Factset Research Systems Inc (FDS) 2018 Q4 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 Q4 2018 Earnings Call.

(Operator Instructions) I will now turn the call over to Rima Hyder, Vice President of Investor Relations.

You may begin your conference.

Thank you, Mike, and good morning, everyone.

And good afternoon to those joining us here in London.

Welcome to FactSet's Fourth Quarter 2018 Earnings Conference Call.

We come to you today from our European headquarters in London.

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 live at factset.com.

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

To be fair to everyone, please limit yourself to 1 question plus 1 follow-up.

Before we discuss our results, I encourage all listeners to review the legal notice on Slide 2, which explains the risk of forward-looking statements and the use of non-GAAP financial measures; and Slide 14, which explain the risks associated with our forward-looking guidance statement.

Additionally, please refer to our Form 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 the presentation and in our earnings release issued earlier today.

Joining me today are Phil Snow, Chief Executive Officer; Maurizio Nicolelli, Senior Vice President, Finance; and FactSet's new Chief Financial Officer, Helen Shan.

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

Thanks, Rima.

Good morning to everyone in the U.S., and good afternoon to those joining us here in the U.K. We end fiscal '18 on many high notes, and are very proud of all the accomplishments that our employees around the globe have contributed to this year.

FactSet celebrated 40 years early this month.

Much has changed since 1978 when we started with 2 employees, and now, over 9,500 employees in 24 countries.

What remains consistent is our pledge to our clients to be the standard for world-class solutions, the promise to our employees to be the career destination for the best and brightest, and the commitment to our shareholders to continue to return value.

Very few companies can claim 38 years of consecutive revenue growth and 22 years of adjusted diluted EPS growth.

FactSet has achieved these milestones by setting the global standard for how financial data is delivered, integrated and consumed by the investment community.

Throughout 2018, we continue to diversify our suite of solutions through the integration of our acquisitions and new product investments.

This resulted in a number of new landmark achievements opening up new markets to us.

We deepened our relationship with many existing clients, and we added approximately 400 net new clients and over 3,000 users during our fiscal year.

We won a deal to provide solutions to over 15,000 advisors at Bank of America Merrill Lynch, one of the largest wealth managers in the world, and a testament to the strength of our growing wealth offering.

We enhanced our Multi-Asset Class risk models, leading to several wins and strengthening our position in the analytics market.

And lastly, we expanded our CTS business and launched a new platform to address the growing demand for alternative data.

This quarter, we reported a new high watermark for organic ASV at $39 million.

Organic ASV growth came in at 5.7%, an improvement from 5.3% in the third quarter.

A quick note on ASV.

In the past, we have excluded the change in professional services from our change in ASV.

However, it is an important component of our sales goals.

The sales force is incentivized both on change in ASV and the change in professional services, and to be consistent internally and externally going forward when we give guidance or refer to our top line growth rate, we will be referring to ASV plus professional services.

Professional services is a relatively new area of growth for us, and while it's still small, it grew at over 20% in fiscal 2018.

Including professional services, our growth rate came in at 5.9%.

Earlier this year, at Investor Day, we provided you with our ASV breakout with growth rates for our various workflow solutions.

Towards the end of the year, we realigned a few pieces within these workflows.

The biggest change is that a portion of portfolio management and trading now sits under analytics.

We believe this alignment is better suited for delivering a comprehensive solution for the portfolio life cycle.

Moving on to other key metrics.

Organic revenue grew over 5%, and adjusted operating margin for the fourth quarter and full year came in at 31.3%, a 30 basis point improvement from our third quarter.

Our actions to streamline parts of our organization and optimize costs gave us some benefit this quarter, but we expect additional benefits in fiscal '19.

We remain focused on increasing margin in 2019 and plan to deliver 100 basis point margin increase.

This fiscal year, adjusted diluted EPS increased 16% to $2.20, boosted in part by the U.S. Tax Reform.

The $39 million increase in ASV this quarter was across all our workflow solutions.

In research, the growth in workstations, fueled by seasonal banking hires, was the largest contributor.

Analytics was a close second, with increased sales and portfolio analytics reporting and risk.

Additionally, our unique content Data Feeds propelled CTS to its highest quarter ever.

ASV from new and existing clients increased year-over-year, with the Americas region bringing in the most new business.

Cancellations remain relatively flat this quarter versus a year ago, a trend we have observed over the last few quarters.

Turning to our geographic breakdown.

Our Americas organic ASV growth improved this quarter to over 5%, showing signs of stability as cancellations improved once again.

Outside the Americas, ASV grew organically by 6%, with Asia PAC growing over 11% and Europe growing at 5%.

Higher cancellations this quarter versus last year weighed down the overall international growth rate, but despite this challenge, Asia PAC had one of its biggest ASV quarters ever.

In conclusion, we are pleased with our year-end results and start 2019 with strong momentum.

As we look ahead to fiscal '19, we believe we are well-positioned to capture additional market share in this challenging market.

Throughout this past year, we continue to return value to shareholders through our share buyback program and increased dividend.

We repurchased approximately 330,000 shares for $68 million during the fourth quarter under our existing share repurchase program.

Over the last 12 months, we returned over $390 million to stockholders in the form of share repurchases and dividends.

This represents an average cash return of 91% as a percentage of free cash flow and proceeds from employee stock plans.

Before I turn the call over to Maurizio and Helen, let me first welcome Helen Shan, our new CFO, who has been with us since early September.

And I want to say a special thank you to our outgoing CFO, Maurizio Nicolelli, who has been an instrumental member of our leadership team and has contributed greatly to FactSet's success.

During his tenure leading finance, we have more than doubled our ASV and trebled adjusted diluted EPS.

Let me now turn the call over to Maurizio one last time to talk in more detail about our financial results, followed by Helen, who will talk you through our guidance for fiscal '19.

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

We are pleased with our fourth quarter results, ending the year with solid metrics.

Versus our guidance, we ended the year with 6% organic ASV growth and 11% revenue growth.

Our GAAP operating margin came in below our guidance due to certain onetime charges related to restructuring and corporate costs not accounted for in the fourth quarter.

Adjusted operating margin for the full year was 31.3%.

As discussed on previous calls, with the additional cash savings from the tax reform, we made purposeful decisions to make further investments in higher growth businesses.

We saw some of this momentum build up in our fourth quarter with the highest-ever ASV.

This increase in ASV also drove higher compensation, which in turn impacts our near-term margins.

Let's now go through our fourth quarter results.

GAAP revenues in the fourth quarter increased 6% to $346 million and 5% to $347 million on an organic basis versus the fourth quarter of 2017.

Looking at our segment revenue, U.S. revenues grew 5% and international revenues increased 6% on an organic basis.

This growth comes primarily as a result of higher sales across all our business lines.

ASV increased to $1.39 billion at the end of our fourth quarter.

Organic ASV increased approximately 6% year-over-year and $39 million since the end of our third quarter.

This increase was primarily driven by higher research, workstation sales and analytics.

Adjusted operating margin of 31.3% was 30 basis points higher since the third quarter of 2018 and 10 basis points better than last year as we continue to create more efficiencies in our cost structure.

Looking at operating expenses in some detail now.

Operating expenses for the fourth quarter totaled $258 million, an increase of 5% year-over-year, primarily driven by higher compensation expense and legal costs.

Fourth quarter cost of services expressed as a percentage of revenues decreased by 40 basis points compared with the year-ago period due to stock-based compensation acceleration in the prior year.

The decrease was partially offset by restructuring costs, additional employee compensation and higher data costs.

SG&A expenses, expressed as a percentage of revenues, were also up 10 basis points compared with the fourth quarter of fiscal 2017.

The increase was primarily higher compensation costs from severance and new hires and higher legal costs, partially offset by lower stock-based compensation.

Our client and workstation counts were both up this quarter versus our fiscal third quarter of 2018.

In the past 3 months, we added nearly 170 net new clients and approximately 2,400 new users.

The net new clients mainly came from institutional asset managers and wealth.

We now have over 5,000 clients and over 91,000 users.

Moving on to the tax rate.

Our quarterly effective tax rate was 18% compared with 25.3% a year ago, primarily due to the U.S. Tax Reform that we discussed earlier in the year.

Our annual effective tax rate was 18%, which excludes the onetime deemed repatriation tax on historical repatriated foreign earnings to toll tax.

GAAP EPS increased 16% to $1.77 this quarter versus $1.52 in the fourth quarter of 2017.

The increase was primarily attributable to the lower tax rate from the U.S. Tax Reform.

Excluding intangible asset amortization, the deferred revenue fair value adjustment and other nonrecurring items, adjusted EPS also grew 16% to $2.20 this quarter.

Free cash flow, which we define as cash generated from operations less capital spending for our fourth quarter, was $91 million, an increase of approximately $2 million or 2% over the same period last year.

The increase was due to a lower effective tax rate and an improvement in working capital items, partially offset by higher capital expenditures.

Our CapEx grew due to the buildout of new office space and technology upgrades.

Next, we turn to our ASV breakout.

As we showed you at our Investor Day, we think of our business in various workflow solutions.

We realigned some of these workflow solutions as Phil explained earlier.

The changes to this breakout include moving a portion of PMT to research -- from research to analytics and reclassify most of the workstations' ASV under the research business.

As you can see on the slide, the growth rates from these workflow solutions are in line with what we showed at Investor Day, highlighting that more than 50% of our business grew at a high single and double-digit growth rate as we continue to manage the mix in our portfolio.

Let me now turn the call over to Helen to discuss the outlook for our fiscal 2019.

Thank you, Maurizio, Phil and Rima, and hello, everyone.

I'm honored to be joining the FactSet team.

I've been a beneficiary of the FactSet offerings, both as a banker and a corporate client.

I've only been here a short time.

I'm quickly learning about the portfolio lifecycle and the innovative solutions we are building for our clients, and I believe we have a lot of opportunities ahead of us.

I look forward to working with this team and to meeting many of you in the coming months.

For our 2019 outlook, our views are predicated on a number of factors.

We expect that macroeconomic conditions and global trends will essentially remain the same, as we've experienced in our fiscal 2018.

We anticipate continued investment to offer a seamless portfolio of life cycle solution, which we believe will provide sustainable growth in the future.

And we believe growth will be propelled primarily through capturing a larger share of wallet from our existing client base through both cross-selling and upselling our higher-value solutions.

As Phil noted earlier, going forward, we will provide top line guidance on both ASV and professional services on a combined basis.

Organic ASV and professional services is expected to increase in the range of $75 million and $90 million over fiscal 2018.

GAAP revenues are expected to be in the range of $1.41 billion and $1.45 billion.

GAAP operating margin expected to be in the range of 29% and 30%.

Adjusted operating margin is expected to be in the range of 31.5% and 32.5%, reflecting the targeted improvement in operating efficiencies.

The annual effective tax rate is expected to be in the range of 17.5% and 18.5%.

This range incorporates a full year with a lower corporate tax rate as a result of the U.S. Tax Reform.

GAAP diluted EPS is expected to be in the range of $8.70 and $8.90.

The year-over-year increase primarily reflects the absence of the 2018 toll tax charge.

Adjusted diluted EPS is expected to be in the range of $9.45 and $9.65.

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

As we look to 2019, we plan to execute on our strategy: To continue to grow top line, to optimize our cost structure and to return long-term value to shareholders.

With that, we are now ready for your questions.

Mike, I'll turn this call back over to you.

(Operator Instructions) Your first question is from Joseph Foresi with Cantor Fitzgerald.

I wonder if we could start by talking about the Merrill Lynch deal.

Is there any way to provide any color around some of the numbers associated with that deal?

And how do you expect it to flow through the model?

When will the -- we'll be able to see it in ASV and some of the other metrics on the revenue side?

Thanks, Joe.

We were anticipating that might be the first question.

So let me talk a little bit about the deal.

And we can't give you the exact numbers, but what I can tell you, it's an enterprise agreement.

As you would expect for a client of that size and a commitment like this, it's a multiyear deal.

And it includes a lot of desktops.

We disclosed the number in the press release.

And it also includes some feeds that we're providing them to go into their systems.

What you should expect to see is us recognizing most of the ASV for this deal in the first half of the coming fiscal year.

Okay.

And then, so I guess just for clarification purposes, is that included in guidance?

How should we think about the seasonality and the impact to margins?

I just want to make sure that we're kind of modeling it appropriately.

Yes, it is.

It's included in the total guidance number.

Your next question comes from George Tong from Goldman Sachs.

Your guidance includes the BAML contract.

Can you discuss how your outlook for the underlying business, excluding the BAML contract, is currently trending relative to recent quarters?

If it's consistent with recent growth excluding the new contract, or if it's accelerating in growth?

It's Phil Snow.

So we may be being a little bit conservative on our overall guidance.

As I've mentioned on a lot of previous calls, we have pretty good visibility in halves of our fiscal year.

There are a number of large deals that we're still waiting for decisions on.

Within the first half, some of those are renewals.

And I think as we get closer to the end of the first half, we may be in a position to give you some revised guidance at that point, but we didn't want to go out -- we wanted to go out a little bit conservatively to start the year until we got more visibility on that.

Yes.

Makes sense.

And then on margin, you're still committed to 100 basis points of annual margin expansion.

Can you talk about the near-term drivers for margin improvement and potential drivers of upside or downside versus your expectations?

Absolutely.

So we're absolutely targeting 100 basis points of margin expansion, which would get us to 32.3%.

And I can talk a little bit about what we're focused on there.

One is just continued acquisition of the integration -- to continue the integration of the acquisitions we did.

We feel that there's some efficiencies we can get there.

We're looking at some of the larger parts of our business.

We believe that there are some efficiencies there in terms of engineering compounds and so on.

And Gene, who's the new CTO, he's been looking at those areas.

I think we've done a lot of work in the last half of fiscal '18.

We were expecting to get a little bit more benefit from that in Q4, but you should see that flow through into the first half of fiscal year '19.

And I'd like to sort of also remind people that halfway through FY '18, we sort of intentionally invested more on our business as a result of the U.S. Tax Reform.

So we made some additional investments and risks.

We also gave some compensation to our employees in certain locations for certain types of roles.

And we did invest some money in the second half of last fiscal year for this BAML deal.

So for a deal of this size, obviously, there's a lot of work that goes into it from an engineering standpoint, but we also staffed up pretty aggressively to make sure that we'd be able to roll out to as many users as we've talked about in a way that we were comfortable with.

So we've done that.

That's going to be a lot of work for us this year, but that is expense that we've made that we should get a payback from in the future.

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

So just in terms of like -- your current outlook, if we assume 100 basis points of margin expansion in like fiscal '19 and '20 like you suggested at the Investor Day, should -- how should we think about margins beyond that?

Like do you think that it's going to stay at like your 33% to 34% range as you did historically where you managed to margins?

Or could we see outsized growth beyond that?

We haven't modeled that far out, so -- David, so thank you for the question, and thank you for congratulating us on the deal.

As we get more information, as we get closer, we'll think about that.

But I think we were -- the guidance we've given is for 2 years at this point.

And if we decide to revise that, we'll -- of course, we'll let you know.

Sure.

Okay.

And then just any update on the FactSet exchange marketplace?

I just wanted to see if you're generating any revenue in earnest today.

And kind of how big of a revenue contributor should we expect for like fiscal '19 and beyond?

I would -- currently, we're expecting continued strong growth from CTS.

We've gotten tremendous feedback from the marketplace for the data exchange and the solutions exchange.

And to remind everyone, the solutions exchange allows you to go in to the Open:FactSet Marketplace and begin testing and programming against the data in a hosted environment.

So we're seeing tremendous interest in there.

We have a lot of very large firms globally testing this out.

And we believe we'll begin to monetize this within fiscal year '19.

But it's still early days.

We're continuing to accelerate providers onto the platform, and we're very optimistic about what it means over a multiyear period.

Your next question comes from Bill Warmington from Wells Fargo.

So for Maurizio, I just wanted to say that, that was the most upbeat financial presentation I think I've ever heard him give.

And so wishing you happy trails.

And then for Helen, welcome to the show.

So first question is on -- the sell side ASV looks particularly strong this quarter.

In fact, I think it's the strongest that we've seen in 8 quarters.

So I just wanted to ask what was behind that.

So, Bill, thanks for the question.

It's Phil Snow.

So yes, we had a very strong year in banking.

A lot of it was driven in the second half by good seasonal hiring in the banking group.

So we had -- we reported we added a significant number of desktops in Q4, and a lot of those were from our banking users.

And I think some of this also stems from the additional focus that we have in our strategic client group, so we've talked about this a little bit.

But we've sort of organized our sales team in a way where we've got very high focus on our largest accounts, both on the buy-side and the sell-side, and I think that's also kind of helped here.

Okay.

And for my follow-up question, I wanted to ask about the key selling point, in your opinion, in terms of the reasons that BAML made the decision they did to move from Thomson Reuters to FactSet.

And what I'm specifically getting at is to try to get a sense for some of the biggest challenges that you're facing in terms of winning new clients and what you're doing to overcome them.

So I think in this case, it really, I think, was a combination of the product that we have, which is fantastic.

We've put a lot of work into FactSet over the last few years.

It's not just for this wealth product, but all of the work that we've done to modernize our platform and program things in HTML and have more of a web look and feel for our product, really helped drive this.

A big piece of that was the Google-like search functionality that we have in FactSet, which makes it very easy to use.

It's very easy to discover what's on our platform.

The second thing is really our people and our service.

So we got some of the best feedback we've had for such a large deal in terms of going to all of these offices during the trial, and I think it was the combination of those 2 things that really gave them the confidence to make what was a big decision for them to move.

Your next question comes from Hamzah Mazari from Macquarie.

The first question is just around potential to move into other markets.

You're obviously moving into wealth, but curious if there's an initiative or any focus on either insurance verticals, the corporate side.

As you look at your business longer term, do you see opportunity in other markets?

Or this is largely sort of buy-side, sell-side going forward?

That's a great question, Hamzah.

And we -- historically, we've not broken out other client types other than buy-side and sell-side.

We have a lot of client types in the buy-side bucket.

And we've done exceptionally well with insurance companies since we became more of a Multi-Asset Class product.

So our fixed income offering, combined with our risk offering, which just continues to get better by leaps and bounds, that's helped us in insurance.

It's a fast-growing market segment for us.

And we've been quietly growing our corporate business very quickly.

So part of that is through great partnerships we have with other firms, but we also sell directly into the corporate space.

So these aren't massive parts of FactSet today, but to your point, I think it opens up a good opportunity for us as a company as our product suite evolves.

The other thing I'll point to is our open strategy.

So we're unbundling our product in a way that is very compelling for the marketplace, not just for large banks and asset managers, but we can now deliver pieces of FactSet in lots of different, interesting ways, which opens up opportunities for us at the big firms with our technology groups, conversations that we wouldn't have had a few years ago.

But I think it also opens up conversations for us with the types of firms that you just mentioned in your question.

Got you.

And a follow-up question just around -- you mentioned sort of client cancellations flattening out.

You've said that a few times, I guess.

Just curious, how are you thinking about buy-side consolidation?

Is that a headwind that's now behind you guys?

Just any views how you think about that.

And maybe just how that's impacted your business the last few years.

Is it 2 subscriptions going to 1?

Is it as simple as that?

Or any thoughts on buy-side consolidation would be helpful.

So I think we'll continue to see some buy-side consolidation.

I think some of the -- what you saw in our European growth rate slowing a little bit this quarter had to do with 2 large consolidations that happened in Europe.

So active managers continue to be under pressure for a number of reasons.

They're looking for efficiencies, some of that is combining forces to go after the market.

So we're here to help those clients, get them through an integration, and hopefully, build a good relationship and grow from there.

But we don't anticipate that it's over.

It's something that we've been dealing with for a number of years now and feel like we're getting better at in terms of providing more solutions to clients.

So that's part of our whole portfolio lifecycle.

If someone is consolidating and we can provide solutions all the way across, from research to client reporting, we feel like we have a good opportunity.

Your next question comes from Glenn Greene from Oppenheimer.

So first, Phil, it was helpful to get the ASV splits at the end of the year and obviously, sort of showing the strength in CTS, analytics and wealth.

Is there any reason that you think that those sort of directional growth trends, meaning sort of high single, low double digit in analytics and wealth, or maybe high-teens in CTS, if -- should that persist throughout fiscal '19?

Any reason to think that changes?

I think we're anticipating very similar growth rates for the coming year.

We obviously are focused on growing all of these business and focused on having a strategy to grow each of them.

And I think the way that we've organized now -- as we've organized now as we've gotten bigger really gives us an opportunity to do that.

But these are big numbers, they've got good momentum.

And I would expect to see similar growth rates for the coming year.

And just a quick clarification on the BAML deal.

Was that -- is the ASV for that included within the year-end numbers, specifically within the wealth ASV number that grew 10%?

And like a follow-up on that would be, if that's the case, I'm surprised it was only 10%.

Yes.

So as I mentioned earlier on the call, we're going to recognize most of the ASV for this deal in the first half of the coming fiscal year.

So it's -- I read that's mean as revenue.

You mean -- so you're going to -- it's not reflected in ASV currently is what you're saying?

We did poke a little bit in Q4, but the majority of it is getting booked in the first half of 2019.

You'll see it in our Q1 and Q2 numbers, yes.

Your next question comes from Toni Kaplan from Morgan Stanley.

Are there other sizeable wealth deals in the pipeline that you're anticipating you are -- you could actually close?

So over many years, absolutely.

These are large deals.

There's a number of them out in the marketplace.

And I think for the reasons I stated earlier, in terms of our products and our people and our focus, it's obviously something we're focused on.

This deal has gotten us a lot of good interest, not just from the largest wealth managers globally, but the wealth market in general.

I think it's really put us on the map in a different way.

So we will -- we do anticipate that this deal will help drive the wealth business moving forward.

And we put in a tremendous amount of work in FY '18 to get this -- to get this deal, so it really accelerated, frankly, the development of our wealth product, which is a good thing -- which means good things for every wealth manager.

Okay.

Great.

And then could you give us what you're assuming on interest expense in the guidance?

We have some, you might presume, increases in underlying interest rates, but not material.

So it's probably in line with what you've seen in -- what we've reported in 2018.

Your next question comes from Manav Patnaik from Barclays.

This is actually Greg calling out for Manav.

Just wanted to talk about the sales cycle.

I think you've talked about it in the past recently.

It's getting a little bit longer as you move into the enterprise-wide arrangements.

Just what you're seeing there in terms of closing new deals.

And are you seeing any lengthening of the cycle as you continue to go through these larger deals?

Well, so there's a wide spectrum.

You saw us close well over 150 new accounts in Q4, and some of those come in very quickly if they're smaller.

But yes, for the larger deals, BAML is a great example.

Something like that can be well over a 12-month commitment in terms of going from RFP to a signed contract.

And as our product gets more complicated, it can be longer.

But I don't have anything meaningful to give you in terms of what's -- nothing's really materially changed in the last 3 to 6 months.

Okay.

That makes sense.

And then in terms of M&A interest, a bunch of the assets that you've acquired over the last 12, 24 months there are starting to get integrated.

Just wondering about your interest in M&A and what you're seeing in the market.

So we continue to be opportunistic.

We're always interested in content.

I think the Open:FactSet Marketplace allows us to integrate content at a much faster rate than we have historically where FactSet doesn't actually have to own a content.

But we will look at unique contents that we think we can monetize ourselves in a better way.

We're also looking at anything that's interesting from a technology standpoint that might help us with our open strategy.

We're looking at some smaller stuff there.

But beyond that, we feel like we have a very good line up in terms of what we need to deliver growth over the next few years.

Your next question comes from Peter Heckmann from Davidson.

My question's been answered.

But could you review with us the average price increase that you saw in fiscal '18?

And what type of price increases might be contemplated in fiscal '19?

I think over the entire fiscal year, we probably captured somewhere between 1% and 2%; that's typical.

And we don't see that changing in FY '19.

We think it's pretty similar.

Okay.

And if you'd humor me with a follow-up then.

Within the subniche of wealth management -- or the current part of the subniche that you have a solution for, how would you size that total addressable market?

I would assume that you would say that your market share there is lower than it is across the entire data services landscape.

So I'm not sure I caught all of that.

But the wealth market is large.

I think before we closed this current deal, I think we were sizing the ultrahigh-net-worth market that we were going at to close to $0.5 billion.

And I think the acquisition of FDSG, which happened I think about 1.5 years ago now, and the work we've done here makes that a much bigger number.

So we've got massive amounts of runway in terms of growing the wealth business.

Your next question comes from Keith Housum from Northcoast Research.

This is actually Brendan on for Keith.

I just want to ask what -- some of these adjustments, the non-GAAP adjustments, there's a little -- there's a bit more room than we've anticipated, and then there's some more in guidance, too, for next year.

Just wondering, I think it's -- speaking more to those, what exactly some of those -- some of the costs are.

And if that's something we should anticipate and is kind of recurring down the road?

Or is it just something that you're seeing for next year?

Yes.

Sure.

This is Maurizio.

So in the fourth quarter, you saw a number of items come through in the nonrecurring range.

And so we went through a restructuring effort during the fourth quarter, which really will help us go in into fiscal '19 with our margin improvement.

And so you saw a lot of those costs get booked during the fourth quarter.

And we had a number of legal matters that got concluded during the period that got expensed as onetime items during the quarter.

There will be these items going forward, and so our best estimate is in our guidance now going forward.

Your next question comes from Peter Appert from Piper Jaffray.

So Phil, you haven't given us obviously the specifics on the size of the Merrill contract.

But I'm wondering if ex-Merrill, the 6% growth in ASV that you're guiding to for next year would actually imply maybe a little bit of slowdown in part of underlying ASV growth.

So I mentioned earlier, Peter, we're being conservative going into the first half, just given that there are a number of large deals that we're aware of that we don't have full visibility on yet.

If we -- once we get through that, I think we'll be in a better position to give you some revised guidance potentially at the end of the second half -- end of the first half, I apologize.

I'm wondering if -- sort of related to that, I guess.

On the context of your win, are you seeing more aggressive response from competitors?

I guess, your commentary on whether the intensity of the competitive environment and the pricing pressures that we've seen for a while is more evident now?

I don't think so.

I think it's consistent with what we've seen over the last few years.

And the next -- last question comes from Tim McHugh from William Blair.

Just wanted to ask on the professional services, I guess, the decision to include that back into the growth, I guess -- I understand the comment that it's always included in the conversation, but I think that was true last year.

So I guess why the change in opinion on that?

And you mentioned it's growing 20%.

I guess, what is the growth driver of that?

Why is it growing quickly for you guys right now?

Yes.

So it's a -- this is a new area for us.

When we began to implement our own risk models, we began to generate a little bit of revenue from professional services.

But a number of the acquisitions we did, which were more workflow and software-based than content, came with groups that have professional services.

So it's not a massive part of our business, but we're -- we think it's something that we can rationalize.

And as we move forward and our product becomes more multifaceted and requires longer implementation, it's something that we want to kind of build up our competence around.

So it is a bigger piece of what the sales force focuses on these days.

Obviously, we want to incent and align properly with them.

I think in term -- I believe we'll still be breaking out professional services.

So if you want to calculate the ASV growth rate the way that we've calculated it historically, you'll still be able to do that.

Okay.

And then just to be -- a follow-up on the margin comment.

Just to be clear, so when you talk 100 basis points of expansion, I guess, the midpoint of the range for the full year is not at that level.

So are you talking exit rate?

Is that the comment?

And just I guess, I don't understand that about the cadence of margins across the year.

What we're talking about is a full year margin of 32.3% that we're targeting.

Okay.

Is it just because the middle of the guidance is 32.0% or something, correct?

Correct.

Yes.

It's a wide range.

And I will now turn the call back over to Phil Snow, CEO.

All right.

Well, thank you, everyone, for joining us on the call today.

If you have additional questions, please call Rima Hyder.

We look forward to talking to you next quarter.

Operator, that ends today's call.

This concludes today's conference call.

You may now disconnect.