Factset Research Systems Inc (FDS) 2017 Q3 法說會逐字稿

Good morning.

My name is Mike, and I will be your conference operator today.

At this time, I would like to welcome everyone to the FactSet third quarter webcast.

(Operator Instructions)

I will now turn the call over to Rima Hyder, Vice President, Investor Relations.

You may begin your conference.

Thank you, Mike, and good morning, everyone.

Welcome to FactSet's Third Quarter 2017 Earnings Conference Call.

Before we begin, I would like to point out that the slides we will reference during the course of this presentation can be accessed via the webcast on the Investor Relations section of our website at factset.com.

The slides will be posted on our website at the conclusion of this call.

A replay of today's call will be available via phone and on our website.

This conference call is being transcribed in real time by FactSet's CallStreet service and is being broadcast by factset.com.

After our prepared remarks, we will open the call to questions from investors.

(Operator Instructions)

Before we discuss our results, I encourage all listeners to review the legal notice on Slide 2, which explains the risks of forward-looking statements and the use of non-GAAP financial measures.

Additionally, please refer to our Forms 10-K and 10-Q for a discussion of risk factors that could cause actual results to differ materially from these forward-looking statements.

Our slide presentation and discussions on this call will include certain non-GAAP financial measures.

For such measures, reconciliation to the most directly comparable GAAP measures are in the Appendix to this presentation and in our earnings release issued this morning.

This non-GAAP information should be considered supplemental in nature and should not be considered in isolation or as a substitute for the related financial information prepared in accordance with GAAP.

In addition, these GAAP financial measures -- in addition, these non-GAAP financial measures may not be the same as similarly entitled measures reported by other companies.

Joining me today are Phil Snow, Chief Executive Officer; and Maurizio Nicoletti, Chief Financial Officer.

I'd like to now turn the call over to Phil Snow.

Thanks, Rima, and good morning, everyone, and thank you for joining us on our call today.

We delivered third quarter results in line with our guidance and continued to growth ASV in a challenging environment.

These market conditions are exactly why we've been on a steady trajectory to build out our enterprise solutions through innovation, acquisition and partnership.

Our clients need greater efficiencies and more of a unified ecosystem for their data and analytics, and we're fully engaged in the strategy to build end-to-end solutions across critical areas of the portfolio life cycle.

And as we move beyond the workstation to becoming more of a workflow company, the portfolio life cycle strategy expands the scope of FactSet solutions to create integrated workflows.

As you can see on the slide, we think of the portfolio life cycle in 3 main areas: research; portfolio management and trading; and analytics.

And in each of these areas, FactSet has a robust suite of products for our clients, and you can clearly see where our recent acquisitions fit into these areas.

We believe the integration of these acquisitions and our continued product innovation will enable us to achieve higher growth.

Let me now give you an overview of our third quarter results.

Organic revenues and organic ASV grew 6% year-over-year.

Adjusted diluted EPS increased 13% to $1.85, at the high end of our guidance range, and adjusted operating margin was 32%.

Like last quarter, our results were impacted by cost pressures within the industry as clients seek to lower their total cost of ownership.

And as I just stated, we see this as an opportunity to partner with our clients and help them leverage technology to optimize costs.

The cross-sell momentum across the portfolio life cycle is picking up with multiple wins this quarter and a number of strategic opportunities in the pipeline.

This quarter, we did see an increase in new business with solid wins from plan sponsors, hedge funds and wealth managers, and our analytics and CTS suites performed very well, along with strong sales from Portware, offsetting the positive factors and in line with the theme from the second quarter of cancellations from fund consolidations and failures.

Our international business grew organically by 8% fueled by growth in Asia Pacific.

With our recent acquisitions of BISAM and IDMS, which we've now renamed FDSG, we have increased our international footprint, particularly in Europe.

International ASV now represents 30 -- 37% of our total.

And Asia Pacific grew almost 11% over the last quarter, and Europe grew at 7%.

FactSet continues to focus on innovation.

Year after year, we win awards for our software.

Last year, when we won best research provider, Inside Market Data said we were by far the industry leader, and in naming us Best Analytics Provider, they said portfolio analytics was always a best-in-class product.

This year, at the Inside Market Data and Inside Reference Data Awards, FactSet won the Best Market Data award for the first time, replacing one of our largest competitors, which had won the category every year since the awards were launched in 2003.

FactSet this year, again, was recognized as Best Analytics Provider.

As we saw this quarter, we once again had strong growth from both our analytics suite as well as our CTS business.

Both of these product suites have consistently grown in double digits over the last few years.

And as we look to provide you with more metrics, the CTS business is one that is relatively easy for us to carve out and can give you more perspective on what's driving our growth.

CTS now represents approximately 10% of our revenues, and the success of this off-platform business is taking us beyond the workstation model.

A big piece of CTS today are our end-of-day and intraday feeds to power applications and solutions directly within the client's environment.

However, our recent large investment in technology now provides us with a natural stage where clients can build their own solutions and leverage third-party applications and data within a hosted FactSet open environment.

Wealth is another area that has consistently shown strong growth for us over the last number of years.

The FDSG acquisition allows us to capitalize on the shift toward technology-enabled advice for all wealth segments.

Investors are demanding digital tools that help them make investment decisions and provide flexible ways to interact with their advisers.

Additionally, the regulatory requirements in this sector are a focus for clients.

In combination with our analytics products and our unique content, we have the ability to provide our clients with powerful yet cost-effective information for their investment portfolios along with servicing key workflows from regulatory document creation to distribution.

As I stated last quarter, we're focused on integrating our recent acquisitions and ensuring that we can offer our clients a broad suite of solutions within the FactSet ecosystem.

The integration efforts are going well, and we've made significant improvements to-date.

These acquisitions, along with our infrastructure upgrades, provide FactSet with scale and drive cost efficiencies in the longer term, providing us with an opportunity to expand margins.

We remain committed to organic growth, and reacceleration of ASV is still the highest priority for us.

At the same time, we continue to return value to shareholders.

Over the last 12 months, we've returned over $458 million to stockholders in the form of share repurchases and dividends.

We recently increased our dividend by 12%.

This increase marks the 12th consecutive year we've increased dividends, highlighting our continued commitment to our shareholders.

We continue to invest in product development in high-growth areas, such as analytics, wealth, trading in our Data Feed business as we grow our workflow solutions.

We believe we have a solid sales strategy in place under new sales leadership to capitalize on the current market trends and increase our growth rate.

As we look to the last quarter of the fiscal year for us, we remain confident with the opportunities we see to meet our targets and ability to capitalize on the market trends.

Let me now turn the call over to Maurizio to talk about our third quarter financial results and fourth quarter outlook.

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

In the third quarter, we continued to grow ASV and EPS and maintained adjusted operating margins within our guidance range.

Before we get into the details of the quarterly results, I want to point out that our quarter-over-quarter comparisons were impacted by onetime cost of $4.4 million primarily related to our recent acquisitions.

Additionally, starting with this quarter, we will have a deferred revenue fair value adjustment from purchase accounting related to the recent acquisitions.

This adjustment totaling $2.5 million impacts our GAAP revenues and has been excluded from our adjusted results.

Let's now go through the third quarter results in more detail.

GAAP revenues in the third quarter increased 9% to $312 million and 6% to $294 million on an organic basis versus the third quarter of 2016.

When adding back the deferred revenue fair value adjustment, revenues were approximately $315 million, at the higher end of guidance.

We have provided a reconciliation of GAAP to our adjusted metrics in the back of our earnings release and slide presentation.

Looking at our segment revenue.

U.S. revenues grew 5% organically with most of this increase primarily coming from our analytics and data feeds products.

International revenues increased 8% on an organic basis with strong performance from our Asia Pacific region.

ASV increased to $1.28 billion at the end of our third quarter.

Starting with this quarter, we are excluding professional services fees from our as-reported ASV metric as these service fees are not subscription based.

They were previously included in ASV.

Our recent acquisitions, in particular, BISAM and FDSG, have given rise to higher professional services fees.

Professional services fees billed during those last 12 months totaled over $16 million.

Had we included professional service fees, our as-reported ASV would have been $1.3 billion.

Organic ASV increased 6% year-over-year and approximately $10 million since the last quarter.

This increase was primarily driven by international client price increases of $5 million and new sales partially offset by cancellations.

Moving down the income statement, let's take a look at our operating expenses.

Operating expenses for the third quarter totaled $225 million, an increase of 13% year-over-year primarily driven by our recent acquisitions.

Third quarter cost of services expressed as a percentage of revenues increased slightly by 360 basis points compared to the year-ago period.

The increase was driven by higher compensation costs, depreciation and amortization expense and data costs.

Higher compensation costs were due to base salary changes and incremental hires in our centers of excellence in India and the Philippines as well as our recent acquisitions.

SG&A expenses expressed as a percentage of revenues were down 60 basis points compared to the third quarter of fiscal 2016.

The decrease was primarily a result of lower employee compensation due to the sale of the market metrics business in the fourth quarter of fiscal 2016, partially offset by acquisition-related costs.

Our GAAP operating margin decreased 300 basis points year-over-year to 28% primarily due to the acquisition-related cost and the deferred revenue adjustment.

Our adjusted operating margin was 32%, which was at the higher end of guidance.

Our current year annual effective tax rate was 25.5%, a decrease from 28.4% a year ago primarily due to FactSet's global operational realignment effective September 1, 2016.

Adjusted EPS grew 13% to $1.85, at the high end of our guidance.

Free cash flow, which we define as cash generated from operations less capital spending, for our third quarter was $84 million, a decrease of approximately $4 million from the same period last year.

The decrease was the result of a lower tax benefit from a reduction in stock option exercises and timing of vendor payments, partially offset by an improvement in cash collections.

Excluding recent acquisitions, our DSOs decreased from 40 days at February 28 to 38 days at May 31.

The BISAM and FDSG acquisitions also impacted our client count this quarter.

The third quarter client count stands at 4,692, up 225 from our second quarter.

This increase includes 117 clients from these acquisitions.

As Phil stated, these integrations are going well, and we have made good progress in combining products and sales teams.

Both BISAM and FDSG were accretive to adjusted EPS by $0.01 and $0.03, respectively, for the third quarter.

In fact, FDSG is ahead of our initial expectations as we guided you to $0.03 for the remainder of the fiscal year 2017.

BISAM is in line with our initial guidance of $0.02 accretion for the remainder of fiscal 2017.

BISAM added $25 million to ASV this quarter, and FDSG added $63 million.

Both amounts exclude nonsubscription-related ASV.

Moving on to our share repurchase program.

We repurchased 300,000 shares for $48 million during the third quarter under our existing share repurchase program.

We remain committed to returning capital to shareholders and maintaining a balanced capital allocation framework.

Now let's turn to our guidance for the fourth quarter of fiscal 2017.

For the fiscal fourth quarter, we expect our GAAP revenues to be in the range of $321 million to $328 million.

The midpoint of our organic revenue guidance is 5.5%.

Our GAAP operating margin is expected to be in the range of 28% and 29%.

Adjusted operating margin is expected to remain in the range of 31% and 32%.

Similar to last quarter, the annual effective tax rate is expected to be in the range of 25% and 26%.

GAAP diluted EPS is expected to be in the range of $1.67 and $1.73, and adjusted diluted EPS is expected to be in the range of $1.86 and $1.92.

The midpoint of the adjusted diluted EPS range represents 12% growth over the prior year.

In summary, we remain confident in our ability to return value to our shareholders.

We are focused on top line growth as well as our cost structure.

We believe in the long run that there is leverage in our business model as we integrate our recent acquisitions and realize cost synergies going forward.

Thank you for your participation in today's call.

We are now ready for your questions.

(Operator Instructions) Your first question is from Tim McHugh from William Blair.

It's Stephen Sheldon on for Tim.

I guess, with the strong contributions from off-platform and premium products, can you give us some more color on traditional workstations growth, I guess, particularly in the U.S.?

Yes.

Hi, Stephen.

It's Phil Snow.

Yes, so we definitely continue to invest in our call workstation product.

It's one of our flagship offerings, obviously.

But we are experiencing pricing pressure in the market as things become more competitive, and we're out there competing for the same dollars with some of the larger providers that are out there.

So as you saw in our numbers, we're growing our terminals, which I think is a positive, but part of what you're seeing there is that the pricing pressure for those is higher than it was historically, and we're offsetting that with selling more of our value-added products as well as the companies that we've acquired through M&A over the last couple years.

Okay.

And then just a quick follow-up.

I guess organically, if we stripped out recent acquisitions, how would margins have trended year-over-year?

So margins would have been comparable year-over-year.

These -- the acquisitions that we have done over the past 6 months have dropped our adjusted operating margin down to 31.9%.

But if we hadn't done those or if you excluded those, we would be right around the historical metric.

Your next question is from Bill Warmington from Wells Fargo.

So a question for you on MiFID II, just to ask about how -- whether that's impacting the business yet and some thoughts about how that potentially impacts the business.

Hey, Bill, it's Phil Snow.

So we actually see MiFID II as an opportunity for us.

We see regulatory as an area that we have a lot of assets that we can point in that direction.

MiFID II, for one example, with specific solution that we've developed is we have a partnership with a firm called ONEaccess, which allows us to integrate their suite of tools to track and value research product and services.

These tools are getting integrated with our RMS suite, which includes Code Red and internal research notes, and that's going to enable users to look about -- look at corporate access events, create a research valuation framework and carry out a quantitative broker vote.

So that's just one solution that we have for MiFID II, which has a lot of components to it.

Another one is with the Portware acquisition, we've developed a solution for best execution, which is something that's part of MiFID II as well.

Got it.

And then a couple housekeeping items.

You had mentioned on the guidance and the prepared remarks in terms of coming in for this past quarter at $312 million and the guidance being $311 million to $317 million, and if you had adjusted for the fair value, it would have come in more around $315 million.

The guidance for Q4, $321 million to $328 million, should we think -- should we be including the fair value adjustment in those numbers?

Or that number is excluding that $2.5 million fair value adjustment?

How should we think about that?

Hi, Bill, it's Maurizio.

That revenue guidance is our GAAP revenue guidance, so it includes deferred revenue fair value adjustment in it.

Got it.

So it will -- it has the impact of the fair value adjustment.

It does not have the revenue -- the deferred revenue.

It includes the impact of the deferred revenue fair value adjustment.

It is a GAAP number.

Your next question is from Shlomo Rosenbaum from Stifel.

Just a follow-up on Bill's question.

The guidance for the current -- the quarter just reported, was that contemplating a deferred revenue adjustment in there or not?

Because there was coming through about coming out in the middle of the range.

If you would add that back, was that something that -- was the guidance assuming that you are not going to have to write anything off and, therefore, that's the right way of looking at it?

Just trying to understand the context there.

So we went through -- hi, Shlomo.

It's Maurizio.

So we went through our purchase accounting valuation process after the acquisition closed.

And when we went through that process, the deferred revenue fair value adjustment came in larger than what we had expected, and so that's why you see this -- the $312 million is at the lower end of the guidance range.

And so that's why we've been very upfront with everyone on how much that adjustment was during the period.

So just -- was it supposed to be -- were you expecting -- it was 2.5, were you expecting 1, 1.5?

Or just trying -- is the commentary that it really was exactly in the middle of the range of what you were expecting or not?

We were expecting it to be lower and to be right around the middle of the range.

Okay.

Just, Phil, going back to some commentary you made about opportunity for leverage in the business model as you realize cost synergies and things like that, is that a comment saying, "hey we're going to get back to margins we had before"?

Or is this a comment saying, "hey, there's margin upside from what we had before"?

I think Maurizio and I are primarily focused on getting the acquisitions integrated well and getting back to the margins that we had pre- the recent M&A activity.

I think we're -- as I mentioned in my notes, we're just very focused on top line growth as the most important factor for us.

So if we do feel like we've made all the necessary investments to drive the high-growth areas for us, that does give us an opportunity to expand margins later.

That's something I think we'll be evaluating as we work through the next 12 months.

Okay, good.

And then the professional services getting excluded from the ASV, can you walk us through exactly what you're doing in the professional services?

And how much visibility do you have to that in any given quarter?

It sounds like right now, you're -- it's within around $4 million in revenue.

Is that something that when you give us the guidance on a day like today, you have pretty good visibility into that?

Or how should we think of that?

So Shlomo, it's Maurizio.

So the professional service revenue is really the implementation piece on the -- really, the last 3 acquisitions that we made: Vermilion, BISAM and FDSG.

And so that is really revenue that is built in the implementation phase that is amortized over the life of the contract.

And so we've incorporated that into our revenue guidance, but we have excluded it from ASV because it's really nonsubscription-based revenue.

And so to be upfront and to be very transparent, we've given you both numbers.

We've given you what the ASV number is and also how much of the last 12 months of professional service fees have been billed to our clients.

The next question is from Peter Appert from Piper Jaffray.

Phil, can you talk a little bit about your comfort with the current business mix?

Any whitespaces left in terms of things you feel the need to fill in?

Yes, we feel very good about the progress we made over the last 2 years to fill out the portfolio life cycle.

So that slide we showed you where we can go from research to portfolio management and trading to analytics, we feel if we get all of that connected, we're making really good progress.

That gives us much more opportunity, particularly in the larger institutional asset management clients where we're seeing some of the cost pressures.

Similarly with wealth, the FDSG acquisition allows us now to go from end to end.

Previously, we were really attacking the ultrahigh net worth and high net worth part of the market.

This now connects us with the affluent.

So we feel that entire $2 billion market, that's sort of how we value it, is now something that we can go after.

And then lastly, with CTS, which I describe were really thinking about investing more in there, opening up our platform.

And as clients look to do more things across their enterprise, that just gives us a whole host of different options in terms of unlocking more value within our clients where they're building things themselves.

So I think that all 3 of those things, combined with our really strong call workstation product as well as our established analytics suite, we feel like we've got a lot of great options across the portfolio of products we have.

Regulatory is another area which I mentioned.

It's early days for us, but we do have a team of people that are focused on that.

So I think as we move forward, that's another area you'll be hearing us talk more about.

So regulatory could be a focus from an M&A standpoint, but otherwise, would I interpret your comments to be that pace of M&A activity will be less going forward?

We're certainly not as active as we have been in the last 24 months.

So I think regulatory is an interesting area.

We're always on the look for unique content.

With what we have now, there's lots of ways for us to leverage unique content.

But the current focus for us is really on integrating the assets that we acquired over the last 24 months.

Got it.

Can I just sneak in one more?

The -- on the margin leverage question and getting back to prior margins, Maurizio, is that -- do you envision that being something that can happen over the course of maybe 4 -- the next 4 quarters?

I think that's really the 4 to 8 quarters out, I would say, as we go and integrate these acquisitions.

I would say, it's probably a year or 2 out.

The next question is from Toni Kaplan from Morgan Stanley.

Phil, you mentioned that the CTS business is only about 10% of revenue.

Just given how quickly feeds are growing versus the traditional workstation business, I was a little bit surprised that it's not higher.

So basically, how should we reconcile that?

And how large do you expect the CTS business to ultimately get to?

It's a large market.

I think it's pretty well published what a number of our competitors have in the space.

Our offering, Toni, has been pointed historically at very much sort of the quant market.

That was a big market for us.

So quant's consuming end-of-day feeds for us to do analytics, a lot of clients building applications, feeding data into performance systems.

So we see it as a large opportunity for us.

A company of FactSet's size, it does take time for those dissynergies to move, but we certainly are excited about that area, and we're going to continue to invest more in it.

Okay, great.

And then can you talk a little bit about the competitive landscape?

Are you running up against new competitors as you expand your product capabilities and also especially changing geographies as well?

And anything to note on your positioning and how aggressive the market is right now?

So I think the competitive landscape hasn't changed that much.

As we move into new areas and our competitors move into new areas, we kind of bump up against competitors in new ways, but it's primarily sort of the larger competitors that we've always been competing against and a lot of niche analytics providers that we compete with, with our analytics suite.

And then I wouldn't say it's so much competition, but we're now, I think, competing with our clients for the money that they spend to build things.

That's sort of a newer area for us, and CTS is one piece of that.

When we look at the competitive landscape, FactSet traditionally is really going to win.

It's just in terms of the strength of our analytics, the quality of our content, the flexibility of our platform and the service levels that we provide.

And where we're losing now where it's sort of we're trading blows with people is when clients are consolidating, and there's pieces that we don't have, in some cases, we're going to lose some or all of our business.

However, as we stitch together some of the things we talked about today, I think that's going to provide a great opportunity for us moving forward.

Okay, great.

And just one last quick one.

It looks like sell-side improved over last quarter in terms of the growth rate -- the ASV growth rate.

Anything to call out in terms of strength there, that'd be helpful.

Nothing in particular.

That's definitely a more volatile piece of our business than the buy-side.

So very often, large deals can kind of swing things one way or the other.

We do really well with our desktop product there with junior bankers, and we're beginning to see more penetration with our CTS product within the sell-side.

Traditionally, that's something that we've really just had more success with on the buy-side and with redistribution partners.

Your next question is from Manav Patnaik from Barclays.

My first question is around the wealth management business.

It clearly sounds like a nice opportunity for you guys.

I was hoping you could just elaborate on whether this opportunity is more than just sort of the workstation penetration opportunity.

And like you gave us CTS at 10% of the business, any help on what wealth size is today at FactSet?

So FDSG, which is the acquisition we've done, does have a number of terminals, but primarily, that business is really just creating very elegant portals for large banks -- large retail banks.

So that's sort of -- they've got a digital product, and that's definitely a trend that we're going to see in the wealth market.

So what excited us so much about the acquisition was combining that with our call workstation and analytics product, which serves the high end of the market very well, but as trends change and we try to get to more people, having a digital solution is very helpful.

And we can't -- thanks for asking, on the size of wealth market.

We can't give you that number today.

But hopefully -- we're showing some movement here for you guys so you can get a better understanding.

And I think Maurizio and I are getting closer over the next couple of quarters to being able to break things down for you at a more granular level.

Okay.

That's helpful to know.

And then just in terms of you mentioned analytics a bunch of times.

Fixed income, obviously, has been a focus for you guys.

Any color on -- you've had some of the fixed income assets trade hands more recently.

If those are the kind of things that maybe you guys have or would look at or maybe they're out of the realm of where you guys are targeting.

I missed the second half of that.

Sorry, could you reask that?

Well, just in terms of like I'm referring to [you book] in the index businesses that just got sold.

And I guess my question is your focus on fixed income and analytics, particularly.

Is it different than that side of the book?

Just curious on your appetite for the M&A or expansion plans there.

Yes.

So our strategy really has been to integrate the benchmark providers.

On the analytics side, we -- I think we have exceptionally strong fixed income analytics for our own product, and there is interest, in some cases, from partners that are out there for us to help power some of that for them.

So we're having some of those conversations, but the -- we're really focused on our own analytics suite and essentially being able to create an integrated solution for clients that want to use multiple components.

And just in terms of creating benchmarks, our focus there has been more on the ETF creation.

So there's been multiple examples of that in press releases that we've put out there that demonstrate that we've got the capabilities to do that if we wanted to.

Your next question is from Ato Garrett from Deutsche Bank.

Looking forward to the fourth quarter revenue guidance, or you gave us the -- what the organic ASV growth would be at the midpoint.

Wondering, can you give us what the ASV contribution expectation is from the acquisitions you've closed recently?

We don't, so -- hi, this is Maurizio.

We don't give guidance on how much projected ASV would be from the acquisitions.

It's -- we don't.

That's not on the guidance that we give.

Okay.

Fair.

And then looking at -- again, going forward, just thinking about free cash flow and some of the acquisitions you've made, the impact we've seen on margins and just thinking about what that might do.

Should we still see free cash flow conversion like above 100% of net income?

Or do you have a different expectation for free cash flow in fourth quarter going forward?

Free cash flow should range right around what we have done in the last 12 to 24 months, and I don't see free cash flow significantly changing.

We still generate a significant amount of free cash flow and at times, over the last 12 month basis, above net income.

So I don't see that changing.

We're still a very cash-generating business.

Okay.

Great.

And then just one last one on the competitive environment.

I know we saw some paperwork getting filed about another desktop provider in Nordics region that might be going public or is getting some external interest for bids.

I'm wondering if you see that as -- if that was to be picked up by any of your larger competitors where that might have an impact on some of your international growth, which has been -- have driven some strong results this quarter.

Just what your thoughts might be if that's a product that you don't really compete with or if it's just too small to really be too relevant.

Yes.

I think the product that you're talking about we see in the Scandinavian region.

My understanding is it's a good product.

But if that got applied by someone else in the market, I don't think that would have any material impact on our European business at all.

The next question is from Hamzah Mazari from Macquarie.

This is Kayvan Rahbar.

I'm filling in for Hamzah.

Can you give us a sense, as you guys are transitioning from a desktop business to more workflow business, do the capital requirements for the business change if the workflow-oriented business gets to be the vast majority of the portfolio?

No.

So it's Maurizio.

Listen, our capital requirement doesn't change.

It's still within our overall structure, and so that would not significantly change one way or the other our capital investments or capital needs.

Your next question is from Glenn Greene from Oppenheimer.

A question for Phil.

Just broadly, just about sales activity, what you're seeing.

You talked about cross-sell momentum picking up.

You alluded to better activity with enterprise solutions analytics.

Could you just give us a little bit more color on the parts of the businesses -- parts of the business that you're actually seeing momentum in?

And is there any way to frame -- obviously, you're sort of going through somewhat of a transition in your business.

But is there sort of faster-growing parts of your business?

How those are growing and what proportion of the business they may represent that may be offsetting some of the slower growth in the workstation business.

Yes.

I think we've -- and we've talked about this a lot.

So there's just geographically, clearly, from our comments today, Asia Pac has been an area that's done very well within the larger clients.

When we're selling analytics and CTS, it's going into the risk and performance teams and, in a lot of cases, into the front office or building solutions for the front office.

Across -- we have a very broad suite of products, and we service a lot of different clients.

We did very well again this quarter with wealth managers, with insurance companies, with hedge funds.

Corporate has been good for us.

Planned sponsors, we're picking up momentum.

The one area that we've seen the most pressure is in our core institutional asset management clients as they're under severe cost pressure.

They're focused on expense management.

Hiring's down.

And we see the flows from active to passive.

So our strategy, the portfolio life cycle strategy, is most going to help those clients.

So we think that we're in pretty good shape.

Yes.

So the -- it's a good segue to my follow-up question.

So the client pressures that you alluded to that you've been talking about for a few quarters, is there any way to frame it?

Has it gotten better, worse?

Or is it relatively stable?

How would you characterize that?

I think it's relatively stable.

I think the trends that we've seen in terms of the asset flows and the move from domestic to international, which might be the one that's helping us the -- in the wealth business and just generally speaking, the desire to see increased transparency through regulation.

Those are trends that have been going on for a while, and it's hard to imagine them abating in the next couple of quarters.

So that's our thesis, and we have a strategy, essentially, to capitalize on it.

Your next question is from David Chu from Bank of America.

So if cancellations are stable, is it fair to assume that gross adds have weakened a bit in like the recent quarters?

Gross adds have been very consistent with what we saw the same quarter a year ago for both Q3 and Q2.

In fact, in Q2, it was a little bit higher.

So in both this quarter and the quarter previous, we saw a material uptick in cancellations and through consolidation or through complete client failures.

That's -- those are the headwinds we're facing.

We've got a great product suite.

We've got a great sales team.

We're selling as much or more product than we did last year, but there are just a few things that are out of our control.

So we have to offset that by selling more.

Okay.

So it actually does sound like cancellations are like upticking versus being stable.

Is that fair?

I would say it was similar to last quarter.

But compared to a year ago, definitely more, yes.

Okay.

And just as a follow-up.

I know you gave unique client count for the 2 recent acquisitions.

Can you provide a unique like subscriber count?

So we haven't gone to that level.

So obviously, BISAM has a -- does not have a user count because of their type of service.

On the FDSG side, we have not incorporated that into our user count as a lot of their users are at the lower tier of the market, and it would have distorted just the overall user count for us going forward.

Your next question is from Alex Kramm from UBS.

I guess just coming back to some of the things that you were saying.

Clearly, you're transitioning to a workflow kind of firm, and that's growing much, much faster than the core terminal business.

I guess, where are we in that net balance at this point?

When can the workflow strong growth actually kind of start offsetting the pressures on the terminal side?

I guess it's a roundabout way of asking, do you think ASV growth organically has kind of bottomed?

Or do you feel like it's going to get worse before it gets better?

Yes.

There's no way to predict whether or not ASV growth will continue to decelerate.

I think Maurizio's guidance or our guidance is a little bit down from where it is this quarter just in terms of the growth rate.

But it's going to be -- getting these assets integrated, Alex, is -- it's a multiquarter or multiyear thing.

So I think it's not something that's going to happen overnight, but we've got great suites of products to sell for all of the different kind of areas we talked about today.

I think that by itself is going to help us with our growth rate.

Getting them all connected over the next year or 2 will take it to another level.

Okay.

And then -- no, that's fair.

And then just maybe just as a follow-up to that.

Two things that may be minor things here, but like, one, on the repurchasing, Maurizio, like that was a fairly slow quarter.

And then also, on the organic hiring, I think those growth rates, I think it was 5% year-over-year, those have come down over the last couple quarters.

So I guess, just thinking about those 2 things separately, you're not buying back as much and you're not hiring as much, like what does that mean for the near-term outlook as you see it, considering how weak the stock has been and as you want to capitalize on kind of the opportunities from a hiring perspective?

Okay.

So let me take both questions separately.

So the first, on the buyback during the third quarter, keep in mind, we used existing cash flows to purchase FDSG.

So we had -- we lowered -- we had a slightly lower quarter in terms of buying back shares during the period.

We're still committed to our buyback program, and there's still plenty of funds within the buyback program that's available to us to go buy back shares in the fourth quarter and also in fiscal '18.

On your second question, just -- so let me just -- can you go back to your second question...?

Yes, no sorry.

Yes, I probably should have asked those separately, but I wanted to stick with 2 questions.

So no, the other side was just the hiring has slowed, right.

So the question is, is that because you don't see the opportunities out there?

Because I think, historically, the hiring has supported the growth.

So where does that fit in that the growth has come down in the hiring?

So keep in mind, our third quarter, we don't -- we have very little new hiring classes in the third quarter.

So what you're really going to see now is our high-end classes increase headcount in the fourth quarter, both in the U.S. and Europe and also in both India and the Philippines.

So you'll see that growth rate come back in the fourth quarter.

It's a little bit more timing than anything else in terms of the growth rate on our headcount side.

Your next question is from Keith Housum from Netcoast Research (sic) [Northcoast Research].

And it refers to recent changes in sales leadership, is there any -- I know it's kind of early here in the change.

But is there anything we can point to in terms of changes that are being made that perhaps will help drive any additional growth in the future?

Thanks for the question.

So it's early days.

The transition has been very smooth.

John Wiseman is a FactSet veteran.

He's been here -- he's actually on his second tour at FactSet.

He's been here 13 years.

I've worked with them that entire time, and the great thing about John is he has deep relationships across the entire organization as well as globally.

He was running our global SP&A team, Strategic Partnerships & Alliances, so he's had exposure to some very large opportunities and orchestrated some of the most complicated deal that we have, most complex with very large clients and has great experience with both the on-platform as well as the CTS business.

So I think John's going to bring an additional level of focus, particularly to our larger accounts and structure a group around that, which should be really helpful with our portfolio life cycle strategy.

Okay, great.

And then so you've talked often in the past about trying to get the revenue growth to 10%, and you've also talked about how it's going to be difficult to do in the current environment.

Is there a need to change your long-term 10% growth margin or growth in the revenue side based on what maybe long-term challenges you have in the institutional management side?

Yes.

I think we're just focused on getting back to accelerating our growth rate.

Double digits would be great to get to.

We're -- whether or not we're going to get there in the next couple of quarters, it's hard to imagine that happening, but I think in the long term, we definitely see the opportunity for us to grow at a higher rate.

Your next question is from Joseph Foresi from Cantor Fitzgerald.

This is Mike Reid on for Joe.

Just wanted to clarify that the 237 new users, that was from the 108 organic client additions.

Is that right?

It's from -- it's not totally derived just from the 108 net new clients.

It's from the whole client base.

Okay.

So does that kind of 2 to 1 number then signify the loss of users across clients?

Or there other dynamics there?

There's other dynamics there, right.

So if you're a new data feed client, you're not going to be included in the user count.

So you're going to have clients that come onboard that spend more than our $10,000 threshold limit that are not purchasing the traditional workstation.

Okay.

And then, can you just give us a little bit detail on any momentum building for the FactSet web rollout?

So it's still very early days there.

I think I mentioned that on the last quarter.

We've got a new version of our universal screening engine, which is getting integrated.

The PA3 product we have, with the Portfolio Analytics 3, which is getting great momentum now across our core workstation, that's going to be integrated into the web.

So we've got some nice wins, but it's not a material driver of our growth right now.

The last question is from Peter Heckmann from D.A. Davidson.

My questions were primarily housekeeping, Maurizio.

Just -- so when we forecast beyond your current quarter guidance, the 3 most recent acquisitions added about $103 million in ASV.

What you're saying is there's an additional roughly $11 million to $12 million in professional services work that was included in the revenue from those, but it's not included in the ASV.

Is that correct?

Correct.

You got it.

Great.

And then one quick question.

What would be the percentage of revenue that's now denominated in foreign currencies with these acquisitions?

And then, could you give us the top 3?

So in terms of foreign currency, with -- it's more than -- more than 90% of our revenues are billed in U.S. dollars still even with these recent acquisitions.

And so that really has not changed.

And in terms of the denomination, the biggest one will be yen, and then followed by the pound and euro.

And this -- they're very close, to be quite honest, in terms of mix, but those are the top 3.

Okay.

So maybe they approached roughly 3% of revenue each.

Get you about 9% of revenue kind of denominated in foreign currency that, that would be consistent with your comment that 90% is denominated in U.S.

Correct.

Great.

Thank you, everyone, and see you, all, next quarter.

This concludes today's conference call.

You may now disconnect.