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spk01: Ladies and gentlemen, thank you for standing by, and welcome to the FACTSET 4th Fiscal Quarter 2021 Earnings Conference Call. At this time, all participants are on a listen-only mode. After this speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press the Start and the 1 key on your touchtone telephone. Please be advised that today's conference may be recorded. If you recall all participants, please press Start and 0. I would now like to hand the conference over to your speaker host today, Rima Haider. Please go ahead.
spk00: Thank you, and good morning, everyone.
spk10: Welcome to FACSET's fourth 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 encourage all listeners to review the legal notice on slide two, 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 gap 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 Chan, Chief Financial Officer and Chief Revenue Officer. And now, I'd like to turn the discussion over to Phil Snow.
spk13: Thank you, Reema, and good morning, everyone. Thanks for joining us today. I'm pleased to share that we delivered strong fourth quarter and full year results. We ended the year with record organic ASV plus professional services growth of $68 million for the quarter, crossing the $100 million annual ASV threshold for the first time and soundly beating the top end of our guidance. Our year-on-year organic ASV growth rate accelerated 200 basis points to over 7%, and we delivered annual revenue of $1.6 billion, an adjusted EPS of $11.20. Our outperformance was driven by two years of planned, accelerated investment in content and technology, which is paying dividends. FactSet's goal to be the leading open contents and analytics platform is resonating in the marketplace and increasing our wallet share with clients. Our targeted investment in new content sets was a significant ASV driver in fiscal 21 and fueled our workstation growth. The continued development of our deep sector coverage improved sell-side retention and expansion with our largest banking clients and helped secure a new business. Content and technology were both key to our expansion with wealth management firms where we landed important wins, including with the Royal Bank of Canada and Raymond James Canada. These wins were due to our market-leading data and the launch of FactSet's Advisor Dashboard. We are also expanding our addressable market by increasing our content and delivery capabilities across the front, middle, and back office. We added meaningful ASV from our cloud and API solutions this year, including delivering more data through the cloud and cloud-based platforms, entity mapping and linking client data through our data management services, or DMS, and unlocking opportunity in new workflows by unbundling our components to plug and play into other third-party systems, such as CRMs. Cloud delivery coupled with the strength of our DMS and concordance as a service, solutions enable our clients to centralize, integrate, and analyze disparate data sources for faster and more cost-effective decision-making. This has been a major driver for our CTS business. As we look ahead to 2022 and beyond, we remain focused on three things. Scaling up our content refinery to provide the most comprehensive and connected set of industry, proprietary, and third-party data for the financial market. Two, enhancing the client experience by delivering hyper-personalized solutions so clients can discover meaningful insights faster. And third, driving next-generation workflow-specific solutions for asset managers, asset owners, sell-side wealth management, and corporate clients. We added new data and capabilities to further these goals by acquiring differentiated assets over the past year. The addition of True Value Labs has grown our ESG offering. BTU Analytics advanced our deep sector content for the energy markets, and Cabot Technologies will better support the portfolio analytics workflows of asset managers and asset owners. The progress we have made on our investment plan along with these acquisitions and our award-winning products give us a distinct competitive advantage. Turning now to our financial results, we accelerated our organic ASV plus professional services growth to 7.2%. Our strong performance was driven by stellar execution from our sales and client-facing teams throughout the entire year and especially in the fourth quarter. Our buy-side and sell-side growth rates increased 100 and 400 basis points respectively since the third quarter, reflecting higher sales across our key clients. On a year-over-year basis, we saw an increase in ASV growth rates from high single-digit to double-digits across banks, asset owners, hedge funds, data providers, wealth managers, and corporates, including private equity and venture capital firms. We capitalized on the strength of our end markets, particularly in banking, and landed several large deals in our wealth and CTS businesses. Turning now to our geographic segments, we saw acceleration in every region. ASV growth in the Americas rose to 7% in the fourth quarter, driven primarily by increased sales to our banking, corporate, and wealth clients. We also had a large data partner win this quarter in CTS. AsiaPAC had a record ASV quarter and delivered a growth rate of 12%. We saw wins across many countries with global and regional banks, as well as our research management products. CTS and analytics also contributed to growth with wins across asset managers and data providers. EMEA accelerated to a 6% growth rate driven by strong performance with data providers, asset managers, and banking clients, and CTS had the highest contribution to this region, followed by research. Now turning to our businesses. Research was the largest contributor to our ASV growth this year with a growth rate of 6%, driven by very strong growth on the sell side at 12%. We increased research workstation users by 86% this quarter versus a year ago with growth across both sell-side and buy-side clients. Increasing our workstation presence and footprint with our largest clients positions us very well for cross-selling opportunities in the future. Analytics and trading accelerated in the second half in fiscal 2021 versus the first half, ending the year at a 6% growth rate. We saw wins across performance and reporting, front office, and core analytics solutions. Within front office solutions, we are really pleased to see larger wins with our trading platform and believe this will be a contributor to analytics going into next year. CTS grew 16% driven by core company data and data management solutions sold through an increasing number of channels. CTS had robust sales to data providers this year, and expanded their footprint across multiple workflows within middle and back office functions at asset management and banking clients. Additionally, while all True Value Labs ESG sales are excluded from our organic numbers, I'm pleased to report that ESG data sales were a contributor to CTS's overall growth this quarter. Wealth ended the year with a 6% growth rate. Wealth workstations grew 24% year over year, And they, alongside FactSet's advisor dashboard, have been the biggest contributors to winning new clients. We've seen a combination of large and medium-sized wins as existing clients continue to expand their advisory businesses, and we are equally pleased with our new business wins. We are also seeing cross-selling opportunities with analytics products as wealth managers increasingly look to advance the sophistication of their offerings. Moving forward with fiscal 22, we will report three workflow solutions. We are combining the desktop portion of the wealth business with research into one business to be known as research and advisory. We believe this is the right strategy to further our goals to holistically manage our desktop solutions, accelerate the build-out of differentiated front office solutions, and facilitate the global expansion and adoption of street account news and facts at web. We have also taken the wealth digital business and combined it with CTS to better align our digital solutions. In summary, we are entering fiscal 22 with strong momentum and a solid pipeline as reflected in our annual ASV guidance. The need for more differentiated content and analytics is at an unprecedented high, and we are perfectly positioned to capture this demand and poised to deliver best-in-class workflows and a hyper-personalized experience for our clients. I'm proud of our company's strong performance in fiscal 21. We have advanced our digital platform, executed at a high level, and strengthened our relationship with clients. I'll now turn it over to Helen, who for the last time as CFO will discuss our fourth quarter and full year performance in more detail and take you through our fiscal 2022 guidance. I want to thank Helen for leading our global finance organization the past three years. And I'm confident that as our chief revenue officer, she will bring a disciplined, growth-oriented mindset and the same rigor to the sales organization as she did leading finance, enabling us to continue our success going forward.
spk09: Thank you, Phil. And hello, everyone. I'm happy to be here with you today, and I hope that we will continue to engage even after I fully transition to my sales role. Like Phil, I want to congratulate FactSetters around the world for achieving outstanding results in fiscal 2021. While we have continued primarily to operate remotely, I am so impressed with the resilience with which our FactSet teams are able to serve our global clients. Our 7% top-line growth this year is a testament to the hard work of our teams and validates our strategy to invest in content and technology capitalize on market trends, and address client needs. Throughout this fiscal year, we accelerated our growth rate in ASV plus professional services through consistent conversion of our pipeline, delivering over 100 million in ASV growth and surpassing our most recent guidance for the year. Full-year revenue also exceeded our target as we realized more revenue from ASV booked early in the fourth quarter. We generated solid earnings through disciplined expense management and operating leverage. Driving sustainable long-term growth requires continued investment back into the business, as reflected by our increased spend on differentiated content and cloud-enabled technology. We executed our plan well, and our operating results are in line with expectations due to higher revenue and productivity gains. with higher adjusted operating income and growth in adjusted EPS. Let me now walk you through the specifics of our fourth quarter. Before I explain the quarterly results, I want to remind everyone that our prior year fourth quarter GAAP results were impacted by a one-time non-cash charge of approximately $17 million, related to an impairment of an investment in a third party. Thus, any year-over-year comparison of GAAP operating results for the fourth quarter of 2021 should take that into consideration. As you saw on the previous slide, our organic ASV plus professional services growth rate was 7.2%. This increase reflects the higher demand for our solutions as clients execute on their own digital transformations. Our success in solving the workflow challenges has resulted in higher levels of both client retention and cross-selling activity. For the quarter, GAAP revenue increased by 7% to $412 million. Organic revenue, which excludes any impact from foreign exchange, acquisitions, and deferred revenue amortization, also increased 7% to $410 million. Growth was driven by our analytics, CTS, and research solutions. For our geographic segments, organic revenue for the Americas grew to 6%, EMEA grew to 7%, and Asia Pacific to 12%. All regions primarily benefited from increases in our analytics and CTS solutions. Gap operating expenses grew 3% in the fourth quarter to $293 million, impacted by a higher cost of services. Compared to the previous year, our gap operating margin increased by 320 basis points to 28.9% and our adjusted operating margin decreased by 150 basis points to 31.6%. As a percentage of revenue, our cost of services was 10 basis points higher than last year on a GAAP basis and flat to last year on an adjusted basis. The increase is primarily driven by growth and compensation comprised of higher salary expenses for existing employees, new hires to support a multi-year investment plan, and higher bonus accrual in line with stronger than anticipated ASV performance. SG&A expenses, when expressed as a percentage of revenue, improved year-over-year by 330 basis points on a GAAP basis, but increased 170 basis points on an adjusted basis. The primary drivers include higher compensation costs, reflecting the same factors as noted in the cost of services. Moving on, our tax rate for the quarter was 15%, higher than the prior year's tax rate of 7%, primarily due to lower tax benefits associated with stock-based compensation in the current quarter, as well as a tax benefit related to finalizing the prior year's tax returns. GAAP EPS increased 15% to $2.63 this quarter versus $2.29 in the prior year. Again, this improvement is primarily a result of the impairment charge we recorded in the fourth quarter of 2020. Adjusted diluted EPS remained flat year over year at $2.88. Adjusted EPS was driven by higher revenues, offset by higher operating expenses, and an increase in the tax rate. 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 $171 million for the quarter, an increase of 18% over the same period last year. This increase is primarily due to higher net income, improved collections, and the timing of certain tax payments. For the fourth quarter, our ASV retention remained above 95%, and our client retention improved to 91%. which again speaks to the demand for our solutions and excellent execution by our sales team. Compared to the prior year, we grew our total number of clients by 10% to over 6,400, largely due to the addition of more wealth and corporate clients. And our user count grew 14% year over year and crossed the total of 160,000, primarily driven by sales in our wealth and research solutions and in particular in the number of banking users. For the quarter, we repurchased over 265,000 shares of our common stock at a total cost of $93 million with an average share price of $348. For the year, we repurchased 265 million of our shares and increased our dividend for the 22nd consecutive year. With share repurchases and dividends on an annual basis, we have returned to shareholders almost 70% as a percentage of free cash flow and proceeds from employee stock options. We remain disciplined in our buyback program and committed to returning long-term value to our shareholders. Turning now to our outlook for fiscal year 2022, we delivered outstanding results in the back half of 2021 and believe this pace will carry into our next fiscal year. For organic ASV plus professional services, we are guiding to an incremental $105 to $135 million. The midpoint of this range represents a 7% increase, which is equal to this year's organic growth rate, reflecting continued momentum in our business. We are confident in our ability to perform at the high standard we demonstrated in FISCO 21 with underlying drivers to include discipline execution and continued benefits from our investments. We expect growth to be driven largely with existing clients through high retention and cross-selling. In addition, we expect our ability to successfully sell new business in this virtual environment to continue. Our recent investments in digital and content are providing us with more opportunities to sell direct solutions tailored for specific workflows. Drivers of future growth would include, first, the retention and expansion of our sell-side client base through our deep sector strategy as we launch new targeted industries in addition to new private markets offerings. Second, new wins with wealth managers who have been responding well to our web-based workstation and personalized advisor dashboard. And third, growth with institutional asset management clients who benefit from our data management solutions and enhance capabilities in front office and ESG workflows. We are mindful about the global environment and potential future market disruptions, but we believe we have the right offerings and strategy to maintain our high performance and growth rate into fiscal 2022. From an operational perspective, we plan for continued labor productivity and operating leverage. In addition to our multi-year investment plan, New investments will be made in content and front office solutions, funded in part by ongoing cost discipline, including permanent savings related to the pandemic and additional efficiency actions. As a result of higher growth in revenues and continued cost discipline, we are guiding to an expansion in our operating margins. Combined with our consistent use of capital for share repurchases, we expect to accelerate growth in our diluted EPS, both on a GAAP and adjusted basis. We are seeing the results of our investments take hold in both technology and content. As we look to fiscal 2022, we are focused on delivering more value to clients, prioritizing our resources, and ensuring execution excellence. As I transition to my new role, I am seeing firsthand the experience and skills of our sales team adapting to meet the needs of the market. Our client-centric mentality, combined with our expanding data universe and digital advances, provide me with the confidence that we have the people, strategy, and product to build a leading open content and analytics platform in our industry, all while generating long-term value for our shareholders. With that, we are now ready for your questions, and I'll turn it over to the operators.
spk01: Thank you, ladies and gentlemen. If you'd like to ask a question at this time, you will need to press the start and the one key on your touch-tone telephone. To withdraw your question, press the pound key. In fairness to all participants, please limit yourself to one question and one follow-up. Please stand by while we compile the Q&A roster. And our first question coming from the lineup, she's Sabudra with RBC Capital Market. Your line is open.
spk14: Thanks. Congrats on such a solid quarter and impressive guidance. My question more on the research side, this is the first year where we've seen such a massive acceleration to 6%, as you mentioned, your deep content as well as technology transformation bearing fruit. I was wondering if you could provide more color. It looks like it's been driven by new events, client retention, but if you can just talk about How do we think about this research and advisory growth going forward? Is that kind of growth sustainable given your deep sector strategy? Thanks.
spk13: Hi, Ashish. Yeah, thank you for the question. Yeah, we're very pleased with how our research business performed this year. Clearly, we had very good performance on the sell side, and the investment that we made in new content really helped drive new logos, expansion of existing clients, and help with retention. Yeah. That was a big driver on the sell side. However, the research business grew at a healthy clip in lots of different firm types. So we did very well on a relative basis to last year with institutional asset management. We did well with corporates, hedge funds, a number of different firm types. So it was pretty broad-based. You can see that we grew our workstations by I think 14% over the last year. So just getting that footprint is really important for us moving forward to cross-sell. We closed lots of new logos. So my hats off to the research team. They've done an amazing job and just really a monster quarter from the sales team in terms of going out and executing on all the opportunities we had in front of us.
spk14: That's very helpful, Keller. Thank you. And maybe just a question on margins. Again, great to see margin expansion despite the investments. And my question was more over the midterm. As you retire your data center, first the question is, are you still on track to retire the data centers by end of fiscal year 22? And how should we think about the cost savings as you get rid of some of the redundant cost and get back to a more normalized investment cycle? Thanks. Thanks.
spk09: Helen Williams Hi, it's Helen. Thanks for that question. Yes, as it relates to the status of our investment plan, we remain on track. We're obviously being able to, as we've talked about in the past, to be doing our transformation and transition to the cloud, and that remains on track as well. And so we do expect to complete most of what we expected to get out of the data centers by year end, but obviously we'll see how the year progresses, but there's nothing right now that changes our view.
spk14: That's helpful. Thanks again, and congrats on the solid quarter.
spk09: Yeah, thank you.
spk01: And our next question coming from the lineup, Kevin McVeigh with Credit Suisse. Your line is open.
spk06: Great. Thanks so much. And let me add my congratulations as well. Hey, for 22, the guide, can you unpack maybe a little bit, Helen, how are you thinking about new logos versus additional client offerings? And then just any thoughts as to the client retention? Because, again, you're seeing a lot of success across multiple vectors. So just try to get a sense of, you know, the buildup a little bit.
spk09: Yeah, happy to do that. Thanks for your question. So we've been very pleased with the way we've been able to execute. Honestly, as we think about from a year ago to now, I think what has been extremely beneficial to us is our ability to grow with existing clients. So in the past, we've talked about two-thirds of the growth comes from existing, one-third from new. If we take a look at how the year actually progressed, we actually saw, with existing clients, the ability between retention and expansion to be nearly three-quarters of it. That doesn't mean that new business didn't grow. In fact, it grew at the same pace as in the past, Kevin, but what we saw was our ability from many of our investments to really resonate with our existing and even our largest clients. So we do look at new business going forward, continuing to do well. If I think about the course of the year, We actually had more in terms of volume. The average transaction price might be a bit lower, but we made that up from volume, and I think that just reflects the virtual environment and the situation that we're in. But it continues to be a key part of our overall growth.
spk06: That's great. And then just real quick, it looks like in September, Snowflake announced a new solution, the Financial Services Data Cloud. That probably brings more leverage in terms of what you're doing with them, but Any updates as to how that impacts kind of the existing partnership you announced back in January, if at all?
spk13: I think it's just consistent, Kevin, with what we've been doing with them. And we're working with, you know, lots of different cloud providers to make sure that we provide FactSets data and analytics, you know, in the places that our clients want to consume it. So super happy with the Snowflake relationship. Adding on services like Concordance will help us. And we do think that, New channels like this are going to be important as we move forward.
spk06: Great. Congrats again. Thank you.
spk01: Our next question coming from the lineup at night with Barclays. Your line is open.
spk15: Thank you. Good morning. I just had a question on the analytics business. I get stuck at the 6%, 7% growth for the last couple of years. Is that the right growth rate for this business, or is there any initiatives in there that could probably, you know, get that higher?
spk13: Hey, Manav, thanks for the question. We certainly think analytics can do better. We did get off to a bit of a choppy start with analytics in the last fiscal year, and we attributed that to, I think, sort of everyone getting their feet under them as we learned how to work through the pandemic. Analytics had a much stronger second half, Very good performance with our front office solutions, which include our portfolio management platform, as well as our trading solutions. And analytics is setting up much better for next year. So we see a good pipeline for the first half and good pipeline within the buy side, which, as you know, is where most of our analytics solutions are pointed.
spk15: Got it. And then just on the research business, can you just talk about or help break out how much of that growth came from just new hiring on the sell side versus the rest on the buy side? And then I think you talked about winning some trading business. So can you just elaborate a bit on the trading side of the offering?
spk13: Sure. So we think that we outperformed significantly for three reasons. One is the investment in content and technology, which we outlined, the excellent performance of our front office team, and then we'd say about a third of it probably was us really just capitalizing on the strong trends in banking. So I'd probably attribute about a third of it to the trends that are out there, and it's the work that we put in, though, that allowed us to capitalize on those trends. The trading business is really the portware business that we acquired a few years ago. We had a very strong year. We closed some new logos, and we increased our transaction revenue. I think a lot of that might have come from FX, so we've got a very strong FX capabilities within our EMS.
spk09: Yeah, Manav, I think it's important. Keep in mind that the retention piece that Phil alluded to is really quite key. It is a part of why research did so well this year.
spk15: I appreciate that.
spk01: Our next question coming from the line of Tony Kaplan with Mark and Stanley. Thank you.
spk11: I wanted to focus on wealth. The ASV was up 6% organically year-over-year. It's a little bit lighter than we've seen in the last few years. You did mention that the workstations in wealth was up in the mid-20% range. So just hoping you could give some color on what sort of dragged the rest of wealth down. Thanks.
spk13: Yeah, good question, Toni. So you're absolutely right. The desktop business grew significantly at 24%, and the ASVX, the digital solutions part of wealth, grew at about 10%. So we had one large deal that got canceled in February, which was a legacy digital solution from the acquisition we did many years ago, not the type of solution that we're sort of upgrading our clients to these days. So that was something that was out there. It was with a large firm that was under financial stress and something that was a headwind for us in Q2. You might have, I think I may have mentioned it in that quarter. We also had one other loss on the digital side, which was not related to wealth, but another anticipated cancel. So In total, we might have had about $6 million in counsel from the old legacy digital business. So I would factor that in when you're thinking about our wealth business. But the new solutions we're focused on and how we're going to market now, that was exceedingly healthy and I think bodes well as we go into next fiscal year.
spk11: Got it. And just regarding removing the wealth disclosure in the future, I guess one You know, why are you doing that and how much is related to research versus CTS? And if you could sort of give the growth rates of the pieces so that we know how much to impact each of those segments by, that would be helpful. Thank you.
spk13: Yeah, so it's just we've realigned our business. So the wealth business, which was run by Goran Skoko, has now become research and advisory, which he'll be leading. You know, once Christie moved into the chief product officer role about a quarter ago. So really there were two pieces to wealth. There was the web or workstation business, which lines up nicely with our research business line. And then there's the digital part of wealth, which lines up very nicely with CTS. So there were really good synergies on the product and workflow side that we can capture by organizing things this way. And the digital piece of wealth, some new really good capabilities have been built there called fact-set widgets. which is in line with our open strategies. So I believe after the call, you'll get all of the numbers that show you what the growth rates would have been this year for those three business lines, which I'm sure Rima will be happy to review with you later today.
spk11: Perfect. Thanks.
spk13: Yep.
spk01: Our next question coming from the line of Hamza Mansari with Jeffrey. Your line is open. Thank you.
spk08: Hi, this is Mario Cortolacci filling in for Hamza. My first question just around sales is could you comment on how much capacity and room for improvement there may be in sales execution today? And maybe you can also touch on what your hiring plans are over the next year?
spk09: Hi, this is Helen. Thanks for that question. When I think about the continued pace for sales, And in terms of what we have the opportunity to do, I think from an execution perspective, the results speak for itself for this year. And where we're looking to accelerate our efforts will be along the lines of some of our solutions that right now we're seeing a lot of client demand for on ESG, on wealth analytics. And what we're seeing, as I mentioned earlier, about our ability to expand within the wallet share of our existing clients, I would expect to see that continue as well. And so what we've done is we're going to be planning on essentially focusing on premier-type clients, our highest clients, and including some that we'll think we can really continue to do that expansion on the enterprise front. So from an execution perspective, those are the areas that I think we'll continue to expand on. But it really is building on the momentum that we already have seen this year.
spk08: Thanks. And then for my follow-up, I mean, we've seen a lot of large M&A in the financial services space in general. Maybe you can just talk about what your willingness is to participate in any of the larger M&A. And specifically, are there any synergies with assets that are currently not in your portfolio today? And then are there any significant scale advantages today that you might be lacking?
spk13: I think our answer has been consistent regarding M&A. We feel that we have the scale we need. We're one very well-integrated platform. And we're very good at doing tuck-in acquisitions for unique content and technology, which we demonstrated this year. So we're really happy with our platform and our ability to be a central player in the ecosystem and be really agnostic to the data that's on our platform, whether it's ours or us integrating third-party content. We do have a very healthy balance sheet, and we've said historically that if the right transaction comes around that's larger, we're in a position to execute on it. But we don't feel that it's something we need to do to be successful, and we've demonstrated that this year.
spk08: Great. Thank you very much. Thank you.
spk01: Our next question coming from the lineup, Alex Graham with UBS. Your line is open.
spk05: Yes. Hey, good morning, everyone. Sorry if I missed this in your prepared remarks, but can you just talk about the outperformance on ASV in the fourth quarter? I mean, obviously, you had some guidance out there that you gave us just a couple months ago. And then I would say you beat that by, I don't know, $25 or so million. So just wondering if there was anything chunky, maybe not repetitive there, that you would call out that we may have missed? Because that obviously creates a tougher comp for next year.
spk13: Well, like some quarters, Alex, we do have some large wins. So we did have one very good win on the wealth side, and we had one very good win on the data partner side. But that doesn't mean we can't have these types of wins in future quarters. So That certainly helped getting those done. But again, I think just excellent execution from the sales team, really closing out the year in dramatic fashion and capitalizing on those market trends that we spoke about earlier.
spk05: Okay. No, no, that's helpful. I just wanted to make sure there wasn't anything super chunky, but it seems like two larger things. And then just as a follow-up to a question earlier, I think you said that you think the environment added about a third of the growth, so I guess a little bit over 2% or so. So I guess as we look into 2022, what type of environment is kind of factored into your guidance from an overall industry perspective? Because you can't ignore, as you said yourself, that there's been a lot of tailwinds in capital markets that have helped you. So just curious. Yes. what you expect, if you expect us to persist, or what kind of environment we should be thinking about.
spk13: So just to be clear, I would say a third of the outperformance versus our guidance was due to those trends, not a third of our overall performance as a company. And as I mentioned in an earlier question, the buy side is setting up very nicely for us next year. We see a very healthy pipeline, good trends on the buy side. So even though there are some tough conditions out there for asset managers. Our investment in our platform, our content, opening it up, really allow us to take market share and really help them with some of their challenges, which is managing data better, which CTS does a great job of, and then really being plug and play in terms of their workflow solutions. So we feel good about the buy side going into next year. Of course, continued health on the sell side will help us, but we don't need that to be successful and to meet our guidance.
spk05: Oh, thanks for clarifying. Take care.
spk01: Our next question coming from the line of Andrew Nicholas with William Blair. Your line is open.
spk16: Hi, this is actually Trevor Romeo in for Andrew. Thanks for taking my questions. I was just kind of hoping you could provide an update on the selling environment and how sales cycles have evolved in terms of length and complexity. Have you seen any changes in the speed of client decision-making lately?
spk09: Hi. Thank you for that question. I'll take that one. So I think one of the other points that helped drive our outperformance was our analytics business, which accelerated, and some of the deals that perhaps had taken a bit longer really coming to fruition. And we continue to see that as we think about, look at the pipeline going forward. So I don't think I would say there's wholesale change yet in terms of the decision-making. That really is case by case But I will say that as we settle into much more so of the virtual environment, clients are clearly focused on their own digital transformation and the need to improve. And as a result, some of the things that we've had for a while that got pushed were realized, and we'll continue to see that going forward.
spk16: Okay, great. And then just in terms of the deep sector content investments that you've been making, we're just wondering if there are any particular sectors or industries that where you've kind of seen the strongest uptake at this point, and then going forward, which ones you might expect to see the most investments? Thank you.
spk13: Yeah, so I think the three that we have released are financials. We've done some good work in insurance, real estate. So we're seeing really good usage across all of those, and we're beginning to make progress on some of the other sectors. So I'd say it's pretty broad-based there.
spk16: All right. Thank you very much.
spk01: Our next question coming from the lineup, George Tong with Goldman Sachs. Your line is open.
spk17: Hi, thanks. Good morning. I wanted to follow up on the components of ASV growth in fiscal 2022. You've had several larger wins in 2021 and also some larger legacy cancels. So as you look ahead to fiscal 2022, what kind of ASV growth do you expect across your realigned research, analytics, and CTS businesses?
spk13: I don't think we're giving explicit guidance there, George, on those three business lines, but I would say it's well balanced between all of them. CTS, I would expect, will continue to have a high growth rate, just given the trends in the market and the opening up of the platform. Analytics, as I've mentioned, is setting up well versus last year, and Not a lot has changed in terms of the components of that business line. And we're very optimistic about research just based on what we've seen over the last year and our ability to close new logos and meaningfully increase the number of users of FactSet across a lot of different firm types.
spk09: And, George, I would take a look across the geographies as well. I mean, if I look at the pipeline, quite frankly, America's, which has been very strong in 2021. We expect to have that have continued strength, but we saw double-digit growth in Asia-Pac and Europe ticking up as well. So I think it's really quite broad-based. I think it's what gives us not only a lot of pride of what we've just done, but also the confidence as we go forward, which is reflected in our guidance.
spk17: Got it. Very helpful. And then on pricing, what kind of pricing assumptions are you reflecting in your guide and how much do you expect pricing to go up by in the forthcoming year, particularly as you think about how much competitors are raising their prices by? So do you think you're raising prices in line with the competition ahead of or below the competition for next year?
spk09: Sure. I'll take that one as well. I mean, we're very – We could see that our clients value our products by what we were able to capture this year, and we'll continue that into next year. I think we'll be in line with many of our competitors as well. So we would expect to see that similar impact, if not more. We've spent a lot in enhancements in the value that we can clearly tie back to what we've done for them. So, George, I would expect to see it in line not only in the market but in the previous year.
spk17: Very helpful. Thank you.
spk01: Our next question coming from the line of Patrick O'Sullivan with Bregman James. Your line is open.
spk07: Hey, good morning. In terms of your momentum with sell-side customers, to what extent would you ascribe that growth to new customer wins or new product sales as opposed to your existing customers growing their headcount? Hey Patrick, it's Phil.
spk13: So just in terms of new logos, we did better this year on the sales side than we did last year. I think we were actually down in terms of new logos on the sales side and we were up this year. So we're certainly adding new clients and some of that, as you can expect, is being driven by just the investment that we've made, particularly in the content area.
spk07: Okay. And then I guess, speaking of the headcount theme, FactSet's headcount growth has slowed. I think it was 4% in the fourth quarter, year over year. I think closer to 3% ex-acquisitions. Was that an intentional deceleration of your headcount growth, or does it reflect challenges in terms of hiring and retaining talent in this environment?
spk13: I think we've done very well in terms of the employee value proposition at Faxit over the last year. We've done a lot to really make sure that our employees feel like they're taken care of, that they have flexibility in terms of how they work and so on. So I think we have a lot to be proud of there for our employees. Like lots of firms, right, we're going to be faced with a lot of movement, I think. On the talent side, we believe that creates a good opportunity for us in the marketplace. We think we'll be able to, you know, retain the talent we need at FactSet, but also attract some really good new talent to the company. So, you know, I think we're probably in line, frankly, in terms of what we planned in terms of headcount growth there. I don't know, Helen, if you've got anything you wanted to add.
spk09: Yeah, no, and I think what we've seen is in our own productivity and efficiency improvements as we've gone through, I think we've talked before around workforce mix. If I take a look at where, while our headcount has gone up, the mix of that is also quite key. And then when we talk about the operating leverage or our labor productivity, you've seen that come through as well. And please note that especially since we've invested quite a lot in the technology front, that is meant to help us in terms of having the type of work that our folks do. So I wouldn't necessarily look at people count as the driver here when you think about our opportunities going forward. Thank you. You're welcome. Thank you. Next.
spk01: Our next question coming from the line of Owen Lau with Oppenheimer. Your line is open.
spk02: Thank you for taking my question. Going back to the driver of CTS, could you please remind us some of the use cases of CTS and as this segment continues to evolve, do you see a scenario that customers will like mostly need API and data feeds but not so much on the desktop or they will still come hand in hand because desktop can still provide a good distribution channel to customers? Thank you.
spk13: Yeah, great question. Thank you. Yeah, so traditionally, FactSet has sold a lot of data workflow solutions through CTS to quants. But that's not the only workflow that we've sold to. So we still do very well selling to quants. But we're also thinking about how do we expand our market share by getting into more workflows across the middle and back office. And as we've opened up our platform and invested in new content, it's created some great opportunity for us to help clients manage their own data with our entity data map and our concordance services. Managing data is expensive. And FactSet is really expert at that. So that is one area that we're seeing really good growth from, particularly as we make those services available through new channels such as cloud providers that we already spoke about. We've done traditionally well with performance workflows as well. This was a very good year for us. with our benchmark data feeds. So Faxa does a lot of work to integrate all of the different benchmarks and indexes that are out there that feed into a client's own performance system. So that could be our own performance system, but we're not the only performance system out there. And so there are lots of opportunities here, you know, real times and other opportunities, sort of that trading workflow. So as we've developed more of our own capabilities there, we view that as a good opportunity.
spk09: And just to add to that, when we talk about the sell side, Phil alluded to this before, the growth there is also on the feed side. And so we're seeing, interestingly, that being a driver for our CTS business. So I think that's an important piece to consider as well.
spk13: Just to finish off your second point there is a valid one. We do think there's going to be a very healthy balance out there for how people want to consume feed. value. So it could be through a workstation or a web where we tee up the next best action for a particular user. But increasingly, firms are going to want to consume data in new ways as they analyze things in new ways. And that could be just a research analyst deciding they want to, you know, program in Python or use Tableau or some other types of systems to sort of do their analysis. So that It could be the same type of user but through a different workflow or it could be just feeding directly into a system that a client has like a CRM.
spk02: Got it. That's extremely helpful. And then going back to the research, I think we touched on a lot about the growth there. But there are lots of news out there that many investment banks are raising the salary of their junior bankers on the banking side. Do you see, like, in terms of the new, is there any, like, additional subscriptions from these clients? Do you think they also increase the hiring and FACSA can benefit from that as well? Thank you.
spk13: Yeah, I think that's what we just saw in Q4 is we saw the banks, if I'm understanding your question correctly, you know, hire a lot of new talent. And when that happens, you know, very often Faxit will just get deployed automatically onto those desks.
spk09: I think also in addition to the number of analysts, to your point, Owen, what they're looking for is to be able to provide their analysts the tools that are needed, and I think that's what we're finding, and that's why I think our retention has improved as well. What we're finding is getting the tools of FactSet to the analysts to allow them to do their work in a more efficient way so they don't not spending you know 100 plus hours I think all of that comes into play got it that's my question I thank you very much you're welcome now next question coming from the line of David Chu with Bank of America your line is open all right thanks guys so you highlighted strong performance from the sales teams throughout the call
spk04: Helen, are there any key changes to the strategy since you took on the new role?
spk09: Yeah, thanks for your question. One of the things, quite frankly, is how proud I am in the fact of how we have executed, and I think the areas of focus, if anything, is more of an enhancement at this juncture. I think what we will focus on is our go-to-market strategy. I think we will focus more on driving the enterprise discussion with senior client executives. It really allows us to provide our platform for their own digital transformations. And in terms of major changes, I would say no, other than really, again, enhancing on the areas that we think we can leverage across the firm types or, quite frankly, operationally where we can provide them more bandwidth to spend more time with clients.
spk04: Got it. And then just on the wealth side, are there any meaningful RFPs coming up, let's say, in the next 12 months? And how would you characterize your win rates now when you go into these RFPs?
spk13: Yeah, we're not going to comment on that. But there is, I think, a steady drumbeat of these opportunities coming through each year. And, you know, we do exceptionally well when we get into an RFP just based on the product we have and the legendary fax-out service. Those are two things that really give us an advantage when we're competing for those businesses.
spk04: Okay, got it. Thanks, guys.
spk09: Thank you. Thank you.
spk01: Our next question coming from the line-up, Keith Hotham with North Coast Research. The line is open.
spk03: Two more, guys, and congrats on a great quarter. So just looking at the pipeline that you guys have talked about in the past as being fantastic, because I remember back to the last quarter, how would you characterize the pipeline coming out of the fourth quarter compared to, I guess, the third and second quarter?
spk13: The way that I would look at that, Keith, is just sort of versus the first half of last year. And, you know, we got off to a pretty rough start last Q1. You know, we were definitely digging out of a hole there and just came storming back in the last three quarters. So as I mentioned already a few times, the first half, which is typically the period that we have the most visibility on, is setting up quite nicely, particularly on the buy side with the analytics team.
spk03: Great. If we talk about the growth that you guys are experiencing, would you talk about it as more a market share gain or more an expansion of your overall product set and expansion of the overall market?
spk13: It's a combination there. I think we do very well competitively, and our strategy, we believe, is differentiating in terms of opening up the platform and investing in new content sets and being neutral in terms of what data we provide the market. So that is resonating particularly well with our clients as they try to differentiate themselves and become more efficient. And we get a lot of upside from expanding clients when we We continue to build out our solution. Our clients trust us, and we've got great service. And when trends are good like this in the market, we're able to really capitalize on that.
spk03: Great. Thank you. Thank you.
spk01: Our next question coming from the lineup, Craig Hoover with Hoover Research Partners. Your line is open.
spk12: Yes, good morning. My first question, as you remember, two years ago, you guys put a three-year investment plan and stuff with, I guess, on the back end that you were expecting to be able to get to high single-digit ASV growth on the back end of that. Is that still the plan here a year out, or has it been pushed out some, as you've alluded to in prior calls because of this pandemic?
spk13: Thanks, Craig. Yeah, so we're entering the third year of that original three-year plan, and I think you can see our performance this year and what our guidance is for next year. So we certainly, high single digits is certainly something that's achievable. I believe back then we articulated that we would exit the year with a 33% margin, which is, I think, I believe the middle of our guidance here for this year. And, you know, our aspiration was to get to double digit EPS growth. I think if you look at the midpoint of our guidance, it's high single digits, but that doesn't mean, you know, if we execute well, we can't get to that thing. So I'm Couldn't be prouder of our company. We've all worked exceptionally hard over the last two years, and it's really great to see this level of performance, and we're really optimistic as we go into FY22.
spk12: And then my follow-up, please, on the cost side related to that three-year investment program. I think originally you thought you were going to spend $15 million each of the three years. It's changed. Maybe if you could just update us on those numbers, please. I think it was higher last year. Do you have that number?
spk09: Sure, I can talk broadly on those points, Craig. Yes, I mean, as discussed earlier, we are on target in terms of our plan. There are things that we probably accelerated in terms of spend and in some cases where we've adjusted along the way. That's what you would expect in a three-year plan. So from a technology perspective, we probably spent a bit more, and we're able to make that up, as you can tell from our performance this year. To go back a little bit to your point on us having pushed it out, I think what's really, I think, admirable is the fact that with the situation that we had with the pandemic, we were trying to be as transparent as possible, and the fact that we were able to achieve what we have and what we're indicating for the third year really does mean that we were able to meet what we had originally given guidance on.
spk12: Thank you.
spk01: I'm showing up for the questions at this time. I would like to hand the conference back over to Mr. Phil Snow for closing remarks.
spk13: Thank you all for joining us today. In closing, I want to reiterate how pleased we are with our performance this fiscal year. We also made substantial progress on our internal ESG strategy. Steps we have taken this past quarter alone include joining the UN Global Compact and Principles of Responsible Investment, publishing our global diversity figures, and committing to becoming MLT Black Equity at Work certified. In addition to completing our sustainability plan, which outlines our ESG goals and aspirations. I'm very proud of all FACTSET has accomplished this year, and we look forward to speaking with you again next quarter. In the meantime, please call Rima Haider with additional questions. Operator, this ends today's call.
spk01: Ladies and gentlemen, that's our conference for today. Thank you for your participation. You may now disconnect.
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