FactSet Research Systems Inc.

Okay, perfect. I'll transfer us over to the main room. There'll be a brief moment of silence, and then I'll give the introduction. Transferring in three, two, one. Good day, and welcome to the FACSET third quarter earnings call. At this time, all participants are in listen-only mode. After the speaker's presentation, there'll be a question and answer session. Instructions will be given at that time. As a reminder, this call may be recorded. I would like to turn the call over to Kevin Toomey, head of investor relations. Please go ahead.

Thank you and good morning, everyone. Welcome to FactSet's third fiscal quarter 2025 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. The call is scheduled to last for one hour. To be fair to everyone, please limit yourself to one question. You may reenter 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. Discussions on this call may contain forward-looking statements. Such statements are subject to risks and uncertainties that may cause actual results to differ materially from results anticipated in these forward-looking statements. Additional information concerning these risks and uncertainties can be found in our Forms 10-K and 10-Q. 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, both of which can be found on our website at investor.faxset.com. During this call, unless otherwise noted, relative performance metrics reflect changes as compared to the respective fiscal 2024 period. Also, consistent with the last quarter, please note that starting fiscal 2025, FactSet is reporting organic ASV rather than organic ASV plus professional services to focus on the recurring nature of our revenues. Joining me today are Phil Snow, Chief Executive Officer, Helen Chan, Chief Financial Officer, and Goran Skoko, Chief Revenue Officer. I will now turn the discussion over to Phil Snow.

Thank you, Kevin, and good morning, everyone. Thanks for joining us today. Before we discuss our Q3 results, I just want to take a moment to recognize an important milestone for FactSet and for me personally. Earlier this month, we announced my decision to retire after 30 years with FactSet and the past decade as CEO. It's been a privilege to spend my career here working alongside such a talented, collaborative, and mission-driven team. Together, we've expanded our data and workflow capabilities, deepened client relationships, and more than doubled our revenue over the past 10 years, positioning FactSet as a trusted global enterprise leader, empowering smarter, data-driven investment decisions. It's been an incredible journey, and I'm proud of all we've accomplished together. Looking ahead, I'm even more confident in FactSet's future. I'm also pleased to share that Sanok Viswanathan will become FactSet's next CEO in early September. Sanok brings over 25 years of global leadership experience in financial services and technology, most recently at JPMorgan Chase, and he has a strong strategic mindset and a proven track record of delivering technology-driven growth at scale. As FactSet prepares for its next chapter of leadership, I'm proud of the solid foundation we've established, built on innovation, client trust, and industry-leading data and workflow solutions. I'm confident Sunox leadership will guide FactSet through its next phase of growth and look forward to working with them closely to ensure a smooth and thoughtful transition. With that, let's turn to our third quarter results. In the third quarter, we achieved organic ASV growth of 4.5% year over year, fueled by recent wins in wealth, dealmakers, and partnerships. We also delivered an adjusted operating margin of 36.8% and adjusted diluted EPS of $4.27. As we previously indicated, we anticipated stronger growth in the second half of this fiscal year, and we're pleased with our Q3 performance. These results reflect the successful execution of our enterprise solution strategy and underscore our commitment to helping clients lower their total cost of ownership. We continue to see positive trends in ASV retention, and I am pleased to report that both expansion within existing accounts and new business accelerated in the quarter. As you may recall, the fourth quarter is seasonally our highest ASV of the year, and with a healthy pipeline and growing momentum, we are well-positioned for a strong close to the fiscal year. Accordingly, we are reaffirming our FY25 guidance. Helen will cover our financial results and guidance in more detail later in her remarks. Turning to third quarter results, ASV retention remained strong at over 95%, while client retention was at 91%. Our client base grew to over 8,800, driven by strong demand from corporate wealth management and buy-side clients, including those added through the liquidity book acquisition. Our user count rose to over 220,000, primarily reflecting growth among wealth management users. Starting with our performance by region, In the Americas, organic ASV increased by 5%. The strength of this quarter was driven by higher banking and asset manager retention, coupled with higher demand in wealth, hedge fund, and corporates. In EMEA, organic ASV growth was 2%. We saw improved retention in banking and wealth. However, this was offset by lower contributions from the annual price increase and buy-side headwinds. In Asia Pacific, organic ASV growth increased 7%, primarily driven by higher retention in the banking sector. This growth was partially offset by the reduced pricing uplift and asset owner headwinds. Now turning to our results from a firm-type perspective. Wealth organic ASV maintained its double-digit growth pace in Q3, marking a second consecutive quarter of acceleration. We continue to capture market share by displacing incumbent providers, with new business sales nearly double the number of new logos versus a year ago. Our product portfolio demonstrated broad-based strength among both new and existing clients, specifically a large seven-figure renewal and twice as many six-figure wins as a year ago. Notably, we are growing FactSet's presence in wealth by selling more data feeds and digital solutions to clients who already use our industry-leading desktop solution across their organization. The attach rate for off-platform products continues to rise, and so far in FY25, we are capturing attach rates that are around 1.5x what we saw in FY24. Within Dealmakers, this quarter's banking gains were largely driven by the favorable comparison to last year's third quarter, which included the impact of the UBS Credit Suisse merger. Over the past three years, our seat count has grown considerably as we continue to displace incumbent providers as clients increasingly choose our best-in-class banking solutions. We're also encouraged by meaningful improvements in retention highlighted by the signing of several multi-year deals, including a favorable outcome on a large global banking renewal. These long-term agreements reinforce FactSet's position as a trusted enterprise partner and create new opportunities for future growth. While it's still early to assess summer hiring trends, preliminary indications suggest they may be in line with last year's levels. We're optimistic about our ability to expand the footprint of FactSet services to drive add-on sales beyond the workstation. We continue to execute on our robust Pitch Creator pipeline, and within just six months of launch, we now have 10 signed deals and over 45 opportunities, with large banking clients in active trials and others in later stages of commercial negotiation. In addition to Pitch Creator, our recently acquired Logo Intern solution is proving to be a valuable utility tool for clients and strengthens our position in banker automation. Together, these tools are creating greater workflow efficiencies, driving adoption, client conversations, and closes. Outside of banking, PEVC remains a bright spot, with Q3 marking our fourth consecutive quarter of accelerating growth, driven by the strength of our private markets offering and Cobalt. Corporates also contributed meaningfully, supported by strong tailwinds from our Owen business, which drove increases in both ASV and seat count. Since the acquisition of Owen earlier this year, nearly half of new corporate's ASV has come from competitor displacements. This success validates our land and expand strategy using investor relations users as an entry point to deepen relationships within the office of the CFO. Within the institutional buy side, we had several positive developments this quarter. We secured strategic wins for our front and middle office solutions and improved retention with our asset management clients. One example is a new IRN 2.0 deal with a major US asset manager choosing us to replace their legacy research management system thanks to our advanced dashboard and Gen AI capabilities. Our managed services offering is also opening new growth channels as we replaced several incumbent vendors at a major asset manager who is now fully aligned with Vaxat. Hedge funds were another area of strength with growth accelerating due to new fund launches, greater adoption of the workstation and data products, and the positive impact of our recent street account price increases. We expect hedge fund demand to continue in fiscal 2025. At the same time, we face several headwinds. Reduced contribution from the annual price increase offset some of our gains. Additionally, as clients, especially asset owners, continue to optimize costs and streamline their vendor relationships, we are seeing more pressure in these areas. We are committed to leveraging our innovative solutions and client relationships to drive future growth. For partnerships in CGS, growth continued in the third quarter, driven by a significant real-time win and strength in the new issuance markets for CGS. New business and expansion activity remains strong across multiple partner types. Looking ahead, we expect this positive trajectory to continue into the fourth quarter. In summary, I want to reiterate that our number one priority is to drive top line growth. The breadth and quality of our opportunities give us visibility and confidence as we look ahead. We are well positioned to deliver in Q4 and meet our full year fiscal 2025 guidance. The majority of the pipeline for the remainder of the year is driven by the institutional buy side. As noted earlier, the demand for middle office solutions, in particular performance and managed services, is high as clients look for longer-term help as they upgrade their tech stack. Our innovation with using GenAI in our buy side solutions is supporting strong client engagement and opportunities as well. Demand for our data solutions is expected to be a notable contributor to our Q4 results. The need for fundamental and estimates data remains high, in part driven by hedge funds and wealth. Engagement on real-time and benchmarks has grown as clients look for modern technology quality and stability, and these solutions represent more than a third of the data opportunities. Wealth remains our growth engine. Our success in displacing incumbents and expanding from the advisor desktop into adjacent areas such as APIs, widgets, and data feeds is resulting in meaningful client demand. Our wealth pipeline is strong, spanning desktops and real-time data, and a growing demand for more sophisticated PLC tools where FactSet has deep industry credibility, giving us greater confidence to extend our success both geographically and within the Wealth home office. Our teams are capitalizing on Faxit's first mover advantage in Gen AI, executing our go-to-market strategy to deliver innovative solutions that streamline workflows and help clients unlock greater efficiencies. With the strong foundation we've built, we are well positioned to fulfill our mission of supercharging financial intelligence. I will now turn it over to Helen to take you through our third quarter performance and FY25 guidance in more detail.

Thank you, Phil, and hello to everyone on the call. We anticipated a better performance in the second half, and I'm pleased to report that the third quarter showed strength in both financial and operating results. As Phil mentioned, our pipeline is solid, positioning us well for continued ASV growth to finish out the year. Given this momentum, we are reaffirming our guidance for FY25. I'll share more details shortly, but let's first review the quarterly results. Organic ASV grew by 22.6 million in the quarter, representing a 4.5% increase year-over-year. We successfully captured an additional 11 million in our annual price increase, primarily in the EMEA and Asia-Pac regions. This amount was lower than prior year and reflects the anticipated headwind of lower CPI in our pricing. GAAP revenues increased 5.9% year-over-year, reaching 586 million. When we look at organic revenues, which exclude foreign exchange movements and impact from acquisitions or dispositions during the past 12 months, we saw a 4.4% increase, reaching $577 million. For our geographic segments, organic revenue grew by 5% in the Americas, 2% in EMEA, and 6% in Asia Pacific. Now turning to expense. Gap operating expenses, which include one-time non-recurring items, increased 11.7% year-over-year to $391 million. This was primarily driven by both higher employee and technology expenses. On an adjusted basis, operating expense grew 10.6%. Employee expense increased 12% compared to the same quarter last year. This reflects our return to a normal bonus accrual and excludes a one-time payroll tax adjustment in the third quarter of the prior period. These two factors account for approximately two thirds of the year over year change. Our workforce has grown by 2.6% year-over-year, strengthened by our strategic acquisitions of Erwin and LiquidityBook earlier this fiscal year. From Q2 to Q3, we have managed down our headcount in our core business as we continue our disciplined approach of self-funding investment priorities through enhanced productivity and operational efficiency. Technology-related expenses increased 21%, reflecting the higher amortization of internal use software and our ongoing investment in generative AI capabilities. As previously communicated, we are strategically focusing our growth spend on technology to drive market leadership through product innovation. These costs now represent approximately 11% of revenue this quarter, up slightly from 10% from the same period a year ago. We have managed the two remaining large spend categories effectively. Third-party content costs increased 1% year over year, now representing under 5% of revenue, about 20 basis points lower than the prior year. Our real estate and related facilities expense remained steady year over year at just under 3% of revenue, also 20 basis points lower as compared to last year. For a more detailed breakdown of our expense progression from revenue to adjusted operating income, I encourage you to reference the appendix in today's earnings presentation. Moving to our margin performance, our GAAP operating margin was 33.2%, lower by 350 basis points compared to a year ago. Adjusted operating margin was 36.8%, a decrease of 270 basis points year over year. These figures reflect the normalization of our bonus accruals this year, the one-time favorable tax adjustment in the prior year, and increased technology expense. SG&A as a percentage of revenue was approximately 20 basis points higher year-over-year on a GAAP basis, primarily due to increased compensation expense and professional fees related to our acquisitions. On an adjusted basis, excluding one-time items, our SG&A improved by about 15 basis points, demonstrating our ongoing commitment to operational efficiency. Our gap effective tax rate in the third quarter was 17.5%, an increase from 17% we saw in the same quarter last year, primarily reflecting lower excess tax benefits from our stock-based compensation. Regarding earnings per share, our GAAP diluted EPS was $3.87, a decrease of 22 cents or 5.4% versus $4.09 in the same period last year. Adjusted EPS decreased by 10 cents or 2.3% to $4.27. These results reflect our continued investment in the business, which drives our revenue growth. Our EBITDA was $236 million, a decrease of 1.7% compared to the prior year period, reflecting lower net income. Most notably, our free cash flow, which we define as cash generated from operations minus capital spending, grew to $229 million in the third quarter, up 5% over the same period last year. This improvement was driven by stronger operating cash flows, highlighting the underlying financial strength of our business and our ability to increase cash generation even as we invest for future growth. Turning now to the use of capital for shareholder return. In the quarter, we repurchased approximately 184,000 shares for around $81 million at an average share price of $438.45. At the end of the fiscal quarter, we had $106 million remaining under the $300 million share repurchase authorization our Board approved last September. Additionally, on June 17, 2025, our Board of Directors approved a new share repurchase authorization of up to $400 million, which will become available on September 1, 2025. On June 18th, 2025, we paid a quarterly dividend of $1.10 per share to holders of record as of May 30th, 2025. This represents a 6% increase from the previous quarter's dividend and marks the 26th consecutive year of dividend increases on a stock split adjusted basis. When we combine our dividends and share repurchases, we have returned $415 million to our shareholders over the past 12 months, demonstrating our ongoing commitment to delivering shareholder value. During the quarter, we refinanced the credit facility that was established three years ago for the CGS acquisition. Our new credit facility includes a $500 million funded term loan and a billion-dollar undrawn revolver, providing us with additional liquidity and balance sheet flexibility to support business growth. we continued our disciplined approach to debt management by repaying $62.5 million of term loan principal, consistent with our previous pace, and ended the quarter with a gross leverage ratio of 1.7 times. Finally, the second half of fiscal 2025 is showing improved results with third quarter organic ASV growth accelerating as we successfully meet client demands. Our visibility into the pipeline gives us confidence in Q4 performance and we are reaffirming our previously issued guidance. We are making targeted investments in our strategic priorities, focusing on differentiated products and internal efficiency initiatives. We anticipate Q4 to be the highest quarter for expense this fiscal year, with investments concentrated on our GenAI and infrastructure projects, alongside go-to-market initiatives that are already strengthening pipeline volume and quality. In conclusion, we remain committed to driving ASV growth, maintaining operational focus, and allocating capital wisely to enable FactSet to deliver sustainable long-term value to shareholders. On behalf of the executive leadership team, I would also like to extend my sincere gratitude to Phil for his leadership and contributions. While many of us know Phil for his love of impossibly spicy foods and his deep knowledge of 80s rock bands, his unwavering focus has always been on two things, his family and FactSet. On a personal note, I've learned much from his open leadership style and truly valued our partnership through both challenges and successes. and we are enthusiastic about welcoming Sunok in September as he leads FactSet into its next chapter of success. Having been a FactSet client himself, he brings a unique perspective that will further help us enhance our client-first approach. On behalf of all FactSetters, we wish Phil only the best and look forward to having Sunok on board. And with that, we are now ready for your questions. Operator?

Thank you. If you'd like to ask a question, please press star 11. If your question has been answered and you'd like to remove yourself from the queue, please press star 11 again. Our first question comes from Slow Mo Rosenbaum with Stifel. Your line is open.

Hi, thank you very much. I want to ask if there's any change in the macro environment. You know, you're seeing a little bit of a turn up in the ASV growth, which is certainly positive after over a year of sequential declines. I'm wondering, is it all better execution and products getting traction? Or are you seeing anything in the end markets that are giving you any tailwind whatsoever?

Hello Mo, it's Phil. Thanks for the question. Yeah, honestly, we've not seen that much difference, I would say, this fiscal year. Obviously, we had In April, you know, the markets were dynamic, so we saw maybe a couple of weeks of clients probably waiting to kind of see how things played out. But I think the main takeaway I would think for you is that many of our clients are going through these multi-year transformations in terms of their technology and data. And FactSet's just in such a great place to support them with that. And that's certainly what we're seeing. you know, in the pipeline for the rest of the year. And maybe I'll ask Goran here just to add a few other comments.

Hi, Shlomo. So I think we see a little bit more positivity in client reactions over the past quarter. So there is some momentum there. I would attribute most of the, you know, momentum changing in our favor is to our products resonating. You know, I think we're focused more on our data solutions in general. And I think we are we're seeing that pay dividends and we do expect, you know, significant boost from the, you know, from our buy side offerings in the fourth quarter. Our Gen AI solutions have also, you know, helped us generate momentum, you know, particularly I would say, you know, Pitch Creator and our conversational API and as well as our offerings on the buy side in that regard. would attribute it mostly to you know execution and you know really the product line maturing in some of the areas that are really helping us thank you thank you our next question comes from alex cram with ubs your line is open yes hey guys um not sure if this is just a follow-on to the first question but

maybe a little bit more specific on the 4Q outlook. If I look at the guidance range, which is obviously unchanged, I think to get to the low end, you need to basically do what you did in the last two years in the fourth quarter, I think mid $50 million range. So I think the one thing that you said earlier in your prepared remark was banking was kind of in line with last year. So maybe, and you touched on this a little bit just now, but like, Maybe relative to last year, can you just, like, contrast where things are significantly better and where they're maybe a little bit weaker to kind of get a sense where they could actually be upside or downside to the low end?

Yeah, thanks, Alex. I'll start, and I'm sure Goran will have additional comments. So, you know, we're definitely significantly ahead of where we were at this time for the last two years. The areas that look like they're going to be driving growth are the Americas and EMEA. So both of those regions look strong. I would say our core business, the workstations, relatively flat to last year. So the strength is really coming from our enterprise solutions. So that's the portfolio lifecycle for the buy side, as well as our feeds business, which is really doing great. So that's showing a lot of momentum going into Q4. And the buy side, more specifically, I think as Goran mentioned, looks really strong for Q4. So when you look at kind of the top 15 deals we have out there for Q4, I think 10 of those or approximately two-thirds of those are coming from the institutional asset management part of our business.

So, you know, Alex, just to add to what Phil already said, you know, I think obviously the, you know, book to ASV or, you know, commitments that we have is well ahead of last year. We see improved retention in the quarter. I think we have good visibility into constellations for the next 90 days, and we see significant improvements in that number. So those are two very tangible factors that increase our confidence in reaching the numbers that we are projecting. Pipeline itself, we couldn't be happier with the diversity of it. So we see pipeline is very diverse across the deal sizes, as well as firm types and solutions. So, you know, we are not dependent on any large deal to really get us over the finish line in the fourth quarter. And, you know, that gives us additional confidence. Personally, I'm really happy about what we see as an uptake on the buy side, as Phil already mentioned. And, you know, and I think that what Further, I think reinforces our confidence is that we do have some, you know, quick, fast developing deals in the fourth quarter that can help us offset any fallouts that can potentially happen. So we're quite confident that we'll be within the range that we have guided towards.

Excellent. Thanks for the additional color.

Thank you. Our next question comes from Faiza Alwi with Deutsche Bank. Your line is open.

Yes, hi, thank you. I know it's a bit early, but I wanted to ask if you have any thoughts around how we should think about, you know, fiscal 26, because I know you've talked about you typically do have visibility over the next six months. And really, if I can just ask a direct question, do you expect to see further acceleration beyond Q4?

Hey, Faiza, it's Helen. Let me try to take that one. So right now we're obviously focused on this quarter and executing against that. We feel very comfortable is what Goran and Phil both talked about. And you can imagine that the same trends that you're hearing us talk through will continue. But we don't talk about next year until we go into our September call. So that's what we plan on doing that.

Thank you. Our next question comes from Ashish Subhadra with RBC. Your line is open.

Thanks for taking my question.

Phil, congrats on your retirement. Just in the prepared remark, there was a comment around asset owners continuing to optimize costs and streamline their vendor relationship. I was just wondering if you could provide some color on the headwinds there, but also how do we think about inflecting the group for that particular project?

Yeah, I mean, we have a great business with asset owners, and they utilize a lot of our core analytics product for the buy side. And our strategy has obviously been to be open, flexible, and provide best-in-class point solutions for those firms. Many of them are essentially just looking how to further streamline their businesses. So it's a competitive area. You know, we're partnered with many important firms in the space to provide solutions there. But it certainly, at least in this quarter, was a bit of a headwind for us. Although looking at the pipeline for Q4, it looks like, you know, we'll do better than we did in Q4 of last year or for the year. So that'll be a good tailwind. Goran, do you want to add anything there?

Yeah, I think the quarter is a little bit of an outlier from that perspective. You know, obviously, as Phil said, it is a competitive space. But, you know, looking ahead, you know, we do not see a similar quarter in our future. You know, we are, you know, investing in the liquidity book will certainly help us close the OMS and post-trade compliance gap. And we are building the, you know, total portfolio solutions have made, you know, significant, you know, progress there as well. So we do expect, you know, that this will remain a competitive area for us, but expect improvement in the future.

Thank you. Our next question comes from Owen Lau with Oppenheimer. Your line is open.

Good morning, and thank you for taking my question. So the adjusted operating margin for the first three quarter, it's about 37.2% based on my math. It implies that the fiscal 4Q margin has to go down to around 34.6% to hit the midpoint of your full year guidance. So it's any expense or investment we should be aware of for your fourth quarter, or it will follow historical pattern and it will more likely to land at the high end of your full year margin guidance. Thanks a lot.

Hey Owen, it's Helen. Thank you for that question and your numbers are correct. So as you know, as we start off the year, we talked about that we're executing our investment plan across our what we call our three pillars, which is expansion and data. embedding deeper in our client workflows and accelerating through our Gen-AI roadmap. So the pace of investments has picked up over the course of the year. And so for the rest of the year, we pretty much remain on track to deliver the margin within our guidance range of 36 to 37 on the adjusted basis. The spend that we see picking up will be on the expertise that we've brought in to work on new solutions like in Gen-AI. The investments that we're actually using to support the integration of the acquisitions, as you may recall, both of our acquisitions are slightly dilutive. And then the technology costs, which are increasing as we expected. So at this point right now, we feel pretty comfortable that we will be in the range that we've discussed, and we'll continue on that path.

All right. Thanks a lot.

You bet. Thank you.

Thank you. Our next question comes from Andrew Nicholas with William Blair. Your line is open.

Hi, good morning. Thanks for taking my question. Appreciate all the commentary on the monetization of GenAI and the success on the top line. I just wanted to ask about progress from an internal efficiency perspective. Helen, I think you mentioned briefly some internal efficiency initiatives. Just curious, How much of that is gen AI related? And if we're thinking about kind of the increased investment there, how much of that could potentially be offset and over what time frame from cost savings from the same technologies? Thank you.

Great. Yeah, this is Phil. I'll start and then I'm sure Helen has some additional comments. So, yeah, we're certainly very focused now on using AI internally. Our initial strategy really was to focus on building the foundation, the capabilities, educating our workforce and delivering product to the marketplace. So we feel good about that. But we're now in a very good place to apply that same strategy internally. So we're looking at, you know, obviously developers giving them tools to, you know, produce code more efficiently. We're looking at, you know, all of our client facing employees who spend a lot of time doing administrative tasks, getting ready for meetings and so on. So there's lots of things we can do to help them be more productive and spend more of their time really on sort of the prospecting and selling and the fun part of the job. And then there's obviously efficiencies that we can garner through collecting data. We've been masters of that for decades of just further automating the collection of data. So this certainly helps with that. So those are some of the areas that we're focused on. And I think just sort of getting organized around that internally and thinking about how that affects the algorithm for the next three years is going to be an important piece of, I think, how we think about the company and how you should think about it.

Yeah, no, that's exactly right. Phil touched on all the real high points. What's interesting, and as you might guess, the question that I like to always ask when we're investing is what's the ROI? The challenge right now as we're investing in Gen AI is that direct competition direct result between investing and the reduction. But I think what we look at is the overall either increasing an output or being able to see more flat growth and expense going forward. And I think that's really honestly the right way to go. So currently, some of the examples that we've done is internally a cost rate events coverage, which more than doubled from 7,000 to 15,000. We've seen a 10% improvement on output from our engineering through the coding assistance. Our street account has expanded. And another, just an example of AI generated fund descriptions we've been able to get those projects done in a third of the time. And that means that we're just not only faster, but higher quality. And those are just examples that are very hard to get an ROI on, but you can see how that ends up benefiting. Now, the outcome that we look at, for example, if I look at headcount growth, if you take out the acquisitions, we are essentially flat to down in terms of headcount. And so that is where I think we'll see some of these benefits flow through very much on the things that Phil already talked about in sales and engineering and in product, looking at the day in the life. We have over 50 opportunities that we've prioritized. So we'll see more of that come through going forward. Thank you.

Thank you. Our next question comes from Surrender Zen with Jefferies. Your line is open.

Thank you. A big picture question here around the margins and kind of the trade-off of growth versus margins here. What we think over the next one, two, three years is the idea that kind of expenses, we should see more operating leverage, I guess, that we're near peak investment, I guess, fiscal 4Q, and then it kind of feels normally or below normal at that point in time.

Sure. Thanks for that question. Now, as we said, based on our current outlook, we anticipate that our margin is going to land comfortably within this guidance range. and as noted that we did have some dilution from our recent acquisitions, but we've essentially, as we talked about on Investor Day, part of this will be self-funding our investments through lower hiring is one piece, and we'll continue on the efficiency front as well. Now, so we're not looking at this point to talk more around what we've talked about already in terms of our longer-term outlook, but I can say that just as I answered before, some of the points that we're starting to see in 25, we would expect that to continue going into the next couple of years.

Thank you. Our next question comes from Craig Huber with Huber Research Partners. Your line is open.

Good morning. Thank you for taking my question. On the cost side, Helen, it looked to us like your cost adjusted for some one-time items. overall was up about 10 to 11% year over year. If you take out the acquisitions, was it up more like 300 basis points lower than that? So call it roughly 8% maybe. And while you're answering that question, can you touch on please, the investments you guys are making in your sales forces? Is that up significantly all these years or more like flattish? How should we think about that?

Great. Thank you for that. I think I caught most of that. But part of the increase of impacting our margin, as you know, is bonus accruals, compensation, where last year we knew we were coming in at a different level and therefore we adjusted our bonus as a result of that. So that is the biggest piece of that delta. And then I don't know if you call that one time, but that makes a big difference In terms of investments, our tech expenses continue to be higher. They are up 21%. Part of that is the amortization of internal use software, and part of that's just spend as it relates to the cloud. I will say, though, other expenses, which is like facilities, is lower 20 basis points as a perspective relative to revenue as is third party. So we're really trying to manage our third party costs as we try to go through the additional need of investments on the tech spend.

What about the Salesforce part of it?

Oh, yeah. Sorry. No, I would say from a Salesforce perspective, we're relatively flat. There are areas that we are investing more in and more on the product specialty side. But overall, I would say from a Salesforce perspective, relatively flat.

Great. Thank you.

Thank you.

Thank you. Our next question comes from Tony Kaplan with Morgan Stanley. Your line is open.

Thanks so much. And Phil, congrats on your retirement. I wanted to ask the offensive Gen AI question. You mentioned 10 signed deals and 45 opportunities. On the signed deals, are these customers you already had that want to adopt Pitch Creator or are these new banks that want to have sort of a full fact set product and are adopting and Pitch Creator was like the driver for that. And, you know, what else is out in the marketplace like it at this point? I know you were sort of first, but has anything, any other products come up to this point? Thanks.

Hi, Tony. It's Goran. So, you know, it's a bit of a mix. You know, I would say most of the current deals are with the existing clients, you know, where they have adopted Pitch Creator as part of the overall solutions. We do have deals in the pipeline. Don't forget that Pitch Creator has been out there less than, you know, about four or five months. So, we do have... you know, some selling activity where Pitch Creator is significant contributor in the sentiment of those deals that are currently in the pipeline. So we expect it to contribute to winning new business in addition to, you know, cross-selling and upselling of the existing business. I hope that that helps.

Thanks.

Thank you. Our next question comes from Jeff Silber with BMO Capital Markets. Your line is open.

Hey, this is Ryan on for Jeff. Just going back to your guidance, it implies a pretty broad range of outcomes in the final quarter of the year. Just wondering how you can help us understand some of the swing factors or the macro impact that might be driving that. I think you mentioned a lot of that is pipeline from institutional buy side. Thank you.

Yes, thank you. This is Phil. So as Gora mentioned, it's a very broad portfolio of opportunities. We're not really relying on any big swing deal, I think, or there's nothing left in terms of a potential big negative out there. So it's really just execution on a broad portfolio. We're well ahead again of where we were this time last year. There's just a lot of deals to close. So I believe barring any really disruptive thing in the markets, it looks like we're in a good position to execute that within the range. But we, I think, just wanted to leave it sort of the way it was, just given the number of deals that we have to close in the next two and a half months.

Yeah, our guidance range is obviously, you know, designed to reflect the potential variability of outcomes. And so we really want to make sure that we're doing that. And that's why we're leaving it as is.

Thank you. Our next question comes from Manav Patnik with Barclays. Your line is open.

Hi, this is Brendan on Fremont. I just want to ask on the, you guys are highlighting the just increased focus on data solutions and just want to see, you know, why does it feel like there's more momentum there now? And is there something about your, you know, either the product you're offering or you go to the market that's changed that's giving you more confidence?

Um, yeah, so it's, it's, it looks like it's returning to, you know, historical levels or at least it's on that path, which is fantastic as a growth driver for the company. Uh, we've certainly brought in that suite of offerings. So we've added, uh, some, you know, very good real time, uh, pricing corporate actions and reference data capabilities. So FactSet is, um, delivering data now to more workflows than we might have historically, historically. We were really focused on quant workflows, going into a lot of other performance systems. But I think that the broader suite of stuff we're doing now for clients, including some of these new data areas, is really helping. And I think we also organizationally, if you remember a year or two ago, we moved the CTS business, which was a vertical, into the data part of our business. And the thinking there was, You know, we just want one factory for data and the feeds that we're delivering to our clients, our partners and even our own engineers. We wanted to have more consistency there. So I do think there was a bit of a blip there just due to that big change internally. But I think we're in a good shape now and a lot of that settled out.

Just to add to what Phil said, I think additionally, I think we refocused the team on data sales within the sales organization, and I think that's paying dividends. Phil already mentioned improvements or some products that we really are investing in and have high hopes for in terms of our real-time exchange data feed business as well as price reference data. Those are starting to contribute, and we expect you know, significant contribution from them. And also in the current environment, I think there is more and more demand for data in general. So all of that is driving, you know, improvement in that part of the business.

Thank you. Our next question comes from David Modermaden with Evercore ISI. Your line is open.

Thanks. Good morning. And Phil, congrats on your retirement. Thank you. I just wanted to just level set for where we are in terms of the 30 to 50 basis points ASV contribution from Gen AI this year. Are we tracking in line with that? And you know, as in terms of the traction you're getting there, do you think that's something that we should see accelerate and add more to ASB from that 30 to 50 basis points in the next year or two?

Yeah, we're definitely tracking towards that. We talked a little bit earlier about pitch created, but that's just one of the SKUs we have. So I think we have multiple SKUs now that are sort of getting into seven figures. We're monetizing, you know, these solutions across sort of six different Beachfronts, I think the buy side has been a bit slower than the sell side to adopt some of this stuff. But we're hoping that changes for our portfolio commentary product, which we're very bullish about. We've just released the fixed income part of that. So we had equity to begin with and risk, but a lot of firms are waiting for us to have fixed income as well. So now that that's out, we're optimistic that we'll do more there next year. So I certainly do anticipate that the momentum will continue to build. And we focus on a few workflows in this last fiscal year, but the team's done a great job of identifying sort of three or four other areas for us to start building out. And like everyone, we're now focused on agentic workflows. So just going from the foundation and the capabilities to essentially creating agents that can, interact with each other and with employees. That's an exciting evolution that we're in the middle of.

Great, thank you. Yep, thanks.

Thank you. Our next question comes from Scott Wurzel with Wolf Research. Your line is open.

Hey, good morning. Thank you for taking my question. I'm wondering if you can talk a little bit about the QSIP collaboration with Omni that you announced and just the opportunity there and the overall demand for identifiers among VC and PE-backed companies.

Thank you. Yeah, so we're excited about being the gold standard for private market identifiers with QSIP. We're working very hard in the ecosystem to sort of identify partners that are interested in doing work with us. And JP Morgan is one of those firms. So I think Omni is one of the things we're excited about in terms of building out QSIP. So we've also spent a lot of time working with different firms on private credit. I think that's probably the one we're with furthest ahead. So we feel like we're building some good momentum here. Thanks.

Thank you. Our next question comes from Russell Quilt with Rothschild and Redburn. Your line is open.

I think in your opening remarks, Helen, you mentioned the new liquidity you have to support growth. Will that be deployed organic or inorganically? And what are the main areas that you think you might deploy that additional capital to drive improving returns from next year?

Thanks for that question, Russell. So yeah, correct. We have ample liquidity, which is one of the benefits of sitting in this seat and not worrying about as markets are really quite volatile where we'll be. And as we noted that we slightly increased our share buyback from 3 to 400, which is well within, I think, when you think about as a percentage of our market cap. So I think we will continue, as we've talked about in the past, our commitment on shareholder return. and we'll take advantage of any market dislocations as it relates to share buyback. And of course, we've done a fair amount of acquisitions this year and that will continue to be where our focus will be in terms of adding inorganic growth as well. But right now, as you might guess, we have lots of irons in the fire and we'll continue on that path.

Thank you.

Thank you. Our next question comes from Jason Haas with Wells Fargo. Your line is open.

This is Vinny on for Jason Haas. In a previous answer, you mentioned that two areas driving growth are Americas and EMEA, but EMEA organic ASC has been decelerating. So what gives you confidence in this region given the buy side headwinds there? Thank you.

Goran? Hi, it's Goran. So, you know, I think we have, you know, our expectations for Q4 based on everything we see and the momentum in EMEA is that we will see re-acceleration. Our retention is trending much better in EMEA year over year. And, you know, just the strength of the pipeline and diversity of that pipeline in EMEA is, you know, gives us a lot of confidence in in Q4. I mean, you're right that this region has seen more challenges when it comes to buy side in general and more cost pressure, but at the same time, just based on.

So hopefully, I'm just looking here as well at the pipeline. So it looks very broad based as well. So across you know, our seats, our PLC offerings, and our feed offerings. It looks like a good portfolio of stuff for a MEA and Q4.

And just as we get Gorin back on here, the other piece, as we think about the acceleration, because you are right, as it relates to Q3, keep in mind our annual price increase was lower this year than last year in terms of what we're contractually going out with. So that headwind sort of goes away when we get into Q4, when we start to compare apples to apples. Gorin, sorry, we lost you there for a moment.

Yeah, so I'm not sure what you were able to hear, but basically, yeah, I think reinforcing what Phil said is the breadth of the pipeline and diversity is what gives us confidence and we see improvement in Q4 and immediate.

Thank you. As a reminder, to ask a question, please press star one one. Our next question comes from George Tong with Goldman Sachs. Your line is open.

Thanks. Good morning. I'd also like to extend my congrats to Phil on your retirement.

Thanks, Rog.

Yes. So earlier, Helen, you talked about the MIA and APAC pricing contributions decelerating a little bit because of lower CPI increases. Can you elaborate on the pricing environment more broadly in the international regions and if you're seeing any competitive changes that might also be affecting your pricing there?

Sure, happy to talk about it. Thanks, George. So yeah, there are two ways for us to capture pricing, as you know. One is the annual price increase, which is contractual, and that is impacted by CPI, as you noted. And then the other is captured at the product level. So increased rate cards or higher price realization versus the rate card can help us there. So what we've seen this year, I mean, we adjust our prices. In fact, we raise selectively rate cards in January, and we see a lot of that come through in renewals and new business. But the solid increases thus far have been in more corporate and hedge funds. We did raise our price, for example, on street account, which has been received well in terms of the value that clients see from it. I have mentioned in the past, as you may recall, that new business price realization was under pressure, and so we took greater discounts in favor of volume. And so that sort of worked out for us. I have to say that we've stabilized that. So right now we don't see that continuing in terms of total discounts. We're seeing improvement on wealth and in asset management in terms of our price realization. We're flat on banking. And as noted, as you might guess, we've seen some pressure on asset and asset owners. So the guidance range we have did incorporate the lower inflation rate. But right now, I would say there's not a huge difference across in the outside of the Americas globally. They're kind of following the same piece. So we tend to look much more along on a firm type basis.

Very helpful. Thank you.

Thank you.

Well, I think that's our last question. So let's wrap up. Thanks to everyone for being here today. As we head into the fourth quarter, we're seeing strong momentum, visibility into our pipeline, and confidence in delivering on our full-year targets. Our enterprise partner status is resonating, and we're focused on execution, solving our clients' workflow challenges, and driving long-term growth. To finish, this will be my last earnings call as the CEO of FactSet. It has been an honor to serve in this role for over the past decade, and I'm proud of what we've achieved together over the past 30 years and feel confident in the company's future prospects, I look forward to welcoming Sunoka aboard in September and working closely with him to ensure a seamless transition. And to our clients, partners, shareholders, and all the fact-setters around the world, thank you all for your trust and support. Operator, that ends today's call.

Thank you for your participation. This does conclude the program. You may now disconnect. Everyone, have a great day.