Factset Research Systems Inc Q1 2025 Earnings Call Summary

The following is excerpted from the question-and-answer section of the transcript.

Question: Alex Kramm - UBS Group AG - Analyst : Yes. Sorry to be so short-term focused here, but obviously, you're talking about the two halves, but I feel like both Phil and Helen, both of you talked about green shoots and optimism to the second quarter. So, if I look at the 1Q, probably a little bit softer than what you saw last year. Maybe something slipped a little bit. I also think there's a chunkier deal coming into the second quarter. So, shouldn't we be positioned for acceleration in ASV growth already in the second quarter? Or how should we be thinking about the cadence from here?

Question: Shlomo Rosenbaum - Stifel, Nicolaus & Company, Inc. - Analyst : I hate to use my one question on the kind of housekeeping thing, Helen, but I'm going to do it anyway. Can you explain the total company ASV growth of 4.5%, but the components were each lower than that, like buy side at 4.3 and sell side 3.5. Is there some kind of calculation adjustment that's being made to those items that would get you to 4.5? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 19, 2024 / 4:00PM, FDS.N - Q1 2025 Factset Research Systems Inc Earnings Call

Question: Kelsey Zhu - Autonomous Research US LP - Analyst : It sounds like managed services could be a key growth driver for buy side ASV going forward. I was just wondering if we have any updated thoughts on total addressable market, who the key competitors are in this space and just generally your strategy to expand in that market.

Question: Faiza Alwy - Deutsche Bank AG - Analyst : So I wanted to ask about -- you mentioned that you're getting exceptional feedback on sort of some of the gen AI products and what folks are seeing from your competitors. So curious if you could give us a bit more color around that? Is that across the board? Are there any specific products where you're maybe getting more traction? And maybe if you can dimensionalize that for us? Like is there a way to think about potential contribution from ASV this year? Is it incremental to the guide? Just a bit more color there would be helpful.

Question: Ashish Sabadra - RBC Capital Markets - Analyst : In the prepared remarks, there was a reference to softness in areas where clients are [deprioritizing] these budgets. I was just wondering if you could provide some color on that front. But also, as you -- as we get into calendar year '25, any early commentary on how those budgets are shaping up for your customers?

Question: Ashish Sabadra - RBC Capital Markets - Analyst : Yes. That's right.

Question: Scott Wurtzel - Wolfe Research Securities - Analyst : Just a quick housekeeping one. Just on the Irwin acquisition and how we should think about the contribution from that to total revenue for this year would be helpful.

Question: Jeffrey Silber - BMO Capital Markets - Analyst : I wanted to shift gears to talk about margins a bit. If I remember correctly, you're guiding to margins for 2025 to be somewhat slightly down. They were flat in the first quarter. Is that something that we should expect to continue? Should we expect to continue or expect to see some margin compression in the back half of the year? And if so, what are the reasons for that?

Question: Toni Kaplan - Morgan Stanley & Co. LLC - Analyst : I wanted to look at the wealth part again because I think you mentioned that you were lapping a big well win in the quarter, but specifically called out maybe a deceleration because of timing around large deals, but a good pipeline. So, I was hoping to talk about like are you seeing even more elongated decision-making in wealth? Are you seeing any changes in the competitive environment? Are people being particularly aggressive? I know it's always been sort of a competitive market. But just wanted to get more color there.

Question: Owen Lau - Oppenheimer & Co. - Analyst : I think I heard that you had the seven-figure landmark win away from a key incumbent. What were the key reasons for the win? Do you have more competitive pricing strategy or products? And do you expect more wins like that in the coming quarters? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 19, 2024 / 4:00PM, FDS.N - Q1 2025 Factset Research Systems Inc Earnings Call

Question: Manav Patnaik - Barclays Bank PLC - Analyst : Helen, I think you made some remarks around just the pricing packaging versus competition. I was hoping you could just elaborate on that just in the context of it sounds like your growth pipelines are obviously really strong, but what exactly are you tweaking, I suppose to make the conversions better?

Question: Andrew Nicholas - William Blair & Company LLC - Analyst : I wanted to ask on your appetite for M&A, the latest and greatest there? And relatedly, does your conviction in kind of monetization of your AI investments change that appetite at all? Or does it inform the types of assets that are most attractive to you in terms of inorganic action?

Question: Surinder Thind - Jefferies LLC - Analyst : I guess I'd like to touch base on the monetization of some of your AI products over the past year. Can you maybe talk about the value proposition from the perspective of the client? And what you're seeing in terms of maybe the uplift to your revenues, and where the offset is from the perspective of the client in terms of the savings or the efficiencies that they're seeing because one of the things that we found is that a lot of gen AI solutions tend to be quite expensive. And it's quite easy to use a lot of your, what I would call your credit tokens or your AI budget, especially given that the earlier commentary around clients not really seeing a material improvement in their overall budgets.

Question: Craig Huber - Huber Research Partners, LLC - Analyst : Great. You talk about pricing, if you would, for this fiscal year. You talked about that it won't be probably as strong as last year. What are you expecting for realized pricing this fiscal year versus last year? It's just interesting you're talking about you're expecting overall revenues to accelerate in the second half of the year. It's obviously against -- it sounds like not quite as beneficial pricing. Can you quantify it as best as you could this year versus last?

Question: David Motemaden MotemadeN - Evercore ISI - Analyst : I had a question just on the client retention. It was good to see that. It's been around 90% for the past year. That ticked up a little bit to 91% this quarter. Historically, we've seen that when retention has moved up, you've also seen ASV accelerate. That wasn't the case this quarter. Is that just the pricing dynamic? Or maybe you could unpack what was driving that increase in the retention, and why we're not seeing that translate to a reacceleration in ASV this quarter? Goran Skoko - Factset Research Systems Inc - Executive Vice President, Managing Director EMEA and Asia Pacific, Head of Research & Advisory Solutions Just a couple of things. I think we're seeing -- obviously, we spoke quite a bit about our focus on improving retention during the Investor Day. I think we're putting processes, procedures in place to help our client-facing organization to focus on retention. We're encouraged by the improvement in client retention. There are certainly fewer client cancels, these full client cancels this quarter than previously, which accelerated our retention rate. And that, I think, is a good sign of what's to come. All of the retention efforts we're putting in place are currently reflected, I would say, in specific areas. We saw improvement of retention in investment management in Americas, in particular, both for our workstation and our analytics solution. And everything that we are focusing on currently, we expect better results as we go along. But I think not immediate, but we do expect that retention will continue to improve over the coming quarters.

Question: Jason Haas - Wells Fargo - Analyst : I'm trying to reconcile a couple of comments that you've made. So, it's good to hear that you're seeing some more optimism on client engagement and a better pipeline. But I think you also said that you're expecting your customers' budgets to remain flat and still be pretty cost focused. So, I wasn't sure if that implies that you're seeing potential for more share gains or you're seeing a situation where clients are spending more time shopping? And maybe just following up on the budget point. I think given that we've had pretty good equity market performance and there's generally an expectation for M&A activity to pick up, why don't you think clients will increase their budget? What's holding them back at this point (technical difficulty). Thanks. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 19, 2024 / 4:00PM, FDS.N - Q1 2025 Factset Research Systems Inc Earnings Call Goran Skoko - Factset Research Systems Inc - Executive Vice President, Managing Director EMEA and Asia Pacific, Head of Research & Advisory Solutions A couple of things. Maybe my comment was a little bit too pessimistic about clients not increasing the budget. So I think certainly, the improved M&A activity and improvement in banking fees is something that we spoke about correlation of our sell-side revenues to banking fees. And we do expect that some of the macro conditions will improve as we go through the year and then the hiring in banking in the fourth quarter takes place. I also think it's really important that our strategy is to make sure -- make certain that we can perform well

Question: George Tong - Goldman Sachs & Co. - Analyst : As you look across your different client segments on a relative basis, can you talk about which you expect to show the most improvement going into the second half of the year and which may perhaps show lesser improvement in performance?

Question: Shlomo Rosenbaum - Stifel, Nicolaus & Company, Inc. - Analyst : I just wanted to ask you a little bit about the pickup you said in the last six weeks that you're seeing. It seems to be like a noticeable pickup in terms of decision-making with the clients. And do you think that has something to do specifically with the FactSet efforts in the product that is resonating more? Do you think that might have to do with just more optimism after, let's say, the presidential elections because last six weeks seems to be coincidental like right around the presidential elections, things seem to pick up. And just in general, are you seeing anything in terms of administrative picks that could be positive or negative for the industry or for FactSet on its own, if you can just address those items.