Factset Research Systems Inc (FDS) 2014 Q4 法說會逐字稿

Welcome and thank you for standing by.

(Operator Instructions)

Now I will hand the call over to Ms. Rachel Stern, Senior Vice President, Strategic Resources and General Counsel.

Ma'am, please go ahead.

Thank you, operator.

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

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

Joining me today are Phil Hadley, Chairman and CEO; Phil Snow, President; 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 www.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 remarks to only one question and one follow-up so that we will have enough time to address questions effectively.

Thank you, Rachel.

And good morning everyone.

Here's our agenda for this call.

First, I will provide color on Q4 results.

Second, I will provide guidance for Q1 including how to factor the R&D tax credit into future earnings.

Third, we will end with your questions.

So let's begin with fourth quarter results.

Following on our positive results from last quarter, FactSet had a solid fourth quarter.

Our ASV growth rate accelerated.

Operating margins rose sequentially.

Adjusted EPS grew by double digits.

And all our key metrics including client and user counts were up.

ASV increased $31.6 million to $964 million at August 31.

The ASV growth rate on an organic basis accelerated to 7.3% over the past 12 months.

Buy-side accounted for 82.6% of our ASV this quarter, while the remaining 17.4% of ASV was derived from our sell-side clients.

Organic ASV growth rates from buy and sell-side clients rose to 8.5% and 1.6% respectively.

Please note that our buy-side business includes traditional asset management clients, hedge funds, wealth managers, off-platform data feed business and market metrics.

The sell-side part of our business targets M&A advisory, capital markets and equity research professionals.

Adjusted EPS rose this quarter to $1.31, an increase of 11% compared to the same period last year.

We are so proud to mark our 17th consecutive quarter of double-digit EPS growth.

In Q4, free cash flow generation was $65 million, compared to $71 million in the year-ago quarter.

Free cash flow over the last 12 months was $247 million, down 2%.

We define free cash flow as cash generated from operations less capital spending.

The decrease in free cash flow was driven by a rise in accounts receivable and stock option exercises in the prior year.

In the just completed fourth quarter, our DSOs were 34 days, flat from Q3, but up from a record low of 30 days a year ago.

Higher level of option exercises in 2013 reduced our tax payments, thus improving prior year working capital.

At the end of this quarter, our cash and investment balance was $136 million, up $2 million from Q3.

We repurchased 620,000 shares this quarter for a total of $75 million.

We still have $87 million authorized for future share repurchases.

When capital allocated to share repurchases is aggregated with dividends paid, we returned $341 million to shareholders over the past 12 months.

Common shares outstanding were 41.8 million at the end of the fiscal year.

Now let's turn to our P&L.

In the fourth quarter, revenues rose to $239 million, a 9% increase over last year.

Organic revenues grew 7% over last year, excluding $3.7 million in revenues from acquisitions completed in the last 12 months.

Q4 operating income grew to $79 million compared to $71 million in the same period last year.

Adjusted operating income for the quarter increased 8% over last year.

In fiscal 2013, adjusted operating income includes a non-cash pretax charge of $2.6 million for stock-based compensation, primarily related to vesting of performance based options.

Adjusted net income also grew 7% this quarter to $55 million, and adjusted diluted EPS grew 11% to $1.31.

Please note that the increase in our average share price during Q4 increased weighted average shares outstanding and reduced EPS by a penny.

US revenues in the fourth quarter grew to $161 million, up 6.5% organically over the fourth quarter last year.

Non-US revenues increased to $77 million.

The international growth rate was 7.3%, excluding revenue acquired from the Matrix acquisition, and the impact of foreign currency.

Fourth quarter revenues from our Europe and Asia-Pacific regions were $59 million and $18 million respectively.

Excluding foreign currency effects and the Matrix acquisition, year-over-year growth rates were 6% in Europe and 12% in Asia-Pacific.

As I mentioned at the beginning of the call, the Company's performance in the fourth quarter was a positive across all our metrics.

Please allow me to provide some details on the drivers of our growth.

The client count expanded by 81 compared to 60 in the same quarter last year.

We added more clients this fourth quarter on a net basis than we have in the last nine years.

This strong performance on a new client acquisition follows our solid Q3 growth as well.

Total client count rose to 2,743 at quarter end.

Looking back on the year as a whole, we added 200 net new clients in 2014, an 85% increase over the number of net adds in 2013.

We view this as important because new clients typically come on with moderate deployments and often experience substantial growth in subsequent years.

Our annual client retention rate was greater than 95% of ASV and rose to 93% in terms of the number of actual clients, up from 92% last year.

This quarter, our net user count of FactSet terminals rose by 2100, compared to 1400 in the year-ago quarter.

This user count growth is the largest quarterly increase in three years.

Users totaled 54,600 at quarter end.

The fourth quarter typically includes new users on both the buy and sell-side as our largest clients usher in their new hire classes.

This quarter we saw higher than expected new hire classes at our banking clients coupled with fewer cancellations.

While it may be too early to say that our banking clients have turned a positive corner, we were encouraged by the performance we saw on that side of our business in Q4.

Improvements in the ITO and M&A marketplaces have been a boost for our banking clients this year.

Wealth management continues to be a growing part of our sales effort.

We've been gratified to see that wealth management clients who select FactSet workstations are also frequently interested in buying FactSet tools that do not come with the standard packages we offer, including some wealth clients buying applications in our portfolio analytics suite of products, which leads to my next point.

The portfolio analytics suite of products remain a solid cornerstone of FactSet sales in the buy-side space.

Our clients have increasingly demanded tools to help them with multi-asset class risk modeling, attribution and reporting related to equity and fixed income portfolios, which are the key elements of our portfolio analytics offering.

I'd also like to point out that we've had success marketing workstations to those focused on credit analysis.

Our suite of reports covering debt and liquidity analysis has improved over several years and is relevant to users investing in both equities and corporate debt.

We've also experienced expanded sales of our proprietary content.

We've noted strong demand for our Street account product and have focused more attention internally on ways to sell FactSet fundamentals, FactSet estimates, our ownership transcript and entity Mapping Data.

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

For Q4, operating expenses were $159 million, and our operating margin in this quarter was 33.3%, which is 50 basis points higher than Q3.

Cost of services in Q4 expressed as a percentage of revenues increased 220 basis points compared to the year-ago period, due to incremental costs from the Matrix and Revere acquisitions, and higher compensation expense from additional headcount in our consulting and engineering teams, partially offset by prior year stock-based compensation charge from the vesting of performance-based options.

Expressed as a percentage of revenues, SG&A expenses decreased by 330 basis points in Q4, compared to the year-ago period, due to lower compensation expense from employees performing SG&A roles including a prior year stock-based compensation charge.

At the end of our fiscal year, we had over 6600 employees, an increase of 6% in global headcount since last year.

In Q4, we increased headcount by 267 employees as expected, since the fourth quarter is when our new consulting, engineering, product development and content collection classes begin.

Our effective tax rate for the fourth quarter was 30.4%, flat with last quarter, and up 150 basis points from last year because of the expiration in the federal R&D tax credit.

Now let's turn to our guidance for the first quarter of FY15.

We expect that our revenues will range between $240 million and $243 million.

Our operating margin is expected to range between 32.8% and 33.8%.

This range is 30 basis points higher than the margin guidance provided on our last call.

The annual effective tax rate should range between 31% and 32%.

This range also takes into account the expired federal R&D tax credit and assumes it will not be reenacted before November 30, 2014.

We expect that diluted EPS will range between $1.31 and $1.33.

This estimate accounts for the expired R&D tax credit, which has the effect of lowering each end of the range by $0.02 compared to the just completed fourth quarter.

The mid-point of the range suggests 12% year-over-year growth after adjusting for the expiration of the R&D tax credit.

Please note that the R&D tax credit has expired only once in its 33 year history without being retroactively reenacted to previous years.

Should the R&D tax credit be reenacted on or before November 30, 2014, diluted EPS would range between $1.36 and $1.38, and FactSet would also recognize a benefit of $0.13 per share if the credit is retroactively applied to previous periods.

Looking back on FY14, we are proud of a number of our accomplishments.

Our metrics accelerated in the second half of the year and were positive across the board.

For the fiscal year, ASV was up 7.3% organically to $964 million.

EPS grew by 11%.

Return on equity was 40%, increasing our three-year average return to 37%.

Clients and users reached record highs including Q4.

$340 million was returned to shareholders.

We continue to reinvest in our business in terms of hiring new employees to fuel our growth.

We had a strong year, and we believe that we're well positioned for growth in the coming year.

We've been successful in expanding our market share against both internal client build systems and competitor products.

From where we sit, the global markets appear to be getting stronger, so we're happy for what that means for our clients.

We worked hard this past year to get where we are, and we're excited about the work ahead in 2015.

Thank you.

We're now ready for your questions.

Thank you.

We will now begin the question-and-answer session.

(Operator Instructions)

Our first question comes from Shlomo Rosenbaum of Stifel.

Your line is now open.

Hi.

Good morning and thank you very much for taking my questions.

Phil, Peter, maybe you could address the growth is accelerating.

Can you talk a little bit more about whether you think more of the growth is starting to come from hiring in the end markets, or do you think you're being more successful in displacements, or if you think it's a combination of both?

Where is the weight, where is it more heavily weighted?

It would be really difficult for us to know the exact answer to that.

I think the answer we feel internally is both.

When we were looking at the win losses for clients this year or this past quarter, we definitely won more clients and also didn't lose as many clients.

I think we felt the same way when it came to seats and the number of users we had in the client base.

All in all, it was just a very strong, broad-based quarter for ASV growth.

Okay.

And can you talk a little bit more about the composition of some of the new clients and users, comprised of fair amount of [long away] shops, hedge funds, how much is the wealth management becoming more of a factor, if it's not -- so maybe a qualitative, if not quantitative.

I will let Phil Snow answer this.

Hi, Shlomo, it's Phil Snow.

Hi, Phil.

We saw a very healthy mix of new client wins this quarter across traditional asset management, hedge funds, wealth, broker dealers, as well as some other types of firms that we sell to.

The quality of the wins was very high.

So these weren't just new firms getting created.

These were firms where we took relative market share away from our competitors.

And what's really great about getting new clients like this, so many of them, is it really lays down the foundation for us to cross-sell our products across the existing users and new groups and departments within those firms.

Okay.

So you're saying it's basically broad-based.

It's not one thing that sticks out more than another?

Right.

Yes, it was broad-based.

We did well in every client category.

Okay.

Very good.

This is -- if you allow me to squeeze in one more.

How long will Matrix continue to be pointed out as a drag on margins?

I think the only -- we didn't point it out as a drag on margins, Shlomo.

We just pointed out in terms of organic ASV growth rate.

As soon as we've owned it for a year, we will stop pointing it out in terms of organic ASV growth.

Okay.

Thanks.

Thank you.

Next from Peter Appert of Piper Jaffray, your line is now open.

Thanks.

Good morning.

If I've got these numbers right, I think at the midpoint of the revenue guidance range, it would imply something like 8.3% growth for the first quarter.

And this is a little bit nitpicky, but that will be down a fraction from what you did in the fourth quarter.

So does that suggest you're seeing anything in terms of password growth that would make you a little more cautious near term?

Are you talking ASV, Peter or -- ?

Revenue.

Revenue guidance.

Organic can't be guided down.

We will have to check the numbers, Peter, to make sure we have it.

But organic wouldn't -- the guidance wouldn't show organic deceleration.

In terms of expectations for passwords, this is really the question, would your expectation be that we should continue to see some positive momentum over the next couple of quarters in terms of the password growth rates?

I mean, I would say the way that I've answered the question, the way I would continue to answer, is we definitely see our end markets firming and our relative market position improving as well.

So all of our metrics, ASV seats and clients would generally be headed in the right direction.

First quarter sometimes is a clean-up quarter for the big sell-side clients.

So seats could be -- I don't really -- I honestly don't know.

I haven't seen a forecast for the first quarter.

But wouldn't be material in the ASV side.

Got it.

And you guys have held the SG&A costs basically flattish here for the last couple of years.

Is there ability to continue to control those costs?

Should we expect some -- maybe some catch-up in terms of SG&A cost growth on a near term basis?

GAAP accounting has SG&A, and internally we're 100% operating margin.

I couldn't answer that question.

One last thing, then.

The tax rate, even excluding the R&D credit, I think the implied tax rate is up maybe 100 basis points year to year.

Anything specific driving that?

If you exclude the R&D, I think our tax rate would be flat on a year-over-year basis.

I was actually looking -- I'm sorry, Peter.

The guidance for last quarter ex the tax credit was like 30% to 31%.

Now it's 31% to 32%, I think.

In the just completed fiscal year, we were eligible for the tax credit for four months out of the 12, and so relative -- our effective tax rate increasing or projected to increase in next quarter relative to the just completed fiscal year because it would be expired for the entire year in FY15.

Okay.

Thank you.

Thank you.

Next from Alex Kramm of UBS.

Your line is now open.

Hey, good morning.

Maybe just on the competitive dynamics, maybe a little bit of an update here.

Are you seeing more players getting to the end line when it comes to negotiating for new -- for new accounts and things like that?

And are you winning the same amount that you used before?

Has anything changed in terms of wins versus losses and new competitors entering the market, in particular on the buy-side?

Alex, Mike Frankenfield.

As we said in previous quarters, the competitive dynamic changes slowly, quarter to quarter, even year to year.

I think when we look at the wins that we're having, as Phil or maybe Peter highlighted earlier, we compete not only against external competitors, all the big names that you know, but a lot of times we're competing against in-house systems.

And I would say our execution on both of those fronts is very strong.

We're doing well in the marketplace because our software development teams continue to improve our product, to add enhancements that our clients care about.

And our sales force is very focused on new names and same store sales generation, and they're executing well.

Okay.

Great.

Then just a clean-up question here on FX.

We've seen some major FX changes here recently.

Can you just remind us how that impacts you?

I think from a revenue perspective it's mostly dollar, maybe a little bit of pounds which hasn't really moved.

The Euro decline, that could actually help you on the cost side.

Is that right?

Or how should we think about it?

Hi, Alex.

It's Peter.

From an FX perspective, roughly 98% of our revenues are billed in US dollars.

We do have some substantial expenses that we pay in both pounds, euros, and also have big operations in hydrobed in the Philippines.

We from time to time hedge some of those expense exposures.

Currently we are unhedged on both the pound and the euro.

Very good.

Thank you.

I will keep it at two.

Thank you.

Next from Manav Patnaik from Barclays.

Your line is now open.

Hi.

This is actually Greg calling on for Manav.

First off I was hoping to get some granularity within the sell-side growth that you've seen between the mid-market and boutique banks versus what you're seeing from the bulge banks.

And then also whether most of that growth is coming from probably banking versus equity research?

Hi, it's Phil Snow again.

So I think we said for a few quarters now that we've seen good activity at the middle tier firms.

This quarter we definitely saw a positive uptick in the number of workstations we were capturing at the bigger firms.

I will let Mike answer the question about corporate finance versus equity research.

Continue to make good progress in both of those areas.

Our product adds significant value to the financial modeling process that occurs in both of those firms or both of those firm types.

Okay.

Thank you.

And then I wanted to ask about your strategy around selling to large corporations, which one of your competitors has noted as an area of focus.

Maybe you can give some color on the opportunity there and how you're positioned.

It's Phil Hadley.

We've historically approached the corporate market via partners, and we have several partners that sell into that market.

And it's been our historic strategy primarily to allow us to focus on the financial professional in the institutional market buy and sell-side.

It's worked very well for us.

We have substantial revenue coming from that opportunity, and we continue to decide whether it's something we'd want to actually put our direct salesforce on.

But at this point it's not something that is the best next opportunity for us.

Okay.

And one more, if I can squeeze it in.

On your strategy around chat functions, especially with the recent noise around new competitors like Babble and Wicker, maybe just what your thought process around integrating some of these new chat functions and in general your strategy there.

This is Mike Frankenfield.

We have a messaging product.

It's doing well in the marketplace.

We have 100% open platform.

We're willing and have federated with other chat programs.

Our main objective is to develop products, and chat is no different, that facilitate the work flow within our clients.

So a common use application is a buy-side portfolio manager wanting to talk to the buy-side trader within the firm.

Both users happen to have FactSet and being able to communicate over the FactSet platform is a way for them to gain efficiencies and improve communications.

Okay.

Thanks, guys.

Thank you.

Next from Joseph Foresi of Janney Montgomery Scott, your line is now open.

Hi.

I was wondering if you could help us understand the step-up in the business.

How much of this do you think is attributable to -- I know you mentioned at the IPO market and M&A, and how much do you think is sustainable?

In other words, do you think that this is a full step-up, or do you think if those two factors start to moderate, you might see some moderation in user activity?

I certainly think the capital markets activity helps our sell-side client base, particularly corporate finance.

The equity research department and the buy-side certainly is far more correlated to the overall health of the equity market.

So certainly that helps us.

But as a percentage of our total business and how much of it actually creates data on the sell-side corporate finance piece, it's certainly helpful.

But I also feel like we are gaining on the share and value part of the product.

The product team has done an outstanding job continuing to reinvest in our product, and I think our competitive position is continuing to expand both in content and in work flow on our platform.

Got it.

I wonder if we could just talk quickly about pricing.

Do you think that pricing power is increasing as we head into this uptick in the cycle, or do you think it's stayed about the same and that we're not at that inflection point yet?

Price has not been a tool that FactSet has used as a form of growth.

We have taken modest inflationary price over the last several years.

Certainly if my comments are true and we feel our relative competitive position is there, the price would potentially be available to us.

But quite frankly, I'd rather gain share and expand our opportunity as opposed to using price as the mechanism for growth.

Thank you.

Thank you.

Next from Tim McHugh of William Blair & Company, your line is now open.

Thanks.

I guess just on the improvement in the sell-side.

You talked about the M&A environment.

I guess can you give us a perspective how much is M&A advisory or investment banks versus the research side of the equation?

Have you seen any change in the equity research, sell-side equity research side of the equation, or should we think of mostly the pick-up coming from the M&A advisory?

I'm sure the answer is both.

If you're just taking market opportunity in headcount, the corporate finance department in a typical firm, I'm going to pick a round number is probably three times the headcount of an equity research department, just in round terms.

We do have opportunities also in sales and trading which would be an entirely separate work flow that has been successful for us.

I think that we feel like the opportunity is still expanding for us.

Is that three to one roughly an approximation we could think of for your split of business today?

Or are you --

I think that's our split and/or what we think the marketplace looks like inside of a typical big sell-side firm.

If somebody disagrees round enough to get you.

Certainly works for me.

It's a little bit hard for us to disentangle it because so many of these are enterprise deals where we are selling to the organization and that organization has the ability to then deploy within research, within banking M&A, credit, sales trading, et cetera.

So we view that entire segment as a very attractive segment.

Every firm's built differently.

Certainly have some firms that are more research focused than corporate finance focused.

We certainly have firms that were boutiques that were 100% corporate financed, no research.

I was picking that if you took the top 10 big firms that historically is what I'd pick as a round number mix between the headcount available for selling a product like ours.

Okay.

And then in the wealth management space, can you remind me who's the biggest competitor you're seeing out there?

I guess both from an installed competitor and then people trying to compete for new engagements out there.

On the wealth side it's -- each one of the big competitors has an offering in the wealth space.

As we do whenever we try to enter a new market, we're trying to come up with unique functionality.

We do some unique things with wealth manager portfolios, no surprise.

It's a direct extension of our portfolio analytics functionality that is so powerful for our traditional institutional asset management clients.

So a lot of the opportunities that we're identifying are greenfield opportunities and certainly competition from the likes of Thomson, et cetera.

Is the growth then -- you're saying green -- would you attribute the growth in wealth management to more greenfield or displacements?

The combination of both.

When you're talking about going into a wealth shop, we have two potential solutions to offer.

We can offer broad-based desktop deployment.

That is typically a displacement situation.

There are areas within the wealth teams that have a need for all of the high-powered analytics that FactSet delivers, and they may have a very large spend on a few users.

So it is a mix of both, displacing competitors as well as selling our traditional powerful analytics to wealth firms that, as they become more sophisticated, need these powerful tools.

Okay.

Great.

Thank you.

Thank you.

Next question comes from Toni Kaplan of Morgan Stanley.

Your line is now open.

Hi.

Thanks for taking my questions.

I notice that your hiring slowed a little this quarter to about 6% year-over-year.

Should we read anything into that, given that you've mentioned in the past that you tend to increase your headcount in line with your expected revenue growth rate?

Hi, Toni.

It's Peter, how are you?

I don't think there's anything to really read into that percentage.

Our headcount does ebb and flow from time to time.

We were very excited with the acceleration in the second half.

Sometimes our headcount process needs to get adjusted and there is a cycle of time to increase our headcount.

So we're constantly looking at that and making sure that we have the right go forward investment to accelerate growth.

Okay.

Great.

And one last one.

If ASV continues to accelerate, would you start to invest more or could we see some margin expansion in 2015?

Thanks.

Hi, Toni.

It's Phil.

We certainly plan for flat margins and we probably continue to reinvest in the headcount that Peter was talking about to improve our competitive position in the marketplace.

Thank you.

Thank you.

Next from Bill Warmington from Wells Fargo.

Your line is now open.

Good morning, everyone.

It's nice to see the sell-side contributing something there.

We're certainly happy about it.

So a question for you on the data feed business, just to ask whether that's been contributing to the growth as well.

And maybe give us a sense for how big that is.

I don't think we break that out but I think we had a very good fourth quarter in our feed business, so we delivered to clients both raw data feeds of the content we collect as well as some good derived data that we might massage out of that based on the clients' needs.

We can touch a lot of different parts of the organization there.

We can touch performance systems.

We can touch the quantitative work flow, risk and compliance.

If a client's building a portal, there's all kinds of interesting ways clients want to use our data.

Then on the capital allocation side, just need to ask your thoughts heading into 2015 in terms of M&A versus share repurchases.

Hi, Bill, it's Peter.

I think you really touched on a high quality problem for us.

Yes.

Thank you for that.

Over the last 12 months we've generated free cash flow just under $250 million, and we have $136 million of cash on the balance sheet.

So we feel like we have quite a bit of gunpowder for capital allocation, whether it's M&A or share repurchase and dividends.

We've been more aggressive in repurchases because -- over the last 12 months just because it just correlates with the amount of our M&A activity.

So our M&A process is very healthy.

We're constantly out in the marketplace, and we're often, because of our position to really allocate capital aggressively, we often get calls from bankers for different opportunities.

So I think it will continue to be a reverse correlation between M&A and share repurchases, because they're quite accretive given the interest rates are near zero.

And then one more, if I may.

Just wanted to ask about the -- on the acquisition that's you guys have been doing over the last couple of years, just wanted to ask whether they have been contributing to the client count and user additions either directly or indirectly.

Just trying to think of the last couple being Matrix, Revere, Street account.

We would have given you the initial headcount or the initial client count change, which wasn't that material.

I remember calling Matrix maybe 30 or 40 but not a big number.

But then going forward, because there's so much overlap in our businesses and that's part of the reason they make the strategic cut at an acquisition level, very little impact on the overall client count.

And then just to be clear, our client count threshold for counting clients is 24,000 US, so we have a huge list of clients who don't make that cut and some of those products hit below that price point.

But just to keep our metrics clean and people focused on the core of our client base, we've chosen to have that be the threshold.

Got it.

Thank you very much.

Thanks, Bill.

Thank you.

Next from Keith Housum of Northcoast Research.

Your line is now open.

Good morning everyone.

Thanks for taking my question.

Just coming back to your question regarding data feeds and announced subscription business, can you remind me, is that business more of a recurring revenue stream, or is that usually like a one time revenue opportunity for you?

It's 100% recurring revenue subscription business for us.

Got it.

And just in terms of business for the quarter, was it pretty evenly weighted throughout the quarter, or did it seem to get better as the quarter went on?

I wouldn't -- we typically don't dissect ASV growth by month within a quarter.

So I think I would say -- I would leave it with it was a very strong quarter throughout.

Okay.

Thank you.

Thank you.

Next from Peter Heckmann from Avondale Partners, your line is now open.

Just a follow-up question on some of the acquisitions and as they roll into the organic growth rate, would you say that Street accounts continues to grow at a rate in excess of the overall Company, and if so, would you characterize that growth as coming internationally?

Peter, as was mentioned, we're certainly very happy with street account and what it's -- the value it's delivered to our clients.

We won't break out the future ASV and typically won't on any acquisition as we go forward.

Part of it's because we can't.

It becomes part of the product and part of the core terminal and you really don't have a direct number anymore.

We're certainly pleased with the acquisition.

Okay.

And then can you comment on standalone Street account, those outside of the platform?

It seems like there's some other competitors that are coming out, more aggressive price point and maybe been able to mimic or copy the relative speed and maybe not quite the content level.

But seems like they're getting there, and so would you say within Street account that the service itself is stronger within the FactSet users, or do you still see a strong growth in the base of users independent of the platform?

There are always competitors in the marketplace.

We feel very strongly that we've got the best products in the marketplace and haven't seen any competitive in-roads into the work flow that Street account has.

Okay.

Okay.

That's fair.

And then as regards the other acquisitions, since the acquisition, any material growth in ASV?

Should we assume that the ASV growth there has mirrored the rest of the Company or would the two acquisitions I would assume certainly the smaller one would be growing at a rate faster than the overall Company.

None of the acquisitions are material relative to the Company.

We just haven't bought anything big enough revenue stream to make any impact that is material at the Company level.

Okay.

Okay.

Appreciate it.

Thank you.

Next from Dan Dolev of Jefferies.

Your line is now open.

Thanks for taking my question.

It looks like if I look at it correctly, looks like Europe organic growth decelerated a little bit.

Can you maybe talk about the trends there?

Hey, Dan, it's Mike Frankenfield.

Europe actually did quite well in Q3.

I think what you're seeing is a little bit of ASV that was pulled into that quarter from Q4.

Certainly the macro environment is not as strong in Europe as it is in the United States, but having said that, we're still very optimistic about our prospects in the UK, in Europe, and the rest of international.

So I wouldn't read too much into this quarter.

Okay.

And then one more question following up on Toni's question.

Historically when we looked at it, when revenues were growing in line with employment growth, you were able to expand OpEx that you're modeling if I look at it correctly at the midpoint, OpEx growing roughly in line with revenues.

Is there any chance at some point that we could get to that historical performance where revenue growing a little bit ahead of employment and OpEx expanding, I mean margins expanding.

Sorry about that.

Every once they a while margins expand because we can't spend the money fast enough.

That would be a good problem to have.

But we've got so many great product ideas that I think we will continue to invest in the business as we go forward.

That's more of a structural thing.

You don't see yourself going back to that 2001-2005 period where --

I don't really think of our margins expanding, contracting.

The question was asked earlier about Matrix being dilutive to margins.

We have the very high class problem of there are very few businesses out there that would actually be accretive to our margins.

Almost everything we buy has got a lower margin than we do.

Therefore, it ultimately is dilutive to margins.

I look at it really at the EPS level.

Our goal is to drive EPS at something greater than the organic revenue growth, and as you can see from history we've been pretty successful at that.

Okay.

Thank you very much.

Thank you.

Next from Andre Benjamin of Goldman Sachs.

Your line is now open.

Please go ahead.

Thank you.

Good morning.

My first question with regards to Asia and Europe versus the US, is there anything else that you would call out besides the macro as things that are driving the trends in that business, either at the US clients asking for different things in different parts of the world?

That would be helpful.

Hi, Andrew, it's Mike.

Certainly when you move into markets in Asia, markets in Europe, there's always demand for local content.

And FactSet looks at each market opportunity, and we assess how big of an investment we can make in local content.

In terms of general functionality in the product, there's a lot of commonality around the globe in terms of what users want from software functionality, how they want their work flow improved.

We feel just got a great platform that we can leverage around the world and meet the needs of users everywhere.

Apologize if this question was answered.

But in terms of thinking through, say, non-desktop solutions, are there any logical areas that you would like to call out in terms of whether it's data feeds or pushing into regulatory compliance or any other thing that you would think of that makes natural sense organically?

I think we're doing a great job of addressing the goal of pushing out our functionality and content across multi-platforms.

So whether it's traditional FactSet desktop, mobile, data feeds, we're here and ready to meet the needs of our clients and give them our high quality data and analytics any way they want to consume it.

Thank you.

Thank you very much.

Thank you.

There are no further questions at this time.

I will hand the call back to the speakers.

Thank you very much.

See you next quarter.

Thank you.

That concludes today's conference call.

Thank you all for participating.

You may now disconnect.