Factset Research Systems Inc (FDS) 2016 Q3 法說會逐字稿

Good morning. My name is Lindsay, and I will be your conference operator today. At this time, I would like to welcome everyone to the FactSet Research Systems Inc. third-quarter webcast.

(Operator Instructions)

Ms. Rachel Stern, Senior Vice President Strategic Resources and General Counsel, you may begin your conference.

Thank you, operator.

Good morning, and thanks to all of you for participating today. Welcome to FactSet's third-quarter 2016 earnings conference call.

This conference call is being transcribed in real time 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 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.

Thanks, Rachel. And good morning, everyone, and welcome to today's call.

At our core, FactSet is client-centric. We've always been, and it's why we've been able to grow our Business so successfully year after year. We partner with our clients to help them work smarter and more efficiently.

And as client needs have changed, we have evolved our Business to meet those needs. And this has helped us to fuel growth, even in a challenging market. This evolution has produced new growth drivers, which are evident in our Q3 results.

We had another exceptionally solid quarter this quarter. Organic ASV grew 9.3% from the prior year, while EPS increased to 12.3%. And this is a testament to our broadening suite of premium products, and the strength of our business and service model. This quarter we saw particularly strong contribution from our analytics, CTS, and Portware businesses.

First, analytics -- we continue to see strong demand for our multi-asset-class analytics suite, which includes solutions for risk, performance attribution, return analytics, quants, publishing, and portfolio services. And driving this demand is the ongoing convergence in the market towards multi-asset-class investment strategies, as clients seek yield in a low rate environment. Layered on top of this is the need to control for risk from a growing number of regulatory requirements.

Second, we saw robust growth in our CTS business. We're laser focused on delivering value to our clients in the way they want to consume it. We have a great workstation business, and many of our clients want to leverage that same value that they get through the workstation in other ways. And we are committed to providing those solutions.

The CTS suite includes a growing number of standardized data feeds that complement and mirror the data in the FactSet workstation. And there's an increased awareness in the market now around our CTS capabilities and data solutions that power a growing number of workflows for the middle and front office.

Third, we saw ongoing growth in our Portware business. Portware maintained its strong track record of growth; client volume increased, as did new client and broker connections. And overall, the integration continues to go really well.

We're executing on the healthy pipeline from the close of the acquisition in October. And we are beginning to see the positive effects related to cross-selling opportunities.

Also contributing to growth this quarter was our annual price increase for clients in the EMEA and APAC regions. This year that contributed $4.2 million in ASV.

Let me say a few words about Workstation. The market volatility that we've seen since the beginning of the year has had an effect on our overall Workstation growth.

Workstation still grew, which is a testament to the strength of the product. And this quarter, we really had a lot of great wins on the Workstation side, but that was offset by a higher than usual number of cancels. And those of you that have covered FactSet for a long time understand our Workstation business has gone through multiple volatile periods and is well positioned to continue to grow as volatility subsides.

Overall, our buy-side business, which includes traditional asset management clients, hedge funds, wealth managers, CTS and Portware accelerated to 9.6%, up over 100 basis points from the prior-year period. Our sell-side, which includes M&A advisory, capital markets and equity research declined to 8.1% growth. And you can attribute the slowdown on the sell side to it being more heavily leveraged to workstations and headcount trends.

As you also saw this quarter, we're exiting from the Market Metrics and Matrix Solutions businesses. And as part of executing on our strategic plan, we've decided to exit from our non-core market research business that was focused on advisor-sold investments and the insurance space.

As such, in May we entered into a definitive agreement to sell Market Metrics and Matrix Solutions to Asset International, a portfolio company of Genstar Capital. This transaction is consistent with our long-term strategic direction, and demonstrates our commitment to deliver significant value to our shareholders.

Our capital allocation continues to be aggressive, as we deploy capital in the form of new product development, acquisitions, dividends and share repurchases in order to maximize shareholder value. Over the last 12 months, we've returned $344 million to shareholders in the form of share repurchases and dividends, funded entirely by cash generated from operations.

In conclusion, the third quarter adds to our continuing string of successful quarters. Over the years, regardless of the market cycle, FactSet's absolute and relative financial performance have been strong. At FactSet, we are well situated to serve a broad range of our clients' needs, given our ability to offer enterprise solutions across many user workflows backed with our industry-leading client service.

Our future outlook remains optimistic. And our guidance for Q4 shows strong organic ASV growth, and similar to this quarter, EPS growth 300 basis points higher than ASV growth.

Now let me turn it over to Maurizio, who will give a more detailed look into our third-quarter performance.

Thank you, Phil, and good morning to everyone on the call. As you heard from Phil, we continue to outperform relative to the market during an uncertain market period, which is a reflection of our position in the marketplace and also the health of our Business.

So, now let's review our third-quarter results. Revenues grew in the third quarter to $287.5 million. Excluding the revenues acquired from acquisitions completed within the last 12 months and the effects of foreign currency, organic revenues grew 9% over last year.

During the just completed third quarter, US revenues grew to $193 million. Excluding revenue acquired from recent acquisitions, organic revenues in the US were up 8.5% compared to the year-ago third quarter.

Non-US revenues increased to $94 million. Revenues from our Europe and AsiaPac regions were $70 million and $24 million, respectively.

Excluding foreign currency and acquired revenues from acquisitions completed in the past 12 months, the international growth rate was 10.1%. This growth rate breaks down into 8.1% from Europe and 16.8% from Asia Pacific, respectively.

Included in our third-quarter results were the following non-reoccurring items. First, operating expenses include $1.4 million in professional fees, primarily related to the sale of the Market Metrics and Matrix business. Secondly, income tax expense includes a $3.2 million benefit related to finalizing prior years' tax returns and other discrete tax items.

Adjusted operating income, which excludes $1.4 million in non-reoccurring professional fees and $4.1 million in deal-related amortization, grew to $95 million, an increase of 8% from the third quarter last year. Adjusted net income, which excludes non-reoccurring items and deal-related amortization, grew 10% to $68 million, while adjusted diluted EPS grew 12% to $1.64.

Now let's take a look at operating expenses. Total operating expenses for the third quarter were $198 million. Our adjusted operating margin, which excludes non-reoccurring items and deal-related amortization, was 33% this quarter, down 10 basis points from the second quarter.

Third-quarter cost of services, expressed as a percentage of revenues, increased by 370 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 headcount expansion from new hires and the addition of Portware. The increase in amortization of intangible assets primarily relates to the acquisition of Portware less than 12 months ago.

SG&A expenses, expressed as a percentage of revenues, decreased by 130 basis points in the third quarter compared to the year-ago period due to lower compensation expense from employees performing SG&A roles, partially offset by an increase in professional fees related to the sale of the Market Metrics and Matrix businesses. At the end of our third fiscal quarter, we had 8,100 employees. Excluding employees added from the Portware acquisition, headcount has increased 14% during the past 12 months.

The third-quarter effective tax rate was 24.8%, down from 28.5% a year ago, driven by the $3.2 million benefit from finalizing previous years' tax returns and other discrete income tax items. Excluding discrete benefits in both years, our effective tax rate was 28.4%, down 170 basis points over last year.

Free cash flow during the last three months was $89 million, a decrease of $10 million from the same period last year. The decrease was a result of higher client receivables, higher income tax payments, and an increase in capital expenditures driven by office expansions in New York, London and Chicago. Our DSOs when excluding those receivables recorded as held for sale were 34 days at the end of the third quarter compared to 33 days in the prior-year period.

Our cash and investments balance was $211 million, up $13 million during the quarter. We define free cash flow as cash generated from operations, less capital spending.

During the third quarter, we repurchased 505,000 shares in the open market at an average price of $151 per share. Our diluted weighted average shares decreased by 347,000 shares as a result of our ongoing repurchase activity and a lower share price, reducing the dilution from existing share-based compensation.

Now let's turn to our guidance for Q4 of FY16. Our guidance for the fourth quarter includes the results of the Market Metrics business for the full quarter. The transaction is expected to close in our fiscal fourth quarter of 2016. We will update guidance upon closing of the transaction.

The Market Metrics business, which includes Matrix Solutions, had ASV of $37 million as of the end of the third quarter. The transaction is not expected to have a material impact to our fourth quarter of FY16 or our FY17 results, as we plan to use proceeds from the sale to repurchase shares under the existing share repurchase program.

For our fiscal fourth quarter, we expect revenues will range between $292 million and $298 million. GAAP operating margin should range between 31% and 32%, while adjusted operating margin should range between 32.5% and 33.5%. We expect our annual effective tax rate to range between 28% and 29%.

GAAP EPS is expected to range between $1.61 and $1.65. Adjusted EPS is expected to range between $1.68 and $1.72. The mid-point of this range suggests a 13% year-over-year growth.

In summary, we are proud to deliver solid ASV growth and double-digit EPS growth again. The mid-point of our guidance for the next quarter suggests this trend will continue. We continue to invest aggressively in our product and people, as we believe we are well positioned to outperform the overall market today and in the future.

Thank you for joining our call this morning. We are now ready for your questions.

(Operator Instructions)

Our first question comes from the line of Peter Heckmann from Avondale. Your line is now open.

Good morning, everyone. Thanks for taking my question. Maurizio, on the ASV from the divested businesses, I believe you said $37 million combined for the two businesses. If that's correct, can you talk about the relative growth rate of ASV over the last year compared to the corporate average as well as margins compared to the corporate average so we can get a little bit finer point on what a post-divestiture FactSet looks like?

So we don't break out information for our specific segments like that. I will tell you that just in terms of its growth rate and also its margins, it's slightly below where the overall FactSet rate is today.

Great, that's helpful. And then can you talk about, are you seeing any impact, or can you perceive any impact from the Department of Labor's fiduciary rule on the buy side in terms of maybe their thought process of further pressure on fees? Further move towards fee-based investments and potentially passive investments that's reflecting on their thoughts about cost containment?

Hi, Peter. It's Phil Snow. So I can talk a little bit about the shift to passive investment. It's certainly something that we all know is going on in the market. We continue to build capabilities to meet our clients' needs in this area. Our portfolio suite of products is very well suited to analyze any type of asset, whether it's an active or a passive investment. We have invested in this is space with ETF.com, which you saw that we purchased recently. And last quarter, that data was used by State Street to launch the first FactSet-branded ETF leveraging that data, the FactSet Innovative Technology Index, so it's a trend we're aware of. We know that our clients are under cost pressure, just from a macro trend. And part of this is being driven by the shift from active to passive investments.

That's helpful. I'll get back in the queue.

Our next question comes from the line of Joe Foresi from Cantor Fitzgerald. Your line is now open.

Hi. Just kind of building on your prepared remarks, how would you describe the current environment for your product? And maybe you could talk a little bit about the areas where you're seeing obviously the biggest softness?

Hey, Joe. It's Phil Snow. So as I just highlighted a little bit on the previous question, we definitely see continued uncertainty in the market related to economic and political reasons, clients are under some cost pressures. But we do believe it's in that type of environment that FactSet is very well suited to partner with our clients to sit down with them and help them through these times. We've done it a few times already. It's not new to us. And what I'd like to stress today is that it's important to understand that within our product suite there's been an ongoing shift in the weight of our business away from pure Workstation to a broader suite of offerings.

So Workstation's still a hugely important piece of our business, it's the core of our business. We continue to reinvest in it aggressively. But the sophistication of these value-added applications and solutions outside of the Workstation has been growing. So I think you can think of us as a solutions provider with Workstation being one of those components. And if you break down the FactSet suite of products that's not directly tied to Workstation, there are quite a few now.

So within the analytics suite itself, we have risk and performance solutions that can be applied at the enterprise level. We have our portfolio services product, which allows for reconciliation of portfolios and calculation of derived analytics. We have a great publishing business that we sell primarily to the buy side. We have a whole research management solutions piece of our business now, which is a combination of the Code Red acquisition partners. So we have a lot of users on the buy side and the sell side that are research analysts or portfolio managers that are using FactSet, but it's not in the actual user count number that we're providing you, which is more of our core Workstation.

Of course, we have our CTS business. We have Portware, we have some very strong web offerings like StreetAccount. So there is a growing suite of products that we offer to our clients. And we are beginning to be able to sell those at the enterprise level. So that's -- I think you did see the Workstation and client count come down, but we're able to partner with our clients for these larger enterprise solutions and sell them a lot more solutions than we were 5 or 10 years ago.

Got it. Is there any way to get a sense of either numerically or even quantitatively how much of a pick-up you saw in the cancellation trends, just so that we can kind of compare it to client and user growth? I know it's not necessarily a number that you typically give.

Sure.

Joe, hi. It's Scott. I'd categorize it for you, without getting into the detailed numbers, the pick-up was in what I think of as the non-controllable, it's firms merging, going out of business, and a user no longer there. We did see a pick-up in that part of the cancellations. The more controllable, where someone is actually moving away from us, was flat in terms of trend. So that was the notable, that the market headwinds hit, but we expected that. We've been clearly all watching the market headwinds collectively, and we knew that there was going to be more pressure in that space.

Got it. And last one quickly for me, just any kind of initial thoughts on Brexit and the EU and its impact on your business? Thanks.

Sure, Joe. It's Phil Snow. So for us, obviously it's adding to the uncertainty that's out there, but for us it's business as usual. We're going to continue to partner with our clients to help them through this period. The risk solutions that we have are very well geared towards something like Brexit. And we also have this fantastic database called GeoRev which allows you to really understand a firm's geographic exposure, not just where they're domiciled, and we have had a lot of inbound inquiries about that data set. We've had them anyway, but there was a pick-up on it last week. And the weakening pound definitely doesn't hurt us because as you know, we bill in dollars in Europe. But we have an employee base there that where the expenses are in pounds.

Got it. Thank you.

Our next question comes from the line of Shlomo Rosenbaum from Stifel. Your line is now open.

Hi. Thank you very much for taking my questions. Phil, you're just teasing us out there. You keep saying that you have much higher revenue that's not seat-count based, but you just won't give us the numbers that we're looking for in terms of what is it now, what was it five years ago so we get a better sense of that?

Yes, so I'm sorry for teasing you, but it's -- there are some things we haven't broken out. And today we're continuing to report the same numbers that we have. I will tell you, Shlomo, that you'll be pleased to hear that we have a new audio conferencing service. So hopefully you can hear the response to this question.

So but maybe just help us qualitatively if not quantitatively, typically what I've seen in the past is that as seat count slows down you end up with higher revenue per seat, and it's really just an indicative of the seat count going down, and that usually portends an issue for FactSet's growth, either -- just a slowing of that growth. But it sounds like you're communicating is, is that we should not expect that to see that the same way this time because of the predominance, or not predominance, but the preponderance of more of these non-seat-based products that you have?

Yes, I think that's a great way to think about it. If you go back 10 years and you think about how we were billing our clients, we would have base fees, we would have various database fees and then we would add on workstations. So the trend that you saw would be natural as clients were canceling workstations on the margin. But you're right in that today that we have these broader offerings. So if we're selling a fee that's a six-figure deal, that's obviously going to raise the per-workstation metric if you just simply divide ASV by workstations.

So given the market environment and the growth rates in those other businesses can you sustain that current -- the growth rate at current levels, given what you see in the market?

Well, I think Maurizio's given some Q4 guidance that indicates that we're positive about what we see in Q4 and you'll get some updated numbers on that once the Market Metrics divestiture is completed.

Right. So then in terms of -- Maurizio, maybe I'll focus on you. So the high level implication, though, is that by taking Market Metrics out at a slower growth rate with a little bit lower margins is that we should get some addition by subtraction, right? Because you should end up with a faster growing business with higher margins. In terms of the way to look at it, you're going to provide us like historical comps to look at it on a historical basis as well?

So we'll have an 8-K filing that will have some pro forma information. And that will have that information in it.

Okay. Before Rachel cuts me off, I'll ask one last one. Can you quantify the EPS benefit from pound depreciation that should be fairly significant for you guys?

So our overall exposure on FX is about $182 million, and that's what we had in our 10-Q at the end of Q2. Approximately a third of that is pounds, and we're already hedged on 50% of that. There is a benefit to us. But keep in mind, we manage our margin to a very tight range whether FX goes with us or against us. So the expectation that there's going to be a significant change to operating margin, I would not be expecting that. There may be a slight uptick from there, but I would not be forecasting that going forward.

Great. Thank you very much.

Our next question comes from the line of Andre Benjamin from Goldman Sachs. Your line is now open.

Thanks, good morning.

Andre.

Similar to go on the back of Shlomo's last line of questions, with the number of users and clients slowing the last four quarters but ASV growth holding up much better as the number of solutions sold has strengthened, do you have any color on how you're thinking about, even in the guidance that you have provided, how those trends should continue? Should user count continue to moderate because of the factors we've seen in the market? But does the other number go up? Or I'm trying to get a sense of the moving pieces, at least as far as your guidance is concerned.

Hi, Andre. It's Scott. There's a natural reaction on user count based on market headwinds. We've seen it historically. You get sell sides that in many cases are retrenching sort of back to their core businesses, and that takes some regional parts of their businesses out altogether and you lose some workstations. But I'll reiterate Phil's comments. We have such a phenomenal toolkit of solutions now for our clients. And yes, Workstation's very important and it's an important piece of our puzzle, but it's just one piece. And what we see out there now is, certainly with all of the volatility that's going on and the uncertainty, our clients are looking to us even more to help them be smarter about their jobs and solve their problems. And it just opens up so many more opportunities for us. So we feel good about it in general.

I know you mentioned multi-asset class products. Any color? In the past you've talked specifically about fixed income and private wealth, including the last Analyst Day. Any update on how material those have become since we last really dug into it then and how they've been growing?

Probably the only one piece I'd add on to what we've talked about historically on the call, multi-asset classes is a really important piece for us. And we are doing really well in that space. We have seen an uptick in just specifically the credit part of the market. We've got some really neat solutions that originally we had devised for more of a multi-asset class approach that now on their own solve for the credit analyst very, very well. And we've seen a pick-up in that space.

Thank you.

Our next question comes from the line of Manav Patnaik from Barclay's. Your line is now open.

Yes good morning. Thank you. So the first question is can you just remind us of the lag behind when you lose, whether it's truly after mergers or whatever it is? Like, how long does that take based on your contract structure to actually hit the ASV numbers?

Hi, Manav. It's Scott. It depends. We have some different contract terms that are out there depending on the client. I can tell you that what we saw this quarter, or what we're seeing right now, we saw probably the bulk of what's in our vision this quarter, and it's already hit. We've seen it settle. So we're not projecting as much of the non-controllable cancellation coming through in the coming quarters. I don't know if that answers your question. But it varies contract to contract. But we feel that we saw the bulk of the headwind already hit us.

Okay. And then maybe just some more color around the buy-side pressures, and maybe what you're seeing there. You don't need to tell us about the sell side. But I guess we keep hearing a lot of funds closing and redemptions and those kind of things. So how do you envision that dynamic on your Workstation business with the buy side versus these other non-Workstation risk solution type areas?

It's Scott again. So I mentioned earlier that we did see more of the what I consider the non-controllable cancellations out there, the mergers and closures, both hedge fund, buy side, sell side obviously as well. It's not easy out there. We know that AUM's under pressure, fees are under pressure, it's real. The reality is that the more the pressure comes on, the more our clients are looking for solutions that help them with TCO, help them with performance, help them with better efficiency.

And so we've actually -- we're actually having more conversations now around potential opportunities because our clients are under pressure and looking for more help. So it's really where we shine with our consultative support. So yes, it's challenging out there. But the number of opportunities that we are facing right now is very encouraging.

And I guess to tie that with your prior response to my question, so all the funds that have closed or announced closure and so forth so far that use your business, you said that's already baked into your numbers; correct? Or will there be a lag? Yes?

Yes, so typically, again, our contracts are somewhat different for some clients. But typically we have a 90-day cancellation clause. And so a lot of that was hitting in Q2. So we saw the results of that in Q3. So the bulk of it, yes. I'm not saying there's no more cancellations coming. It's part of our business, but the bulk of that uptick in that non-controllable portion we saw coming through towards the end of Q2 and has hit in Q3.

Fair enough. And then just the last one. You said you're seeing a lot more opportunities because of the current environment. And I guess the problem we always have is that every other market data player says the same thing. So I guess maybe if you could help us characterize the wins, losses? Is this business that will lead you from taking share from someone, or is this just stuff that nobody has ever used and it's new business for you guys?

So it's a bit of both. There's stuff people have never used. It's some of that, our proprietary content that Phil talked about. Our GeoRev and our Revere content, for example, potentially moving from a in-house research management system to outsourcing to us. So there's absolutely some new. But we are definitely picking up market share in many different areas. Our clients are doing more due diligence into their information technology, decision-making. They are scrutinizing it even more on their side. There's disruption in the market out there in terms of certain offerings in the risk and analytics space. And that opens the door for us as well. So the number of conversations that we're having that are leading to opportunities are absolutely increasing.

All right. Well, thanks a lot. I appreciate the color.

Our next question comes from the line of Alex Kramm from UBS. Your line is now open.

Yes. Hey, good morning everyone. Just coming back to the Brexit questions earlier, just a quick one here. Did Brexit at all influence your Q4 guidance? Is anything factored in? I know it's early days obviously, but I noticed that your EPS range, for example, is I think $0.06 -- or, I'm sorry. $6 million for the revenue. It's usually a little bit higher than what we've seen in the past. So just talk about how -- if you factored in anything already?

Alex, it's Maurizio. No, we have not factored any uncertainty from Brexit in our guidance. Our guidance is fairly clean. And you're correct, it is a little bit of a wider range. And it's just to give a little bit more variability to our guidance. Historically our guidance of only $4 million on revenues was fairly tight compared to other public companies. So we made a conscious decision to just widen it. If you look at the midpoint of that revenue range, we're still growing revenues organically by 9%.

Fair enough. Great. Thank you for the color. And then secondly, I think the fourth quarter typically is one of your most important quarters in terms of sell side, buy side, hiring classes coming in. Any color on what you're seeing or hearing out there in terms of how that seasonal hiring pattern is progressing that we should be thinking about?

Alex you'll know the hiring better than we will. So I should ask you the same question. But we are typically seeing obviously no surprise. We are seeing some slowdown in grad hiring. We start to see that now. We start to ultimately take those orders now. So we are seeing a little bit of a slowdown there. But in general you're right, fourth quarter's important. All of our quarters are important. But again, we're feeling very good about our business, not only this quarter but when we look mid to longer term we're feeling very, very good about the business.

Great. Then just one last one. On Portware you mentioned you're seeing some early success on cross-selling. Anything you can elaborate there, like who are you selling more to, where are the wins coming from? Thank you.

The wins -- it's Scott. The wins are still in the fairly traditional places where Portware sells today. So it's in the buy side that has more volume and sophisticated trading requirements. So there hasn't been a dramatic shift in where the wins are coming. What's been really neat to see is our general sales force understanding the value proposition around Portware and FactSet integration and being able to position it well to that core client, but also outside of that core client, hedge funds and different areas like that. So we're really pleased with the integration from a sales perspective, and obviously the integration from a product perspective is going very well. So we're really excited about it.

Excellent. Thanks. That's it for me.

Your next question comes from the line of Peter Appert from Piper Jaffray. Your line is now open.

Thanks, good morning. So Phil, I'm wondering if the growth you're seeing in the feed business and some of the other non-workstation businesses has any implications for margins? And then sort of related to that, whether you see a different level of price sensitivities for the feed business versus the workstation business?

That's a great question, Peter. So in terms of margins, I think what we're faced with at FactSet is more ideas than we know what to do with. So if we do have higher margins on the feed business we're going to take that and either reinvest it in more solutions for CTS or other pieces of our business. So I think you can continue to see kind of the same sort of consistency in our margins, and us just continuing to reinvest in the business.

The CTS suite has evolved. We've invested a lot in that over the last 5 to 10 years. It was primarily a custom business and there's just been an ongoing campaign, really, to take all of the content that we have on our system, make it standardized, put more analytics around it and tie it all together in a way where it makes it really easy for clients to consume. We're working with a lot more outside partners now on solutions to get our data into different third-party systems. So it's really doing great.

I would imagine that the fee businesses, CPS business broadly, would have to be stickier than the traditional workstation business, right? Harder for -- barrier to exit for client higher. Is there any quantitative evidence to suggest that is true?

I think your intuition is right there. Once you get a feed into a client, it ends up propagating into a lot of different systems. So it becomes difficult for clients to unravel it sometimes. So it does make it sticky. So we have a lot of momentum in this business. It's one of the fastest growing areas that we have. And we're able to sell new solutions to clients as well as, in some cases, replace existing solutions.

I don't think -- I'm not sure, Phil, if you addressed this or not and I know this is a sensitive topic. But I'm wondering if maybe you have a little bit more pricing power for this business than you do in the workstation business?

What do you mean by that exactly?

If you have better ability to get pricing in the feed business when contracts come up for renewal than you do in a traditional workstation situation because there are potentially fewer alternatives for the client, or more expenses across the change?

Yes there's a lot of good products out there outside of the workstation just like there are through the workstation. So I think it's a pretty similar exercise for us. It's really sitting down with a client, understanding their workflow and partnering with them and showing them that we can not just provide the great data and solutions to them, it's also providing good service around it. It's competitive in the feed space as well.

Sure, understood. One last thing. Maurizio, you I think warned us not to get too excited about currency as a source of upside to profitability. And I'm just thinking that the movement in the pound is so dramatic here recently, I'm not sure how you could spend the money quickly enough to offset that benefit. So any thought on that?

Peter, I said there may be an uptick. I just didn't say there would be a significant uptick. It's not to say that it won't affect the margin if the pound stays where it is today. I just didn't say it was going to be significant, that's all.

Okay. And I'll get one last in, then. The Portware, I think at the time of the acquisition you had implied maybe that was a somewhat lower margin business than the existing FactSet business, doesn't seem like it's dramatically moving the margin for you. Is Portware similar profitability to the exiting business?

It's building to an operating margin similar to the overall FactSet business. As we grow the business quarter by quarter, it's getting closer and closer to where we would like it to be as compared to the FactSet business.

Got it. Thank you.

Thanks, Peter.

Our next question comes from the line of Toni Kaplan from Morgan Stanley. Your line is now open.

Hi, good morning. Can you give us any more color on sort of the overall portfolio strategy, specifically with regard to selling Market Metrics? I know you purchased the business in 2010. So just wanted to see if there's any change in strategic priorities since then, or was there something about the business that maybe didn't meet the initial expectations?

Hi, Toni. It's Phil Snow. So when we acquired Market Metrics it's was, and Matrix, great standalone businesses. We thought at the time there was potential to integrate it with the rest of the FactSet offering or suite. That just didn't happen over time. So when we do acquisitions, I think we typically like to go through a one plus one equals more than two exercise. And we're really, on the buy side we're focused on making sure that we're filling in all the pieces of the investment lifecycle for our clients for that trade and building community between the buy side and the sell side with our research solution. So that's really our primary focus. And it's just that Market Metrics didn't really fit cleanly into that strategy.

Great. And then are there certain areas of M&A that would be very attractive to you right now, meaning any sort of capabilities that you would like to look at adding to the existing product set?

So I think our M&A strategy isn't going to differ too much from how it has historically. So if you look back at what we've done, we're typically looking for good workflow solutions that speak to the strategy that I just spoke about, as well as unique content sets that we can leverage both through the workstation and through the feed business. So the acquisitions that we did of Revere and ETF have been exceptionally helpful to FactSet. We're going to continue to look out in the market for more opportunities like that.

Thanks a lot.

Thank you.

Your next question comes from the line of Keith Housum from Northcoast Research. Your line is now open.

Good morning, guys. A lot of my questions have been asked. Last one I have here is, looking at the Portware business you have been very complimentary in terms of how it has contributed to the business going forward. But if I look at it, it looks like it's been about $10 million of revenue a quarter for you guys. Is there a delay between when you guys will actually get a win and when you start recognizing the revenue? I'm just trying to understand the growth trajectory of how it's growing under your watch so far.

So we don't give guidance on, or information on what it's done historically. The $10 million difference is really the $41 million that we bought at acquisition back in September. That would be opening ASV number was $41 million. And that's the delta you see on a quarterly basis of $10 million. It's done well for us, but we just don't break out the growth for that one area.

Got you. Okay, I appreciate that. Just revisiting the Market Metrics sale again. Is there any other parts of your business, or are you guys doing a broader analysis in terms of non-core assets and what you might have available for sale?

Hey, it's Phil Snow. So no, we're not doing a broader analysis. We're happy with all of the assets that we have, and we are going to continue executing on our strategy.

Great, thank you.

Our next question comes from the line of David Chu from Bank of America. Your line is now open.

In terms of the macro picture, how would you describe client budgets? Are you seeing a significant drop to the budgets?

It's Phil Snow. Just generally there's been a lot of cost pressures. This is nothing new. This has been going on for years and years and years, and we've been continuing to execute in that environment. So I wouldn't say that it's any worse than it has been. And as both Scott and I have pointed out, as cost pressures come down on clients, regulatory fee pressure, it really opens the opportunity for us to sit down with a client, have them lay out all of the different services that they get from other providers and gives us an opportunity to help them. And because we're a trusted partner for our clients, we've been through this two or three times, and each time it happens we have more and more stuff to offer them in these types of environments.

Last quarter it sounded like there was some impact on upselling to the existing clients, but that new business wins were relatively healthy. How would you describe this quarter?

The new business was off a little bit from our expectations, again not surprising just with decision-making slowing a little bit with what's going on in the market. And the, what I think of as the organic growth within our current client base, the growth side of that was very healthy.

Just lastly, in terms of uncontrollables what specifically are you referring to? It sounds like maybe there's some merger M&A type activity, but what else?

When a firm shuts down, when a user has to leave a firm, ultimately when there's no longer someone there to use our service.

Okay, got it. Thank you.

Our next question comes from the line of Bill Warmington from Wells Fargo. Your line is now open.

Good morning, everyone. So a couple of questions. The first on the Market Metrics $165 million in proceeds, is that a net proceed number net of taxes, or do we have a cost basis to worry about?

No, that's the gross sale purchase price.

Can we get a sense for what the net is you're going to use for the buyback?

So we've increased the buyback by $165 million. We haven't broken out what exactly that net number is. Obviously it's just not (multiple speakers) number.

The other question I have is, we're hearing from some of the buy siders that Bloomberg has aggressively been going after the research management solutions space, specifically the Code Red clients, and they've been now offering this RMS system as part of the Bloomberg subscription at no incremental cost. And so I wanted to ask whether that has had any impact on the client base? Whether you've lost any clients and if so, if it's brought about any change in terms of how you go to market with that product?

Hey, Bill. It's Scott. They've had that solution for a long time baked into the terminal. We feel really good about our research management solutions in general, both buy side and sell side. It's been a very strategic part of our overall workflow strategy. With our position of Code Red and our own IRN and RMS solutions now all working very well together, we feel really good about our capabilities in the space, and we are actually leading in some of the regulatory areas with our solutions to solve some of the reg problems in this space as well. So we feel great about our RMS business.

Bill, I'll add on to that. It's Phil Snow. That I believe this was the strongest quarter we've had from a Code Red standpoint since the acquisition. It was a really strong quarter for us in the RMS space.

Got it. All right. Well, thank you very much.

All right. Thank you all for participating today, and we hope to see a lot of you on Thursday of this week at Investor Day.

This concludes today's conference call. You may now disconnect.