Factset Research Systems Inc Q2 2025 Earnings Call Transcript

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

Question: Kelsey Zhu - Autonomous - Analyst : Hi, good morning. Thanks for taking my question. I want to start with the Gen AI question. I think in this space, Factset definitely has a first-mover advantage. And I was wondering if you can provide more color 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've highlighted before. And how are you thinking about the pricing for these products? And how receptive are clients to add those as an additional service and not as part of the current subscription?

Question: Shlomo Rosenbaum - Stifel - Analyst : Hi, thank you. So it sounds like your tone is definitely getting better as the year goes on. And what I'm trying to understand is if you could parse out, is the environment getting better? Or 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 you guys have been doing? So I guess, it sounds like the green shoots have been turning greener and, I guess, looking for the reasons for it, just to understand how you guys are progressing.

Question: Alex Kramm - UBS - Analyst : Yes. Hi, 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 of capital markets picking up and then hiring picking up. And clearly, that continues to get pushed out. So it should continue to be a swing factor. So just wanted to figure out where exactly does that swing factor lie in your guidance range. Thanks.

Question: Faiza Alwy - Deutsche Bank - Analyst : Yes. Hi. Thank you. I had a couple of quick questions about ASV in the quarter. One, just for avoidance of doubt, I want to make sure, is the UBS Vault 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 a legacy solution. Maybe if you can help quantify that also and if there's any sort of -- are there any more legacy contracts like that or products that are expected to be retired, whether it's this particular product or something else in the future? Thank you. Goran Skoko - Factset Research Systems Inc - Executive Vice President, Managing Director EMEA and Asia Pacific, Head of Research & Advisory Solutions Hi, Faiza. It's Goran. So a couple of things. Absent the lower price increase that we implemented this quarter and a couple of strategic deals that we proactively canceled, we would have actually seen acceleration in the quarter. So there is no further retirement of the products that we are planning on for the rest of the year. So you've already seen the impact of that in Q2. Back to your question about the UBS deal. We signed the contract in the quarter. We are thrilled with it. It's another strategic win for the fastest-growing segment of our portfolio. So we are quite pleased with it. I think it speaks to the strength of the product. We purely want this on a better product suite, really, and it enables us to further expand this relationship as the years progress. Implementation of it will take place throughout the next five or six months. I think we will be starting that in the quarter 3 -- in Q3. It's a very strategic win for us. We love our position in that space, and it really position us to land and expand as we expand additional services to all of these clients and the market share we have won over the last few years.

Question: Ashish Sabadra - RBC Capital Markets - Analyst : Thanks for taking the question. Just wanted to clarify the pricing in the quarter. So there was a reference to lower CPI weighing on pricing. 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 third quarter as well? Thanks.

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

Question: Owen Lau - Oppenheimer - Analyst : Hi, good morning. And thank you for taking my question. So I have a follow-up with the previous question about the data and feeds business and sales. So is it fair to say that the market uncertainty actually helps your data feed business? Because people want more data, people want more REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 20, 2025 / 1:00PM, FDS.N - Q2 2025 Factset Research Systems Inc Earnings Call kind of information, that's why that part of the business outperformed compared to your initial expectation. And then the M&A part, it looks like it cooled down a little bit, so that's why you can still maintain the full year ASV guidance or narrow the range.

Question: Andrew Nicholas - William Blair - Analyst : Hi. Good morning. Thank you for taking the question. I wanted to double back to the commentary on wealth, in particular, 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 skews 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 kind of where the growth opportunities are once you have signed up as many flagship clients as you have at this point. Thank you. Goran Skoko - Factset Research Systems Inc - Executive Vice President, Managing Director EMEA and Asia Pacific, Head of Research & Advisory Solutions Hi, it's Goran. I will take that. So all of the above. I think we certainly see opportunity for regional 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 copying that to what we are doing in Europe. Particularly, we're focused on Switzerland and UK as the growth market for us in the near future, and then further expansion in Asia as well. Asia is growing quite nicely for us, and we see those geographic opportunities are 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, the real extension of our strategy is layering on additional services to support additional workflows of our clients. For example, we supported their business development with some of our lead generation tools that we have recently launched, and they are resonating quite well in the market. And then, all of the other portfolio management workflows that our clients undertake are other areas that we are building for and expanding into. I hope that answers your question.

Question: Craig Huber - Huber Research Partners LLC - Analyst : Can you hear me here? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 20, 2025 / 1:00PM, FDS.N - Q2 2025 Factset Research Systems Inc Earnings Call

Question: Craig Huber - Huber Research Partners LLC - Analyst : Okay. I'm not sure what happened there. Coming into 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. You had high single-digit growth for two-plus years and stuff. And now, you're -- I 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.

Question: George Tong - Goldman Sachs - Analyst : Hi. 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?

Question: Toni Kaplan - Morgan Stanley - Analyst : I wanted to go back to the price increase. You mentioned the CPI being -- the lower CPI being a driver there. And so I guess, when I was doing the calculation, I was getting about 2% price increase versus roughly 3% last year. 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 your confidence coming from your strong pipeline in deals? It 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 that is really going to drive this inflection higher in the organic ASV, and maybe a competitive environment might be relevant here as well, if that's a factor? Thanks, Goran Skoko - Factset Research Systems Inc - Executive Vice President, Managing Director EMEA and Asia Pacific, Head of Research & Advisory Solutions Hi, Toni, it's Goran. So there's a number of factors that I think we can point to is, point in time, our booked ASV is actually quite a bit higher year-over-year as compared to 2024 and 2023. So that gives us quite a bit of confidence. The pipeline is better, again, compared 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 downside for us. And as Phil and Helen mentioned, we do not see 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 what we are quite happy with is that, that pipeline represents large seven-figure deals, but also those midsized deals that are easier to execute on. So all of that gives us confidence that we are at the inflection point for the organic growth for the rest of the year.

Question: Ryan Griffin - BMO Capital Markets - Analyst : Hi. Good morning. This is Ryan on for Jeff. You talked in the past about selling more into the tech budget. I was just wondering what type of sensitivity that is 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 are clients' conversations and sales cycles been trending over the last few weeks? Thank you.

Question: Jason Haas - Wells Fargo - Analyst : Hi, 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, if it was M&A or something maybe the type of clients that you're bringing on. So if you could explain that, that would be helpful. Thank you. Goran Skoko - Factset Research Systems Inc - Executive Vice President, Managing Director EMEA and Asia Pacific, Head of Research & Advisory Solutions So I'll take that. So I think we have seen a significant uptick in private equity in terms of the clients we're bringing on. Those are usually a smaller number of users for us. So I think, both competitively and in terms of our pricing and packaging as well as the improvement in the private market's 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.

Question: Surinder Thind - Jefferies LLC - Analyst : Thank you. It sounds like the confidence in the second half comes from the fact -- 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's just a lot more elevated activity or renewals coming up in the past a little bit? Just trying to understand the forward cadence and how we should think about renewals and risk in the cycle at this point in time. And if just clients maybe are trying to take advantage of pricing at this point and so you just -- they themselves have been pushing for more renewals. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 20, 2025 / 1:00PM, FDS.N - Q2 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 So I think what you're seeing in the current cycle is really related to the contract expiration dates. Going forward, I think we're being a lot more organized around renewals. I think we spoke about this during our Investor Day and are creating -- as we have a very large number of clients now, we're creating playbooks for renewals. We're being proactive. Wherever we can, we are trying to get ahead of those renewals and renew them prior to the expiration date. So we're trying to make sure that we have better dispersion of renewals across the entire year rather than them being bunched up. So all of that is something that we are paying lots of attention to in terms of our sales operations and how we're addressing those. Helen?