Executives: Rachel Stern - Senior Vice President, Strategic Resources and General Counsel Phil Snow - Chief Executive Officer Scott Miller - Director, Global Sales Maurizio Nicolelli - Chief Financial

Officer
Analysts: Hamzah Mazari - Macquarie Ashley Serrao - Credit Suisse Greg Bardi - Barclays David Chu - Bank of America Toni Kaplan - Morgan Stanley Shlomo Rosenbaum - Stifel Patrick O’Shaughnessy - Raymond James Peter Appert - Piper Jaffray Alex Kramm - UBS Joseph Foresi - Cantor Fitzgerald Glenn Greene - Oppenheimer Tim McHugh - William Blair Andre Benjamin - Goldman Sachs Keith Housum - Northcoast

Research
Operator: Good morning. My name is Lindsey and I will be your conference operator today. At this time, I would like to welcome everyone to the FactSet Research Systems Inc. Fourth Quarter Conference Call. [Operator Instructions] Thank you.

Ms. Rachel Stern, Senior Vice President, Strategic Resources and General Counsel, you may begin your conference.

Rachel Stern: Thank you, operator. Good morning and thanks to all of you for participating today. Welcome to FactSet’s fourth quarter 2016 earnings conference call.

This conference call is being transcribed in real time by FactSet’s CallStreet service and is being broadcast live via the Internet at factset.com. A replay of this call will also be available on our website. Our call will contain forward-looking statements reflecting management’s expectations based on currently available information. Actual results may differ materially. More information about factors that could affect FactSet’s business and financial results can be found in FactSet’s filings with the SEC.

Annual Subscription Value, or ASV, is a key metric for FactSet. Please recall that ASV is a snapshot view of client subscriptions and represents our forward-looking revenues for the next 12 months. Lastly, FactSet undertakes no obligation to update publicly any forward-looking statements as a result of new information, future events or otherwise. Joining me today are Phil Snow, Chief Executive Officer; Scott Miller, Director of Global Sales; and Maurizio Nicolelli, FactSet’s Chief Financial Officer. And now, I would like to turn the discussion over to Phil.

Phil Snow: Thanks, Rachel and good morning everyone and welcome to the call. Our client-centric approach has always been a key foundation of our success at FactSet and we have noticed in the last quarter that pressures our clients have experienced have not abated. And this is really prompting us to move even closer to them to help them navigate in uncertain markets. As a result, we continue to build market share and grow ASV and earnings. This quarter, we continued our positive top line growth.

Q4 ‘16 revenue was up 9.7%, with ASV up 8.8% organically and adjusted EPS up 11.9%. Over the last 12 months, we have returned $431 million to shareholders in the form of share repurchases and dividends, an increase of 33.5% over the prior year. Our primary growth drivers for this quarter include the following. Our core workstation business was up over 2,000, representing 5.5% growth versus a year ago. Workstations grew across the buy-side and the sell-side and over a number of different client and user types.

And on top of this expanding footprint, our value-added analytics and off-platform solutions all showed strong growth in the double-digits. Our robust portfolio analytics solutions have been the cornerstone of our growth in the middle office. And this year, FactSet was named the Best Data Analytics Provider by Waters Technology. We are seeing increased demand for total portfolio risk analytics and increased traction for our fixed income and multi-asset class performance and risk offerings. In addition, we continue to diversify and innovate.

A great example is our portfolio services, which supports our clients in integrating, cleansing and building robust analytics on top of their data. This managed service is a great example of broadening our sources of revenue while responding to client needs. Content and Technology Solutions, or CTS, our off-platform data feeds business continued to accelerate this quarter. Clients are developing internal solutions to provide more customization and to help them target their customers and users more directly. Firms are coming to us to integrate unique content and analytics into their client portals, performance systems, CRMs, quant and regulatory workflows.

Our strategic acquisition of Portware has provided a new stream of revenue and growth. We have seen notable wins in both the sovereign wealth and investment management space and we have also grown globally with the addition of new clients in Europe, North America and Asia. The integration is going well and we are excited about the new innovative solutions we are working on for our clients. Portware revenues have grown in double-digits since the acquisition and we are now breakeven on a GAAP EPS basis with Portware. Our research management solutions also had a strong quarter.

Growth in our RMS suite is driven by the ongoing regulatory demand for transparency across an increasing number of workflows. We will continue to capitalize on marketplace trends, including the movement from active to passive. Our portfolio analytics suite, industry leading EPS data and deep industry taxonomy offer powerful solutions for passive investment workflows. FactSet Revere is a leading taxonomy that has designed unique and proprietary business industry classification systems. On September 12, FactSet reached another milestone with the launch of 4 iShares thematic ETFs by our index licensee partner, BlackRock.

BlackRock has collaborated with iSTOXX FactSet to launch thematic indices. They are rules-based, systematic strategy indices built using FactSet proprietary data. An additional source of growth for FactSet is our partnerships. In Q4, we grew our strategic partnership with QUICK to deliver industry leading solutions to investment professionals in Japan and Asia. A newly formed joint sales initiative will focus on supporting and expanding the use of the QUICK FactSet workstation.

As we close out a successful fiscal year 2016, here are some of the highlights for the year. We added 116 net new clients and 3,450 net new workstations across a broad set of firm and user types. We expanded our portfolio of multi-asset class value-added products, our offerings and analytics, CTS, research management and Portware all grew in the double-digits. We reinvested across all four pillars of our business, technology, content, analytics and service, adding over 1,000 employees in fiscal year ‘16. Our investment in product, coupled with the acquisition of Portware, now allows us to address an increasingly greater percentage of our clients’ enterprise workflow.

At FactSet, we strive to be the best partner for our clients. This strive to be the best includes our technology, which is the backbone behind our solutions. We have made good progress this year on the migration to our next generation technical architecture and clients are already seeing the benefit with significant improvements in speed and new product capabilities. As we go forward, we expect that you will continue to see us differentiate ourselves, building on the core, expanding our suite of enterprise solutions and partnering with our clients to solve their greatest challenges. Let me now turn it over to Maurizio who will give us a more detailed look into our fourth quarter performance.

Maurizio Nicolelli: Thank you, Phil and hello to everyone on the call. As you heard from Phil, we continue to significantly grow ASV and EPS during the period in which our clients are experiencing an uncertain environment. Our position in the marketplace enables us to provide clients with meaningful solutions to increase efficiencies and consolidate on to the FactSet enterprise solution. Let’s now go through our fourth quarter results. Revenues in fourth quarter were $287.3 million.

Excluding acquired revenue from Portware, the effects of foreign currency and revenue related to the Market Metrics business in all periods presented, organic revenues grew 8.8% over last year. During the just completed fourth quarter, U.S. revenues grew to $190.4 million. Excluding revenue from the Portware acquisition and revenue related to the Market Metrics business, organic revenues in the U.S. were up 7.4% compared to the year ago fourth quarter.

Non-U.S. revenues increased to $96.9 million. Revenues from our Europe and Asia-Pac regions were $71.5 million and $25.4 million respectively. Excluding foreign currency, acquired revenue from Portware and revenue related to the Market Metrics business, the international growth rate was 11.7%. This growth rate breaks down into 10% from Europe and 16.8% from Asia-Pacific respectively.

Included in our fourth quarter results were the following nonrecurring items. First, operating expenses included $4.6 million in expenses related primarily to legal matters addressed during the quarter. Secondly, other income included a $112.5 million gain on the sale of the Market Metrics business. Adjusted operating income, which excludes $3.7 million of deal-related amortization and the $4.6 million of non-recurring items related primarily to legal matters, grew to $96.1 million, an increase of 6.2% from last year. Adjusted net income, which excludes the non-recurring legal matters deal related amortization and the gain of the sale of the market metrics business increased 8.5% to $68.6 million, while adjusted diluted EPS grew 11.9% to $1.69.

Now, let’s take a look at operating expenses. Operating expenses for the fourth quarter totaled $199.6 million. Our adjusted operating margin, which excludes non-recurring items and deal related amortization was 33.4% this quarter, up 40 basis points from the just completed third quarter. Fourth quarter cost of services expressed as a percentage of revenues increased by 210 basis points compared to the year ago period. The increase was driven by higher compensation and amortization of intangible assets.

Employee compensation expense grew due to headcount expansion from new hires and the addition of Portware. The increase in amortization of intangible assets primarily relates to the acquisition of Portware less than 12 months ago. SG&A expenses expressed as a percentage of revenues was flat compared to the year ago fourth quarter. The non-recurring legal matter expenses and higher marketing costs were offset by lower compensation expense. Increased marketing costs were driven by incremental branding and advertising costs, while compensation costs decreased due to the sale of the market metrics business.

At the end of the fourth fiscal quarter, we had 8,375 employees. Excluding employees added from the Portware acquisition and those lost in the sale of the market metrics business, headcount has increased 13.4% from the year ago period. The fourth quarter effective tax rate was 27.8%. Excluding income tax benefits, the fiscal 2016 annual effective tax rate was 28.3% compared to 30.3% in the year ago period. The 200 basis point decline was primarily driven from the re-enactment of the Federal R&D income tax credit earlier in the fiscal 2016 year.

Free cash flow during the last three months was $57 million, a decrease of $16.3 million from the same period last year. The decrease was a result of higher income tax payment related to the gain on the sale of the market metrics business, partially offset by strong cash collections, which lowered client receivables. Our DSOs were 31 days at the end of the fourth quarter compared to 33 days in the prior year period. Our cash and investments balance was $253 million, up $41.5 million during the quarter. We define free cash flow as cash generated from operations less capital spending.

During the fourth quarter, we repurchased 258,000 shares in the open market at an average price of $166 per share. In addition, on July 1, 2016, we entered into an accelerated stock repurchase program to repurchase an additional $120 million of FactSet common stock. As a result of the ASR, we received approximately 600,000 shares of our common stock on that date, which was equal to 80% of the total number of shares of common stock expected to be repurchased under the ASR. The final settlement of the accelerated stock repurchase program is scheduled to occur in the first quarter of fiscal 2017. Our diluted weighted average shares decreased by 516,000 shares, primarily as a result of our open market repurchase activity and the ASR program, partially offset by higher share price increasing from the dilution from outstanding share based equity awards.

Now, let’s turn to our guidance for the first quarter of fiscal 2017. For the fiscal – the first quarter, we expect that revenues will range between $286 million and $292 million. GAAP operating margin should range between 31% and 32%, while adjusted operating margins should range between 32.5% and 33.5%. We expect our annual effective tax rate to range between 28% and 29%. GAAP EPS is expected to range between $1.62 and $1.66.

Adjusted EPS is expected to range between $1.68 and $1.72. The midpoint of this range suggests a 14.5% increase year-over-year growth. In summary, we are pleased with our fourth quarter performance as organic ASV was a strong 8.8%, while adjusted EPS grew 310 basis points higher than ASV at 11.9%. Looking at the first quarter, the midpoint of our guidance suggests 8.8% organic revenue growth and 14.5% adjusted EPS growth. We are pleased with our industry position and market opportunities as we help our clients navigate and consolidate on to FactSet during this difficult environment.

As we continue to partner with our clients and invest aggressively in our product and people, we believe FactSet is well positioned to outperform the market. Thank you for your participation in today’s call. We are now ready for your questions.

Operator: [Operator Instructions] Our first question comes from the line of Hamzah Mazari with Macquarie. Your line is now open.

Hamzah Mazari: Good morning. Thank you. I was wondering if you could give us an update on the competitive environment, any change you are seeing from the competition, whether it be more aggressive pricing or whether it would be new products or any bundling of services, any color around any change in the environment would be helpful?

Scott Miller: Hi Hamzah, it’s Scott Miller. We haven’t seen significant shifts in the quarter. The themes that we have really seen over the last couple of quarters stayed true.

It’s – there is some challenges in the market out there and that gets competitors trying to figure out how to mitigate cancellations and things like that, so we have seen a little more activity. But the themes haven’t really changed in the last couple of quarters.

Hamzah Mazari: Okay, great. And just a follow-up question, is there any sense – could you give us a sense of how much of your business is sort of workflow related where you are connected into your client enterprise system and tends to be very sticky versus a business that’s just primarily a desktop solution, any qualitative or quantitative color would be helpful? Thank you.

Phil Snow: Hi Hamzah, it’s Phil Snow.

So we like to think that most of our product is sticky. Our users really love us. It does – the fee business definitely tends to be a little bit stickier over time once you have it in there. But our portfolio analytics workflow and everything that we do for our clients, all the way from research through portfolio management, now trading, performance and risk and client reporting, we cover all of those things for our clients. So it’s the seamless connection of that workflow at the entire enterprise that makes FactSet such a compelling offering for our clients.

It’s not individual kind of types of users or workflows. It’s the entire enterprise that’s using our system now.

Hamzah Mazari: Great. Thank you so much.

Phil Snow: Thank you for the question.

Operator: Our next question comes from the line of Ashley Serrao from Credit Suisse. Your line is now open.

Ashley Serrao: Good morning. So international growth continues to be strong, I was just hoping if you could talk about the types of clients that are driving incremental wins for you in the region and how pipelines are looking like today?

Scott Miller: Hi Ashley, it’s Scott Miller. The international business is growing very well.

It tends to be fairly diverse as it is in the U.S., in the Americas, in general. In Asia-Pac, we are – we have good workstation growth, but also great growth in our multi-asset class risk and analytics. And our fee business is doing very well throughout Asia-Pac as well and that’s echoed throughout EMEA. We get into some larger buy side markets like the UK market. We tend to see more coming in the portfolio analytics and spaces like that.

But it’s fairly broad and it’s been consistent growth and we really like the international market.

Ashley Serrao: Okay. And then maybe switching gears to the U.S. market, perhaps if you can just provide some color on the deceleration in growth here this quarter, I know it’s still early in the quarter, but just in the context of continued hiring and the reinvestment of currency benefits back into the business, should we expect the return to shop in results over the coming year or how are you thinking about the U.S. side of the story?

Scott Miller: The U.S.

market, the story for us was two fold. We had a record growth in new client acquisitions, so we brought on a bunch of brand new clients, which was terrific and that was across predominantly buy side, hedge fund, middle market buy side and the wealth area, but it was mixed with an increased cancellation rate that was what I would call market related. So, it was clients going out of business, hedge funds going out of business, some of the smaller buy side where they have been shedding employees. So, that was really the story was it was great growth sales, mixed with increased market related cancellation. But in general, we feel good about the Americas.

We have got some terrific wins in both the sell side and the buy side space. So, we feel good about the pipeline in the future.

Ashley Serrao: Alright, thanks for taking my questions.

Maurizio Nicolelli: And just to answer your question on currency, we saw a little bit of benefit during the quarter in that our adjusted operating margin trended towards the upper end of our range. Going forward, you will still see our operating margin be within the range as we continue to reinvest within the business.

Ashley Serrao: Okay, thank you.

Operator: Our next question comes from the line of Manav Patnaik with Barclays. Your line is now open.

Greg Bardi: Hi, this is actually Greg calling on for Manav. Thanks for the details on the workstation growth.

I think you said 5.5% in the fourth quarter. Just for context, would you be able to give some of those numbers going back a few quarters?

Maurizio Nicolelli: Yes, those are public numbers. So, we can get you more detail later if you need it, but we report these numbers every quarter.

Greg Bardi: Okay. And then just thinking about the growth deceleration and kind of ending up towards the bottom end of guidance, just wondering on the color between base business growth and new business growth, I think you had some color on the increased cancellations.

So, what you are seeing there and is that all of seen in the fourth quarter or do we have further flow-through as we look into the first quarter of ‘17?

Scott Miller: Hi. It’s Scott, Greg. We definitely saw an increase in the quarter of the market-related cancellations in that buy side sector. It feels like the worst of it’s over and it feels like we have come through and I would talk to the sales force and look at the pipeline and get a sense of what they are feeling out there and it feels like it’s feeling healthier.

Greg Bardi: Okay, thank you.

Operator: Our next question comes from the line of David Chu with Bank of America. Your line is now open.

David Chu: Hey, Scott. You just mentioned that the environment is starting to feel a little bit healthier. Can you just, I guess, describe what you are seeing?

Scott Miller: Well, in general, our – we feel good about the product offering we have, the client base that we are going after.

So, I am not sure where you want to see the detail. But in general, we feel good about the prospects that we have as we have throughout the year.

David Chu: So, from maybe client cancellation perspective, do you expect that to moderate go forward?

Scott Miller: I can’t read the markets, but we feel good about – certainly feel good about the prospects and the business, the new business and the add-on potential that we have across our current client base is still feeling very good. So, I wish I could read the markets, I can’t but I am feeling good about our overall prospects in general.

Phil Snow: Okay.

The thing to remember to is that we are relatively small compared to some of our competitors. We have an expanding product suite. And on a relative basis, we are doing exceptionally well. So, the way that we approach our clients in a tough market, it’s to our benefit. So, we feel that by getting closer to them, by continuing to provide a greater expanding suite of solutions that even if they are feeling pressure that we are going – we can succeed.

David Chu: Got it. And just one additional question, how would you describe non-terminal revenue growth in the quarter? I mean, is the pace of growth slightly moderate versus 3Q or was it largely in line?

Phil Snow: It depends on the area. But as I mentioned in my opening, as it is Phil Snow, all each area grew in double-digits. Some pieces have been growing at 10%. Other pieces are closer to 20%.

But that entire suite of add-on products is doing exceptionally well. And we are very pleased that we were able to add users this quarter, which expands our foundation. And if you look back at our history, as we expand our footprint, it really allows us to add on more and more of these value-added products over time.

David Chu: Okay, got it. And just one last, I mean, would you say that Portware is the fastest growing piece of the non-terminal revenue segments?

Maurizio Nicolelli: It’s a very high growing piece of it, yes.

David Chu: Okay, thank you very much.

Operator: Our next question comes from the line of Toni Kaplan with Morgan Stanley. Your line is now open.

Toni Kaplan: Thank you. Good morning.

Phil Snow: Good morning, Toni.

Toni Kaplan: Are you seeing any customers asking for coverage reductions to their subscriptions like dropping specific premium offerings or is it more just as you are mentioning the sort of cancels on these sort of smaller funds that are shutting in place?

Phil Snow: The impact was more from those market-related cancellations. The positive impact of a more challenging market is we have more conversations with our clients and we have got to help them solve for not only to all the cost of ownership, but better workflow and better performance. So, we are having some really great conversations out there. But that – the piece of the cancellation was much more market related than anything else.

Toni Kaplan: Got it. And then you have had really strong hiring in the full year of fiscal ‘16 even excluding Portware, I think sort of around that 13% level. And in the past, I think your strategy has been to hire to where you think growth is going to be. Should we expect that hiring continues at these levels or maybe slows to catch up with our wait for growth to catch up?

Phil Snow: Hey, Toni, it’s Phil Snow. So, I kind of speak to that a little bit.

So, since we opened Centers of Excellence in Manila and Hyderabad, we have been able to expand the capabilities that we have there in terms of the types of work we do. So, we are beginning to do more product and engineering-related activities on top of the great content collection that we already do there. So, some of the growth in hiring you are seeing is from those low cost locations. And we have so many great investment ideas for our product that we are really bullish about being able to use these centers to develop more products for our clients. Whether or not we will see the same level of growth in those areas this year, we are not sure.

It really just depends on how aggressive we want to be about building out more products in those locations.

Toni Kaplan: Got it. And just one last one for me, Phil, you mentioned in the opening remarks about the ETF business. And so I was just hoping you could expand on the strategy going forward for passive business and what we should expect in the upcoming quarter?

Phil Snow: Sure. I would be happy to do that.

So, we have helped our clients with their passive workflows for sometime. The suite of products we have, particularly in analytics, with alpha-testing some of the risk capabilities in PA really allow clients to kind of research what would be a good strategy for ETF. And with the acquisition of ETF.com, we got the best-of-breed content out there for ETFs along with some great thought leadership. So, what we are finding now is that we can address a lot of different pieces of the ETF workflow. We can do ETF due diligence.

We can help clients with ETF creation, ETF research. And of course, the PA suite allows you to compare, if you are an active manager, how are you doing versus passive or compare different passive strategies. We are also aggressively building out our ETF coverage in some of the holdings, but we are able to get those daily. We are really cleaning them. And that’s a product set that we are very excited about.

Coming up for the future, we are very focused on the U.S. holdings right now, but we have a plan to expand that to international coverage. So, we are firing on all cylinders. It’s a good piece of our business and we see this shift going on in the marketplace. We feel uniquely positioned to help clients that either just want to do passive or want to do a combination of active and passive strategies.

Toni Kaplan: Thanks a lot.

Phil Snow: Sure.

Operator: Our next question comes from the line of Shlomo Rosenbaum with Stifel. Your line is now open.

Shlomo Rosenbaum: Hi, good morning.

Thank you for taking my questions. Were the wins in the quarter in the U.S. all takeaways and can you just give a little bit more color as to what kind of wins they were, I know you mentioned it before, but maybe just a little bit more detail?

Scott Miller: The wins Shlomo, we saw them across a bunch of different client types end solutions. We had some terrific wins in the sell side space within research, both in terms of global banks and regional as well. We saw some really significant wins in the multi-asset class, analytics and risk space.

And then from a user type perspective, wealth was very strong, saw some very good wins in that space. Our corporation sectors continue to do very well. And buy side research, we saw some great wins there too.

Shlomo Rosenbaum: Okay. And then if there were higher cancellations in the quarter, how come the retention levels that are reported remained the same?

Maurizio Nicolelli: Hi Shlomo, this is Maurizio.

It’s really driven by the dollar base, so the cancellations are at the lower end of our total client base. So the dollars are smaller, so it still remains at the 95% level.

Shlomo Rosenbaum: So the smaller ones are canceling a little bit higher level because whatever some of the business they are shedding business or going out of business, are you having higher retention of the larger clients, is that offsetting it?

Scott Miller: Yes, that’s a fair assessment.

Shlomo Rosenbaum: Okay. And hey Maurizio, would you guys borrow money or increase the debt levels to repurchase more stock than what you have been doing?

Maurizio Nicolelli: We have – that’s come up a lot in discussion.

We have always shied away from doing so. We always want that capability to be able to have that ability to go borrow money if something significant comes along on the M&A front. So there is really no change in terms of our capital allocation right now.

Shlomo Rosenbaum: Okay. And just in terms of the wins that you saw in the U.S.

and internationally, is there any competitor out there that was a little bit more lopsided and who you are taking business from?

Scott Miller: Nothing that I would point out, Shlomo, it was fairly broad based. It was the typical competitors so that we go up against. But we definitely – we saw some strategic wins. I mentioned sell side research and the multi-asset class analytics. So there were some specific areas where we were really excited.

But they were against the typical competitors we come up against.

Shlomo Rosenbaum: Okay, great. Thank you very much.

Operator: [Operator Instructions] Our next question comes from line of Patrick O’Shaughnessy with Raymond James. Your line is open.

Patrick O’Shaughnessy: I was hoping you can talk about mechanics of the Portware cross-sell, so you are selling to the same organization, but presumably different personnel at that organization, so kind of how do the mechanics work. And then on a related note, with the Thomson Reuters acquisition of a competitor to Portware, do you kind of see that as validation of your strategy?

Phil Snow: Yes. This is Phil Snow. So I will address the second question first there. Yes, we do see it as a validation of our strategy.

Our – the Portware piece of FactSet is really addressing the high end of the market. So we are in the very largest asset managers, sovereigns and also sophisticated hedge funds. So that’s not a competitor that we have seen very much while Portware has been here and I think for many years prior to that. But I think it does point to the fact that it was an important piece of what we wanted to do. We just wanted to do it with a different client base at a different level.

Scott Miller: Sorry, I was going to add on. Patrick, from a cross-sell perspective, I am really excited about it. We had anticipated that our general sales force would be able to identify opportunities for Portware and we could leverage certain Portware clients to cross-sell our analytical solutions as well. And we are seeing that happening. So we are really excited about it.

Patrick O’Shaughnessy: Got it. Thank you. And then for my follow-up question, there was a tick down in your ASV per user this quarter and given some of the strength that we are seeing in Portware and some of your market data feeds, kind of curious what was underlying that decrease quarter-over-quarter?

Phil Snow: As we have said in previous quarters, that’s just not a metric. We even track ourselves, frankly. So it’s – our business is so broad based with different things.

I think if you are following us by ASV per user, that’s – it’s something that we don’t track. Patrick O’Shaughnessy: Got it, okay. Thank you very much.

Phil Snow: You’re welcome.

Operator: Our next question comes from the line of Peter Appert with Piper Jaffray.

Your line is now open.

Peter Appert: Phil at the Investor Day, I think you had promised that perhaps you would be trying to give a little more transparency in terms of revenue drivers on a go-forward basis, so I am wondering if you can give us any concrete numbers in terms of the desktop business versus the non-desktop business from a revenue perspective currently, so the current mix and the respective growth rates?

Phil Snow: Yes. Peter thank you for the question. We were definitely anticipating that. So we continued to look at our business and really think about the best way to measure and segment it.

We are still doing some work on that. So at this point, we are really just going to I think stick to what we have done historically. I think we have indicated some really high growth rates for some of our add-on products. But at this point, we are not really in the best position to break that out for you in any more detail.

Peter Appert: Do you think, Phil that – so you are seeing slower growth in terms of terminal count, obviously offset at the moment by strength in the other businesses, on a go-forward basis, does that arithmetic continue to apply and I am trying to think about the sustainability of recent revenue growth?

Phil Snow: So we still see Peter great opportunity in both our core workstation product and all of the other value-added products that we have developed and integrated.

So we are – there is still a ton of market share out there for us. Our clients are definitely facing some headwinds, the core client base that FactSet does address, but our expansion into multi-asset analytics, multi-asset class analytics, the fact that we now have almost every point in the investment life cycle for our largest investment and it just ticked off. But even if they are slowing down hiring or even negative in hiring and assets are flowing between different assets types so from active to passive, we still feel very uniquely positioned moving forward given the level of reinvestment in the business to grow every area of our business. It’s just going to differ quarter-to-quarter depending on what’s going on.

Peter Appert: Understood.

One last thing, the legal charge, can you tell us what that was about?

Maurizio Nicolelli: Sure. Peter, it’s Maurizio. It’s – we had a few legal matters that were specific to the period that we reserved for during the period, which is really items that will really pertain specifically to Q4 that were just non-recurring or out of the ordinary.

Peter Appert: Thank you.

Operator: Our next question comes from the line of Alex Kramm with UBS.

Your line is now open.

Alex Kramm: Yes. Hi, good morning.

Phil Snow: Good morning.

Alex Kramm: Just coming back to a couple of things you have talked about, I think you talked about the competitive environment a little bit, I think in the past you have been a little bit more specific, so wondering if you could talk about SNL, Capital IQ a little bit, I mean they are going through a big integration, two organizations coming together, in the past you have taken advantage of those times, so anything you are doing there in particular, in engaging with clients and disrupting a little bit or nothing to point out?

Scott Miller: Hi Alex, it’s Scott.

So my comment earlier that we haven’t seen a dramatic shift is that we have sort of been seeing this over the last six months or so, what I called a few quarters ago, a disruption in the competitor space. It’s still out there. We see it as an opportunity because it in many cases, gives us the chance to go and have additional conversations with our clients and it gives us a chance to go and showcase our solutions and prove our value until the cost of ownership and performance play that we have. Specific to S&P Capital IQ, it hasn’t really changed dramatically in the quarter. We see them in the investment banking space.

That’s where we see them the most. And we have got terrific solutions in that space. So again not a big change in the competitor environment over the last quarters, it’s been consistent over the last couple of quarters.

Alex Kramm: Alright, great. And then just stepping back for a second here, I know this is a couple of quarters ago, but I remember when you were very excited about the environment and we are talking about getting back to double-digits ASV growth.

I think you have kind of pulled back from that last quarter given the environment, but with everything else you are seeing there outside of the environment, are you – you think there is an opportunity to return to that kind of long-term outlook again or what do think something has changed to some kind of shelf life for the time being? Thank you.

Maurizio Nicolelli: Great question. Thank you. So, yes, we feel the potential is out there for us, as I just mentioned. So, it really – there is a lot of things going on within our client base.

They are definitely feeling decompression. But again, we feel uniquely positioned to work with clients and take advantage of what’s going on in the market. So, we are not going to give out sort of future predictions about our growth rate, but FactSet is a great company. We have awesome people. We have great technology and product and we are really optimistic about the future.

Alex Kramm: Fair enough. Thank you.

Operator: Our next question comes from the line of Joseph Foresi with Cantor Fitzgerald. Your line is now open.

Joseph Foresi: Hi.

Cancellations picked up in the quarter, but I think you said you expected stability from here. I guess I am wondering why the stability? Is it that you are replacing the business quicker than its leading or are there other catalysts? I am just wondering I know you talked to the sales force, but I am wondering what the puts and takes are there?

Scott Miller: I will correct myself and say that I wasn’t predicting stability. It’s a choppy market out there. The positive aspects for us are what Phil had mentioned before. We have broad-based solutions, a broad-based client base and we have got – we have got the ongoing capability, which we have had over the previous quarters to go and sell into this market very well.

Joseph Foresi: Okay. So, I mean is it a matter of – I guess, as a follow-up, is it a matter of replacing the loss business? Any specific industry, let’s call it buy side, with some of your newer offerings, is that what your goal is there or is it a matter of there just being less cancellations in those end markets?

Phil Snow: The broader opportunity for us moving forward is within our largest clients today. So, yes, as clients consolidate and we have a broader suite of offerings across different workflows and asset classes, the biggest opportunity for us as a firm is to go in and replace our competitors’ products that are out there and address new workflows. If clients are building things themselves, which a lot of them are doing, that’s not necessarily a replacement. It’s just helping the client do things more efficiently and help things solve their problems, but the market that we are in really is one of replacing competitors.

There is not a lot of workflows out there, now, where our clients want to pay 2x or 3x for duplicative services. So, that’s – we fit in that environment for a while. And again, we feel really well positioned to succeed in that type of environment given who we are as a company and the culture we have and how we work with our clients.

Joseph Foresi: Thank you.

Operator: Our next question comes from the line of Glenn Greene with Oppenheimer.

Your line is now open.

Glenn Greene: Thank you. Good morning. Just a couple of sort of follow-ups some things that have been alluded to, but just to be clear on the client attrition dynamic that you talked about. It sounds like it was very small clients, such so small that it would have a de minimis impact on ASV, which is – so it didn’t have – the question is, did we see any meaningful impact on ASV from the client attrition or was it too small to factor in?

Scott Miller: It was an impact.

I am not sure meaningful is the right word for it. It was an increased impact than we have seen in the last couple of quarters. So, it was one of the reasons why we pulled back a bit was there was some increase in the number of market-related cancellations.

Glenn Greene: Okay. And then Portware, I think you alluded to double-digit revenue growth and I think you framed it as GAAP breakeven.

I mean by my math and hopefully you can corroborate this or is this Portware sort of running at a $50 million, $55 million sort of plus revenue rate and could you sort of help us with the adjusted margins, how to think about where they are now directionally?

Maurizio Nicolelli: We don’t give ASV by product line. Obviously, Portware started with $39 million and has done well in double-digit growth since we have purchased the company. On the adjusted margin, it still has a lower adjusted margin than FactSet, but it is becoming more and more profitable as each quarter goes along. It was breakeven to GAAP EPS this quarter and it was $0.04 accretive to adjusted EPS during the period.

Glenn Greene: Okay, that’s helpful.

And then just the final one, I think you alluded to the wealth management business doing, I think the quote was very strong and I think that’s been going on for a while as it’s sort of the newer channel for you, but maybe could you give help us frame the degree of growth and how meaningful it is to your business at this point again directionally?

Scott Miller: Yes, like many of the markets that we are playing in, the addressable market is great for us. It’s got lots of upside. We are relatively small and relatively in terms of some of the markets we play in. So, the upside potential is great. The wealth space, we are still focusing on the higher end of that market as we talked about in the past.

Our solutions play wonderfully in there, because we can mix workstation with some analytics that play into the wealth space. Phil talked about ETF. It’s an important driver in that space for us as well as they look at both active strategies and trying to solve for passive as well. So, we are really well positioned in that space and we like it a lot.

Glenn Greene: Okay, great.

Thank you.

Operator: Our next question comes from the line of Tim McHugh with William Blair. Your line is now open.

Tim McHugh: Yes, thanks. I just want to ask about the headcount, the organic 13%.

I know you said some of it’s investing in your facilities, but I was hoping to get a little more color. I am trying to think about how much that is there how quick are you growing sale headcount versus kind of R&D customer support – trying to understand where the headcount increase is going?

Phil Snow: So, I think we got most of that question. It came in a little choppy. Tim, I believe, you were asking about how we spread out the headcount?

Tim McHugh: Yes.

Phil Snow: So, we definitely – we have always reinvest in our sales force.

Our sales force is a combination of hires right out of school as well as industry hires and that’s such an important piece of our business that we have multiple classes a year that come in globally and those consultants that we hire go on to become salespeople. They go on to become subject matter experts, product developers and so on. So, we continue to hire there and we continue to hire in every aspect of our business. I would say that for product and engineering and content, it was probably more tilted towards the lower cost locations this year than in previous years.

Tim McHugh: Okay, the sales headcount similar to the pace of overall headcount?

Phil Snow: We don’t break that out specifically, but we did reinvest well in the sales force last year.

Tim McHugh: Okay. And my only other question is the cancellations I think you said it was mostly because of smaller people going into business. If you adjusted for that, is there any difference in the kind of the win loss versus competition as it relates to the cancellation rate during the quarter?

Scott Miller: The win loss versus competition for us the way we track it was actually a little bit more positive in our favor than we have seen before.

Tim McHugh: Okay, thank you.

Scott Miller: Thanks.

Operator: Our next question comes from the line of Andre Benjamin with Goldman Sachs. Your line is now open.

Andre Benjamin: Thanks and good morning.

Phil Snow: Hey, Andre.

Andre Benjamin: My first question I was just wondering if there has been any change to the length of the selling cycle as you go in and talk to a lot of these firms.

And then I am thinking specifically about Europe, you have reported double-digit growth there. It’s been a challenged financial environment. So, just wondering what’s driving such strong growth there? And any color on desktop versus some of the other businesses that can be doing that?

Phil Snow: There has been no dramatic shift in the – in who we are selling into in the European market and the types of solutions that are selling well there. There was a slight slowdown in the sales cycle in the UK when Brexit came out. People were sitting and sort of contemplating a little bit.

We saw that and we see that picking up now. So, there was no dramatic change in the sales cycle. Our European business is doing great. Our international business in general is doing great and we see that continuing.

Andre Benjamin: Okay.

And then I know around the time of the [indiscernible] the same day you made announcement that you were going to be working with the Symphony Communications platform. I was just wondering where that stands. Is the tie-in complete? And if it is, are you seeing any impact of that on client wins or your dialogue with your clients?

Phil Snow: Andre, it’s Phil Snow. Yes, to follow-up on that, our development teams have been working very closely together since we last spoke, working on the integration, being able to get from FactSet to Symphony and vice versa. So we can’t talk about when those APIs are going to be released.

But the team has really accelerated its efforts. We are hearing that there is quite a bit of activity in the marketplace, but I wouldn’t anticipate that it’s going to have any meaningful impact on ASV or revenues for quite a while.

Andre Benjamin: Okay, thank you.

Phil Snow: Sure.

Operator: Our next question comes from the line of Keith Housum with Northcoast Research.

Your line is now open.

Keith Housum: Great. Thank you. Thanks for taking my questions. Good morning.

Just a broader question here, does this apply second quarter role, I think we have heard you guys talk about cancellations, based on your experience, are the cancellations coming from, is it more poor performance from the underlying funds or is it pressure from withdrawals and perhaps due to competitive pressure from the ETFs?

Phil Snow: That’s a great question. So we definitely, if you look at the net new fund flows, active versus passive, there has definitely been on out-flowing from active equity. So I would say that we have been feeling some of that pressure, particularly for the active managers that are underperforming. That’s definitely one aspect of it.

Keith Housum: Okay.

And as you look at your R&D, especially in the ETF area, I guess how would you describe your efforts, are you in the first inning of a nine inning ballgame or how do you feel about your products that you have in development to offset, I guess what could very well be sustained periods of cancellations recent reports that are out there?

Phil Snow: So we are aggressively investing, particularly on the content side, having the highest quality content in that area is important. We feel like we already do and we just want to broaden that gap between ourselves and our competitors.

Keith Housum: So your ETF products would be more geared towards the buy side or the sell side?

Phil Snow: They are more geared to the buy side.

Keith Housum: Okay, thank you.

Phil Snow: Sure.

That’s it. Thank you everyone and we will see you again next quarter.

Operator: This concludes today’s conference call. You may now disconnect.