Factset Research Systems Inc (FDS) 2004 Q2 法說會逐字稿

Good morning and thank you all for holding.

At this time I'd like to inform all participants that you will be on a listen-only mode until the question and answer session of today's conference.

This conference is being recorded.

If you have any objections, you may disconnect at this time.

I would now like to turn the call over to Mr. Wong.

Thank you, sir, you may begin.

Thank you.

Good morning and thank you all for joining us on this conference call.

Phil Hadley, Mike DiChristina and Mike Frankenfield, who are, respectively, FactSet's CEO, President and SVP of Sales and Consulting are here with me today in our Greenwich office.

You will have an opportunity to ask questions following my review of our operating and financial performance for the second quarter of our fiscal 2004 year.

Throughout this conference call, there will be certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

These statements are based on management's current expectations and beliefs and are not guarantees of future performance; and involve certain risks, uncertainties and assumptions, which are difficult to predict.

Therefore, actual results may differ materially from what is expressed or forecasted in such forward-looking statements due to changes in economic, business, and/or competitive factors.

More information about these and other potential factors that could affect FactSet's business and financial results are in FactSet's annual report on Form 10-K for the year ended August 31, 2003; and quarterly reports on Form 10-Q for each of the quarters ended February 28th, 2003;

May 31, 2003; and November 30, 2003, all of which are on file with the Securities and Exchange Commission.

FactSet undertakes no obligation to publicly update any forward-looking statements as a result of new information, future events or otherwise.

Earlier this morning we announced that FactSet posted another record quarter for the period that ended this past February 29th; with revenues, net of clearing fees, rising 11.4% to $61.4 million and operating income increasing 13.8% to $21.5 million, from $18.9 million in the same quarter a year ago.

A lower effective tax rate, combined with a one-time income tax benefit related to certain state credits allowed for net income to advance 21% to $14.7 million.

One-time tax benefit contributed two cents to our EPS of 43 cents on a fully diluted basis for the quarter, up from 35 cents for the second quarter of fiscal 2003.

Our financial performance for the first six months of the 2004 fiscal year reflected comparable results, net revenues increasing 11.8% to $120.6 million, operating income rose 15.8%, net income grew 21%, EPS increased from 68 cents to 82 cents; including the two-cent tax benefit which I just mentioned.

Total subscriptions, net of clearing recoveries, rose to $249.2 million, as of February 29th, up 11.8% from the $222.9 million a year ago and up $10.4 million from the $238.8 at the end of the first quarter fiscal 2004.

Subscriptions reflect the total annual billings for all services being supplied to clients at any point in time.

Incremental subscriptions to our databases and applications, including our Portfolio Managers Workstation, were the primary drivers of this growth.

As of February 29th, our net client count was 992, a net increase of 64 over the past 12 months and up 11 during the quarter.

Our Workstation count at the end of the quarter was 19,400, which was up another 100 from our total as of November 30th.

This increase represents the third consecutive quarter in which we have experienced modest Workstation growth, reflecting greater stability and a more positive outlook for the financial services industry.

This increase also represents the first fiscal quarter since 2001 -- August 2001, in which we have not experienced year-over-year declines in Workstation count.

Demand for portfolio analytics applications continued to rise in the quarter with over 360 clients representing 2,700 users as of the end of February.

An increase of roughly 25 clients and 300 users during the past 12 months.

Client retention continued to remain above 95%, once again confirming the value of FactSet's applications and services to our clients.

Revenues from our domestic clients grew 10.9% to $49 million for the quarter, compared to the same period in fiscal 2003; with the growth coming from predominantly from continued penetration of the investment management market.

Revenues from our international operations rose 13.6% for the fiscal quarter to $12.4 million.

By region revenues from our European and Pacific Rim operations were $9.6 million and $2.8 million, up $1.2 million and $300,000 respectively for the same period a year ago.

International subscriptions now total $15.5 million, representing slightly over 20% of our total subscriptions.

Moving on to expenses, we have remained cautious in managing our cost structure to sustain a strong operating margin.

Cost of sales as a percentage of revenues declined about 10 basis points compared to the same quarter a year ago.

Lower depreciation expense in our computed-related equipment was mostly offset by higher data costs and increases in compensation to our consulting and software engineering groups.

This partially due to an increase staffing levels.

Selling, general & administrative expenses, as a percentage of revenues, improved by 65 basis points, benefiting from lower occupancy expenses and miscellaneous expenses.

Increases in T & E promotion and professional fees offset a substantial portion of these gains.

The net result is that our operating margin rose to 35% for the quarter, up from 34.3% a year ago.

Turning to capital spending, our cap ex for the quarter totaled $2.2 million, of which just under $1 million was used for the purchase of technology assets and the remainder for the expansion of various offices in the U.S.

On a side note, you will see in the cashflow statement, contained in our earnings release, $6 million cash inflow related to landlord contribution for leasehold improvements.

The contribution was received this past quarter, and is treated for accounting purposes as deferred rent, which will be amortized over the 15-year life of our lease.

You will also see that this contribution is reflected on our balance sheet under deferred rent and other liabilities.

Please keep in mind that the $35 million guidance we have given with respect to total capital spending for the 2004 fiscal year is net of this landlord contribution.

As a reminder, the increased levels of capital spending this year are related to our move to a new headquarters site in the late summer.

This new headquarters will allow us to consolidate our three Connecticut offices in one site, and will also afford us greater flexibility with respect to expansion.

There are two other items I'd like to touch on before we take your questions.

First, as you may have seen from an announcement we made last month, we relocated our data center in Greenwich to Reston, Virginia.

As with the move of our other data center in Manchester, this relocation provides greater levels of reliability for our clients, and also significant -- also significant capacity for expansion.

The move also provides us with geographic and network diversity, reducing the risk of potential single points of failure along the North East corridor.

The other item of note this quarter is that we purchased 2 million shares of common stock from Howard Willie, one of the company's co-founders, in January.

Because this purchase took place in the middle of our fiscal quarter, it reduced our weighted average share count by 1 million for the quarter that just ended.

For future quarters, the weighted average shares outstanding, and on a fully diluted basis, will reflect a decrease of the 2 million shares that we purchased.

At this point, we will be happy to take any questions you might have.

Thank you.

That the time we are ready to begin the question-and-answer session. [Caller instructions] One moment for the first question.

Our first question comes from Brett Manderfeld, you may ask your question.

Hi, good morning guys, it's Brett Manderfeld from Piper asking the question.

The question is: SG&A it looks like was up sequentially on an overall dollar level, was there anything going on, is that the new data center coming on line, is there anything else that we should be looking at there and is that kind of a run rate we should be looking for for the rest of the year?

Thanks.

Well, in the SG&A line, part of that would be related with the data center, but I think the one area that I mentioned in my comments earlier was that we had additional professional fees, which are probably going to occur on a recurring basis, on a quarterly basis, so expect to see some of that come off.

So that'll be continual, Ernest.

Sorry.

You said that will be continual going forward.

No, there were some professional fees that we incurred this past quarter which we would not expect to occur on a regular basis.

Okay.

And I guess secondly, just related to the Marquee product, can you give us an update in terms of the rollout there and receptivity, please?

Hi, Brett.

How are you doing?

It's Phil Hadley.

Um, as we mentioned last quarter, we are about halfway through the transition from our old pricing to our new pricing with our clients, which means that roughly half of our clients have the ability to access Marquee.

That choice inside of a client is a very individual thing, but we've seen certainly an acceleration of transition in our client base to adopting Marquee as part of the service that they have access to.

So you're about halfway -- halfway through that transition.

Halfway through in somebody being able to have it if they chose to, um, the clients who have actually chose to -- to implement that portion of our product, isn't anywhere near halfway at this point.

But I think that a general comment would be that the feedback we're getting in the marketplace is very positive and we've seen many significant clients switch over and choose Marquee as their primary quotant improvisor.

And is there something that -- that -- that you would use as kind of a trigger to go to your clients and say, would you like this -- the new product and I guess I'm kind of curious why you wouldn't just go to all of them right away and say we've got this new product, would you like it?

To date it's just U. S. news and quotes which, if you're a global manager may not meet all of your needs.

That and people who tend to be bound into a contractual relationship with the current provider, so the window of opportunity for them to choose a change isn't every day, it's typically once a year.

Sometimes once in every couple years.

Um, and it's a feature-based decision that, you know, clients get to that point at various points in time.

I guess the logical follow-up would be when do you expect to have international pricing built into the system?

Our current target is within the next year.

Next year.

Okay.

Great.

Thank you.

Thank you.

Our next question comes from John Neff.

Your line is open, you may ask your question.

Hi, guys, just a little bit more, I guess, color on the SG&A line.

It's been a while since we've seen the operating margin decline sequentially.

Sort of this -- if you can -- just what sort of professional fees were incurred and could you in any way sort of give us a proportion or a breakdown in terms of what was recurring and what was non-recurring in terms of the incremental cost?

John, to begin with, I think, as we mentioned in our guidance last quarter, our overall margin -- operating margin was going to be coming in between 35 and 36%, so I think we had guided towards potentially a lower end as well.

But with respect to your questions, um, the professional fees, um, run the whole gamut of consulting fees related with various aspects of our operations, I'd rather not get into the specifics.

There are also some additional miscellaneous fees, but--

I guess I'll throw in a comment on top of that.

We knew that we were going to get the benefit of -- we had spent substantial capital expenditures three years ago on our mainframes when we rolled those out and rolled in the new ones at basically half the price we paid the first time.

We knew we were going to get a benefit from the depreciation/amortization line.

Uh-huh.

Given the prospect of the business we had moving forward, you know, we chose to invest that money in the business as opposed to expand margins.

I think it's an indication of what we think the market is -- is -- looks like to us.

And, you know, as opposed to continue to expand margins which we had done through the downcycle, um, you know, I think we're more optimistic and chose to invest in the business and drive the top line.

It will give the shareholders a better return on their investment.

Okay.

Great.

And, um -- and we've talked about this in the past, Ernest, I just was wondering, especially in light of the article today with MFS and everything, are you hearing any more or -- in terms from clients, in terms of soft dollar scrutiny and concerns related to that?

Um, I guess I can answer that question.

It's Phil Hadley.

Um, you know, we've actually done quite a bit of research in the last quarter just because it seems to be a question that comes up a lot and we wanted to make sure we had as much information as we could to answer the question.

Obviously, the soft-dollar issue somewhat is a political issue.

You know, it certainly has some merit if you're looking at shareholders, uh, of mutual funds and if the commission pool is reduced.

Um, on the negative side of it with the industry, you know, it'll certainly hurt smaller investment managers.

I think the larger investment managers can handle that much better than the smaller firms can.

I don't think people have thought through how it's going to affect independent research.

Certainly if you're a quantitative firm and you don't even use Wall Street research, you know, it hurts your particular investment style.

Um, so as we went through and talked to our clients, we really kind of probed and tried to figure out which outcome we thought would come to fruition.

Uh-huh.

The consensus certainly is that there will be more disclosure.

I don't think there's any debate that somewhere out of this process there will be a requirement that people will disclose how they're spending their commission dollars.

The second scenario is that you take the ICI report and say, well, you know, we should draw a new line somewhere.

That maybe a -- a -- a newspaper is not allowed to be used with commission dollars but full-service brokerage still is.

Um, that one I think has lots of issues to it because I don't think, you know, as we talked to our clients, only a few had really thought through all of the pros and cons and where do you draw the line.

You know, a lot of the full-service brokerage firms provide many of the things that, you know, would be -- you know, banned if you drew the line that way.

And many of the full-service brokerage firms provide benchmarks, many of them provide electronic access to research, many of them have, uh, electronic trading.

Um, you know, how do you handle trading through a Bloomberg and getting credit for that?

I mean there are a lot of issues of where do you draw the line and where does the line end up?

Uh-huh.

Our response to that would be, you know, it's impossible for us in the business to react to something that -- that we don't know where the line is going to be drawn.

We do sit in a luxurious position at the firm in that, you know, we were founded as a broker dealer; and in fact for the clients who pay directly to us in commissions, they're not using -- it's not a third-party or soft-dollar relationship, it's just like a full-service brokerage firm.

Some of our clients have a hard time making that leap because the person who answers the phone isn't in fact an employee, but that means that we're one employee or two employees away from solving that problem if that's just a perception issue.

We'll certainly go that way, if it helps our clients and if it helps, you know, FactSet as a business and gives clients a mechanism to pay it if the line gets drawn in a way where full-service brokerage is okay; but anything short of that or third party is not okay.

And then the last scenario is that commissions get banned completely, which, you know, takes FactSet out of the picture, takes full-service brokerage out of the picture and all of your paying for is trading.

As we explored all of these options, um, you know, we kind of looked at the impact level on our business and -- you know, we have a business where 60% of our business today is paid for in cash dollars.

And unlike many products on the street, ours has had a definitive price for years and years and years.

And, in fact, the few firms that have switched, which would be less than a handful of firms; all of which would be headline firms in the newspaper and typically have issues with -- with various regulatory agencies at this particular point in time, so their incentive to switch is very strong, um, relative to everyone else.

Um, the impact on the service level of the clients that we analyzed has actually been positive.

Meaning that there hasn't been any change in subscription level.

In fact, several of the clients substantially increased their subscription level.

Hmm.

So from a business perspective, I just don't see it as a significant issue.

Now, there's certainly an issue at the lower end of the market, as I mentioned, if you ban commission dollars, you will hurt the smaller money managers because they don't have the same economy of scale as the larger investment managers do.

In purchasing our service, or any service, or even full-service Wall Street Research, you know, it's definitely a scale business.

I'd be surprised if the regulatory agencies really want to, you know, allow the majors in the industry to dominate more than they already do and to provide such a huge barrier for somebody to enter this pretty good business, but, you know, stranger things have happened.

But if that -- that scenario did happen, and you look at the mix of business that FactSet has, our business is very, very, very skewed to the high end of the marketplace.

And as I mentioned, those few that have changed, you know, don't even blink when it comes to switching and it doesn't change their pattern at all.

And if you analyze the other end of the spectrum for us and get down to -- I don't know, pick the hundred smallest clients that we have that would be most severely affected, maybe it would affect half of those clients in a pretty significant way.

I don't see it affecting, you know, our future opportunity any more or less than the mergers in our industry that have been happening for the last 20 years.

If it's a percent in our future opportunity growth rate, you know, maybe that's the case.

Um, but that can't even happen until, you know, it becomes a clearer picture where a ban is inevitable and that we can't change or configure ourselves as a business to fit in the right sets of fence from a regulatory purpose, um, to the benefit of our clients.

Um, so it's definitely an issue that's been out there now for a year.

When I look at our business, and our business issues internally, it doesn't even reach the top of the radar screen and Wall Street Research, it seems to be the most popular thing that everybody has to talk to.

I'm also shocked that -- at the fact that it's somehow associated with us and not everyone else.

You know, it's certainly going to affect Reuters and certainly will affect Thomson.

If anybody in this industry, maybe they're not counting commissions the way we're counting it.

We're counting it the ones that are directly paid with us, as well as through third party.

But it will affect every player in the industry and dramatically change how the -- how those firms get paid as well.

But I guess the net net of it is, I really don't view it as a material issue and when we're strategizing internally about what our priorities are and how we're going to react to things, we've done research primarily because we have been pushed to do so; but I just don't see it as being something that is an issue for FactSet going forward.

Even if you banned it tomorrow, maybe there would be a step function in our opportunity for one quarter, but then we're back to the races and growing at whatever rate we'd grow at in the future based on the opportunities and the software that we can create, but that doesn't scare me in the least.

Great answer.

Thank you very much.

Thank you.

Our next question comes from Joe LaManna.

Your line is open, you may ask your question.

Yeah, I have a question looking back and then looking forward on the operating margin.

It appears that historically in your fiscal fourth quarter your operating margin has been noticeably higher than in the previous three quarters of each year.

What is the reason for that and is that a -- is that a pattern that you expect to repeat in this year's fourth quarter.

There is no specific reason for operating margins being higher in the fourth quarter and, you know, as -- as you are aware, Joe, typically we only give guidance one quarter out at a time.

And we aren't giving guidance for our third quarter operating.

So there's no seasonality to the margin?

Not specifically.

And as we've given guidance, you know, we've actually -- you know, worldwide increased our office space commitment by about 25% and we're rebuilding out, uh, roughly -- somewhere between 50 and 60% of that space in the next six months.

So from a business perspective, we certainly will have some pressures from that.

The good news is, obviously, that it's an indication of how we feel about our business as well as, you know, sets us up very well for the next 15 years, so it's a great investment in our future opportunity.

Based on that and based on your earlier comment, Phil, that in this quarter you chose to reinvest in the business and drive revenue more than margin, is that something that you would expect to continue beyond this quarter.

I think, you know, the comment I've typically given quarter to quarter and when anybody's ever asked me about margin is it's not -- sometimes it's been a side-effect of our business and certainly we were very conservative in the downcycle and margins did expand.

But as a business we tend to drive -- want to keep margins consistent or reasonably consistent and drive revenues.

So I mean that would be the -- the focus that we would have at this point.

Um, certainly quarter to quarter, I think we're down 50 basis points from last quarter, which to me is not significant.

There's no way that -- that you can manage your expenses that tight so that it's magically the same number every quarter.

Okay.

Thank you.

Thank you.

Our next question comes from Craig Huber, your line is open you may ask your question.

Yes, good morning.

Thanks, from Morgan Stanley.

Phil or Ernest, just on this cost of services, I just want to get a little more clarification on the sequential increase there.

I think you mentioned some database fees and so forth, some labor costs, reinvestments and so forth.

But can you just put a little more meat on the bones?

It sounds like most of that's going to be recurring going forward but I just wanted to confirm that.

Thanks.

Sure.

With respect to labor costs, I mean on the costs of services we include our consultants and software engineers.

Year-over-year our headcount has actually increased by over 13%.

I'm not sure whether that's reflected -- it certainly probably is higher than that with our software engineers and -- and consultants and so there would probably be more, you know, margin pressure on the cost of services line with respect to those additional hires.

Data costs is just a function of the health of our business, quite frankly the more, um, we have clients, the more they subscribe and that's actually good for our business when we see data costs increasing.

Are you suggesting, though, that you brought in some pretty senior people during the quarter or maybe on the latter part of the prior quarter so we didn't see that ramp up in labor costs last quarter.

Well, in the first quarter--we do our merit increased in the first quarter in the middle of the first quarter.

So you are never going to get the full affect of merit increases in the first quarter, the full effect is always going to happen in the second quarter.

In addition to -- you know, we've continued to expand headcount throughout the first and second quarter.

So the two will compound each other.

Okay.

Thank you.

Thank you.

Our next question comes from Keith Gay.

Your line is open you may ask your question.

Good morning.

This looks like the third straight quarter that password count has increased since the bottom of last May and it looks like it correlates pretty well with securities industry employment.

Do you expect -- are you seeing a gradual increase continuing and can you kind of characterize that relative to sell side as well as buy-side clients?

I can handle the first part.

Um, I would -- I mean obviously the summer will be an interesting metric; and I think, you know, from what we've seen, you know, I think the hiring patterns for this coming summer are certainly more positive than they have been for the last two.

I think that will bode well for us.

As far as the mix for the buy or the sell, I don't think it's probably material--

It isn't really material, there's probably, um, a higher level of buy side passwords relative to sell side during the past year.

Okay.

And -- and on the soft-dollar issue, Phil, can you just -- you had said, just to re -- repeat, um, you had said you have anecdotally customers that have switched from soft-dollar over to cash.

Are you -- are you basically saying that you haven't seen any customer losses or reduction in subscription value there?

And, also, what has been your -- I think over in the U.K., there's -- I think very little soft dollar, if any, what has been your experience over there?

Is there anything that we can -- we can glean from that?

In the U.K., you -- it hasn't even been a datapoint that has ever reached management that we've talked about.

As far as the data that we looked at, this quarter, just trying to find a datapoint, you know, as I said it's a handful--which I'm talking five or less, um, of the subscriptions that we looked at, um, you know, in these communications they're major firms and actually increasing the subscription to our product.

So the -- you know, the only correlation -- I mean there is no correlation that we can find that we -- would be negative.

As far as client losses, I haven't seen a one that relates to soft dollars.

When we did research the client base, you know, the majority of client bases are going to wait and see.

It's impossible for a buy side firm to create a policy around something they don't know, you know, how it's defined yet.

So the majority are going to wait and see.

And the only ones that have actually made the move are the ones that are at the high end that had issues with mutual fund trading.

And then, Ernest, on the cap ex guidance for the fiscal year, can you give us a little better handle of how we should think of that relative to the last two quarters of the year?

How that -- how that flows in or where you're planning your increased cap ex expenditures.

Well, as I think we mentioned last quarter, probably about $17, $18 million of this cap ex is related with, uh, leaseholds and furniture and fixtures; and of that total, probably two-thirds would relate to leaseholds and the remaining furniture and fixtures.

Our leaseholds would be depreciated over a 15 year timeframe, given the term of our lease, furniture would be depreciated on a 7 year double declining basis.

The remainder of the $17 million would be a combination of, uh, data center upgrades, technology equipment and the like.

Okay.

Thank you.

Thank you.

And as a reminder, if you would like to ask a question, please press star one.

Our next question comes from Peter Everett.

Your line is open, you may ask your question.

Hi, good morning.

I guess first to follow on to Keith's question with regard to the trend in password count.

I was actually thinking that in the context of the employment numbers looking a fair amount better in recent months, that the password count might have been a little bit stronger; and I'm wondering if we should read something into that in terms of continued reticence on the part of organizations to commit to the FactSet service, whether you're hearing anything about that back from your sales folks.

And I will just throw a second question out unrelated to that.

And that is, Phil, I was hoping you could maybe give us a little insight in terms of product or service enhancements that we should be looking for over the next six to 12 months that you think might be relevant from a revenue perspective?

Thanks.

This is Mike Frankenfeld.

With respect to the increase in passwords, we continue to see clients operating much like we are, sort of cautiously optimistic.

They certainly are adding quite a bit new of value-added applications and databases and they are adding passwords really as -- as their headcount increases and so far it appears that it's increasing at a pretty slow rate, but positive nonetheless.

So no indication from clients, though, that they're approaching the purchase decision with FactSet differently than past cycles in terms of asking people to double up, etc.?

Definitely not.

Increasingly, it's important for -- clients feel it's important that each employee has their own password.

Due to the nature of our service, always being on and being a service that clients are using all day long as part of their investment process.

Okay.

Peter, does that conclude your question.

No.

I was hoping you'd talk about new product offerings that we should be anticipating over the next year that might be relevant from a revenue perspective?

We haven't made any product announcements and don't plan to, you know, the strategy of FactSet if you continue to build value in the categories that we currently serve in the marketplace.

Obviously, the Portfolio product, the Marquee and we focus on the investment management and investment bank.

Within our product lines are actually hundreds of products, certainly enhancements in each one of those, but no major shift in our product strategy in the next six months or several years probably.

Okay.

Thanks.

Thank you.

Our next question comes from Aaron Skloff.

You may ask your question.

Good morning.

I know we spoke a bit earlier about north of 50% of the customers having the opportunity to upgrade to the new pricing with the new product offering.

Can you tell us what kind of expectations you actually have for attachment to that new pricing and that new product offering over what period of time?

Uh, I guess I'd answer the question over the next several years.

We haven't set a definitive time as to when to convert everybody over on a hard basis, but it's been going very well on a softer basis.

And I think that works better for both parties, both FactSet and the client.

Um, so, you know, I think it -- it has a lot to do with making sure the value point's there for the client.

Obviously as the Marquee product gets stronger and as we continue to enhance the features in our product, it -- you know, makes it a much easier decision for the client and, in most cases, it's their decision as opposed to ours.

So based on your discussion with the clients and your own expectation, do you have kind of intermediate term goals, for instance, in one year out we expect this percentage, two years out, this percentage and hopefully in several or three years, I forget what your exact comment was, we'll be at this percentage?

Any expectations internally.

In approximately three years we'll be at 100%, so somehow in the next three years we'll be at 100%.

Is it fair to assume prorata?

Um, I'll answer that casually, but honestly I haven't -- haven't, uh, you know, it may not be -- it may not happen pro rata, but, uh, you know, that would be a safe assumption.

Very good.

Thank you for your help.

Thank you.

And our next question comes from Craig Huber, your line is open, you may ask your question.

Phil, just to be totally clear.

If I recall correctly, roughly a year and a half ago I thought you said you planned a three-year transition for people -- for all of your customers to be on the Marquee platform.

This you mentioned three years just a minute ago.

Is that three years from now or three years from back then?

I guess the answer is -- you know, we haven't set a definitive end point, so, you know, I said it was in 2004, then, you know -- then it would be the end of 2004.

And if -- it could happen any time in the next three years is basically the answer.

But what we have set a hard end point there.

Okay.

And then your Marquee product, how long do you think it's going to take you to have that product where the functionality of it is every bit as good as IOX and/or Bridge or even better, frankly.

Is it another one or two years away to get it to that level?

Uh, well, I think in our strategy with Marquee is not to create, you know, another product that exists in the marketplace.

You know, we focus on the features our clients tell us are important.

I think, you know, the returns we are getting from the clients who are using the product on a full-time basis are very positive.

There are many features there that don't exist in the marketplace.

I think the most significant thing for us is to get, you know, the non-U.S. quotes in the product.

And I think that will afford us a great opportunity from that point on.

As far as matching everybody else in the industry for features, uh, I think that's a game that no one will ever win because everybody's always moving but, obviously, we're kind of young in the marketplace; so it will take us longer to get to the point where you would necessarily consider apples to apples on every single feature.

But if you look at niches that we serve I think that, you know, for our typical end-user that it will be a very full-service product and it is already for many.

Okay.

And then lastly, for your Basic Workstation, can you discuss what your plans are perhaps over the next six to nine months, any new features or databases you want to make accessible through FactSet?

Thanks.

We've got--this is Mike Frankenfeld.

We've got lots of enhancements planned for all the different applications.

We continue to put all sorts of new enhancements that -- into our Portfolio Analytics product, probably not the appropriate forum to go into detail here.

We continue to enhance our Company Analysis capabilities and really all of the major features in our basic product, uh, are -- are continuously evaluated and enhanced where appropriate.

Okay.

Thank you.

Thank you.

Our next question comes from William Drewry.

Your line is open you may ask your question.

Hi, thank you.

I'm not sure if you covered this before but I don't think you did.

Just wondering, right now, what percentage of your business is coming from investment banks and just, you know, major money center banks, if that's still a relevant term to use these days.

And just wondering what you're hearing from those types of clients as their business, you know, starts to significantly improve here; as far as their -- you know, interest in -- in, um, you know, ramping up or ramping back up, uh, you know, on the password side.

And then one just little question for, uh -- for Ernest.

Just wondering had what the dollar amount was and the benefit of the quarter of the two cents, I did not see that or missed that in the release, if you could give us the actual dollar amount on a net-income basis?

Thank you.

As far as the mix of our business, it stayed relatively constant through time, roughly the investment banking part of our business is 25%.

As far as the conversations we've been having with our clients in the last six months, I'd say, you know, the tenor of the conversations changed significantly; um, from 100% cost focus to, uh, much more value looking forward focus.

I mean, I would characterize it as a dramatic change in tenor.

So do you think that -- that, um, that would yield that percentage going up, that 25, or has it been constant over the course of the cycle so you would expect, um, that to stay constant even if, uh, you started to see a significant increase in the volume from the big investment banks going forward?

You know, the investment management side of the business is doing well, so on a relative basis they kind of move along together.

Investment banking, probably lost a percent or something in this part of the cycle.

Um, but I don't see a dramatic shift in the mix of our business in the next couple years.

Um, you know, much more than a percent or two.

Bill, with respect to the other question on the tax benefit, um, you interpolate from the EPS two cents, um, you get to a number that's about $700,000.

Great, very helpful and thank you very much.

Thank you.

And as a reminder if you would like to ask a question, please press star one.

Our next question comes from Brett Manderfeld.

Your line is open you may ask your question.

Question, is there a way to break out the sequential growth in subscriptions at $10 million.

I say break out, is -- is roughly 50% coming from the new pricing with Marquee, or is it 10%?

Hopefully you can give us a ballpark, thanks.

Brett, the exact breakout certainly I don't have, uh, here.

Uh, certainly a small portion of it is -- is -- I guess what you would consider price, but typically it's -- when we look at it, we look at it as we're delivering a mix of new clients and -- as well as within the existing clients, new Workstations, uh, new Marquee Workstations as well as new applications and databases.

By far the largest increase of that $10 million is, um, a result of increased subscriptions to databases and applications such as our PMW application, along with some increase subscription value for Workstations.

So it's not really coming from the Marquee, the upsell?

No.

I would say -- and this is just guessing, because it's -- you had a he have to break it down client by client to figure out exactly what everything -- but I would guess, you know, certainly less than -- than, you know, our -- probably a couple million of the $10 is related to people changing their configurations.

Okay.

That's helpful.

Thank you.

Thank you.

And at this time, I'm not showing any further questions.

I just wanted to make a final comment.

Just -- just so that people kind of put things in the right context, FactSet had a significant quarter.

I think this is the best quarter that I've seen in the marketplace in the last two years.

As far as our organic growth rate, as was noted by Keith, our ID count as well as our organic growth rate bottomed in May of '03 and has actually improved and, uh, improved from 10.5% to 11.8% on a subscription run rate basis this quarter.

I think that bodes well for the future of FactSet and opens up future opportunities.

Thank you all for listening.

Thank you.

This concludes today's conference.

Thank you for your participation.