FACTSET RESEARCH SYSTEMS INC Q2 FY2025 earnings call

• Phil Snow welcomed Kevin Toomey as new Head of Investor Relations. Second quarter organic ASV grew 4.1%, adjusted operating margin 37.3%, adjusted diluted EPS $4.28. Anticipated inflection in ASV growth in second half. - Wealth reaccelerated with double-digit growth, big wins like UBS, now primary market data partner to half of world's Top 20 wealth management firms. - Dealmakers had banking as drag but renewal activity increased. Launched PitchCreator with robust pipeline. - Acquired LiquidityBook to enhance client workflow needs. - CGS growth solid, benefiting from new issuance market. - Helen Shan discussed quarterly results: organic ASP grew $19.6 million, 4.1% y-o-y. GAAP operating margin decreased, adjusted operating margin 37.3%. Technology spend increased 31%. Employee expenses up 3%, but flat/excluding bonus. Third-party content costs up 7%. Returned capital to shareholders via share repurchases and dividends. Reaffirmed 5% midpoint of organic ASV growth guidance, narrowed range, reaffirmed adjusted operating margin and EPS ranges.

In the second quarter, FactSet's organic ASV grew 4.1% year-over-year. By region: Americas saw 4% organic ASV growth, with strength in wealth and hedge funds offset by mixed results in other segments; EMEA had 3% organic ASV growth, with momentum in hedge funds and PEVC firms offset by erosion in asset management and banking; Asia-Pacific maintained 7% organic ASV growth, driven by Data Solutions sales. Wealth reaccelerated to double-digit growth with big wins like UBS. Dealmakers had banking as a drag but renewed activity. PEVC had double-digit growth. Asset managers and owners faced headwinds but managed services helped. Hedge funds were a bright spot. CGS growth remained solid. Revenue-wise, GAAP revenues increased 4.5% to $571 million, organic revenues up 4% to $568 million.

• Reaffirmed 5% midpoint of organic ASV growth guidance, narrowing the range of top-line outcomes. - Maintaining adjusted operating margin range 36%-37% and adjusted diluted EPS range $16.80-$17.40. - GAAP operating margin expected 32%-33%, EPS $14.80-$15.40. - Higher expenses anticipated in second half for Gen AI, infrastructure, and go-to-market initiatives to boost pipeline.

• Market uncertainty remains a risk. - Lower CPI impacting annual price increases. - Potential impact of acquisitions on margins and EPS if not managed properly. - Risks related to client retention and market competition in various segments.

Q: Could you provide more color on Gen AI traction, especially PitchCreator and pricing?

A: Phil Snow said they're pleased with Gen AI momentum, six SKUs sold, PitchCreator has good reception, Conversational API and Portfolio Commentary also gaining traction. Goran Skoko added clients reacting well to pricing, PitchCreator has active trials.

Q: Is the environment getting better or is the company doing better despite environment?

A: Phil Snow said they've de-risked big rocks, seeing strength across markets, resurgence in asset management, feeds business coming back. Goran Skoko added improvement in buy-side and EMS space.

Q: Where does banking swing factor lie in guidance range?

A: Phil Snow said they've been conservative on banking hiring in pipeline, PitchCreator could help. Goran Skoko said guidance midpoint is baked in with slightly lower or even headcount compared to last year.

Q: Is UBS Vault deal included in ASV this quarter and any more legacy contracts to retire?

A: Goran Skoko said UBS deal was booked in Q2, implementation to start in Q3. No further planned retirements of products.

Q: Color on pricing versus pricing realization for existing deal versus new and renewals, and international pricing pressure?

A: Helen Shan said standard contracts have annual price increases based on higher of CPI or RPI or 3%, international price increases align proportionally. New business has slightly lower price realization but higher volume.

Q: Color on managing to midpoint margin guide with tech costs up?

A: Helen Shan said benefited from lower people costs, managed content and technology costs, expecting ramp up in second half for strategic investments.

Q: Data feed business performance and M&A impact?

A: Goran Skoko said data feed business performing well due to quality content and sales focus, M&A like LiquidityBook and Irwin providing synergies and cross-sell opportunities.

Q: Land and expand strategy for wealth market?

A: Goran Skoko said includes regional expansion, more users, additional services, layering on services for additional workflows.

Q: Anticipation of significant ramp up in organic revenue growth from technology spend?

A: Helen Shan said investments in technology are part of consistent investment to support mid to high-single-digit growth as in three year plan.

Q: Changes in buy-side budgets and sales cycles due to market downturn?

A: Phil Snow said not seeing much change yet, resilient through markets, strong pipeline for second half.

Q: Confidence in second half from pipeline and renewals?

A: Goran Skoko said booked ASV higher y-o-y, better pipeline than previous years, proactive on renewals creating playbooks.

Q: Client count growth and users per client decline?

A: Goran Skoko said uptick in private equity clients with fewer users, Phil Snow mentioned Irwin acquisition clients not including users yet.