Factset Research Systems Inc Q4 2024 Earnings Call Transcript

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

Question: Toni Kaplan - Morgan Stanley & Co. LLC - Analyst : I think this question is for both maybe Phil and Helen. You've had a very significant period of margin expansion since 2021. And when we look forward, just given the balancing act that you mentioned of investment versus margin, should we view '25 as representative of a normal year? Or how should we be thinking about margins over the long term?

Question: Ashish Sabadra - RBC Capital Markets - Analyst : I wanted to follow up on the prepared remarks about improvement in the second half or the growth accelerating as the year progresses. Despite that second half '25 progress, the 2025 ASV guide implies no improvement compared to like 2024 despite potentially better macro with Fed cutting rates. So I just wanted to understand what's your macro and pricing assumptions baked into guidance?

Question: Alex Kramm - UBS Group AG - Analyst : I guess just very quickly on the buy side, maybe you can flush out your comments a little bit more. One, you mentioned a large asset management cancel this quarter. Can you maybe give a little bit more background? It seems like in asset management, you usually have a very sticky offering and not a lot of competitive threats, so just wondering what's going on there. And then overall, the asset management environment looks like headcount reductions or hiring is stabilizing. So are you seeing some of that already? Or is it still too early to kind of get more positive on that end market?

Question: Manav Patnaik - Barclays Bank PLC - Analyst : I just wanted to follow up on the strong performance in CGS that you called out in your prepared remarks, Phil, I guess how fast has CUSIP been growing? I imagine with all the headlines in CDs, it's a pretty big number. So just curious if you could give us the update on how fast it grew this year, I guess what percentage of the business it is and what you've assumed for '25?

Question: Faiza Alwy - Deutsche Bank AG - Analyst : Yes. So I wanted to ask about the ASV guide for '25. You're not baking in sort of any type of acceleration, which seems prudent. But I'm curious how you would characterize that? Is it more conservatism on your end? Are you seeing sort of anything in the marketplace that's leading you to believe that things won't change? And then I know you have your Investor Day coming up. So maybe give us a preview of how we should think about a more normalized ASV growth for the company.

Question: Kelsey Zhu - Autonomous Research US LP - Analyst : So you've previously talked about gen AI kind of expected to start delivering incremental ASV in FY25. I'm assuming that's already included in the 4% to 6% ASV growth guidance. But just curious, have you sized the impact of gen AI investments for both ASV and expense outlook for the next few years?

Question: Surinder Thind - Jefferies LLC - Analyst : With respect to the ASV guide, how should we think about the current pricing environment and what's built into the guide? And then related to pricing, how does something like FactSet Mercury or your AI offering, how do you price that?

Question: George Tong - Goldman Sachs & Co. - Analyst : Your fiscal 2025 revenue growth guide of just over 4% is a deceleration from about 5.5% growth in fiscal 2024, even though ASV growth in fiscal 4Q benefited from several large wins that should ramp into next year. Can you help bridge the gap and discuss what may be dampening revenue performance next year compared to fiscal '24?

Question: Andrew Nicholas - William Blair & Company LLC - Analyst : I wanted to ask maybe a bigger picture one on the investment dollars. It sounds like the year-over-year decline in operating margin is at least in part or it sounds like half is tied to the reset of the bonus pool, but there's obviously incremental dollars here tied to investment. And I just wanted to ask a little bit more about the thought process, how you think about kind of balancing that investment spend with kind of your priorities of driving top line growth. And then kind of relatedly, if embedded in your guidance is some flexibility to potentially ramp up investment spend as we move through the year, if you're hitting higher ends of your revenue guidance because it does look like a little bit of an inverse relationship between revenue growth and operating income guidance based on the table on the release.

Question: Owen Lau - Oppenheimer & Co. - Analyst : I do have a follow-up with the investment, Helen, you just mentioned. So as you start to monetize gen AI, do you need to continue to invest to maintain the growth rate or you can scale back some of your maybe early investments or current investments at some point?

Question: Jeffrey Silber - BMO Capital Markets - Analyst : Earlier, you referred to some of the wins you had in your top 10 customers. I think you said there were 9 that you took share from your competitors. I know this may be a generalized question, but is there anything specific that drove that share change? I know each contract might be different, but I'm wondering if there are any commonalities in those deals.

Question: Jason Haas - Wells Fargo - Analyst : I'm curious if you could comment a little bit more on what you're seeing in regards to the competitive environment. It sounds like you're winning your fair share out there. But I'm curious if -- given it's still a tough backdrop if you're seeing any level of aggressive pricing from some of your competitors?

Question: Craig Huber - Huber Research Partners, LLC - Analyst : Question here. Over the year, how are your hedge fund clients doing in that market and also, when you sell into corporates? How is that going for you right now? Is it getting better or worse or about the same?

Question: Russell Quelch - Redburn Atlantic - Analyst : When you think about your strategy to stimulate topline growth back above 5%, I wonder do you feel you may need to be more aggressive in exploring inorganic actions? Or perhaps alternatively, would you consider partnership opportunities to accelerate growth in areas such as wealth, where you think there's a big TAM opportunity? Just curious as what you're thinking there is ahead of the Investor Day.

Question: Shlomo Rosenbaum - Stifel, Nicolaus & Company, Inc. - Analyst : Phil, I want to ask you a little bit just holistically. Over the last few years, we've seen the company expand the margins. Growth hasn't been as much as what we've historically seen. And FactSet has usually been more of a growth company. It seems like now, the guidance right now is for margins to be down a little bit sequentially, but a lot more talk about the new products or anything. Is there any change philosophically that is going on recently within the company where you have pivoted a little more to margin and now are pivoting more to growth? And I just wanted to ask you to talk about that. And then just a little bit about the 2H improvement this year versus what you were talking about last year because the outlook at this time last year was almost exactly the same way in terms of a muted first half and then expectations in the second half. If you could point out the differences internally where you have line of sight to things, I would say, beyond just kind of the Fed rate cut, but things that you're actually seeing in front of you that give you more confidence this year versus last year, that would be helpful.

Question: Scott Wurtzel - Wolfe Research Securities - Analyst : Just wanted to go back to some of the commentary on the data expansion side of your sort of strategic investment plan with deep sector, private markets and real time. Just wanted to maybe get a little bit more color on sort of how that's coming up and maybe impacting your conversations with clients, specifically on the renewal side. And then I know we'll probably hear more about this at Investor Day, but if you can kind of give us a sense of maybe sort of the road map on the product side with those three initiatives would be great.