FactSet Research Systems Inc.

Good day, and thank you for standing by, and welcome to the FactSet Q2 earnings call. At this time, all participants are on 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'll need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Kendra Brown, Head of Investor Relations. Please go ahead.

Thank you, and good morning, everyone. Welcome to FACTSET's second fiscal quarter 2023 earnings call. Before we begin, I would like to point out that the slides we will reference during this presentation can be accessed via the webcast and are currently available on the investor relations section of our website at factset.com. 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 risk 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 Linda Huber, Chief Financial Officer. We will also be joined by Helen Shan, Chief Revenue Officer, for the Q&A portion of today's call. I will now turn the discussion over to Phil Snow.

Thank you, Kendra, and good morning, everyone. Thanks for joining us today. I'm pleased to share our second quarter and first half results. Our organic ASV plus professional services growth year over year accelerated to 9.1%, driven by healthy expansion among existing clients and the successful execution by our sales team of our price increase in the Americas. We saw several large wins this quarter, outpacing last year and allowing us to capture more of the addressable market. Our second fiscal quarter performance resulted in adjusted diluted EPS of $3.80, and an adjusted operating margin of 37%, exceeding our guidance and situating us well for the remainder of the fiscal year. Growth this quarter was the strongest amongst banking, asset owners, and wealth management clients, aided by larger wins across each of these client types. Acceleration was broad-based with double-digit ASV growth from our banking, corporate, and private equity and venture capital clients, and our investments in contents and technology supported retention and expansion. We saw our core workstation drive follow-on opportunities for feeds and digital platforms and wealth, and increased transactional revenue and demand for content from asset owners. In the first half, our end markets remained largely supportive. However, we are not immune to market volatility. As interest rates rise and macroeconomic conditions remain uncertain, we're beginning to see a more challenging environment for our clients. This includes reductions in AUM, constrained budgets, and headcount rightsizing after increased pandemic hiring. We're also monitoring the recent instability across the banking sector, which accounts for 17% of our ASV. In this regard, there are several key factors to keep in mind. First, Faxit is not materially exposed to commercial banking. Second, no one single client represents more than 3% of our ASV. And finally, our multi-year enterprise contracts offer protections that includes seat minimums and longer cancellation notification windows. Given the evolving market dynamics, particularly in banking, we feel it is prudent to take a conservative view on the second half of the fiscal year. As such, we expect continued ASV growth, but with modest deceleration in the second half. We are therefore updating our guidance for fiscal 2023 to reflect organic ASV growth of $145 to $175 million, inclusive of QSIP global services, which becomes an organic part of our business in the third quarter. At the midpoint, this is a $15 million reduction in core business ASV growth. We expect two-thirds of this reduction to come from the challenging conditions facing the banking sector, and the remaining one-third is expected to come from lengthening sales cycles and constrained budgets for other firm types. This reduction in ASV will be offset by the addition of $10 million of ASV growth from CGS. Together, these changes represent 8% growth at the midpoints in line with our medium-term outlook. To preserve EPS, we will continue to drive disciplined expense management. As a result, we expect adjusted operating margin of 34% to 35% as previously communicated. We maintain a long-term view of our business and are steadfast in our commitment to investing for growth, and we will speak more about CGS and guidance later in the call. The demand for data and technology is increasing, and we are a proven, trusted partner for our clients for their digital transformations. In the second fiscal quarter, we remained focused on building the leading open content and analytics platform, and several large deals reinforced our conviction regarding this strategy. First, within research and advisory, we were selected as the primary market data provider for BMO's wealth management division. This was a key contributor to almost 9% workstation growth year over year. Our ongoing investments in our digital platform and content refinery also resulted in wins across banking. The most notable was a seven-figure deal for a global bank sell-side research department, which included workstations and data feeds. Across the sell side, we are meeting the need for flexible, integrated solutions, including feeds, APIs, CRM integrations, and banker productivity tools. In content and technology solutions, we want a major real-time deal to provide our market data as a service offering to a premier asset management client. This solution will replace its legacy on-premise infrastructure. Our ability to augment enterprise platform deployments with consistent data is accelerating growth and expanding our share of wallet for content and technology solutions. Finally, within analytics and trading, investment in our portfolio lifecycle suite has increased cross-sell opportunities with active asset managers and asset owners. Within the middle office, growth accelerated in our core analytics offering, which includes portfolio analytics, quantitative solutions, fixed income, and reporting. We also see increased buy-side demand for outsourced performance and risk solutions consistent with the trend toward investment firms outsourcing middle office functions. Our open platform and enterprise solutions have positioned us well to capitalize on this with several other opportunities in our pipeline. As we celebrate the first anniversary of the acquisition of QSIP Global Services, I'd like to congratulate the team on a job well done. with ASV growth of 8% since the acquisition. CGS's core securities identification capabilities align well with FactSet's data management strategy. With the integration now complete, we're focused on growth across asset classes, geographies, and capabilities. We are working on expanding into loan data and private companies. For more than 50 years, CGS has provided mission-critical solutions to the front, middle, and back office. This work continues, and in close partnership with the American Bankers Association, we will continue to innovate. Turning to performance across our regions, organic ASV growth in the Americas accelerated year-over-year to 9.3%, driven by strength in analytics and trading and content and technology solutions and the execution of our price increase. Our Americas price increase delivered $30.7 million in ASV, up $10.6 million from last year. In addition, the region benefited from improved expansion with banking, wealth management, and asset management clients. We also had strong sales of middle office solutions. While new business decelerated overall for the quarter, we saw strength in new logos from asset owners. In Asia Pacific, we delivered organic ASV growth of 10.8%. Performance was driven by research with improved expansion and retention in banking. Expansion also improved among asset managers and asset owners, although this was partially offset by client cancellations. Given the recent changes in COVID policy across Asia, we are starting to see improvement in the pipeline. However, we expect a lag effect as the market normalizes. Finally, in EMEA, organic ASV growth accelerated to 8.1%. Acceleration was driven by analytics and trading, where we saw an improvement in expansion and retention among asset owners. Improved retention among private equity and venture capital firms and hedge funds also contributed to growth. However, we also experienced headwinds as the major markets in the region remain under cost pressure and the United Kingdom begins to see an adverse impact from Brexit. In summary, I'm pleased with our first half performance. We're confident in our ability to meet our medium-term outlook despite market conditions. And as we head into the second half, we have a solid pipeline driven by our open platform connected content, and market-leading workflow solutions. And with more than 40 years of growth, FactSet has a proven history of successfully navigating market volatility. Our greatest asset is our people, and I'd like to wrap up by recognizing their diligence and commitment to our strategic priorities. We were honored to be named one of Glassdoor's Best Places to Work in 2023, and I want to thank all FactSetters for helping create the culture that made this award possible. At FACSIT, we're committed to growth for our clients, employees, investors, and communities. We recently published our fiscal year 2022 sustainability report-themed commitment to action. The report highlights the progress we have made in turning our commitments into action, and I encourage you all to take a look. I'll now turn it over to Linda to discuss our second fiscal quarter performance in more detail.