Factset Research Systems Inc (FDS) 2015 Q4 法說會逐字稿

Welcome, and thank you for standing by.

(Operator Instructions)

I would now like to turn the call 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 fourth-quarter 2015 earnings conference call.

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.

Joining me today are Phil Snow, Chief Executive Officer; Scott Miller, Director of Global Sales; and Maurizio Nicolelli, FactSet's Chief Financial Officer.

Now I'd like to turn the discussion over to Maurizio Nicolelli, Chief Financial Officer.

Thank you, Rachel, and good morning, everyone.

Here's where we will focus our time for this call.

First, I'll review the fourth-quarter results.

Second, I'll cover guidance for the upcoming first quarter.

Third, Phil Snow will discuss our recent agreement to acquire Portware.

Lastly, we'll close by addressing your questions.

Let's proceed with our fourth-quarter results.

FactSet performed very well in the fourth quarter, as we achieved record highs in all of our key metrics, which include ASV, revenues, client count, user count, and EPS.

During the quarter, our organic ASV grew $36.9 million, continuing our market share expansion.

Our growth rate accelerated to 9.2%, up 30 basis points from the third quarter, and up 190 basis points versus the prior year.

In terms of geography, ASV from our US operations totaled $715 million, while international operations accounted for $343 million, or 32% of the total.

Buy-side clients, which include off-platform data sales and the Market Metrics business, accounted for 82.5% of ASV, while the remaining ASV was generated by our sell-side clients, which include M&A advisory, capital markets, and equity research businesses.

Please note: Our results contained two discrete items.

First, operating expenses included a $3-million pre-tax charge primarily from the vesting of performance-based equity instruments.

Second, income tax expense includes a $2.3-million benefit from finalizing prior-year tax returns and other discrete items.

Excluding these two items, our adjusted operating margin grew to 33.9%, while our adjusted EPS rose 13% to $1.48.

This quarter marks our 21st 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 $73 million in free cash flow, an increase of 12% over the same period last year.

Free cash flow increased during the quarter due to high levels of net income, lower income tax payments, and a reduction in deferred fees due to timing of when we invoice our clients.

Our cash and investments balance was $182 million, down $500,000 during the quarter.

This quarter, we spent $78 million on share repurchases.

As of quarter end, $134 million remains available for future share repurchases.

We also paid regular quarterly dividends of $18 million.

Now let me walk you through our P&L.

Revenues grew in the fourth quarter to $261.8 million, up 9.1% organically over last year.

Adjusted operating income, which excludes a $3-million pre-tax charge due to the vesting of performance-based equity instruments, grew to $88.7 million, an increase of 11.7% over last year.

Adjusted net income advanced 11.9% to $62 million, and excludes the after-tax expense of $2.1 million from the vesting of performance-based equity instruments, and income tax benefits of $2.3 million from finalizing prior-year tax returns and other discrete items.

Adjusted diluted EPS grew 13% to $1.48.

In the fourth quarter, our US revenues rose to $176.5 million, which equates to 8% organic revenue growth compared to the same period last year.

Non-US revenues rose to $85.3 million.

Excluding the impact of foreign currency, the international revenue growth rate was 11.6%.

More specifically, revenues in the fourth quarter from Europe and Asia-Pac regions were $65.2 million and $20.1 million, respectively.

Excluding foreign currency effects, year-over-year growth rates were 10.4% in Europe and 15.5% in Asia-Pacific.

Let's now review the revenue growth drivers this quarter.

The organic ASV growth rate accelerated to 9.2%, and was driven by broad-based global growth from both the buy and sell side.

The growth rate from buy-side clients grew 50 basis points to 9% during the fourth quarter.

The growth rate from sell-side clients was 9.8%, a decline sequentially from the third quarter, but up 130 basis points from last year.

Our net user count increased by 3,210, which is our highest ever increase in a single quarter.

Net user count of FactSet terminals totaled 62,205 at quarter end, which represented a year-over-year growth rate of 14%.

The fourth quarter typically includes new users from both the buy and sell side, as our largest clients bring in their new hire classes.

Sell-side growth accounted for a little more than half the user increase.

Growth in the IPO and M&A marketplaces have also been a boost for our banking clients this year.

During the year, FactSet released a new user interface with an emphasis on the ease of use and search.

We believe this new UI also contributed to the net user increase.

Also contributing to our growth, we have seen accelerated demand for our fixed income portfolio products, portfolio analytics suite of products, sales of equity attribution, and multi-asset-class risk models.

Our stable of value-add products in the equity and fixed income analytics suite boosted strong sales in the US, European, and Asia-Pac regions.

Our solutions in the portfolio services space also continue to do extremely well.

As clients look for areas to outsource services around data integration, enrichment, quality control, and process monitoring, they are turning more and more to our managed services in this space.

Selling content in both data feeds continues to be a strong and developing product line for us.

We've had success leveraging the distribution network of third-party providers.

Large clients value our industry-leading content such as StreetAccount news, geographic revenue, and entity data -- FactSet Fundamentals, FactSet Estimates, and FactSet Ownership.

Finally, our research management solutions, what we call RMS, which include both our IRN and Code Red products, continued to grow in the fourth quarter, as clients now have a choice between our hosted and local solutions.

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

Total operating expenses were $176.1 million.

Our adjusted operating margin was 33.9%, which excludes the $3-million pre-tax charge from vesting performance-based equity instruments.

Cost of services expressed as a percentage of revenues increased by 230 basis points compared to the year-ago fourth quarter.

This increase was driven by higher compensation expense, including stock-based compensation.

Employee compensation expense grew as we expanded headcount 11% year over year, primarily from our new college graduate hiring in consulting and software engineering, and acquired employees in connection with the February 2015 Code Red acquisition.

Stock-based compensation grew due to the vesting of performance-based equity instruments.

SG&A expenses expressed as a percentage of revenues decreased by 180 basis points in the fourth quarter compared to the year-ago period, due to lower compensation expense from employees performing SG&A roles and a reduction in occupancy costs, partially offset by higher stock-based compensation expense.

At the end of our fiscal year, we had 7,360 employees, a year-over-year increase of 11%.

We hired 409 net new employees this quarter, primarily within our software engineering and consulting classes.

The fourth-quarter effective tax rate was 27.7%, down from 30.4% a year ago, driven by income tax benefits of $2.3 million from finalizing prior-year tax returns and other discrete items.

Excluding these income tax benefits, our current year annual effective tax rate was 30.3%, down 10 basis points over last year.

Now let's turn to guidance for the first quarter of FY16.

Our guidance does not include results from the expected acquisition of Portware.

We will update our guidance when the acquisition closes.

We expect that revenues will range between $265 million and $269 million.

Operating margin should range between 33% and 34%.

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, 2015.

We expect that diluted EPS will range between $1.46 and $1.48.

This estimate accounts for the expired federal R&D tax credit, which had 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 13% year-over-year growth after adjusting for the expiration of the R&D credit.

Please note: The R&D tax credit has expired only once in its 34-year history without being retroactively reenacted to previous years.

Should the R&D tax credit be reenacted on or before November 30, 2015, diluted EPS would range between $1.51 and $1.53, and FactSet would also recognize a benefit of $0.14 per share if the credit could be retroactively applied to previous periods.

Now I'd like to turn the discussion over to Phil Snow, Chief Executive Officer.

Thank you, Maurizio, and good morning, everyone.

My prepared remarks today will cover two topics.

First, I'll cover the strategic rationale behind acquiring Portware.

Given that this will be FactSet's largest acquisition, I will also touch upon our capital allocation strategy.

Second, I'll offer some thoughts about our 2015 results.

Let's turn to Portware.

Yesterday we entered into a definitive purchase agreement to acquire all of the outstanding membership interests of Portware for $265 million in cash, partially offset by expected income tax benefits with an estimated present value of $50 million.

We plan to fund the acquisition with an expansion of our existing revolving credit facility.

We expect we'll close in late October or early November.

From many perspectives, I'm very excited about the acquisition of Portware.

Strategically, Portware will be a platform to expand our presence in large global asset managers by becoming part of their trading ecosystem.

We expect to combine our leading expertise in portfolio analytics with Portware's innovative suite of trade automation solutions, and cross-sell the solutions at FactSet's blue-chip global buy-side client base.

To be clear, we still need to do significant work over the next couple of years to execute our plans and capture market share that is meaningful to our overall growth rate.

Importantly, we believe that eliminating disparate systems between middle and front offices is high on the wish list of our global asset manager clients.

We can streamline our clients' work flows by capturing more of the trading life cycle, and integrating it into FactSet.

I very much look forward to welcoming all the employees of Portware to the FactSet team.

I can tell you there's a high level of internal excitement and momentum to unifying our products, enhancing the work flow of clients, and driving up the value of our joint offering.

Regarding our capital allocation strategy, little has really changed.

We've been looking at many ways to expand our trading capabilities over the past few years.

During that time, we developed a strong belief that buying a proven winner in the marketplace was the best path forward.

We analyzed many opportunities, and have been impressed by what we found at Portware.

Our acquisition strategy has not changed since I have assumed the CEO role, and I do not anticipate a significant shift in our strategy on this front.

Regarding the size of the acquisition and FactSet's leveraging of its balance sheet, I have a few thoughts I'd like to share with investors.

One, the additional $265 million in debt to our balance sheet is more a function of record low interest rates rather than a strategic shift.

Like most corporations, we focused on returning capital to shareholders in the form of share repurchases and dividend payments, in light of the low returns available on cash balances over the last few years.

We believe that our return on capital far exceeds our cost of capital by a wide margin.

We continue to enjoy the luxury of great financial flexibility, given annual free cash flow generation of $281 million.

Second, the size of this acquisition is well correlated to the size of the opportunity for FactSet.

FactSet has made amazing strides in growing organically; but at the same time I recognize, along with our executive team, that there are times when an acquisition, rather than building a system internally, is the best course of action to put us on a path to capture significant business on a global scale.

Finally, we view the task of optimizing capital very seriously, whether investing in existing operations, acquisitions, or returning capital back to shareholders, maximizing our EPS accretion is what drives us.

Excluding amortization of acquired intangible assets, we believe the Portware acquisition will be accretive to earnings right away, and open up future market opportunity in our core client base, which will drive future growth.

Now let me turn my attention to the just-completed FY15.

I am proud of our many achievements, and want to thank every FactSet employee for their hard work in driving up shareholder value.

Our key metrics accelerated throughout the year, and the accompanying growth rates reached three-year highs.

Our organic ASV growth rate accelerated 190 basis points to 9.2%.

We crossed the $1-billion mark on ASV in February, and ended the year at $1.06 billion.

Clients and users reached record highs, including a record Q4 for user additions.

Free cash flow grew by 13.5% to a record $281 million.

We returned $323 million to shareholders in the form of dividends and share repurchases.

Return on equity was 46%, increasing our three-year average returns at 41%.

We continue to reinvest in our Business, as we increased global headcount by 11% in order to fuel organic growth.

We completed strategic acquisitions in the past 12 months, including Code Red.

EPS grew by 16% in 2015.

Finally, we established a path to a large opportunity within our core client base by signing an agreement to acquire Portware.

To summarize, we had a strong year, and I believe we are well positioned for future growth in FY16.

We have been successful in expanding our market share against competing products.

We have made tremendous progress accelerating all our key metrics.

And we look forward to achieving our aggressive but achievable goals in 2016.

Thank you, and we are now ready for your questions.

(Operator Instructions)

Our first question comes from Ms. Manav Patnaik from Barclays.

Ma'am, your line is now open.

This is actually Greg calling on for Manav.

I just wanted to ask a little bit more about the cross-sell opportunity with Portware, and maybe along those lines, who is the typical Portware user for the buy-side client, and are a lot of these guys already FactSet users?

Hi, Greg.

It's Phil Snow.

Portware is a great strategic fit for us.

Many of their more recent wins have been at the large buy-side client user base, which is one of our core areas as well.

We see this as a great strategic fit.

We have, as you know, great penetration within the middle office of our clients, and we have a good footprint with analysts, portfolio managers, and traders.

This really gives us a great opportunity to further penetrate the buy-side trading user community.

Okay.

And then, some of the articles I've read about Portware have been talking about their rapid growth on the FX side.

Can you talk about your thoughts there, what FactSet currently offers to the FX side, and what you guys are thinking there?

We don't currently have a lot of FX capabilities, which is one of the exciting parts about this acquisition.

What I can say is that our strategic focus, as you've seen, has to become more of a multi-asset-class solution for our clients.

We're excited about the fact that Portware is a multi-asset-class solution, and gives us more flexibility and opportunities in that area.

Okay.

Thank you very much.

Our next question comes from Ms. Toni Kaplan from Morgan Stanley.

Ma'am, your line is now open.

Thanks very much.

First, could you give us a sense of the growth in wealth management users during the quarter?

Was that a key contributor to the 14%?

Hi, Toni.

It's Scott Miller.

We don't break out growth rates by client or product segment, but we were very happy, we've been very happy with the growth in the wealth space.

It's continuing to outperform our overall growth rate, and we see great opportunities remaining in that space.

Okay.

Great.

And then secondly, now that you've announced a large acquisition in Portware, how does that affect your appetite for future acquisitions, and can you talk about what you view as an optimal leverage level, especially given that rates are so low, as you mentioned?

Hi, Toni.

It's Phil Snow.

I don't -- as I mentioned in the comments, our strategy hasn't changed where it comes to M&A.

We continue to look at a lot of different interesting opportunities that come across our desk, either in the content analytics or platform delivery area.

This is our largest acquisition, just on a dollar basis, but as a percentage of FactSet's size at the time, we've made other acquisitions that are this large.

So, we feel like we still have a tremendous amount of flexibility if we wanted to execute on something of a similar or larger size.

We certainly have seen some things that have come across; there's just nothing that we've been this excited about executing on.

Okay.

Great.

And do you have a target leverage level or it's just whatever makes sense, you'll just evaluate it?

We still have -- hi, it's Maurizio.

We still have tremendous flexibility in our capital structure.

We'll have $300 million in debt, but our EBITDA is far larger than that.

So, our capacity to continue to allocate capital to where it's best allocated, whether it's share repurchase, dividend or acquisitions, is still very much there.

So, there's no target level as of today.

Okay.

Thanks a lot, guys.

Our next question comes from Mr. Shlomo Rosenbaum.

Sir, your line is now open.

Hi, good morning.

Thank you for taking my questions.

How should we think about the growth of Portware?

The first quarter, the Company had 40% year-over-year growth.

Is that indicative of the way the Company is growing?

Is it continuing to accelerate from there?

Just trying to understand how I should think about this over the next year or so?

I'll answer that, Shlomo.

I'm not sure where the 40% comes from, but what I can say is that Portware has had a tremendous amount of recent success in the marketplace, and this was really driven by a significant shift in their strategy.

They shifted towards creating really good analytics and automation, freeing up the traders to spend their time in areas where they can add the most value.

We really love the analytics component of the Portware offering, and we see that as a very good complement to FactSet and the portfolio suite of products that we've done so well with.

I'll tell you where I got that from.

On their website, they put out in the first quarter that they had grown 40% year over year.

That was something -- where I got that from.

It seemed they had -- the strategy you're talking about is indicative of really good growth, and I was just wondering if there's -- is this something, when you think about the 60 or so clients that they've got right now, how many clients of the close to 3,000 that you have do you think this kind of platform could be potentially sold into?

A lot of them, I think.

FactSet's got a great buy-side client base.

It's 80% of our ASV.

There's about a 75% overlap with their client base and ours.

So, 75% of the Portware clients are already FactSet clients.

That other 25% represents a cross-sell opportunity for other products, but the largest cross-sell opportunity is for Portware to penetrate the rest of the buy-side client base.

What size clients?

I'm trying to get into it what size client would be buying something like this?

You talked about blue-chip clients.

Is there a certain asset under management where someone will spend-- (multiple speakers)

Some of our very largest clients today on the buy-side use Portware.

Some of the very largest sovereigns globally use Portware.

They also have good penetration within the hedge fund space.

Okay.

And is this straight out -- how is the software priced?

Can you discuss that a little bit?

That's something we can't discuss, no.

Okay.

All right.

I'll get back in the queue.

Thank you.

Okay.

We'll certainly have more detail for you later.

The next question comes from Mr. Alex Kramm of UBS.

Sir, your line is now open.

Hey, good morning.

Just maybe going back to the base business for a second here, obviously organic growth rates continue to accelerate really strong.

Just maybe can you talk to us about what you're seeing out there and your confidence level to get back to that or to get to that 10% growth that you outlined as a goal?

The two things I would note is, on the buy-side, increasingly we're hearing, with all the volatility in markets, asset managers are pushing off budget, AUM is down.

Then the sell-side, you highlighted M&A and smaller boutiques as an area of growth, and it seems like that M&A cycle might be coming to an end, too.

Just wondering what you're seeing out there and how you're feeling in the context of getting back to 10% with that backdrop?

Hey, Alex.

It's Scott Miller.

I'll take a couple pieces of that.

Clearly, volatility in the market is something that we watch.

We talk to our clients a lot about it.

The thing about volatility for us, as well, is it requires better data, more analytics, and better information in general, which plays right into our sweet spot.

So, with the volatility comes opportunity for us.

We feel really good about the opportunities out there across both buy side and sell side.

Our growth has been very broad based across our regions and our client base, so we feel good about the opportunities going forward.

Okay.

And then secondly, just coming back to the acquisition and the strategy, you touched upon this a few times, but when I think about FactSet, a lot of people still think of you as a desktop business that has, to some degree, a pretty strong value proposition.

And now it seems like you're going to some other parts and becoming maybe a little bit more of a broad-based financial technology provider within this EMS.

There's probably other parts of the value chain that you can now fill when you think about order management and other even parts that sit in between it.

Just wondering, should we be thinking about FactSet a little bit more as a broader FinTech provider that might be going after some more competitive businesses or some more businesses that you might not have the same kind of mode that you have today or how would you defend that?

The easiest way to think about our Business, and the way that we think about it internally is, we have very great -- we have great penetration within the middle office of our clients, the performance risk portfolio area.

We also have really good deployment within the front offices of our buy-side and sell-side clients.

We also have a business where we provide solutions outside of the workstation.

That's how we're organized.

That's how we think.

And we think there's huge opportunities for us in all of those dimensions, particularly within the largest clients in the market.

All right.

Fair enough.

Thank you.

The next question comes from Mr. David Chu of Merrill Lynch.

Sir, your line is now open.

Hi.

Thanks, guys.

The press release mentions $41 million in ASV for Portware.

Is this the right way to think about annual revenue contribution in year one?

Yes.

Okay.

And can you just speak to the margin profile of the company?

We included the accretion/dilution analysis in the press release.

The only other thing to really add there is just from an EBITDA margin, it's right around 20% right now.

Around 20%.

Okay.

Great.

And then, you guys continue to do a good job lowering SG&A as a percentage of revenue.

Just want to see how much more room you have there, and what you're doing to deliver the leverage?

David, in general, we look at -- we manage the Business based on the operating margin overall.

The difference between cost of services and SG&A is really a function of where we bring in employees.

The majority of our employees that were brought on in the fourth quarter were in cost of services from both our consulting and software engineering classes.

But at the end of the day, we're really looking at the total operating margin that we're managing to.

Okay.

Got it.

Great.

Thanks.

Next question comes from Mr. Peter Heckmann of Avondale.

Sir, your line is now open.

Good morning, everyone -- just a couple follow-up questions.

Phil, when you talk about looking to continue to expand the asset classes for FactSet, and again, it goes to a little bit more of the legacy view of FactSet and that's clearly evolving, but you primarily consider to be an equity solution, but you've been adding fixed income capabilities, FX capabilities.

What type of investments do you think are needed to really develop a robust multi-asset-class solution?

And as CEO, do you still think of the Company as managing the long-term towards flat operating margins and [investments in incremental] profits in the platform, or might this require some additional incremental investments that could pressure margins?

I'll start with the second part of that question first, which is, yes, the philosophy here hasn't changed.

We want to drive double-digit EPS growth rate, keep our margins flat, and reinvest everything we can back in the Business for our clients and our shareholders essentially.

So, every year we go through a robust investment process exercise, where we look at all of the different opportunities available to us within different areas of the Business.

This year, again, fixed income and multi-asset class was very prominent in the ideas, and we continue to fund that.

We continue to overweight that versus some of our other areas.

But there are lots of areas that we need to continue to invest in, in the Business.

It's not just strictly adding into fixed income on some other asset classes.

Okay.

Just a follow-up question -- maybe this is better for Maurizio, but on the assets from ETF.com, was there any measurable level of ASV contribution with that small acquisition?

And then number two is, can you comment on the pricing environment and perhaps quantify how much pricing is contributing to overall organic growth for FY15?

This is Phil Snow again.

For the ETF.com acquisition, no, there wasn't any significant revenue that was part of that acquisition.

It was more of a content acquisition.

In terms of pricing, I think you can expect the same thing.

If I understood the question correctly, the same as in previous years, where that's -- we add very low-single digits in terms of our pricing over the year.

All right.

That's helpful.

Thank you.

Next question comes from Mr. Keith Housum of Northcoast Research.

Sir, your line is now open.

Great, thanks.

First question for you on Portware: From a geographic perspective, is there significant geographic overlap you guys have or opportunity to take Portware perhaps where you guys are and they are not?

The Portware -- I don't have the numbers right in front of me, but there's very good overlap with the global offices that we have, which is great from an integration standpoint.

And they're -- like us, the bulk of their revenues are probably in the Americas, and they're starting to see a lot of success globally, as well.

So, there's very good overlap.

There's good large clients and prospects in every region.

Got you.

Okay.

And then going on to the core business, as we look at the market volatility over the past few weeks, is there any signs from your customers that there's concerns about their hiring trends going for the rest of this calendar year?

Hey, Keith.

It's Scott Miller.

We haven't really seen any of that indication.

We clearly stayed close to our clients through all this volatility.

It's felt still fairly healthy.

If we look at the sell side and graduating classes that we just saw were reasonably healthy, and attrition rates were nothing of note.

So, we haven't seen anything that alarms us in that space so far.

Great.

Thank you.

Appreciate it.

Next question comes from Mr. Bill Warmington of Wells Fargo.

Sir, your line is now open.

Good morning, everyone.

A question for you on the geographic growth: I wanted to ask about the strong international growth, and you had mentioned strength in Europe and also Asia.

Just wanted to ask specifically what kind of products you were seeing the most success with there, whether it's wealth management, fixed income, or the legacy desktop, or one of the others?

Hi, Bill.

It's Scott.

It's pretty broad-based.

We've seen it across both sell side and buy side in Asia-Pac and EMEA.

We restructured our regions about eight months ago to have international split into EMEA and Asia-Pac.

So, looking at it across those two, it's been fairly broad-based in terms of where the growth is coming from.

Okay.

Thank you.

And then, on the employee count, I know that was up almost 11%, but it sounded like a fair amount of that was coming from the acquisitions that have been done.

If you excluded those acquisitions, what would that more normalized headcount growth look like?

The acquisition of Code Red only added 40 employees in total.

So, the large majority of the adds during the year are from new hiring that we've done.

Got it.

Is that mostly offshore or is that onshore?

It's a healthy mix.

Okay.

And then final question was -- just wanted to ask on Portware whether there were any client concentrations we should be aware of?

No.

They do have some large client deployments, which is partly why we're so excited, but it's not particularly concentrated at the top if it's a risk question.

Got it.

Thank you very much.

Next question comes from Mr. Tim McHugh of William Blair & Company.

Sir, your line is now open.

Yes, thank you.

Just on Portware, can you talk about the medium-term expectations for margins?

Just given the 20% EBITDA margin and the multiples that you paid, it seems rather high.

So, is that multiple a reflection of -- you think the margins will move towards the corporate average, or is it about the growth potential more so?

Every acquisition we look at is unique, as you would expect, and we do a tremendous amount of due diligence.

We think that just the growth rate, the future opportunity, the strategic fit, and the future margins that we projected make the price that we paid a great deal for FactSet shareholders.

Okay.

Maybe just to follow up on that -- we've seen competitors in your related space also pay fairly high multiples for other financial data businesses.

Is the pricing for acquisitions getting more and more competitive in this sector, and how does that influence then as you think about the strategy you talked about, about trying to expand the things you do within the broader financial data sector?

We've certainly noticed some froth over the last year or two as we've looked at strategic acquisitions.

But I would not say that froth played into our thinking in terms of the pricing for this acquisition.

We feel like we paid a very fair value for the asset.

Okay.

Thank you.

Next question comes from Mr. Dan Dolev of Jefferies.

Sir, your line is now open.

Hi.

Thanks again for taking my question.

Can you talk about -- it looks like organic growth, revenue growth in the US has decelerated about 60 basis points.

I know the compares are tougher, but there's a bit of a bifurcation between the accelerating ASV and the decelerating organic growth.

Can you talk a little bit about what's trending that, and how we should think about the coming quarters, the run rate for organic growth in the US?

Thanks.

Dan, it's Scott.

From my perspective, over the year, we've seen acceleration across all three regions.

The Americas is our most mature market, and so the other regions are accelerating faster, but I feel I'm very comfortable with the growth prospects for all of the regions and I like what we see in the Americas.

Got it.

Thanks.

And then just one housekeeping question: It looks like one of the metrics is no longer disclosed, more specifically the number of workstations.

Can you maybe discuss what's behind that?

If I missed it, then sorry.

We do have the number of workstations in the press release.

We were up 3,200 workstations during the quarter.

Got it.

Okay.

All right.

Thank you.

Appreciate it.

Next question comes from Mr. Patrick O'Shaugnessy with Raymond James.

Sir, your line is now open.

Hey.

Good morning.

So, first question is -- Symphony -- the start-up messaging service and technology platform has certainly gotten a lot of press.

Just curious what your read is on that as a product, and if there's any opportunity for FactSet to partner with Symphony in any way?

Hi, Patrick.

It's Phil Snow.

As we announced, we have joined the Symphony Foundation, and we -- this is consistent with what we've said in the past.

We believe that an open messaging community is best for the entire marketplace.

We fully support that.

That will be something that our users will be able to use.

Got it.

Missed that.

Thank you for pointing that out.

The follow-up from me: Obviously McGraw-Hill bought SNL during the quarter.

They announced it.

And I think that acquisition really highlighted the dominance of SNL in some key verticals, particularly financial services and real estate.

Curious if there's any opportunity for FactSet to maybe more directly go after those verticals and encroach on a market opportunity that still seems pretty powerful?

It's a great question.

They've built a great product.

They go incredibly deep in some sectors.

We go deep as well.

We don't go quite to that level of depth within particular industries.

And when we're evaluating our investments each year, we think about that as one of our options.

But we sit side by side today with SNL quite happily in a lot of our client bases -- a lot of things that FactSet does that SNL can't provide.

Great.

Thank you.

Next question comes from Mr. Glenn Greene from Oppenheimer.

Sir, your line is now open.

Thank you, good morning.

I just want to go back to the margin profile of Portware.

Is it just a function of its -- at this point, with a $40-million revenue run rate, it just hasn't really scaled, and that the incremental margins are very high?

Is that how you think about it over time?

We think about it right now as it has approximately a 20% margin.

It will grow over time as we expect the business to grow and get more in line with FactSet's margin going forward as we reinvest into the business also.

Okay.

And then strategically it's a little bit different than FactSet's typical acquisition.

Obviously, it's more focused on the trading, and more data and analytics and algorithms.

Is that an increased focus that we could see other acquisitions or internal development toward this direction over time as well?

We've been building out our own buy-side trading solution for some time.

This really gives a lot of additional heft to it.

We just didn't feel like we had the internal expertise to build for this particular work flow.

But we continue -- for all of the adjacent work flows within our largest clients, we continue to evaluate the partner, build or buy option for us.

Okay.

Then finally, just on the very strong user growth in the quarter, the 3,200, and I know it's seasonally a strong quarter but this seemed better than normal seasonality.

Was there anything unusual in the quarter, one big client that had a lot of adds or anything like that?

And is there any sequential concern going into 1Q that we get some fall-off?

Hi, Glenn.

It's Scott.

Nothing that specifically calls out there.

It was very widespread.

Sell side was a little bit higher in the overall number than buy side was -- not surprising.

We do see good growth in the sell-side workstation this time of year as the new hire classes come in.

But it really was just good growth all over the place, and a testament to our sales force and client services group who are out there and they were doing a terrific job and it showed.

Okay.

Great.

Thanks a lot.

Next question comes from Mr. Shlomo Rosenbaum of Stifel.

Sir, your line is now open.

Hi.

Thank you for squeezing me back in.

Maurizio, the acquisition is supposed to go from being $0.03 dilutive to becoming accretive in 12 months.

The implication is you guys get to FactSet-like operating margins in about 12 months.

And I'm just wondering, is this a function of revenue growth or is there some kind of particular cost take-out that you're planning in terms of real estate integration -- office integration, really?

I'm just trying to gauge that.

Usually with a company this size, it would be a revenue growth type of function, but I want to make sure I'm thinking about it properly.

Hi, Shlomo.

It's Maurizio.

You have it correct.

This is a function of revenue.

It is very little cost taking out in this process.

It really is all about revenue growth.

Okay.

So, it's really the significant solid revenue growth that's lifting the margins over here and that's underpinning the valuation of the Company and the opportunity and everything like that -- that's the way to be thinking about this?

Right, it's providing the substance over the next 12 months.

Got you.

Thank you very much.

Thanks, everyone.

See you again next quarter.

That concludes today's conference.

Thank you all for your participation.

You may disconnect at this time.