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.