Factset Research Systems Inc (FDS) 2016 Q2 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.

Ma'am, you may begin.

Thank you, operator.

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

Welcome to FactSet's second-quarter 2016 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.

And now I'd like to turn the discussion over to Phil.

Thank you, Rachel.

Good morning, everyone, and welcome to today's call.

At FactSet, we're committed to bringing the world's best insight and information to investment professionals.

Our historical and recent track record of success has been built on two foundations.

One, we have a real passion for understanding our clients needs and are driven to deliver an unparalleled customer experience, and two, we invest our time and people into developing superior analytics, technology, and content to meet those needs.

And as a result, throughout our history, we've been able to consistently produce significant growth for our Company and value for our shareholders.

This past quarter was no different.

In a tough beginning to the markets this calendar year, we produced solid growth.

We have an increasingly diverse suite of enterprise and workstation solutions that enable us to weather a challenging time.

In the second quarter, our organic growth ticked up to 9.5% from 9.4% in Q1, and excluding foreign exchange, ASV rose $29.8 million versus $25.4 million in the same quarter last year.

ASV growth rate has been on an upward trend every quarter over the last nine quarters, and rising 100 basis points since February of 2015.

The buy-side and the sell-side both grew at 9.5% this quarter, and the buy-side increased 20 basis points from 9.3% to 9.5%.

And just to remind everyone, we've defined the buy-side as traditional asset management clients, hedge funds, and wealth managers.

We also include our CTS, Portware, and market metrics businesses into that number, and on the sell-side, it's defined as M&A, advisory, capital markets, and equity research.

Let's break down the key contributors to our growth in the second quarter.

We had positive ASV changes related to broad based growth globally from both the buy-side and the sell-side businesses, and we saw solid growth in our core buy-side client base in all three of our regions, the Americas, EMEA, and Asia-Pac, and on the sell-side, the growth is primarily driven with our middle market segment.

This year our annual price increase contributed $9 million in the Americas, and as we've mentioned in the past, the number of clients affected by the price increase each second quarter has been declining, because more and more of our clients have been experiencing a price increase at the time of renewal and renegotiation of their contracts with us.

And as a result, price increases occurred throughout the year and are not a significant item in the second quarter as they had been in prior years.

Portware, in its first full quarter being owned by FactSet performed well, as we made strides in both integrating the group into the FactSet organization and executing on its strong pipeline of new opportunities as we take advantage of cross-selling the Portware solution to FactSet's blue chip, global buy-side client base.

CTS had an exceptionally good quarter.

To remind everyone, our CTS suite provides FactSet content and analytics outside of the terminal product, and we had strong contribution this quarter from our core investment management client base for CTS.

Lastly, the continued strong performance of our analytics suite contributed to buy-side growth.

Multi-asset class offering, performance risk, quantitative analysis, production, and managed services all make up an excellent suite of analytics products that we can sell into our clients at the enterprise level, and this boosted sales in all regions within the investment management business.

Our recent analytics road shows in all three regions gave over 150 clients a first look at the next generation of our portfolio analytics suite.

These products are core to our buy-side clients, and continue to be a large piece of what's driving that business.

Moving forward, our expectation of continued growth is based upon two main drivers that have historically produced consistent results.

First, demand for our value-added applications is strong.

This includes analytics, CTS, Portware, and RMS, our Research Management Solutions suite.

We are connecting more dots within our client base, with solutions for an increasing number of workflows.

In parallel, we are laser focused on our core workstation business.

Even in a challenging or tightening market, we view that we still have a relatively low share of front-office users on both the buy-side and the sell-side.

And over time, there is still tremendous opportunity to capture more users in portfolio management, research, banking, wealth, and trading.

We remain committed to understanding our clients' needs, and continue to provide them superior solutions that help them make smarter decisions every day.

The Portware acquisition is a great example.

Portware's innovative suite of trade automation solutions coupled with our expertise in portfolio analytics will enable clients to streamline their operations and focus on key decisions.

We continue to push innovation while succeeding at servicing current client needs by investing in our people and developing them to succeed.

We are really proud to announce that FactSet was recognized for the eighth time in a row on Fortune's 100 Best Companies To Work For list.

We view the investment in our employees as critical to providing the best service possible to our clients, to enable continue growth of our overall business.

The investment industry is facing more challenging times.

FactSet is a trusted partner for our clients, and we are uniquely positioned to give them the tools and support to weather market volatility.

At our heart, FactSet is a productivity tool.

We make our clients' workflows more efficient by providing a broad range of enterprise solutions and providing excellent service.

Our solid and expanding business enables us to reinvest and partner effectively with our clients to meet their needs for smarter investment decisions, and in doing so, we'll continue to drive organic revenue growth and return capital to our shareholders.

Let me turn it over now to Maurizio, who will give us a more detailed look into our second-quarter performance.

Thank you, Phil, and good morning to everyone on the call.

As you heard from Phil, our client-centric solutions enabled our business to continue to excel during a choppy period in the markets.

Here is a break down of our second-quarter results, both from a revenue perspective as well as from an operational view.

Revenues grew in the second quarter to $281.8 million.

Excluding revenues acquired from acquisitions completed within the last 12 months and the effects of foreign currency, organic revenues grew 9.5% over last year.

During the just completed second quarter, US revenues grew to $190 million.

Excluding revenue acquired from recent acquisitions, organic revenues in the US were up 9.4% compared to the year ago second quarter.

Non-US revenues increased to $92 million.

Revenues from our Europe and Asia Pacific regions were $69 million and $23 million, respectively.

Excluding foreign currency and acquired revenues from recent acquisitions completed in the last 12 months, the international growth rate was 9.6%.

This growth rate breaks down into 7.3% from Europe and 17.6% from Asia Pacific, respectively.

As noted in the press release, beginning this quarter, we have changed our non-GAAP reporting by adjusting for deal-related amortization.

Adjusted operating income and margin, adjusted net income, and adjusted diluted earnings per share will exclude both deal-related amortization and non-reoccurring items.

This change is intended to better reflect the underlying economic performance of the business.

A quarterly schedule reflecting this information, retroactive to the first quarter of FY15, has been included on page 10 of the press release.

Included in our second-quarter results were the following non-reoccurring items: first, operating expenses include both a $2.4 million pre-tax charge from restructuring actions, as well as an incremental $1.4 million charge for stock-based compensation expense related to a change in the vesting of performance-based stock options.

Together they increased operating expenses by $3.8 million.

Secondly, income tax expense includes a $7.3 million benefit related to the permanent reenactment of the US federal R&D income tax credit, which occurred in our just completed second quarter and was retroactive to January 1, 2015.

Adjusted operating income, which excludes $3.8 million in non-reoccurring items and $4.1 million in deal-related amortization grew to $93 million, an increase of 9% from the second-quarter last year.

Adjusted net income, which excludes non-reoccurring items and deal-related amortization, grew 10% to $66 million, while adjusted diluted EPS grew 12% to $1.59.

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

Total operating expenses for the second quarter were $197 million.

Our adjusted operating margin this quarter was 33.1%, which excludes non-reoccurring items and deal-related amortization.

Second-quarter cost of services, expressed as a percentage of revenues, increased by 380 basis points compared to the year-ago period.

The increase was driven by higher compensation, including stock-based compensation and amortization of intangible assets.

Employee compensation expense grew due to the non-reoccurring restructuring cost, the change in the vesting of performance-based stock options, our headcount expansion from new hires, and the addition of Portware.

The increase in amortization of intangible assets is primarily related to the recent acquisition of Portware.

SG&A expenses, expressed as a percentage of revenues, decreased by 160 basis points in the second quarter compared to the year-ago period, due to lower compensation expense from employees performing SG&A roles and a reduction in global occupancy costs.

At the end of our second fiscal quarter, we had 8,093 employees, an increase of 16% in global headcount during the past 12 months.

We hired 160 net new employees this quarter, primarily from our engineering and consulting recruiting classes in the US and Europe and our content collection classes in Hyderabad and Manila.

The second-quarter effective tax rate was 20.2%, down from 24.1% a year ago, due to a $7.3 million income tax benefit related to the permanent reenactment of the federal R&D income tax credit.

Excluding discrete benefits in both years, our effective tax rate was 28.8%, down 160 basis points over last year.

Free cash flow during the last three months was $81 million, an increase of $39 million from the same period last year.

This increase represents our highest ever second quarter of free cash flow in Company history.

Our cash and investments balance was $198 million, down $5.2 million during the quarter.

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

Free cash flow was up 90% year over year, due to higher levels of net income, lower income tax payments, and higher client receivable collections.

Our DSOs were 33 days at the end of the second quarter compared to 36 days in the prior-year period.

During the second quarter, we've repurchased 465,000 shares in the open market at an average price of $153 per share.

Our diluted weighted average shares decreased by 527,000 shares as a result of our ongoing repurchase activity and a lower share price, reducing the dilution from existing share-based compensation.

As Phil mentioned at the beginning of the call, throughout our history, we have been able to consistently produce significant growth for our Company and value for our shareholders.

Although the markets have been volatile, our business model has proven to be resilient and continues to outperform within our industry.

Our client-centric approach and diversified offerings help us remain strong in weak and strong markets.

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

We expect that revenues will range between $286 million and $289 million.

GAAP operating margin should range between 31% and 32%, which includes a 120 basis point reduction from the operations of Portware.

Adjusted operating margin should range between 32.5% and 33.5%.

We expect our annual effective tax rate to range between 28.5% and 29.5%.

GAAP EPS is expected to range between $1.54 and $1.58.

Adjusted EPS is expected to range between $1.60 and $1.64.

The mid point of this range suggests an 11% year-over-year increase.

In conclusion, the first half of FY16 was strong.

Our growth rate accelerated to higher levels, while we continued to invest in our future growth opportunities.

Thank you for joining our call this morning.

We are now ready for your questions.

Thank you.

(Operator Instructions)

Operator, I don't see any questioners in the queue, currently.

Can you please make sure that that functionality is available to all of our listeners?

Yes.

Yes, it is available but let me double check.

(Operator Instructions)

At this time, there are no questions on queue.

Operator, I'm getting some messages from the dialers on our call that the functionality is not working.

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Can you please check that?

Would you like me to open the line, Rachel?

Yes, absolutely, please.

Okay.

I'll open the line, just give me one second.

So if you're a caller trying to ask a question, would you please keep trying?

Rachel, all lines are now open.

Operator, I don't think that's working.

You should turn them off.

Okay.

Let me ask the callers again.

If you are trying to ask a question, please can you hit the directions the Operator gave you at the beginning of the call.

Operator, I think we have a few questions now.

Could you please introduce the first question?

Our first question comes from Mr. David Chu from Bank of America.

I'm sorry, Mr. Shlomo Rosenbaum, from Stifel.

Hi, good morning.

Thank you for taking my questions.

If you can just comment a little bit on what the ASV and revenue growth would be if you excluded any incremental growth in the quarter from Portware, so we can get an idea if the business, excluding Portware, is accelerating, decelerating, or staying the same?

That would be helpful.

Sure, Shlomo.

It's Maurizio.

As you've seen in our historical organic revenue or organic ASV calculation, we include the incremental changes after an acquisition, but we do pull out from our calculation any at the amount that we have -- that we acquire in ASV.

We have not changed that calculation, so we have included the changes in Portware in the organic number.

Keep in mind, they are not material at the end of the day.

They are -- Portware is less than 5% of overall ASV, but we don't break that out in our organic calculation.

I will ask Phil to give us a little bit of color on how Portware is doing.

Yes, sure thanks for the question, Shlomo.

Yes, so Portware is executing very well on its business plan.

Just to remind everyone, when we made the acquisition, they had a very strong pipeline of large investment managers.

So these are big sales, we continue to make good progress on the pipeline, and from the profitability standpoint, they're doing better than expected.

So if you look at adjusted EPS, Portware is $0.02 accretive to our results, whereas if you look at, on a GAAP basis, we would be $0.02 dilutive and that's a little bit ahead of where we thought we would be at this point.

Let me ask the question a different way.

The business, excluding Portware, accelerating or decelerating?

Performing well.

I mean, as we said on the call, we're executing well.

As you can see in the results that the number of workstations was down compared to the second quarter of last year, but we're doing exceptionally well with a broad range of products that we sell to our clients: the analytics suite, CTS, RMS, Portware.

They are all contributing to our growth.

Okay, and what impact -- can you repeat again the FX impact on ASV in the quarter?

I just missed it.

More than 95% of our ASV is billed in US dollars.

There is an FX piece to it.

There's a small portion of our ASV that's billed in pounds, and also small portion of it billed in yen, but it was immaterial to the overall number.

We do exclude that small piece from our organic growth rate calculation.

And then I'll just leave at the last one.

Could you talk a little bit about the trends in the business through the quarter?

In other words, there definitely was chop in the quarter I guess at different times, and as you entered the quarter, how did it look versus exiting the quarter in terms of the environment?

Hi, Shlomo, it's Scott speaking.

Clearly, market volatility was a theme for us.

There's both a good and a bad to that.

The challenge with market volatility is that we do see, typically, a slight slowdown in the sales cycle, in the close cycle.

So we did see pipeline pushed into the second half.

In general, we saw a lot more opportunity than we saw challenges, because the volatility opened up lots of conversations around our analytical suite of problems -- of solutions, data, lots of conversations around our CTS product.

So in general, we kept focus on the sales cycle like we had been going through in the previous quarters, but we faced some of the challenges head on and I was very happy with the way that we executed through the quarter.

Okay great.

Thank you very much.

Our next question comes from Mr. David Chu.

Hi, thank you.

So in terms of the slightly slower subscriber growth in the quarter, was this primarily from the sell-side?

It looked like a sell-side ASV growth slowed a little bit.

Hi, David, it's Scott.

It was a mix.

We did see a little bit on the buy-side as well.

It tended to be with our same-store sales; our current client base where we were up-selling.

What we did see was a nice uptick in new business conversations and new business closes, so there was a mix going on.

Yes, there was some push, but we saw an uptick in some of the closes as well.

Okay, great.

And then in terms of just the macro, so are you seeing firms kind of cut spend in aggregate at this point?

Not dramatically different than we had seen in the previous quarters.

We are -- clearly, as we've said over the last couple of questions, market volatility gets people thinking and pausing a little bit, but we haven't seen a dramatic shift in the spending.

When you do see markets go the way they did, in many cases, there's a requirement for more analytics and more data.

So we're approaching it from a proactive standpoint, and we haven't really seen a dramatic shift in spending.

I'll add to that as well.

We've lived through volatility of the markets at FactSet.

And whenever we have a tightening, it really gives our sales team, with the relationships that we have with our clients, an opportunity to sit down, discuss their total cost of ownership, and really review what they're spending.

So we have that great relationship with our clients and our salespeople can really sometimes benefit from these types of market conditions.

Okay, great.

And just lastly, is the 2Q run rate or amortization of deal related intangibles in 2Q, is that a decent run rate for the rest of the year?

Correct.

Okay.

Thank you, guys.

Thanks.

Thank you.

And our next question comes from Mr. Alex Kramm, of UBS.

Hi good morning.

Sorry, I'm at a conference, hopefully you can hear me okay.

First off, can you just talk about buy-side versus sell-side?

It seems like the sell-side, in these choppy environments, tends to be a little bit quicker in cutting than the buy-side.

So I think with the sell-side, large firms have some minimums.

So can you maybe talk through kind of the volatility you can take before it actually starts hitting your business?

And then on the buy-side, given the lag, do you get a little bit more incrementally concerned about the second half or nothing to worry at this point, at this place?

Thanks.

Hi, Alex.

It's Scott.

Sell-side was mixed.

There was a lot of M&A activity going on, obviously, in the last couple of quarters, and so we saw some really great conversations going on in that space.

There's clearly pressure on areas like the trading floor, which is less of an exposure to us.

In the research area, we've got some good stuff going on there, as well.

So, it was mixed.

Buy-side, yes, there was a slowdown in is some conversations, but that was a push in pipeline into the second half.

So we feel still feel really good about the second half.

Alex, it's Phil Snow.

So you know, there are pieces of our business that are tied more to cyclicality than others, and the sell-side business is definitely more heavily levered to headcount versus our buy-side business.

As we made in our comments at the beginning, our buy-side business is becoming less levered to headcount, and we have products that are very sticky at the enterprise level that, if you went back 5 or 10 years ago, wasn't necessarily the case.

Okay, that's helpful.

Thanks.

And then just one of the positives we continue to see here is that the ASV per user or per client is ticking up, and I think it's made another jump this quarter or quarter-over-quarter.

I know to some degree this is Portware, but is this also a reflection of cross-selling?

Is there an incremental push that you're doing right now, or is this just noise and it can jump around the ASV per user?

It is noise.

It's a very hard one to dig into, but I think if you just go back to the comments I made on the previous question, it could be very much related to that.

Fair enough.

And then just lastly, a quick one.

Can you just remind us how big hedge funds are within your buy-side community, considering that those seem to be struggling a little bit more to start the year?

We don't break out the number explicitly in terms of client side, Alex, but I will say that we saw really good activity in the hedge fund space in the quarter.

Yes, there is pressure on that market, there often is when there's volatility, but we saw some great new business wins in that space.

Much appreciated.

That's it for me, take care.

Thank you.

Thank you.

Our next question comes from Mr. Peter Heckmann, from Avondale.

Thank you.

Good morning, everyone.

Good morning.

One observation, and then a couple questions.

And I think people are asking around the edges, but on a first half basis this year, user adds are down pretty materially from the first half of last fiscal year.

And so, two questions: one, what are we seeing, there?

Is this just some natural lumpiness, or are we seeing the push out, or would you say that there were areas of the business that saw some offsets?

And then number two is how should we think about the business as it becomes less directly dependent on users?

You've never said directly how much of the revenue is based on users.

We've kind of estimated about a third, but it seems like it's even decreasing from that.

And would that be more bundle enterprise licenses on the buy-side, or more bundled deals that is creating a situation where even if users aren't growing as fast, your penetration within clients is making up the difference?

Yes, I think that said, a good example is our CTS business.

So with CTS, we can offer feeds of content or analytics or APIs where clients can get FactSet value outside of the workstation, and those types of solutions seem to be extremely sticky once they are in the clients.

And so, could you remind me, did you provide any user count at all on Portware?

No, we didn't.

(multiple speakers) -- have that layered in the numbers?

That's not, we don't include Portware users in our user count.

It's really kind of what you think of as the core FactSet workstation.

We also don't include users of our RMS suite, so we have three product lines in there.

Two of them are locally deployed.

One is Code Red, that traditionally we've sold more to the buy-side, hedge funds, big client sponsors, and our partner solution, which is on the sell-side.

We also have web solutions that we sell our clients, and we typically have not broken those out either.

So there are lots of other people using FactSet other than the number that we report in our press release.

Got it.

That's helpful, thank you.

Our next question comes from Toni Kaplan, of Morgan Stanley.

Hi, thank you.

You had strong hiring again this quarter, up about 14% excluding Portware.

Was the hiring again focused on salespeople and consultants?

And is there a certain area that they're focused on, or is it just general like selling and training?

The 160 net new employees that we had during the period really focused around our consulting and engineering classes in the second quarter, which is what we do every year.

And also a piece of that hiring was also our content collection classes in Manila and Hyderabad.

So it's really part of our second quarter employee headcount growth.

Okay.

It was just up a lot year-over-year, so -- okay, that's fine.

And then just could you give us an update on how you view your total addressable market in fixed income, whether it be in terms of dollars or number of clients, or however it is that you look at it?

Thanks.

We view the numbers as extremely big, and I think in a lot of markets, we don't feel that we have more than 5% or 10% of the addressable market share.

So we tend to think of the overall market as being around $25 billion, which gives us less than 5% market share.

Not all of that is readily addressable today, but if you add up the market share of our major competitors, that's really what the industry is spending.

Thanks a lot.

Thank you.

Our next question comes from Tim McHugh, from William Blair.

Yes, thank you.

First, people have asked differently about the environment, so I might try one more.

You've talked about wanting to get to 10% growth, and obviously you've been kind of slowly accelerating over last year.

Is this an environment conducive to that continuing, as we think forward?

Or is it -- in this environment, would you say that's -- you probably need a better environment to continue to see that and to get to double digit growth?

So typically the way we think about growth is just -- we just want to do very well relative to our competitors in the marketplace.

I think that's the way we typically think of it.

We don't view our market share as necessarily expanding.

We're really -- about taking market share, and we're just going to continue to execute as well as we can against our competitors.

But, we're not going to put out any numbers there in terms of what we think we're going to do in terms of sales growth beyond the revenue guidance that Maurizio was given for Q3.

Tim, it's Scott.

On the sale side, the opportunities that we've seen for awhile now are still very much all there.

We've got some great stuff going on from new business and from up-selling in current client base, and none of that has moved.

The market volatility, it causes pause in some cases.

Yes, it had some impact on the direct workstation, but the overall opportunities out there have not changed for us.

In many cases, they've actually increased because of the market volatility, so we're still very confident with the business growth.

Can I ask -- you came in kind of in the lower half the guidance range, which your history has given the visibility; you're usually at the upper half, and I think last quarter was the same thing and you said it was more back-end loaded bookings.

Is that true again this quarter?

And if we've seen this for two quarters, is there a trend there?

Is there something about what products they're selling or the environment that we should infer from that?

Hi, Tim.

It's Maurizio.

We actually did have a significant portion of our ASV recorded towards the January-February period during the quarter.

So it lowered our -- slightly lowered our revenue for the quarter, and we also have about a $0.5 million deferred revenue adjustment from purchase accounting that's still coming to our revenue line from the Portware acquisition.

That lowers overall revenue.

So when you take those two items, we are slightly lower than where the consensus estimate was.

Okay, and then just one math one.

Now that the R&D tax credit is permanent, I guess, is this 29% the right tax rate that we could use going forward?

Is that how you think about, I guess, steady state?

29% is right around steady state.

Our range is between 28.5% and 29.5%, and 29% is literally right in the middle of that range.

All right, thanks.

Thank you, our next question is from Keith Housum, from Northcoast Research.

Great.

Thanks for taking my question; I appreciate it.

Here's two questions for you, if you don't mind.

First, what was the FX impact on the bottom line, I guess on EPS, for the quarter year-over-year?

FX did benefit us slightly during the quarter, but it was immaterial to our results at the end of the day.

We did get a benefit from our pound and euro exposure, but just from the overall result, it was immaterial.

Okay, and you know -- I think the last comment in your -- bullet in your press release, regarding getting into the index business.

If you guys could elaborate a little bit more on what your aspirations are with that, and where you see yourself playing and perhaps where you guys could go with it?

Hi, Keith.

It's Scott.

So we are spending some great effort in the ETF space, both from a thought leadership and a data and an analytics perspective.

One of the knock-ons from that is for us to be looking at the index base as well.

It's not core to our strategy, going forward right now, but it's something we find really interesting.

We've had a number of our clients ask us about it and some partners who wanted to do things with us in that space, so it's something that we're looking at.

I'd put more emphasis on what we're doing in the ETF space as opposed to index.

Keith, it's Phil Snow.

I agree with that, and the ETF effort that we have, really, is a function of the Revere acquisition that we made a couple of years back.

So Revere has an incredibly deep taxonomy to classify companies at a much deeper level than other products that are out there in the marketplace, and a lot of ETF providers have come to us to build universes of companies for them for particular types of ETFs that they are creating, and that's what you saw with State Street and the innovative technology in ETF.

Great, thank you.

Thank you.

Our next question is from Manav Patnaik, from Barclays.

Hi, this is actually Greg calling on for Manav.

Just wanted to ask about the international growth.

Looked like Europe slowed down a bit.

Maybe some pressures from the bulge bracket banks, but APAC was really strong.

So any color you can provide there, on those two markets?

Greg, I think your comments were right, there.

We did see a slight slowdown across the EMEA.

It was really in pockets.

It was pretty broad based.

Nothing that I would draw particular attention to, and Asia-Pac continues to be a great growth market for us.

We saw some really good stuff going on in our non-core markets in China and Korea, and in areas like that we saw some good stuff going on.

So we like what we see out of Asia-Pac.

And then I just want to ask on what you're seeing in the M&A market and whether recent choppiness is providing any new opportunities?

And maybe an update on what you're seeing from a valuation perspective, as well?

So on the M&A front, Manav, not much has changed for us there.

We continue to focus on strategic acquisitions around unique content and adjacent workflows, and we continue to see quite a few opportunities that we're interested in, but there's nothing transformative that we're looking at at this time.

Okay, and one more for me.

Just any color you can provide on what the restructuring charge was -- Yes, I guess just what the restructuring charge was?

Sure.

So we went through and reviewed our large employee groups to realize some productivity gains in order to make us more efficient into the future, and so the $2.4 million charge really relates to just our overall restructuring process that we completed in Q2.

And it's something that we go through every year, every 12 to 24 months.

Okay, thank you.

Our next question comes from Mr. Andre Benjamin, from Goldman Sachs.

Thank you, good morning.

First question I had -- I know you had mentioned that most of the growth on the sell-side was from the middle markets, so I was trying to understand what was -- what are you finding successful in that segment?

And is it really more a function of just lower penetration, or is there something special that they find that the value proposition for that part of the market versus your larger customer?

It's a mix, Andre, of those two.

So we are picking up market share in that space, and we're also diversifying a little bit the user types and some of the different solutions.

Things like our RMS and our partner solutions are getting traction in that space, and we're expanding beyond just the analyst user type in there as well, so it's mixed to both of what you had talked about.

And then are you doing anything -- I know you've been investing a lot in the data procurement, so is there anything we should be aware of that you're trying to maybe leverage some of that data and change your economics or value proposition in terms of [off site] more data that you're collecting fundamentally versus (inaudible) parties?

We continue to invest heavily in content, and that's where you saw some of the headcount growth coming from, and we just continue to pull more and more value into the workstation from a content standpoint.

So, having unique content and best-of-breed content is a big piece of FactSet's value proposition, and we know that just standing still for that is really never an option for us.

Andre, it's Scott.

I would add to that, we are getting -- we're doing more packaging of the content as well from a data feed perspective, specifically for the regulatory space, and we saw some great traction on the back of that over the last couple of quarters.

Thank you.

Thank you.

Our next question is from Joseph Foresi.

Hi this is -

Operator I think we lost the questions.

Can you please ask the folks who had been in the queue to put their questions in again?

Okay

(Operator Instructions)

I think we had a question from Joe Foresi coming up.

So when you see him in the queue -- There we go.

He should be the next question.

Can you hear me guys?

Yes, we can, Joe.

Okay, thanks.

This is Mike Reed, on for Joe.

I appreciate you taking the call.

Just had a quick question about the 51 new clients.

Is there any difference you're seeing in the makeup, or is it generally the same as its kind of been?

It's Scott, Mike.

Not a dramatic shift.

We did see some good wins in the wealth space, and particularly some good wins in the insurance space, which was off the back of our multi-asset class and fixed-income risk solutions.

Those are probably the two that I would highlight.

Other than that, it was fairly broad based.

We had a number of initiative in terms of new business pipeline generation over the last couple of quarters, and we're starting to see that come through quite well now.

Just another one.

Its sort of been asked about the macro environment, but do you -- or do you think you will see any effects just in the general slowdown in the IPO cycle, separate from other macro concerns?

It's Scott again, Mike.

I don't see it as a particular factor for us.

The M&A activity has been decent.

I don't see it as a particular factor, no.

Okay, great thanks guys.

Thank you.

Thank you.

Our next question comes from Patrick O'Shaughnessy, from Raymond James.

So a couple months ago there was a story out there, JPMorgan was apparently looking to replace several thousand terminals -- Bloomberg terminals with Thomson Reuters.

Curious if that was something that you're basically also trying to participate on?

And then more broadly, do you see a trend at some of the major banks, as they are increasingly focused on cost, to try to rip out some of their Bloombergs and replace it with alternative, lower priced solutions?

Hi, Patrick.

It's Phil Snow.

Generally, when we are out there talking with the C-level executives at the bigger banks, there's definitely a focus on total cost of ownership, and that could come from any type of vendor.

So whenever somebody is paying a lot of money and they feel that they're not getting the most value out of that, they are going to look for alternatives, and that's -- I think if you go back to one of the comments earlier on the call, in an environment like this, it really gives us great opportunity to sit down with clients and look at their overall spend.

Okay, and then on specifically with JPMorgan, is that something that -- business that you're going after, or was that kind of a product set that maybe Thomson Reuters could fit better than what you guys could offer?

We've got a good relationship with all of the major banks, and we've got some great conversations going on with all of them.

All right thank you.

Thank you.

Our next question is from Peter Appert, from Piper Jaffray.

Hi.

This is actually Steven, dialing in for Peter.

Thank you for taking my question.

I just want to ask a little bit more about the [password] growth in the quarter.

We see deceleration of the password growth, is that a function of competitive dynamics, or challenging comps, or is the user market environment getting more difficult?

Hi, Scott.

I don't see it as a result of competitive at all.

If anything, it was somewhat market driven with the volatility in the market.

Again, we don't see it as a concern.

The great thing about our business is that we've got an incredibly diversified portfolio of solutions out there that can offset any market-condition downturns in workstation growth.

We've also got some good plans in place to build up that workstation growth in the coming quarters as well.

So, not a major concern.

Great, and just another question.

I was just wondering what kind of growth are you seeing -- (technical difficulties) -- revenue, not just data feeds, and is there any significant differences in the profitability in non-terminal?

Thanks for the question.

So traditionally, we've just not broken out that growth rate.

But one good byproduct of collecting a lot of content for our terminal product, is that we can then turnaround in a lot of cases and monetize that with feeds.

So I would say, yes, that is -- there's some good profitability associated with our CTS business.

Okay, great.

Thanks.

Thank you our next question is from Mr. Shlomo Rosenbaum, of Stifel.

Hi.

Thank you for squeezing me back in.

I just wanted to ask a little bit in terms of the competitive environment, and specifically with Thomson Reuters.

It looks, at least from some of the data that I have, that they might have actually increased workstations for the -- (technical difficulties) -- time sequentially since 2008, and I just wanted to know if there's a change in the -- you're noticing a change on their side, in terms of even more aggressive pricing or anything like that?

And then I have one other follow-up question after that.

Shlomo, it's Scott.

We haven't -- in the last quarter, haven't seen a dramatic change.

There's lots going on in the competitive environment.

I haven't seen any dramatic change in pricing strategy.

No, is the short answer.

And what, exactly, is the insurance product sale?

It's our -- it is not terribly different to our typical investment management sale.

More emphasis clearly on the fixed income space, because of the assets that they typically have under management.

So it's the portfolio analytics, portfolio risk, sale, our core product along with portfolio services, but a big focus on multi-asset class and fixed income.

Okay.

Thank you.

And that concludes today's conference.

Thank you for participating.

You may now disconnect.