FactSet Research Systems Inc.

Good day and thank you for standing by. Welcome to FACTS, that second fiscal quarter 2024 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 need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised today's conference is being recorded. I would now like to hand the conference over to your speaker today. Allie Van Ness, please go ahead.

Thank you and good morning, everyone. Welcome to FactSet's second fiscal quarter 2024 earnings call. Before we begin, the slides we referenced during this presentation can be found through the webcast on the investor relations section of our website at factset.com. A replay of today's call will be available on our website. After our prepared remarks, we will open the call to questions from investors. The call is scheduled to last for one hour. To be fair to everyone, please limit yourself to one question. you may re-enter the queue for additional follow-up questions, which we will take if time permits. 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, reconciliations 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 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, Ali, and good morning, everyone. Thanks for joining us today. In the second quarter, we grew organic ASV plus professional services by 5.4% year over year, delivering adjusted diluted EPS of $4.22 and an adjusted operating margin of 38.3%. Given challenging industry factors and continued market uncertainty, our results this quarter were mixed. You may recall that we anticipated the softer top line growth from our December call. We ended this quarter with more than 8,000 clients, adding 75 net new logos, and our user count was 206,478, down 605 in the quarter, mostly due to consolidation following UBS's acquisition of Credit Suisse. In addition, please note that the ASV reduction impact of Credit Suisse is not reflected in our second quarter results. While we cannot share details about ongoing business discussions, our full year guidance continues to assume a conservative view of the credit suites reduction as we indicated last quarter. Overall, ASV retention remained greater than 95% and client retention was 90%. In terms of market conditions, client caution continued to delay purchasing decisions. We saw increased pressure on client headcount as they seek further efficiency gains. As a result, we saw higher erosion this quarter. We had fewer large deals in Q2 and saw a lower impact from our price increase, both of which contributed to a slower growth rate. However, industry cost cutting appears to be stabilizing, and we are starting to see pockets of recovery. As we signaled in our December call, anticipation of softer top-line growth drove our own difficult but necessary cost cuts, including headcount reductions during the quarter. Continued careful expense management will allow us to maintain margins of EPS growth along with investment in new products to drive future performance. Currently, we expect to finish the fiscal year at the lower end of our ASV growth guidance range of 5 to 7 percent. Turning now to our performance by region, America's ASV growth decelerated by 200 basis points from the prior quarter to 5.9 percent, mainly due to a large wealth cancellation, as well as banking erosion and lower price realization. The wealth cancellation resulted from a client's decision to move a custom, non-standard workflow solution in-house following a change in its business strategy. In EMEA, ASV growth decelerated 40 basis points to 5%, mainly due to headwinds from lighter institutional asset manager renewals, partially offset by new business acceleration. In Asia Pacific, ASV growth decelerated 240 basis points to 5.6%. Softer banking expansion coupled with a larger institutional asset manager loss offset wins with asset owners. While new business accelerated modestly across regions, it was offset by greater reductions in both retention and expansion. On the institutional buy side, we saw headwinds across all firm types due to cost cutting and continued headcount reduction. For example, in 2023, passive funds surpassed active funds in total assets under management. As a result, our institutional asset management clients are seeing continued increased fee pressure. To help offset this pressure, we have expanded our capabilities to address users' needs, including in the front office. Our managed services business is growing as our clients outsource more of their middle office workflows to FAFSA. This helped drive some gains with asset owners. We have invested in our platform to reduce clients' total cost of ownership, or TCO, Given our ability to help clients do more with less, they are increasing their reliance on us despite fee pressure. As a result, we are investing in managed services given our growth in this area. We are leveraging our strength in the middle office to further power front office solutions. This quarter we displaced a front office incumbent in asset management in Asia, and we did this by connecting the client's entire workflow, including both OMS and EMS capabilities, We also won that business on the strength of our open platform. Simultaneously, we are developing GenAI enhanced tools and co-pilots for portfolio managers and fundamental research analysts, which we believe will significantly reduce their time to insight. In deal makers, we saw a higher erosion in banking and lower retention in private equity and venture capital. However, corporates are starting to see good momentum with investor relations users. At the same time, expectations are high around the effect generative AI will have on our industry Initial client feedback has been extremely positive on our new Gen AI solutions, including FactSet Mercury, a conversational way to generate answers and insights from documents and structured data sets that is in beta release as part of our FactSet Explorer program. We see early signs that large language models working with our deep repository of well-curated data in our open platform can power accelerated workflows for our clients. While we perceive that this trend will drive future growth, these initiatives need time to gain commercial momentum. In banking, our GenAI banker efficiency tools are gaining users. We had more than 200 GenAI meetings with our banking clients in Q2. Beta products and testing with clients include Chart Creator and Investment Banking Office Refresh API, which allows clients to automate cloud model updates. This is our first client-facing off-platform solution for banker automation, and we believe it can drive a new revenue stream. Finally, Transcript Assistant, our GenAI-powered chatbot, is in full release, as announced last week. Transcript Assistant accelerates analysis of earnings call transcripts with a conversational, interactive interface. Clients have the freedom to ask their own custom questions or choose from a FactSet-provided prompt. User uptake has been strong. We are now expanding event coverage and comparative analysis in parallel with the FactSet and Mercury integration. You can read more about transcript assistance in our press release from last week. Turning to wealth, activity was more subdued this quarter, given one large cancellation and no large deal. However, wealth partnerships are creating stronger connections with portfolio and business development workflows, in turn increasing senior executive level client engagement. We have recently driven major changes in the organization to position ourselves for future growth. including moving to our firm-type focus and reducing costs. Given this rapid pace of change, I am extremely proud of how the company has risen to the occasion. This change process may have been challenging in the short run, but has positioned us well for a market upturn. Finally, I want to highlight our focus client event in Miami at the end of April. This event brings together top thought leaders, industry experts, and key decision makers from the finance and tech sectors. Our theme for 2024 is the revolution of an ecosystem, discussing the potential of artificial intelligence and machine learning. Attendees can expect a thoughtfully curated agenda with inspiring speakers, educational sessions, and opportunities for meaningful connections. Registration information can be found at focus.factset.com. I'll now turn it over to Linda to discuss our second quarter performance in more detail.