So absolutely, I think we've obviously got the balance sheet to support that. We've done a lot of work to integrate the software companies that we acquired. But we do think there's some good opportunity out there for some smaller data sets or providers that could really support what we talked about, right, in terms of the areas of the market that we're interested in. So, we're actively looking at things like we always are. Obviously, evaluations were pretty high over the years and talking to banks. I think deals are starting to get done again, obviously it was kind of a frozen period. But I do believe that the ice is thawing a little bit and we're going to begin to see some deals in our space.

Great. Thank you so much.

Sure.

Hi, thank you very much for taking my questions. So, Phil, can you talk a little bit about the company's ability to sell in the current environment? It sounds like you guys are doing pretty well. How much of it is the same way that you guys are benefiting from retention? So there's stuff not falling out of the funnel? And how much of it is that you're actually really doing a good job selling, which is fairly impressive in this kind of work-at-home environment?

It's a good mix, Shlomo. So we've been able to close some new names. We did well in new business in Asia, which as I spoke about on the last earnings call, I thought it would be kind of the first region to come back from that standpoint. But talking to our leader of our European business, she's telling me that we're beginning to see some good opportunities over there on the new business side. We have been really effective at closing what was in our pipeline for Q3, so that when we spoke three months ago. And I think part of what Helen and I were thinking about was would it really delay clients’ decisions to buy things? We've seen some of that. How well would we be able to implement things virtually? We are very capable of doing that. In some cases, our clients I think were having difficulty engaging with us. But, net-net, I think again, we were positively surprised by how we were able to do things more remotely than typically FactSet has done in the past. So, I think that's very promising in terms of how we think about selling and supporting clients in the future. And yes, there have been a few cases of clients that were planning on transitioning potentially to other solutions. And those decisions have been delayed, which has helped us on the other side as well. But again, net-net, it's been very positive. I mean, I'm sure it's not lost on you that this is the best third quarter that FactSet has had since 2016. And I think to execute in this environment and produce those results is something we're very proud of.

Okay, great. One other question, just on the tech investment. Are there any milestones that you could talk about in the earlier signs of success that you could talk to? Just as we talk about the investment and the potential for you to accelerate the spend, maybe you could talk about some of the things that maybe early innings you've been able to accomplish?

Yes. So we've opened up a lot of APIs. I believe we're up to about 40 that we've put into our developer portal. So clients are able to now come in and program directly against FactSet. They were able to do that in some cases before. And they're not analytics with the area; we've seen good adoption of API. So we began to sell the APIs for analytics. A little over a year ago we had some initial success last year, but it's really begun. It's a small number now, but it's beginning to grow pretty quickly. And I think we're learning as we go as well. So that's one that I would point to.

Okay, great.

Hi, good morning. Thanks for taking my questions. It looks like ASV growth reaccelerated a bit in APAC in the quarter, which is obviously encouraging. I was just wondering if there's anything you can take away from that, that uptick, whether it be in terms of sales cycles, pipeline conversion, implementation timelines? And then apply that to how you're thinking about the same dynamics in the U.S. or EMEA over the next couple of quarters?

Sure. I would say it was just a very good mix in Asia PAC, and I think we saw good growth in Japan. We saw good growth in Hong Kong and North Asia. And we saw good growth in Singapore. So I think the team executed well across the whole region. As we just pointed out, we had some good wins on the new business side. So, I think we've begun to go back to the office in Hong Kong. So that's the first office, I think that we've begun to have employees return to. So it looks like clients are really engaged over there. And as we've spoken about before, we view Asia as it's our fastest-growing region, one that has a ton of opportunity for it and where the trends are really in our favor. So, we're really optimistic about what we're able to do there across all geographies and all of our business lines.

Got it. And then one more would just be on on-site implementations. I know that was kind of a headwind you called out last quarter. Just curious if there's been any improvement in that capability, whether it be FactSet's capability or client's ability to handle off-site implementations? And kind of how that's evolved over the past couple of months?

Yes, it's been really positive. I think as I just pointed out with the previous question, that we've been able to do almost everything we need to do from an implementation standpoint virtually. And our clients are learning how to do that as well. And that's clearly one of the benefits of going to the cloud; if everyone's up there, I think it just makes it easier for all of us to work together. And if you have APIs and components that sort of plug in very easily with other people's systems and ecosystems, that it makes the whole thing much faster. It really just catches the sales cycle and the implementation scheme versus the kind of heavy lift where it's more custom and you have to be on-site.

Got it. Thank you.

All right. Thank you. So can you just highlight the cadence of ASV growth over the course of the quarter? Just wanted to see if things were quite slow and like let’s say mid-March, early April and things picked up quite significantly since then?

I don't think there's anything different David honestly, from previous quarters. So, we had a healthy pipeline going into the quarter. And from what I saw, we were closing things at kind of the same rates that we did in previous years. Like any sales team, you're going to have that mad push at the end of the quarter or the end of the year. So, our Q4 is always our biggest quarter. And typically in a quarter people are very anxious to sort of get things in. And one thing that we've done, which has really helped is we've got a clearer compensation model for our sales team. And they are really incented to bring things in earlier if they can and they're getting paid on a more frequent basis, just based on transparent compensation models than they had in the past. So, I think some of what we're seeing here is just some of the discipline that we've put into the sales force over the last years, and all the great work that has been done there.

Got it. Thanks. And then in the past, if we look at like past recessions, revenue growth slowed more sharply at the tail end, or as the economy was coming out of the downturn. Just wanted to get your thoughts around timing. Do you feel like we've seen the worst in terms of the revenue impact? Or is that something maybe still to come based on just the subscription nature of your business?

Well, I think it's very hard for all of us to predict. So I do think that this, if you want to call it a downturn, it's different than what we experienced in '08 and '09. But I think all of us, as we look out over the next 12 months, it's very hard to predict what's going to happen in the world from a lot of different dimensions and what the impacts are going to be on economies, the markets, and then us. But I'll just go back to is, we're a resilient company, we've just shown that. And no matter what the environment, we're going to, I believe, execute well against it. But in terms of talking about whether or not we've seen the worst of it, I don't think any of us can say that with any certainty right now.

Sure. That's fair. Thank you.

Hey, good morning. Thanks for taking my question. So about $19 million of ASV growth year-to-date coming from price increases. Can you talk about how that compares to last year? And kind of your thoughts on the sustainability of that as you build out more depth and breadth of the content sets and then go back and try and true up pricing. How much fight are you getting on those front lines?

Sure. I'll try to address that. Thank you for your question. So as you recall, last quarter when we talked about the Americas, we got an improvement of $2 million year-on-year, and so did the international. So that gives you a sense of the improvement this year versus last year, so $4 million. But I think what we see, I mean, we are in a competitive environment, so that's always the case. But we have put in a lot of enhancements and value into products and the offerings, and I think that's really coming through. So what we're seeing this year; we have also natural price increases in our contracts already. Is that continued recognition by clients that the value that we're bringing in is worth the additional amount. Now that being said, we have to continually invest to be able to do that. And I think the three-year plan is certainly meant to help that along, not only with new products, but really enhancing our existing and to maintain if not increase our retention rate with our existing clients.

Yes, that makes sense. I didn't hear you mention it, but regarding your previous discussions about the outlook for 2022 and the goal of achieving high single-digit ASV growth, could you provide an update on your thoughts about that number? Do you believe it is still attainable within the next 18 months?

Yes, I'll take the first shot there. We are working hard to make sure we can get the next three months correct. So I wouldn't say there's a lot of variables right now. Our plan hasn't changed; we still see in terms of our belief of what the investments will bring in the upside, I think we'll have more, we're going through all that right now, as you can imagine, in our own budgeting process, but also in thinking through how our investments were fair. So, I think we'll come back to talk more about that. Right now, we don't have any change in our view, but gosh, there's a lot that can happen and we're doing work on that right now.

Got it. Thank you.

You're welcome.

Thanks for taking my question. So maybe just a quick clarification, you raised the lower end of the ASV guidance or took down the revenue guidance for the year. I was just wondering if you could provide some color there what's causing that. Is it just the timing of when the revenue gets recognized? And then just a quick one on wealth front, you mentioned a significant win there. I was just wondering if we can think about the sizing for that significant win compared to your prior win. And when do we when will that get implemented and revenue gets recognized?

Okay. Thanks, Ashish. Yes, so I think, in March, I think all of us were really wondering what was going to be happening, right, in terms of what was going on in the world around us. We mentioned we had a very strong pipeline. And it just wasn't clear to us sort of how clients were going to react and really what was going to happen in the markets, if you remember sort of how volatile things will back then. So, we came up with a methodology which we thought was good to, at least be conservative in terms of what can be achieved. But we've learned a lot over the last quarter. And as I mentioned, we were effectively able to execute on the pipeline that we had in Q3. And I still feel good about our pipeline for Q4. So that's why, we just feel like we can raise the bottom end of that guidance up to $60 million to give you a narrower range as we look out for the quarter. The other wealth win was with an existing client, where we have a solid deployment. Much of that has already been implemented, and we are recognizing the annual subscription value along with the revenue for Q3. While it may not match the scale of the deal we discussed two years ago, it remains a significant seven-figure win at an important time for us.

And let me just pipe in a little bit as it relates to the revenue. So the good news is we've gotten some better confidence from this quarter, Ashish, so that's a real positive because of some of the unknowns, as we've already talked about. Do keep in mind, in a subscription business, it really does matter when the ASV comes in. And so as you know, the first quarter for us was softer than we had hoped. And so that it does carry through. And depending on what happened on the back-half of the year, without the pandemic, the dollars might have been a little bit different. And so we believe how revenue was going to come out. But knowing, a, that we had a weaker first quarter, that it's really coming through a bit from a revenue perspective as we look at the full year.

That's very helpful. Helen, could you provide a follow-up on the margin trend, specifically regarding the percentage of our employees in low-cost locations? What do you anticipate for that percentage in the mid-term? Additionally, how does that impact margins, especially considering your margin goal for fiscal year 2022, given that you're currently ahead of it? As you shift to lower-cost destinations, could that create an upside for the mid-term margin target?

Yes. No, we've continued to migrate, we look at high-cost low-cost. And as I mentioned, there was about 2% improvement in this quarter. That's been pretty consistent. So right now, we're roughly around, let's call it two-thirds offshore one-third onshore. We did actually hire more onshore, it's actually growth. And that would have been I think the first in a couple of quarters due to the capabilities that we're trying to build. And in some cases that can really be found more in the developed markets. So that's where you see that come through. And that was anticipated. The opposite of that or the balance to that, as I mentioned, is that some of the roles that we saw from our investment plan that we could fill that we thought would either need to be new hires in underdeveloped countries, we were able to either sell with own folks or quite frankly, with folks in the lower cost countries. Going forward, I mean, that's still going to be a driver for us on productivity with or without investments was a focus. And we saw that from FY '19 through now. And that's certainly part of our thinking, as we were thinking about the margin that we come out in FY '22 already.

That's very helpful. Thank you. Thanks on a good quarter and congrats on a good quarter.

Thank you.

Hi. Thanks. Good morning. Just wanted to dive a bit deeper into the ASV growth outlook. You indicated that the pipeline was healthy in the quarter and that win rates have been relatively consistent. Can you talk about how ASV growth could evolve over the next 12 months, given the high visibility there based on what you're seeing in the pipeline?

Well, I think I've been consistent George, in saying that it's a little difficult to see more than six months out with a huge degree of confidence. So, I think we're comfortable talking about Q4 and the fact that we've definitely got the pipeline to support the range that we provided. And Q1, just bear in mind, is typically a smaller quarter for us. So I think in terms of talking about next year, we may be able to give you some more visibility on that next quarter, but it's a little difficult to predict typically and I think given the current environment, it’s even more difficult to predict.

Okay got it. And then, if we dive into some of the components of ASV, specifically just bifurcating renewal rate performance versus new business trends, can you comment on both of those and how they've progressed within the quarter?

Yes, I think we've seen an improvement. Please go ahead, Phil.

I think we've seen continued strong retention from our existing clients, which remains above 95%. New business growth has also been stable, so while that component contributes to overall growth, we are also benefiting significantly from the solid retention rates.

Got it. Thank you, very helpful.

Good morning, everybody. Phil, over the past few weeks you guys experienced another change at the sales level, the directors level. I think this is another change or probably a third change over the past several years. Any reason for the change, any reason for a change in the strategy there? How should we be thinking about that?

So, I’ll refer you back to the 8-K there, so we don't typically comment beyond that in terms of changes in leadership. But what I will say is the sales team that's been executing exceptionally well. When I look at the four leaders, the Americas, the EMEA, the Asia Pac region and our strategic client group, between them, they all have over 60 years of experience in total. So we've got a very deep bench and they’re all executing at a very high level. And we've put in a tremendous amount of discipline in the sales force over the last number of years in terms of pipeline management, pricing, and how we compensate folks. So, I'm really pleased with how the sales force is executing and the talent we have in the team. And I'm confident in their ability to execute as we move forward. I'm not planning any changes in the organization right in terms of how things are structured; I think it's working really well and it's working well with the specialty sales teams that are organized the way they are.

Got you. I appreciate it. And as a follow-up, you guys are well-known for having a great servicing group of consultants, young kids out of college. And obviously now they're not traveling or servicing the customers and that’s obviously an inefficient role of travel. Are we thinking that perhaps those consultants are lesser in number today than they were several months ago? And as you guys travel more, you'll need to hire more or were you guys able to I guess redefine what their roles were and working more from home as opposed to travelling?

Yes, I think the role has evolved over time. I was once in that position myself, and I recently spoke with one of our consultants who has been with us for a year. I asked her about her experience working from home, and she mentioned that she has become quite knowledgeable about FactSet. She shared that her experience working with clients has been positive, noting that engaging with people over video can sometimes be easier than meeting in a crowded room. So it's giving us a lot to think about in terms of how we support clients in the future, but I do think there's a way for us to continue to evolve what is an industry-leading service model for our clients and just continue that great tradition for FactSet. So, thank you for the question.

Great. Thank you.

Okay. Thank you. So, I'd like to thank you all for joining us today. I'm pleased with our accomplishments year-to-date and our ability to pivot around the challenges and rally to be there for each other in times of need. It's undeniably been a challenging few months for us all. And as we reflect on this past quarter it's impossible not to think of the broader events that have occurred. I want to take a moment to address that here particularly the Black Lives Matter protest. At FactSet, there’s no place for racism or discrimination of any kind. And I want to extend a special thank you to the members of our black business resource group for sharing and organizing insightful conversations over the past year, including let’s talk about race and the recognition of the June theme. I remain committed to supporting our black colleagues and clients and to listen and learn, and I'm also committed to our overall diversity and inclusion initiatives. We had a focused D&I strategy and effort in place since 2016 and we've come a long way cultivating a more inclusive environment. I'm proud of what we've accomplished with the launch of our business resource groups, unconscious bias training, leadership commitments, and increased investments in our retention and advancement programs for diverse leaders. We’re now stepping into the next phase of our strategy and the company plans to significantly expand our investments in diversity and inclusion efforts, with a focus on examining the processes by which we attract, recruit, support, and promote our people to ensure we’re eliminating any and all bias and to make progress. We’ll continue to increase diversity at all levels of the organization and we’ll do our best to work to be an agent of change. With that, I'd like to thank everyone once more for your time. If you have additional questions, please call Rima Hyder, and we look forward to speaking to you next quarter.