Factset Research Systems Inc (FDS) — Q1 2022 Earnings Call Transcript

Thank you, and good morning, everyone. Welcome to our first fiscal quarter 2022 earnings call. 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 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 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 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 Linda Huber, Chief Financial Officer. Before we get started, I want to let you all know that we are planning an Investor Day in early April, and we will be sharing more information soon. So stay tuned. With that, I will turn the discussion over to Phil Snow.

Thank you, Kendra, and good morning, everyone. Thanks for joining us today. Before I begin, let me start by welcoming Kendra, who recently became our Head of Investor Relations. Kendra has worked at FactSet for more than two decades, most recently serving as my Chief of Staff. She brings a deep knowledge of the company and industry expertise to her new role. I look forward to working with Kendra to continue growing our Investor Relations program. I'd also like to welcome Linda to her first earnings call as a member of the FactSet team. We are excited to have her here and have already begun leveraging her deep financial and operational expertise as we continue to execute our growth strategy. Turning to our performance, FactSet is off to a strong start to fiscal 2022, and I'm pleased to share that this quarter had the highest Q1 incremental Annual Subscription Value (ASV) on record. Building on the momentum from Q4, we grew organic ASV plus professional services by 9% year-over-year in Q1. The strong performance of our sales and client-facing teams carry forward from Q4, increasing the pace of our go-to-market strategy. These teams continue to drive increased retention and expansion rates among our existing clients while achieving a high number of new business wins. The biggest contributors to this quarter's growth were institutional asset management clients as we continue to see strength in our workstation and accelerating growth in our analytics workflow solutions. The last two years of accelerated investments in content and technology continue to drive top-line growth. We are seeing increased demand for differentiated content and workflow solutions. FactSet's leading open content and analytics platform is allowing us to meet this demand and capture more share of wallet with our clients. By client type, wins were broad-based. We saw double-digit ASV growth rates from our banking, wealth, hedge fund and corporate clients, as well as private equity and venture capital funds and partners. Our investments in content and technology, including deep sector, wealth and analytics solutions continue to support client retention rates and renewals across the board. Overall, we are pleased that our performance resulted in a 13% increase in adjusted EPS from the prior year period. Our adjusted operating margin of 33.6% exceeds our guidance. Linda will walk you through the details in a few minutes. We are now in the final year of our multiyear investment plan, and we remain on track to achieve our goals. Our focus is on our digital platform, scaling our content refinery and creating hyperpersonalized workflow solutions. Within our content refinery, Environmental, Social, and Governance (ESG), data for wealth, private markets and deep sector are all fueling workstation growth. We continue to grow our deep sector data, launching real estate and technology, media and telecom in November. Deep sector and our investments in private markets have translated into growth and higher retention within sell-side firms. Our recent acquisition of Cobalt further advances our private market strategy by connecting differentiated data with tracking and portfolio monitoring, providing value to our private equity and venture capital clients. Our workflow solutions, which deliver efficiencies across the front, middle and back office continue to add meaningful ASV. Our analytics APIs are resonating with our clients, and we are increasingly integrating with cloud-based platforms. Earlier this month, we launched over 90 data sets and a number of APIs on Amazon Data Exchange, becoming the first major data and analytics provider to do so. Our trading business continues to grow, bolstered by the recent addition of fixed income support for trade execution. This enables our clients to surface new insights and trade across asset classes with greater speed and efficiency, and was a significant contributor to the growth of our Analytics & Trading business during the quarter. Our product teams are focused on identifying, developing and implementing tailored client workflow solutions for each of our client types. This has been incredibly successful within wealth, as our adviser dashboard maintains a healthy pipeline and solid client engagement for FY '22. We see this hyperpersonalization as a key differentiator and are committed to working with our clients to evolve our offering. Looking across our regions, we saw continued strength in ASV growth across all our markets. The Americas was the biggest contributor as organic ASV growth accelerated to 9%, supported by broad-based strength across our businesses. This was driven by strong retention and expansion among asset managers and asset owners. The region also benefited from capturing higher price increases. In EMEA, growth accelerated to 7%, consistently improving over the past three quarters. Research and Advisory had a particularly positive impact driven by improved retention among asset managers and wealth clients, and strong workstation sales to new customers. Asia Pacific had another robust quarter with growth accelerating to 14% driven primarily by CTS. We again saw wins across many countries with hedge funds, asset managers and asset owners driving ASV growth. In summary, I am proud of the FactSet team for delivering such strong results to the start of the year. The first quarter, as you know, is historically a slower start to the fiscal year and not necessarily an indication of our performance for the rest of the year. However, our momentum from Q4 has continued, and we are well positioned to deliver on our targets for the year. As such, we are reaffirming our fiscal 2022 guidance and we remain confident in our pipeline and in the value we are delivering to our clients. Looking ahead, we continue to focus on three strategic priorities: scaling up our content refinery, enhancing the client experience through hyperpersonalized solutions and delivering next-generation workflow solutions for clients. We believe that our people, culture and performance-driven mindset will enable us to execute on these priorities as we accelerate the pace of change. We are committed to investing in and developing the talent experience and the skills of our team as we build the industry's leading open content and analytics platform. Finally, an important milestone in our company's history occurred earlier this week when we became part of the S&P 500 Index. Our addition was predicted by our S&P 500 constituent's prediction signal on October 1. Our inclusion is a proud moment for us and a testament to our tremendous growth and our efforts to help our clients do their best work. Our team's creativity, dedication and collaborative spirit make us a trusted partner, and I'm tremendously proud of their drive to create smarter, more innovative solutions for our clients. I'll now turn it over to Linda, who will take you through the specifics of our first quarter performance.

Thank you, Phil, and hello to everyone on the call. I'm really pleased to be here today as part of the FactSet team. I've been at FactSet for just a few months, but in that short time, it's become clear that the company is performing really well from accelerating top line growth and strong free cash flow generation to its long history of consistent and growing shareholder returns. And there's still a lot of runway ahead of us as the investments made over the past two years are paying off and driving growth. There is undeniably a great deal of talent across the organization. I look forward to working with the team to build on FactSet's history of outstanding performance while generating meaningful value for shareholders. Looking now at the first quarter, as you have seen from our press release this morning, we are pleased to report acceleration in our top line with high single-digit growth, both in terms of revenue and organic ASV plus professional services. I'll now share more details on our first quarter performance. First, on ASV, we grew organic ASV plus professional services by 9%. As Phil noted previously, we typically see a seasonal deceleration in Q1. Our performance reflects increased demand for our content and product, higher retention and our ability to realize higher pricing. The marketplace has been supportive with solid workstation growth in banking and greater demands for our portfolio analytics solutions. As market conditions continue to evolve, our subscription-based ASV will continue to support value-based pricing. GAAP revenue increased by 9% to $425 million, while organic revenue which excludes any impact from foreign exchange and acquisitions, increased 9% to $423 million. Growth was driven primarily by Analytics & Trading and Research & Advisory. All regions experienced notable year-over-year growth. For our geographic segments on an organic basis, Americas revenue grew 9%, EMEA also came in at 9% and Asia Pacific revenues grew at 14%. Main drivers in the region were analytics, CTS and workstation growth. Turning now to expenses. GAAP operating expenses grew 13% in the first quarter to $302 million impacted by anticipated changes incurred during the period. We recorded a restructuring charge of $9 million to drive a more efficient and empowered organizational structure. Ongoing savings from this realignment will primarily be used for product reinvestment and key talent retention. In addition, we recognized $4 million of expense related to vacating certain office space in New York City. We recently polled our employees on optimal work arrangements and consistent with what we see in the market, a vast majority prefer a hybrid or remote working model. Given this preference, we are reassessing our real estate footprint to better reflect our new work arrangements. Also in Q1, we incorporated the FactSet Charitable Foundation to facilitate our corporate social responsibility goals. Compared to the previous year, our GAAP operating margin decreased by 230 basis points to 29%, and our adjusted operating margin decreased by 70 basis points to 34%. As stated before, this exceeds our guidance on this measure. Our increased expenses were partially offset by lower compensation expense. As a percentage of revenue, our cost of sales was 32 basis points higher than last year on a GAAP basis and 72 basis points lower on an adjusted basis. This reflects increased data and infrastructure costs and higher compensation expenses for our existing employee base. These expenses also include our ongoing shift to the public cloud as part of our digital transformation and multiyear investment plan. Lower personnel expenses partially offset these increases. When expressed on a percentage basis of revenue, SG&A was 198 basis points higher year-over-year on a GAAP basis and 145 basis points higher on an adjusted basis. The primary drivers include increased employee compensation, higher bonus accrual and real estate exit costs. This was partially offset by lower stock compensation year-over-year. Turning now to taxes. Our tax rate for the quarter was 10% compared to last year's rate of 16%. This lower rate was due to a tax benefit from the exercise of stock options as a result of our record stock price. This caused the annual estimated benefit to be higher than expected. The lower annual rate was partially offset by higher-than-expected U.S. income. GAAP EPS increased 7% to $2.79 this quarter versus $2.62 in the prior year. Adjusted diluted EPS grew 13% to $3.25, driven by higher revenues and a lower tax rate. A reconciliation of our adjustments to GAAP EPS is provided at the end of our press release. Free cash flow, which we defined as cash generated from operations less capital spending, was $64 million for the quarter, a decrease of 9% over the same period last year. This was primarily due to the timing of tax payments, higher year-over-year employee bonus payments and a reduction in capital expenditures related to facilities build-outs. Our ASV retention remained at greater than 95%. We grew the total number of clients by 14% compared to the prior year, which continues to be driven by the addition of more wealth and corporate clients. Our client retention improved to 92% year-over-year, which speaks to the success of our products and investments and the efforts of our sales teams. For the first quarter, we repurchased 46,200 shares of our common stock for a total of $19 million at an average per share price of $403. We remain disciplined in our buyback program and committed to returning long-term value to our shareholders. We are reaffirming our guidance for 2022. And as we often say, our business is a tale of two halves. While it is clear that our momentum from Q4 has continued and we believe that we are well positioned to deliver on our targets, it's still early in the fiscal year. We remain focused on developing our content, technology and people and delivering value for our shareholders. And with that, we're now ready for questions.

Linda, just a follow-up on that last comment on sustainability of revenue growth that FactSet has shown over the last few quarters.

Yes. I'll take that one, Manav. So I think we feel very good about the sustainability of the growth rates. The investments that we made in both our digital platform as well as content are really paying off. So, on the content side, the investments in deep sector, ESG, wealth content, these are all driving workstation growth very nicely. And then on the technology side, just the opening up of the platform and the ability to serve up data to clients wherever they want it, whether it's in Snowflake, Amazon, through our APIs, you name it, that, I think, has a lot of runway. And then we just continue to invest in making sure that our software is the best in the industry and that we're creating an interface that is really pleasing to our clients where they can come in, sift through all the noise and really understand sort of what it is that's important to them.

I was focusing on the acceleration you've observed in the sell side, particularly. This quarter, we also saw momentum in the buy side. I'm curious about your thoughts on whether the sell side will continue in this manner or if there are indications that it might slow down.

We had a strong quarter for the sell side compared to this time last year. However, I'm particularly excited about the growth in the buy side. Overall, we saw the buy side grow by about 200 basis points. The largest segment for us has been institutional asset managers, who have faced significant pressure in recent years, but our solutions are connecting well with them. They experienced a strong quarter compared to other fund types, making them the biggest contributor in absolute terms compared to last year. We are optimistic about the buy side, especially as our analytics solutions begin to gain traction again. It seems there was some pent-up demand on the buy side, and as we all adapt to the new environment, we witnessed many delayed deals starting to materialize.

Perfect. And great speaking with you again, Linda. Just wondering if you could talk about how it's going so far and any best practices that you're bringing with you from Moody's and MSCI and really any sort of changes in capital allocation strategy as you think about it from what you've seen so far?

Thanks, Toni, and it's great to hear from you as well. So far, everything is going great. It's been about 10 weeks. And for this quarter, we've been able to pair some pretty terrific top line growth with our start on what we're going to do on working on the margin. So you probably saw, we did a $9 million restructuring charge as well as a $3.7 million real estate charge. On the margin front, we've talked about the need to focus on four big buckets of cost, which would be compensation, technology, real estate and third-party data. So what you're seeing here is the out-of-the-box first efforts here to make sure we've got the margin plan moving along. This is a best practice, obviously, that has worked in other places. So the $9 million restructuring charge, we were able to take about 5% off the compensation line. We increased spans of control for the managers, and we reduced the number of layers in the corporation by one. So that efficiency was very, very helpful to us. We've also been very careful about headcount additions. Headcount is about flat for this quarter. And we did invest some of that 5% savings from the comp line back into key talent and high potential employee performance compensation for those folks. On the real estate line, as we said, we've got to take a look at our real estate footprint given that a number of our employees are very excited about continued flexibility. The analysis here is to look at the real estate line, think about what we can best do to get the footprint rightsized. And we haven't come to a conclusion yet on that because we have to make sure that the offices work well for the employees, but we're starting on our margin journey here. You see that the margin exceeded the guidance for the GAAP operating margin. And on capital allocation, we've begun our discussions. No official decisions quite yet. We will be releasing our 10-Q early in January, and we'll see where we get to after that. But so far, so good, good focus on margin, good focus on capital allocation. We are also looking to be more specific about the returns on our investments that we've made. Not quite there yet on that one, but Phil will be speaking some more about the fact that we've continued to invest through the pandemic, and that is really paying off for us now. We continue to invest where some others pulled back. So, so far, good, and thanks for the question.

Terrific. As a follow-up, Phil, I wanted to inquire about the product roadmap moving forward. You mentioned that the deep sector strategy is gaining some traction. What comes next? I’m sure we’ll hear more at the Investor Day, but is there anything you’re particularly excited about for this fiscal year?

Yes. Thanks, Toni. There is still quite a bit of work to do to finish off the work that we set out three years ago. So we're on track for deep sector. We released a couple more industries there, so we've got a few more to go. We continue to build out our ESG coverage, so we're very excited about the Truvalue Labs acquisition that's growing at a good clip. One of the things we do well when we acquire data like that is just continue to build it out in terms of coverage. So there's a lot of effort behind that. On the private market side, that's a relatively new area for us. We're super excited about the Cobalt acquisition, but we're just going to continue to build out what we can offer there from both the data and workflow standpoint. So I’d say on the content side, those are still very exciting and still a ton of runway, and we think we can take a lot of market share once we complete all of those. On the software side, it's really this concept of next best action. We’ve seen a lot of interest in our adviser dashboard, which has been sold to a number of wealth firms. That really allows an adviser to sift through the noise and sort of understand what he or she may want to do as the first ten things on any given day. We're going to extend that concept to other firm types and other workflows. It's still early days for that, but we do think that that is going to be an important differentiator for us as a firm.

Congrats on the solid results. I just wanted to hold down further on analytics, Phil. Obviously, you mentioned pretty good pent-up demand and momentum, strong demand for your end products. I was just wondering if you could talk about how big is the opportunity where you are in exploring those opportunities. Also, as we think about these implementations, are you replacing existing third-party systems or in-house applications? I was just wondering if you could also talk about whether you're gaining market share. Any incremental color on the analytics front?

Thanks, Ashish. As you know, it's a broad portfolio of solutions and products we have there. So maybe I'll break it down. In terms of our front office solutions, what we have in there are our trading capabilities, and we put our new Quant research environment in there. Both of those are doing very well. We're seeing very good adoption of the front office solutions. I think the release of our fixed income trading capabilities should provide some good upside in the future. So on the front office side, we feel good there. We've put a lot of effort into integrating those assets that we bought a few years ago. We've released our portfolio management platform, and we're seeing a ton of interest. In the middle office, we had a very good quarter as well. In fact, a lot of what drove analytics was good old portfolio analysis, and we saw a very good uptick there, which had been sort of flat for a while. I think that's a testament to us continuing to invest in that product and some of the work we've done there to just continue to execute well on the sales front. We see a ton of opportunity; I think it's around a $600 million business today. That's what we reported at the end of last fiscal year, but it's really nice to see the growth rate of that segment of our business, which has been differentiating for FactSet and should be moving forward. There's a lot of excitement amongst the team, and that's what's been driving the improved relative performance on the buy side.

That's very helpful color. And Linda, maybe a follow-up question. Thanks again for providing that color on the cost or cost takeout opportunity and margin expansion opportunity as well as capital allocation. I was wondering when do you plan to provide like an update on the mid or long-term? Should we expect that at the Investor Day? And maybe if I can just ask on the margin front itself, how do you think about the margin expansion opportunity as you think about these four buckets of cost take out?

Ashish, maybe I'll start with your second question first. On the margin opportunity, it's clear that FactSet has some room to go and to improve on the margin front. What we're going to do is look at all four of these buckets very carefully, benchmark them and see what action we should take. What you've seen this quarter, as I said, is a start on that path. Our guidance for this year is 32.5% to 33.5% adjusted operating margin. We're ahead of that for this quarter, which is really good; very hard to predict the margin sequentially. So we're just going to stick with the annual guidance. We have a very sharp eye on our margin focus at this point. On capital allocation, I think you're right, as we move toward Investor Day, which is currently scheduled for April 5, we'll see what happens as every day is new with COVID. We would like to talk a little bit more about this. Directionally, many of the companies in this space are investment-grade companies in the BAA, BBB space. I think we'll think about that a little bit further and give you a broader guidance next time.

That's very helpful color. Yes, no, it was very helpful, and congrats once again.

I believe you mentioned value-based pricing opportunities several times in your prepared remarks, Linda. Could you elaborate on that a bit more? You've recently discussed how the inflationary environment might work in your favor. However, as I consider the upcoming quarter, which typically sees an increase in the Americas, I'm reminded that this added about 1.5% to pricing last year. It seems unlikely that you can apply repricing across the entire portfolio. Could you discuss how much of your ASV you can actually reprice? Also, how do you feel about achieving that 1.5% from last year in the context of a higher inflationary environment this year?

Sure, Alex. Let me start and then Phil will pick up from there. It’s important to note that most of our contracts indicate that we can take price increases if warranted at 3% or up to the rate of inflation. Now we're not obviously going to price to the rate of inflation, which recently has been quite a bit higher. The sales team, led by Helen Shan, has done a good job of upping the realization on the price front for us, being very careful to provide appropriate value to our customers. So with that, I'll turn it over to Phil.

Yes. Thanks, Linda. Alex, yes, I think we have good pricing power. Linda mentioned that Helen put in a massive amount of work in the last two years to rationalize a lot of the SKUs that we had on FactSet. In fact, at one point, I was told that there were more FactSet SKUs than molecules in the universe, which worried me a little bit. We've done a great job to rationalize that. For new business, we're ensuring that we're using these new packages. It has made the lives of the salespeople so much easier. They have less to worry about in terms of making sure the packages are customized for clients, which enhances efficiency and provides more value in the marketplace.

Okay, great. And then I guess, secondarily, just coming back to the margin. Obviously, decent severance action taken this quarter. You said some of these savings are going to be reinvested. So any other color you can give us in terms of how quickly you plan to reinvest these savings? I mean, I look at last year, and I know your margin was decent in the first quarter, but it was down year-over-year. And I don't know what the cadence for the rest of the year is going to be. But should we expect the near-term margins to come up a little bit as you realize these savings before they get reinvested later on this year?

Yes, Alex. It's, as I said, tough to predict the margin quarter-over-quarter. This first quarter has run exceptionally strong in terms of sales, as Phil has detailed. One of the things that we noted as a result of that, which makes it difficult to talk about the margin quarter-over-quarter, is the performance plans and the bonus plans associated partially with the sales team and with the rest of the corporation. For example, last year, we put up $15 million for the performance plan. This year, in fact, that number is $21 million, just to show you the difference in the strength between Q1 this year versus last year. We will continue to work hard on making progress on the margin. We took some of these charges earlier in the year, so we are hopeful that the run rate will improve as we move through the year.

No, that's good. Thanks.

Phil, could you elaborate on the margin journey? Historically, FactSet has had a philosophy of reinvesting incremental margin beyond a certain threshold to promote long-term revenue growth. Given today’s discussions and the potential for margin expansion, is this philosophy still in place, but with a higher margin target in mind?

Yes. Thanks, Shlomo. Good to talk to you. Yes, we will continue to reinvest in our product. We've done that over the last four decades. As a technology and content company, it's essential that we do that. We took that step back a couple of years ago. We're marching back to levels that we had back then. I believe that a big piece of the thesis here was to invest in technology in a way which would make FactSet more efficient.

And Shlomo, I would add, we've increased on the margin by 50 basis points for this year. We would hope that trend would continue, but stay tuned year-over-year. One of the other things we're going to have to watch is the management of the product portfolio. We're going to focus on how profitability. Is there anything we need to trim or prune to ensure that we have the product focus correctly in order?.

Yes. In your follow-up conversations with Kendra and Linda later, they can provide more detail here. But part of the restructuring, we also reorganized the Company in a way where we're thinking about product management differently.

Okay, great. And just for my follow-up, can you just talk a little bit about what you're seeing in terms of employee churn? I just noted that some of the investment is to make sure to invest in retention of key personnel, and it's a secret across Wall Street that there's a lot of movement going on right now. What are you seeing internally?

Yes, Shlomo, I think a lot of that just has to do with us becoming more efficient as a company. Linda mentioned that we went through the spans and exercise where we added one span of control on average for managers, and we removed one layer from the organization. I would attribute most of it to that. But like any company, we're very cognizant of the war for talent. We're really focused on making sure that the employee value proposition is as strong as it's always been and that we’re hiring and retaining the critical roles and functions that we need to succeed in the future.

So deep sector has obviously been a key driver of both retention and new business. Just wondering if you can discuss the competitive landscape for these data assets? And just wondering how unique your data is relative to other providers and how it is differentiated?

One of the differentiators is that FactSet connects any data that we have in our refinery to other datasets. There's a ton of value in linking all of this deeper data to everything with our entity data map. There is broad-based demand for more detailed data as people look for alpha in their investment process. We're not just seeing demand for this in banks; we're also seeing demand for it in corporations. We're moving quickly, and the visualization we provide for the content is going over very well with our clients. We're making the data available through feeds and APIs, which is important as well. This is the next generation of fundamental data for our clients.

Just a quick one from me. Could you please provide some update on the opportunities in ESG and the progress of offering this service to clients?

Yes. We see a lot of opportunities on the ESG front. We acquired Truvalue Labs about a year ago. We've done well continuing to sell that product, and we've also integrated it into the FactSet ecosystem. You can now use ESG as an overlay in your portfolio analytics process. The differentiator is that it's an outside-in look at a company, and it's more of a real-time evaluation of how that company is doing. We're stepping on the gas to build out the coverage for this, as we believe it will be important. I'm optimistic about using ESG throughout the system, depending on the business or firm type or workflow, as more firms look to integrate ESG factors.

Sorry. So just for me to understand that, do you think it's better to build in-house? Or do you think it's better to buy the service from an outside party?

Well, we offer both. In true FactSet fashion, we're very open. We probably have up to 20 different ESG providers within FactSet. Most firms are building their own solution but using elements from different providers. It's still not clear where we're going with ESG in terms of regulation. So there's a lot of opportunity here.

You guys mentioned Omicron earlier, just sound like it's on the margin side. But maybe you could walk us through how to think about Omicron in terms of, I guess, delayed office reopenings. Does it could potentially push out maybe sales or the implementation of analytics packages? Or is there any indication on any impact to the sales cycle?

I don't think so. We’ve performed exceptionally well over the last two years regardless of the situation. We figured this out to do it remotely. We want to offer our employees the best balance in their lives. Our offices are open for business, and our employees can come in if they're vaccinated. We probably need to take another pause here to pay attention to local regulations and do the right thing for our employees. However, in terms of us running our business and working with our clients, I don’t think it’s going to change anything.

Great. And then just my follow-up is around sales force productivity. So maybe you can give us a sense for how it's trended or how it's trending today? How much more room there is for improvement there? You guys mentioned that your employee base is being very efficient, but anything else?

Our sales productivity is increasing, and I think there's more runway there. Helen certainly hit the ground running as Chief Revenue Officer. She's done a great job and restructured the sales force by firm type where we can, focusing on different types of clients. We've invested a lot in our information systems over the last few years. We’ve done a lot to rationalize the packages on FactSet. Helen is putting effective incentives in place for the sales team, which were evident in Q1. So there's a lot of levers that we're pulling. The sales team is having a lot of success. We have a great team at FactSet on the sales front and client service. It's big, with a couple of thousand people, and they're all working very well together, having fun, and it's great to see the momentum.

I just wanted to touch on the retention side. It was nice to see client retention increased to 92%, which I think was the highest in several years. Just wondering if you think you have room for that metric to increase further and maybe what might be a realistic target for client retention?

It’s great to see the improvement. This is a testament to the dedication and focus of the sales and client service teams. They've been able to operate in this environment very effectively. I know retention has been something that Helen has been stressing strongly with the sales team. It points to the strength of our products and how well we've worked with our clients. There are multiple reasons why this number is increasing; FactSet is becoming stickier and a critical part of many of our clients' workflows.

Okay, great. And then I think you touched on this a bit in the prepared remarks, but the ASP growth in Asia has been quite a bit stronger than the other two regions in the past few quarters. Is there anything you can call out there benefiting the Asian markets, in particular, more than the others?

That market has grown faster than the other two for a long time. It’s still our newest market. We see a lot of opportunity leveraging some of the solutions we’ve built. Active management seems to be more prevalent in every region, but it may be a bit easier to be an active manager in Asia than some other regions. We have great solutions for active managers.

So can you unpack the ASP a little bit? It sounds like you're going to be in a period of probably better pricing and retention is going up. Should that imply some upside to that? And then just can you unpack the pricing a little bit? How much of it is the rate of inflation as opposed to maybe the remixing of higher value-added services? Can you help us understand that dynamic?

Sure. Our success or acceleration was broad-based this quarter. We saw strength across every region and all three of our business lines. The investments we've made in technology and content apply to all of these different areas. In terms of price, our major price increases don’t typically go in until Q2 for clients in the Americas and Q3 for EMEA and Asia Pac. Up to this point, it primarily relates to price realization across new packages we’ve created.

It does. And then just real quick, because obviously, the cloud is transforming your business. Where are you focused internally on that? More importantly, where are your clients in terms of cloud adoption? Can you help frame where you folks are internally and where your clients are externally in terms of cloud adoption?

I can't give you percentages for the clients. For FactSet, we're more than halfway through our program to move to the public cloud. It's a multi-cloud strategy. Clients are moving quickly to the cloud; almost every firm you talk to is undergoing digital transformation. We're focused on this; it speaks to some of the success we've seen over the last few quarters.

Phil, can you talk about the growth that you experienced this quarter? How it compares to prior quarters in terms of growth from existing customers versus new customers?

In terms of relative performance to Q1 of last year, we saw improvement in expansion, retention and new business. I think it just speaks to the fact that we're firing on all cylinders here. We're seeing good momentum.

Great. And I want to kind of reconcile that. In the past two to three quarters, you've spoken to strong momentum in the pipeline. Perhaps talk about the pipeline this quarter compared to Q4 we just passed. Is your optimism the same level you've had in the past few quarters?

I feel very good about our pipeline. Relative to this time last year, Q2 and Q3 are looking good across institutional asset management. We've got decent visibility on the next six months. We just feel that, given the seasonality in Q4, we need a little more time before revisiting guidance.

FactSet previously had a longer-term target of high single-digit annual organic ASV plus professional services growth. What are your qualitative views on FactSet's longer-term ASP growth outlook given your experience as CFO of other info services companies?

The numbers we put up probably speak more strongly than our opinions; the fact that we've been able to do 9% this first quarter has really made a strong statement on growth potential for the company. Our growth is broad-based, not reliant on one or two deals. The investments we've made over the past two years have paid off, and we're excited for the future.

Got it. Yes, very helpful context. And then, Phil, in fiscal 2021, research, organic ASV plus professional services growth was 5.7%. This was meaningfully higher than the average of 1% growth between fiscal 2017 and fiscal 2020. Can you elaborate on the trends within research that may be similar or different from those in fiscal 2021? Do you believe mid-single-digit growth is sustainable within research?

Research had a very tremendous quarter. We're continuing to see strength with sell-side analysts in Q1. It wasn't the primary driver of ASV, but it certainly helped. This reflects the great work that Research and Advisory has done to get more content into the platform and build out fantastic reports. I am optimistic; there's a ton of opportunity for us to capture.

In your buy-side set of clients, you obviously include corporations. What percent overall now of your revenues are corporations? How is that piece doing versus a year ago?

We don't break that out as a number, but I can say it’s growing very quickly. It’s probably our fastest-growing firm type. The investments we've made in new content sets have allowed us to appeal to more workflows within corporations than we might have historically.

Can you speak a little bit deeper about the deep sector data? What sectors have you rolled it out for so far? What are your aspirations there?

We’ve spoken publicly about those. I think we can certainly provide more detail in follow-up conversations later today. Great. Thank you all for joining us today. In closing, I want to reiterate how pleased we are with this quarter's performance. As a company, we are ending the calendar year strong. We saw the highest incremental Q1 ASV in the Company's history. We celebrated the achievement of joining the S&P 500 Index. We also welcomed Cobalt Software and its talented team to FactSet. Please be well this holiday season. If you have additional questions, call Kendra Brown, and we look forward to speaking with you next quarter.