Factset Research Systems Inc (FDS) 2014 Q2 法說會逐字稿

Welcome, and thank you for standing by.

(Operator Instructions)

Now, I will turn the meeting over to your host, Ms Rachel Stern, Senior Vice President Strategic Resources and General Counsel.

Ma'am, your line is open.

You may begin.

Thank you, operator.

Good morning, and thanks to all of you for participating today.

Welcome to FactSet's second quarter 2014 earnings conference call.

Joining me today are Phil Hadley, Chairman and CEO; Peter Walsh, Chief Operating Officer, and Mike Frankenfield, Director of Global Sales.

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 also be available on our website.

Our call will contain forward-looking statements reflecting management's 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.

Annual subscription value or ASV is a key metric for FactSet.

Please recall that ASV is a snapshot view of client subscriptions, and represents our forward-looking revenues for the next 12 months.

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

I'd like to turn the discussion over now to Peter Walsh, Chief Operating Officer.

At the end of his remarks, we will have time for questions.

Please limit your questions to one each and one follow-up, so that we have time to address as many as possible.

Thank you, Rachel, and good morning, everyone.

Here's how I plan to spend our time today.

First, I'll review two housekeeping items.

Second, we'll review Q2 results.

Third, I'll provide guidance for Q3.

Finally, we'll end with your questions.

So let's begin with some housekeeping.

You'll remember, that in December, we acquired a 60% ownership interest in Matrix Data Limited for $20 million.

On February 17, we acquired the remaining 40%, for a total purchase price of $32 million.

As we've mentioned before, Matrix provides intelligence to the UK financial services market for mutual fund distribution, and complements our Market Metrics business.

In Q2, Matrix added $2 million to revenues, while reducing our operating margin by 40 basis points and earnings per share by $0.01.

We do not expect Matrix to have an impact on our diluted earnings per share for the full fiscal year in 2014.

We have also kept you updated on the US Federal R&D tax credit and its impact on FactSet.

The credit expired on December 31, 2013, and therefore, our Q2 EPS and Q3 guidance includes a $0.03 reduction compared to the prior year.

The R&D tax credit has only lapsed once in its 32 year history.

Our tax rate would have been 29%, rather than the actual rate of 30.5% had the credit been reenacted before the end of Q2.

Now on to second quarter results.

FactSet had a solid and encouraging second quarter.

ASV, revenues, client count, user count, and EPS all grew to record highs.

We are pleased that this quarter ASV totaled $920 million, up 6% organically over the prior year.

We grew ASV by $29.8 million this quarter, of which $7.3 million came from the acquisition of Matrix.

Our ASV from US operations totaled $626 million, while international operations accounted for $294 million or 32% of the whole.

Buy-side clients, which include off-platform data sales and the Market Metrics business, accounted for 82.7% of ASV, while the remaining 17.3% of ASV was generated by our sell-side clients, which include M&A advisory, capital markets, and equity research businesses.

Adjusted EPS rose to $1.22, a 10% increase compared to the same period last year.

Prior-year adjusted EPS excludes tax benefits from the R&D tax credit, and a charge related to stock-based compensation.

We are proud to point out that this quarter marks our 15th consecutive quarter of double-digit EPS growth, which is nearly 4 years of growth at that level.

Free cash flow, which is defined as cash generated from operations, less capital spending, was $38 million for the quarter, down 12% compared to the same period last year.

Over the last 12 months, free cash flow was $254 million, up 21%.

Free cash flow was lower this quarter due to an increase in accounts receivable.

In each of the last five years, DSOs has peaked in Q2.

This year in Q2, DSOs were 39 days compared to 36 days a year ago.

The increase in accounts receivable was driven by the timing of client payments.

Client collections through yesterday, the first 11 business days of March, were $13 million higher than the comparable periods in January and February 2014.

We believe the increase in accounts receivable is temporary.

And like previous years, will return to normal levels during Q3.

Our cash and investment balance was $103 million at February 28, down $85 million in the past three months.

Share repurchases this quarter increased to 800,000 shares, for a total of $86 million.

As of February 28, we still had $219 million remaining in our share repurchase program.

During the prior 12 months, we have returned $398 million to shareholders in the form of dividends and share repurchases.

At the end of the quarter, we had 42.4 million shares outstanding.

Now let's review our P&L.

In the second quarter, FactSet's revenues increased to $227 million, up 7% compared to last year.

Organic revenues grew 5.1% over last year, excluding $3 million in revenues from recent acquisitions.

Operating income for Q2 grew to $75.1 million.

This quarter, adjusted net income grew 6% to $52 million, and adjusted diluted EPS grew 10% to $1.22.

Please note that the prior-year adjusted net income and EPS both exclude income tax benefits from the federal R&D tax credit, and a charge related to stock-based compensation.

Our US second quarter revenues rose to $154 million, which equates to 6% growth compared to the same period last year.

Non-US revenues rose to $73 million.

Excluding incremental revenue from the acquisition of Matrix and the impact of foreign currency, the international growth rate was 6%.

More specifically, revenues in the second quarter from Europe and the Asia-Pacific regions were $56 million and $17 million, respectively.

Excluding foreign currency effects and acquisitions, year-over-year growth rates were 5% in Europe and 12% in Asia-Pacific.

Our second fiscal quarter was a strong one from a number of vantage points.

One, client growth was strong this quarter, as we've added 64 net new clients organically compared to 35 last year.

Overall, we added 96 clients, with 32 acquired from Matrix.

Organic net client growth this quarter was the highest total since 2006.

Our total client count is now 2,632.

We continue to include in our reported client count only those clients that we bill at least $24,000 annually.

Consistent with prior quarters, our annual client retention rate was greater than 95% of ASV, and 92% in the terms of actual clients.

Our net user count of the FactSet terminal rose by 849 users over the past quarter, compared to a decrease of 150 in the year-ago quarter.

Total user count was 51,900 users at quarter end.

While users declined slightly at sell-side clients, user growth on the buy-side experienced the highest quarterly change since 2004.

Wealth management continues to be a growing area for us with positive returns.

We have found that our workstation can be well tailored to the needs of our wealth management clients, who operate in both large teams and in small groups, depending on the client.

Their use of our workstations often closely parallels those of our traditional institutional asset management clients, as their practices have become ever more sophisticated.

Those clients are also increasingly making use of our Portfolio Analytics suite of products.

Four, our Portfolio Analytics suite of products continues to be a strong seller for us.

In particular, our clients and prospects have appreciated the value of this set of applications that is capable of use in analyzing securities and portfolios, based on a variety of asset classes.

We were gratified this quarter to see sales related to our equity attribution and risk, with success from clients who focus heavily on fixed income portfolio analysis as well.

In addition, our publisher and SPAR applications have been successful this quarter, too.

Our investment banking clients continued to face challenges in their industry, making their purchase decisions lengthier and more difficult.

Sales of proprietary content by our global content sales team have expanded as well.

FactSet's StreetAccount product, both on and off-platform, continues to be a highly regarded and desired product by many of our clients seeking condensed, easy to digest, up-to-the-minute news.

We've also been successful in licensing proprietary FactSet data, including FactSet Fundamentals, FactSet Estimates, ownership, transcripts, and data linking entities as well.

A range of clients consume our data feeds from large, existing FactSet clients to many that are entirely outside of our core client base.

Lastly, as had been our practice over the last few years, we issued our annual price increase for many US investment management clients during the second quarter, and it increased ASV by $7 million.

As we've previously mentioned, the price increase issued each second quarter has been becoming progressively smaller, and not as a fundamental matter, but because more and more clients have been experiencing a price increase at the time of the renewal and renegotiation of their contracts with us.

As a result, price increases are imposed throughout the year and there's not as much a standard item in Q2.

Now let's take a look at the expense side.

For the second quarter, operating expenses were $152 million, and our operating margin this quarter was 33.1%.

As forecasted, the recent Revere and Matrix acquisitions lowered our Q2 operating margins by 70 basis points.

Q2 cost of services, expressed as a percentage of revenues, increased 280 basis points compared to the same quarter of 2013.

Due to incremental costs from the Matrix and Revere acquisitions, plus higher compensation expense from additional headcount in our engineering, consulting, and product development groups.

SG&A, expressed as a percentage of revenue, decreased by 950 basis points in Q2, compared to the year-ago period due to a prior period pretax charge of $15.7 million for vesting of performance-based stock options, and lower occupancy costs, as we did not enter into any material new leases this quarter.

By the end of the second quarter, we had 6,486 employees, a net increase of 87 employees, primarily due to the acquisition of Matrix.

In Q2, our effective tax rate was 30.5%, consistent with Q1.

As I've mentioned, the effective tax rate was impacted by the expiration of the Federal R&D Tax Credit.

Had the credit been reenacted, our Q2 effective tax rate would have been 29%.

Now let's turn to our guidance for the third quarter of FY14.

Please note that all guidance figures include full consolidation of Matrix.

We expect that our revenues will range between $229 million and $233 million.

Our operating margin is expected to range between 32.5% and 33.5%.

This range includes a 70 basis points reduction from Revere and Matrix acquisitions.

We expect that diluted EPS will range between $1.24 and $1.26.

This diluted EPS estimate accounts for the expiration of the Federal R&D Tax Credit, which had the effect of lowering each end of our range by $0.03.

The annual effective tax rate should range between 30% and 31%.

This range also takes in the lapse of the Federal R&D Tax Credit.

In reviewing the first half of our fiscal year, we continued to make strides.

We have grown by every measure: EPS, ASV, client count, user count, and revenues.

Our return on equity exceeded our three-year average of 35%, and we continued to be aggressive in deploying capital in the form of new product development, acquisitions, and share repurchases to maximize EPS accretion.

Although we are in many instances the smaller player in the field, we still believe we have the preeminent products and the best solution for our clients, coupled with one of the greatest service models and teams in the industry.

This was most evident as new clients and user acquisition on the buy-side reached quarterly highs not seen since 2006.

We plan to keep on pushing ourselves to create the best solutions for a variety of problems, no matter how simple and straightforward or elegantly complex.

Thank you.

We're now ready for your questions.

The first question comes from Mr. Peter Appert.

Sir, your line is open.

You may proceed.

Thanks.

So Peter, on the SG&A costs, even if I take out the vesting thing a year ago, it looks like the SG&A was flat or down a little bit year-to-year.

Anything you'd call out on that?

Peter, I wouldn't call out anything specifically.

As you know, we've been managing FactSet at the total operating income line, and that's rarely where we focus.

So there hasn't been anything specific that I would call out.

Okay.

The sequential acceleration in passwords is very encouraging, obviously.

And the -- so I don't think you gave a specific number for buy-side, did you, in terms of percentage increase in buy-side passwords?

We didn't give a specific percentage increase.

We just said it was the best since 2004.

Okay.

I know that Phil in the past has said that he doesn't really focus on revenue per terminal, but I can't help notice that the revenue per password number has decelerated a little bit over the last couple of quarters.

I assume some of that is a function of mix and pricing.

But anything else that's noteworthy in that metric, and is that something we should be concerned about?

No, Peter, it's Phil.

I think the way I would think about it, is any time we have strong password growth like we did this quarter, it's going to bring down the average per password.

Because as we sell our product in that vector of revenue, they wouldn't come on at the average.

So it's actually a good thing.

And the same is true with client count.

If we have a strong quarter for adding clients, a new client does not come on at the average client rate that we'd have.

So as I've said many times, I think it's important to look at it as a positive, but as soon as you start dividing the numbers there's lots of things that come into play.

Got it.

And then last thing, Phil, the acceleration password growth is particularly noteworthy because some of your competitors have seen tougher times.

Any color you can offer in terms of how you're feeling about the competitive dynamic in the market currently, or how it's changed from a quarter or couple of quarters ago?

No, it really doesn't change that much quarter-to-quarter.

Same players in the space.

I think we feel very good about the product and mix that we have in the marketplace.

As Peter kind of added in the color, it was certainly primarily a buy-side phenomenon for us.

And we continue to gain share both in seats, as well as clients.

Okay, and this is actually the real last thing.

The cap spending number looked particularly low this quarter.

So Peter, any thoughts on where that should be for the full year, and how should we think about that going forward?

In terms of capital spending, I think the real drivers of it in terms of movement from quarter-to-quarter really relates to real estate and build out of new space.

We mentioned on the call that we hadn't signed any new leases, and I think that's really the reason why it was sort of a muted quarter in terms of capital spending.

In terms of full year, we've stopped including in our guidance because it's been such a small and really irrelevant number.

I think if you look at it in terms of historical numbers relative to a percentage of revenues, it stays very consistent year-to-year.

Got it.

Thank you.

Thank you.

The next question comes from Mr. Shlomo Rosenbaum.

(Operator Instructions)

Mr. Rosenbaum, your line is open.

You may proceed.

Hello, thank you very much for taking my questions here.

Hey, Peter and Phil, maybe you can just give us a little bit more color in terms of the strong user and client adds for these [long OEs], hedge funds, were they wealth management, can you just give us a little more color as to what the composition was?

Hello, Shlomo, it's Mike.

Growth in user count is primarily coming from the investment management segment, which includes wealth managers.

We think of -- when we think of wealth managers, I'll remind everybody that we're targeting really the high net worth managers who are operating very much like traditional institutional investment managers.

We had several big wins in the quarter, some important client displacements, that led us to have some really good user growth in that area.

It was a little bit offset by some headcount reduction in the banking segment, though the reduction in users in the banking segment is happening at a much slower pace, and it's also being offset by positive growth amongst the middle market banking users.

So any decline in that segment is really only happening in the big firms.

It just -- the tone from you guys just seems to be better this quarter.

And I'm wondering if you're sensing that the environment just overall is getting better, or is it just because, hey, you had some competitive wins that really did pretty well over here?

And can you just talk about that a little bit more?

Because it sounds like the buy-side is definitely doing better for you, and then on the sell-side it's just not quite as bad.

And you're just not seeing -- you're not seeing the declines at the same pace and actually getting more traction.

So you just delve into that a little bit more.

It's Mike again.

I hesitate to get too the excited or too [level].

Our sales process is characterized as one that has a very, very long sell cycle.

Our product development process involves making bets and developing product that takes years to get into the marketplace.

So really what you're seeing this particular quarter is the results of work that began many quarters ago.

It's come to fruition now.

And I think we just take a steady as she goes, keep trying to understand what our users need, how we can add value to them, and try and build the best product possible.

Come on.

Give us a little bit more than that.

Just on the tone.

Is there any -- would you say you're better, you feel the environment is better this quarter than last quarter?

Just -- or is it really just a pop this quarter because -- ?

Again, I'm not -- it's hard to get too excited on a quarter-to-quarter basis.

If you look at why we're doing well, we've got great improvements to the product in terms of functionality, user experience, speed.

Our content sets enable us to sell complete solutions to clients without having to involve third parties, and that gives it a little bit of momentum.

We've specialized the sales team even further, and have greater segment focus and specialization on new client acquisition.

These are all things that I think are really resonating with clients, and maybe there's a little bit of firm creation on the buy-side.

There's certainly a little bit of firm creation in the middle market from the sell-side.

All of that -- there's still uncertainty amongst the very biggest clients on the sell-side.

So overall, it's a positive environment, and I feel like we've got a great product to go after it.

Very good.

Thank you very much.

Thank you.

The next question comes from Manav Patnaik.

Your line is open.

You may proceed.

Hello, good morning, everybody.

I was just wondering if you could remind us how you define the size of the wealth management market, and maybe what your current penetration is today?

Just to get a sense of how much leg is left in your wealth management side?

This is Phil.

It's certainly depending on where you would draw the line, give you over 500,000 users, I'm not sure that's really the target we're after at this point.

As Mike alluded to, we're after the higher net worth or the ultra net worth end user, who, maybe in old school days, you might think of as a trust officer in a commercial bank.

But things have changed, and assets gather in a bunch of different ways.

And as Mike alluded, we've had success in that space.

The good thing for us, is it's really the same product we're selling to that space.

And our work flow solutions, since they really have an institutional nature, work very well for us.

Any sense of I guess obviously 500,000 is the big market which maybe you're not after.

But how many of those users you guys currently have?

Not something we've quantified at this point.

But that just is a driver for us.

All right.

And then just one more from me.

In terms of these nice little acquisitions that you seem to have done with Revere and Matrix, how would you characterize the M&A pipeline and what the opportunities look like in terms of -- or maybe even not just small but even mid-sized ones that you guys track?

I would call the pipeline very consistent.

We're generally an attractive buyer, so we're involved with pretty much anything that's in our space.

We have a pretty high threshold when it comes to things that we're truly interested in, and the threshold really isn't going to help our financial professional end users that we currently sell to.

So we put under that filter and look for things that are going to be great for our shareholders and for FactSet.

Okay.

All right.

Fair enough.

Thank you, guys.

Thank you.

The next question comes from Mr. Glenn Greene.

Your line is open.

You may proceed.

Thank you.

Good morning.

Nice results on the quarter.

A few questions.

I want to drill down a little bit on the buy-side user growth, try the to tackle it in a couple different ways.

Was there any change from your existing clients in terms of their propensity to add seats or licenses?

Just trying to get a sense for the core business, ex new client adds.

Was there any acceleration there?

I think there was modest acceleration amongst the existing clients.

It really came -- there were three drivers.

There was a big expansion amongst the wealth users, core business added users, and then we acquired new clients, which certainly drives workstation growth.

And was the 850,000 odd or there about, almost 900,000 buy-side user adds in the quarter, was it skewed by a few large deals, or do you think it was more broad-based?

You alluded to the wealth management and a few competitive take-aways, but just trying to get a sense for was this a few one-off nice big wins or was it more broad-based, systemic?

I think it was broad-based.

There were unquestionably a couple big wins, but they were not a disproportionate amount of the total user increase.

And then just to help me understand how you're defining the strongest user growth since 2004.

As we look back through our model, there's certainly been plenty of quarters of stronger user growth in this quarter.

Does that imply that the historical user growth we've seen might have been more dramatically skewed toward the sell-side than I guess I would have thought?

Yes, yes.

Because the way we were just calling that out in this particular quarter, Glenn, was just isolating that buy-side user growth was the strongest since that period.

And that's -- is that a year-over-year or a quarter-to-quarter metric, sorry, that you're thinking about it?

That's just in the quarter itself.

Relative to previous quarters.

Okay.

And one more clarification, if I might.

The organic ASV growth number, the 6% year-over-year, just as I think about it, just to make sure I'm on the same page and how you'd get there, I would have thought you would have the $7 million for Matrix and the $5 million for Revere that you would adjust out.

Maybe there's something else in there.

No I think those are the two adjustments.

Is that what -- it's noise, but you get -- it's about a point lower organic growth, I think.

Maybe after the call we can compare numbers.

But I think you might -- it rounds up to 6%.

Okay.

all right.

Thank you.

Thank you.

The next question comes from Mr. Joseph Foresi.

Sir, your line is open.

You may proceed.

Hello.

My first question here is, how sustainable do you think the momentum is on the sell-side?

And maybe you could just talk about how many of those additions were new versus take-aways.

Hello, it's Mike.

So the sell-side is characterized really by two client types.

There's the large, [bold bracket] firms, and the middle market firms.

The areas that we're seeing the best growth, though by no means spectacular growth, is in the middle market area.

In the big firms, they continue to be very cost focused, spending a lot of effort rationalizing their spend.

They've not yet turned into the point where they are investing materially in their business.

So we're not seeing any sort of material growth in the bold bracket firms.

And then just on the -- sorry.

Go ahead.

Well I was going just add a point of clarification.

I think the percentages we put out, the 17.3% and the 82.7%, would be what we would think on the organic.

So it would exclude the $12 million or the $5 million from Revere plus the $7 million from Matrix, which might be leading people to think that the sell-side grew and it didn't.

So the growth this quarter is on the buy-side.

Okay.

That's very helpful.

And then just on the margin front, how do you think about those long-term as you continue to integrate the acquisitions?

And how do you think of them in relation to SG&A spend?

I would go with Peter's answer, in that honestly, don't think of SG&A and cost of goods as something different in FactSet, even though the accounting profession divides those two up.

And I would think that over time, we'll integrate and get efficiencies with those acquisitions.

But I would stay focused on FactSet from an EPS growth perspective.

If I could sneak one last one in.

On the banking, I think you said you lost a couple.

Maybe you could just talk about what was the reason for that?

Well I think that Mike alluded to the fact that banking is just a very choppy space for us.

They typically do all of their hiring in the fourth quarter, and everything in between can be up or down depending on -- an individual client can swing a quarter on an ASV basis.

But I wouldn't characterize it any different, other than the fact that quarter-to-quarter it's very choppy.

This quarter less choppy than last, but still choppy.

Thank you.

Thank you.

The next question comes from Mr. Alex Kramm.

Sir, your line is open.

You may proceed.

Hello, good morning.

Just a couple of things left here.

One, I think in the quarter past or maybe two quarters ago, you made a comment that when you actually get new users or new clients on-board that a lot of times you actually give them a little bit of a fee waiver for a year or a few months or so.

And that's been one of the reasons why ASV growth has trailed some of the user and client growth.

So obviously this year or this quarter we saw a nice little acceleration in ASV here.

So just wondering, is some of that playing out over the last few quarters?

You've been giving fee waivers, and now finally those users are kicking in and starting to pay?

And if that's the case, what is the pipeline of maybe more people going from that transition into actually paying for the services they're getting?

Alex, just I think a point of clarification.

User and client wouldn't count if somebody's on a zero revenue trial to match a contract expiration.

Okay.

But then in general, can you make comments about that revenue kicking in for maybe some of the guys that you have generated in general?

So, Alex, every quarter, a very high percentage of our ASVs that we derive comes from existing clients.

New clients when they come on, come on at a much lower average ASV than our existing clients.

We may also offer transition discounts to help clients manage the transition from one supplier that did analytics to FactSet.

Once these clients become clients, that's really when our opportunity begins to introduce new products, new services, and to upsell the client and help them improve more and more of their work flow process.

The punch line is, new clients come on at a typically low ASV level, and over time they grow.

And it's that relationship we have with clients that drives ASV for FactSet.

That makes sense.

Thanks for that clarification.

And then just secondly, maybe on the margin a little bit, I don't think you've commented on it.

Obviously, that has come down from the acquisition here.

And I think the guidance next quarter, again, the margin is still looking at that lower level, but at the same time you're saying the acquisition is not dilutive for the full year.

So is that implying that you're getting back to margins, the 50 basis points higher or so that you've seen last year as we move throughout the quarter, throughout the year and then into FY15?

Hello, Alex, it's Peter.

There's a lot of things that influence our operating margins from quarter-to-quarter, and even the two acquisitions that we referenced.

While they did have an impact on our margins, the relative size to FactSet's entire business is quite small.

Historically, looking back, we've managed our margins to be flat, and we're very proud of that fact.

Because at the rate at which this business is generating margins at between 33% and 34%, we're still -- which is very high, we're still aggressively investing back in the business.

In terms of looking ahead, I definitely would encourage investors to look at our forward operating margin guidance in Q3, and also EPS, which implies that on an adjusted basis, again, EPS will grow by more than 10%.

All right.

Fair enough.

Thank you.

Thank you.

Our next question is from Tim McHugh.

Sir, your line is open.

Yes, thanks.

I just had one question, most of mine have been asked.

But on the pricing trend, you gave the commentary that the price increase looks smaller just because of I guess different timing in terms of when you're pushing through price and in terms of adding them to renewals.

Can you give us any color in terms of how that year-over-year pricing trends would look right now versus what you've seen the last 6, 12, 18 months?

Just trying to normalize for that timing factor, and how pricing is trending for you.

So as Peter alluded, historically we've -- or as he said in his opening statement, we saw less from price increase in the second quarter of this year, because more of the price increases have been over the course of the year in a way that corresponds with clients renewals.

Our philosophy around pricing is pretty consistent.

Over the course of the year, FactSet releases hundreds of enhancements to its clients at no incremental cost.

As the year goes on, and we study the competitive dynamic, we study the effect of these enhancements on our users, and we try to determine where we've added the most value.

It's a very fluid process.

I would say our price increases tend to mirror CPI, at about that level, and that's a level that I would anticipate going forward.

Okay.

Thank you.

Thank you.

Our next question is from the line of Bill Warmington.

Sir, your line is open.

Thank you.

And I'd like to add my congratulations on the strong subscriber growth and the strong client growth.

So a question for you on the -- you mentioned your investment in new products.

I just wanted to ask about the new product pipeline, how that was looking, if there was anything particularly that you wanted to focus on?

Thanks, Bill.

It's Peter.

In terms of new product, we've been investing both in terms of new applications and new content.

Our fixed income portfolio analytics product has been one that has been garnishing a lot of investment for us and continues to do quite well in the marketplace.

We've been -- on the content side, I would say that we've been investing aggressively in StreetAccount in terms of expanding its coverage, and also its value points in different types of news stories.

And we've gotten particularly good feedback from users on that investment.

I did also want to ask how StreetAccount was doing just in terms of an acquisition that you guys made, how that's performed versus your expectations over the past couple years?

I would characterize Street account as materially outperforming our expectation.

It's given us opportunities to enhance the work flow of our existing users, but it's also given us an opportunity to attract new users, in fact, and penetrate firms and users that we didn't have before.

And I might just add to Mike's comments, just for clarity.

As we add users who subscribe to StreetAccount through their existing product that we acquired, they're not included in our user count.

So the user count that we're describing is just FactSet terminals only.

On the wealth management side, how should we think about revenue per seat a as it compares to traditional buy-side and traditional sell-side?

As I think we alluded to before, we're really targeting the users in the wealth community that are operating very much like an institutional asset manager.

The price points are very similar.

It's been exciting to see these users increase their level of sophistication, and generate interest in some of the more advanced analytic applications we have, such as portfolio analytics.

So I think as the information needs and sophistication of that user group increases over time, it represents a great area, actually, to potentially grow.

And one last question.

On the $7.3 million contribution to ASV in the quarter you just reported from acquisitions, is that a good number to use for next quarter as well?

Or how should we think about that?

The way we treat acquisitions when we add them, just to make sure that everybody's clear on where organic, that's just the beginning point.

If they add ASV next quarter, it will be part of the organic growth.

The $7.3 million will stay in our organic calculation for four quarters, and then drop out.

Got it.

All right.

Thank you very much.

Thank you.

Our next one is from the line of Hamzah Mazari.

Your line is open.

Hello, there.

This is Flavio.

I'm standing in for Hamzah today.

Great quarter, guys, and thank you for taking my question.

Going to piggyback a little bit on the pricing question, and just play on the wealth management theme as well.

We know that probably the sell-side clients are the ones that are most price sensitive.

But within the buy-side, do you see any difference between the wealth managers in the more traditional buy-side, institutional buy-side, in regards to pricing and how they react to that?

We don't see a lot of difference.

The information needs, the analytical needs of both the institutional managers and the wealth managers are similar.

And the complexity of the needs, the degree to which they need to do complex analysis is one of the important drivers of how much value we can deliver, and therefore, how much we can charge.

That makes sense.

And you also mentioned that the wealth management clients are the ones driving up the client count.

Is that because they are brand-new clients, or is it because even if you sign the wealth management division of a sell-side client, that counts as a new client as well?

So I was just wondering if you could give some color.

In terms of user count, wealth management clients are certainly a factor in that.

In terms of client count, that is being driven in a much more broad-based way, a combination of traditional managers, some small wealth management shops, hedge funds, middle market, investment banking, boutique firms.

And then to clarify, if a wealth division of a sell-side firm who we've already counted as a client wouldn't add to our client count.

It would just be counted as part of the major client.

Perfect.

That's very helpful.

And I think you mentioned on your last call that wealth management was not still a big part of the Asia-Pac side of the business, it's more a UK, US centric business.

Is there any difference there, and what drives that double-digit growth in Asia-Pac?

Just a comparison of what are the drivers on the non-Asia and the Asia side of the business?

There's little change in the mix.

Wealth is still not a material driver in Asia.

Asia growth is being driven by new firm creation, certainly all of the things that are driving the core business.

It's also coming off of a relatively low base, which helps it achieve higher growth on a percentage basis.

That's helpful.

All right.

I think I already sneaked one question too many.

Thank you so much for your time, guys.

Thank you.

Next one is from the line of Toni Kaplan, and our last question is from Toni Kaplan's line.

Sir, your line is open.

Thank you.

So Thomson has recently started to roll out its Eikon functionality for investment management.

When your salespeople are either going to existing or new prospects, is there anything that they're starting to hear on that product and how it compares to FactSet's?

Thanks.

We haven't seen much Eikon in our core users.

It's certainly popped up in select cases, but so far the majority of what we've heard is that they've released a new version.

They've released several versions of a product.

We know they're going through some conversions, and that we believe most of the Eikon users that are out there today have been converted from other legacy Thomson platforms.

We know that they've recently expressed their desire to convert their ThomsonONE users to Eikon.

The ThomsonONE users do have overlap with the FactSet target user group, and that's a group of users and a group of firms that we've been talking to for years.

So the direct answer to your question is, we haven't seen it much in our market, and we'll continue to monitor it.

Okay.

Thanks.

And just one follow-up.

On M&A, are there any areas that you're maybe potentially looking for holes in the product portfolio that you think would be incremental?

You talked about there's a big M&A pipeline earlier, so just wanted to see what areas might especially be useful for adding enhanced functionality to the product.

Thanks.

Thanks, Toni.

I think our DNA really is to think about organic growth.

Peter was talking about all of the investments we've been making in product.

And we really think about our plans going forward for the next 12, and doubling of the business being an organic opportunity.

I think we look at acquisitions on a strategic basis as an opportunity for us to potentially in some cases buy something instead of build.

But it's not part of our plan.

There's no portion of the next 12 months revenue that we're planning to buy versus build.

I think that puts us in a very strong position in that the acquisitions we've made have been very accretive to FactSet, both strategically as well as performed well from a financial perspective.

So we're very, very careful about that process.

And I was really just alluding to the fact that it's kind of a pipeline as normal.

And there's always things that are kind of interesting.

But it really involves lots of factors before it would be something that we would actually acquire.

The culture needs to fit.

It needs to be something that's strategic for the business.

In addition to that, the financial criteria of a [hurdle] and being accretive to us in the long run is important.

So, it's really more business as usual in that category.

Thanks a lot.

Nice job on the quarter.

Thank you, Toni, and thank you, everyone, else for your questions today.

We look forward to catching up with you next quarter.

Thank you.

And this concludes today's FactSet second quarter conference call.

Thank you.