FactSet Research Systems Inc. (FDS)

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FactSet Research Systems Inc. (FDS)

Q4 2017 Earnings Conference Call

September 26, 2017 11:00 AM ET


Rima Hyder - Vice President, Investor Relations

Phil Snow - Chief Executive Officer

Maurizio Nicolelli - Chief Financial Officer


Anj Singh - Credit Suisse

David Chu - Bank of America

Keith Housum - Northcoast Research

Ato Garrett - Deutsche Bank

Bill Warmington - Wells Fargo Securities

Toni Kaplan - Morgan Stanley

Tim McHugh - William Blair & Company

Manav Patnaik - Barclays

Joseph Foresi - Cantor Fitzgerald

Alex Kramm - UBS

Hamzah Mazari - Macquarie

Peter Appert - Piper Jaffray

Shlomo Rosenbaum - Stifel



Good morning. My name is Denise and I will be your conference operator today. At this time, I would like to welcome everyone to the FactSet Fourth Quarter 2017 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. Rima Hyder, Vice President of Investor Relations, you may begin your conference.

Rima Hyder

Thank you, Denise and hello to everyone. Welcome to FactSet’s fourth quarter 2017 earnings conference call coming to you today from our European headquarters in London. Before we begin, I would like to point out that the slides we will reference during the course of this presentation can be accessed via the webcast on the Investor Relations section of our website at factset.com. These slides will be posted on our website at the conclusion of this call. A replay of today’s call will be available via phone and on our website. The conference call is being transcribed in real-time by FactSet’s CallStreet service and is being broadcast live at FactSet.com. After our prepared remarks, we will open the call to questions to investors. To be fair to everyone, please limit yourself to one question plus a follow-up.

Before we discuss our results, I encourage all listeners to review the legal notice on Slide 2, which explains the risks of forward-looking statements and the use of non-GAAP financial measures. Additionally, please refer to our Form 10-K and 10-Q for a discussion of risk factors that could cause actual results to differ materially from these forward-looking statements. Our slide presentation and discussions on this call will include certain non-GAAP financial measures. For such measures, the reconciliation to the most directly comparably GAAP measures are in the appendix to the presentation and in our earnings release issued earlier today. This non-GAAP information should be considered supplemental in nature and should not be considered in isolation or as a substitute for the related financial information prepared in accordance with GAAP. In addition, these non-GAAP financial measures may not be the same as similarly entitled measures reported by other companies.

Joining me today are Phil Snow, Chief Executive Officer; and Maurizio Nicolelli, Chief Financial Officer. I would now like to turn the call over to Phil.

Phil Snow

Thanks, Rima. Good morning to everyone in the U.S. and good afternoon to those joining us here in the UK. As we close out fiscal 2017, I just want to take a moment to highlight this year’s accomplishments and really thank the FactSet employees around the world who have worked hard to achieve our strong results in a challenging market. Fiscal 2017 was a solid year of accomplishments for us as we continued to pivot from being a workstation towards being a workflow company. In Q4, we delivered revenue and adjusted EPS at the high-end of our guidance range and above consensus estimates. And throughout 2017, we continued to diversify our suite of products through strategic acquisitions and product investment. This year’s acquisitions have allowed us to fill critical gaps within our portfolio lifecycle strategy.

We have made significant progress in integrating these acquisitions, and this work remains a key focus for us in fiscal year 2018. Additionally, as part of our project NexGen, we have created a stronger FactSet technology infrastructure and delivery platform, and we have released many updates to our key products and increased the number of applications available in FDS Web. We added over 500 net new clients and almost 5,000 users during our fiscal year with the majority of the client increase coming organically. Our clients value our longstanding relationships and the breadth and depth of solutions we bring to them. Cross-selling within our diverse product suite continued this quarter as evidenced by some of our key client wins in both our traditional business with national bank investments as well as a result of our acquisitions with Danske Bank and Banco Santander Totta. These wins highlight our transition from a workstation to a workflow company.

Lastly, our best-in-class products won many industry awards this year. FactSet, Vermilion, and Portware received awards in 9 industry competitions to-date in 2017, including best market data award for the first time. We are thrilled that our commitment to fresh ideas and innovation in response to client needs is recognized widely in our industry.

Now, turning to our fourth quarter results; organic revenues and organic ASV both grew at 6% year-over-year. Adjusted diluted EPS increased 12% to $1.90 at the high end of our guidance range. Adjusted operating margin was 31%, which is in the range we expected. We are pleased that we added more ASV this quarter versus the same quarter last year. The fourth quarter increase of $32 million in ASV was driven by growth across the majority of our key workflows, including analytics, investment banking, and CTS. Our broker-dealer and institutional asset management clients provided us with the highest gains this quarter versus the prior year. Our strategy of going deeper with clients through cross-selling and up-selling is going well as evidenced by higher year-over-year sales to existing clients. Offsetting these wins were client cancellations, but the number of cancellations decreased this quarter versus the prior year. Our international business performed well in the fourth quarter driven by institutional asset managers in Asia-Pac. International ASV grew organically by 8% fueled by growth in Asia-Pacific. International ASV now represents over 37% of our total ASV. Asia-Pac grew almost 13% and Europe ASV grew 6%.

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