Factset Research Systems Inc (FDS) 2009 Q3 法說會逐字稿

Welcome the the FactSet Research Systems third quarter fiscal 2009 quarterly earnings conference call.

At this time, all participants are in a listen-only mode.

(Operator Instructions).

Today's conference is being recorded.

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

Now I will turn the call over to Mr.

Peter Walsh, Chief Financial Officer.

Thank you, Operator.

Good morning to everyone.

Welcome to FactSet's earnings conference call for the third quarter of fiscal 2009.

Joining me are Phil Hadley, CEO, Mike DiChristina, President, Scott Beyer, Director of our Non-US Sales Operations, Sharon Kennedy, Head of Investment Banking, and Mike Frankenfield, who is in charge of our US Investment Management Business.

This conference call is being transcribed in real time by FactSet's CallStreet service and is being broadcast live via the internet at factset.com.

A Replay of this call will be available at our web site.

Our call will contain forward-looking statements reflecting management's current expectations, based on currently available information.

Actual results may differ materially.

More information about factors that could affect FactSet's business and financial results can be found in FactSet's filings with the SEC.

In an effort to provide additional information our comments may include non GAAP measures, such as free cash flow.

Any non GAAP measure discussed today has been reconciled to the related GAAP measure in our earnings press release and our SEC filings.

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

Our agenda today will be broken in to three parts.

First, I will review Q3 results.

Second, I will cover guidance for the upcoming fourth quarter.

Finally, we will close by addressing your questions.

Before I talk about results, I would like the take a moment to highlight one item.

Included in this quarter's EPS was an income tax benefit of $3 million, or $0.06 per share.

During the quarter, we finalized our US tax returns for 2008.

We recognized a tax credit from repatriating foreign earnings and adjusted certain reserves to reflect expiration of the statute of limitations.

Prior to covering third quarter results, it's appropriate to remind listeners that we believe FactSet is operating from a position of strength.

Our balance sheet is strong and in the last 12 months, our business has generated $161 million of free cash flow.

We successfully captured non-employee related cost savings, helping us deliver healthy EPS increases, while investing aggressively for the future.

Our financial flexibility facilitates a philosophy of continuous investment to improve our product offering.

We think a good metric to track investment levels is our head count plan, which for 2009 reflects an increase of more than 20%.

While our top and bottom line growth has declined, please do not lose sight of the fact that it remains positive.

Our EPS is growing in double digits through these poor market conditions, while we execute on investments for the future.

Let's turn to the review of the third quarter and begin with free cash flow.

As a reminder, we define free cash flow as cash generated from operations, which includes the cash cost for taxes and changes in working capital, less capital spending.

During the last year, free cash flows rose to $161 million, up 34% over the last 12 months.

One very interesting relationship is the comparison of earnings to our free cash flow.

Free cash flow over the last year exceeded net income by 14%, this illustrates the quality of our earnings.

Free cash flow generated during the third quarter was $64 million.

It was a record amount, and 39% higher compared to our previous best quarter.

Drivers of free cash flow during Q3 were increased levels of net income, lower currency rates, strong execution on cost savings, positive working capital changes and lower CapEx.

Improvement in working capital was driven by a 14%, or $11 million decrease in accounts receivable.

As we reminded listeners on last quarter's call, it's normal for receivables to rise during Q2 and fall in Q3.

Over the last 12 months, accounts receivables increased just 2%, while revenues are up 5%.

DSO at quarter end is now 42 days, down from 48 days last quarter.

Capital expenditures were $1.2 million, net of landlord contributions, for construction of $1.9 million.

Approximately 70% of capital expenditures were for computer equipment, and the remainder covered office space expansion.

Capital spending levels decreased compared to prior year due to improvements in hardware utilization and higher levels of landlord contributions to fund the build out of new office space.

Our ending cash and marketable securities balance was $191 million at May 31, up 44% during the quarter, compared to $132 million at February 28, 2009.

During Q3, we invested $11 million to repurchase common stock and paid a quarterly dividend of $8 million.

There is $134 million remaining in repurchase authorization.

The quarterly dividend rate rose from $0.18 to $0.20 per share.

An increase of 11%, effective with the dividend paid today June 16th.

Now moving to the P&L.

Revenues were $154 million, up 5% versus us a year ago.

Operating income advanced 11% to $53 million.

Net income rose 18% to $39 million.

EPS was $0.79 per share, up 22%, of which 10% related to income tax benefits.

Let's look at the revenue drivers.

ASV decreased $9.5 million during the third quarter, excluding a $1.1 million benefit from foreign currency movements.

As a reminder, we define annual subscription value, or ASV, as the forward looking revenues for the next 12 months from all subscription services currently being supplied to our clients.

ASV was $615 million at May 31, and advanced $25 million over the last 12 months, a growth rate of 4%.

FactSet's Investment Management business represents 81% of total ASV.

The remainder relates to services used by M&A Investment Bankers and sell-side equity research professionals.

While we're not pleased with the absolute quarterly ASV change compared to history, we believe it represents strong relative performance.

Since the global economic downturn began in September 2008, our ASV has been flat in a shrinking market.

This causes us to believe that our market share is growing.

An already difficult selling environment was amplified by weakening equity markets in 2009 through mid March.

Users declined 1,600 to 37,100, driven by adjustments from sell-side firms.

Client count was 2,033 at May 31, a net decrease of 34 clients.

The annual client retention rate was greater than 95% of ASV in 88% of clients.

Allow me to provide some color behind the recent client trends were seeing.

Buy-side clients continue to manage spending carefully.

While our user count from the buy-side was flat, firms continue to trim deployment of applications that do not support a daily process or are utilized on a very frequent basis.

PA2.0 was deployed by 647 clients, representing 5,600 users.

Users dropped by 180 during the quarter, while the number of clients decreased by five.

The fact that our PA client change is positive since September 2008, indicates to us that the economic downturn forced this outcome rather than competitive pressures.

Finally, sell-side firms continue to scale back on headcount.

The headcount reduction this quarter was almost entirely sell-side driven, and is the effect of several large mergers and a strong bias to conserve capital.

Lack of available credit through most of Q3 adversely impacted the number of M&A transactions, and the profitability of sell-side banks.

During the quarter, we saw several positive growth trends that are noteworthy to underscore.

First, healthy returns continue from investments in proprietary content.

We were pleased with the adoption rate of FactSet Fundamentals by both new and existing clients.

This drove down the loss and dilution from our investment in fundamentals.

The quarterly operating loss from FactSet Fundamentals decreased 38% to $1.6 million from $2.6 million last quarter.

The investment in FactSet Fundamentals diluted earnings by $0.02 per share, an improvement of $0.01 compared to Q2.

Demand for FactSet estimates continue to ramp up nicely.

We're delighted with how our investments have paid off to expand coverage globally and add (inaudible) research from sell-side firms.

Our proprietary content offers us significant opportunities.

We've increased the number of employees supporting our collection operations, and have sharpened the tools to deliver data in bulk form.

We believe our own content can be leveraged with current clients and prospects.

We didn't have proprietary content in the last downturn that began in 2001.

Since that time, content collection has become a core competency and is an asset that is enhancing our growth.

Marquis' performance continues to be strong, its a product that services real time news and quotes needs of a global investor.

Its deployment is ramping nicely with user growth of 39% on a year-over-year basis.

Marquis users have increased during every quarter that comprises this current downturn.

Since Marquis is a product used every day, this statistic is significant, and means to us that even though the number of users have declined, the overall engagement level from existing users is increasing.

News and quotes is a common denominator on almost every user's desktop, existing cost clients and prospects alike.

This fact and the fact that Marquis users are increasing in this shrinking environment, tells us our product is improving its competitive position.

This phenomenon is key, given the number of user prospects for Marquis is far greater than the size of our existing user base.

Taking a look at geographic performance, US revenues were $105 million, up 3% from the year ago quarter.

Non US revenues increased 8%, to $49 million, including currency.

By region, quarterly revenues from our European and Pacific Rim operations were $39 million and $10 million, respectively.

Subscriptions by the non US based clients were $196 million, representing 32% of the Company wide total.

Moving to expenses for the quarter.

Operating expenses were $101 million, and our operating margin rose to 34.5%.

In Q3, operating expenses declined sequentially compared to Q2.

The source of this decline was successful cost savings initiatives.

As we covered on last quarter's call, our annual expense base was reduced by $16 million, or $4 million per quarter, due to a stronger US dollar compared to last year.

We hedged the majority of our currency exposure for Q3.

On a hedge basis, Q3 currency rates were very consistent sequentially, compared to Q2.

While both the Euro and Pound had gained significantly on the US dollar in the past 60 days, the impact on our expense base will not be immediate.

Our Euro and Pound currency risk is hedged 95% through mid January 2010.

Turning to the specifics of the quarter.

Cost of sales as a percentage of revenues increased 28 basis points over the prior year period.

Higher compensation and amortization of intangibles were partially offset by a reduction in variable data costs.

Higher compensation and amortization of intangibles was driven by our investment in FactSet Fundamentals, which was not in operation at this time last year.

Lower data costs were caused by a reduction in variable payments to data vendors based on deployment of their content over the FactSet platform.

SG&A expenses expressed as a percentage of revenue declined 2.3% year-over-year.

This decrease was driven by lower compensation and T&E expenses, partially offset by higher rent.

Lower compensation was due to favorable currency movement and stable head count in the US and Europe.

T&E was lower due to a decrease in the cost per trip and the FactSet engineering conference that was held only in the prior year quarter.

Rent increased due to a full quarter of expense from our recent office expansions in Boston, Hyderabad and Tokyo.

Employee count at May 31, 2009 was 2,550, up 400 employees during the quarter.

The increase in headcount was driven by expansion of FactSet's proprietary content operation, including the FactSet Fundamentals collection team.

The effective tax rate for the quarter was 28%.

The components of the effective tax rate are 33.6% for fiscal 2009, partially offset by an income tax benefit of 5.6%.

The income tax benefits related to finalizing prior year's tax returns, repatriating foreign earnings for the US, and adjusting certain reserves to reflect expirations of the statute of limitations.

EPS was $0.79, including income tax benefits of $0.06 per share.

EPS grew 22%, including 10% related to income tax benefits.

Let's move to the outlook for the fourth quarter of fiscal 2009.

Projected revenue range for Q4 is $152 million to $157 million.

EPS guidance for Q4 is $0.73 to $0.75 per share.

This guidance represents a 10% increase in EPS at the mid point of the range, and includes $0.02 dilution from FactSet Fundamentals.

The 2009 guidance for capital expenditures, net of landlord contributions, is $22 million to $26 million.

The top end of the range has been lowered by $2 million compared to the guidance last quarter.

To sum it up, Q3 adds to our continuing string of successful quarters.

Our EPS is growing in double digits while we continue to invest for the future.

Over the years, regardless of the market cycle, FactSet's relative financial performance has been strong.

Our results highlight the benefits of investing in our products, a predictable business model, and a very talented employee base.

We are fortunate to operate in an industry where opportunities are enormous relative to current size.

We have a lot of work ahead, but we are excited and focused on the future opportunity to create great value for our shareholders.

Thank you for your participation in today's call.

We are now ready for your questions.

Our first question comes from Peter Appert of Piper Jaffray.

Thank you.

Two questions please.

First, Peter, can you talk about the fixed income product.

The momentum you're seeing there.

How significant it is to revenues and how significant you think it could be as a driver in fiscal 2010.

And the second question, as you think about revenue per terminal, in the last down cycle you benefited significantly from growth in revenue per terminal, partly from the introduction of Marquis.

Is FactSet Fundamentals sufficient to drive similar kinds of growth in revenue per terminal in this cycle.

How do you think about the potential for growth in revenue per terminal.

Good morning, it's Phil.

Fixed income products for us is still early opportunity.

We are investing very heavily in it and are excited at the early returns.

It's a growth product for us.

Still doesn't show up as something that's truly material that's driving the business at this point.

Second part of your question on revenue per terminal, in the last cycle there were a couple of factors that came in to play, Access pricing model is one where the terminal prices is one of the components of what our clients pay for service, its really broken into three pieces, there is a front end base fee, which is a core level of service, clients have the option to subscribe to additional users receipts.

In addition they have the option to subscribe to additional products.

When user account and some of the large (inaudible) comes down, it's really just on the marginal fee count basis, which tends to drive the revenue per terminal.

So, that's one of the factors.

The second factor you pointed out is the fact that we are continuing to sell more product.

To the extent that we have more applications, or more content or applications for fees to sell on the front end of the product, that tends to drive revenue per terminal.

To answer your question on whether proprietary content can help in that factor, the answer is absolutely yes.

In the last cycle, if you went through the list of proprietary content thats on FactSet system, we had just started building content, so it wasn't a driver at all, at this point we have a full suite of products of which Fundamentals and Estimates would certainly be very core to the FactSet service.

In the current quarter, if I'm calculating this correctly, I think you were up about 12% on a year to year basis, in terms of revenue per terminal.

Is that a run rate number that we should be using going forward?

It's not a metric we follow internally, it's one that definitely the analyst community follows, we tend to look internally at revenue from the component, but always in a total ASV form.

Just because configurations in clients are changing all the time.

I couldn't comment on what that trend should be.

Okay.

Just one last thing, Peter on the FX front, I'm not fully following your comment on the $16 million benefit versus the hedged exposure.

As we think about the earnings benefit from FX, is it basically, is the message that the $4 million per quarter is still operative for another couple of quarters, assuming FX stays where it is.

The right way to think about FX depends on what context you are looking at it.

If you are looking on a year-over-year basis, it is a $4 million quarter benefit when you compare today's rates versus is last year's rates we used in Q3.

If you are looking at the impact of FX sequentially, the FX rates utilized in Q2 compared to the just completed Q3, are very, very consistent because we hedged those rates during the quarter.

Going forward, we have extended our hedging program to mid January, 2010, so the recent weakening of the dollar relative to the Euro and Pound impact on our annual expense base has been deferred, and any future changes of the dollar, stronger or weaker, will also be captured effectively once January 2010 rolls around.

You are good through January 2010 on the $4 million run rate?

The run rate on $4 million is comparing and a year-over-year basis.

Your rates change every quarter.

Right.

Am I right then, that given the hedge, though, you're assuming rates basically constant through January 2010.

They are constant when we hedge them out in Q2.

And so, we will continue to see that benefit in the earlier quarters.

Thank you.

Our next question comes from Kevin Doherty, Bank of America.

Following up on some of the cost questions, maybe excluding the FX, total SG&A actually declined year-over-year, really for the first time at least in the last ten years.

Any indication on where that absolute basis can go, given your further cost containment efforts, and assuming FX is relatively flat, could that absolute number decline sequentially in the fourth quarter?

Kevin, the way we are really managing our expense is at the total operating expense line.

We are really managing FactSet's operating margin to be flat.

The fact that SG&A declined was really a function of a much lower T&E base, due to lower cost per trip, and us managing our inter- office travel on a careful basis.

And the fact that our investment levels were very, very strong, but particularly in content collection, which is really in the cost of services line.

But what we are really focusing on is investing very heavily and aggressively in the future, and we're focusing on the total operating expenses in the Company, in an attempt to make sure investment levels are healthy while keeping flat operation margins.

Maybe to extrapolate what we saw in this quarter, by in large the cost of services were relatively flat year-over-year, but you got a lot of leverage at the SG&A side, I guess that's why I was focusing on that front.

Going forward, you have been managing from flattish margins, but you've been ahead of the curve in containing costs, is that trend something you think is sustainable?

Even your guidance next quarter implies some sequential margin improvement.

Trying to think longer term, if we are in an environment of flattish revenues, what do you think that will means for the operation margin.

Our guidance as of today goes out for a quarter, we cover both EPS and revenues, we haven't given specific operating margins, it wouldn't be prudent or appropriate to do so just on this call.

I think I will let you calculate what you think the operations margins are based on our guidance for EPS.

Okay.

Just to follow up, about the 34 clients lost in this quarter, were those mostly hedge funds or what's the right way to think about what comprised those clients?

It probably wouldn't be surprising to anyone on this call to think the adds or the purchase decisions by our clients were delayed in the last 90 days.

On the add side, things slowed down dramatically, certainly relative to what we experienced over the last several years.

Then in addition to that, as we analyze the clients that left us, the vast majority of those either suffered severe AUM loss, or just plain closed the doors all together.

So, its fair to assume those were mostly smaller clients that you lost.

Yes.

If I could sneak one last one in, last quarter you mentioned potentially benefiting as some of your competitors that have more exposure to annual contracts might be under a little more cost pressure, have you seen any incremental benefit of that yet, or do you think that's something still to come in terms of some wallet share benefit?

To refresh everybody's memory, our business model is one where our clients for the most part have a month to month contract, the fact where they can adjust service levels up and down, which benefits back very positively in a strong environment where clients are adding services and can easily add and don't have to have a long-term purchase decision to bring a service on.

In this part of the cycle, it does come across as a bit of a negative, in that they are able to adjust our service negatively, quicker than other players in our space.

It's not a positive in this cycle relative to our competitors, only to the extent that when the contracts do come around for other services in the marketplace, we are viewed as a strong partner and our business model is one where they feel comfortable having that as a flexible partner to be able to have a great service.

It sounds like nothing that's moved the needle, at least to date.

No.

Our next question comes from Glenn Greene of Oppenheimer.

Thank you, good morning, guys.

The first question, I wanted to go back to the client end user growth, or decline trends, with 34 client losses, it sounds like it's generally been small buy-side firms, and you eluded to the sell-side user decline was mainly sell-side.

I'm trying to reconcile those two factors, what proportion of the user decline was from the sell-side versus the buy-side?

Essentially all.

If you're thinking about the user decline, it was close to 100 percent of the user adjustment, on a net basis was on the sell-side.

On the client count, think of it, we report the net number, obviously gross adds and cancels that create that net number.

So I just described on the last answer, what I thought the characteristic were on the slow down of the adds, as well as the consistent heavy cancels from primarily the buy-side.

Then related to pricing, you guys put in place a price increase last quarter, I was wondering what kind of push back, or to the extent that's been the stable, and has that helped.

Our price increases is quite modest.

Low single digit.

It went through the client base, and is generally expected in our industry.

Then finally, any color or commentary relating to competitively, specifically related to Thomson Reuters and the integration there, if that's been a benefit in any way to you, if there has been some disruption in conversion of platforms and things like that.

Obviously both ends of these were competitors and prior to merging together I think that the merger of the two firms creates opportunity for everyone in the marketplace as they rationalize the product line, the gigantic and largest player in the space, they've announced discontinuation of several of their products, which creates opportunity for us and for the most part not material to them.

They definitely have created some opportunity for us.

Thank you.

Our next question comes from John Neff of William Blair.

Hi, guys.

Compared to your fiscal end last August, you've added about 600 employees, and you had indicated that 600 employees was about what you were going to add to support the proprietary data efforts with the fundamentals acquisition, can you give us update on where you stand with that hiring.

I'm a little confused by your fiscal 2009 plan, calls for 20% head count growth, when you are standing at 40% as of May.

Thanks, John.

The way to reconcile it is during the quarter we converted a BPO relationship to a (inaudible), meaning we hired employees, and a growth rate of more than 20%, I'm essentially including those people in the beginning year base, that's how you get to a what I would call a apples-to-apples, year-over-year basis of 20%, more than 20% employee growth.

Okay.

If I recall, that BPO relationship was about 300 folks.

That's right.

So are you essentially done now?

Yes.

In terms of hiring.

Not in terms of hiring, we will continue to hire during Q4, both in Fundamentals and also a popular hiring season because we hire directly out of college for both consulting and software engineering.

Okay.

But as far as the support for the proprietary data efforts, that hiring that 600 people you discussed, that's pretty much done?

We will continue to hire there.

Okay.

I guess one of the questions I have is that your headcount is way up, yet your operating margins are up 200 basis points.

Maybe number one could you quantify in the quarter and maybe year to date what the margin benefit from FX has been, and then what does that suggest for margin potential coming out of this downturn, and the hypothesis would be more proprietary content equals more operating leverage coming out of this and the fact you've been able to, even if all the margin improvement was FX, 200 basis point year-over-year, even if it was all FX, the fact you've been able to maintain your margin, while adding the significant amount of headcount, what does that say about operating leverage coming out of this, historically I thought of you as maintaining a flat margin type of profile.

If you are looking at year-over-year and the impact of currency on operating margin, it would have improved operating margins by 2.6%.

And going forward, we are obviously focused on keeping our margins flat and investment levels very very high.

Because FactSet, the software product, it is important we invest in our product for the future.

We are pleased that we are going to see a plus 20% net headcount growth, because that represents as significant investment in our product and for the future.

We are continuing to invest in that product whether it be content or applications, or in the service, as we go forward, and we continue to see this as a marathon, and keeping those investment levels very high is a very important to win that marathon.

I guess one of the things at the margin, having more proprietary content than you ever had to sell, by definition, you have got roughly $5.2 million in run rate for Fundamentals at this point.

It's a $100 million opportunity, losing $1.6 million this last quarter, as that grows that run rate grows, how does it not put upward pressure on margins overtime.

John, it's really all about the whole software business and in our case content as well, how much do you continue to invest for the future of the product.

You could take this business and take margins up substantially, by not investing for the future.

As we complete the fundamental project and replicate the product that we purchased from Thomson Reuters, you could have margins continuing to expand, but it's not a industry that allows you to sit still on the features at the software level, as well as the content.

So, we will continue to invest in more and more content o drive the value of our product forward and increase the value for our clients.

And your guidance for Q4, revenue of $152 million to $157 million, based on where subscription value ended in May, sets up a baseline revenue number of below the mid point of your guidance range.

My question is what could get you to the high end of that guidance range?

I think the Q4 has a fair amount of nonsubscription revenue, I was wondering if that would be what would be getting you to the high end of that range.

I think for us to be on the high end of the range we need to see subscription value that would be certainly a significant improvement over what we just placed in Q3.

You're right to point out that there is nonsubscription revenue, most notably revenue that we do collect only in Q4, related to intern work stations that work just in the summer.

You're not counting on the nonsubscription piece to get to the high end.

No.

That is likely to be lower in Q4 this year than last year.

It's included in the calculation of our guidance.

Okay.

Good.

Quick housekeeping question, Peter, Marquis user account was that 39% or 31%?

39% on a year-over-year basis.

Okay.

Then last question, you haven't disclosed this, I'm not expecting you to do it now, but any thought to eventually disclosing proprietary content subscription value from proprietary content.

I can't see us having any plans to do that John both because, for competitive reasons it's obviously something that's valuable to us.

Second most important one, distinguishing the value creation in our product between the actual content and software and service, makes it a subjective call.

Guys thank you.

Our next question comes from Jon Maietta of Needham and Company.

Do you get a sense that there is a lot of pent up demand in the customer base and with prospects, and do we need to see another quarter or a couple quarters of stability in the equity markets before we could see folks accelerate spend again?

We think about running the business in what we focused on internally, we focus on the things we can control.

The things of our team can control would be the execution of our product and marketplace, we spent a great deal of time making sure we are investing in the right software for our client's work flow and the right content to make it so they get the best answers to their questions and investment process.

As far as where the market is going, I have to admit and I'm sure everyone on this call would admit, if you were trying to predict the last year two years ago, I don't think anybody on the call would have gotten it right.

I don't have an opinion as to where the market is going to go.

I do know that if the market, we are strongly correlated to how the market is to doing from an AUM basis and from an employment or M&A capital market activity level.

To the extent those are stable or positive, that's a good thing for us, to the extent the market goes in to a tail spin, those are negative for us.

As a business, we to some extent almost ignore those and plot along and make sure we can execute against the things we can control.

Have you had commentary from customers where you can connect the dots.

Where folks may be saying, if we can just get through calendar 2009, we will be in a good spot to invest in technology next year.

My guess is that you probably have as much exposure to that as I do.

And the feelings of the buy-side and how they feel in this environment, it varies dramatically firm by firm, depending on how they've managed through this cycle.

Just one housekeeping item, Peter should we expect that the tax rate to normalize in Q4 get back to a 30% to 35% range?

Yes.

If I was looking at a tax rate going forward I would use the effective tax rate for 2009, excluding one time items which is 33.6%.

Thanks very much.

Our next question comes from the Dave Lewis of JP Morgan.

Hi, guys, good morning, most of my questions have been asked.

I want to dig deeper on the competitive landscape.

Some competitors have gotten in to proprietary content like yourself, can you elaborate your edge on the asset management side, particularly in bringing the content towards your customers having as a historically being a consolidator of content, being at the front seat of the table, or how that gives you an edge.

There is a customer service factor variable that gives you guys an edge in the negotiations, can you elaborate how you go about differentiating yourself on that pitch.

Thanks.

Across for Estimates, Fundamentals, Marquis.

So as you pointed out, its an integration business, many players in our space.

Clients have a great deal of choice when it comes to fundamentals, estimates, news, all kinds of content, as to what is the best solution for their work flow.

At the same time, as somebody who has spent the last 30 years manipulating that content to answering questions for our clients, we get a clear picture as to what they need in their process.

Historically, we depended on what somebody supplied us to answer those questions.

Now we sit in the position to go collect the content, or modify how the content is collected in a way where we can extend the value deeper than we could before.

Earnings estimates for example, being able to have earnings estimate data base is nice.

It's much more powerful for clients to be able to click on each of the analysts on this call, and go to your research document and see where the estimate came from and get more color, than it is to just see an estimate that maybe a consensus or a name in a detailed list.

To click on your name and have it email you directly.

Because our core client base are large institutions, your good client, that enhances work flow because they can stare at the seven analysts on FactSet and know exactly who you are, and exactly which research reports you put out, and know who is the high on the street and low on the street, and your commentary that goes along with each of those, if you take and extend that to fundamentals, having data and the data base is great, it's much more powerful if you can navigate back to the source document that created that number.

So the underlying theme is that because we know so much about our clients work flow, our ability to take our proprietary content and make the best on the system is something we will focus heavily on in the next years to come.

Our next question comes from Greg Moskowitz of Auriga.

Good morning, guys, wondering if we go to the user account change sequentially, you said it was almost all sell-side driven.

I believe last quarter, the commentary was along the lines of almost every major buy-side firm having made reductions, and curious if you are seeing any perceptible change in terms of the approach taken by bigger buy-side clientele, have they right-sized for happenstance in terms of AUM, or how are you looking at that?

It's hard for I me to answer whether they feel they got the right size for their employment base for their current level of assets under management.

Our user count was stable in the quarter.

And that either means we're gaining share or the clients spending habits changed.

If we look at the sell-side, is the user change generally driven by maybe a smattering of firms undergoing a grooming process or right sizing on their end, or is it a function of a minority of larger firms making significant changes?

The large firms on the street drive all of the headcount as far as the total fee basis, one where they've gone through several cycles of adjusting headcount and continue to do so to try to find the right size for the business.

If I look back historically, FactSet has seen a little more of a sequential uptick in ASV in the fiscal fourth quarter as compared with other periods, I know you don't guide to ASV specifically, wondering if you have thoughts on ASV from a seasonality perspective.

Historically, that seasonality up tick in ASV, some was sell-side related.

Due to their own hiring patterns with really hiring heavily out of universities.

I'm sure they have adjusted their hiring patterns relative to history.

Given the off market conditions, and so we are not sure obviously if that trend will continue in this particular Q4.

Got it.

Lastly a follow up on the hiring question, I believe you were at 230 employees that were based over in India for the FactSet Fundamental effort, curious where that stands at today.

We have more than 300 employees in Q4, as a very aggressive hiring period for us, we will reach our head count plan of somewhere between 500 and 600 employees for fundamentals by the end of the fiscal year.

Great.

Thanks for taking my question.

Thank you.

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