FactSet Research Systems Inc.

Good day, and thank you for standing by. Welcome to the second quarter earnings call. At this time, all participants are in listening mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 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'd now like to hand the conference over to your speaker today, Kevin Toomey, Head of Investor Relations. Please go ahead.

Thank you, and good morning, everyone. Welcome to FactSet's second quarter fiscal 2026 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 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 2. 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-YAP 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.factsite.com. During this call, unless otherwise noted, relative performance metrics reflect changes as compared to the respective fiscal 2025 period. Joining me today are Sanog Vishwanathan, Chief Executive Officer, Helen Shan, Chief Financial Officer, and Goran Skoko, Chief Revenue Officer. I will now turn the discussion over to Sanok.

Thank you, Kevin, and good morning, everyone. Thank you for joining us. ASV growth accelerated in Q2 for the fourth consecutive quarter. Organic ASV grew 6.7% to $2.45 billion. It accelerated across all geographies and has grown year over year in each of retention, expansion, and new business. Adjusted operating margin was 35% and reflects the investments we're making this year. Adjusted value to DPS was $4.46, up 4% year over year. These results confirm that Faxit's foundational strengths are increasingly valuable in an AI-intensive environment. Our connected data embedded workflows, best-in-class service, and broad distribution. Customer wins from this quarter illustrate the breadth and depth of our data and product capabilities. First, following the multi-year renewal of our relationship with a major global investment bank, we expanded into their international corporate bank. This was driven by the depth and differentiation of our deep sector content. Similarly, our private capital data assets was central to our new mandate with the leading Australian private equity fund. These wins show how dealmakers continue to value our differentiated data. Second, one of our largest international wealth clients selected our proposal generation solution as an extension of their existing use of FactSet for portfolio monitoring. A major Canadian wealth manager adopted our real-time exchange data feed product, These expansions showcase demand for our products that span the whole investment lifecycle, including portfolio construction, ongoing oversight, and end-client engagement. Third, Capital Group expanded their use of our Portware trading platform, which also achieved several new wins with other large asset managers. In addition, our new auto management solution, Liquidity Book, is gaining significant traction with hedge funds and other institutional buy-side clients. Based on our strong first half performance, we are raising our ASV, revenue and EPS outlook ranges for fiscal 2026. This reflects sustained momentum across all client types and geographies. We are maintaining our guidance range for operating margin as we continue to balance investments with productivity improvements. Last quarter, I outlined three priorities. driving commercial excellence, delivering productivity improvements, and solidifying our long-term strategy for sustainable growth. We've made strong progress on all three. We are bolstering the health of our client franchise, making our core operations more efficient, and redeploying our resources to fund strategic investments to drive further growth and structural investments to deliver better operating leverage in the medium term. First, on commercial excellence, We are rolling out new pricing and packaging, are infusing AI throughout the sales lifecycle, and have realigned sales and customer success incentives. With disciplined pricing and packaging, our revenue base is becoming more durable. Our direct seed-based exposure now represents less than 20% of ASV because of appropriate minimums and bundling into enterprise agreements. In Q2, the majority of our renewed ASV was in the form of enterprise agreements or contracts that are more than three years duration. On average, these renewals extended in length by more than 30%. Our focus on client health has led to a five-point net promoter score improvement just this quarter amongst our investment banking users. This is helping drive ASV retention and expansion. Our overall ASV retention continued at over 95% in Q2. 86% of our top 200 clients use five or more of our solutions, up from 78% three years ago. In Q2, data solutions grew by double digits across all firm types, including the highest expansion we have seen since 2023. Today, 48 of our top 50 clients are using at least three of our AI solutions, with several more in trials. In Q2, new business growth accelerated. Our marketing leads increased 11% year-over-year. And with stronger lead scoring and more targeted outreach, win rates for these opportunities improved by 29% year-over-year. Corporates and private capital wins were particularly strong, with double-digit growth in both. First half productivity initiatives have already captured more than half of the 100 basis points of productivity improvement we targeted for the year. We've made real changes in technology, data operations, and client support, our largest three operating cost centers. We've consolidated all Faxit technology under our newly appointed CTO and are converging on standard tools and platforms to deliver efficiency. For example, our internal development platform that standardizes tooling and software deployment will allow engineers to spend more time on product development. AI coding assistants now author nearly one-fifth of our successful code commits and free up a quarter of our engineers' capacity in those teams. This includes over 90% reduction in effort spent on businesses' usual activities like software upgrades and patching. Some teams have radically reduced time to market for new product development by fully automating the delivery lifecycle and collapsing a month-long cycle to one day. We see ample scope to scale this transformation. In data operations, we are seeing rapid transformation as we drive down unit cost and time to value and expand our content universe. Our Rubix private company classification project to deepen coverage from four to six levels is a great example. We've quadrupled classification capacity year over year while keeping costs flat, capturing scale economies in our business. This quarter, we've deployed four distinct AI tools across different parts of our data operations, generating 25% plus reduction in manual curation on average. We are expanding this systematically across all our data while maintaining high-quality standards. The text-to-formula agent that we launched in October 2025 has fundamentally changed how we handle client inquiries. Our help desk experiences double-digit monthly growth in formula support requests, but the volumes handled by our client service representatives have now started to decline as the agent absorbs an increasingly large share of these inquiries each month. This allows our support colleagues to focus on higher-level activities such as custom client implementations, advanced analytic support for fixed income and quant workflows, and outbound engagement to expand our reach. We are lowering the variable cost of serving each client while increasing our capacity to engage and retain our highest-value accounts. Beyond these three areas, we are systematically identifying further cost savings across the business. These include streamlining procurement and lead-to-cash processes, consolidating legacy software contracts, and optimizing our third-party data agreements. These productivity gains will make us a structurally more efficient company, flattening the cost curve as we scale, and freeing up resources for high return opportunities. We've made substantial progress on developing our medium to long-term strategy. I will share it in detail along with the business plan at an investor event after the end of this fiscal year. Let me reiterate that we are well positioned to be a winner in an AI-intensive world and to deliver attractive ongoing financial returns. To give you some insights now, a key element of our strategy is to be a leading data and workflow infrastructure provider for AI-enabled institutional finance. What we are seeing so far is clear. As clients move AI into production, they are pulling FaxSet deeper into their operations, not replacing us. Our foundational strengths include connected data and embedded workflows, and these make us more valuable to clients as they implement AI in their environments. We are wired into our clients' operations, and so the relationship deepens with every transaction. five key factors make our data differentiated and trusted and thereby integral to financial institution clients that have zero error tolerance data depth and coverage we collect and refine data source directly from over 300 stock exchanges millions of public and private company websites thousands of data partners and clients themselves for example broker research pacset holds the commercial and legal rights to access these proprietary data sets and license content data cohesiveness we seamlessly integrate the data from one time period to another to provide holistic company time series data from annual quarterly and preliminary reports going back over 40 years data comparability We provide data that is comparable within and across industries with considerations to different accounting standards, market and company specific presentations, reporting practices, and regulatory requirements. Data traceability. Clients can view the data source of each data point through document tracebacks. This creates data transparency, credibility, and reliability. Data quality. We apply quality checks to data and apply in-tool checks at every step of our collection pipelines. We have automated logical validation rules augmented by audits conducted by humans. After all this, we conduct product checks by our experts to ensure our data products are fit for use in each of our end markets. Over the past three years, we have tripled our data assets while maintaining these high-quality standards. But it's not just data alone. It's how deeply we integrate FactSet data with client data and deliver value. That is, how we support the sophisticated decisions our clients make every day. FactSet's office add-ins are woven into clients' daily research and reporting, and the custom models they've built on our data have grown by 17% just this quarter. Our by-site analyst clients store over 2.5 million research notes in our database. And this has been growing at over 35% per year for the last three years. Investment committees use this research to make decisions. Compliance teams run regulatory checks against our outputs. And the longitudinal analyses stored and reported from our analytics book of record are essential to communicating the definitive source of portfolio performance and the characteristics of millions of funds managing trillions in assets. The number of institutional portfolios integrated into FactSet grew by 20% in the last year to almost 8 million. Let me use a value at risk calculation for a multi-asset class portfolio to illustrate the mission critical nature of our embedded workflows. When a portfolio manager looks at a value at risk number, they scrutinize the output of tens of thousands of simulations across hundreds of risk factors driven by millions of data points. position attributes, historical return series, yield curves, volatility surfaces, correlations, and many, many more. All of which must be correct, consistently sourced, and temporarily aligned. If even a single data node is wrong, the entire risk calculation silently misstates the riskiness of a portfolio. This isn't a theoretical concern. It's a daily operational reality for every institutional investor managing risk at scale. The data checks we conduct across our multi-asset class portfolio analytics suite alone have grown by 29% in just the last year, underscoring the importance of our robust infrastructure. AI accelerates aggregation and finds patterns in the data, but it cannot substitute our trusted, reconciled data production and modeling infrastructure that underpins these risk, valuation, and compliance workflows. Our AI strategy will leverage these foundational strengths and build more integrated solutions at all levels of the emerging AI stack. Partnerships for growth are an important component of our strategy. For example, partnerships with Snowflake and Databricks enable clients to seamlessly combine fact-set data with their own sources and operate AI-driven workflows in the secure cloud environments they already use. We are also actively partnering with Anthropic, OpenAI, and other leading frontier labs to ensure that facts and data sets are readily available in their marketplaces to facilitate rapid development of new AI solutions. And we are infusing agentic capabilities across our workstation so that users can operate more effectively inside our governed, trusted workflows. Our newly announced partnership with Finster will accelerate our agentic platform for banking, meeting the growing demands of our dealmaker clients. We have strong traction and are seeing rapid adoption and use of our solutions as AI workloads take root at our clients. One illustration. Our MCP server that's built on a robust ecosystem of content APIs was launched in December and already has over 120 clients actively engaged. API call volume is steadily growing as well, with March volumes at three times the February level. We expect this success to be replicated across our AI solutions in all layers of the stack. As AI continues to reshape financial institutions, FactSet is becoming more central to clients' mission critical workflows. We are in the early innings of sector level technological change and are building on our current foundational strengths to continue creating value for our clients in the future. Let me close by thanking every fact setter for their continued focus and commitment to delivering for our clients. We are winning competitive mandates and expanding relationships from a position of strength. Now, I will hand over to Helen to discuss our Q2 performance and updated guidance in more detail.

Thank you, Sanok. Great to be here with everyone today. For the second quarter, organic ASV accelerated to 6.7%, an increase of $38 million. Growth was balanced across all regions and fueled by three key drivers, strong client expansion, new business wins, and higher pricing capture from our annual price increase in the Americas. Let's walk through our performance by region. In the Americas, organic ASV grew 7%, up from 6% in Q1. Asset management continued to be a bright spot, with growth driven by both trading and middle office solutions. Dealmakers contributed with competitive displacements in banking and uplift from successful renewals in sell-side research. An increase in new business logos was powered by hedge funds and corporates. In EMEA, organic ASV grew 4%, in line with Q1. A competitive managed services win, higher demand for data solutions in wealth, and a large banking renewal that included Pitch Creator and our new MCP solution drove the positive results. These wins helped offset softness with asset owners, partly due to pension reform in the Netherlands. In Asia Pacific, organic ASV accelerated to 10%, up from 8% last quarter. Improved demand from asset managers and hedge funds for middle office and trading solutions, coupled with stronger banking retention, drove the region's performance. Now turning to our results by firm type. On the institutional buy side, we delivered 5% organic ASV growth, up from 4% last quarter. This reacceleration was driven in part by higher trading volumes fueled by additional portware installations, increased data demand by hedge funds, and continued strength in managed services linked to our performance solutions. In wealth, organic ASV maintained a 10% growth rate, despite the challenging year-over-year comparison given our landmark UBS win a year ago. This performance was driven by higher demand for our wealth platform, as we further integrate into clients' daily workflows with our proposal generation and advisor dashboard solutions. In fuel makers, organic ASV grew 8%, up from 6% in Q1. Competitive displacements and successful enterprise renewals added momentum in banking. Our investments in deep sector, aftermarket research, and banker productivity solutions position FactSet as a trusted enterprise partner. Both corporates and private capital accelerated to double-digit growth this quarter, with new business and competitive winds fueled by demand for our data. The organic growth in market infrastructure accelerated to 8%, up from 7% in Q1, with robust sales in real-time data and higher retention. In addition, strong issuance activity supported the positive results for QSIP. We continued to expand our client and user base. In Q2, we added 98 net new clients, bringing our total to 9,101, led by corporates and wealth. Our user base increased to over 241,000, with additions largely in wealth and dealmakers, reflecting a 10% annual growth rate. Lastly, we continue to have solid retention rates at 91% for clients and above 95% for ASV. These results reflect the mission-critical nature of our business, as the world's leading financial institutions continue to trust FactSet. Turning now to our financial results. Second quarter revenues grew 7.1% year-over-year to $611 million, or 6.8% organically, excluding impact from foreign exchange and M&A. Adjusted earnings per share was $4.46, up 4% year-over-year, driven by higher revenue and a lower share count, partially offset by a higher tax rate. The adjusted operating margin came in at 35% for the quarter, as compared to 36.2% in Q1 and 37.3% a year ago. In line with our plan, this reflects the timing of strategic investments, driven by three main factors. First, higher people expense due to year-over-year compensation adjustments and full impact from merit increases. Second, accelerated technology spend on cloud infrastructure and AI tools. And third, higher professional fees from increased project work in the quarter. The midpoint of our full-year margin guidance reflects expected investment pacing through the second half in technology infrastructure, professional services, and product development. AI is playing a dual role, enhancing client value through new capabilities while driving productivity gains. We remain committed to long-term growth while maintaining our track record of capital discipline. As highlighted last quarter, we are investing to differentiate our data, deepen client workflows, and modernize our platforms, with approximately two-thirds directed towards growth initiatives and one-third on enhancing our internal infrastructure. Funding will come from productivity improvements and disciplined cost management. With the first half now complete, let me connect our investments to the early outcomes we are seeing. Our investments in data expansion are delivering. We now offer our core data sets through MCP servers, giving clients flexibility to access our data in their preferred environments. Workstation users are benefiting from optimized real-time data delivery, driving both efficiency and cost effectiveness for clients. and we are meeting client demand by integrating premier research firms like JPMorgan, Barclays, and Kepler directly into our platform. These are expanding our addressable market while enhancing the value we deliver to clients. Our workflow investments are receiving market validation. We expanded our long-standing Schroeder relationship to provide a managed service to enable greater scale. As highlighted earlier, Capital Group selected us as their trading platform because of our hyperscalable platform and high-volume capabilities. And the year-post acquisition, demand for a liquidity book order management system, and Faxit plus Erwin investor relations solution is driving meaningful new logo growth and cross-sell expansion. These all showcase our ability to scale from point solutions to enterprise-wide partnerships. On the structural side, we're executing across four priorities. First, modernizing our tech stack and cybersecurity to strengthen platform resiliency as we integrate agentic capabilities into the workstation. Second, deploying AI to scale our content operations as mentioned by Sunil earlier. Third, strengthening our brand with our fluent in finance campaign that is generating strong top of funnel growth. Lastly, freeing up engineering capacity with AI, enabling us to accelerate new projects with existing talent. We expect these benefits to accelerate through next fiscal year and beyond. We are also on track to capture our intended in-year expense savings by automating manual processes through AI, optimizing cloud usage, and streamlining our portfolio through product lifecycle rationalization. For example, we've been able to reduce the cost of vectorizing client data by 80% while delivering faster and more accurate results. Of our planned 100 basis points in savings, we have already secured more than half and remain on track to deliver the full benefit in H2. This improving operational efficiency, combined with consistent free cash flow generation, gives us flexibility to deploy our capital. Our framework prioritizes organic investments, followed by strategic M&A, then returning excess capital to shareholders. Our balance sheet remains strong with gross debt leverage at 1.4 times, providing capacity across all three priorities. At current valuation levels, we see our buyback program as a compelling use of capital. In Q2, we repurchased approximately 652,000 shares for $163 million, and year-to-date, we've deployed over $300 million to repurchase shares at attractive prices. To put this into context, in the past two quarters alone, our accelerated pace of buybacks has resulted in a 3% reduction in total shares outstanding. At quarter end, we had approximately $700 million remaining under our upsized $1 billion authorizations. Based on our strong first half performance and improved visibility, we are raising our fiscal 2026 guidance. ASV growth is now expected at $130 to $160 million, representing approximately 5.4 to 6.7% growth, an increase of $20 million at the midpoint. We are targeting GAAP revenue at $2450 million to $2470 million, representing an increase of $25 million at the midpoint. We are maintaining our guidance ranges for GAAP operating margin and adjusted operating margin, accounting for the potential higher performance-based compensation given the strong commercial outlook. The effective tax rate remains unchanged. Our guidance range for GAAP EPS is now $14.85 to $15.35, an increase of $0.20 at the midpoint. For adjusted EPS, our range is now 1725 to 1775, representing an increase of 25 cents at the midpoint. This revised outlook reflects improved visibility in client demand, accelerating commercial momentum, and realized benefits from our productivity initiatives. Our priorities are clear. Deliver innovation, deepen client relationships, and invest with discipline. With that, I'll turn it back to the operator for questions.

Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. We ask that you please limit yourself to one question. Please stand by. We'll compile the Q&A roster. Our first question comes from the line of Kelsey Zhu with Autonomous Research. Your line is now open.

Hi. Good morning. Thanks for taking my question. If you transition all of your workstation ASV into data solutions ASV and apply usage-based pricing on top of that, what would that look like? Because I think end users are using fact-checked workstations to get access to your data anyway. So just curious how you think about the business model in the quote-unquote post-AI world, especially as data consumption is expected to increase meaningfully. How important is it for FACTS as a company to own the user interface product, especially for research analysts? Thanks a lot.

Thank you, Kelsey. I appreciate the question, and it is an important question for not just us, for the whole industry. We, at the moment, are seeing strong growth across all our channels. So we are seeing continued growth in our workstation, which Helen already talked about. We are also seeing tremendous growth in our data solutions, both through data feeds, APIs, and increasingly through our newest channel, which is the NCP server, which allows for opening up of new TAMs inside our clients. So we're seeing user personas shifting from just the traditional users who continue on the workstation to also include technology teams, data science teams, and the broad enterprise user across our clients, which happen to be very large financial institutions for the most part. So we're seeing actually a real compounding of this at the moment. Your question is a speculative question about the future where, you know, all these channels disappear and we are just in the data business. The way we are working through that, its early stages in this evolution of the market, is we are developing our strategy by working jointly with our customers to effectively look carefully at our pricing and packaging. And we are striking enterprise contracts with them that gives both them and us a lot of flexibility in how to continue to deliver value to them in the future. So you've seen the results. We've had great success in this quarter alone in restructuring some of our contracts And we're seeing a real extension of almost 30% or over 30% in our enterprise contracts. And also a significant share of our contracts are now enterprise agreements or agreements that are really long-term in nature. So with that, we give ourselves and our clients flexibility to consume our data in any number of ways through the workstation, through data feeds, through MCP, and frankly, any new channels that open up in the new context. So we are very optimistic about the future of this multi-channel mix business, if you will, because, remember, the core of all of this is our data, which is highly valuable in whatever context our clients consume it. And, you know, we've given you quite a lot of evidence of how important it is for us to deliver strong, high-quality concordant data. And, Gordon, do you want to add anything to that?

Yeah, Kelsey, you know, the concept of utilizing our content or components of FACSAT is not new to us. You know, over the past seven, eight years, we have been talking about open approach and servicing clients where they are, meeting them where they really need our solutions. So in terms of owning that interface or really enriching the interface so the clients can properly, you know, complete the workflow, that has been our approach for years. In terms of, Sanok touched on enterprise-level agreements and as we, you know, which we are entering with more and more clients into and consumption rate on top of that, which we think will more than compensate to any type of attrition on the workstation side going forward.

Thank you. Our next question comes from the line of Ashish Subhadra with RBC Capital Markets. Your line is now open.

Hi, thanks for taking my question. Really strong momentum in the business. My question is focused on the sales pipeline, demand environment, as well as sales cycle, particularly in the context of these geopolitical, evolving geopolitical concerns. Any color that you can provide on that front. Thanks.

Sure, Ashish. We are seeing broad-based demand and a really strong pipeline through the rest of the year. We are seeing improved retention, continued expansion, and also really strong new business growth. So it's across the board. What's driving our sales cycle now is we're seeing asset managers consuming a lot of our data solutions. As you know, we've been making investments in real-time data, pricing and reference data, and private capital data. All of this is resonating, and it's driving a significant interest in our buy side. Our middle office solutions are, again, resonating very well with the managed services overlay that is particularly getting even more exciting in an AI-intensive world where we can add agentic workflows on top of that. And our trading solutions are growing strongly as well. So broadly, I'd say the sales cycle has not changed. The macro conditions are not affecting us. We see strong traction across all of our client groups. What I can say is when it comes to AI solutions, the sales cycle is considerably faster. Clients are eager and enthusiastic to try out new solutions. And you might have seen we even announced yesterday a new partnership with Finster on our banking agent tech platform. Again, we're being very client demand driven, and we see tremendous demand and enthusiasm from clients to try these solutions. And our MCP solution, which we launched just in December, again, to reiterate, has been our fastest-growing solution in the market.

Thank you. Our next question comes from the line of Manav Patnaik with Barclays Capital. Your line is now open.

Thank you. Good morning. I just wanted to focus on, you know, I think you mentioned your middle office and trading solutions. growing really strong as well. And I noticed in the prepared remarks, you know, that came up a lot in terms of, you know, the accelerated growth. So I was just hoping you could double click on that, maybe just help us appreciate, you know, how big those two solutions are and maybe what are the key, you know, key sub-solutions, I guess, within those that are selling really well nowadays.

Thank you, Manav. Yes, this is one of the crown jewels in our business, which is we are deeply, deeply entrenched in providing some of the critical support to large buy-side clients. It starts with sort of the essential ingredients of what we do in portfolio analytics, which is performance analytics, attribution, and risk management. And these are mission-critical processes for our clients

For the second quarter, organic ASV accelerated to 6.7%, an increase of $38 million. Growth was balanced across all regions and fueled by three key drivers, strong client expansion, new business wins, and higher pricing capture from our annual price increase in the Americas. Let's walk through our performance by region. In the Americas, organic ASV grew 7%, up from 6% in Q1. Asset management continued to be a bright spot, with growth driven by both trading and middle office solutions. Dealmakers contributed with competitive displacements in banking and uplift from successful renewals in sell-side research. An increase in new business logos was powered by hedge funds and corporates. In EMEA, organic ASV grew 4%, in line with Q1. A competitive managed services win, higher demand for data solutions in wealth, and a large banking renewal that included Pitch Creator and our new MCP solution drove the positive results. These wins helped offset softness with asset owners, partly due to pension reform in the Netherlands. In Asia Pacific, organic ASV accelerated to 10%, up from 8% last quarter. Improved demand from asset managers and hedge funds for middle office and trading solutions, coupled with stronger banking retention, drove the region's performance. Now turning to our results by firm type. On the institutional buy side, we delivered 5% organic ASV growth, up from 4% last quarter. This reacceleration was driven in part by higher trading volumes fueled by additional portware installations, increased data demand by hedge funds, and continued strength in managed services linked to our performance solutions. In wealth, Organic ASV maintained a 10% growth rate, despite the challenging year-over-year comparison given our landmark UBS win a year ago. This performance was driven by higher demand for our wealth platform as we further integrate into clients' daily workflows with our proposal generation and advisor dashboard solutions. In dealmakers, Organic ASV grew 8%, up from 6% in Q1. Competitive displacements and successful enterprise renewals added momentum in banking. Our investments in deep sector, aftermarket research, and banker productivity solutions position FactSet as a trusted enterprise partner. Both corporates and private capital accelerated to double-digit growth this quarter, with new business and competitive wins fueled by demand for our data. Their organic growth in market infrastructure accelerated to 8%, up from 7% in Q1, with robust sales in real-time data and higher retention. In addition, strong issuance activity supported the positive results for QSIP. We continued to expand our client and user base. In Q2, we added 98 net new clients, bringing our total to 9,101, led by corporates and wealth. Our user base increased to over 241,000, with additions largely in wealth and dealmakers, reflecting a 10% annual growth rate. Lastly, we continue to have solid retention rates at 91% for clients and above 95% for ASV. These results reflect the mission-critical nature of our business, as the world's leading financial institutions continue to trust Backset. Turning now to our financial results. Second quarter revenues grew 7.1% year-over-year to $611 million, or 6.8% organically, excluding impact from foreign exchange and M&A. Adjusted earnings per share was $4.46, up 4% year-over-year, driven by higher revenue and a lower share count, partially offset by a higher tax rate. The adjusted operating margin came in at 35% for the quarter, as compared to 36.2% in Q1 and 37.3% a year ago. In line with our plan, this reflects the timing of strategic investments, driven by three main factors. First, higher people expense due to year-over-year compensation adjustments and full impact from merit increases. Second, accelerated technology spend on cloud infrastructure and AI tools. And third, higher professional fees from increased project work in the quarter. The midpoint of our full-year margin guidance reflects expected investment pacing through the second half in technology infrastructure, professional services, and product development. AI is playing a dual role, enhancing client value through new capabilities while driving productivity gains. We remain committed to long-term growth while maintaining our track record of capital discipline. As highlighted last quarter, we are investing to differentiate our data, deepen client workflows, and modernize our platforms, with approximately two-thirds directed towards growth initiatives and one-third on enhancing our internal infrastructure. Funding will come from productivity improvements and disciplined cost management. With the first half now complete, let me connect our investments to the early outcomes we are seeing. Our investments in data expansion are delivering. We now offer our core data sets through MCP servers, giving clients flexibility to access our data in their preferred environments. Workstation users are benefiting from optimized real-time data delivery, driving both efficiency and cost effectiveness for clients. and we are meeting client demand by integrating premier research firms like J.P. Morgan, Barclays, and Kepler directly into our platform. These are expanding our addressable market while enhancing the value we deliver to clients. Our workflow investments are receiving market validation. We expanded our longstanding Schroeder relationship to provide a managed service to enable greater scale. As highlighted earlier, Capital Group selected us as their trading platform because of our hyperscalable platform and high volume capabilities. And a year post acquisition, demand for a liquidity book order management system and Faxit plus Erwin investor relations solution is driving meaningful new logo growth and cross-sell expansion. These all showcase our ability to scale from point solutions to enterprise-wide partnerships. On the structural side, we're executing across four priorities. First, modernizing our tech stack and cybersecurity to strengthen platform resiliency as we integrate agentic capabilities into the workstation. Second, deploying AI to scale our content operations, as mentioned by Sunil earlier. Third, strengthening our brand with our fluent in finance campaign that is generating strong top of funnel growth. Lastly, freeing up engineering capacity with AI, enabling us to accelerate new projects with existing talent. We expect these benefits to accelerate through next fiscal year and beyond. We are also on track to capture our intended in-year expense savings by automating manual processes through AI, optimizing cloud usage, and streamlining our portfolio through product lifecycle rationalization. For example, we've been able to reduce the cost of vectorizing client data by 80% while delivering faster and more accurate results. Of our planned 100 basis points in savings, we have already secured more than half and remain on track to deliver the full benefit in H2. This improving operational efficiency, combined with consistent free cash flow generation, gives us flexibility to deploy our capital. Our framework prioritizes organic investments, followed by strategic M&A, then returning excess capital to shareholders. Our balance sheet remains strong with gross debt leverage at 1.4 times, providing capacity across all three priorities. At current valuation levels, we see our buyback program as a compelling use of capital. In Q2, we repurchased approximately 652,000 shares for $163 million, and year-to-date, we've deployed over $300 million to repurchase shares at attractive prices. To put this into context, in the past two quarters alone, our accelerated pace of buybacks has resulted in a 3% reduction in total shares outstanding. At quarter end, we had approximately $700 million remaining under our upsized $1 billion authorizations. Based on our strong first-half performance and improved visibility, we are raising our fiscal 2026 guidance. ASV growth is now expected at $130 to $160 million, representing approximately 5.4 to 6.7% growth, an increase of $20 million at the midpoint. We are targeting GAAP revenue at $2,450 million to $2,470 million, representing an increase of $25 million at the midpoint. We are maintaining our guidance ranges for GAAP operating margin and adjusted operating margin, accounting for the potential higher performance-based compensation given the strong commercial outlook. The effective tax rate remains unchanged. Our guidance range for GAAP EPS is now $14.85 to $15.35, an increase of $0.20 at the midpoint. For adjusted EPS, our range is now 1725 to 1775, representing an increase of 25 cents at the midpoint. This revised outlook reflects improved visibility in client demand, accelerating commercial momentum, and realized benefits from our productivity initiatives. Our priorities are clear. Deliver innovation, deepen client relationships, and invest with discipline. With that, I'll turn it back to the operator for questions.

Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. We ask that you please limit yourself to one question. Please stand by while we compile the Q&A roster. Our first question comes from the line of Kelsey Zhu with Autonomous Research. Your line is now open.

Hi, good morning. Thanks for taking my question. If you transition all of your workstation ASV into data solutions ASV and apply usage-based pricing on top of that, what would that look like? Because I think end users are using fax as workstation to get access to your data anyway. So just curious how you think about the business model in the quote-unquote post-AI world, especially as data consumption is expected to increase meaningfully. How important is it for FACTS as a company to own the user interface product, especially for research analysts? Thanks a lot.

Thank you, Kelsey. I appreciate the question, and it is an important question for not just us, for the whole industry. We, at the moment, are seeing strong growth across all our channels. So we are seeing continued growth in our workstation, which Helen already talked about. We are also seeing tremendous growth in our data solutions, both through data feeds, APIs, and increasingly through our newest channel, which is the NCP server, which allows for opening up of new TAMs inside our clients. So we're seeing user personas shifting from just the traditional users who continue on the workstation to also include technology teams, data science teams and the broad enterprise user across our clients, which happen to be very large financial institutions for the most part. So we're seeing actually a real compounding of this at the moment. Your question is a speculative question about the future where, you know, all these channels disappear and we are just in the data business. The way we are working through that, it's early stages in this evolution of the market. is we are developing our strategy by working jointly with our customers to effectively look carefully at our pricing and packaging. And we are striking enterprise contracts with them that gives both them and us a lot of flexibility in how to continue to deliver value to them in the future. So you've seen the results. We've had great success in this quarter alone in restructuring some of our contracts And we're seeing a real extension of almost 30 percent or over 30 percent in our enterprise contracts. And also a significant share of our contracts are now enterprise agreements or agreements that are really long term in nature. So with that, we give ourselves and our clients flexibility to consume our data in any number of ways through the workstation, through data feeds, through MCP and frankly, any new channels that open up in the new context. So we are very optimistic about the future of this multi-channel mix business, if you will. Because remember, the core of all of this is our data, which is highly valuable in whatever context our clients consume it. And we've given you quite a lot of evidence of how important it is for us to deliver strong, high-quality, concordant data. And Goran, do you want to add anything to that?

Yeah, Kelsey, the concept of utilizing our or content or components of AXA that is not new to us. You know, over the past seven, eight years, we have been talking about open approach and servicing clients where they are, meeting them where they really need our solutions. So in terms of owning that interface or really enriching the interface so the clients can properly, you know, complete the workflow, that has been our approach for years. In terms of Sanok touched on enterprise level agreements and as we you know, which we are entering with more and more clients into, and consumption laid on top of that, which we think will more than compensate to any type of attrition on the workstation side going forward.

Thank you. Our next question comes from the line of Ashish Sabadra with RBC Capital Markets. Your line is now open.

Hi, thanks for taking my question. Really strong momentum in the business. My question was focused on the sales pipeline, demand environment, as well as sales cycle, particularly in the context of these geopolitical, evolving geopolitical concern. Any color that you can provide on that front. Thanks.

Sure, Ashish. We are seeing broad-based demand and a really strong pipeline through the rest of the year. We're seeing improved retention, continued expansion, and also really strong new business growth. So it's across the board. What's driving our sales cycle now is we're seeing asset managers consuming a lot of our data solutions. As you know, we've been making investments in real-time data, pricing and reference data, and private capital data. All of this is resonating, and it's driving a significant interest in our buy side. Our middle office solutions are, again, resonating very well with the managed services overlay that is particularly getting even more exciting in an AI intensive world where we can add agentic workflows on top of that. And our trading solutions are growing strongly as well. So broadly, I'd say the sales cycle has not changed. The macro conditions are not affecting us. We see strong traction across all of our client groups. What I can say is when it comes to AI solutions, the sales cycle is considerably faster. Clients are eager and enthusiastic to try out new solutions. And you might have seen, we even announced yesterday a new partnership with Finster on our banking agent tech platform. Again, we're being very client demand driven and we see tremendous demand and enthusiasm from clients to try these solutions. And our MCP solution, which we launched just in December, again, to reiterate, has been our fastest growing solution in the market.

Thank you. Our next question comes from the line of Manav Patnaik with Barclays Capital. Your line is now open.

Thank you. Good morning. I just wanted to focus on, you know, I think you mentioned your middle office and trading solutions. going really strong as well. And I noticed in the prepared remarks, you know, that came up a lot in terms of, you know, the accelerated growth. So I was just hoping you could double click on that, maybe just help us appreciate, you know, how big those two solutions are and maybe what are the key, you know, key sub-solutions, I guess, within those that are selling really well nowadays.

Thank you, Manav. Yes, this is one of the crown jewels in our business, which is we are deeply, deeply entrenched in providing some of the critical support to large buy-side clients. It starts with sort of the essential ingredients of what we do in portfolio analytics, which is performance analytics, attribution, and risk management. And these are mission-critical processes for our clients And, you know, as we said in prepared remarks, millions of funds depend on the immutable data that is stored and distributed from our analytics book of record, which delivers these quality, high-grade analytics year after year after year over the last several decades. And so it's a very important part of the core investment operations of our clients. The parts of that that are particularly growing, especially in this quarter, and we see this trend continue, is clients continuing to shift into multi-asset class portfolios and starting to really demand a total portfolio view that mixes private and public positions, normalizes risk across these asset classes, and looks at what-if scenarios, cutting across different types of risk analyses that you run on all of those portfolios. Events like in recent markets around private credit and the like only increase the relevance of these risk analyses and make our business even more sticky to our clients. So we're seeing strong progress in our managed services that help clients operate these large platforms, transform their data, ensure that it is deeply integrated into our systems and the output of it is reported downstream into multiple different sources, whether it is compliance teams that are doing regulatory checks, end clients that are demanding progress on performance, and also investment committees who are using all of that research and analytics to make asset allocation, both strategic and dynamic asset allocation decisions.

Thank you. Our next question comes from the line of Shlomo Rosenbaum with Stifel. Your line is now open.

Hi, thank you very much for taking my question. Can you talk a little bit about what has changed so much in the last couple of quarters? We were seeing kind of the company's organic growth slowing down, kind of meandering. You came in a few quarters ago. Usually we don't see a real acceleration with the change that happens instituted by the top within just two quarters. And I was wondering if you can kind of point to a few critical parts about what seems to be clicking, what is there because, you know, maybe you changed some incentives that really realign things, or what are things that were going on beforehand that seem to have hit their stride so we can just kind of get a sense as to, you know, the picture of the reacceleration of the revenue growth and what might be the runway for that going forward.

Thank you. It's a very important question and something that we, you know, we spend a lot of time on. And we believe that we are just at the start of this inflection. There is a number of things that are landing well for us. I'd start by saying that prior to my showing up, the client, the company has started making very targeted and focused investments in the right areas that are areas where we see huge headroom for growth. I'll start with data. Data is the foundational strength of the company. We've certainly had, you know, many decades of success in building our datasets and continuing to build the kind of client franchise that we have today. And yet there are, you know, big parts of the data environment that, you know, we are still early in the game. and we have the smallest market share amongst our competitors, and we see huge headroom for growth. A great example is real-time data. So real-time data, we now have capabilities that are competitive and comparable to our larger competitors. It's an investment that's been made over the years and accelerated in the last couple of years, and that's allowed us to win very significant clients. For example, one of the largest global asset managers, is a client of ours. They went live about a year ago and we displaced hundreds of different internal solutions and we developed and delivered a world-class market data solution real time with delayed data distributed across the entire asset management estate of this client. So that's one example of something that's clicking. That is a marquee win in the space And just off the back of that, we are seeing huge traction across the buy side and the sell side for real-time data. I'll just rattle off a few other investments like that that we've been making that are all clicking now. So clearly our AI investments are working. We are doing well across the various layers of the AI stack, AI-ready data, the MCP server, our agent tech platforms, and our AI solutions that are infused inside the workstation that, like we said, 48 of our top 50 clients use at least three of our AI solutions, and I expect that number to be quite a bit higher in future quarters. Third, our investments in content beyond real time, which are really relevant for dealmakers and wealth managers. So pricing and reference data, as well as the data in private capital or private company-related data, And other data sets, obviously, our historical hallmark has been supply chain data, reviewer data, et cetera. These are all coming together nicely and opening up lots of new opportunities for us. And when I look at the penetration of data solutions distributed beyond the workstation amongst our client base, we still have a huge room to just continue to increase cross-sell within our existing client base. So, I mean, certainly our efforts at commercial excellence, to your point, Shlomo, in the last couple of quarters are helping. We see terrific energy in our sales and customer success teams. And that's, of course, adding value to our retention and expansion. But even more, it's all of these targeted investments that have been made over the last few quarters are starting to click and a lot of runway ahead of us. Helen, do you want to add anything?

Yeah, maybe one thing just to add, Shlomo, because you're absolutely right. Things take a little bit of time to get leveraged. But I think back to what Sanok was saying, the core of what we are is really important. Our open platform is perfect in this new environment as we're talking about AI, which is why AI is a tailwind for us. And that's why you're seeing double digit growth in data across all the various firm types, whether it's banking or wealth or on the buy side. So I think that's a really important point that our investments we made have helped both retention and then why new business is growing as well.

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

Hey, good morning, and thanks for taking my question. I wanted to focus on