Factset Research Systems Inc (FDS) 2015 Q1 法說會逐字稿

(Operator Instructions)

And now, I'm turning the meeting over to your host, Ms. Rachel Stern, Senior Vice President, Strategic Resources and General Counsel.

Ma'am, you may begin.

Thank you, Operator.

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

Welcome to FactSet's first quarter 2015 earnings conference call.

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

This conference call is being transcribed in realtime by FactSet's call street 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 Managements 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 is our agenda for this call.

First, I'll provide color on Q1 results.

Second, I'll provide guidance for Q2.

Third, we'll end with your questions.

So let's begin with first quarter results.

FactSet continued to accelerate its growth in the first quarter.

Our key metrics were up, including our ASV growth rate, EPS, free cash flow, and our client and user counts.

This quarter, the organic ASV growth rate accelerated to 8.5%.

Excluding FX, ASV rose $9.2 million, and was $970 million at quarter end.

We are pleased that the ASV growth rate has been on an upward trend every quarter over the last year, rising 350 basis points since November 2013.

Drivers of this improvement have been broad based, as the organic growth rates from our buy- and sell-side businesses improved to 8.9% and 6.7%, respectively.

Buy-side clients accounted for 82.5% of ASV, and sell-side firms accounted for the remaining 17.5%.

Our buy-side businesses include traditional Asset Management clients, hedge funds and wealth managers, off-platform data feed sales, and the market metrics business.

The sell-side targets only M&A advisory, capital markets and equity research professionals.

Our growth was both top and bottom line oriented.

In Q1, adjusted EPS grew 11.9%, to $1.32.

This quarter marks our 18th consecutive quarter of double-digit EPS growth.

Let's now turn to free cash flow.

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

Over the last three months, we generated 66 million in free cash flow, an increase of 26% over the same period last year.

Free cash flow has increased due to higher levels of net income, an improvement in our age receivables, and lower taxes paid during the quarter.

Our DSOs were 33 days at the end of the first quarter, compared to 34 days three months ago.

Our cash and investment balance was $140 million, up $4 million during the quarter.

This quarter, we spent $48 million on share repurchases.

At the regular quarterly meeting yesterday, our Board of Directors authorized the addition of $300 million to our share repurchase program.

Today, $339 million is available for future share repurchases.

We also paid regular quarterly dividends of $16 million.

When aggregating regular quarterly dividends paid in shares repurchased over the past 12 months, we have returned $332 million to shareholders.

Common shares outstanding were 41.6 million at the end of the quarter.

Now let's turn to our P&L.

Revenues grew in the first quarter to $243 million, an increase of 9% over the last year.

Organic revenues grew 8% over last year, which excludes $2.5 million in revenues from the acquisition of Matrix that was completed within the last 12 months.

Our operating income this quarter grew to $80 million, an increase over $75 million posted in the first quarter last year.

Net income grew 7% to $56 million, and adjusted diluted EPS grew 11.9% to $1.32.

This quarter, US revenues rose to $164 million, up 7% compared to the first quarter a year ago.

Non-US revenues increased to $79 million.

Revenues from our Europe and Asia Pacific regions for the first quarter were $61 million and $18 million, respectively.

Excluding foreign currency and acquired revenues from Matrix, the international growth rate was a strong 9.8%.

This growth rate breaks down into 8.2% from Europe and 15.2% from Asia Pacific, respectively.

Let's now go through key contributors to our positive growth this quarter.

Our annual client retention rate, in terms of the number of actual clients, increased to 93%, up from 92% a year ago.

In addition, our client retention rate, when expressed as a percentage of ASV, continues to be greater than 95%.

Our strong retention record is showing up in our user count.

Net user count of FactSet terminals increased this quarter by nearly 1,000 users, and totaled 55,600 at quarter end.

The net user addition in Q1 is our highest since November 2007.

Overall, users are up 9% year over year.

This is the best annual user growth rate in more than three years.

The growth came from both buy- and sell-side clients.

As we discussed last quarter, we continue to see an uptick from our investment banking clients, whose activities had previously languished over the past few years.

From what we have seen, M&A and capital market activities are on the rise.

As a result, we've seen fewer cancellations than expected from our investment banking clients.

The market environment for our buy-side clients also continues to be constructive, as the majority of our user expansion this quarter came from this segment.

In Q1, we increased our net new clients by 19, for a current total of 2,762.

We're pleased with this expansion, as the first quarter is typically not a popular time for new clients to sign on, as the majority of firms are at the end of their fiscal year end and budgeting cycle.

In general, the positive ASV changes relate to strong performance in each of our three primary verticals: our US investment management, international investment management, and our global banking and brokerage teams.

In USIM, we've seen sustained demand for our fixed income portfolio products, multi-asset class risk and stress testing, attribution and publishing products.

Our international IM team has seen strong performance in the Asia Pacific region, driven by our portfolio analytics suite of products.

We've also seen continued growth from our wealth management workstations, which have fared successfully against some of our competitors' products on a number of occasions.

Proprietary content also continues to be a strong product set for us, as well as a point of entry for new clients looking for data feeds.

In addition to street account, clients also value our FactSet fundamentals, FactSet estimates, transcripts, takeover defense and entity mapping data.

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

Total operating expenses for the first quarter were $162 million, and our operating margin this quarter was 33.1%.

First-quarter cost of services expressed as a percentage of revenues increased by 290 basis points compared to the year-ago period.

The increase was driven by higher compensation and additional third-party data costs.

Employee compensation expense grew, as we expanded headcount 8% year over year from new hires, and from acquired employees in connection with the Matrix acquisition.

A rise in third-party data costs was driven by higher rates of client adoption of our risk suite, and use of certain benchmark families.

SG&A expressed as a percentage of revenues decreased by 240 basis points in Q1, compared to the year-ago period, due to a decline in compensation and lower marketing and occupancy costs.

At the end of our fiscal year, we had nearly 6,900 employees, an increase of 8% in global headcount.

We hired 248 net new employees this quarter, primarily in our Hyderabad and Manila locations, which we primarily have content collection and engineering functions.

The first-quarter effective tax rate was 30.8%, up 30 basis points over last year.

The year-ago effective tax rates includes an 80 basis points benefit from the US federal R&D tax credit.

The US R&D tax credit expired on December 1, 2013, and was not extended as of November 30, 2014, the end of FactSet's first quarter.

Although a bill including the renewal of the R&D tax credit for calendar year 2014 has been approved by the US House of Representatives, it has not been signed into law.

Accordingly, FactSet did not recognize any income tax benefits from the R&D tax credit during the just-completed first quarter.

The current impact of the R&D tax credit to FactSet is estimated to be $0.20 in EPS per year.

Only once in its 33-year history has the tax credit not been retroactively re-enacted.

If FactSet is able to recognize the full value of the 2014 R&D tax credit in its Q2 effective tax rate, the annual $0.20 EPS benefit would break down into a $0.14 one-time benefit to EPS, and a $0.02 increase in quarterly EPS in Q2 through Q4.

Now let's turn to our guidance for Q2 of FY15.

We expect that revenues will range between $244 million and $248 million.

Operating margins should range between 32.8% and 33.8%.

We expect our annual effective tax rate to range between 31% and 32%.

Diluted EPS is expected to range between $1.35 and $1.37.

The midpoint of this range suggests 12.4% year-over-year growth.

In summary, Q1 was a strong start to our fiscal year.

Our business expanded on many fronts and across all geographic regions.

We are pleased with the 350 basis points acceleration in our ASV growth rate, to 8.5%.

Our user base is growing nicely at both buy- and sell-side clients.

While our market share expands, we are continuing to invest aggressively in a forward market opportunity that we believe is many times our existing size.

Our aim is not just to string a few quarters together, but rather to leverage our favorable position in the marketplace, and execute at a high level, for the longer-term benefit of our shareholders.

Thank you.

We are now ready for your questions.

Thank you.

(Operator Instructions)

We have our first question here coming from Manav Patnaik from Barclays.

Thank you, good morning.

The first question, just on the R&D tax credit, just to understand.

So let's just say it does get signed into law today or in the coming week.

How will you guys reflect that?

Like will you have a one-time benefit in the quarter?

Will you retroactively restate it?

Just curious on how that would work.

Hi, Manav, it's Peter.

If -- under your assumptions, if the R&D tax credit is re-enacted just for 2014, in Q2, we would have a one-time benefit to EPS of $0.14.

And our quarterly EPS in Q2 through Q4 would increase by $0.02 per share.

Okay, got it.

All right.

That's helpful, thank you.

And just from an FX perspective, can you just help us understand -- I know you guys do a lot of hedging, but in terms of your exposure and how we should think about FX impact, either to revenue or margins or so forth?

Certainly.

I think in broad terms, and I'm just rounding a little bit for the benefit of ease.

In expenses, FactSet has, in annual terms, $200 million of expenses in currencies outside the US dollar.

Half of those are between Euros and pounds.

And in revenues, we build 97% of our ASV in US dollars.

The other 3% is weighted to yen and pounds sterling.

So we're at a net expense position.

The strength of the dollar does benefit our bottom line.

But in addition, what we're doing with it is we're going to reinvest back in the business and keep our margins flat.

I certainly would encourage anyone to look at our public filings, our Ks and Qs, because we'll lay out our foreign currency exposure by currency, as well as what's hedged, in very specific terms.

Okay, all right.

And then lastly, just from an industry perspective, there's been a lot of noise around chat services.

I was just curious on how you guys -- I know you guys had launched your own chat platform.

How you intend to either partner with those guys or compete against those guys?

Any thoughts there would be appreciated.

Hi, Manav, how are you?

So as you mentioned, we have a successful chat service that many of our clients use.

It federates with AOL, and many in the industry, and we certainly have an open platform, and will federate with anyone.

I think what you're referring to is a consortium that's being formed to create even a broader competing service with (multiple speakers) that area.

I only see that as a positive in the industry, as it creates chat in a more open forum.

All right, fair enough.

Thank you, guys.

Thank you.

Our next question comes from Joe Foresi from Janney Montgomery Scott.

Hi.

I wonder, could you give us some color around the uptick on the sell-side?

What you think might be driving that, and how sustainable it is?

Hey, Joe, it's Mike Frankenfield.

Overall, we see solid fundamentals on the sell-side of our business.

If you break that into two pieces, the research side and the corporate finance M&A side, I'd say things are relatively stable on the research side.

From what we saw this year, on the [corp 10] and M&A side, was much higher employment levels.

In other words, the normal falloff that happens at the end of the year, where [analyst leads] was not as significant.

And as a result, we retain more users.

The class hiring in those firms has been very robust, as you would imagine.

Most of the change in that is driven by really 10 firms.

And we're seeing solid hiring levels, solid deployment levels, amongst our largest clients.

Okay.

And could you talk a little bit about pricing?

And when you go into -- maybe you can just separate it by the buy-side and the sell-side?

I'm sorry, is your question in regard to pricing overall or pricing --

Yes, overall.

And if you're seeing any difference between the pricing function on either the buy- or the sell-side?

Pricing remains very consistent.

Our challenge in the business is to constantly add value to our product, to continue to justify the prices that we charge.

And I think we're doing a great job of that.

The product development pipeline that we have is very strong.

Our product continues to improve at a very, very rapid pace, relative to the value that we feel we're delivering, and certainly relative to the competition.

Okay, thank you.

Thank you.

Our next question here comes from Shlomo Rosenbaum from Stifel Nicolaus.

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

My first question is just trying to hone in on exact organic growth, just for this quarter, and then again, I guess, for next quarter.

If you would remove both the Matrix revenue contribution, and then the currency impact, what's the organic revenue growth for this quarter?

And then what should we expect for Matrix revenue next quarter?

In other words, what was the February quarter's contribution in the last year?

Or what would we be excluding from the number, in order to come up with an organic revenue growth rate for FactSet next quarter?

Good morning, Shlomo, it's Peter.

Good morning.

The organic ASV growth rate is 8.5%.

There's a table on page 8 of the press release that lays out our methodology to calculate it.

It backed out $7.3 million of acquired ASV for Matrix, and $2.6 million adjusted for FX, from primarily the strengthening of the dollar against the yen.

In Q2 next year, we will have -- Matrix will be with FactSet for a full year, so it will be not adjusted at all in our organic ASV growth rate that we publish at the end of Q2.

I was asking about revenue, as opposed to ASV growth, in this last quarter?

Our revenue growth rate organically was 8%.

And I'll have to come back to you with -- it's -- we backed out $2.5 million for Matrix, and that will not be backed out in Q2.

Okay, so the currency you're seeing, though, is not a factor, because almost everything you're billing is in US dollars?

Right, 97% is in US dollars, correct.

Okay, got it.

And then just on the margin side, can you go over the impact?

It sounded like the reason why the gross margin went down was a significant uptake in products that have third-party data that's integrated into that.

It seemed that -- was that the primary factor?

And why, like all of a sudden this quarter, did it have such a big impact?

Was there a particular push?

Or was there a significant client sale that took a bunch of those workstations?

If you could just give us a little bit more info on that?

That was a secondary factor, in terms of data costs.

The primary factor, by a large margin, is investment in new employees.

Okay.

That would be either through our organic headcount growth or through the acquisition of Matrix.

The data costs -- the variable data costs did increase, and that does increase when, along with ASV, and in this particular quarter, related to increased subscriptions to our risk suite.

And some benchmark subscriptions that are variable, particularly in fixed income.

So it's really the headcount growth that you guys are seeing in -- basically from the hires?

Is that the way to think of it?

Yes.

Okay.

Shlomo, it's Phil.

Our summer class, traditionally, we're hiring engineers and consultants.

Both of those would go into cost of sales.

Great.

Thank you very much.

Thank you.

Our next question comes from Alex Kramm from UBS.

Hi, good morning.

Just to start off, maybe you can just go back to the guidance.

I seem to be a little confused.

When I look at -- I think you talked about the midpoint.

But when I look at your operating margin and sales guidance, I actually get to something a little bit lower.

So maybe you can talk a little bit about the items below the line?

It looks like other income has been ticking up.

Do you expect more of a tick-up there?

And also, do you expect to be actually be fairly aggressive in this next quarter on buybacks?

Because that's what it seems to be implying.

Thank you.

I think, Alex, what you're -- in the 12.4% that I was -- there was -- that's on an adjusted EPS basis.

And it backs out -- or adds -- reduces the last year's EPS by $0.01, which had the R&D tax credit in it for four months.

And our guidance has it out for all periods.

Okay, can you talk about those two items, though, a little bit?

The other income and the share buybacks?

Any color there, just for our models?

Sure.

On share buybacks, over the last three years, I mean the quarterly -- what we've purchased quarterly has really ebbed and flowed.

It's ranged from 28 million to 144 million.

We're not on a specific program.

We have the luxury of having a high quality empowerment, in terms of too much cash.

And the amount which we allocate to share buybacks does --we know it's accretive, and it's variable related to M&A activity.

Other income interest rates for us hasn't been changing material, and I wouldn't expect any material change in Q2.

Okay, great.

And then just maybe a little bit bigger picture.

Obviously, growth in Europe, or internationally in general, has been very strong.

When I talk to people in Europe, portfolio managers, for example, I guess there's a few changes coming with -- or are already in place, in terms of what asset managers can charge, or can use soft dollars for, and things like that.

And when I talk to some guys over there, they are certainly looking at the technology spend that they have, and what products they want or really need in particular, if they have to pay for it themselves.

So have you seen any impact from some of those new rules?

Or do you see a little bit more questions coming from over there?

Or is it basically unchanged?

Hi, it's Philip Snow here.

We have not seen any impact from that so far in Europe.

All right, that's all for me, then.

Thank you.

Thank you.

Our next question comes from Tim McHugh from William Blair & Company.

Yes, just following up on that last one a little bit on Europe, and I guess Asia, as well.

Can you talk a little bit, to the extent you have a -- I guess any feedback from the clients, in terms of the economic environment over there?

I guess, in the headlines we watch, are a little bit -- at least more cautious, in terms of what spending behavior would be out of Europe.

But -- and Asia, for that regard.

But it seems like you're not seeing that.

So I guess, can you give some color around that?

Phil?

I think what we're seeing is really a strong competitive product in the marketplace.

We're certainly growing more than we feel our competitors are growing in our markets we serve.

We -- as you can tell by our results on the international side, we had strong performance, and that wasn't just Europe or Asia.

It was really both.

So I think we just feel that our product is strong and competitive, and making inroads in the marketplace.

Does it -- is -- I guess are there signs that the macro environment is creating a tougher market for others, and you're just selling through that?

Or is it just wrong to -- I guess, is there such a secular adoption and lower penetration rate in Europe that maybe the macro environment is not relevant?

A micro country-by-country buy-side/sell-side to dissect, to really get granular.

And I think if we feel, certainly on the sell-side, as you could tell, we had a strong quarter relative to prior year.

Your prior year was certainly an easy comp for us on the sell-side, And then on the buy-side, I think our work flows, both on the portfolio side as well as the core product, are doing quite well.

Okay, great.

And then -- I'm sorry, I missed earlier on the foreign exchange comment relative to your cost.

Did you say because of the hedging -- and I guess, where some of your costs are, that it's a benefit to your margins?

And I guess is that for the -- was that comment related to this quarter, or looking forward the next couple of quarters?

Overall, this quarter, and if rates stayed the same in Q2, we do get a benefit -- a net benefit from FX.

But if you look at our margin guidance, you'll notice that we're managing the Company to be flat.

So we're going to reinvest that benefit back in the product, in the form of new headcount.

Do you quantify at all the size of that benefit?

We -- I haven't quantified it.

I think you can go into our Q and look at what we've hedged, and our net exposures by currency, and take a crack at it.

Okay, thank you.

The next question comes from Andre Benjamin from Goldman Sachs.

Thank you, good morning.

I was wondering if maybe you could provide an update on the efforts to penetrate the fixed income market?

And maybe it would be good if you could -- I don't know if you have, in the past, give color on how much revenue or growth is coming from that set of products versus the core equity product?

The fixed income product is accelerating, in terms of growth, by every metric, in terms of ASV, in terms of client count.

As a reminder, the primary way we're addressing the needs in the fixed income space is to load large quantities of fixed income data, and combine that with our clients' portfolios.

So that clients can look at fixed income data within the context of our analytics application, specifically portfolio analytics.

It's really a unique offering in the marketplace.

We don't break out separate numbers for it.

But in previous quarters, we've described that we were in the very early innings of what we perceive the market potential to be.

We would maybe advance that an inning or two.

It's still very, very early days.

It's not inconceivable that someday, in the far future, we could see a world where as much as half of our ASV is coming from our fixed income products.

We're a long ways away from that, but very excited about the opportunity.

Thanks.

And then, I guess similarly, on the buy-side ASV, it's a traditional asset manager.

I know [US Health] and others also going after some of the higher end PWM clients.

I don't know if there's anything that you would call out there, in terms of either percentage that comes from those two asset based -- or types of clients?

And maybe any differences that you're seeing in selling to those client mixes today?

So certainly from the sell-side, we segment the marketplace and attack traditional asset managers, hedge funds.

And then, as you pointed out, the high net worth, or the PWM, the private net worth.

I assume is that what you're talking about?

Yes.

(inaudible) wealth?

Okay.

We've highlighted on prior calls, and continue to find great success, in the wealth space.

It's a smaller segment for us, so the growth rate is higher, just because it's coming off a smaller base.

Our core market always historically has been a traditional asset manager, and then a much smaller proportion of our buy side revenue is the hedge fund space.

Thanks.

Our next question here comes from Peter Appert from Piper Jaffray.

Thanks.

So Peter, I know you've talked about this in prior quarters.

Can you remind me, why the big variability in cost growth, between cost of sales versus SG&A?

The big variability really relates to employee growth.

It's -- as Phil previously mentioned, most of our new employee headcount starts off as consultants and engineering, which is a part of our cost of sales line.

And also, obviously, what we acquired from Matrix all came into cost of sales.

That's -- but I'd like to remind everyone, really, the way we're managing FactSet is that the operating income line, and that's where we spend all our time and focus.

But there's no message, in terms of flatter down fractionally SG&A expense?

You're not trimming the size of the sales organization or something?

(laughter) No, no, not at all.

There's no message.

And our general philosophy is, we're growing the size of our sales force, and we're doing that today at least at the rate of ASV growth.

Got it.

And then I think Mike mentioned some -- might have indirectly mentioned this.

But I'm wondering, in terms of the sell-side growth from the acceleration you saw this quarter, how broad based was it?

Is it one or two big sales driving this?

Or is it more widespread?

It was across virtually every client.

Interesting.

And do you attribute it to market share, or just client growth?

Just in terms of user count, really all the metrics.

User count, ASV growth, extremely broad based, not a significant amount on one (inaudible).

Okay.

But I'm sorry, I meant specifically, do you feel you're taking business from someone else?

Or this is add-on business, just to reflect growth in these clients?

The majority of it in this particular quarter was a function of expanding our existing footprint.

But we're not -- I don't think any significant [share wins specifically].

Got it.

And Phil, I'm wondering, just big picture, thinking about the next several years, in terms of growth dynamic.

How do you -- could you call out for us what we should look at, in terms of what the primary growth drivers are?

You've talked about the fixed income business.

But I think there's a perception in the market that your end-user customer base is relatively static.

So the question is, how does FactSet continue to grow?

The fact that the in customer base is static for us is true of almost every player in this industry.

And certainly, the bulk of the revenue of the industry comes from the largest 500 firms in the space.

I remember when we went public, we had 85 of the Top 100.

I'm sure we're deep into the 90s at this point.

So the client count hasn't changed much over time.

It's really about selling work flows to the clients we have.

And I think that's really where we excel.

Every one of our clients, certainly the largest clients, there are significant numbers of users for us to get.

I didn't get the exact number in our press release this quarter, but rounding at 60,000 end users in an industry with hundreds of thousands, we know our clients well enough to know that there are thousands of users just on the desks we don't have in those clients, both buy and sell-side.

And then, as Mike mentioned, the fixed income work flows are very exciting for us.

We continue to get deeper into offering risk and quantitative tools for our clients.

So it's a lot more product to the current clients we have.

It was really exciting for us.

Throw on top of that, FactSet content is, in many categories, the premier content in the industry.

And it really gives us all kinds of different channels to continue to grow our business, without expanding our client count by a single client.

And on that front, Phil, can you share with us what portion of the business currently is from data feeds?

I could.

We don't.

(laughter)

Today is the day, as you know.

It's a good question to ask.

I think the way to think about it is, clearly, before, we were just in the integration business, and we had a small integration feed business, where we helped clients where the productivity is taking multiple sources and turning them into one.

But obviously, with a big content engine that we have today, and as I mentioned, premier content, the opportunity for us to distribute our content both to re-distributors in this space, corporate market.

As well as being able to match work flows for our clients, and feed their internal needs for data in other forms than spreadsheets are in our core product.

Thank you.

Our next question comes from Dan Dolev from Jefferies.

Hey, thanks for taking my question.

The question is on ASV per workstation growth.

If my numbers are correct, it looked like it was flat year over year in Q1, which compares to, call it, 170 basis points positive growth in 2014.

Where does that come from?

And is that related to maybe some price concessions on the sell-side?

Or if you can give some color on that, that would be great.

Thanks.

I think I would just point out that it's not a metric that we follow internally at all.

There's so much revenue that's not workstation related that would skew that number up or down in a particular order.

Feeds, as was mentioned on the last question, would be a factor where it wouldn't change workstation count by any, and would clearly affect that number up and down.

I think Mike mentioned, I actually feel like our product is getting more competitive in the marketplace, and gaining share.

So I don't feel like we're in a deflationary environment at the workstation level, [at this point].

Got it.

And then on the margins, it seems like margins were growing ex-Matrix in the last few quarters, and you were guiding to margins possibly declining ex-Matrix.

Is -- can you just give some color on, is that -- are you taking (inaudible) investment in the business?

Or is that pricing related, or anything like that?

I think we're constantly investing in the business.

We guide margins to be flat (inaudible) is the way that we run the business.

I think if you look at our history, it's never flat.

That's what you plan for.

And some of the things either move it up or down, depending on what happens in a particular quarter.

I think from a business level, though, we are really trying to (inaudible), and are pleased that we continue to drive double digits (inaudible), which I think is going to create the greater shareholder (inaudible).

And my last question is on the potential new entrant to the market.

There's been a lot of news recently in articles, there's a company called Money.net.

They claim to have 15,000 customers, or a very big number.

Are you seeing them in the marketplace at all?

And maybe you can share your views, if you know about this product at all?

Anything you can say about it would be great.

We have seen Money.net in the marketplace.

We have not faced them in any sort of competitive situations, yet.

(inaudible) very bright individuals from some of our competitors that spun off and created an incoming product that comes in very, very low price point.

It's probably going to be interesting to the wealth management community, but I don't see it being competitive with FactSet for a long time to come.

Are they going after a different part of the wealth management?

Is that why you're not -- you don't think that's a threat to you, longer term?

Yes, I think we've articulated our wealth strategy pretty clearly.

We're looking at ultra high net worth wealth managers who are interested in a very sophisticated level of data and analysis.

They are operating very much like our traditional institutional asset managers.

And I have had an opportunity to look at that product, and they are not in the same universe, at the moment.

I would just --

Thank you.

The barrier to entry to the institutional level in a product is a substantial investment in content.

It took us 10 years, and we had a great deal of scale, to be able to build out the content that we have on our system.

And you start with company fundamentals, move to estimates, transcripts and institutional holdings, and you work your way down the list.

Just the sheer cost of goods to produce that level of content, to be an institutional player in the space, really precludes -- or would make it very difficult for a small player to find their way to the institutional scale in any short period of time.

Understood.

Thank you very much.

Our next question comes from Toni Kaplan, Morgan Stanley.

Hi, thanks for taking my questions.

So sell-side ASV growth has improved over the last four quarters, this one being 6.7%.

Can you give us a frame of reference of what that number looked like historically, like pre-financial crisis?

My memory is not that good, to be able to give you every quarter for any period of time.

I can tell you that the sell-side, for us, has always been more cyclical.

In the stronger markets, back pre-financial crisis, it was definitely been a driver in the organic growth rate.

And then in the financial crisis, it would definitely have been dilutive to our growth rate.

So it definitely, if you've looked at it over time, the buy side has always been more stable.

And it would flop back and forth, as to which one was the driver for organic growth in our business.

Okay.

And then you mentioned the high demand for the risk suite.

Any more color on what the reason was for that?

Thanks.

Hi, Toni, it's Phil Snow.

So part of the reason for that is, we just continue to put up more and more compelling offerings in the risk space.

Recently, last fiscal year, FactSet released a multi-asset class risk model, which is getting quite a bit of traction in the marketplace.

So that's another area that we're being able to monetize our [flexion] in fixed income is combining that with equity and on the risk side.

Okay.

And that's a FactSet model?

It's not a third-party model?

That particular model, yes, is a FactSet model.

Terrific, thanks.

Our next question comes from Pete Heckmann from Avondale.

Good morning, everyone.

I just had a comment on the second-quarter guidance.

Can you talk about what type of realized pricing increase is contemplated in that number?

It looks like you've been very consistent getting price increases in the 2% to 3% range.

Do you think that around that same range is in the cards for FY15?

Our -- this is Mike Frankenfield.

Our pricing has changed as we, over time, as you recall.

Two years ago was the last year that we really did the big, formal price increase to all of our clients in Q2.

And what we've done now is to make the majority of our price be coterminous with the contract renewal dates of our clients.

But really, price comes over the course of the entire year.

Okay.

And can you comment, in terms of the range that might occur, then, over the full year?

Is 2% to 3% still in the right range?

Or is that something that you're not going to go into more [detail] --

I think overall price is probably in the -- yes, very low single digits.

There are certainly price opportunities that we take on individual products that we perceive are performing extremely well.

And there are cases where there are products where we don't feel like we have any pricing power, because we need to continue to invest in them.

But that would probably be a good ballpark range, if you wanted to apply (multiple speakers) --

Okay.

And then just looked like you had good, strong growth in Asia Pacific.

Is there any contribution from that partnership?

I can't remember what the partner -- was it Quick?

You were looking at building, potentially, a high end workstation for the Japanese market.

Was there any contribution from that in the quarter?

Or is that still to come?

Still to come.

Okay.

Appreciate it, thanks.

Our next question comes from Glenn Greene from Oppenheimer.

Thank you, good morning.

Just a couple questions left.

But -- and maybe the answer is similar to the -- on ASV.

But the user growth in the quarter -- and obviously, you alluded to it being the strongest in seven years for the first quarter, which was seasonally soft.

What drove the user growth?

Was it broad based?

Were there a few big-off, one-off clients?

And maybe just a little bit more color on the strength of the user growth?

Hi, Glenn.

It's Phil Snow.

Yes, the user growth was broad based.

It was across the sell-side and the buy-side.

The sell-side had positive net user growth for the first time in a long number of years for this quarter.

But the buy-side was very strong, as well.

It was actually the bigger contributor of the two numbers for the quarter.

So there weren't any one-off large client wins, and that drove that number in the quarter?

No.

They were good, single to 10, 20 digit user (inaudible).

Got it.

And then just maybe a little bit of color on what you're seeing in the PA suite?

Any way to frame the momentum there, relative to the ASV growth?

And have you seen any change competitively?

Obviously, Bloomberg rolled out a product some time ago.

But any traction there?

We still are very competitive in the PA space.

We just continue to add more and more functionality to that application.

And again, the addition of fixed income really rounds out the offering, and allows people to look at either equity fixed or balanced funds.

And the risk [piles] on top of it.

So analytics is doing well, and it's being driven by every asset class.

Okay, thank you.

Our last question here comes from Shlomo Rosenbaum from Stifel Nicolaus.

Hi, thank you for squeezing me in for one more.

I just wanted to follow up on a question that was asked beforehand, because clients have been asking this, as well.

What percentage of your revenue is now coming from soft dollar payments, as opposed to hard dollar payments?

Shlomo, it's Peter.

I have to get back with the actual percentage, but my guess is that it's around 20%.

And I'll come back and look at that, and confirm that back with you.

The 20% soft dollar is your rough guess?

Hello?

Yes, we were sitting here talking about it.

The question hasn't been asked in a long time.

I think that it's roughly 20% from soft dollars for the buy-side.

Okay, great.

Thank you.

I can tell you it's only trended down in my career, starting at 100% in 1985, and down to something that we don't track very regularly at this point.

Okay, very good.

Thank you, everyone.

See you in 90 days.

Thank you.

Happy Holidays, everybody.

Thank you, and this concludes today's conference.

Thank you for joining, and you may now disconnect.