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FactSet Research Systems Inc.
CEO : Mr. Frederick Philip Snow

Quarterly earnings growth(YoY,%)

Period	Revenue	Operating Income	EPS	Release Date
2023 Q2	19.5% YoY	37.2%	16.2%	2023-03-23

Linda Huber says,

Organic Revenue and ASV Growth

• Organic ASV plus professional services grew 9.1% YoY.
• Organic revenue, excluding acquisitions and dispositions over the last 12 months and foreign exchange, increased by 8.9% to $470 million.
• Growth was driven primarily by CUSIP Global Services, Analytics & Trading, and Content & Technology solutions.

Geographic Segments

• On an organic basis, revenue growth for the Americas was 8.2%, EMEA revenue grew at 8.2%, and Asia Pacific revenue growth increased 15.3%.
• Revenue growth was driven by increases in Content & Technology solutions, Analytics & Trading, and Research & Advisory.

Expenses

• GAAP operating expenses grew 12.4% in Q2 to $346 million, primarily due to increased salary and bonus expenses for existing employees.
• People expenses grew by 10% YoY in Q2, primarily due to increased salary and bonus expenses, but were 350 basis points lower YoY as a percentage of revenue, driven by slower salary growth, higher labor capitalization, and FX benefit.
• Facilities expense decreased by 7% YoY in Q2 due to reduced real estate footprint, lapping of the previous year’s impairment charge, and FX benefit.
• Technology expenses increased by 27% YoY in Q2, driven by increased cloud spend, third-party software costs, and higher amortization of internal use software.
• Third-party content costs increased by 5% YoY in Q2, but the team is doing an excellent job of controlling costs despite inflationary pressure.

Margin and EPS

• GAAP operating margin increased by 430 basis points to 32.9% compared to the previous year.
• Adjusted operating margin improved by 330 basis points to 37%, resulting from higher revenue, lower personnel costs as a percentage of revenue, and lower content and facilities costs.
• GAAP EPS increased 19% to $3.38 in Q2 versus $2.84 in the prior year.
• Adjusted diluted EPS grew 16.2% to $3.80, driven by higher revenue and margin expansion, partially offset by increased interest expense and higher tax rate.

Guidance

• Organic ASV growth for FY23 is expected to be $145 million to $175 million, a $15 million reduction in core ASV growth at the midpoint.
• FY23 revenue is expected to be in the range of $2.08 billion to $2.1 billion, decelerating 95 basis points from previously issued guidance.
• Adjusted margin guidance is maintained at 34% to 35%.
• Adjusted EPS for FY23 is expected to be $14.50 to $14.90.

Philip Snow says,

Organic ASV growth and Professional Services

• Organic ASV plus Professional Services growth year-over-year accelerated to 9.1% driven by expansion among existing clients and successful execution of price increase in the Americas.
• Core workstation drove follow-on opportunities for feeds and digital platforms and wealth and increased transactional revenue and demand for content from asset owners.
• Expect continued ASV growth but with modest deceleration in the second half due to reductions in AUM, constrained budgets, and headcount rightsizing after increased pandemic hiring.

Guidance and Changes

• Updating guidance for fiscal 2023 to reflect organic ASV growth of $145 million to $175 million, including CUSIP Global Services, which becomes an organic part of the business in the third quarter.
• Expect 8% growth at the midpoint in-line with the medium-term outlook, but with a $15 million reduction in core business ASV growth due to challenging conditions facing the banking sector and lengthening sales cycles and constrained budgets for other firm types.
• Expect adjusted operating margin of 34% to 35%, as previously communicated, to preserve EPS by driving disciplined expense management.

End Markets and Regions

• End markets remained largely supportive in the first half, but the company is not immune to market volatility, including reductions in AUM, constrained budgets, and headcount rightsizing after increased pandemic hiring.
• Organic ASV growth in the Americas accelerated year-over-year to 9.3% driven by strength in Analytics & Trading and Content & Technology solutions and the execution of the price increase.
• Organic ASV growth in Asia-Pacific was 10.8%, driven by research with improved expansion and retention in banking.
• Organic ASV growth in EMEA accelerated to 8.1%, driven by Analytics & Trading, improved retention among private equity and venture capital firms and hedge funds, but also experienced headwinds due to cost pressure in major markets and Brexit.

CUSIP Global Services

• CUSIP Global Services exceeded expectations with ASV growth of 8% since the acquisition.
• The company is focused on growth across asset classes, geographies, and capabilities, including expansion into loan data and private companies.
• The Core Securities Identification capabilities align well with FactSet’s data management strategy.

Sustainability Report and Culture

• The company recently published the fiscal year 2022 sustainability report highlighting progress in turning commitments into action.
• FactSet was named one of Glassdoor’s Best Places to Work in 2023, recognizing the culture that made this award possible.

Q & A sessions,

ASV Growth Slowing and Margin Compression

• CUSIP acquisition slowing ASV growth from strong 19.5% to 8%
• Expense growth continuing at about 11% in the back half of the year
• Adjusted operating margin of about 37.6% in the first half, but closer to 32% in the back half
• Real estate footprint reductions potentially providing $15 million to $20 million back into the P&L for next year

Cost Management and Capital Allocation

• Additional headcount affecting people costs, offset by higher capitalization; essential hires only
• Technology costs within 8% to 9% of revenue, with higher capitalization due to heavier tech spend
• Real estate rationalization plans, with an additional $15 million to $20 million reduction in the back half of the year
• Reduced bonus pool of $100 million to $105 million, expecting $10ish million savings
• Focus on essential travel and essential trips only
• Reinvesting in strong and fast-growing businesses as top priority for capital allocation, followed by dividend and share repurchase
• $181.3 million in share repurchase authorization to be spread evenly over the remaining months

APAC Accelerated Growth and Global Banking Clients

• Accelerated growth in Australia due to increased demand from asset owners and improved retention, and in Japan with asset managers
• Hong Kong still recovering but pipeline beginning to book
• Good footprint within large global banks, with distributed portfolio across IB, AM, and wealth users
• Handling potential uncertainty in Q4 due to banking ASV hiring with prudence

Advisor Workstation and Product Marketability

• No gaps related to the product intended to take to market with the advisor workstation
• Winning due to ease of use, speed, flexibility, superior analytics capabilities, and advisor dashboard with next best action suggestions
• Continues to grow in double-digits
• Open and flexible technology allows for integration of feeds and other components into other parts of the business