NYSE:FDS FactSet Research Systems Q3 2024 Earnings Report $432.15 +3.44 (+0.80%) As of 04/30/2025 03:59 PM Eastern Earnings HistoryForecast FactSet Research Systems EPS ResultsActual EPS$4.37Consensus EPS $3.91Beat/MissBeat by +$0.46One Year Ago EPS$3.79FactSet Research Systems Revenue ResultsActual Revenue$552.70 millionExpected Revenue$552.71 millionBeat/MissMissed by -$10.00 thousandYoY Revenue Growth+4.30%FactSet Research Systems Announcement DetailsQuarterQ3 2024Date6/21/2024TimeBefore Market OpensConference Call DateFriday, June 21, 2024Conference Call Time11:00AM ETUpcoming EarningsFactSet Research Systems' Q3 2025 earnings is scheduled for Friday, June 20, 2025, with a conference call scheduled at 11:00 AM ET. Check back for transcripts, audio, and key financial metrics as they become available.Conference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Quarterly Report (10-Q)Earnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by FactSet Research Systems Q3 2024 Earnings Call TranscriptProvided by QuartrJune 21, 2024 ShareLink copied to clipboard.There are 15 speakers on the call. Operator00:00:00Good day and thank you for standing by. Welcome to the Third Quarter FactSet Earnings Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer Please Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Ali Menes, Head of IR, Investor Relations. Operator00:00:29Please go ahead. Speaker 100:00:35Thank you, and good morning, everyone. Welcome to FactSet's 3rd fiscal quarter 2024 earnings call. Before we begin, the slides we reference during this presentation can be found through the webcast on the Investor Relations section of our website atfactset.com. A replay of today's call will be available on our website. After our prepared remarks, we will open the call to questions from investors. Speaker 100:00:59The call is scheduled to last for 1 hour. To be fair to everyone, please limit yourself to one question. You may reenter the queue for additional follow-up questions, which we will take if time permits. 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 ks and 10 Q for a discussion of risk factors that could cause actual results to differ materially from these forward looking statements. Speaker 100:01:32Our slide presentation and discussions on this call will include certain non GAAP financial measures. For such measures, reconciliations 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. We will also be joined by Helen Shan, Chief Revenue Officer, for the Q and A portion of today's call. I will now turn the discussion over to Phil Snow. Speaker 200:02:03Thank you, Ali, and good morning, everyone. Thanks for joining us today. Before I speak about this quarter's results, I just want to point out that we scheduled today's call on a Friday to allow for observance of the Juneteenth holiday earlier this week. We finished our Q3 with organic ASV and professional services growth of 5%. Adjusted diluted EPS rose to $4.37 for the quarter and our adjusted operating margin was 39.4%. Speaker 200:02:31This quarter we continue to see the impact of clients tightened budgets and cost rationalization, trends we highlighted last quarter that were echoed by others in the industry. These pressures extend decision making and lengthen sales cycles. Also, as you may recall, the Q3 is seasonally our weakest of the year. Against this backdrop, we continue to build on FactSet's history of 44 consecutive years of revenue growth and 28 consecutive years of adjusted EPS growth. And in these 44 years, we have successfully navigated through even more difficult market conditions than we face right now. Speaker 200:03:08Despite challenged end markets, this is an exciting time in our industry, particularly for technology companies with valuable data assets. We are harnessing the power of GenAI to build cutting edge solutions and capture market share. For example, we held our 11th client symposium in Miami in April, showcasing new products and the value they bring to clients. These new products are driving requests for hundreds of product demonstrations, creating new leads for our sales team. Returning now to our Q3, we concluded with 8,029 clients and 9 net new logos. Speaker 200:03:45Our user count exceeded 208,000. Overall, ASV retention remained higher than 95% and client retention was 90%. Currently, we expect to finish the fiscal year with annual organic ASV plus professional services growth between 4% 5.5%. Linda will provide further updates to guidance in a few minutes. Turning now to our performance by region, we saw slower growth in the 3rd quarter due to continued market headwinds and the effect of the cancellation from the Credit Suisse UBS merger, which impacted all of our regions. Speaker 200:04:21Overall, this cancellation accounted for approximately 30 basis points or 2 thirds of our ASV deceleration quarter over quarter. In the Americas, gains from asset owners and wealth managers were offset by continued client cost rationalization and the Americas region's organic ASV growth rate was 5.7%. In the EMEA region, growth was driven by a price increase, sales to asset owners and higher ASV from the analytics product suite. The EMEA region's organic ASV growth rate was 4.4% and in the Asia Pacific region, we saw acceleration from buy side firms driven by front office solutions and growing transactional revenues. The Asia Pacific region's organic ASV growth rate was 6.1%. Speaker 200:05:07Looking now at trends by phone types, on the institutional buy side, we had a notable win this quarter displacing a competitor at a large asset manager in the U. S. This win was driven by our advanced fixed income analytics. We took an enterprise sales approach and the client chose our portfolio performance solutions and analytics capabilities. We had another significant win with a global asset manager. Speaker 200:05:32It moved to a multi year agreement including middle office portfolio services. This contract aligns with the client strategy to consolidate vendors and to reduce total cost of ownership. These victories demonstrate our ability to provide tailored high value solutions to our clients. These clients also recognize that our ongoing management of their complex portfolio holdings positioned us well-to-do more for them. In Banking, we saw a decline from the Credit Suisse cancellation. Speaker 200:06:02This segment is still impacted by cautious hiring and a wait and see attitude toward overall capital market conditions. In Wealth Management, although growth was modest this quarter, the sector remains a tremendous opportunity for FactSet given our active pipeline. We're committed to enhancing our offerings to capture future growth and deliver compelling value to wealth advisors and their clients. A great example of this is our recent investment in A Identifyd, which was announced last week By incorporating A Identifyd's relationship management data into FactSet's intelligent prospecting solution, we're able to accelerate new client acquisitions for Wealth Advisors. This brings us to the fast evolving technology landscape where FactSet is well positioned to lead. Speaker 200:06:50We have more than 40 years of meticulously curated and connected data. We are trusted by institutional asset managers and retail wealth advisors with 16,000,000 portfolios on our system, representing more than $30,000,000,000,000 in assets. And on the sell side, FactSet is well established as the platform of choice for fundamental research workflows. For users on both the buy side and the sell side, FactSet has a unique breadth of data curated for their specific use cases. Our rich data ecosystem is a singularly robust and safe foundation for harnessing the power of generative AI. Speaker 200:07:30Specifically, our clients benefit from the combination of our data, our knowledge of clients' workflows and our new generative AI tools. Together, they are producing unique insights and efficiencies for our clients. At FactSet, we are energized to help our clients find new ways to surface insights to set them apart from their peers. We're doing this with live demonstrations of our new products that are available right now. As a result, FactSet is the trusted partner of choice, given that accuracy requires both seasoned judgment and traceable data sources. Speaker 200:08:03At FactSet, we have both. A prime example is our portfolio commentary product released last month, which generates complete detailed investment performance summaries in about a minute. Portfolio Commentary combines our comprehensive data and deep domain expertise to provide tailored and highly efficient outputs. We also launched the new Portfolio Manager Hub, an end to end solution that integrates all elements of a portfolio manager's workflow from news and research to analysis and trade simulation. PMHub adds a GenAI backed chatbot called Portfolio Assistant to tap into our data to provide precise traceable answers all without leaving the platform. Speaker 200:08:47Enthusiastic client response to portfolio commentary and PM Hub give us confidence that we can extend our buy side middle office presence to front office users. And on the sell side, FactSet Mercury optimizes the company research workflow for junior bankers using a single trusted conversational interface, we are working towards producing pitchbooks and charts on demand. We expect users to save another 10 hours per week using this tool in addition to the 5 to 10 hours per week that they said they saved with FactSet before we release Mercury. As banking conditions improve, we are confident that bankers will seek out FactSet Mercury to give them better speed, accuracy and efficiency. Looking ahead, we have a multi year strategic investment plan built on 3 key pillars. Speaker 200:09:36First, we are expanding our market data for deep sector private markets, alternatives and real time applications. With real time market data, for example, we aim to compete for market share by transitioning to cloud based solutions. By enhancing our Sika plan's cloud capabilities and expanding content coverage, we can offer more scalable, reliable and efficient data services. We're well positioned to capture market share when clients demand modern cloud based infrastructure. Secondly, client workflow. Speaker 200:10:08Beyond our middle office business, we are heavily investing in our front office capabilities covering both fundamental and quantitative research. Our offerings for the sell side, particularly in banking automation are gaining traction with top global banks and boutique firms. Our wealth franchise also continues to grow with significant new opportunities in the pipeline. Thirdly, generative AI. This foundational strategic initiative we believe will begin delivering incremental ASV in fiscal 2025. Speaker 200:10:38As we mentioned, our new portfolio commentary in FactSet Mercury are already driving demand. And last week, we announced our off platform AI solutions for technologists. These include a new generative AI data package, a conversational API powered by FactSet Mercury and a new AI partner program to bring fintechs and AI startups onto FactSet's platform. Together, we expect to see ASV growth from tech savvy financial funds and hedge funds. In summary, I am extremely excited about our competitive opportunity. Speaker 200:11:13As demand for traceable quality data grows, particularly for financial decision making, we are adding critical AI tools to deliver real advantages for our clients. Our partnership focused approach has made FactSet a preferred provider and positions us well for even greater success when market conditions improve. I will now hand it over to Linda to discuss our Q2 performance in more detail. Speaker 300:11:39Thanks, Phil, and hello to everyone. As you've seen from our press release this morning, despite slower ASV growth in the 3rd quarter, we improved margins and EPS and we are increasing guidance on both of these for the fiscal year. I'll say more about that later. First, our results for this quarter. As Ali noted, our usual reconciliation of our adjusted metrics to comparable GAAP figures is included at the end of our press release. Speaker 300:12:05For the Q3, organic ASV grew 5%, while adjusted operating margin improved 3 40 basis points to 39.4 percent and adjusted diluted EPS rose 15% to $4.37 For the quarter, GAAP revenue increased 4 percent to $553,000,000 on sales to institutional asset managers, asset owners, partners and corporates. For our geographic segments, organic revenues grew by 5.5% in the Americas, 2.4% in EMEA and 3% in Asia Pacific. Turning now to expenses. GAAP operating expenses decreased 2% year over year to $350,000,000 This was driven by lower compensation expense, mainly due to a reduction of $8,000,000 to our annual bonus accrual, as well as a reduction in salary expenses and payroll taxes, partially offset by higher intangible amortization and cloud related costs. Compared to the previous year, GAAP operating margin increased by approximately 4 20 basis points to 36.6%. Speaker 300:13:12This was due to increased revenues combined with reduced operating expenses as a result of lower compensation expense. On an adjusted basis, operating expenses decreased 1.2%. And now looking at each of our 4 major cost buckets in turn, First, as we have frequently discussed, technology continues to be our main area of expense growth. Specifically, technology costs increased 26% year over year. Technology costs now represent about 9.5% of revenue. Speaker 300:13:42Secondly, in contrast, employee expenses fell 8.6% year over year, driven by lower compensation expenses due to earlier cost reduction efforts and the lower bonus accrual. 3rd, our 3rd party content costs increased by 9% due to the timing of changes in variable fee expenses. And finally, real estate and related expenses saw a 14% decrease year over year as we saw the benefits of early and significant steps we took to reduce this expense bucket. As we've mentioned before, thoughtful expense management is positioning the company for future growth, while allowing us to continue to invest in technology strategic initiatives. Turning now to margin. Speaker 300:14:23Adjusted operating margin improved by 340 basis points to 39.4%. This was primarily due to an adjustment to the bonus accrual, a one time payroll tax adjustment and lower salary expense. The bonus accrual was reduced by about $8,000,000 for the fiscal year given our lower ASV achievement. This change added about 160 basis points to our adjusted operating margin in the quarter. Additionally, earlier cost rationalization efforts resulted in another 130 basis points of the 340 basis point adjusted operating margin improvement. Speaker 300:14:58And as always, you will find an expense walk from revenue to adjusted operating income in the appendix of today's earnings presentation. As a percentage of revenue, our cost of services declined by 90 basis points year over year on a GAAP basis. Cost of services was approximately 40 basis points lower on an adjusted basis. The decrease was primarily due to lower compensation expense, partially offset by an increase in intangible amortization and cloud related costs. And in SG and A as a percentage of revenue, it was 3 20 basis points lower year over year on a GAAP basis. Speaker 300:15:34SG and A was approximately 300 basis points lower on an adjusted basis. The decrease was primarily due to lower compensation expense, a reduction in bad debt expense and lower facilities costs. Turning now to tax. Our tax rate for the quarter was 17% compared to last year's rate of 16.9%. This slight increase was primarily due to higher pre tax income, partially offset by increased utilization of foreign tax credits and additional tax benefits from stock based compensation. Speaker 300:16:05Turning now to EPS. GAAP to EPS increased 18.2 percent to 4.09 dollars this quarter versus $3.46 in the prior year period. This was driven by higher revenues, margin expansion and a lower share count, partially offset by higher interest expense. On an adjusted basis, EPS increased 15.3 percent to $4.37 also driven by revenue growth and margin expansion as well as reduced share count, partially offset by higher interest expense. EBITDA increased to $240,000,000 up 16.9% year over year due to higher net income. Speaker 300:16:42Free cash flow, which we define as cash generated from operations less capital spending, was $217,000,000 for the quarter, an increase of 13% over the same period last year. This was primarily driven by higher net cash from operating activities and reduced spend on property, equipment and leasehold improvements. FactSet continues to be a strong producer of free cash flow. And turning now to share repurchases for the quarter. We repurchased 135,150 shares for approximately $60,000,000 at an average share price of $442.12 Our fiscal 2024 share repurchase plan targets $250,000,000 of repurchases. Speaker 300:17:24As of May 31, 2024, we had $128,100,000 remaining for repurchases in fiscal 2024. Also, yesterday, we paid a quarterly dividend of $1.04 per share, which represented a 6% increase in the regular quarterly dividend from the previous quarter. This marks the 25th consecutive year we have increased dividends on a stock split adjusted basis. We remain disciplined in our buyback program and committed to returning long term value to our shareholders. Combining our dividends and share repurchases, we returned $430,100,000 to our shareholders over the last 12 months. Speaker 300:18:02And during the 3rd quarter, we paid down $62,500,000 of our term loan, which brings our gross leverage down to 1.7 times. This is consistent with our plan to repay term loan in full by the Q2 of fiscal 2025. As Phil mentioned earlier, given the delayed recovery in our end markets, we are now guiding to incremental organic ASV plus professional services growth of $85,000,000 to $120,000,000 for the fiscal year, reflecting 4.8% growth at the midpoint, down from our recent guide to approximately 5%. Revenues are now expected to be in the range of 2.18 $1,000,000,000 to $2,190,000,000 for the year. On the other hand, our expectations for margin and EPS growth for the year have gone up. Speaker 300:18:48Specifically, GAAP operating margin is expected to be in the range of 33.7% to 34%, up approximately 100 basis points from prior guidance. And adjusted operating margin is expected to be in the range of 37% to 37.5%, up 70 to 80 basis points from prior guidance. Adjusted EPS is now expected to be $0.40 higher than prior guidance in the range of $16 to $16.40 The effective tax rate guidance remains unchanged in the range of 16.5% to 17.5%. In closing, we continue to manage our cost base carefully so that we can deliver value to our shareholders while maintaining investment in Gen AI and other strategic initiatives. We believe that we are well positioned for growth as the markets pick up. Speaker 300:19:36We're now ready for your questions. Operator? Operator00:19:41Thank you. At this time, we will conduct a question and answer Our first question comes from the line of Toni Kaplan of Morgan Stanley. Your line is now open. Speaker 400:20:11Terrific. Thank you so much. I wanted to ask regarding ASV. The guidance seemed pretty wide in terms of the range. Are there sort of a wide range of array of outcomes that could happen? Speaker 400:20:26I think the midpoint sort of assumes that things maybe stay are flat sequentially. And so therefore, that would maybe be a little bit better than the last few quarters. So just wanted to get a sense of you talked about the challenging environment like any green shoots there and how we should be thinking about that? Thanks. Speaker 200:20:52Thanks, Tony. It's Phil. I'll start and I think Helen will have a bit more detail here. So yes, we definitely have more visibility now on Q4. 4.75% is the mid range now of mid of the range that we just gave you. Speaker 200:21:08We wanted to make sure we derisked sort of the low end. So the low end is at 4. So we feel really confident about this range and feel confident about the middle of the range. There are though, I mean it is our biggest quarter and there are a lot of swing deals in the quarter, a lot of 7 figure opportunities. So you never really know until the quarter is over whether or not you're going to get all of those. Speaker 200:21:32But I do think there's reason for optimism here. As I mentioned in my comments, we had some very nice wins in Q3 that was strategic, new kinds of wins for us across the portfolio lifecycle, really helping clients with total cost of ownership. So I'm becoming more encouraged in our ability to go out, help clients save money with the existing portfolio lifecycle set of products, as well as the tools that we're now building for generative AI. Speaker 500:22:05Yes. No, I think as Phil had mentioned, we had some very good wins earlier in Q3. And so when we take a look at Q4, we've also had a number of deals that have longer decision cycles and that's moved us a bit as well. But if I look at the weighted pipeline for Q4, it's in line with last year and we've been able to sell at the same pace. It's really the end market that's been impacting us from an erosion perspective and cost decision. Speaker 500:22:36So that's why we've gone for a wider range to allow for that, but we're very confident right now at this point that we've de risked it. Thanks a lot. Welcome. Operator00:22:48Thank you. One moment for next question. Our next question comes from the line of Alex Kramm of UBS. Your line is now open. Speaker 600:22:58Yes. Hey, hello, everyone. Phil, you talked about, I think, 3 areas of investments here that you're excited about or that you're focused on rather. If I go back a few years ago, I think we found ourselves in the same kind of situation. Growth had come down maybe from the environment and you felt like you needed to spend a little bit more to get the growth going again. Speaker 600:23:22So when you talk about these investments, if I think about Speaker 200:23:24the next couple of years, do Speaker 600:23:25you think the company needs another kind of boost of investments? Speaker 200:23:29Or do you think you can do Speaker 600:23:30all this in the current kind of cost base that you have in front of you? Thanks. Speaker 200:23:34It's a fair question. Thank you, Alex. So I think the reasons for optimism are we have a lot of ongoing multiyear initiatives that are still being built out, and we expect to drive growth in the future. So that would be deep sector private markets more recently real time. So bit of an old advantage. Speaker 200:23:56So those things are still chugging along quite nicely and are promising. And in the last 18 months or so, we really have done a good job of freeing up incremental dollars to invest in generative AI and the data platform. And I think we've unleashed another wave of innovation at the company honestly in terms of how we've approached this. So I do feel optimistic. It is a fair question though. Speaker 200:24:20So as we go through Q4 and we do our rolling 3 year plan, I think we are going to evaluate whether or not there are some things that we'd want to invest more in, but we can't really give you any real guidance on that until the September call, but it's a good question. Fair enough. Thank you. Thank Operator00:24:42you. Thank you. We'll move on to our next question. Our next question comes from the line of Kelsey Xu of Autonomous. Your line is now open. Speaker 300:24:57Hi, good morning. Thanks for taking my question. So the industry data we track suggest that there are some early signs of capital markets activity recovery. So just curious what are you hearing from your sell side customers and when do you expect sulfide ASC growth to reaccelerate? Speaker 200:25:18Well, thanks, Kelsey. So I think we certainly are seeing more activity on the M and A front with the bankers. I think we're seeing a little bit better hiring than we did. And Helen might have some more comments on this. And I think if you look at the trends historically as banking fees go up, historically banking hiring has followed that and then historically FactSet's ASV on the sell side follows that. Speaker 200:25:43So if historical trends remain true, no guarantees, I think there are some reasons to be optimistic there. Speaker 500:25:52Yes, I'll add a little bit to that. I think what we're seeing from the large investment banks, the universal banks, the hiring has been pretty muted. So they're being more conservative themselves. We're seeing higher numbers from the middle market banks, the boutiques. So I would say that right now, seasonal hiring for the quarter is for the Q1 this year for the first time this year, higher than the previous year. Speaker 500:26:20But I would we're not necessarily building that in as a big recovery into our Q4 numbers. Speaker 700:26:27Thank you. Operator00:26:30Thank you. One moment for next question. Our next question comes from the line of Manav Patnaik of Barclays. Your line is now open. Speaker 800:26:43Thank you. Good morning. I guess I just had a little bit of a run rate question and kind of a 2 part. 1 on the top line, is the UBSCS impact now fully in the run rate? Or do you anticipate more impact? Speaker 800:26:57And then just specific to expenses as well, all the headcount efforts and stuff you've made thus far, is that is there more to flow through? Just trying to appreciate the dynamics on those 2. Speaker 500:27:10Sure. I'm on a high Italian. I'll take the first part. So I would say the majority of the impact from that transaction is reflected in this quarter. There's a little bit left in Q4, but it's much smaller. Speaker 300:27:24Yes. And Manav, looking at the margin improvement, I want to try to go through the detail of this so everyone understands what's one time and what continues. So the total good guys on the margin improvement side, this is adjusted operating margin, were about 5.40 basis points and then the negatives were about 200 basis points. So let me go through these. The lower bonus accrual of $8,000,000 to get our annual bonus accrual in line contributed about 160 basis points to the good for Q3 and that will not be repeated. Speaker 300:28:02In other words, we had to do that adjustment. Lower salaries added about 130 basis points and that will continue. Lower payroll taxes added about 120,000,000 and that's a one time thing. That's based on the CARES Act. It's a refundable tax credit for keeping people on payroll during COVID. Speaker 300:28:22Lower facilities expenses added 60 basis points that will continue. Higher capitalization added 40 basis points, which will also continue and lower stock based comp amortization added 20 basis points. That one has caught up and will not continue. So out of the 5.40 basis points, about 280 basis points are 1 timers. And then on the negative side, we had higher technology costs for 170 basis points and higher third party data and other expenses for 30 basis points. Speaker 300:28:51So 3 40 basis points overall improvement. And on the Goodguys side, about half of that will continue as we move through the year. Hope that helps. Speaker 900:29:03Yes. Thank you. Operator00:29:06Thank you. One moment for our next question. Our next question comes from the line of Faiza Alwyff of Deutsche Bank. Your line is now open. Speaker 1000:29:19Yes. Hi. Thank you. Good morning. So I wanted to ask about the competitive environment. Speaker 1000:29:26And I'm curious what you're seeing from competitors. It seems that over the last couple of years, you've seen competitors invest as well relative to what had been the case previously. And I know you talked about price competition for new business. So just give us a sense of how you would assess the competitive dynamics at this point? Speaker 200:29:48Yes. Thanks, Faiza. So on the institutional buy side, I would say, we have 2 key competitors there. And the name of the game is really total cost of ownership. So we feel very well positioned with the portfolio analytics that we have on FactSet, but even better positioned now that we have invested in our front office tools. Speaker 200:30:10So we I mentioned that we launched PM Hub, which really connects very nicely the middle office solutions that we have with the front office. So I feel really good about our competitive position on the buy side and those firms really are, I think, feeling the most cost pressure and the ones taking costs out. So I think the firms that have portfolio analytic solutions are the ones that have the right to compete on the buyer side. And I think we're in good shape there. In Wealth, similarly, we have the portfolios on the system. Speaker 200:30:43We've done an amazing job with our Wealth Advisor product and Advisor dashboard. And you heard me talk about another workflow today, which is sort of the CRM workflow. So we're really focused very heavily now on building out additional workflows for the wealth space, but we couldn't feel better positioned in the wealth space. I think within banking, private equity, corporates, the hedge funds, that space admittedly is getting a bit more crowded. So there's lots of us in there with fundamental analyst products. Speaker 200:31:16I think the work we've done with deep sector, with private markets, the tools that we're building with generative AI, all of those I think give us a very nice position there on the competitive front. Speaker 500:31:27And I'll just comment on your point around pricing. As we've mentioned before, there is some price pressure on new logos, but they're not widespread. Really, when it happens is when we're displacing competitors, where we may need to reduce price to help match budgets, for example. But the good thing is that we are almost always in multiyear contracts. So we recapture the price and improve our price realization as the contract matures. Speaker 700:31:57Thank you. Operator00:31:58Thank you. One moment Speaker 500:32:01for next question. Operator00:32:07Our next question comes from the line of Surinder Thind of Jefferies. Your line is now open. Speaker 200:32:13Thank you. A question about GenAI and just the integration of the tools and the feature set, as clients begin to adopt more and use more, how does that impact the technology cost for you guys? Any color there would be helpful. It's a great question. Thank you. Speaker 200:32:36It's a bit unknown at this point. As Linda has spoken about, our technology expenses are going up and that's for good reason because we're investing here. But yes, as clients use more of these tools, it's going to cost in terms of compute. So of course, we're thinking carefully about that. We have fantastic engineers at FactSet that are sort of monitoring this and that will be baked into how we end up charging for these products. Speaker 200:33:04So it's an equation that will have to be figured out over time. But if we're delivering enough value in terms of saving clients time, which is really what we're focused on, it should outweigh the added expense that we or they would be incurring from the compute. Thank you. Operator00:33:24Yes. Thank you. One moment for our next question. Our next question comes from the line of Ashish Sabadra of RBC. Your line is now open. Speaker 900:33:39Thanks for taking my question. I just wanted to clarify on the CSUBS headwind. Was that just the net impact or how do we think about like any potential cross sell opportunity? Was there any cross sell opportunity which lowered that impact? And then maybe just a quick clarifying on revenue versus ASV growth in the 4th quarter. Speaker 900:34:00If my math is right, I get at the midpoint of the revenue guidance less than 2% revenue growth in the 2nd in the 4th quarter, which is almost a 3 point lower than the ASV growth at the midpoint. What's causing that delta? And how do we think about the exit revenue run rate and going into next year? Thanks. Speaker 500:34:21Sure. Hi, this is Helen. Let me address the first part and then I'll turn this to Linda. As it relates to the Credit Suisse and UBS merger, what we are talking about is on a net basis. So we were able to capture some of the cancellation back in selling to UBS. Speaker 500:34:39So that's a positive from our perspective. Speaker 300:34:43Yes. And Ashish, Sharath, it's Linda. Generally, revenue lags ASV. We had an unusual one time acceleration of CUSIP revenues in the Q3 of last year. That increased the revenue attributed to Q3 of 2023. Speaker 300:35:01And by comparison, because that's a tough lap, the Q3 2024 looks lower. So some of it is timing. And I think it is fair to note that in the Q3, while we don't break out CUSIP because it is core to our business, we had very strong performance from CUSIP both in terms of growth and margin. So we're very pleased with how that business is doing. But it's you're correct, but it is a lapping effect that's causing that. Operator00:35:32Thank you, Bhooman. Speaker 900:35:35Sorry, I was wondering if you could comment on the Q4 as well. That was helpful color on the Q3. Speaker 300:35:41Thank you. And the run rate exit at the Q4, Ashish, we are not going to give guidance on that. So we'll see what it looks like when we get there. Speak to you about it in September. Operator00:36:04Our next question comes from the line of George Tong of Goldman Sachs. Your line is now open. Speaker 200:36:10Hi, thanks. Good morning. Wanted to get some additional clarity around the assumptions behind the updated ASV guide. Are you basically assuming that the sales cycles are elongating? So it's basically a matter of timing of when the deals get closed? Speaker 200:36:27Or does it reflect increased client events where the business is essentially structurally lost? And then secondly, can you talk a little bit about international pricing? I believe fiscal 3Q is typically when you push through your pricing actions and how does that pricing compare to the prior year? Speaker 500:36:46Sure. Hey, George, it's Helen. Let me try to answer. I'll do the pricing one first. So the international pricing increase, you're right, we do it every year in Q3. Speaker 500:36:56It was 16% versus 16.8% last year. So you can see that we were able to capture pretty much the same as last year. And that reflects an increase in the number of clients that we were able to capture. So we feel very good about that. And it's in line with our expectations. Speaker 500:37:14So we believe our pricing realization and value that we're giving clients remain the same. When we think about the Q4, the reason that we moved some of this as we think about the pipeline is that we are seeing deals continue to move, especially on the analytics, the buy side in particular. So they're not falling out is the term that we use. So they're not lost. But since they've moved a number of quarters because the larger the deals until clients have greater certainty about the end markets and sometimes their own bandwidth, quite frankly, is more constrained. Speaker 500:37:54We're seeing that continue to move. So that's part of the reason. And I do want to make one point again, which I made earlier. If we look at what we expect for the year, the underlying demand for our products remain steady. On a gross basis, we are in line with last year. Speaker 500:38:11So we're selling as much as we were last year. So it's not a demand problem. But that being said, we have had a number of one time cancels that we've talked about. So the impact has been on higher erosion, which we believe is in part obviously driven by market. Speaker 200:38:32Very helpful. Thank you. Operator00:38:34Thank you. One moment for next question. Our next question comes from the line of Andrew Nicholas of William Blair. Your line is now open. Speaker 1100:38:48Hi, good morning. Thanks for taking my question. Speaker 600:38:51So I think you mentioned that Speaker 1100:38:53you believe AI will drive incremental ASV in 2025. I appreciate all the color there. But I'm just curious on kind of the other side of the coin, maybe in terms of internal cost savings. Is that something that you would also expect to materialize at least at some point in 2025? Or should we still be thinking about this primarily being kind of a breakeven cost effort on the expense front? Speaker 1100:39:19Thank you. Speaker 200:39:21Thanks, Andrew. Great questions. So as you could expect, like many firms, we've been looking at this and I think there are good opportunities for efficiency and client service, quality assurance, content collection, even just engineer just editing code writing. So we're evaluating that closely. I think we will get efficiencies. Speaker 200:39:42The real question is do we reinvest those in products sort of going back to Alex's earlier questions. So there certainly will be efficiencies that we'll get. We're seeing that. It's just a question of what we choose to do with that in the end. Operator00:40:01Thank you. One moment for our next question. Our next question comes from the line of Soma Rosenbaum of Stifel. Your line is now open. Speaker 1100:40:15Hi. Thank you for taking my question here. Speaker 900:40:18I wanted to ask a little bit Speaker 1100:40:20just to clarify first on the questions that were asked before in terms of like CS and UBS. The 4th quarter guidance implies a down quarter in revenue, which is notable. I don't think we've seen this in about 5 years on a sequential basis. And I want to know if you were to exclude what's going on with the UBSCS license is going away, would you show growth sequentially in revenue if we're to kind of normalize for that? I'm trying to understand if that's if there's an environment thing or you're being overly burdened by that. Speaker 1100:40:55And then just in general, there's been a slowdown in revenue growth. And Linda, I've asked you this before, but you've pulled a lot of levers in terms of expenses and we're continuing to see the environment kind of meander around. And what's left on the board for you in terms of if we don't see kind of a pickup? We were kind of hoping to see a little bit more, I think, from some green shoots that were noted last quarter. But if those don't materialize soon, what other levers would you pull? Speaker 500:41:23Sure. Let me take a little bit Speaker 300:41:25of that first and then Speaker 500:41:27I'll turn this over to Linda. As it relates to CS, let me talk through, in particular, we mentioned in our script around the impact. If we take that out as a onetime impact, that would be around 30 plus basis points. Now that's not going to impact revenue right away. That's over the period of time. Speaker 500:41:50If I take a look at some of the other one time items that we've talked about in the past, think it was back last quarter that, that one large canceller, that's helping to explain that delta. But yes, it is in my view, again, let me go back. What we're selling is in line with how we've seen it in the past. There are some one time items that are impacting the erosion. And so I do not view this as an issue with our underlying business, but rather more market or again, some things that are a bit out of our control level. Speaker 300:42:27So Shlomo, thank you for recognizing that despite the meandering market, which is a good adjective for it, we like that. We have been focused Speaker 1100:42:43Hey, Linda, we're Speaker 600:42:45can't hear you here. Operator00:42:54Thank you, Willemund, for next question. Speaker 200:42:59One second, operator. I don't believe Linda was done yet. One second. Speaker 900:43:05Okay. Speaker 300:43:31Cost basis. And so our people costs are down 10% year over year in the 3rd quarter and our real estate costs down 14%. That offsets an increase of 26% in our technology costs and third party data up a little bit unusually in the third quarter. So we feel like we've got all our lines pretty well under control. The thing that was flattering to the margin in the Q3 was the reduction of our bonus accrual. Speaker 300:44:00And of course, that bonus accrual will match our performance with our ASV completion. So we've got a few more things that we can do. I think we've managed very, very carefully. But I don't think we see any major cost cutting actions coming along. We're pretty happy with where we are. Speaker 300:44:21And we planned this all through to match what Helen is seeing for the revenue line for the Q4. So we think we're in a pretty good place. And as you saw, our guidance for adjusted operating margin has gone up 70 to 80 basis points for the rest of the year. So we feel pretty good about our actions and sorry about the audio issues here. Operator00:44:44Thank you. Our next question comes from the line of Craig Huber of Huber Research Partners. Your line is now open. Speaker 1200:44:51Thank you. Back in just a broad question here. How would again, your thoughts here on the sell side and buy side customers that you have out there, the marketplace, do you sort of feel like you're just sort of bouncing along at the bottom here that the worst is behind you? I mean, how you just broadly again, how would you describe what you're going through right now? I mean, in other words, are you feeling like you're at the very bottom here and it's just a matter of time before things start reaccelerating? Speaker 200:45:14It's hard to predict that, Craig. I'll start and I think Helen may have some comments here. So I think for a lot of companies 2024 was sort of positioned as the year of cost cuts. So I think a lot of budgets were kind of set late last year and a lot of firms and a lot of industries including us, people were taking out costs. It does feel that things are getting more constructive with the clients and my conversations with salespeople and clients, it feels like those projects that were paused are beginning to come back to life. Speaker 200:45:46But I'm not sure I would bank on that any sort of real sort of tailwinds from the end markets until potentially next calendar year? I think what we're observing now, I kind of would handicap continuing through the end of the calendar year. Ellen? Speaker 500:46:04Yes. No, I would agree. It's hard to predict obviously market conditions. But I think the softness in banking and the high erosion due to cost consolidations from clients and then, of course, the delay in some of the larger projects. Right now, we're assuming that that's going to remain through the rest of the year, as Phil just said. Speaker 500:46:25I will say, as I said before, this is the Q1 that we've actually seen net seasonal hiring in Banking be higher than the previous year. But I'm not sure we look at that and call it make it a call at the bottom. Speaker 1200:46:38Linda, could you just quickly give us a housekeeping question I have for you here. Just your bonus accruals, what was it each of the 1st three quarters this year? I think it was $24,000,000 to $25,000,000 quarterly last year. What was it 1st 3 quarters this year? Sorry for the housekeeping question. Speaker 1200:46:52Thank you. Speaker 300:46:52That's okay, Craig. And I've just had my microphone replaced. I feel like Taylor Swift. So hopefully it works. Our first quarter bonus accrual was $30,000,000 that included a $3,000,000 top up to sort of catch up a bit from 2023. Speaker 300:47:102nd quarter, Craig was $20,000,000 3rd quarter is 18 dollars and the Q4, we're thinking should be in the range of $15,000,000 $16,000,000 depending on how we finish with ASV. So roughly $83,000,000 for bonus for the whole year. Last year, we were running sort of $105,000,000 for bonus for the full year. So the unfortunate trend here is that we have to adjust bonus based on ASV achievement, which is about 2 thirds of our bonus calculation and margin is the other third. So, hope that gives you the detail you're looking for, Craig. Speaker 1200:47:47Yes, that's great. Thank you, guys. Sure. Operator00:47:58Our next question comes from the line of Russell Quelge of Redburn. Your line is now open. Speaker 1300:48:04Yes. Hi, Phil and Taylor. Just wanted to drill down into the private market space a little bit. A lot of your competitors are also targeting this area for growth. So could you just a favor and just detail your product ambitions here? Speaker 1300:48:17How you're going to win against these other guys who are targeting growth? And the other angle to this question is, it was recently rumored that one of the big incumbents in the space is for sale. So is this something you might look at to accelerate your positioning growth in the area? Speaker 200:48:32Yes. Thanks, Russell. So yes, we've not been shy about talking about this. And we have been investing steadily since 2019 in private markets. We've built out, I believe, our coverage from around $4,000,000 to $8,000,000 or $9,000,000 So we've doubled that. Speaker 200:48:51The quality is getting higher. We acquired Cobalt, which you'll remember. And we're just continuing to work with a lot of partners in the ecosystem. So I think this is an important area. Private credit obviously is important and something that we're taking a look at. Speaker 200:49:10And obviously, we can't comment on any transactions that may or may not be out there right now. Okay. Speaker 1100:49:20Thank you. You're welcome. Operator00:49:22Thank you. One moment for our next question. Our next question comes from the line of Heather Balsky of Bank of America. Your line is now open. Speaker 700:49:37Hi, thank you so much. I wanted to first ask with regards to ASP growth, if you could provide some color in terms of what you're seeing with regards to price versus volume right now and how that tracks versus, I guess, what you expected into the year? And then the other question, bigger picture, and I realized you just talked about kind of that potentially the malaise we're seeing persists till the end of the year. I know this has been a really tough environment to kind of get visibility. But when you think about the recovery, based on what you've been seeing, how do you think things recover? Speaker 700:50:16Do you think we should have a U or V shaped recovery Do you think do you get the sense for clients are going to move very gradually just given all the uncertainty you've had? Just any insight you have. Speaker 300:50:29Sure. I'll start with Speaker 500:50:30that one. Heather, thanks. This is Helen. Thanks for the question. So overall, part of the reason that we see some of the deals that get delayed is because of their size. Speaker 500:50:40So when I think about volume and pricing, actually, interestingly, our volume, meaning number of transactions, is considerably higher this year than last year. And I would say in the low to mid figures is where we're seeing the biggest pickup, probably as high as 20% higher if we as we think about the end of the year. So but that would mean on average the volume is down in terms of the size of the transaction. So as you might guess, in order to grow, you need larger deals. So these larger transactions, which we have very high number of opportunities, but if they don't sort of convert them in that quarter, that's where we're seeing that right now. Speaker 500:51:22So I think that all ties together, Higher volume at an average price that's lower right now in terms of just opportunity size. As it relates a little bit of where do we end up in the bottom, it's very hard to say. I think it varies by firm type. Typically, we've seen banking being the quickest to respond. I think we had thought that, that would be better in the second half of this year. Speaker 500:51:46We're not seeing that. So we'll have to see how that goes. As mentioned by Phil before, if capital markets picks up, where we end up in that. But technology is very much the driver right now. And so as clients are looking to upgrade and as we saw post COVID, once they're ready to spend, the decisions tend to move more quickly. Speaker 500:52:05So I think it's going to be very much dependent on the market conditions. Speaker 200:52:10I do want to kind of add on and point out that we it's up to us to make our own tailwinds here. So regardless of the end markets, we have a $28,000,000,000 total addressable market the way it's been defined historically. 8 of that is beginning to open up to us now with the feed products that we're creating. And then to build on what Helen just said, I think as firms look to outsource more from a technology and even managed services standpoint, I think that addressable market grows. So there's no shortage honestly of addressable market. Speaker 200:52:44And I think the companies that are positioned well moving into this can create some of their own tailwinds despite what the market is giving us. Speaker 700:52:55Great. Thank you. Speaker 1100:52:56You're welcome. Operator00:52:58Thank you. One moment for our next question. Our next question comes from the line of Guru Siddarth of Oppenheimer. Your line is now open. Speaker 900:53:13Hi, this is Guru on for Owen and thank you so much for taking my question. I wanted to ask about the deep sector offering. I think the last major update was back in Q1 when it helped displace a competitor in banking. So any updates here? Because this really seems like it could be solid driver behind AI. Speaker 900:53:32So any updates or insights over here? Speaker 200:53:35A little bit, Guru. Thanks for the question. So yes, we're certainly chipping away here. I believe we now have 8 sectors with some good coverage and over 80 reports within the workstation. And I believe we're also building out some feed deals. Speaker 200:53:53So there's an active pipeline and it is an important aspect of what most banks want to see now when things come up for renewal. So I think there's just 1 or 2 of us in the market honestly that have this in banking. Speaker 900:54:10Got it. Thanks a lot. Speaker 1100:54:11Welcome. Operator00:54:13Thank you. One moment for our next question. Our next question comes from the line of Scott Wertzow of Wolfe Research. Your line is now open. Speaker 1400:54:26Hey, good morning guys and thanks for squeezing me in here. Just wanted to go back to the wealth segment. I'm wondering if we could you can maybe sort of characterize the overall demand on the wealth side relative to what you're seeing on institutional buy side and sell side? I know you talked about modest growth this quarter, but I would love to just kind of hear characterization of the overall demand and compare it to some of the other end markets you operate in? Thanks. Speaker 200:54:49I think it's the healthiest one for us, honestly, Scott. Thanks for the question. So we have a very active pipeline there of deals of various sizes, and we're beginning to build out some interesting workflows beyond sort of what we've been providing over the last few years. And with the introduction of some of these AI tools, I think we're in very good shape. So I'm very optimistic about wealth and our ability to accelerate from here. Speaker 200:55:21Great. Thank you. In summary, we believe we are well positioned in terms of both our strategy and product portfolio to capitalize on the ongoing megatrends in our industry and for when the end markets become more constructive. Thank you all for your great questions today. We'll see you all in September. Speaker 200:55:41Operator, this ends today's call. Operator00:55:43Thank you for your participation in today's conference. This will conclude the program. You may now disconnect.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallFactSet Research Systems Q3 202400:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsSlide DeckPress Release(8-K)Quarterly report(10-Q) FactSet Research Systems Earnings HeadlinesWhat You Need to Know Ahead of FactSet Research Systems' Earnings ReleaseApril 30 at 7:02 PM | msn.comFactSet Research Systems Inc. stock underperforms Tuesday when compared to competitors despite daily gainsApril 23, 2025 | marketwatch.comThe Man I Turn to In Times Like ThisA storm is brewing in the markets: new tariffs, recession warnings, and panic in the headlines. That’s when publisher Brett Aitken turns to Whitney Tilson—a man CNBC once dubbed “The Prophet.” Tilson just released a new prediction that runs counter to what mainstream finance is telling you.May 1, 2025 | Stansberry Research (Ad)FactSet Research Systems Inc. (FDS): The Low Profile Dividend Champion to BuyApril 20, 2025 | msn.comShould You Buy 2025's 3 New Dividend Aristocrats?April 20, 2025 | 247wallst.comFactSet Research Systems (NYSE:FDS) Secures US$1.5 Billion In New Credit FacilitiesApril 11, 2025 | uk.finance.yahoo.comSee More FactSet Research Systems Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like FactSet Research Systems? Sign up for Earnings360's daily newsletter to receive timely earnings updates on FactSet Research Systems and other key companies, straight to your email. Email Address About FactSet Research SystemsFactSet Research Systems (NYSE:FDS), a financial data company, provides integrated financial information and analytical applications to the investment community in the Americas, Europe, the Middle East, Africa, and the Asia Pacific. 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There are 15 speakers on the call. Operator00:00:00Good day and thank you for standing by. Welcome to the Third Quarter FactSet Earnings Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer Please Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Ali Menes, Head of IR, Investor Relations. Operator00:00:29Please go ahead. Speaker 100:00:35Thank you, and good morning, everyone. Welcome to FactSet's 3rd fiscal quarter 2024 earnings call. Before we begin, the slides we reference during this presentation can be found through the webcast on the Investor Relations section of our website atfactset.com. A replay of today's call will be available on our website. After our prepared remarks, we will open the call to questions from investors. Speaker 100:00:59The call is scheduled to last for 1 hour. To be fair to everyone, please limit yourself to one question. You may reenter the queue for additional follow-up questions, which we will take if time permits. 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 ks and 10 Q for a discussion of risk factors that could cause actual results to differ materially from these forward looking statements. Speaker 100:01:32Our slide presentation and discussions on this call will include certain non GAAP financial measures. For such measures, reconciliations 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. We will also be joined by Helen Shan, Chief Revenue Officer, for the Q and A portion of today's call. I will now turn the discussion over to Phil Snow. Speaker 200:02:03Thank you, Ali, and good morning, everyone. Thanks for joining us today. Before I speak about this quarter's results, I just want to point out that we scheduled today's call on a Friday to allow for observance of the Juneteenth holiday earlier this week. We finished our Q3 with organic ASV and professional services growth of 5%. Adjusted diluted EPS rose to $4.37 for the quarter and our adjusted operating margin was 39.4%. Speaker 200:02:31This quarter we continue to see the impact of clients tightened budgets and cost rationalization, trends we highlighted last quarter that were echoed by others in the industry. These pressures extend decision making and lengthen sales cycles. Also, as you may recall, the Q3 is seasonally our weakest of the year. Against this backdrop, we continue to build on FactSet's history of 44 consecutive years of revenue growth and 28 consecutive years of adjusted EPS growth. And in these 44 years, we have successfully navigated through even more difficult market conditions than we face right now. Speaker 200:03:08Despite challenged end markets, this is an exciting time in our industry, particularly for technology companies with valuable data assets. We are harnessing the power of GenAI to build cutting edge solutions and capture market share. For example, we held our 11th client symposium in Miami in April, showcasing new products and the value they bring to clients. These new products are driving requests for hundreds of product demonstrations, creating new leads for our sales team. Returning now to our Q3, we concluded with 8,029 clients and 9 net new logos. Speaker 200:03:45Our user count exceeded 208,000. Overall, ASV retention remained higher than 95% and client retention was 90%. Currently, we expect to finish the fiscal year with annual organic ASV plus professional services growth between 4% 5.5%. Linda will provide further updates to guidance in a few minutes. Turning now to our performance by region, we saw slower growth in the 3rd quarter due to continued market headwinds and the effect of the cancellation from the Credit Suisse UBS merger, which impacted all of our regions. Speaker 200:04:21Overall, this cancellation accounted for approximately 30 basis points or 2 thirds of our ASV deceleration quarter over quarter. In the Americas, gains from asset owners and wealth managers were offset by continued client cost rationalization and the Americas region's organic ASV growth rate was 5.7%. In the EMEA region, growth was driven by a price increase, sales to asset owners and higher ASV from the analytics product suite. The EMEA region's organic ASV growth rate was 4.4% and in the Asia Pacific region, we saw acceleration from buy side firms driven by front office solutions and growing transactional revenues. The Asia Pacific region's organic ASV growth rate was 6.1%. Speaker 200:05:07Looking now at trends by phone types, on the institutional buy side, we had a notable win this quarter displacing a competitor at a large asset manager in the U. S. This win was driven by our advanced fixed income analytics. We took an enterprise sales approach and the client chose our portfolio performance solutions and analytics capabilities. We had another significant win with a global asset manager. Speaker 200:05:32It moved to a multi year agreement including middle office portfolio services. This contract aligns with the client strategy to consolidate vendors and to reduce total cost of ownership. These victories demonstrate our ability to provide tailored high value solutions to our clients. These clients also recognize that our ongoing management of their complex portfolio holdings positioned us well-to-do more for them. In Banking, we saw a decline from the Credit Suisse cancellation. Speaker 200:06:02This segment is still impacted by cautious hiring and a wait and see attitude toward overall capital market conditions. In Wealth Management, although growth was modest this quarter, the sector remains a tremendous opportunity for FactSet given our active pipeline. We're committed to enhancing our offerings to capture future growth and deliver compelling value to wealth advisors and their clients. A great example of this is our recent investment in A Identifyd, which was announced last week By incorporating A Identifyd's relationship management data into FactSet's intelligent prospecting solution, we're able to accelerate new client acquisitions for Wealth Advisors. This brings us to the fast evolving technology landscape where FactSet is well positioned to lead. Speaker 200:06:50We have more than 40 years of meticulously curated and connected data. We are trusted by institutional asset managers and retail wealth advisors with 16,000,000 portfolios on our system, representing more than $30,000,000,000,000 in assets. And on the sell side, FactSet is well established as the platform of choice for fundamental research workflows. For users on both the buy side and the sell side, FactSet has a unique breadth of data curated for their specific use cases. Our rich data ecosystem is a singularly robust and safe foundation for harnessing the power of generative AI. Speaker 200:07:30Specifically, our clients benefit from the combination of our data, our knowledge of clients' workflows and our new generative AI tools. Together, they are producing unique insights and efficiencies for our clients. At FactSet, we are energized to help our clients find new ways to surface insights to set them apart from their peers. We're doing this with live demonstrations of our new products that are available right now. As a result, FactSet is the trusted partner of choice, given that accuracy requires both seasoned judgment and traceable data sources. Speaker 200:08:03At FactSet, we have both. A prime example is our portfolio commentary product released last month, which generates complete detailed investment performance summaries in about a minute. Portfolio Commentary combines our comprehensive data and deep domain expertise to provide tailored and highly efficient outputs. We also launched the new Portfolio Manager Hub, an end to end solution that integrates all elements of a portfolio manager's workflow from news and research to analysis and trade simulation. PMHub adds a GenAI backed chatbot called Portfolio Assistant to tap into our data to provide precise traceable answers all without leaving the platform. Speaker 200:08:47Enthusiastic client response to portfolio commentary and PM Hub give us confidence that we can extend our buy side middle office presence to front office users. And on the sell side, FactSet Mercury optimizes the company research workflow for junior bankers using a single trusted conversational interface, we are working towards producing pitchbooks and charts on demand. We expect users to save another 10 hours per week using this tool in addition to the 5 to 10 hours per week that they said they saved with FactSet before we release Mercury. As banking conditions improve, we are confident that bankers will seek out FactSet Mercury to give them better speed, accuracy and efficiency. Looking ahead, we have a multi year strategic investment plan built on 3 key pillars. Speaker 200:09:36First, we are expanding our market data for deep sector private markets, alternatives and real time applications. With real time market data, for example, we aim to compete for market share by transitioning to cloud based solutions. By enhancing our Sika plan's cloud capabilities and expanding content coverage, we can offer more scalable, reliable and efficient data services. We're well positioned to capture market share when clients demand modern cloud based infrastructure. Secondly, client workflow. Speaker 200:10:08Beyond our middle office business, we are heavily investing in our front office capabilities covering both fundamental and quantitative research. Our offerings for the sell side, particularly in banking automation are gaining traction with top global banks and boutique firms. Our wealth franchise also continues to grow with significant new opportunities in the pipeline. Thirdly, generative AI. This foundational strategic initiative we believe will begin delivering incremental ASV in fiscal 2025. Speaker 200:10:38As we mentioned, our new portfolio commentary in FactSet Mercury are already driving demand. And last week, we announced our off platform AI solutions for technologists. These include a new generative AI data package, a conversational API powered by FactSet Mercury and a new AI partner program to bring fintechs and AI startups onto FactSet's platform. Together, we expect to see ASV growth from tech savvy financial funds and hedge funds. In summary, I am extremely excited about our competitive opportunity. Speaker 200:11:13As demand for traceable quality data grows, particularly for financial decision making, we are adding critical AI tools to deliver real advantages for our clients. Our partnership focused approach has made FactSet a preferred provider and positions us well for even greater success when market conditions improve. I will now hand it over to Linda to discuss our Q2 performance in more detail. Speaker 300:11:39Thanks, Phil, and hello to everyone. As you've seen from our press release this morning, despite slower ASV growth in the 3rd quarter, we improved margins and EPS and we are increasing guidance on both of these for the fiscal year. I'll say more about that later. First, our results for this quarter. As Ali noted, our usual reconciliation of our adjusted metrics to comparable GAAP figures is included at the end of our press release. Speaker 300:12:05For the Q3, organic ASV grew 5%, while adjusted operating margin improved 3 40 basis points to 39.4 percent and adjusted diluted EPS rose 15% to $4.37 For the quarter, GAAP revenue increased 4 percent to $553,000,000 on sales to institutional asset managers, asset owners, partners and corporates. For our geographic segments, organic revenues grew by 5.5% in the Americas, 2.4% in EMEA and 3% in Asia Pacific. Turning now to expenses. GAAP operating expenses decreased 2% year over year to $350,000,000 This was driven by lower compensation expense, mainly due to a reduction of $8,000,000 to our annual bonus accrual, as well as a reduction in salary expenses and payroll taxes, partially offset by higher intangible amortization and cloud related costs. Compared to the previous year, GAAP operating margin increased by approximately 4 20 basis points to 36.6%. Speaker 300:13:12This was due to increased revenues combined with reduced operating expenses as a result of lower compensation expense. On an adjusted basis, operating expenses decreased 1.2%. And now looking at each of our 4 major cost buckets in turn, First, as we have frequently discussed, technology continues to be our main area of expense growth. Specifically, technology costs increased 26% year over year. Technology costs now represent about 9.5% of revenue. Speaker 300:13:42Secondly, in contrast, employee expenses fell 8.6% year over year, driven by lower compensation expenses due to earlier cost reduction efforts and the lower bonus accrual. 3rd, our 3rd party content costs increased by 9% due to the timing of changes in variable fee expenses. And finally, real estate and related expenses saw a 14% decrease year over year as we saw the benefits of early and significant steps we took to reduce this expense bucket. As we've mentioned before, thoughtful expense management is positioning the company for future growth, while allowing us to continue to invest in technology strategic initiatives. Turning now to margin. Speaker 300:14:23Adjusted operating margin improved by 340 basis points to 39.4%. This was primarily due to an adjustment to the bonus accrual, a one time payroll tax adjustment and lower salary expense. The bonus accrual was reduced by about $8,000,000 for the fiscal year given our lower ASV achievement. This change added about 160 basis points to our adjusted operating margin in the quarter. Additionally, earlier cost rationalization efforts resulted in another 130 basis points of the 340 basis point adjusted operating margin improvement. Speaker 300:14:58And as always, you will find an expense walk from revenue to adjusted operating income in the appendix of today's earnings presentation. As a percentage of revenue, our cost of services declined by 90 basis points year over year on a GAAP basis. Cost of services was approximately 40 basis points lower on an adjusted basis. The decrease was primarily due to lower compensation expense, partially offset by an increase in intangible amortization and cloud related costs. And in SG and A as a percentage of revenue, it was 3 20 basis points lower year over year on a GAAP basis. Speaker 300:15:34SG and A was approximately 300 basis points lower on an adjusted basis. The decrease was primarily due to lower compensation expense, a reduction in bad debt expense and lower facilities costs. Turning now to tax. Our tax rate for the quarter was 17% compared to last year's rate of 16.9%. This slight increase was primarily due to higher pre tax income, partially offset by increased utilization of foreign tax credits and additional tax benefits from stock based compensation. Speaker 300:16:05Turning now to EPS. GAAP to EPS increased 18.2 percent to 4.09 dollars this quarter versus $3.46 in the prior year period. This was driven by higher revenues, margin expansion and a lower share count, partially offset by higher interest expense. On an adjusted basis, EPS increased 15.3 percent to $4.37 also driven by revenue growth and margin expansion as well as reduced share count, partially offset by higher interest expense. EBITDA increased to $240,000,000 up 16.9% year over year due to higher net income. Speaker 300:16:42Free cash flow, which we define as cash generated from operations less capital spending, was $217,000,000 for the quarter, an increase of 13% over the same period last year. This was primarily driven by higher net cash from operating activities and reduced spend on property, equipment and leasehold improvements. FactSet continues to be a strong producer of free cash flow. And turning now to share repurchases for the quarter. We repurchased 135,150 shares for approximately $60,000,000 at an average share price of $442.12 Our fiscal 2024 share repurchase plan targets $250,000,000 of repurchases. Speaker 300:17:24As of May 31, 2024, we had $128,100,000 remaining for repurchases in fiscal 2024. Also, yesterday, we paid a quarterly dividend of $1.04 per share, which represented a 6% increase in the regular quarterly dividend from the previous quarter. This marks the 25th consecutive year we have increased dividends on a stock split adjusted basis. We remain disciplined in our buyback program and committed to returning long term value to our shareholders. Combining our dividends and share repurchases, we returned $430,100,000 to our shareholders over the last 12 months. Speaker 300:18:02And during the 3rd quarter, we paid down $62,500,000 of our term loan, which brings our gross leverage down to 1.7 times. This is consistent with our plan to repay term loan in full by the Q2 of fiscal 2025. As Phil mentioned earlier, given the delayed recovery in our end markets, we are now guiding to incremental organic ASV plus professional services growth of $85,000,000 to $120,000,000 for the fiscal year, reflecting 4.8% growth at the midpoint, down from our recent guide to approximately 5%. Revenues are now expected to be in the range of 2.18 $1,000,000,000 to $2,190,000,000 for the year. On the other hand, our expectations for margin and EPS growth for the year have gone up. Speaker 300:18:48Specifically, GAAP operating margin is expected to be in the range of 33.7% to 34%, up approximately 100 basis points from prior guidance. And adjusted operating margin is expected to be in the range of 37% to 37.5%, up 70 to 80 basis points from prior guidance. Adjusted EPS is now expected to be $0.40 higher than prior guidance in the range of $16 to $16.40 The effective tax rate guidance remains unchanged in the range of 16.5% to 17.5%. In closing, we continue to manage our cost base carefully so that we can deliver value to our shareholders while maintaining investment in Gen AI and other strategic initiatives. We believe that we are well positioned for growth as the markets pick up. Speaker 300:19:36We're now ready for your questions. Operator? Operator00:19:41Thank you. At this time, we will conduct a question and answer Our first question comes from the line of Toni Kaplan of Morgan Stanley. Your line is now open. Speaker 400:20:11Terrific. Thank you so much. I wanted to ask regarding ASV. The guidance seemed pretty wide in terms of the range. Are there sort of a wide range of array of outcomes that could happen? Speaker 400:20:26I think the midpoint sort of assumes that things maybe stay are flat sequentially. And so therefore, that would maybe be a little bit better than the last few quarters. So just wanted to get a sense of you talked about the challenging environment like any green shoots there and how we should be thinking about that? Thanks. Speaker 200:20:52Thanks, Tony. It's Phil. I'll start and I think Helen will have a bit more detail here. So yes, we definitely have more visibility now on Q4. 4.75% is the mid range now of mid of the range that we just gave you. Speaker 200:21:08We wanted to make sure we derisked sort of the low end. So the low end is at 4. So we feel really confident about this range and feel confident about the middle of the range. There are though, I mean it is our biggest quarter and there are a lot of swing deals in the quarter, a lot of 7 figure opportunities. So you never really know until the quarter is over whether or not you're going to get all of those. Speaker 200:21:32But I do think there's reason for optimism here. As I mentioned in my comments, we had some very nice wins in Q3 that was strategic, new kinds of wins for us across the portfolio lifecycle, really helping clients with total cost of ownership. So I'm becoming more encouraged in our ability to go out, help clients save money with the existing portfolio lifecycle set of products, as well as the tools that we're now building for generative AI. Speaker 500:22:05Yes. No, I think as Phil had mentioned, we had some very good wins earlier in Q3. And so when we take a look at Q4, we've also had a number of deals that have longer decision cycles and that's moved us a bit as well. But if I look at the weighted pipeline for Q4, it's in line with last year and we've been able to sell at the same pace. It's really the end market that's been impacting us from an erosion perspective and cost decision. Speaker 500:22:36So that's why we've gone for a wider range to allow for that, but we're very confident right now at this point that we've de risked it. Thanks a lot. Welcome. Operator00:22:48Thank you. One moment for next question. Our next question comes from the line of Alex Kramm of UBS. Your line is now open. Speaker 600:22:58Yes. Hey, hello, everyone. Phil, you talked about, I think, 3 areas of investments here that you're excited about or that you're focused on rather. If I go back a few years ago, I think we found ourselves in the same kind of situation. Growth had come down maybe from the environment and you felt like you needed to spend a little bit more to get the growth going again. Speaker 600:23:22So when you talk about these investments, if I think about Speaker 200:23:24the next couple of years, do Speaker 600:23:25you think the company needs another kind of boost of investments? Speaker 200:23:29Or do you think you can do Speaker 600:23:30all this in the current kind of cost base that you have in front of you? Thanks. Speaker 200:23:34It's a fair question. Thank you, Alex. So I think the reasons for optimism are we have a lot of ongoing multiyear initiatives that are still being built out, and we expect to drive growth in the future. So that would be deep sector private markets more recently real time. So bit of an old advantage. Speaker 200:23:56So those things are still chugging along quite nicely and are promising. And in the last 18 months or so, we really have done a good job of freeing up incremental dollars to invest in generative AI and the data platform. And I think we've unleashed another wave of innovation at the company honestly in terms of how we've approached this. So I do feel optimistic. It is a fair question though. Speaker 200:24:20So as we go through Q4 and we do our rolling 3 year plan, I think we are going to evaluate whether or not there are some things that we'd want to invest more in, but we can't really give you any real guidance on that until the September call, but it's a good question. Fair enough. Thank you. Thank Operator00:24:42you. Thank you. We'll move on to our next question. Our next question comes from the line of Kelsey Xu of Autonomous. Your line is now open. Speaker 300:24:57Hi, good morning. Thanks for taking my question. So the industry data we track suggest that there are some early signs of capital markets activity recovery. So just curious what are you hearing from your sell side customers and when do you expect sulfide ASC growth to reaccelerate? Speaker 200:25:18Well, thanks, Kelsey. So I think we certainly are seeing more activity on the M and A front with the bankers. I think we're seeing a little bit better hiring than we did. And Helen might have some more comments on this. And I think if you look at the trends historically as banking fees go up, historically banking hiring has followed that and then historically FactSet's ASV on the sell side follows that. Speaker 200:25:43So if historical trends remain true, no guarantees, I think there are some reasons to be optimistic there. Speaker 500:25:52Yes, I'll add a little bit to that. I think what we're seeing from the large investment banks, the universal banks, the hiring has been pretty muted. So they're being more conservative themselves. We're seeing higher numbers from the middle market banks, the boutiques. So I would say that right now, seasonal hiring for the quarter is for the Q1 this year for the first time this year, higher than the previous year. Speaker 500:26:20But I would we're not necessarily building that in as a big recovery into our Q4 numbers. Speaker 700:26:27Thank you. Operator00:26:30Thank you. One moment for next question. Our next question comes from the line of Manav Patnaik of Barclays. Your line is now open. Speaker 800:26:43Thank you. Good morning. I guess I just had a little bit of a run rate question and kind of a 2 part. 1 on the top line, is the UBSCS impact now fully in the run rate? Or do you anticipate more impact? Speaker 800:26:57And then just specific to expenses as well, all the headcount efforts and stuff you've made thus far, is that is there more to flow through? Just trying to appreciate the dynamics on those 2. Speaker 500:27:10Sure. I'm on a high Italian. I'll take the first part. So I would say the majority of the impact from that transaction is reflected in this quarter. There's a little bit left in Q4, but it's much smaller. Speaker 300:27:24Yes. And Manav, looking at the margin improvement, I want to try to go through the detail of this so everyone understands what's one time and what continues. So the total good guys on the margin improvement side, this is adjusted operating margin, were about 5.40 basis points and then the negatives were about 200 basis points. So let me go through these. The lower bonus accrual of $8,000,000 to get our annual bonus accrual in line contributed about 160 basis points to the good for Q3 and that will not be repeated. Speaker 300:28:02In other words, we had to do that adjustment. Lower salaries added about 130 basis points and that will continue. Lower payroll taxes added about 120,000,000 and that's a one time thing. That's based on the CARES Act. It's a refundable tax credit for keeping people on payroll during COVID. Speaker 300:28:22Lower facilities expenses added 60 basis points that will continue. Higher capitalization added 40 basis points, which will also continue and lower stock based comp amortization added 20 basis points. That one has caught up and will not continue. So out of the 5.40 basis points, about 280 basis points are 1 timers. And then on the negative side, we had higher technology costs for 170 basis points and higher third party data and other expenses for 30 basis points. Speaker 300:28:51So 3 40 basis points overall improvement. And on the Goodguys side, about half of that will continue as we move through the year. Hope that helps. Speaker 900:29:03Yes. Thank you. Operator00:29:06Thank you. One moment for our next question. Our next question comes from the line of Faiza Alwyff of Deutsche Bank. Your line is now open. Speaker 1000:29:19Yes. Hi. Thank you. Good morning. So I wanted to ask about the competitive environment. Speaker 1000:29:26And I'm curious what you're seeing from competitors. It seems that over the last couple of years, you've seen competitors invest as well relative to what had been the case previously. And I know you talked about price competition for new business. So just give us a sense of how you would assess the competitive dynamics at this point? Speaker 200:29:48Yes. Thanks, Faiza. So on the institutional buy side, I would say, we have 2 key competitors there. And the name of the game is really total cost of ownership. So we feel very well positioned with the portfolio analytics that we have on FactSet, but even better positioned now that we have invested in our front office tools. Speaker 200:30:10So we I mentioned that we launched PM Hub, which really connects very nicely the middle office solutions that we have with the front office. So I feel really good about our competitive position on the buy side and those firms really are, I think, feeling the most cost pressure and the ones taking costs out. So I think the firms that have portfolio analytic solutions are the ones that have the right to compete on the buyer side. And I think we're in good shape there. In Wealth, similarly, we have the portfolios on the system. Speaker 200:30:43We've done an amazing job with our Wealth Advisor product and Advisor dashboard. And you heard me talk about another workflow today, which is sort of the CRM workflow. So we're really focused very heavily now on building out additional workflows for the wealth space, but we couldn't feel better positioned in the wealth space. I think within banking, private equity, corporates, the hedge funds, that space admittedly is getting a bit more crowded. So there's lots of us in there with fundamental analyst products. Speaker 200:31:16I think the work we've done with deep sector, with private markets, the tools that we're building with generative AI, all of those I think give us a very nice position there on the competitive front. Speaker 500:31:27And I'll just comment on your point around pricing. As we've mentioned before, there is some price pressure on new logos, but they're not widespread. Really, when it happens is when we're displacing competitors, where we may need to reduce price to help match budgets, for example. But the good thing is that we are almost always in multiyear contracts. So we recapture the price and improve our price realization as the contract matures. Speaker 700:31:57Thank you. Operator00:31:58Thank you. One moment Speaker 500:32:01for next question. Operator00:32:07Our next question comes from the line of Surinder Thind of Jefferies. Your line is now open. Speaker 200:32:13Thank you. A question about GenAI and just the integration of the tools and the feature set, as clients begin to adopt more and use more, how does that impact the technology cost for you guys? Any color there would be helpful. It's a great question. Thank you. Speaker 200:32:36It's a bit unknown at this point. As Linda has spoken about, our technology expenses are going up and that's for good reason because we're investing here. But yes, as clients use more of these tools, it's going to cost in terms of compute. So of course, we're thinking carefully about that. We have fantastic engineers at FactSet that are sort of monitoring this and that will be baked into how we end up charging for these products. Speaker 200:33:04So it's an equation that will have to be figured out over time. But if we're delivering enough value in terms of saving clients time, which is really what we're focused on, it should outweigh the added expense that we or they would be incurring from the compute. Thank you. Operator00:33:24Yes. Thank you. One moment for our next question. Our next question comes from the line of Ashish Sabadra of RBC. Your line is now open. Speaker 900:33:39Thanks for taking my question. I just wanted to clarify on the CSUBS headwind. Was that just the net impact or how do we think about like any potential cross sell opportunity? Was there any cross sell opportunity which lowered that impact? And then maybe just a quick clarifying on revenue versus ASV growth in the 4th quarter. Speaker 900:34:00If my math is right, I get at the midpoint of the revenue guidance less than 2% revenue growth in the 2nd in the 4th quarter, which is almost a 3 point lower than the ASV growth at the midpoint. What's causing that delta? And how do we think about the exit revenue run rate and going into next year? Thanks. Speaker 500:34:21Sure. Hi, this is Helen. Let me address the first part and then I'll turn this to Linda. As it relates to the Credit Suisse and UBS merger, what we are talking about is on a net basis. So we were able to capture some of the cancellation back in selling to UBS. Speaker 500:34:39So that's a positive from our perspective. Speaker 300:34:43Yes. And Ashish, Sharath, it's Linda. Generally, revenue lags ASV. We had an unusual one time acceleration of CUSIP revenues in the Q3 of last year. That increased the revenue attributed to Q3 of 2023. Speaker 300:35:01And by comparison, because that's a tough lap, the Q3 2024 looks lower. So some of it is timing. And I think it is fair to note that in the Q3, while we don't break out CUSIP because it is core to our business, we had very strong performance from CUSIP both in terms of growth and margin. So we're very pleased with how that business is doing. But it's you're correct, but it is a lapping effect that's causing that. Operator00:35:32Thank you, Bhooman. Speaker 900:35:35Sorry, I was wondering if you could comment on the Q4 as well. That was helpful color on the Q3. Speaker 300:35:41Thank you. And the run rate exit at the Q4, Ashish, we are not going to give guidance on that. So we'll see what it looks like when we get there. Speak to you about it in September. Operator00:36:04Our next question comes from the line of George Tong of Goldman Sachs. Your line is now open. Speaker 200:36:10Hi, thanks. Good morning. Wanted to get some additional clarity around the assumptions behind the updated ASV guide. Are you basically assuming that the sales cycles are elongating? So it's basically a matter of timing of when the deals get closed? Speaker 200:36:27Or does it reflect increased client events where the business is essentially structurally lost? And then secondly, can you talk a little bit about international pricing? I believe fiscal 3Q is typically when you push through your pricing actions and how does that pricing compare to the prior year? Speaker 500:36:46Sure. Hey, George, it's Helen. Let me try to answer. I'll do the pricing one first. So the international pricing increase, you're right, we do it every year in Q3. Speaker 500:36:56It was 16% versus 16.8% last year. So you can see that we were able to capture pretty much the same as last year. And that reflects an increase in the number of clients that we were able to capture. So we feel very good about that. And it's in line with our expectations. Speaker 500:37:14So we believe our pricing realization and value that we're giving clients remain the same. When we think about the Q4, the reason that we moved some of this as we think about the pipeline is that we are seeing deals continue to move, especially on the analytics, the buy side in particular. So they're not falling out is the term that we use. So they're not lost. But since they've moved a number of quarters because the larger the deals until clients have greater certainty about the end markets and sometimes their own bandwidth, quite frankly, is more constrained. Speaker 500:37:54We're seeing that continue to move. So that's part of the reason. And I do want to make one point again, which I made earlier. If we look at what we expect for the year, the underlying demand for our products remain steady. On a gross basis, we are in line with last year. Speaker 500:38:11So we're selling as much as we were last year. So it's not a demand problem. But that being said, we have had a number of one time cancels that we've talked about. So the impact has been on higher erosion, which we believe is in part obviously driven by market. Speaker 200:38:32Very helpful. Thank you. Operator00:38:34Thank you. One moment for next question. Our next question comes from the line of Andrew Nicholas of William Blair. Your line is now open. Speaker 1100:38:48Hi, good morning. Thanks for taking my question. Speaker 600:38:51So I think you mentioned that Speaker 1100:38:53you believe AI will drive incremental ASV in 2025. I appreciate all the color there. But I'm just curious on kind of the other side of the coin, maybe in terms of internal cost savings. Is that something that you would also expect to materialize at least at some point in 2025? Or should we still be thinking about this primarily being kind of a breakeven cost effort on the expense front? Speaker 1100:39:19Thank you. Speaker 200:39:21Thanks, Andrew. Great questions. So as you could expect, like many firms, we've been looking at this and I think there are good opportunities for efficiency and client service, quality assurance, content collection, even just engineer just editing code writing. So we're evaluating that closely. I think we will get efficiencies. Speaker 200:39:42The real question is do we reinvest those in products sort of going back to Alex's earlier questions. So there certainly will be efficiencies that we'll get. We're seeing that. It's just a question of what we choose to do with that in the end. Operator00:40:01Thank you. One moment for our next question. Our next question comes from the line of Soma Rosenbaum of Stifel. Your line is now open. Speaker 1100:40:15Hi. Thank you for taking my question here. Speaker 900:40:18I wanted to ask a little bit Speaker 1100:40:20just to clarify first on the questions that were asked before in terms of like CS and UBS. The 4th quarter guidance implies a down quarter in revenue, which is notable. I don't think we've seen this in about 5 years on a sequential basis. And I want to know if you were to exclude what's going on with the UBSCS license is going away, would you show growth sequentially in revenue if we're to kind of normalize for that? I'm trying to understand if that's if there's an environment thing or you're being overly burdened by that. Speaker 1100:40:55And then just in general, there's been a slowdown in revenue growth. And Linda, I've asked you this before, but you've pulled a lot of levers in terms of expenses and we're continuing to see the environment kind of meander around. And what's left on the board for you in terms of if we don't see kind of a pickup? We were kind of hoping to see a little bit more, I think, from some green shoots that were noted last quarter. But if those don't materialize soon, what other levers would you pull? Speaker 500:41:23Sure. Let me take a little bit Speaker 300:41:25of that first and then Speaker 500:41:27I'll turn this over to Linda. As it relates to CS, let me talk through, in particular, we mentioned in our script around the impact. If we take that out as a onetime impact, that would be around 30 plus basis points. Now that's not going to impact revenue right away. That's over the period of time. Speaker 500:41:50If I take a look at some of the other one time items that we've talked about in the past, think it was back last quarter that, that one large canceller, that's helping to explain that delta. But yes, it is in my view, again, let me go back. What we're selling is in line with how we've seen it in the past. There are some one time items that are impacting the erosion. And so I do not view this as an issue with our underlying business, but rather more market or again, some things that are a bit out of our control level. Speaker 300:42:27So Shlomo, thank you for recognizing that despite the meandering market, which is a good adjective for it, we like that. We have been focused Speaker 1100:42:43Hey, Linda, we're Speaker 600:42:45can't hear you here. Operator00:42:54Thank you, Willemund, for next question. Speaker 200:42:59One second, operator. I don't believe Linda was done yet. One second. Speaker 900:43:05Okay. Speaker 300:43:31Cost basis. And so our people costs are down 10% year over year in the 3rd quarter and our real estate costs down 14%. That offsets an increase of 26% in our technology costs and third party data up a little bit unusually in the third quarter. So we feel like we've got all our lines pretty well under control. The thing that was flattering to the margin in the Q3 was the reduction of our bonus accrual. Speaker 300:44:00And of course, that bonus accrual will match our performance with our ASV completion. So we've got a few more things that we can do. I think we've managed very, very carefully. But I don't think we see any major cost cutting actions coming along. We're pretty happy with where we are. Speaker 300:44:21And we planned this all through to match what Helen is seeing for the revenue line for the Q4. So we think we're in a pretty good place. And as you saw, our guidance for adjusted operating margin has gone up 70 to 80 basis points for the rest of the year. So we feel pretty good about our actions and sorry about the audio issues here. Operator00:44:44Thank you. Our next question comes from the line of Craig Huber of Huber Research Partners. Your line is now open. Speaker 1200:44:51Thank you. Back in just a broad question here. How would again, your thoughts here on the sell side and buy side customers that you have out there, the marketplace, do you sort of feel like you're just sort of bouncing along at the bottom here that the worst is behind you? I mean, how you just broadly again, how would you describe what you're going through right now? I mean, in other words, are you feeling like you're at the very bottom here and it's just a matter of time before things start reaccelerating? Speaker 200:45:14It's hard to predict that, Craig. I'll start and I think Helen may have some comments here. So I think for a lot of companies 2024 was sort of positioned as the year of cost cuts. So I think a lot of budgets were kind of set late last year and a lot of firms and a lot of industries including us, people were taking out costs. It does feel that things are getting more constructive with the clients and my conversations with salespeople and clients, it feels like those projects that were paused are beginning to come back to life. Speaker 200:45:46But I'm not sure I would bank on that any sort of real sort of tailwinds from the end markets until potentially next calendar year? I think what we're observing now, I kind of would handicap continuing through the end of the calendar year. Ellen? Speaker 500:46:04Yes. No, I would agree. It's hard to predict obviously market conditions. But I think the softness in banking and the high erosion due to cost consolidations from clients and then, of course, the delay in some of the larger projects. Right now, we're assuming that that's going to remain through the rest of the year, as Phil just said. Speaker 500:46:25I will say, as I said before, this is the Q1 that we've actually seen net seasonal hiring in Banking be higher than the previous year. But I'm not sure we look at that and call it make it a call at the bottom. Speaker 1200:46:38Linda, could you just quickly give us a housekeeping question I have for you here. Just your bonus accruals, what was it each of the 1st three quarters this year? I think it was $24,000,000 to $25,000,000 quarterly last year. What was it 1st 3 quarters this year? Sorry for the housekeeping question. Speaker 1200:46:52Thank you. Speaker 300:46:52That's okay, Craig. And I've just had my microphone replaced. I feel like Taylor Swift. So hopefully it works. Our first quarter bonus accrual was $30,000,000 that included a $3,000,000 top up to sort of catch up a bit from 2023. Speaker 300:47:102nd quarter, Craig was $20,000,000 3rd quarter is 18 dollars and the Q4, we're thinking should be in the range of $15,000,000 $16,000,000 depending on how we finish with ASV. So roughly $83,000,000 for bonus for the whole year. Last year, we were running sort of $105,000,000 for bonus for the full year. So the unfortunate trend here is that we have to adjust bonus based on ASV achievement, which is about 2 thirds of our bonus calculation and margin is the other third. So, hope that gives you the detail you're looking for, Craig. Speaker 1200:47:47Yes, that's great. Thank you, guys. Sure. Operator00:47:58Our next question comes from the line of Russell Quelge of Redburn. Your line is now open. Speaker 1300:48:04Yes. Hi, Phil and Taylor. Just wanted to drill down into the private market space a little bit. A lot of your competitors are also targeting this area for growth. So could you just a favor and just detail your product ambitions here? Speaker 1300:48:17How you're going to win against these other guys who are targeting growth? And the other angle to this question is, it was recently rumored that one of the big incumbents in the space is for sale. So is this something you might look at to accelerate your positioning growth in the area? Speaker 200:48:32Yes. Thanks, Russell. So yes, we've not been shy about talking about this. And we have been investing steadily since 2019 in private markets. We've built out, I believe, our coverage from around $4,000,000 to $8,000,000 or $9,000,000 So we've doubled that. Speaker 200:48:51The quality is getting higher. We acquired Cobalt, which you'll remember. And we're just continuing to work with a lot of partners in the ecosystem. So I think this is an important area. Private credit obviously is important and something that we're taking a look at. Speaker 200:49:10And obviously, we can't comment on any transactions that may or may not be out there right now. Okay. Speaker 1100:49:20Thank you. You're welcome. Operator00:49:22Thank you. One moment for our next question. Our next question comes from the line of Heather Balsky of Bank of America. Your line is now open. Speaker 700:49:37Hi, thank you so much. I wanted to first ask with regards to ASP growth, if you could provide some color in terms of what you're seeing with regards to price versus volume right now and how that tracks versus, I guess, what you expected into the year? And then the other question, bigger picture, and I realized you just talked about kind of that potentially the malaise we're seeing persists till the end of the year. I know this has been a really tough environment to kind of get visibility. But when you think about the recovery, based on what you've been seeing, how do you think things recover? Speaker 700:50:16Do you think we should have a U or V shaped recovery Do you think do you get the sense for clients are going to move very gradually just given all the uncertainty you've had? Just any insight you have. Speaker 300:50:29Sure. I'll start with Speaker 500:50:30that one. Heather, thanks. This is Helen. Thanks for the question. So overall, part of the reason that we see some of the deals that get delayed is because of their size. Speaker 500:50:40So when I think about volume and pricing, actually, interestingly, our volume, meaning number of transactions, is considerably higher this year than last year. And I would say in the low to mid figures is where we're seeing the biggest pickup, probably as high as 20% higher if we as we think about the end of the year. So but that would mean on average the volume is down in terms of the size of the transaction. So as you might guess, in order to grow, you need larger deals. So these larger transactions, which we have very high number of opportunities, but if they don't sort of convert them in that quarter, that's where we're seeing that right now. Speaker 500:51:22So I think that all ties together, Higher volume at an average price that's lower right now in terms of just opportunity size. As it relates a little bit of where do we end up in the bottom, it's very hard to say. I think it varies by firm type. Typically, we've seen banking being the quickest to respond. I think we had thought that, that would be better in the second half of this year. Speaker 500:51:46We're not seeing that. So we'll have to see how that goes. As mentioned by Phil before, if capital markets picks up, where we end up in that. But technology is very much the driver right now. And so as clients are looking to upgrade and as we saw post COVID, once they're ready to spend, the decisions tend to move more quickly. Speaker 500:52:05So I think it's going to be very much dependent on the market conditions. Speaker 200:52:10I do want to kind of add on and point out that we it's up to us to make our own tailwinds here. So regardless of the end markets, we have a $28,000,000,000 total addressable market the way it's been defined historically. 8 of that is beginning to open up to us now with the feed products that we're creating. And then to build on what Helen just said, I think as firms look to outsource more from a technology and even managed services standpoint, I think that addressable market grows. So there's no shortage honestly of addressable market. Speaker 200:52:44And I think the companies that are positioned well moving into this can create some of their own tailwinds despite what the market is giving us. Speaker 700:52:55Great. Thank you. Speaker 1100:52:56You're welcome. Operator00:52:58Thank you. One moment for our next question. Our next question comes from the line of Guru Siddarth of Oppenheimer. Your line is now open. Speaker 900:53:13Hi, this is Guru on for Owen and thank you so much for taking my question. I wanted to ask about the deep sector offering. I think the last major update was back in Q1 when it helped displace a competitor in banking. So any updates here? Because this really seems like it could be solid driver behind AI. Speaker 900:53:32So any updates or insights over here? Speaker 200:53:35A little bit, Guru. Thanks for the question. So yes, we're certainly chipping away here. I believe we now have 8 sectors with some good coverage and over 80 reports within the workstation. And I believe we're also building out some feed deals. Speaker 200:53:53So there's an active pipeline and it is an important aspect of what most banks want to see now when things come up for renewal. So I think there's just 1 or 2 of us in the market honestly that have this in banking. Speaker 900:54:10Got it. Thanks a lot. Speaker 1100:54:11Welcome. Operator00:54:13Thank you. One moment for our next question. Our next question comes from the line of Scott Wertzow of Wolfe Research. Your line is now open. Speaker 1400:54:26Hey, good morning guys and thanks for squeezing me in here. Just wanted to go back to the wealth segment. I'm wondering if we could you can maybe sort of characterize the overall demand on the wealth side relative to what you're seeing on institutional buy side and sell side? I know you talked about modest growth this quarter, but I would love to just kind of hear characterization of the overall demand and compare it to some of the other end markets you operate in? Thanks. Speaker 200:54:49I think it's the healthiest one for us, honestly, Scott. Thanks for the question. So we have a very active pipeline there of deals of various sizes, and we're beginning to build out some interesting workflows beyond sort of what we've been providing over the last few years. And with the introduction of some of these AI tools, I think we're in very good shape. So I'm very optimistic about wealth and our ability to accelerate from here. Speaker 200:55:21Great. Thank you. In summary, we believe we are well positioned in terms of both our strategy and product portfolio to capitalize on the ongoing megatrends in our industry and for when the end markets become more constructive. Thank you all for your great questions today. We'll see you all in September. Speaker 200:55:41Operator, this ends today's call. Operator00:55:43Thank you for your participation in today's conference. This will conclude the program. You may now disconnect.Read morePowered by