FactSet Research Systems Inc. (FDS) Q4 2014 Earnings Call Transcript

Rachel Stern – SVP, General Counsel, Secretary Phil Hadley – Chairman and CEO Phil Snow - President Peter Walsh – EVP, COO Mike Frankenfield - EVP, Director - Global Sales

Shlomo Rosenbaum - Stifel Peter Appert - Piper Jaffray Alex Kramm - UBS Joe Foresi - Janney Montgomery Scott Tim McHugh - William Blair & Co. Toni Kaplan - Morgan Stanley Bill Warmington - Wells Fargo Securities Keith Housum - Northcoast Research Peter Heckmann - Avondale Partners Dan Dolev - Jefferies & Co Andre Benjamin - Goldman Sachs

Welcome and thank you for standing by. At this time, all participants are in a listen-only mode. There will be a question-and-answer session within the presentation. (Operator Instructions) Now, I'll hand the call over to Ms. Rachel Stern, Senior Vice President, Strategic Resources and General Counsel. Ma'am, please go ahead.

Thank you, operator. Good morning and thanks to all of you for participating today. Welcome to FactSet's Fourth Quarter 2014 Earnings Conference Call. Joining me today are Phil Hadley, Chairman and CEO; Phil Snow, President; Peter Walsh, Chief Operating Officer; and Mike Frankenfield, Director of Global Sales. This conference call is being transcribed in real-time by FactSet's CallStreet service and is being broadcast live via the Internet at www.factset.com. A replay of this call will also be available on our website. Our call will contain forward-looking statements reflecting management's expectations based on currently available information. Actual results may differ materially. More information about factors that could affect FactSet's business and financial results can be found in FactSet's filings with the SEC. Annual subscription value or ASV is a key metric for FactSet. Please recall that ASV is a snapshot view of client subscription and represents our forward-looking revenues for the next 12 months. Lastly, FactSet undertakes no obligation to update publicly any forward-looking statements as a result of new information, future events or otherwise. I would like to turn the discussion over now to Peter Walsh, Chief Operating Officer. At the end of his remarks, we will have time for questions. Please limit your remarks to only one question and one follow-up, so that we will have enough time to address questions effectively.

Thank you, Rachel, and good morning everyone. Here's our agenda for this call. First, I'll provide color on Q4 results. Second, I will provide guidance for Q1 including how to factor the R&D tax credit into future earnings. Third, we will end with your questions. So let's begin with fourth quarter results. Following on our positive results from last quarter, FactSet had a solid fourth quarter. Our ASV growth rate accelerated. Operating margins rose sequentially. Adjusted EPS grew by double digits. And all our key metrics including client and user counts were up. ASV increased $31.6 million to $964 million at August 31st. The ASV growth rate on an organic basis accelerated to 7.3% over the past 12 months. Buy-side accounted for 82.6% of our ASV this quarter while the remaining 17.4% of the ASV was derived from our sell-side clients. Organic ASV growth rates from buy and sell-side clients rose to 8.5% and 1.6% respectively. Please note that our buy-side business includes traditional asset management clients, hedge funds, wealth managers, off platform data feed business, and market metrics. The sell-side part of our business targets M&A advisory, capital markets and equity research professionals. Adjusted EPS rose this quarter to $1.31, an increase of 11% compared to the same period last year. We are so proud to mark our 17th consecutive quarter of double digit EPS growth. In Q4, free cash flow generation was $65 million compared to $71 million in the year ago quarter. Free cash flow over the last 12 months was $247 million, down 2%. We define free cash flow as cash generated from operations less capital spending. The decrease in free cash flow was driven by a rise in accounts receivable and stock option exercises in the prior year. In the just completed fourth quarter, our DSOs were 34 days, flat from Q3 but up from a record low of 30 days a year ago. Higher level of option exercises in 2013 reduced our tax payments thus improving prior year working capital. At the end of this quarter, our cash and investment balance was $136 million, up $2 million from Q3. We repurchased 620,000 shares this quarter for a total of $75 million. We still have $87 million authorized for future share repurchases. When capital allocated to share repurchases, is aggregated with dividends paid, we returned $341 million to shareholders over the past 12 months. Common shares outstanding were 41.8 million at the end of the fiscal year. Now let's turn to our P&L. In the fourth quarter, revenues rose to $239 million, a 9% increase over last year. Organic revenues grew 7% over last year, excluding $3.7 million in revenues from acquisitions completed in the last 12 months. Q4 operating income grew to $79 million compared to $71 million in the same period last year. Adjusted operating income for the quarter increased 8% over last year. In fiscal 2013, adjusted operating income includes a non-cash pretax charge of $2.6 million for stock based compensation primarily related to the vesting of performance based options. Adjusted net income also grew 7% this quarter to $55 million and adjusted diluted EPS grew 11% to $1.31. Please note that the increase in our average share price during Q4 increased weighted average shares outstanding and reduced EPS by a penny. U.S. revenues in the fourth quarter grew to $161 million, up 6.5% organically over the fourth quarter last year. Non-U.S. revenues increased to $77 million. The international growth rate was 7.3% excluding revenue acquired from the Matrix acquisition and the impact of foreign currency. Fourth quarter revenues from our Europe and Asia-Pacific regions were $59 million and $18 million respectively. Excluding foreign currency effects and the Matrix acquisition, year-over-year growth rates were 6% in Europe and 12% in Asia-Pacific. As I mentioned at the beginning of the call, the company's performance in the fourth quarter was a positive across all our metrics. Please allow me to provide some detail on the drivers of our growth. The client count expanded by 81 compared to 60 in the same quarter last year. We added more clients this fourth quarter on a net basis than we’ve had in the last nine years. This strong performance on new client acquisitions follows our solid Q3 growth as well. Total client count rose to 2,743 at quarter end. Looking back on the year as a whole, we added 200 net new clients in 2014, an 85% increase over the number of net adds in 2013. We view this as important because new clients typically come on with moderate deployments and often experience substantial growth in subsequent years. Our annual client retention rate was greater than 95% of ASV and rose to 93% in terms of the number of actual client, up from 92% last year. This quarter our net user count at FactSet terminals rose by 2,100 compared to 1,400 in the year ago quarter. This user count growth is the largest quarterly increase in three years. Users totaled 54,600 at quarter end. The fourth quarter typically includes new users on both the buy and sell-side as our largest clients usher in their new hire classes. This quarter we saw higher than expected new hire classes at our banking clients, coupled with fewer cancellations. While maybe too early to say that our banking clients have turned a positive corner, we were encouraged by the performance we saw on that side of our business in Q4. Improvements in the ITO and M&A market places have been a boost for our banking clients this year. Wealth management continues to be a growing part of our sales effort. We've been gratified to see that wealth management clients who selects FactSet workstation are also frequently interested in buying FactSet tools that do not come with the standard packages we offer, including some wealth clients buying applications in our portfolio analytics suite of products which leads to my next point. The portfolio of analytics suite of products remains a solid cornerstone of FactSet sales in the buy-side space. Our clients have increasingly demanded tools to help them with multi-asset class risk modeling, attribution and reporting related to equity and fixed income portfolios, which are the key elements of our portfolio analytics offering. I'd also like to point out that we have had success marketing workstations to those focused on credit analysis. Our suite of reports covering debt and liquidity analysis has improved over several years and is relevant to users investing in both equities and corporate debt. We've also experienced expanded sales of our proprietary content. We've noticed strong demand for our Street account product and have focused more attention internally on ways to sell FactSet fundamentals, FactSet estimates to our ownership transcript and entity mapping data. Now let's take a look on the expense side. The Q4 operating expenses were $159 million, and our operating margin this quarter was 33.3%, which is 50 basis points higher than Q3. Cost of services in Q4 expressed as a percentage of revenues increased 220 basis points compared to the year ago period due to incremental cost from the Matrix and Revere acquisitions and higher compensation expense from additional headcount in our consulting and engineering teams, partially offset by prior year stock based compensation charge from the vesting of performance based options. Expressed as a percentage of revenue, SG&A expenses decreased by 330 basis points in Q4 compared to the year ago period due to lower compensation expense from employees performing SG&A roles including a prior year stock based compensation charge. At the end of our fiscal year, we had over 6,600 employees, an increase of 6% in global headcount since last year. In Q4, we increased headcount by 267 employees as expected since the fourth quarter as when our new consulting, engineering, product development and content collection classes begin. Our effective tax rate for the fourth quarter was 30.4%, flat with last quarter and up 150 basis points from last year because of the expiration in the Federal R&D tax credit. Now let's turn to our guidance for the fourth quarter -- for the first quarter of fiscal 2015. We expect that our revenues will range between $240 million and $243 million. Our operating margin is expected to range between 32.8% and 33.8%. This range is 30 basis points higher than the margin guidance provided on our last call. The annual effective tax rate should range between 31% and 32%. This range also takes into account the expired Federal R&D tax credit and assumes it will not re-enacted before November 30, 2014. We expect that diluted EPS will range between $1.31 and $1.33. This estimate accounts for the expired R&D tax credit which has the effect of lowering each end of the range by $0.02 compared to the just completed fourth quarter. The mid point of the range suggests 12% year-over-year growth after adjusting for the expiration of the R&D tax credit. Please note that the R&D tax credit has expired only once in its 33 year history without being retroactively re-enacted to previous years. Should the R&D tax credit be re-enacted on or before November 30, 2014, diluted EPS would range between $1.36 and $1.38 and FactSet would also recognize a benefit of $0.13 per share if the credit is retroactively applied to previous periods. Looking back on fiscal 2014, we are proud of a number of accomplishments. Our metrics accelerated in the second half of the year and were positive across the board. The fiscal year ASV was up 7.3% organically to $964 million. EPS grew by 11%. Return on equity was 40% increasing our three year average return to 37%. Clients and users reached record highs including Q4. $340 million was return to shareholders. We continue to reinvest in our business in terms of hiring new employees to fuel our growth. We had a strong year and we believe that we are well positioned for growth in the coming year. We've been successful in expanding our market share against both internal client built systems and competitor products. From where we sit the global markets appeared to be getting stronger. So we are happy for that means for our clients. We worked hard this past year to get where we are. We are excited about the work ahead in 2015. Thank you. We are now ready for your questions.

(Operator Instructions) Our first question comes from Shlomo Rosenbaum of Stifel. Your line is now open. Shlomo Rosenbaum - Stifel: Hi, good morning and thank you very much for taking my questions. Phil, Peter, maybe could address the growth is accelerating, can you talk a little bit more about whether you think more of the growth is starting to come from hiring in the end markets or do you think you are being more successful in displacements or if you think it's a combination of both, where is the weight - where is it more heavily weighted?

It's -- would be really difficult for us to know the exact answer to that but I think the answer we feel internally is both, when we’re looking at the win losses for client this year, this last past quarter, we definitely won more clients and also didn't lose as many clients. I think we felt the same way when it came to seats and the number of users we had and the client base. So all-in-all it was just a very strong, broad based quarter for ASV growth. Shlomo Rosenbaum - Stifel: Okay. And can you talk a little bit more about the composition of some of the new client - your clients and users are comprised of fair amount of [inaudible] shops, hedge funds -- how much is the wealth management becoming more of a factor if it is not -- so maybe a qualitative if not quantitative.

I'll let Phil Snow answer this one.

Hi, Shlomo, it's Phil Snow. So we saw a very healthy mix of new client wins this quarter across traditional asset management, hedge funds, wealth, broker dealers as well as some other types of funds that we sell to. The qualities of wins are very high, so these weren’t just new firms getting created. These were firms that we - where we took relative market share away from our competitors. And what's really great about getting new clients like there is so many of them. Is it really lays down the foundation for us to cross-sell our products across the existing users and new groups and departments within those as well. Shlomo Rosenbaum - Stifel: Okay. So do you think it's basically broad based, it is not one thing that sticks out more than another?

Right, yes, it was broad based. We did well in every client category. Shlomo Rosenbaum - Stifel: Okay, very good. Is this -- if you allow to me squeeze in one more, I know you only wanted two, but how long will Matrix continue to be pointed out as a drag on margins?

I think the only -- we didn't point out it as a drag on margins, Shlomo. We just pointed out in terms of organic ASV growth rate. As soon as we’ve owned it for a year we will stop pointing out in terms of organic ASV growth rate.

Thank you. Next from Peter Appert of Piper Jaffray. Your line is now open. Peter Appert - Piper Jaffray: Thanks, good morning. So if I got these numbers right, I think at the mid point of the revenue guidance range it would imply something like an 8.3% growth for the first quarter and this is a little bit nitpicky but that will be down a fraction from what you did in the fourth quarter. So, does that suggest you are seeing anything in terms of password growth that would make you little more cautious near term?

Are you talking ASV or future -- Peter Appert - Piper Jaffray: Revenue guidance

We have organic. Organic can't be guided down. We’ll have to check some numbers, Peter will make sure we have it. But organic wouldn't be -- the guidance wouldn't show organic [deceleration] [ph]. Peter Appert - Piper Jaffray: Okay, so nothing to -- in terms of expectations for password I guess this is really the question. Would your expectations be that we should continue to see some positive momentum over the next couple of quarters in terms of the password growth rates?

So, I mean I would say the way that I have answered the question and the way we would continue to answer is we definitely see our end markets firming and our relative market position improving as well. So all of our metrics, the ASV seats and clients would generally be headed in the right direction. First quarter sometime is a clean-up quarter for the big sell-side clients. So seats could be, I don't really know -- I honestly don't know, I haven't seen a forecast for the first quarter but it wouldn't be material in the ASV side. Peter Appert - Piper Jaffray: Got it. And you guys have held SG&A cost basically flattish here for the last couple of years. Is there ability to continue to control those cost? Should we expect some maybe some catch up in terms of SG&A cost growth on a near-term basis?

GAAP accounting has SG&A, and internally we’re 100% operating margin so I couldn't answer that question. Peter Appert - Piper Jaffray: One last thing then, the tax rate, even excluding the R&D credit, I think the implied tax rate is up maybe 100 basis points year-to-year, anything specific driving that?

If you excluded R&D I think our tax rate would be flat on a year-over-year basis. Peter Appert - Piper Jaffray: I was actually looking at, I am sorry, Peter, it was -- the guidance for last quarter ex the tax credit was like 30 to 31 and now it's 31 to 32 I think.

In the just completed fiscal year we were eligible for the tax credit for four months out of the 12 and so relative -- our effective tax rate is increasing or projected to increase in the next quarter relative to the just completed fiscal year because it would be expired for the entire year in fiscal 2015.

Thank you. Next from Alex Kramm of UBS. Your line is now open. Alex Kramm - UBS: Hey, good morning. Maybe just on the competitive dynamics, maybe little bit of an update here. Are you seeing more players I guess getting to the end line when it comes to negotiating for new I guess -- for new accounts and things like that or are you winning the same amount that you used before or has anything changed in terms of wins versus losses and new competitors entering the market particularly on the buy-side?

Hey Alex, it’s Mike Frankenfield. As we’ve said in previous quarters, the competitive dynamic changes slowly quarter-to-quarter, even year-to-year. I think when we look at the wins that we are having as Phil or maybe Peter highlighted earlier, we compete not only against external competitors all the big names that you know, but a lot of the times we are competing against in-house systems. And I would say our execution on both of those fronts is very strong. We are doing well in the market place because our software development team continues to improve our product to add enhancement that our clients care about. And our sales force is very focused on new names and same store sales generation and they are executing well. Alex Kramm - UBS: Okay, great. And then just kind of clean up question here on FX. We've seen some major FX changes here recently. Can you just remind us how does it impact you, I think, from a revenue perspective, it is mostly dollar, maybe a little bit of pound which hasn't really moved and then the euro decline that could actually help you on the cost side. Is that right or how should we think about it?

Hi, Alex. This is Peter. From an FX perspective, roughly 98% of our revenues are billed in U.S. dollar. We do have some substantial expenses that we pay in both pounds, euros and also have big operations in Hyderabad and the Philippines. We from time to time hedge some of those expense exposures. Currently, we are un-hedged on both the pound and euro.

Thank you. Next from Manav Patnaik, Barclays. Your line is now open.

Hi, this is actually Greg calling on for Manav. First off I was hoping to get some granularity within the sell-side growth that you’ve seen between kind of the mid market and boutique banks versus what you are seeing from the bulge banks, and then also whether most of that growth is coming from probably banking versus equity research.

Hi, it's Phil Snow again. So I think we’ve said for a few quarters now that we've seen good activity at the middle tier firms. This quarter we definitely saw positive uptick in a number of workstations that we were catering on the bigger firms. Now I’ll let Mike answer the question about corporate finance versus equity research.

Continue to make good progress in both of those areas. Our product adds significant value to the financial modeling process that occurs in both of those firms or both of those firm types.

Okay, thank you. And then I wanted to ask about your strategy around selling to large corporations which one of your competitors has noted as an area of focus. Maybe you can give some color on the opportunity there and how you are positioned?

Hi, it's Phil Hadley. We historically approach the corporate market via our partners. And we have several partners that sell into that market. And it's been our historic strategy primarily to allow us to focus on the financial professionals in the institutional market buy and sell-side. It's worked very well for us. So we have substantial revenue coming from that opportunity. And we continue to decide whether it's something we want actually put our direct sales force on, but at this point it's not something that is the best next opportunity for us.

Okay. And one more if I can squeeze it in on your strategy around chat function especially with the recent noise around new competitors like Babble and Wicker, maybe just what your thought process around integrating some of these new chat functions and then general your strategy there?

This is Mike Frankenfield. We have a messaging product. It's doing well in the market place. We have a 10% open platform or willing and have federated with other chat program. Our main objective is to develop products and chat is no different that facilitate work flow within our clients. So, common use application is buy-side portfolio manager wanting to talk to the buy-side trader in the firm. Both users having a FactSet and been able to communicate over the FactSet platform is a way for them to gain efficiencies and improve communications.

Thank you. Next from Joe Foresi of Janney Montgomery Scott. Your line is now open. Joe Foresi - Janney Montgomery Scott: Hi, I was wondering if you could help us understand the step up in the business. How much of this do you think is attributable to -- I know you mentioned at the ITO market and M&A and how much do you think is sustainable? In another words, do you think that this is a full step up or do you think if those two factors start to moderate or you might see some moderation in user activity?

Actually I think the capital market activity helps us our buy and sell-side client base particularly corporate finance. The equity research department and buy-side certainly is far more correlated to the overall equity -- health of the equity market. So certainly that helps us. But as a percentage of our total business and how much of it actually creates data on the sell-side corporate finance be certainly helpful. But I also feel like we are gaining on a share value part of the profit, the product team has done an outstanding job continue here reinvest in our product. And I think our competitive position is continued to expand both in content and in work flow on our platform. Joe Foresi - Janney Montgomery Scott: Got it. And then I wondered if you could just talk quickly about pricing. Do you think that pricing power is increasing as we head into this uptick in the cycle or do you think it's stayed about the same and we are not that inflection point yet?

Price has not been a tool that FactSet has used as a form of growth. We have taken modest inflationary price over the last several years. Certainly if my comments are true and we feel our relative competitive position is there, the price will potentially be available to it. But quite frankly I would rather gain share and expand our opportunity as opposed to using price as a mechanism for growth

Thank you. Next from Tim McHugh of William Blair & Co. Your line is now open. Tim McHugh - William Blair & Co.: Thanks. I guess just on the improvement in the sell-side. You talked about M&A environment. I guess can you give us a perspective how much is kind of M&A advisory or investment banks versus the research side of the equation? Have you seen any change in I guess the equity research and sell-side equity, research side of the equation or should we think of mostly the pick up coming from the M&A advisory?

I am sure the answer is both. If you are just taking market opportunity in headcount, the corporate finance department typical firm and I pick a round number probably three times the headcount of an equity research department just in round term. We do have opportunities also in sales and trading which would be entirely separate workflow that has been successful for us. I think we feel like the opportunity is still expanding for us. Tim McHugh - William Blair & Co.: Is that three to one roughly an approximation we can think of for your split of business today? Or are you --

I think that's our split and what we think the market place looks like inside of a typical big sell-side firm, to somebody disagree round enough to get--

Certainly works for me. It's a little bit hard for us to disentangle it because so many of either enterprise deal, where we are selling to the organization and that organization has the ability to then deploy within research, within banking M&A credit, sales trading etcetera. So we view that entire segment is a very attractive segment. I mean every firms are built differently. It certainly have some firms that are more research focused versus than corporate finance focused. We certainly have firms that were boutiques who are 100% corporate finance no research. I would just kind of picking that as -- if we took the Top 10 big firms that historically isn't just what I would pick as a round number mix between that just a headcount available for selling a product like ours. Tim McHugh - William Blair & Co.: Okay and then in the wealth management space, can you maybe -- who is the biggest competitor you are seeing out there? I guess both from an installed competitor and then people trying to compete for new engagement out there?

On the wealth side is -- each one of the big competitors has been operating in the wealth space. As we do whenever we try to enter a new market, we are trying to come up with unique functionality. We do some unique things with wealth manager portfolio. No surprise is direct extension of our portfolio analytics functionality that is so powerful for our traditional, institutional asset management client. So lots of the opportunities that we are identifying are greenfield opportunities. And certainly competition from the likes of Thompson etcetera. Tim McHugh - William Blair & Co.: Is the growth then -- you are saying green -- I guess would you attribute the growth in wealth management to more greenfield or displacement?

The combination of both. When you are talking about going into a workshop we have two potential solutions offer. We can offer broad based desktop deployment and that is typically a displacement situation. But there are areas within the wealth teams that have a need for all of these high powered analytics that FactSet delivers and they may have a very large spend on a few users. So it is the mix of both exploiting competitors as well as selling our traditional powerful analytics to well firms that as they become more sophisticated need the powerful tool.

Thank you. Next question comes from Toni Kaplan of Morgan Stanley. Your line is now open. Toni Kaplan - Morgan Stanley: Hi, thanks for taking my question. I noticed that your hiring slowed a little bit this quarter to about 6% year-over-year. Should we read anything into that given that you have mentioned in the past that you tend to increase your headcount in line with your expected revenue growth rate?

Hi, Toni. It's Peter. How are you? I don't think there is anything to really read into that percentage term. Headcount does have in flow from time to time. We were very excited with the acceleration in the second half sometimes headcount process needs to get adjusted. And there is a cycle of time to increase your headcount. So we are constantly looking at that making sure that we have the right go forward investment to accelerate growth. Toni Kaplan - Morgan Stanley: Okay, great. And one last one. If ASV continues to accelerate, would you start to invest more or could we see some margin expansion in 2015? Thanks.

Hi, Tony. It's Phil. We certainly plan for flat margins and we probably continue to reinvest in the headcount that Peter was talking about to improve our competitive position in the market place.

Thank you. Next from Bill Warmington of Wells Fargo Securities. Your line is now open. Bill Warmington - Wells Fargo Securities: Good morning, everyone. It is nice to see the sell-side contributing something there.

We are certainly happy about it. Bill Warmington - Wells Fargo Securities: So question for you on the data feed business. Just to ask whether that's been contributing to the growth as well and maybe give us a sense for how big that is.

I don't think we break that out. But I think we had a very good fourth quarter in our feed business. So we delivered to clients both raw data feed as a content we collect as well as some good derived data that we might massage out of that based on the clients' need. So we can touch a lot of different parts of the organization there. We can touch performance systems; we can touch the quantitative work flows which can compliance, if a client is building a portal with all kinds of interesting ways the clients want to use our data. Bill Warmington - Wells Fargo Securities: Then on the capital allocation side. Just needed to ask your thoughts heading into 2015 in terms of M&A versus share repurchases?

Hi, Bill. It's Peter. I think you really touch on our high quality problem for us. Bill Warmington - Wells Fargo Securities: Yes.

So thank you for that. Over -- I guess over the last 12 months we've generated free cash flow of just under $250 million and we have $136 million of cash on the balance sheet. So we feel like we have quite a bit of gun powder for capital allocation whether it's M&A or share repurchase and dividends. We've been more aggressive in repurchases because over the last 12 months just because it's just correlates with the amount of our M&A activity, so our M&A -- a process is very healthy, we are constantly out in the market place and we are often because of our position to really allocate capital aggressively, we often get calls from bankers for different opportunity so I think it will continue to --it would be reverse correlation between M&A and share repurchase because they are quite accretive given the interest rates are near zero. Bill Warmington - Wells Fargo Securities: And then one more if I may. Just wanted to ask about the -- on the acquisitions that you guys have been doing over the last couple of years. Just wanted to ask whether they have been contributing to the client count and user addition either directly or indirectly?

I am just trying to think of the last couple being Matrix, Revere, Street account; we would have given you the initial headcount or the initial client count change which wasn't that material. I am recalling maybe 30 or 40 but not a big number. But then going forward because there is so much overlap in our businesses and that's part of the reason they make the strategic cut in an acquisition level, very little impact on the overall client count. And then just to be clear, our client count threshold for counting client is 24,000 U.S. so we have a huge list of clients who don't make that cut and some of those products, it blow that price point. But just to keep our metrics clean and people focused on the core of our client base we've chosen to have that be threshold.

Thank you. Next from Keith Housum of Northcoast Research. Your line is now open. Keith Housum - Northcoast Research: Good morning, everyone. Thanks for taking my question. Just come back to your question regarding data feed in the non subscription business. Can you remind me, is that business more of recurring revenue stream or is that usually that go one time revenue opportunity for you?

It's a 100% recurring revenue subscription business for us. Keith Housum - Northcoast Research: Got it. And then just in terms of business for the quarter, was it pretty evenly weighted throughout the quarter or did it seem to get better as the quarter went on?.

I wouldn't -- we typically don't dissect ASV growth by month within a quarter. So I think I would say-- I would leave it with -- it was a very strong quarter throughout.

Thank you. Next from Peter Heckmann of Avondale Partners Peter. Your line is now open. Peter Heckmann - Avondale Partners: Good morning, everyone. Just a follow up question on some of the acquisitions and as they are growing to the organic growth rate. Would you say that Street account continues to grow at a rate in excess of the overall company and if so would you characterize that growth is coming internationally?

Peter, as it was mentioned we are certainly very happy with Street account and what it's -- the value is deliver to our client. We won't breakout the future ASV and typically won't on any acquisitions as we go forward. Part of it because we can't. It becomes part of the product and part of the core terminal and you really don't have a direct number any more. But we are certainly pleased with the acquisition. Peter Heckmann - Avondale Partners: Okay. And then can you comment on standalone Street account those outside of the platform. It seems like there are some other competitors that are coming out with a more aggressive price point and maybe been able to mimic or copy to develop speed and maybe not quite the content level but seems like getting there and so would you say that within Street account that the service itself is stronger within the FactSet user or do you still see a strong growth in the base of user independent of the platform?

So always competitors in the market place, we feel very strongly that we've got the best parts in market place and haven't seen any competitive inroads into the work flow to Street account. Peter Heckmann - Avondale Partners: Okay, that's great. And then as regard the other acquisition, since the acquisition any material growth in ASV? Should we assume that the ASV growth there has near the rest of the company or with the two acquisitions I would assume certainly there is a smaller would be growing at a rate faster than the overall company?

None of the acquisitions are material relative to the company. We just haven't bought anything big enough revenue stream to make any impact that is material at the company level.

Thank you. Next from Dan Dolev from Jefferies & Co Your line is now open. Dan Dolev - Jefferies & Co: Hey, thanks for taking my question. It looks like if I look at it correctly, looks like Europe organic growth decelerated a little bit. Can you maybe talk about the trends there?

Hi, Dan, it's Mike Frankenfield. Europe actually did quite well in Q3. I think which are seen as a little bit of ASV that was pulled into that quarter from Q4. Certainly the macro environment is not strong in Europe as in the United States. But having said that we are still very optimistic about our prospectus in UK, in Europe and the rest of international. So I don't read too much into this quarter. Dan Dolev - Jefferies & Co: Okay. And then one more question. Sort of following on Toni's question. Historically when we looked at when revenues were growing in line with employment growth, you are able to expand OpEx that you are modeling, if I look at correctly at the mid point OpEx growing roughly in line with revenues. Is there any chance at some point that we could get to that historical performance where revenue growing little bit ahead of employment and OpEx expanding. I mean margin expanding, sorry about that.

No. Everyone from our margin expanding because we can't send the money fast enough that would be good problem to have. But we got so many great product ideas that I think that we will continue to invest in business as we go forward. Dan Dolev - Jefferies & Co: That more of a structural thing. You don't see yourself going back to that 2001 to 2005 period where --

I don't really think our margin expanding contraction -- contracting the question was asked earlier about metrics being dilutive to margin. We have a very high class problem -- there are very few businesses out there that would actually be accretive to our margin so almost everything we buy is get lower margin than we do. And therefore it ultimately dilutive to margins. I kind of look at really at the EPS level. So, our goal is to drive EPS that's something greater than the organic revenue growth. And as you can see from history, we've been pretty successful at that.

Thank you. Next from Andre Benjamin of Goldman Sachs Your line is now open. Please go ahead. Andre Benjamin - Goldman Sachs: Thank you, good morning. My first question with regards to Asia and Europe versus the U.S. Is there anything else that you recall out beside the macros as things that are driving the trends in that business either at the U.S. clients asking for different things in different parts of the world? That will be helpful.

Andre, it's Mike. Certainly when we move into markets in Asia, markets in Europe there are always demand for local content. And FactSet looks ate each market opportunity and we assess having an investment we can make in local content. And in terms of the general functionality in the product, there is a lot of commonality around the globe in terms of what users want from software functionality, how they want their work flow improve. So we feel we just had a great platform that we can leverage around the world. And meet the needs of users everywhere. Andre Benjamin - Goldman Sachs: Apologize if this question was answered, but in terms of thinking through say non desktop solutions, are there any logical areas that you would like to call out in terms of whether it's data feed or pushing into regulatory compliance or any other thing that you would think of that makes natural sense organically?

I think we are doing a great job of addressing the goal of pushing out our functionality and content across multi platforms. So whether it's the traditional FactSet desktop, mobile, data feed. We are here and ready to meet the needs of our clients and give them our high quality data and analytics anyway they want to consume.

Thank you. There are no further questions at this time. I'll hand the call back to the speakers.

Thank you very much. See you next quarter.

Thank you. That concludes today's conference call. Thank you all for participating. You may now disconnect.