FactSet Research Systems Inc. Price & Performance (FDS)

Thank you, and good morning, everyone. Welcome to FactSet's second fiscal quarter twenty twenty five earnings call. Before we begin, the slides we reference during this presentation can be found through the webcast on the Investor Relations section of our website at factset.com. A replay of today's call will be available on our website. After our prepared remarks, we will open the call to questions from investors. The call is scheduled to last for one hour. To be fair to everyone, please limit yourself to one question. You may reenter the queue for additional follow-up questions which we will take if time permits. Before we discuss our results, I encourage all listeners to review the legal notice on slide two. Which explains the risks of forward looking statements and the use of non GAAP financial measures. Additionally, please refer to our forms 10 ks and 10 Q for a discussion of risks 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, reconciliations to the most direct comparable GAAP measures are in the appendix to the presentation in our earnings release issued earlier today.

During this call, unless otherwise noted, relative performance metrics reflect changes as compared to the respective fiscal twenty twenty four period. Also, consistent with the last quarter, please note that starting fiscal twenty twenty five, FactSet is reporting organic ASV rather than organic ASV plus professional services, to focus on the recurring nature of our revenues. Joining me today are Phil Snow, chief executive officer Helen Shan, chief financial officer and Goran Skoko, chief revenue officer. I will now turn the discussion over to Phil Snow. Thank you, Yed, and good morning, everyone. Thanks for joining us today.

Before I begin, let me start by welcoming Kevin Toomey as our new head of investor Relations and thanking Yepp for serving in the role on an interim basis maintaining strong investor engagement during the past six months in addition to his role as head of corporate development. Kevin brings to FactSet over two decades of experience in the investment relations, equity research, and financial markets. And I look forward to working with him to continue growing our investor relations program. Now on to the results. In the second quarter, we grew organic ASV 4.1% year over year delivering adjusted operating margin of 37.3% and adjusted diluted EPS of $4.28. We are encouraged by the positive momentum of deals progressing through the sales cycle this past quarter, and have confidence that we are reaching an inflection point in ASV growth heading into the back half of the year. We anticipated a slow start to fiscal twenty twenty five and continue to operate in a challenging market environment. Lower CPI has resulted in a lower year over year annual price increase, and softer results in asset management and banking, masked the significant progress we made developing and executing against our pipeline during the quarter.

While acknowledging there remains market uncertainty, I'm pleased with the strength of our pipeline and the product led innovation fact is bringing to the market. Our dialogue with clients continues to be constructive, positioning our business positively for the growth acceleration we anticipate in the second half of the year. With increased visibility into the remainder of the fiscal year, we are reaffirming the 5% midpoint of our organic ASV growth guidance and narrowing the range of anticipated top line outcomes. Helen will cover the rest of our revised guidance in more detail later in her remarks. Turning back to the second quarter, retention remained greater than 95% and client retention was 91%. We grew our client base to over 8,600 led by an increase in corporates, wealth and partners, and our user count increased to over 219,000 driven by our continued success in wealth. Starting with our performance by region, In The Americas, we grew organic ASV by 4% Strength in wealth and hedge funds was offset by mixed results for asset managers, asset owners, and partners. Where a few large losses masked the benefit of strategic seven figure wins. In EMEA, organic ASV growth was 3%, We're continuing to see momentum with hedge funds and PEVC firms in the region, but these gains were offset by erosion headwinds faced in the quarter.

This trend was most notable in asset management and banking. In Asia Pacific, we maintained 7% organic ASV growth driven by continued strong sales of data solutions, particularly among wealth, corporates, hedge funds, and PEVC firms. Now turning to our results from a firm type perspective. Wealth reaccelerated to double digit growth in the quarter lapping last year's large cancellation. We continue to gain market share with leading clients in wealth evidenced by UBS selecting FactSet to power their adviser desktops and client facing portal in The Americas. This is another example of an enterprise deal where digital and technology capabilities are winning in the market. Our differentiating wealth adviser solution and industry leading client service were key to this success. Implementation and rollout are expected to occur throughout the remainder of the year. With this latest win, FactSet is now the primary market data partner to half of the world's top 20 wealth management firms, including three of the four US wirehouses and three of the top five Canadian wealth managers. The opportunity for our wealth business is global, and we are seeing traction with clients outside North America. As we execute against our sales pipeline, I'm confident there is continued runway to extend our success both geographically and beyond the adviser desktop into the wealth home office and adjacent workflows.

Within dealmakers, while banking was a drag to growth, we still saw renewal activity increase notably in the quarter. We signed more than a dozen large banking renewals securing multiyear contracts on many of them, to reinforce FactSet as a trusted partner and opening the opportunity for future upsells. We are confident FactSet's focus on workflow efficiency and total cost of ownership is top of mind for many of our banking clients. We launched PitchCreator midway through the quarter and already have a robust pipeline with more than 50 opportunities Almost two dozen of our largest banking clients actively trialing a product and several of our clients in the latest stages of commercial negotiation. Pitch Creator and our recently acquired LogoIntern solution are extending FactSet's lead in powering junior bankers by streamlining their daily workload. Clients are telling us they welcome the practical workhorse approach FactSet is taking. To boost the productivity of their junior employees who are increasingly asked to do more in the current environment. We expect acceleration of our banking business in the second half of the year notwithstanding the more cautious sentiment and macro uncertainty of recent weeks. Outside of banking, PEVC remains a bright spot with accelerated double digit growth in the second quarter.

Corporates also added to growth fueled by the momentum from our Irwin acquisition in the first quarter. Within the institutional buy side, headwinds from cost rationalization and budget tightening persisted among our asset manager and asset owner clients. While retention pressured growth, particularly among active asset managers facing AUM outflows, the impact in the second quarter included a 7 figure cancel due to our proactive retirements of a legacy and bespoke solution that we are no longer supporting. As clients continue to cut costs and optimize headcount, our managed services offering is providing a natural hedge and an additional growth channel. We gained further momentum with a large 7 figure win displacing a legacy performance system with attached managed services to support the operational workflows of a leading asset management client. Hedge funds were also a bright spot in the second quarter, as we capitalized on fund launches, higher workstation retention, and strong data solution sales. During the second quarter, we announced the acquisition of LiquidityBook to enhance FactSet's ability to serve the integrated workflow needs of our clients across the entire portfolio lifecycle. Adding liquidity books technology forward OMS free trade compliance, and IBOR capabilities to our workstation enables us to more seamlessly link adjacent steps in the front office trade workflow.

We are excited about the bidirectional cross sell opportunities that we are already executing on and expect this acquisition to be immediately accretive to FactSet's growth. For partnerships and CGS, growth in the second quarter remains solid, We are seeing robust new business and expansion activity across multiple partner segments. Particularly amongst index providers, exchanges, and AI focused fintechs. Similar to last quarter, CGS benefited from the continued strong new issuance market across several asset classes. In summary, I wanna reiterate that our number one priority is to drive top line growth. As we head into the second half of the fiscal year, we have increasing visibility into a robust sales pipeline and positive underlying momentum. Wealth will continue to be a growth engine. Not only are we gaining market share and extending our track record of success, displacing the incumbent in this market, but we are also widening the aperture on the breadth of workflows our solutions can address. Leading clients are choosing FactSet to be their enterprise partner, and we continue to receive validating feedback that our products and service levels are positive differentiators versus the competition. There is ample runway for accretive growth across our smaller firm types, The acquisitions of Irwin and LiquidityBook in recent months are already driving cross selling opportunities and pulling FactSet into higher volume, shorter sales cycle opportunities, with corporates and hedge funds where client purchase decisions are more rapid.

Additionally, Cobalt, which we acquired a few years ago, continues to open doors and position us to cross sell PEVC clients seeking enterprise solutions. Our banking products remain best in class strengthened by content investments across private markets, deep sector, and fundamental data. Our clients consistently provide positive feedback on the breadth and quality of our data that we feel is a competitive advantage. We believe FactSet has the best banking product in the market and we continue to extend this lead with our focus on workflow productivity. In the past eighteen months, we renewed more than a third of our banking ASV, representing over 40% of banking users including more than half of our top 25 investment banking clients to multiyear contracts, limiting downside risk in the second half of the year, and positioning FactSet to grow wallet share with our expanded enterprise data and workflow productivity solutions. For the institutional buy side, we are making steady progress driving clients engagement at the enterprise level with a focus on improving their total cost of ownership. Managed services and our expanded data solutions offering are contributing to a healthy second half pipeline and lowering the risk of large client cancellations.

Our teams are intensely focused on capitalizing on FactSet early mover status on GenAI products executing our go to market strategies across our new and differentiated solutions, and mitigating the headwinds that pressured retention in the first half. We are well positioned to deliver on our mission to supercharge financial intelligence, and I am confident in our path forward. I'll now turn it over to Helen to take you through our second quarter and first half twenty twenty five performance in more detail.

Thank you, Phil, and hello to everyone on the call.

Over the first February of the fiscal year, we delivered solid financial and operating performance that sets us up for a strong second half as we previously guided. We utilize our balance sheet to acquire central capabilities for our buy side, corporate, and banking workflows while continuing to return capital to our shareholders. As Phil mentioned, we have a promising pipeline across all firm types, which should boost ASV in the remainder of the fiscal year. As a result, we have updated our fiscal twenty twenty five guidance by narrowing our organic ASV growth range to reflect our confidence in achieving the 5% midpoint. We are also reaffirming the ranges for adjusted operating margin and adjusted diluted EPS with our productivity and expense management effort to expected to absorb the dilution from recent acquisitions. More detailed information to follow, but first, I will review our quarterly results. Organic ASV grew by $19,600,000 in the quarter and 4.1% year over year. It is important to remember that our annual price increase partly depends on CPI, which has declined compared to last year. Thus impacting the price increase for this fiscal year. We captured over 18,000,000 in price increases, primarily in The Americas, versus 25,000,000 in the prior year, resulting in a nearly $7,000,000 headwind to ASV growth this quarter.

GAAP revenues increased four and a half percent year over year to $571,000,000 while organic revenues which exclude foreign exchange movements and impact from acquisitions or dispositions over the past twelve months, increased 4% to $568,000,000 For our geographic segments, organic revenues grew by 4% in The Americas, 3% in EMEA, and 7% in Asia Pacific. GAAP operating expenses, include onetime nonrecurring items, rose 5.8% year over year to $385,000,000 This increase resulted from higher acquisition related professional fees and technology expenses. Partly offset by lapping a onetime restructuring charge in the prior year. Due to these factors, GAAP operating margin decreased by approximately 80 basis points to 32.5% compared to last year's second quarter. On an adjusted basis, operating expenses grew 6.3% and operating margin decreased 100 basis points year over year to 37.3%. This was primarily driven by a 31% increase in technology related spend. Due to higher cloud and software expenses and greater amortization of internal use software reflecting our ongoing investment in generative AI, Technology costs accounted for over 10% of revenue in the quarter, up from 8% in the prior year. Employee expenses increased 3% year over year, primarily due to last year's lower bonus accrual.

Excluding this factor, our employee expenses would have been flat to down year over year.

People expenses are our largest cost category, constituting 40% of revenue. Which is down nearly 60 basis points versus the prior year. By streamlining processes and utilizing automation, we continuously find ways to enhance workforce efficiency and maintain cost discipline while investing in strategic priorities. Third party content costs rose 7% year over year but remained less than 5% of revenues. Similar to the prior year's quarter. With increased data demand, we have actively managed this growth, For example, in the second quarter, we replaced several providers with our own self collected data. We not only reduced licensing fees, we pay third parties, but also now offer superior content. With full redistribution rates that align seamlessly with FactSet's proprietary identifiers. Real estate and related facilities expense decreased 6% year over year staying under 3% of revenues, about 30 basis points lower than the prior year. Please refer to the appendix for today's earnings presentation for a more detailed expense walk from revenue to adjusted operating income. During the quarter, our cost of services as a percentage of revenue was higher year over year by approximately 50 basis points on a GAAP basis and more than a 80 basis points on an adjusted basis.

Primarily due to higher technology expenses partially offset by lower compensation expense. SG and A as a percentage of revenue was approximately 30 basis points higher year over year on a GAAP basis primarily due to increased professional fees linked to acquisitions offset by reduced bad debt expense. On an adjusted basis, s g and a was about 75 basis points lower after excluding onetime nonrecurring items. Our GAAP effective tax rate in the second quarter was 15.9%. A decrease when compared to the 16.4% tax rate in the second quarter of last year. This change was mainly due to lower US tax on foreign earnings, partially offset by discrete items like reduced tax benefits from stock based compensation. Our GAAP diluted EPS increased 11¢ or 3% to $3.76 this quarter versus $3.65 in the same period last year. Primarily due to higher revenue partially offset by an increase in acquisition related professional fees and technology related expenses. Adjusted EPS increased by point $6 or 1.4% to $4.28. EBITDA for the quarter grew 3.6% compared to the prior year period to $225,000,000 driven by higher net income. Free cash flow, which we define as cash generated from operations minus capital spending, was a hundred and $50,000,000 in the second quarter, up 23% over the same period last year.

This result was driven by positive working capital shifts due to decreased income tax payables and improved accounts receivable collections. Turning to return of capital to shareholders. In the quarter, we repurchased nearly a hundred and 37,000 shares for approximately $64,000,000 at an average share price of $470.70. At fiscal quarter end, we had a capacity of a hundred and $87,000,000 remaining under the $300,000,000 share repurchase authorization approved by our board of directors last September.

Today, we pay a quarterly dividend of a dollar 4 per share to holders of record as of 02/28/2025. We remain diligent with our buyback program are committed to delivering long term value to our shareholders. Combining dividends and share repurchases we returned $392,000,000 to our shareholders over the last twelve months. At the end of the second quarter, we paid off the remaining principal of the $1,000,000,000 term loan we took out for our CGS acquisition three years ago. We funded the recent liquidity book acquisition with new borrowings under our revolving credit facility. With $480,000,000 drawn at quarter end. Our gross leverage ratio was 1.7 times consistent with our aim to maintain investment grade ratings. Finally, we remain confident in our second half top line acceleration and are reaffirming the 5% midpoint of our prior guidance on organic ASV growth. We are also narrowing our ASV growth range by adjusting both the top and bottom ends of the range by 10,000,000 to a hundred million dollars a hundred and $30,000,000, reflecting a growth rate range of 4.4% to 5.8%. Our guidance for revenue is now a range of 2,305,000,000.000 to $2,325,000,000, a $20,000,000 increase from our previous guidance.

The change factors in the expected impact for the rest of the year from our recent acquisitions of Erwin in November LiquidityBook in February, and LogoIntern in early March. Based on our solid performance and conscientious cost management in the first half, we are maintaining our guidance range for adjusted operating margin at 36% to 37% and adjusted diluted EPS at $16.80 to $17.40. This decision illustrates our ability to mitigate the modest margin and EPS dilution from the aggregate impact of our recent acquisitions. On a GAAP basis, we expect operating margin in the range of 32% to 33% and EPS to be between $14.8 to $15.4 for the year. This decrease from prior guidance of 50 basis points and 30¢ respectively, reflect onetime nonrecurring expenses incurred in connection with these acquisitions. The guidance range for our effective tax rate remains unchanged between 17% to 18%. As Phil indicated, our teams are well equipped to deliver second half growth We have clearer visibility into our pipeline strength based on our increased breadth of solutions and growing client interest in our Gen AI solutions. We will continue to leverage our expense base and invest smartly. Focusing on differentiated products and internal efficiencies.

We anticipate higher expenses in the second half for planned Gen AI and infrastructure projects alongside go to market initiatives to further boost pipeline volume and quality over the next twelve months. In conclusion, we are prioritizing ASV growth operational focus and strategic capital allocation to enable FactSet to deliver sustainable long term value for shareholders. And with that, we are now ready for your questions. Operator? Thank you.

A reminder, to ask a question, please press 11 on your telephone and wait for your name to be announced. Withdraw your question, please press 11 again. We ask that you please limit yourself to one question. Please stand by while we compile the Q and A roster. Our first question comes from the line of Kelsey Xu with Autonomous. Your line is now open. Hi. Good morning. Thanks for taking my question.

I don't I wanna start with a generic question. I think in this space, FactSet definitely has a first mover advantage. And I was wondering if you can provide more colors around the traction you've been gaining with clients, especially when it comes to Pitch Creator and some of the other Gen AI products that you piloted before. And how are you thinking about the pricing for these products and how receptive are clients to add those FMs additional service and not as part of the current subscription.

Thanks, Kelsey. It's Phil. I'll start, and I think Goran may have some extra words to say here. So, yeah, we're pleased with the momentum. You know, we're well on our way to getting to the 30 to 50 bps that we spoke about in terms of monetizing these assets this year. And we've got six SKUs now that, you know, we've sold and and I know they're out there and more coming. I would say the one SKU that sort of got the most momentum is pitch creator, which I spoke about in my opening comments. So very good reception from the banks. Obviously sitting on top of, you know, the best banking product in the industry already. So this has been very exciting for us. And during the quarter, you know, getting LogoIntern was a was a nice little add there to kind of to put into the product. So, you just been released. We had tons of people trialing it, giving us feedback. But I do think we're now on the cusp of being able to monetize that more seriously as we get into Q3 and Q4. I would say the second skew that we've got the most traction on is the conversational API.

So really taking the ability to take, you know, what you can do in FactSet to search with AI capabilities and plugging it into your own environment. And we're seeing receptivity for that across all phone types. So there are many firms, particularly the larger ones, that want to control the research environment and combine the best of, you know, something like FactSet with their own data that sometimes they're reluctant to release out to anyone. And maybe some other sources. So that's going really well. And then we are beginning to monetize portfolio commentary. That has been a slower, although what we've done is we've packaged that together with a bunch of other things that are, you know, a bit more sort of u usage based for the buy side. So we think that's gonna be a good approach. People love the product. I think they're waiting for all the asset classes in some cases to be filled out. We've done equity risk. But we have begun to sell it. So those are the three today. And we're coming out with some other SKUs in q and q four. But I guess I'll pause there. Goran, do you wanna add?

Yeah. Just to add a couple of things. You know, one is client reacting very well to the pricing structure that we have put in place. Certainly, we are realizing productivity gains from the from the products that we have launched, in particular, you know, pitch We have almost two dozen active trials, and and late stages of negotiation with a number of of of large of larger clients. We are also, you know, helping clients drive their internal initiatives via conversational API as well as as well as vectorized data packages that are ready for call clients to implement in their own environment. So all of those solutions are resonating well and as is as is our pricing structure for those.

Thank you.

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

Phil, it sounds like your tone is is definitely getting better the year goes on. And what what I'm trying to understand is if you could parse out, is the environment getting better do you feel like the company is doing better in an environment that's not really changing that much with all the proactive items that that you guys have been doing. So I guess it sounds like the green shoots have been turning greener and I guess I'm looking for the reasons for it just to understand how you guys are progressing.

Yeah.

Multactim that. So I appreciate that you've recognized my tone is improving. Thanks, Shlomo. Yes. So I think what we feel really good about is I think we've derisked all of the big rocks for the year, So we now have visibility on almost all of those, and I think a lot of the things that we were battling for in terms of the bigger renewals and so on I think of, you know, the majority of those have fallen our way. So I think we feel good about sort of where we stand there. And then I think we're seeing we're definitely seeing strength across every market. So I I would say The Americas, Europe, and Asia all, like, look like they're going to come in you know, they're gonna accelerate into in the second half. If the pipeline proves out. And then we're seeing really good, I think, resurgence in asset management. So the the environment is not getting any easier. That's for sure. But I do think that we're really beginning to see some real progress at selling at the enterprise level, You know, on the buy side, really wanna talk to kind of performance reporting, the managed services, which I know you've asked about.

That continues to do well. Our feeds business, which decelerated a bit over the last year or two, is having a really strong comeback. So it's not just the real time and reference data Hello? And the, you know, the smaller firm types are doing great, like hedge funds, private equity, corporates. You know, the and wealth, obviously, they're growing at a high clip. And what I wanna stress is we're not relying on banking for the numbers that we talked about, you know, today and narrowing of the range. So banking's tough. I don't think that, you know, the environment's getting in, you know, any more there's not more deals coming to market. I think we saw that in January February. So we're not relying on some beta from the banking business to hit the numbers that we spoke about today. If that comes through, that'll be great. That'll be a tailwind for us. Goran, you wanna add anything?

Yeah. Just in addition, to everything Phil said about the buy side, improvement, I think in addition to our traditional strength and middle office solutions, performance solutions, We're also seeing improvement and we're quite pleased with activity in in the EMS space with our Portraire. Solution as well as our front office solutions are gaining more and more traction Last thing on the buy side, I think the liquidity book really helps us you know, com complete the the PLC life cycle. It makes us the go to for consolidation for our you know, for hedge fund and smaller to midsize, you know, buy side clients. So we're quite excited about that. It creates a cross sell opportunity for us of FactSet solutions. And as Helen said, in a bidirectional cross sell opportunity. So know, we're excited about the second half. See, you know, there's there's, you know, a lot lot in front of us, and we have the tools to do it.

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

Yes. Hey, good morning, everyone.

Just actually to follow-up on the last question. Phil, you just mentioned you're not relying on banking or the sell side. But, obviously, there is a range, so maybe you can be a little bit more specific. Does that mean you don't need banking to pick up to hit the low end? Or are you talking about the midpoint? Because clearly, post election, there was a lot of enthusiasm with capital markets picking up and and then hiring picking up. And clearly, that continues to get pushed out. So it it should continue to be a swing factor, so I just wanna figure out where exactly does that swing factor lie in in in in your in your guidance range. Thanks.

Yeah. So I think we've been fairly conservative in sort of what we've put in the pipeline in terms of banking hiring. So that's in our numbers. You know, I think the bright spot is definitely pitch creators, that could actually you know, help them. Goran, what do you want you want to say here?

So as Phil said, I think what we are what what we are baking in for our midpoint in terms of guidance is really, you know, slightly lower or, you know, even headcount compared to the last year. So there is no there is no upside in those numbers that we are that we are counting on. I think it would be a swing towards higher higher higher end of the range.

Thank you. Our next question comes from the line of Faiza Alwy with Deutsche Bank. Your line is now open. Yes. Hi. Thank you. I had a couple of quick questions about ASV in the quarter. One, just for avoidance of doubt, I wanna make sure it's the UBS Walt deal included in the ASV this quarter? And if you could help quantify that, that would be helpful. And then just secondly, you talked about the proactive retirement of legacy solution. Maybe if you can help quantify that also. And you know, if there's any sort of are there any more you know, legacy contracts like that or products that are expected to be retired, whether it's this particular product or something else in in the future. Thank you.

Hi, Faiza. It's it's it's Gorn. So, you know, a couple of things. Absent the lower price increase that that, you know, that we implemented this quarter and and couple strategic deals that we proactively canceled, you know, we would have actually seen acceleration in the quarter. So, you know, there is no further retirement of the products. That we are planning on for for the rest of the year. So you've already seen the impact of that in in Q2. Back to your question about the UBS deal. You know, we signed the contract in the quarter. We are thrilled with it. You know, it's another strategic win for the fastest growing segment of of our portfolio. So, you know, we are we're quite pleased with it. I think it speaks to the strength of the project product. We purely want this on on on a better product, you know, product suite, really. And, you know, it enables us to further expand this relationship as we you know, as as the years progress. Implementation of it will will take place throughout you know, the next five or six months. You know, I think we will be starting that in the in the in the quarter '3 in in in q three.

It's a, you know, very strategic win for us. We we we love our position. That space, and it really position us to land and expand as we expand additional services to all of these clients in the market share we have won over the last few years.

So, yeah, Pfizer, just to add on. So, yes, it is it was booked in q two. The users for UBS won't come through until the next quarter or two as we as we roll it out. So you know, the ASV that we captured at least in the initial stages of UBS is not part of the second half where we, you know, we see, like, like, really robust pipeline. That you can model that out.

Thank you. Our next question comes from the line of Ashish Sabadra with RBC. Your line is now open.

My question. Just wanted to clarify the pricing the quarter. So there was a reference to lower CPI being on pricing. And I was just wondering if you could provide any color on pricing versus pricing realization for existing deal versus new and renewals. Any color on that front? And then similarly on international, should we expect similar pressure on the international pricing in the pro quarter as well?

Thanks.

Hey, Ashish. It's Helen. I'll I'll take that one.

So thank you for clarifying your your thoughts there. Our standard contracts, include annual price increases based on the higher of CPI or RPI or 3%. So our guidance range does reflect the lower inflation rate versus last year. So we expect the international price increases to align proportionally to that what we've seen in The Americas. We do adjust rate cards throughout the the year. So in January, we activated on that. We actually raised global rate cards depending on the package. We've seen higher price realization in certain firm types like corporates and hedge funds, also along with street account. On new business, we are seeing price slightly lower year over year. But the volume is up. Nearly 25%. So driving our total ASV from new business up nearly 10%. So that reflects, our positioning and taking more market share. So we do believe in the sort of land and expand type of, of strategy. So these impacts will come through our renewals and new business. That's separate from the annual price increase. The annual price increase is expected to be lower than last year, but we're capturing additional ASV. Either through higher pricing via rate cards or through higher quantity in new business.

Thank you. Our next question comes from the line of Manav Patnaik with Barclays. Your line is now open.

Good morning. This is Brendan on for Manav. I just wanted to ask on the the margin guide, given believe you guys have already talked about tech costs going up quite a bit this year, I think 25%. And then obviously, if the acquisition is coming in, costs there. It seems like the people cost has to be held down, I guess, net of those acquisitions quite a bit get to the midpoint. Normally, we kind of see those float up a little bit throughout the year. So I guess, you've mentioned some efficiency programs, some initiatives, I guess, guess, any color on what you guys are doing? And to kind of bridge to the to the midpoint?

Sure. I'll I'll take that one as well. Thanks for the the question. So, yeah, we have seen, in this quarter, this half, the way we've benefited from lower people costs despite sort of higher year on year comparison because last year, there was a change in that bonus accrual. Without this, though, the adjusted, people expenses would have been lower. So we're actively managing that. We've got mix that continues to float that way. We are managing our our content and technology costs as well. Including having vendor credits and and cancellations of contracts which I mentioned in my earlier remarks. And we're also seeing some benefit in the first half on FX. Which is also helping us as well. So those are those are the things that are helping on on the on the first half. We'll expect to see a a a ramp up in expenses in the second half. As we prioritize strategic investments. The tech costs, like you said, are gonna continue to ramp up in GenAI and the infrastructure And our go to market, we're actually going to put more money in really build the pipeline in the next twelve months. And we're not we're not looking for FX benefit, either.

So that's really how we're, coming through. And and, absolutely, the the the benefit here is that we're able to absorb the dilution that comes from the acquisitions, which is about 40 to to 50 basis points.

Thank you. Our next comes from the line of Owen Lau with Oppenheimer. Your line is now open.

Hi, good morning and thank you for taking my questions.

So I have a follow-up with the the previous question about the data and FIT business and sales. So is it fair to say that the market uncertainty actually helps, your data fit business because people want more data, people want more kind of information, That's why that part of the business outperform compared to your initial expectation.

And then the M and A part, it looks like it cooled down a little bit. So that's why, you know, you you can still maintain the a like, full year ASV guidance or narrow to, like, a narrow narrow range. Yes.

Maybe I'll start. So I think FactSet always does very well. Well through all types of cycles. So we'll manage through whatever market we're in. I'm not sure that, you know, that's the main reason for the data feed you know, predicted growth or growth. I think a lot of more of it has to do with us becoming increasingly an enterprise partner for our clients. So we're selling at the top of the house. Very often now, we're constructing agreements where our clients can really take value from FactSet any way they want, whether it's through the desktop, analytics, an API, GenAI, some other provider. So that all feeds into that. And, again, I think the fact that we've released some new products here is super exciting. So, Goran, I don't know if you wanna talk a little bit more about the feeds, and then we'll come back to your acquisition question.

Yeah. So just just to follow-up on what one what Phil said it is the quality of our content that's really driving the improvement in in in our numbers in the data feed business as well as we have put some more sales focus on it. But I think there is a high demand for high quality data by hedge funds other players in by by other players in the industry. But also as you see all of these new tech startups that are, you know, that are really AI focused. You know, I think our best of breed data is really the the fuel that drives that entire entire development and potential growth. So we are focused on developing partnerships that we think will will help us in the future. There is higher demand for our our data in traditional business as well. With the development of our real time data feeds exchange data feeds, as well as our security master offering. We are seeing more and more success. We do have a superior delivery and superior technological solutions for our clients. That really improve the efficiency of their operation as they switch to, you know, to to our products.

That's evidenced by a number of wins in this quarter. We had about four or five that were very specific to some of the hardest to deliver exchange data feed sets in particular options. We're quite pleased pleased with that progress, and we believe that the data feed business will be a driver of our success for the rest of the year and going forward.

And maybe I can just add one other piece that we're beginning to see growth in, which is our data management services piece. Which is where we're helping clients be able to concord not only our data but also with the client data. And that's quite difficult. And that is, largely done through technology with some people services as well. So that is a very profitable service for us, and, we expect to see that continue to grow going forward.

Yeah. Owen, you asked about, m and a, and I and I do think that, you know, the two or three things that we've done, you know, this fiscal year are really gonna help. They're smaller, but there's so many great synergies and cross sell opportunities for the team. So the liquidity book acquisition, which we just announced, you know, when we acquired it, it was about $22,000,000 of ASV. ON previously was about 9. And that, you know, liquidity book comes with around a 70 clients I would say more than half of those are hedge funds, There's also sort of a healthy group of clients. There's a sell side offering. And then there's a great opportunity for us to serve kind of the middle of the bell curve the buy side for those firms that need, you know, the entire portfolio life cycle from FactSet. So is really the missing piece, and combining the OMS and the IBOR know, with FactSet EMS and some of our other portfolio managing capabilities. Really does open up a lot more market for us, you know, with a lot of our existing clients. So couldn't be more excited. It also comes with a fixed network, I think that was probably in the press release, but there's some great synergies that we expect to capture from that as well.

Thank you. Our next question comes from the line of Andrew Nicholas with William Blair. Your line is now open.

Hi, good morning and thanks for taking my question.

I wanted to double back to the commentary on wealth. [indiscernible] ASV growth accelerated some big wins there, and you talked about your strong share within the top 20. Can you help outline maybe what the land and expand strategy has fused towards on a go forward basis within that market? Is it adding additional services to existing clients? Is it selling additional users within those contracts? New regions? I'm just trying to understand kinda where the growth opportunities are once you have signed up, as many flagship clients as as you have at this point. Thank you.

Okay. Hi. It's Gordon. I will take that. So So all of the above. You know, I think we certainly see opportunity for regional expansions expansion. We have done very well in Americas. We have made good progress in Europe. And we are focusing on kind of what we have done in US and Canada, really, you know, copying that to you know, to our what we are doing in in Europe. Particularly, we're focused on Switzerland, and UK is the growth markets for us. In the near future and then further expansion in in in Asia as well. Asia is growing, you know, quite nicely for us. And we see see those geographic opportunities as significant. We do see opportunities for more users, especially in the home office, and replacing some of the higher end terminals. So that is another area of focus. And we have been actually quite successful there. But then you know, what [indiscernible] you know, extension of our strategy is layering on additional services to to support additional workflows for our clients. You know, for example, you know, we we supported their business development development with with some of some some of our lead generation tools that we have recently launched, and they are resonating quite quite well in the market.

And then all of the other you know, portfolio management workflows that our clients undertake are other areas that we are building for and expanding into. I hope that answers your question.

Thank you. Our next question comes from the line of Craig Huber with Huber Research Partners. LLC. Your line is now open.

Can hear you. I don't I don't I don't know if that's on our side or your side.

Yeah. Can you can you hear me here?

Yeah. We can now. Yep. You could speak up. Okay. I'm not sure what happened there. Coming into this this decade, I recall you guys announced a large three year internal investment program with a goal of accelerating your organic revenue growth to the high single digits. And it successfully worked, as you recall. We had high single digit growth for two plus years and stuff. And now you're think you talked about 31% increase in technology spend. Now are you anticipating a significant ramp up in your organic revenue growth because of these internal investment spending here as you think out over the next couple of years? Thank you.

Hey, Greg, it's Helen. Let me try to to answer that one. So when we, talked about this at our investor day, as you know, in our three year plan, we plan to, to be in that mid to high single digits. And our the the tech the investments that we're making in technology is to help support that. So there's no specific additional large investment, plan that, like, we had done that that you rightfully said back in 2019, 2020. This is part of our consistent investment back into the business in technology and GenAI, and funding that through, rationalization of cost of our, of our existing client, existing expense base. Thank you.

Our next question comes from the line of George Tong with Goldman Sachs. Your line is now open.

Thanks. Good morning.

In light of the recent market downturn, and volatility, can you talk a little bit more about changes you're seeing with buy side budgets and broader sales cycles, especially among large asset managers and asset owners.

Sure. Hey, George. It's Phil. So yeah, I don't think we're really seeing much of a change, at least not yet. So I think we've been working, you know, through a like, a great period of uncertainty for a number of years, and the pressures that are on the buy side in terms of the shift from active to passive obviously are not new. So I just I think that probably is the forcing function, So we're addressing that with, you know, the enterprise solutions we have, the general AI offerings, yes, it could be choppy, But, again, I think we're very resilient through these markets, and and, you know, we've built a very strong pipeline for the second half. A lot of that is the buy side. And and we don't anticipate that the current market environment could, you know, could influence you know, that pipeline that strongly.

Thank you.

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

Thanks so much. Wanted to go back to the price increase. You mentioned you know, the CPI being the lower CPI being a driver there.

And so I guess when I was doing the calculation, was getting about 2% price increase versus roughly three last year. You know, that that obviously does impact the organic ASV growth and puts pressure on that. But you are it sounds like aiming for inflection here. And so is it is your confidence coming from strong pipeline in deals? Sounds like the international price increase you're expecting to be sort of similar to US, so that probably doesn't help that much. So is it the pipeline, or is there something you know, that that is really gonna drive this inflection higher in the organic ASP? And maybe competitive environment might might be relevant here as well if if that's a factor.

Thanks.

Tony, it's it's Corin. There's a number of factors that, you know, I think we can point to is you know, point time point in time, our booked ASV is actually quite a bit higher year over year you know, and as compared to 2024 and 2023. So that gives us quite a bit of confidence. The pipeline is better. Again, compared to the both to the both years. And in terms of our selling environment, we see it more equivalent to 2023 than 2024. We have better visibility into the down for us. And as Phil and Helen mentioned, you know, we do not see any any large any material losses in the second half. So the year over year retention will improve in the second half. And we have a very solid and diverse pipeline. So both we are quite happy with is that that pipeline represents you know, large 7 figure deals, but also those midsized deals that are easier to execute on. So that all of that gives us confidence that, you know, that we will that we are the inflection point for for the organic growth for the rest of the year.

Thank you. Our next question comes from the line of Jeff Silber with BMO Capital Markets. Your line is now open.

Hey. Good morning. This is Ryan on for Jeff. You talked in the past about selling more into the tech budget. Was just wondering what type of sensitivity that has seen as the macro has unwound a bit compared to what you might see in the financial services and market data. Budgets, and then just more broadly, how have clients conversations and sales cycles been trending over the last few weeks? Thank you. Well, I mean, I'll start So, yeah, so I I think selling into the tech budget budgets is is good. I think everyone including ourselves, is investing very heavily in technology as we you know, as as we sort of transition to a new paradigm, I think, in terms of how we're all gonna be working over the next few years. So I think we've got, you know, good data to support that, you know, some of the deals that we're going out there and selling aren't always into the market data budget, which is know, the one that not surprisingly has been under a bunch of pressure. And I'm not sure that we've seen much of a change in the last few weeks.

So the question was specific to the cell side. And the we're seeing much of a change I think clients you know, do appreciate, you know, we have best of breed products. And I think some of the you know, in general, I think lots of the conversations are about the GenAI tools. In that space, and the conversations have been have been good. Will just add, you know, we are having you know, we are having you know, that level of c level tech technical discussions with some of the clients and some of the larger deals in the second half will come from the tech tech technological budget rather than traditional market data. So that's definitely shifting more and more as as clients invest more and more in in [indiscernible] Thank you. Our next question comes from the line of Jason Haas with Wells Fargo. Your line is now open.

Hey, good morning and thanks for taking my question. So there was a nice uptick in the client count growth year over year. But then on the flip side, it looks like the amount of users per client declined for the first time in a while. So I wasn't sure what was causing that dynamic. It was m and a or something or maybe the type of clients that you're bringing on. So if you could explain that, that'd be helpful. Thank you. Thank you.

So so I'll I'll take that. You know? So I think, you know, we have seen uptick in private equity in terms of, you know, the the clients we're bringing on. Those are usually smaller number of users for us. So, you you know, I think both competitively and in terms of our pricing and packaging as well as the improvement in the private markets product. We are seeing more success there. So that is really what is impacting the number of users per client that you're seeing this quarter.

I think May also be a be a function of we put in all of the clients from the Irwin acquisition. This quarter. So that thing that was a few hundred clients. Right?

Yes. And know, there's a little bit of continued integration, so the users were not included. So that might be driving your number there. As well.

Thank you.

Our next question comes from the line of Surinder Thind with Jefferies LLC. Your line is now open.

Thank you.

It sounds like the confidence in the second half comes from FactSet or part of it is just not having as much renewal activity. And it sounds like you've gone through a really solid period where you've seen some really good strength in your renewals.

Have you guys been more proactive about trying to get ahead of deals before renewal cycles? Or do we just happen to go through a renewal cycle where maybe there is just a lot more elevated activity or renewals coming up in past a little bit. Just trying to understand the forward cadence in how we should think about renewals and risk in the cycle at this point in time. And if just clients maybe, you know, are trying to take advantage of pricing at this point, and so you just you know, they themselves have been pushing for more renewals.

So so, you know, I think what you're seeing in the current cycle is really, you know, related to the contract expiration dates. Going I think we're being a lot more organized around renewals. We are and I think we spoke about this during our investor investor day, and are creating as we have a very large number of clients now, you know, we are we're creating playbooks for renewals. We're being proactive. You know, wherever we can. We are trying to get ahead of those renewals and renew renew them prior to the expiration date. So we're trying to make sure that we have a you know, better better dispersion of renewal across the entire year rather than them being bunched up But so all of that is you know, something that we are paying lots of attention to in terms of you know, our sales operations and how we're addressing those.

Yeah. And as Goran mentioned, to get your point on pricing, for example, the dozen large banking renewals that we that we, completed, all of them were either flat or up, and in aggregate, they were up. So it is not a case where we're sacrificing price. In terms of total ASV per contract. To to be able to renew it. But as as Goran talked about at our investor day, retention is a huge focus of ours. And I think you're seeing some of the benefits from that.

I'm not gonna be able to stop myself here. So a lot of what what we talked about today with these banking renewals, we have an amazing banking product. So 've always had the best product in the industry. We're leaning into the technology part of this with PitchCreator. But we've also made a massive investment in data over the last five years or so. So we continue to build out, you know, the core FactSet data and the other data. But our investment in private company data has been significant. We've, I think, gone from, like, three or four million to almost nine or nine plus million private companies. With much higher quality data. And we're not relying now on some third party sources. We're doing a lot of this ourselves because we can do it better. And then the deep sector initiative that we started in '19, let's that's a long road, but that's beginning to pay off. So I just wanna really stress like, for our banking clients, you know, the the the combination of the technology, the integration with Office, the GenAI work we're doing, as well as the data, is just such a powerful combination, and, obviously, it has a lot to do with the banks wanting to renew with FactSet.

So I think that's the last question. Thank you for joining us today in closing. Our solid financial performance and disciplined execution against our full year pipeline in the first two quarters of this year has positioned us well for the acceleration we anticipate in the second half. Thanks for all the great questions today, and we'll see you next quarter. Operator, that ends today's call.

This concludes today's conference call. Thank you for your participation. You may now disconnect.