Organic ASV Growth: 4.1% compared to last year.
Adjusted Operating Margin: 37.3%.
Adjusted Diluted EPS: $4.28.
ASV Retention: Exceeds 95%.
Client Retention: 91%.
Client Base: More than 8,600 clients.
User Count: Over 219,000 users.
GAAP Revenue: $571 million, reflecting a 4.5% increase from the previous year.
Organic Revenue Growth: 4% to $568 million.
GAAP Operating Expenses: $385 million, a 5.8% rise year-over-year.
GAAP Operating Margin: 32.5%, a drop of roughly 80 basis points.
GAAP Diluted EPS: $3.76, a 3% increase year-over-year.
Free Cash Flow: $150 million, a 23% increase from the previous year.
Share Repurchase: Approximately 137,000 shares bought back for about $64 million.
Quarterly Dividend: $1.04 per share.
Gross Leverage Ratio: 1.7 times.
Revised Revenue Guidance: Between $2.305 billion and $2.325 billion.
Adjusted Operating Margin Guidance: Expected to be between 36% and 37%.
Adjusted Diluted EPS Guidance: Ranging from $16.80 to $17.40.
Release Date: March 20, 2025
For the full earnings call transcript, please consult the complete document.
FactSet Research Systems Inc (NYSE:FDS) reported a year-over-year organic ASV growth of 4.1%, with an optimistic outlook for the latter half of the fiscal year.
The firm posted an adjusted operating margin of 37.3% and an adjusted diluted EPS of $4.28, showcasing robust performance.
FactSet is optimistic about meeting the midpoint of its 5% organic ASV growth target, backed by a solid sales pipeline.
The company has seen considerable growth in its wealth segment, bolstered by major wins, including UBS’s selection of FactSet for their advisor desktops.
Recent acquisitions such as LiquidityBook and Irwin are projected to enhance cross-selling opportunities, contributing to FactSet’s growth.
FactSet faced challenges in the asset management and banking sectors, with some significant losses affecting overall results.
Decreased CPI led to a lowered year-over-year price increase, posing a challenge for ASV growth.
The proactive retirement of a legacy solution resulted in a seven-figure cancellation, impacting growth in the asset management area.
Operating in a tough market, FactSet is navigating ongoing macroeconomic uncertainties.
The banking sector remains challenging, with no notable improvements in deal flow, which affects the company’s growth reliance on this segment.
Q: Can you elaborate on the traction you’ve been seeing with clients, especially concerning Pitch Creator and other Gen AI products? How are you addressing pricing for these products? A: F. Philip Snow, CEO: We are excited about the progress and are set to monetize these assets this year. Pitch Creator has gained notable traction, particularly with banks, and there’s positive feedback across all types of firms for our conversational API. We are also beginning to monetize portfolio commentary. Goran Skoko, EVP, noted that clients are responding positively to the pricing model and experiencing productivity enhancements, especially with Pitch Creator.
Q: Is the environment improving, or is the company managing better in a stable environment due to proactive measures? A: F. Philip Snow, CEO: We are confident that we’ve mitigated the major risks for the year, and we have good visibility into most of them. Strength is evident across all markets, with a rebound in asset management. The environment isn’t getting easier, but we are making headway in enterprise-level sales without depending on banking for our growth numbers, as conditions remain difficult.
Q: Will the UBS Vault deal contribute to ASV this quarter, and can you quantify the impact of the proactive retirement of a legacy solution? A: Goran Skoko, EVP: The UBS deal was signed this quarter, with implementation expected within the next five to six months. The proactive retirement of a legacy solution impacted Q2, but no additional retirements are planned for the remainder of the year. Phil Snow, CEO, added that the ASV from UBS won’t contribute to the second half pipeline.
Q: Can you shed light on pricing versus realization for existing deals compared to new and renewal contracts? A: Helen Shan, CFO: Our standard contracts include annual price hikes tied to CPI or RPI, which are relatively lower this year. We adjust rate cards periodically and have observed higher price realization in select firm types. Newly acquired price realization is slightly down year-over-year, but volume has surged nearly 25%, leading to a nearly 10% overall increase in ASV from new business.
Q: How are you managing the margin guidance in relation to technology costs and acquisitions? A: Helen Shan, CFO: We have benefited from decreased personnel costs and are keeping technology and content expenses in check, including vendor credits and canceling contracts. We anticipate an increase in expenses during the second half for strategic investments, but we’re able to accommodate the dilution from acquisitions, estimated at about 40 to 50 basis points.
Q: Is the current market uncertainty benefiting your data feed business, and how do M&A activities influence your ASV guidance? A: F. Philip Snow, CEO: Factset tends to perform well throughout different cycles, and the growth of data feeds is largely about evolving into an enterprise partner for clients. Goran Skoko, EVP, added that the quality of our content and sales focus are driving enhancements. Recent acquisitions like LiquidityBook and Irwin are expected to create cross-sell opportunities and support ASV growth.
Q: Can you outline your land-and-expand strategy in the wealth market? A: Goran Skoko, EVP: We see ample chances for geographic expansion, increasing user numbers, and additional services to enhance client workflows. Our focus is on geographical opportunities in Europe and Asia, alongside expansion into portfolio management workflows.
Q: Are you predicting a significant increase in organic revenue growth due to technological investments? A: Helen Shan, CFO: Our three-year plan targets mid-to-high single-digit growth, bolstered by ongoing investments in technology and Gen AI. We do not have plans for additional large investments beyond our current strategic initiatives.
For the full earnings call transcript, please consult the complete document.
This article first appeared on GuruFocus.
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