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spk09: Good day and thank you for standing by. Welcome to the FactSet third quarter 2021 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. I would now like to hand the conference over to your speaker today, Rima Haider, please go ahead.
spk00: Thank you, Joelle, and good morning, everyone. Welcome to FACSET's third fiscal quarter 2021 earnings call. We continue to be in various remote locations today. We may have some audio quality issues, and we appreciate your patience should we experience a disruption. Before we begin, I would like to point out that the slides we will reference during this presentation can be accessed via the webcast, on the Investor Relations section of our website at factset.com. The slides will be posted on our website at the conclusion of this call. A replay of today's call will be available via phone and on our website. After our prepared remarks, we will open the call to questions from investors. To be fair to everyone, please limit yourself to one question plus one follow-up. Before we discuss our results, I will encourage all listeners to review the legal notice on slide 2, which explains the risks of forward-looking statements and the use of non-GAAP financial measures. Additionally, please refer to our forms 10-K and 10-Q for a discussion of risk factors that could cause actual results to differ materially from these forward-looking statements. Our slide presentation and discussions on this call will include certain non-GAAP financial measures. For such measures, reconciliation to the most directly comparable GAAP measures are in the appendix to the presentation and in our earnings release issued earlier today. Joining me today are Phil Snow, Chief Executive Officer, and Helen Shan, Chief Financial Officer and Chief Revenue Officer. And now I'd like to turn the discussion over to Phil Snow.
spk14: Thank you, Rima, and hello, everyone. Thanks for joining us today. I'm pleased to share our third quarter results headlined by strong top-line growth. This has allowed us to increase our organic ASV plus professional services guidance for this fiscal year. Building on last quarter's momentum, we grew organic ASV plus professional services by 5.8% this quarter. The investments made in both content and technology over the past seven quarters have strengthened our product portfolio. And as a result, demand for our solutions is increasing, further supported by our clients' own digital transformation needs. Our growth this quarter was strongest with wealth managers, banking clients, and asset owners. The acceleration in ASV reflects solid execution from the sales team, who increased wallet share with existing accounts, and further improved client retention. Our strategy to build the industry's leading open content and analytics platform continues to make an impact in the market. We remain on track with our multi-year investment plan. We continue to build out our content offering with particular focus on deep sector, private markets, ESG, and data for wealth managers. Growth in workstations this quarter was driven by deep sector and private markets data especially with banks and corporate clients. The expansion of our street account coverage in Canada and Asia, as well as more fund data collection, has generated greater demand from wealth managers. And clients are using our data management solutions, which include entity mapping and data concordance services, to manage their own content. These offerings are key differentiators, often sought by asset management clients. Our migration of the cloud is progressing as planned and gives us the opportunity to build new products that support ASV growth. One example is the advisor dashboard, which is being well received by wealth managers as evidenced by new wins and solid pipeline. Clients are seeking personalized tools like the advisor dashboard that can surface insights, increase efficiency, and help users identify the next best action. In addition, we provide greater flexibility to clients by further opening up our platform. Our broad API offerings allow clients to leverage core and alternative data sets, tap into our robust portfolio analytics engine, build digital portals, and gain access to proprietary signals. We have seen strong demand for our analytics APIs as well as fundamental company data APIs for CTS. We are also seeing more data sales through cloud-based platforms such as Snowflake, and having success with CRM integrations. This growth in our digital solutions can be attributed to our technology investments. Looking at our regions, I'm pleased to say that our ASV growth rate increased in the Americas and EMEA across the majority of our business lines. The Americas growth rate increased to 6% with strength across CTS, research, and analytics. Acceleration was driven primarily by strong workstation sales to our banking clients and an overall demand for premium and core data feeds. We've benefited from an increase in hiring at middle market and bulk bracket banks due to robust M&A and equity capital markets. EMEA's growth rate accelerated to 5%, improving over the past two quarters. We experienced stronger results in research and analytics reflected in part by higher retention of our asset management and wealth firms. In addition, we captured greater international price increases as clients continue to affirm the value of our solutions. AsiaPAC's growth remained at 9%, driven largely by research and analytics. Results include strong cross-sales to asset management firms, as well as increases to global banks, who are hiring more to accommodate increased capital markets activity. The region also benefited from higher price increases. In summary, we enter the end of fiscal 21 with good momentum and have good visibility into our fourth quarter. We have a strong pipeline weighted most heavily towards institutional asset managers, broker dealers, and wealth managers, and are increasing our organic ASV guidance to $85 to $95 million for this fiscal year. Overall, we are encouraged by market trends. Clients are showing more willingness to spend against the backdrop of anticipated economic recovery. Decisions on more complex deals that had been delayed are now beginning to be reconsidered as clients look to execute on their own digital transformations. We see increased demand for enterprise-wide technology upgrades and data management as CIOs and CTOs look to future-proof their technology stacks. This gives us conviction in the long-term benefit of our multi-year investment plan and our path to higher growth. This month marks FactSet's 25th year as a public company. I'm proud to reflect on our team's strong performance, the culture of continuous innovation we have fostered, and the significant value to shareholders we have created over the years. We will continue to push ourselves to create smarter, more adaptive, and more personalized solutions that make us the trusted enterprise partner for clients. I'll now turn it over to Helen, who, as many of you know, has taken over the leadership of our sales organization as Chief Revenue Officer while continuing to serve as our CFO. She will take you through the quarter in more detail.
spk10: Thank you, Phil, and hello, everyone. As you've seen from our press release this morning, we are pleased to report an acceleration in our top line, both in terms of revenue and organic ASV plus professional services. Our quarterly results also reflect increased year-over-year spending in people and technology. In line with our investment plan, as well as anticipated higher ASV performance. We believe the progress made in our own digital transformation is enhancing our ability to help clients do the same. I will now share more details on our third quarter performance and provide an update to our annual outlook. We grew organic ASV plus professional services by 5.8%, reflecting in part the client demand for our solutions driven by their own digital transformation needs In addition, our ability to realize higher pricing is a direct reflection of the value our products provide to clients. To that point, in line with the $14 million captured last quarter with the Americas price increase, we added $8 million from our international price increase this quarter. Our investments in content and technology have further strengthened our product offerings with clients, as reflected in both higher levels of client retention and cross-selling. Focused execution from our sales team in delivering key workflow solutions also accelerated our growth. All of these factors underpin our results year-to-date. For the quarter, GAAP revenue increased by 7% to $400 million. Organic revenue, which excludes any impact from foreign exchange acquisitions and deferred revenue amortization, increased 6% to $397 million. growth was driven primarily by our analytics and CTS solutions, which have been the drivers of ASV in prior quarters. As a reminder, ASV represents the next 12 months of revenue, so there is a lag between the recording of ASV and the realization of revenue. For our geographic segments, organic revenue growth for the Americas grew to 6%, EMEA grew to 5%, and Asia-Pacific to 11%. All regions primarily benefited from increases in our analytics and CTS solutions. GAAP operating expenses grew 12% in the third quarter to $282 million, impacted by a higher cost of services. Compared to the previous year, our GAAP operating margin decreased by 300 basis points to 29.5%, and our adjusted operating margin decreased by 390 basis points to 31.6%. As a percentage of revenue, our cost of services was 570 basis points higher than last year on a GAAP basis and 560 basis points higher on an adjusted basis. This increase is driven by higher compensation and technology costs. Compensation growth is comprised of higher salary expenses for existing employees, new hires to support our multi-year investment plan, and higher bonus accrual in line with stronger than anticipated ASV performance. This higher technology spend relates to our planned migration to the public cloud. We have been experiencing higher cloud usage and costs due to increased client trials, enterprise hosting, and new product development. We anticipate this level of elevated expenses to continue as clients adopt our digital solutions. SG&A expenses when expressed as a percentage of revenue improved year-over-year by 270 basis points on a GAAP basis and 170 basis points on an adjusted basis. The primary drivers include reduced facilities expenses, lower spend due to office closures, and a decrease in professional fees, offset in part by higher compensation costs, reflecting the same factors as noted in the cost of services. Moving on, Our tax rate for the quarter was 12% compared to last year's rate of 15%, primarily due to lower operating income this quarter and a tax benefit related to finalizing prior year's tax returns. GAAP EPS was almost flat to last year at $2.62 this quarter versus $2.63 in the prior year. Adjusted diluted EPS decreased 5% to $2.72. Both EPS figures were largely driven by higher operating expenses, partially offset by higher revenue. A reconciliation of our adjustments to GAAP EPS is included at the end of our press release. Free cash flow, which we define as cash generated from operations, less capital spending, was $122 million for the quarter, a decrease of 13% over the same period last year. This decrease is primarily due to higher capital expenditure from higher investment in internal software and the timing of certain tax items. For the third quarter, our ASB retention continued to be above 95%, and our client retention improved to 91%, which speaks both to the mission criticality of our solutions and the solid efforts and focused execution of our sales teams. We grew our total number of clients by 7% compared to the prior year to over 6,100 clients largely due to the addition of more wealth and corporate clients, including private equity and venture capital firms. And our user count grew 11% year over year and crossed the total of 155,000, primarily driven by wealth and corporate users. For the third quarter, we repurchased over 178,000 shares of our common stock for a total of $58 million and an average share price of $323. We also increased our quarterly dividend by 6.5% to 82 cents per share, marking the 22nd consecutive year that we have increased our dividend. We remain disciplined in our buyback program and committed to returning long-term value to our shareholders. The impact of our multi-year investment plan is reflected in our results. The demand for our strong content offerings, digital solutions, and open platform is accelerating growth. Given our strong performance this quarter and our confidence that we will execute successfully on a healthy pipeline as we close out the fiscal year, we are increasing our full-year organic ASV plus professional services guidance range to $85 to $95 million. We are also reaffirming the other metrics in our annual outlook. Given its timing and nature, an increase in ASV in the fourth quarter will not materially change revenue in fiscal year 21, but would result in a higher bonus accrual. The related expense would impact our margins by an incremental 60 to 75 basis points. We believe that we will remain within our stated annual guidance ranges. In closing, from the vantage point of now overseeing FactSet sales and marketing organization, I can attest to the diligent focus and efforts we have made this year. Helping clients leverage our offerings, building a stronger and broader pipeline and converting opportunities to sales. I have confidence in our ability to continue to execute on all these fronts and grow our market share as we finish the year. And with that, we are now ready for your questions. I'll turn it back to the operator.
spk09: Thank you. As a reminder, to ask a question, you will need to press star 1 on your telephone. To withdraw your question, press the pound key. Please stand by while we compile the Q&A roster. Our first question comes from . Your line is now open.
spk11: Yeah, thank you. Good morning. I just had one question, and that is, you know, it sounds like the end markets of your clients are, you know, pretty positive compared to what they were in the prior few years. And so I was just curious on what you are seeing on the competitive side. Is that, you know, our, you know, is it a budget of the clients increasing because of that? Is competition increasing? Just, you know, some overall dynamics there would be helpful.
spk14: Hey, Manav, it's Phil. Thanks for the question. So I'd say it's a combination of things. You know, we're really excited about the movement in our top line. And I attribute that really to the investments that we've made over the last year or two in both content and technology. So we're seeing a lot of good uptick in the research part of our business. And the digital transformation in terms of opening the platform is allowing our clients to consume value from FactSet in new and interesting ways. So the APIs are really driving some of the momentum we're seeing in both CTS and showing some strength now in the analytics business. And I do believe we're taking market share on the wealth side. I think it's pretty well understood who we're competing with there. And for the desktop business, that's a combination of firms. And analytics, again, it's a combination of firms. But overall, I feel really good about the top line and how we're stacking up versus the competitors in the marketplace. And overall, yeah, I think we're seeing that clients are, you know, we can all see a return to some sort of normalcy in terms of how we're working. And the underlying trends in the market are definitely positive.
spk11: I guess then just related to that, maybe can you just talk about your current pipeline and compare it to maybe the prior couple of years?
spk14: Sure. So, yeah, we've got confidence in Q4. We've booked more ASV at this time than we had last year, and we have a stronger weighted pipeline. So there's a higher confidence in the pipeline and a lot more bigger deals, and it's well distributed amongst all the different business lines.
spk11: All right. Thank you, guys.
spk09: Thank you. Our next question comes from Owen Lau with Oppenheimer. Your line is open.
spk05: Good morning. Thank you for taking my question. So the expense in the third quarter was a bit more than expected, and I think, Helen, you called out a couple of things like salary, bonus, and technology. But for the technology, could you please add a bit more color on, for lack of a better term, how much of that will be like one-time or non-recurring in nature? Sure.
spk10: Yeah, sure. I'm happy to talk about that, and thanks for your question. When we think about the higher cost in technology, I would say in part it's really driven also by higher cloud-related costs. And the drivers of the cloud costs include the migration of our existing data and applications, which is always planned, client-related activities such as hosting and trials, and then new product development as we're doing new products which is going directly to the cloud. We monitor these pretty closely, but we're learning along the way. And the cloud allows us to monitor our usage better. I would say most of the higher costs are really related to client activity and new product development. And I think that reflects the faster adoption, probably a bit faster than we had planned. So it's in line with clients who also need to make their own digital transformation. And so we would expect all of this to give us an indication really linked to future ASV growth as opposed to this year specifically. But I would say if we think about the higher costs on the cloud side, a portion of it is just related to future top-line growth.
spk05: Got it. That's very helpful. And then switching gears, I want to go back to True Value Labs, the Sustainable Development Goals Monitor. And I think the monitor is free, but could you please talk about how you're going to monetize this data set? Is it through DataFits or any other product? Thank you.
spk14: Yeah, hey, Owen. Yeah, so absolutely. We'll continue to sell the data feeds and APIs that True Value Labs had developed for the acquisition. And we've been doing hard work to get all of that integrated into the broader FactSet suite so that the True Value Labs data and analytics can be available throughout FactSet. So that's a big piece of the strategy.
spk05: All right, thank you very much.
spk09: Thank you. Our next question comes from Tony Kaplan with Morgan Stanley. Your line is open.
spk01: Thank you so much. I wanted to ask about the 8% sell-side growth in the quarter. Was there anything particular to call out there? Was it more a couple of client wins, or was it more broad-based? And you mentioned the more willingness to spend by clients, so that seems positive. So just wanted to hear about your visibility into the new hiring class as well at the banks. Thank you.
spk14: Sure. So, yes, it is broad-based, Tony. I think we've seen the benefits of hiring this far into our fiscal year, and a lot of that is really driven by the investment that we've made in content and the core platform to support the extra workstations. There are still quite a few large banks that we don't have perfect visibility yet on their hiring classes, and those are going to come in in the next month or two. But we feel optimistic about that just given the trends that we see in the market. So a couple of other things I'd point out for the sell side. One is we're beginning to monetize feeds and analytics in the sell side, which previously we'd not done much of. So that is supporting some of the growth. And then in terms of new logos, we're positive this quarter for sell side firms, whereas Q3 of last year we were negative. So we've seen a good relative, even though we've closed more corporate and wealth clients, we're seeing good relative performance in terms of new logos for the cell site.
spk01: That's great. And now that you're seeing things sort of normalize a little bit, can you just give us an update on if you've changed your thinking at all on the transformation targets in terms of either magnitude or timing, you know, just any sort of extra color from those targets that you had previously laid out before COVID? Thanks.
spk14: So you mean the three-year targets that we laid out?
spk01: Yes, yes.
spk14: Yeah, we're, I think, as we said last quarter or maybe a couple of quarters in a row, we're not going to revisit those right now. But when we get to Q4, you know, we'll be able to give you some guidance like we do every year for fiscal year 22.
spk01: Fair enough. Thank you.
spk09: Thank you. Our next question comes from Andrew Nicholas with William Blair. Your line is open.
spk15: Hi, good morning. I wanted to follow up on the strong sell side, ASB growth a little bit further, specifically curious how much you would attribute that acceleration to the deep sector rollouts and maybe what's the reasonable expectation for the timing of new deep sector rollouts going forward or anything else you can share on areas of focus there?
spk14: I would definitely attribute some of it to that. We had one significant win that was related to deep sector. And we're on track with that program. So the team did a tremendous job of laying out over a three-year period a number of sectors that we would be developing. And we're on track with that program. So seven quarters into it, we feel really good about the momentum there. We've done a lot of hard work to partner with a lot of firms to bring their data and integrate it into FactSet, which is something we always do really well. And then for other data sets, we're going out and collecting it ourselves. So overall, we're really thrilled with that program. The team's done an amazing job, and it's beginning to have a real impact for us on the sell side. But it's not just the sell side. We will be able to monetize this data within the corporate space, you know, within the buy side as well.
spk15: Got it. Makes sense. And then for my follow-up, I know you touched on it here and there in the answers to other questions, but just maybe broadly speaking, if you could update us on the selling environment right now. You've talked in past quarters about lengthening of the sales cycles and analytics, some longer implementation cycles. So any changes there over the past couple months as things have kind of picked up momentum or anything to call out there on a relative basis? Thank you.
spk14: We're beginning to see some real positive signs there for analytics. So I think if you look at that space for our competitors as well, I think it was an area that slowed down for many firms. But we've had a good quarter for analytics, and the pipeline looks really strong. So they've got a really good suite there of things we've been working on. So the core PA product is actually doing well. We're adding new logos and seats for that. I mentioned APIs already. We have a new quant research environment that we're releasing, which has gotten tremendous feedback from the market. And our front office solutions are beginning to show some green shoots as well. So analytics is definitely stabilizing, and clients are willing to now revisit a lot of these decisions for some of these longer sales cycles deals. And obviously, clients are beginning to open up. We are as well as a firm. I think the sales seems itching to get back out there.
spk15: Thank you.
spk09: Thank you. Our next question comes from Hamza Mazzari with Jefferies. Your line is open.
spk16: Hi. Thanks for taking my question. It's actually Ryan Gunning filling in for Hamza today. First, could you just talk about how you're thinking about your pricing model today and whether you believe enterprise-wide versus seat-based is better and how your model currently works? Sure.
spk10: Ryan, I'll take that question. This is Helen. So I think we have a pretty good mix. We do both in some cases seat-based and other cases usage-based. On our larger deals, larger clients where you would see more perhaps of an enterprise pricing model, we do that, but we do that via bands. So therefore, if the users go up or down within the band, the pricing is the same. Then if they go to the next tier, it goes up. So I would say for our largest clients, that's how many of them are set up. Again, it's a blend of, in some cases, usage, but in other cases, users. And we've seen good growth. We can tell from the pricing increases that we've had. Our annual price increase, again, for international is up. So we've been able to capture more of that value that the clients have put into our product. So we would continue to see our mix there be sustainable.
spk16: Got it. That's very helpful. Thank you. And then I guess switching gears, can you give us an update on how you're thinking about larger scale M&A? Obviously, we've seen a good bit of deals in the info services space more recently, but any update there?
spk10: Sure. I'll take that one. As it relates to larger deals, we don't comment on that. As you know, as we've talked about, our focus has been on content and technology. We look to where we think we've got the best use of perhaps gaps that we can help fill in. So we always look at buy versus build versus partner. In terms of acquisitions, we just completed a small one that's called Cabot Investment Technologies, which provides a platform for more behavior-based analysis and targeting asset managers and asset owners. So while it's small, it really fits into our strategy as it relates to the front office and it relates to helping, as Philip talked about in his opening remarks, of making that next best decision. So we're going to be very disciplined in how we're approaching the potential acquisitions that are out there, even though we are looking at all of them as they come through.
spk16: Great. Thank you so much. Thank you.
spk09: Thank you. Our next question comes from Alex Cram with UBS. Your line is open.
spk13: Yes, hello everyone. Just a couple of things on the margin side. First of all, Helen, you made that comment at the end there about the fourth quarter, I think 60 to 75 basis points. Was that relative to what we just saw in the third quarter or how would you characterize that 60 to 75? Right.
spk10: So the way I think about it is really 60 to 75 for the year. So in this particular quarter, because once we had greater visibility, Alex, into where we would see where we anticipate for the year, then we had to both true up for the first half as well as increase for Q3. But what I wanted to give was what is that impact for the entire year? We would say it's somewhere between, we think, 60 to 75 basis points depending on where we end up. And that is based not only on top line but also on margins.
spk13: Okay. So it should be reflected in the run rate, if I heard you correctly now, because you've started to true up. Right. Okay. And then secondarily, also a very quick one, you talked about the cloud and the cost associated with that. It sounded very much like this is spent to grow, but I thought I was also under the impression that there were some duplicate costs as you've been migrating to the cloud and Just can you remind us, are there still duplicate costs today? If there are, when are they – I mean, how big are they and when are they supposed to tail off? And would you just reinvest those savings eventually, or would you actually expect that to flow to the bottom line if there are savings to be realized? Thank you.
spk10: Yeah, sure. Happy to answer that. So our cost is related to the cloud. I would say a portion of it is part of our investment plan, and you're absolutely right. It is a duplication that's happening. because we are not able to get out of our on-premise data center costs at this point. Now, the way that we've looked at it is that is meant to drop off as we complete our total migration. So that will drop off, we think, towards the end of FY22 or the end of our third year. That's where it was meant to happen. And at that point, we'll make the decision around, as those drop off, whether or not any portion of that gets reinvested. But that is part of the savings that we would have expected going forward as well. We've not really talked about the dollar for dollar, but most of this is, as I said, the increase in the spend on the cloud is really, to your point, client-related.
spk13: All right. Fair enough. Thank you very much.
spk09: Thank you. Thank you. Our next question comes from Kevin McVeigh with Credit Suisse. Your line is open.
spk07: Great. Thanks. Ethel, you talked about kind of demand for open content and analytics, fueling growth. as your clients are pursuing digital transformations. Is there any way to frame what the potential market for that can be as it relates to fact set? And is it, you know, can it shift the organic growth 100 basis points or just, you know, is there a way to just maybe tighten that comment up, particularly around the digital solutions, kind of the current and how you see that playing out over time?
spk14: Yeah, I mean, I think the I mean, we're playing a big market today, right? So I think it's at least a $30 billion market that FactSet participates in. And the trends definitely are moving to clients, you know, putting together, I think, more customized workflows for themselves using open technology stacks. So I think it's really just an evolution, honestly, of how clients consume content and analytics today and our strategy today. we believe strongly is the right one in terms of creating these Lego blocks that clients can then use to stitch together to differentiate themselves from their competitors. So those are the conversations we're having with our clients. The workstation is not going away. I think there's always going to be a place for that in the market. But the firms that are going to win are the ones that are being able to plug in as needed for the clients across their entire workflows, whether it's buy-side, sell-side, wealth, you name it.
spk07: helpful and then just anything to call out it seems like the asv retention was around 95 but you saw some nice improvement on the client retention any dynamics to call out there just around retention client relative to asv overall i just think it speaks to the strength of our product the investment we've made and how well the sales team has been executing we're
spk14: interacting more and more with our clients, the virtual environment in some way has upped the amount of interactions we have with them. So I think it just really speaks to the product and the fact that clients like working with us.
spk07: Great. Thank you.
spk09: Thank you. Our next question comes from Shlomo Rosenbaum with Stiefel. Your line is open.
spk04: Hi. Thank you for taking my questions. Hey, Helen, can you talk a little bit more about some of the costs for the client trials? Are those increased people costs, increased technology costs? How does that work? It seems like it's a precursor to future revenue to come. And I thought maybe you could discuss that a little bit and then have a follow-up.
spk10: Sure. Happy to do that. So I would think the majority of that is more along the technology costs. One of the nice things around the trials and the data exploration in an odd way, it shortens the sales cycle. So what used to take much more time and involvement with our sales or implementation folks now can be done in a matter of hours versus weeks or months. And so I would say in some ways there's people who help on that front, but the cost driver to your direct question is much more on the technology side.
spk04: Okay. So is it like hosting costs? I'm sorry, I'm just on the same subject. Sorry, I should be clear.
spk10: Yes, it is more around the hosting, the cloud costs.
spk04: Okay, very good.
spk10: Yeah, the cloud both for data as well as for computation. But it is cloud.
spk04: Got it. And then, you know, so I'm assuming that, you know, those are good things that can lead to future revenue growth. I mean, that's the way that we should be looking at that, just to finish up that question.
spk10: Yeah, I think that that is. I mean, the higher activity, the more they're checking out the different various feeds. We're seeing that lead to more, even if they're looking at alternative data feeds on our open fact set, they often end up buying our own data feeds. So I would say that is a feeder into that.
spk04: Got it. Okay, then one other thing, just kind of a housekeeping item. It seems like there's some kind of reallocation of revenue amongst the segments in the last year quarter. When I go back and what's in the press release for Americas versus Asia PAC, the revenue is much higher in the prior year. What's being reported now in Americas and less in the other two. Is there a Was there something that prompted that reallocation or was there something that was talked about that I missed over the last couple quarters?
spk10: You're saying the actual dollars? Yeah, if you look at the dollars, you've got... Go ahead. You finish your question. Sorry.
spk04: No, I was just going to say, if you look at the dollars as what was reported in, let's say, America's last year in the 10Q, it was, you know, like maybe $7.5 million lower than what's now. And the other ones were higher, and it seems to be reallocation. Did something also change for the fourth quarter? I'm just trying to figure out for modeling how I should be handling this.
spk10: Sure. Sure. No, thank you for that question. Yes, there are some things that were reclassed in part due to where the client's are based. Rima can give you much more detail on that, but that is a reclassification.
spk04: Okay. And that's something that's going to be for the fourth quarter as well, that the year-over-year comp is going to be different than what we saw, you know, if you take out the K and you subtract the first three quarters from it?
spk10: I'm going to say yes because of the way that the movement of these are existing clients that move. But, again, if you spend a little time with Rima, she can talk you through it.
spk04: Thank you.
spk09: You're welcome. Thank you. Our next question comes from George Tong with Goldman Sachs. Your line is open.
spk03: Hi, thanks. Good morning. I wanted to follow up on the margin question earlier and the impact of higher bonus accruals. The 60 to 75 bps of margin impact full year, can you clarify if that's relative to your original margin expectations for fiscal 2021, which would imply you would land in the bottom half of your guidance range and perhaps discuss if there are any offsetting factors to the upside that might mitigate that impact?
spk10: Sure. Thanks for your question. So, yes, the impact for the year is higher. So the 60-75 would have been beyond what we would have provided in terms of our original plan. There are offsets as we manage both from a people perspective, some of the productivity, lower professional services fees that we think. And we'll see how Q4 ends up, but We had expected a certain level of T&E for Q4, and we'll see where that goes. We do think from a margin perspective, though, overall, we'll be on the lower end of our range. So I think that that is a fair way of thinking about it. I would also add what we're seeing come through that likely on the tax rate side, we'll be on the lower end as well. So we should take both of those into, you know, a bit of consideration.
spk03: Got it. Very helpful. And then you're continuing to invest in content and technology. Earlier I believe you had mentioned plans for the full year of about $25 million, $26 million. Can you talk about your plans over the next 12 months? You had laid out a three-year investment plan where it's $15 million on average per year. So how is that shaping up? Do you think your three investments might be similar or would it step down from this year's levels?
spk10: Yeah, so as Phil had alluded to earlier, we'll give greater guidance on this later on after Q4. Our focus right now is obviously trying to execute and convert everything for this fiscal year. I will say the way to think about it, our investment plan is, in terms of what we gave in the beginning two years ago, we're on target, both milestones as well as in general spend. That being said, the cadence, the mix, May, the hiring, which was slower in the first year, caught up mainly in the second year, but some of that might bleed into the third year. But we'll give more guidance on that when we complete the year and have our call next time.
spk03: Got it. Thank you. Very helpful. You're welcome.
spk09: Thank you. Our next question comes from David Chu with Bank of America. Your line is open.
spk02: Hi. Thanks. So when you guys first launched the accelerated investments, I think, Helen, you noted 25% of revenues should benefit should be in year two with like 75% in year three. Is this still the expectation or have you seen some of it pull forward given it seems like it's really helping the ASV growth?
spk10: Thanks for your question. I mean, we do think in general that we'll see more of the benefit in the third year as things are built. As Phil talked about, a lot of what's underpinning Some of the acceleration is on the technology and cloud-based side. So it's a little hard to point to any particular dollar or deal. I think we're still in that general range, as I had given before, that most of it's coming in the third year. But, yeah, we're really pleased at where we are at this point, given the higher ASV growth thus far.
spk02: Okay, great. And then? Just on employee headcounts, it looks like it was up about 6% over the past 12 months. That's the true value. It sounds like that's slightly down from the last quarter, about like 7.5%. So just thoughts on how should we think about that over the next year or so?
spk10: Yeah, I think we've continued to do a lot of hiring for the investments and this churn that's happening as well. So I think that's a fairly – I mean, we have a general cadence here. that you'll see by quarter, so I wouldn't necessarily apply. I would say it's on par from the previous year for this quarter, so I would expect to see that continue.
spk02: Okay, great. Thank you.
spk09: You're welcome. Thank you. Our next question comes from Keith Halsum with North Coast Research. Your line is open.
spk06: Good morning. Helen, I was hoping you could provide a bit of context. You know, it's obviously been four quarters in a row now where you guys have benefited from lower facility costs and T&E. How much is that benefiting operating margins, this quarter, and how do we think about that going forward as you guys resume, you know, back to, I guess, a more normalized world, however that normalized world is going to be?
spk10: Right. Thank you for the question. Yeah, you know, it's one of those where when we first set our guidance, we were thinking around the fact that the back half of this year, we would be much more, I'll call it back to whatever that new normal is. So we didn't expect an uptick. We didn't see that come in Q3, but we're also lapping. So I think on a go-forward basis, when we think about the amount of savings on a run rate, it'll be somewhere in that, call it 25 to 50 basis points based off of our FY19 run rate. We can't look at last year in particular. So that's how I would think about that. The hybrid model allows us to manage our facilities footprint and expenses much better. And honestly, the learnings from operating virtually in terms of client interaction, implementation, which we can do remotely now, as we've shown in several of our larger wealth implementations, and internal meetings are just going to allow us to have that much more productivity.
spk06: Okay, I appreciate it. And then just as a follow-up and changing gears on you, congratulations on the move over to the CRO role. I guess any thoughts now as you approach the Chief Revenue Officer position in terms of the direction of the sales department and the marketing strategy? I guess any thoughts on the move over?
spk10: Yeah, no, thanks for that. I'm really pleased and honored to be able to take on this role. The nice part is we've got a really talented sales organization and a solid leadership team. And so I think our FY21 results to date reflect the focus execution in what still remains to be a challenging, albeit somewhat improving environment. And so from my perspective, you know, the areas that we'll look to accelerate our efforts will be on the solutions that we bring to market from our investment plan, so ESG, wealth analytics, private markets, and to increase the wallet share in our targeted clients. I think we talked a little bit about retention earlier, but expansion has been a big driver for us this year, and we're just selling more things to our existing clients. And then lastly, the focus will be more also on the enterprise discussion with senior executives senior executives. Our aim is to really provide our platform for their own digital transformation. So I don't look at major changes as much as really enhance what we've got going on thus far.
spk02: Great. Thank you. Good luck.
spk09: Thank you. Thank you. Our last question comes from Craig Hoover with Hoover Research Partners. Your line is open.
spk12: Great. Thank you. Can you just clarify a little bit further your costs for the May quarter, they look like they're up about $9 million or so as I look at them versus the February quarter. Was there anything of one time in nature? Just go through that a little bit further that we should think about as you try to think about cost for the August quarter. I can see your guidance for margins, but is there anything one time in nature to call out here that won't repeat, like a catch-up for accruals instead of comp?
spk10: Thank you. The largest piece of that, so thanks for your question, the largest piece of that really is compensation. So Compensation meaning the bonus accrual. So we had to do a catch-up from the first half of the year. But now that we have greater visibility to where we'll end, I mean, we are a pay-for-performance culture. So if we expect higher performance, then we will increase our bonus accrual as a result. So that's what you're really seeing in Q3. And that, again, reflects both the catch-up as well as the higher accrual for the quarter.
spk12: Are you able to quantify that for us?
spk10: I think that's what I said for the year. It's around 60 to 75 basis points for the year. If we had not had the improvement in – if we did not add in the bonus accrual, the increase, that would have been 150 basis points for the quarter. Okay.
spk12: Okay, then my other question, please, that 10 to 15 million higher expectation for ASV organic growth for the year. Is there a way for you to break down that within the segments or revenue where the extra 10 to 15 million might come from as you look at it, please?
spk14: Yeah, we don't, I don't think we typically do the segments by quarter, but we are, you know, we've seen very good momentum within the research business this year. So I think I would expect research to have a very strong quarter The CTS business, the feed business, is doing really well, particularly as we go to digital. There's just more ways to monetize the data. I spoke about analytics showing some stabilization there. And then on the wealth side, we see a pretty strong pipeline there in terms of some exciting deals. So I would just say it's pretty broad-based.
spk12: Great. Thank you.
spk09: Thank you. I'm not showing any further questions at this time. I would now like to turn the call back over to Phil Snow for closing remarks.
spk14: Thank you all for joining us today. We look forward to speaking with you again next quarter. In the meantime, please call Reema Haider with additional questions. Operator, that ends today's call.
spk09: This concludes today's conference call. Thank you for participating. You may now disconnect.
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