FactSet Research Systems Inc. (FDS) Q1 2015 Earnings Call Transcript

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

Manav Patnaik - Barclays Joe Foresi - Janney Montgomery Scott Shlomo Rosenbaum - Stifel Alex Kramm - UBS Tim McHugh - William Blair & Co. Andre Benjamin - Goldman Sachs Dan Dolev - Jefferies Toni Kaplan - Morgan Stanley Pete Heckmann - Avondale Partners Glenn Greene - Oppenheimer Shlomo Rosenbaum - Stifel

Welcome and thank you for standing by. At this time, all participants will be in a listen-only mode. [Operator Instructions] And now, I am turning the meeting over to your host Ms. Rachel Stern, Senior Vice President, Strategic Resources and General Counsel. Ma'am, you may begin.

Thank you, operator. Good morning and thanks to all of you for participating today. Welcome to FactSet's First Quarter 2015 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 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 Q1 results. Second, I will provide guidance for Q2. Third, we will end with your questions. So let's begin with first quarter results. FactSet continue to accelerate its growth in the first quarter. Our key metrics were up including our ASV growth rate, EPS, free cash flow and our client and user accounts. This quarter, the organic ASV growth rate accelerated to 8.5%. Excluding FX, ASV rose $9.2 million and was $970 million at quarter end. We are pleased that the ASV growth rate has been on an upward trend every quarter over the last year rising 350 basis points since November 2013. Drivers of this improvement have been broad-based as the organic growth rates from our buy and sell-side businesses improve to 8.9% and 6.7% respectively. Buy-side clients accounted for 82.5% of ASV and sell-side firms accounted for the remaining 17.5%, Our buy-side businesses include traditional asset management clients, hedge funds and wealth managers, off platform data feed sales in the market metrics business. The sell-side targets only M&A advisory, capital markets and equity research professionals. Our growth was both top and bottom line oriented. In Q1, adjusted EPS grew 11.9% to a $1.32. This quarter marks our 18th consecutive quarter of double-digit EPS growth. Let's now turn to free cash flow. We define free cash flow as cash generating from operations less capital spending. Over the last three months we generated $66 million in free cash, an increase in 26% over the same period last year. Free cash flows increased due to higher levels of net income, an improvement in our age receivables and lower taxes paid during the quarter. Our DSOs were 33 days at the end of the first quarter compared to 34 days three months ago. Our cash and investment balance was a $140 million up $4 million during the quarter. This quarter we spent $48 million on share repurchases. At the regular quarterly meeting yesterday, are Board of Directors authorized the addition of $300 million to our share repurchase program. Today $339 million is available for future share repurchases. We also paid regularly quarterly dividend of $60 million. When aggregating regularly quarterly dividend paid and shares repurchased over the past 12 months, we have returned $332 millions to shareholders. Common shares outstanding were $41.6 million at the end of the quarter. Now let's turn to our P&L. Revenues grew in the first quarter to $243 million, an increase of 9% over last year. Organic revenue grew 8% over last year, which excludes $2.5 million in revenue from the acquisition of Matrix that was completed within the last 12 months. Our operating income this quarter grew to $80 million, an increase over $75 million posted over the first quarter last year. Net income grew 7% to $56 million, and adjusted diluted EPS grew 11.9% to a $1.32. This quarter U.S. revenues rose to $164 million up 7% compared to the first quarter of a year ago. Non U.S. revenues increased to $79 million. Revenues from our Europe and Asia Pacific regions for the first quarter were $61 million and $18 million respectively. Excluding foreign currency and acquired revenues from Matrix, the international growth rate was strong at 9.8%. This growth rate breaks down into 8.2% from Europe and 15.2% from Asia Pacific respectively. Let's now go through key contributors for our positive growth this quarter. Our annual client retention rate in terms of the number of actual clients increased to 93% up from 92% a year ago. In addition, our client retention rate, when expressed as a percentage of ASC continues to be greater than 95%. Our strong retention record is showing up in our user count. Net user count, of FactSet terminals increased this quarter by nearly a 1,000 users, in total 55,600 at quarter end. The net user addition in Q1 is our highest since November 2007. Overall users are up 9% year-over-year. This is the best annual user growth rate in more than three years. The group came from both buy and sell-side clients. As discussed last quarter, we continue to see an uptick from our investment banking clients whose activities had previously languished over the past few years. From what we have seen M&A and capital market activities are on the rise. As a result, we've seen few cancellations and expected from our investment banking clients. The market environment for our buy-side clients also continues to be constructive as the majority of our user expansion in this quarter came from this segment. In Q1 we increased our net new client by 19 for a current total of 2,762. We're pleased with this expansion as the first quarter is typically not a popular time for new clients to sign on as the majority of firms are at the end of their fiscal year end and budgeting cycle. In general the positive ASV changes relate to strong performance in each of our three primary verticals, our U.S. investment management, international investment management and our global banking and brokerage teams. In the U.S. IM, we've seen sustain demand for our fixed income portfolio products, multi asset class risk and stress testing, attribution and publishing products. Our international IM team has seen strong performance in the Asia Pacific region driven by our portfolio analytics suite of products. We’ve also seen continued growth from our wealth management work stations, which has fared successfully against some of our competitor's products on a number of occasions. Proprietary content also continues to be a strong product set for us as well as a -- point of entry for new clients looking for data feed. In addition to StreetAccount, clients also value our FactSet fundamentals, FactSet estimates, transcripts, take-over defense and entity mapping data. Now let's take a look at the expense side. Total operating expenses for the first quarter were $162 million, and our operating margin this quarter was 33.1%. First quarter cost of services expressed as a percentage of revenues increased by 290 basis points compared to the year ago period. The increase was driven by higher compensation and additional third party data cost. Employee compensation expense grew as we expanded headcount 8% year-over-year from new hires and from acquired employees in connection with the Matrix acquisition. A rise in third party data cost was driven by higher rates of client adoption of our risk suite and the use of certain benchmark families. SG&A expressed as a percentage of revenues decreased by 240 basis points in Q1 compared to the year ago period due to a decline in compensation and lower marketing and occupancy cost. At the end of our fiscal year, we had nearly 6,900 employees, an increase of 8% in global headcount. We hired 248 net new employees this quarter, primarily in our Hyderabad and Manila locations, which we primarily have content correction and engineering functions. The first quarter effective tax rate was 30.8%, up 30 basis points over the last year. The year ago effective tax rate includes an 80 basis points benefit from the U.S. Federal R&D tax credit. The U.S. R&D tax credit expired on December 1, 2013, and was not extended as of November 30, 2014, the end of FactSet's first quarter. Although a bill including the renewal of the R&D tax credit for calendar year 2014 has been approved by the U.S. House of Representatives, it has not been signed into law. Accordingly, FactSet did are not recognized any income tax benefits from the R&D tax credit during the just completed first quarter. The current impact of the R&D tax credit to FactSet is estimated to be $0.20 in EPS per year. Only once in its 33-year history has a tax credit not been retroactively reenacted. If FactSet is able to recognize the full value of the 2014 R&D tax credit in its Q2 effective tax rate, the annual $0.20 EPS benefit would break down into the $0.14 one-time benefit to EPS and a $0.02 increase in quarterly EPS in Q2 through Q4. Now let's turn to our guidance for Q2 of fiscal 2015. We expect that revenues will range between $244 million and $248 million. Operating margins should range between 32.8% and 33.8%. We expect our annual effective tax rate to range between 31% and 32%. Diluted EPS is expected to range between $1.35 and $1.37, the midpoint of this range suggests 12.4% year-over-year growth. In summary, Q1 was a strong start to our fiscal year. Our business expanded on many fronts and across all geographic regions. We are pleased with the 350 basis points acceleration in our ASV growth rate to 8.5%. Our user base is growing nicely at both buy and sell side clients. While our market share expense were continuing to invest aggressively in a forward market opportunity that we believe is many times our existing size. Our aim is not just to string a few quarters together, but rather to leverage our favorable position in the marketplace and execute at a high level through a longer term benefit of our shareholders. Thank you. We are now ready for your questions.

[Operator Instructions] We have our first question here coming from Manav, and he is from Barclays. Your line is now open, sir.

Thank you. Good morning. The first question just on the R&D tax credit just to understand, so let’s just say it does get signed into law today or in the coming week, how will you guys reflect that will -- like will you have a one-time benefit in the quarter, will you retroactively restate it? Just curious on how that would work?

It's Peter. Under your assumptions, if the R&D tax credit is reenacted just for 2014, in Q2 we would have a one-time benefit to EPS of $0.14 and our quarterly EPS in Q2 through Q4 would increase by $0.02 per share.

Okay. Got it. All right, that’s helpful. Thank you. And just from an FX perspective, can you just help us understand, I know you guys do a lot of hedging, but in terms of your exposure and how we should think about FX impact either to revenue or margins or so forth?

Certainly. I think in broad terms, I'm just rounding a little bit for the benefit fee. In expenses FactSet has in annual terms 200 million of expenses in currencies outside the U.S. dollar. Half of those are between Euros and pounds. And in revenues, we built 97% of our ASV in U.S. dollar. The other 3% is weighted to yen and pound sterling. So we’re in a net expense position. The strength of the dollar does benefit our bottom line, but in addition what we’re doing with it is we’re going to reinvest back in the business and keep our margins flat. It certainly would encourage anyone to look at our public filings our Ks and Qs because we’ll layout our foreign currency exposure by currency as well as watch hedge in very specific terms.

Okay. All right. And then lastly just from an industry perspective, there has been a lot of noise around chat services and I was just curious on how you guys -- I know you guys have launched one chat position -- chat platform. How you intend to either partner with those guys or compete against those guys any thoughts there would be appreciated?

I mean, as you mentioned, we have a successful chat service that many of our clients use. It saturates with AOL and many in the industry and we certainly have an open platform and we’ll saturate with anyone. I think what you’re referring to is a consortium that’s been formed to create even a broader competing service with that area. I only see that as a positive in the industry as it creates chat in a more open form.

All right, fair enough. Thank you, guys.

Thank you. And our next question comes from Joe Foresi from Janney Montgomery Scott. Your line is now open, sir.

Hi. I wonder could you give us some color around the uptick on the sell side. What you think might be driving that and how sustainable it is?

Hey Joe, it's Mike Frankenfield. Overall we see solid fundamentals on the sell side of our business. If you break that into two pieces through the research side and the corporate finance M&A side things are relatively stable on the research side. From what we saw this year on the corporate and M&A side was much higher employment levels. In other words, the normal fall up that happens at the end of the year where analyst fleet was not as significant. And as a result we retained more users, the class hiring in those firms has been very robust. As you would imagine, most of the change in that is driven by really 10 firms and we’re seeing solid hiring levels, solid deployment levels amongst our largest clients.

Okay. And could you talk a little bit about pricing and when you go into -- maybe you can separate it by the buy-side and the sell-side?

Is your question regard to pricing overall or pricing…

Yeah, overall and if you’re seeing any difference between the pricing function on either the buy or the sell-side?

Pricing remains very consistent. Our challenge in the business is to ultimately add value to our product to continue to justify the prices that we charge and I think we’re doing a great job with that. The product development pipeline that we have is very strong. Our product continues to improve at a very, very rapid pace relative to the value that we feel we’re delivering and certainly relative to the competition.

Thank you.

Thank you. And our next question here comes from Shlomo Rosenbaum from Stifel. Your line is now open sir.

Good morning. Thank you very much for taking my questions. My first question is just trying to hone in on exact organic growth just for this quarter and then again I guess for next quarter. If you would remove both the metrics revenue contribution and then the currency impact, what’s the organic revenue growth for this quarter? And then, what should we expect for metrics revenue next quarter, in other words, what was the February quarters contribution in the last year? Or what we be excluding from the number in order to come with an organic revenue growth rate for FactSet next quarter?

Good morning, Shlomo, it’s Peter. The organic ASV growth rate is 8.5%. There is a table on page eight of the press release that lays out our methodology to calculate it. It backed out $7.3 million of acquired ASV for metrics and $2.6 million adjusted for FX from primarily the strengthening of the dollar against the yen. In Q2, next year, we will have -- metrics will be with FactSet for a full year. So, we’ll be not adjusted at all in our organic ASV growth rate that we publish at the end of Q2.

So, I was asking about revenue as opposed to ASV growth in this last quarter?

Revenue growth rate organically was 8%. And I’ll have to come back to with -- we backed out $2.5 million for Matrix, and that will not be backed out in Q2.

Okay. So, the currency you’re seeing though is not a factor because almost everything, your billing is in U.S. dollars.

Right, 97% is in U.S. dollars.

Okay, got it. And then just on the margin side, can you go over the impact? It sounded like the reason why the gross margin went down was a significant uptake in products that have third-party data that’s integrated into that. It seems that it was at the primary factor and why like all of a sudden this quarter did it have such a big impact? Was there particular push? Or was there significant client sale that took a bunch of those workstations, if you could just give us a little bit more info on that?

That was a secondary factor. In terms of data cost, the primary factor by a large margin is investment in new employees. That was either through our organic headcount growth or through the acquisition of Matrix. The data cost, variable data cost did increase and that does increase when along with ASV, and in this particular quarter related to increased subscriptions to risk suite and some benchmark subscriptions that are variable, particularly in fixed income.

So, it’s really the headcount growth that you guys are seeing in basically from the hirers. Is that the way to think of it?

Yes. Our summer class traditionally, we’re hiring engineers and consultants. Both of those would go into cost of sales.

Great. Thank you very much.

Thank you. And our next question comes from Alex Kramm from UBS. Your line is now open.

Hey, good morning. Just to start off, maybe you can just go back to the guidance, I seem to be a little confused, when I look at -- I think you talked about the midpoint, but when I look at your operating margin and sales guidance, I actually get to something a little bit lower. So, maybe you can talk a little bit about the items below the line, it looks like other income has been picking up. Do you expect more of a tick up there? And also, do you expect to actually be fairly aggressive in this next quarter on buybacks because that’s what it seems to be implying? Thank you.

I think Alex, what you’re -- in the 12.4% that I was -- that’s on an adjusted EPS basis and it backs out or adds -- reduces the last year’s EPS by a penny, which had the R&D tax credit in it for four months, and our guidance has it out for all periods.

Okay. Can you talk about those two items still a little bit? The other income and the share buybacks, any color there just for all models?

Sure. On share buybacks, over the last three years, what we’ve purchased quarterly has really ebbed and flowed. It’s ranged from $28 million to $144 million. We’re not on a specific program. We have the luxury of having high quality problem in terms of too much cash. And the amount which we allocate to share buybacks, does -- we know it’s accretive and its variable related to M&A activity. Other income interest rates for us, hasn’t been change in material and I wouldn’t expect any material change in Q2.

Okay, great. And then just, maybe a little bit bigger picture. Obviously growth in Europe or internationally, in general has been very strong. When I talk to people in Europe, portfolio managers, for example, I guess there’s a few changes coming with or are already in place in terms of what asset managers can charge or can use soft dollars for and things like that. And when I talk to some guys over there, they’re certainly looking at the technology spend that they have and what products they want or really need, and particularly if they have to pay for it themselves. So, have you seen any impact from some of those new rules? Or do you see a little bit more questions coming from over there? Or is it basically unchanged?

Hi, it's Phil Snow here. We have not seen any impact from that so far, in Europe.

All right. That’s all from me, then. Thank you.

Thank you. And our next question comes from Tim McHugh from William Blair & Co. Your line is now open, sir.

I guess just following up on that last one a little bit, on Europe, and I guess Asia, as well. Can you talk a little bit to the extent I guess any feedback from the clients in terms of the economic environment over there. The headlines we watch are a little bit more cautious in terms of what spending behavior would be out of Europe and Asia for that regard, but it seems like you’re not seeing that so can you give some color around that?

I think what we’re seeing is really a strong competitive product in the marketplace. We’re certainly growing more than we feel our competitors are growing in our markets we serve. As you can tell by our result on the international side, we had strong performance and that wasn’t just Europe or Asia. It was really both. So, I think - we just feel that our product is strong and competitive and making inroads in the marketplace.

Got it. Are there signs that the macro environment is creating a tougher market for others, and you’re just selling through that? Or is it just wrong to -- is there such a secured option, lower penetration rate in Europe that maybe the macro environment is not relevant.

Our macro, country by country, buy-side, sell-side, you got to dissect to really get granular. And I think we feel certainly on the sell-side, as you could tell we had a strong quarter relative to prior year. Your prior year was certainly an easy comp for us on the sell-side. And then on the buy-side, I think we’re close both on the portfolio side as well as the core product are doing quite well.

Okay, great. And then -- I am sorry, I missed earlier on the foreign exchange comment relative to your cost. Did you say because of the hedging and I guess where some of your costs are that it’s a benefit to your margins, and I guess, is that -- was that comment related to this quarter or kind of looking forward the next couple of quarters?

Overall, this quarter -- and if rates stay the same in Q2, we do get a benefit, a net benefit from FX. But if you look at our margin guidance, you’ll notice that we’re managing the company to be flat. So we’re going to reinvest that benefit back in the product in the form of new headcount.

Do you quantify at all the size of that benefit?

I haven’t quantified it. I think you can go into our Q and look at what we’ve hedged and our next exposures by currency and take a crack at it.

Okay. Thank you.

Thank you. And the next question comes from Andre Benjamin from Goldman Sachs. Your line is now open, sir.

Thank you. Good morning. I was wondering if may be you could provide an update on the efforts to penetrate the fixed income market. And maybe it would be good if you could -- I don't know if you have in the past gave color on how much revenue or growth is coming from that set of products versus the core equity product.

The fixed income product is accelerating in terms of growth by every metric, in terms of ASV, in terms of client count. As a reminder, the primary way we're addressing the needs in the fixed income space is to load large quantities of fixed income data and combine that with our clients' portfolio, so that clients can look at fixed income data within the context of our analytics application, specifically portfolio analytics. It's really a unique offering in the marketplace. We don't breakout separate numbers for you, but in previous quarters we've described that we were in the very early innings of what we perceived the market potential to be. We'd maybe advance that an inning or two. It's still very, very early days. It's not inconceivable, but some day in the far future we could see a world where much as half of our ASVs coming from our fixed income products. We're long ways away from that but very excited about the opportunity.

Thanks. And then, I guess similarly on the buy side ASV, it's a traditional asset manager. I know you were helping others also going after the higher-end PVM clients. I don't know if there's anything that you call out there in terms of either percentage that comes from those two asset base or types of clients, and may be any differences that you're seeing and selling to those client mixes today.

So, certainly from the sale side we segment the marketplace and attack traditional asst managers' hedge funds, and then as you pointed out, the high net worth or the -- we call PWM, the private net worth. I assume that's what you're talking about.

Yes.

Works well, okay. We've highlighted on prior calls and continue to find great success in the wealth space. It's a smaller segment for us, so the growth rate is higher just because it's coming off a smaller base. Our core market always historically has been the traditional asset manager, and then a much smaller portion of our buy side revenues is the hedge fund space.

Thanks.

And our next question here comes from Peter Appert from Piper Jaffray. Your line is now open, sir.

Thanks. So, Peter, I know you've talked about this in prior quarters. Can you remind me why the big variability in cost growth between cost of sales versus SG&A?

The big variability really relates to employee growth. It's -- as Phil previously mentioned, most of our new employee headcount starts off as consultants in engineering, which is part of our cost of sales line, and also obviously what we acquired from metrics all came into cost of sales. That's -- but I'd like to remind everyone really the way we're managing FactSet is that the operating income line and that's where we spend all our time and focus.

But there is no message in terms of flatter down fractionally SG&A expense. Now you're not trimming the size of the sales organization or something?

No, no, not at all. There's no message in -- our general philosophy is we're growing the size of our sales force. And we're doing that today at least at the rate of ASV growth.

Got it. And then, I think Mike mentioned some -- might have indirectly mentioned this, but I'm wondering in terms of the sale side growth and the acceleration you saw this quarter, how broad-based was it? Is it one or two big sales driving this or is it more widespread?

It was across virtually every client.

Okay. And do you attribute it to market share or just client growth?

Just in terms of user count, really all the metrics; user counts, ASV growth, extremely broad-based not significant amount of lumpiness in it.

Okay. But I'm sorry, but I meant specifically do you feel you're taking business from someone else or this is add-on business just to reflect growth in these clients?

The majority in this particular quarter was a function of expanding our existing footprints. We're not -- I don't think any significant challenge we're expecting.

Got it, got it. And Phil, I'm wondering just sort of big picture thing about next several years in terms of growth dynamic. How do you -- could you call out for us what we should look at in terms of what the primary growth drivers are. You've talked about the fixed income business. But I think there's a perception in the market that your end user customer base is relatively static. So the question is how does FactSet continue to grow?

The FactSet -- the end customer base is static for us. It's true for almost every player in this industry. Certainly, the bulk of the revenue of the industry comes from the largest 500 firms in this space. I remember when we went public we had 85 of the top 100. I'm sure we're deep into the 90s at this point. So the client count hasn't changed much over time. It's really about selling workflows to the clients we have. And I think that's really where we excel. Every one of our clients, certainly the largest clients, there are significant numbers of users for us to get. I mean, I didn't give the exact number in our press release this quarter, but rounding at 60,000 end users in an industry with hundreds of thousands. We know our clients well enough to know that there are thousands of users just on the desks we don't have in those clients' book, buy and sell side. And then, as Mike mentioned, the fixed income workflows are very exciting for us. We continue to get deeper in to offering risk and quantitative tools for our clients. So it's a lot more product to the current clients we have. It is really exciting for us. We're on top of that. FactSet content is, in many categories, the premier content in the industry. And it really gives us all kinds of different channels to continue to grow our business without expanding our client count by a single client.

And on that front, Phil, can you share with us what portion of the business currently is from data feeds?

I could, we don't.

Today, as you know…

It’s a good question to ask. I think the way to think about it is clearly before we were just in the integration business and we had a small integration feed business where we've helped clients with the productivity of taking multiple sources and turning them into one. But obviously with a big content engine that we have today, as I mentioned, premier content, the opportunity for us to distribute our content both to redistributors in this space, the corporate market, as well as being able to match workflows for our clients and feed their internal needs for data and other forms than spreadsheets are on our inner core product.

Thank you.

And our next question comes from Dan Dolev from Jefferies. Your line is now open.

Hey, thanks for taking my question. The question is on ASV per workstation growth. If my numbers are correct, it looks like it was flat year-over-year in Q1, which compares to call it 107 basis points positive growth in 2014. What is that comes from, and is that related to maybe some price concessions on the sale side, or if you can give some color on that that would be great. Thanks.

I think I will just point out that it's not a metric that we follow internally at all. There is so much revenue that's not workstation related that would skew that number up or down in a particular order. We'd -- as was mentioned on the last question will be a factor where we can change workstation now by any and clearly affect that number up and down. I think Mike mentioned I actually feel like our product is getting more competitive in marketplace and gaining share. So I don't feel like we're in an inflationary environment as the workstation level is.

Got it. And then on the margins, it seems like margins were growing X metrics in the last few quarters and you're guiding to its margins possibly declining X metrics. I mean can you just give some color on are you taking investment in the business or is that pricing related or anything like that?

We're currently investing in the business. We guide margins to be flat and this is the way we run the business. I think if you look at our history it's never flat. That's what you plan for and some of the things either move it up or down, depending on what happens in the third quarter. I think on a business level though we're trying to find out that we can even drive double-digit [indiscernible]

And my last question is on a potential new entry into the market. There's has been a lot of news recently in articles is company called Money.net. they claim to have 15,000 customers or very big number. Are you seeing them in the marketplace at all, and may be you can share your views if you know about this product at all. Anything you can say about it would be great.

We have seen Money.net. We have not faced them in any sort of competitive situations yet and very bright individuals from some of our competitors that spun off and created a compelling product that comes in very low price point, probably it's going to be interesting to the wealth management community, but I don’t see it being competitive with FactSet for a long time to come.

Are they going after different part of the wealth management, is that why you are not -- you don’t think that's a threat to you longer term?

Yeah, I think we've articulated our wealth strategy pretty clearly. We're looking at ultra high network wealth managers who are interested in the very sophisticated level of data and analysis. They are operating very much like our traditional institutional asset managers and I have had an opportunity to look at that product and there are not the same universe at the moment. That's the varied entries at the institutional level in part is substantial investment and content. It's across 10 years and we had a regular scale to be able to build out the content that we have on our system, and you start with company fundamentals, move to estimates, transcripts and institutional limits and you work your way down the list and just this year cost of goods to produce that level of content to be an institutional player in the space, really precludes or would make it very difficult for a small player to find their way through the institutional scale in any short period of time.

Understood, thank you very much.

And our next question comes from Toni Kaplan, Morgan Stanley. Your line is now open.

Hi, thanks for taking my questions. So sell-side ASV growth has improved over the last four quarters, almost this one being 6.7%. Can you give us a frame of reference of what that number looked like historically, like pre-financial crisis?

My memory is not that good to be able to give you every quarter for any period of time. I can tell you that the sell-side for us has always been more cyclical in the stronger markets back pre financial crisis it has definitely been a driver in the organic growth rates. And then in the financial crisis it was definitely been dilutive to our growth rate. So it definitely if you looked at it over time, the buy-side has always been more stable and it would clock back and forth as to which one was the driver for organic growth in our business.

Okay. And then you mentioned the high demand for the risk suite, any more color on sort of what the reason was for that? Thanks.

Hi Toni, it's Phil Snow. So, part of the reason for that is we just continue to put up more and more compelling offerings in the risk space. Recently, last fiscal year FactSet released a multi-asset class risk model which is getting quite a bit of traction in the marketplace. So, that's another area that we're sort of being able to monetize our flexion in fixed income is combining that with equity on the risk side.

Okay and that's a FactSet model, it's not a third party model?

That particular model, yeah, is a FactSet model.

Terrific. Thanks.

And our next question comes from Pete Heckmann from Avondale. Your line is now open sir.

Good morning, everyone. I just had a comment on the second quarter guidance. Can you talk about what type of realized pricing increase is contemplated in that number? It looks like you've been very consistent in getting price increases in the 2% to 3% range. Do you think that around that same range is in the cards for fiscal 15?

This is Mike Frankenfield. Our pricing has changed as we've over time as you recall, two years ago with the last that we really did the big formal price increase to all of our clients in Q2 and what we've done now is to make majority of our price be with the contract renewal dates of our clients. So really price comes over the course of the entire year.

Okay, okay and can you comment in terms of the range that might occur then over the full year, is 2% to 3% still in the right range or is that something that you're not going to, or where do you…

I think overall price is probably in the, yeah, very low single digit. There are certainly price opportunities that we take on individual products that we perceive are a point extremely well and there are cases where there are products that we don’t feel like we have any pricing power is we need to continue to invest in them. But that would probably be a good ballpark range if you want to…

Okay. And then just on, it looked like you had good strong growth in Asia Pacific, is there any contribution from that partnership, I can't remember the partner, was it Quick, you are looking at building potentially high end work station for the Japanese market was there any contribution from that in the quarter or is that still to come?

Still to come.

Okay, I appreciate it. Thanks.

Our next question comes from Glenn Greene from Oppenheimer. Your line is now open.

Thank you, good morning. Just a couple of questions left and maybe the answer is similar to the -- on ASV, but the user growth in the quarter and obviously you alluded to it being the strongest in seven years for the first quarter which was seasonally soft. What kind of drove the user growth, was it broad based, were there a few sort of big off, one off clients? And maybe just a little bit more color on the strength of the user growth?

Hi Glenn, it's Phil Snow. You know the user growth was broad based. It was across the sell-side and the buy-side. The sell-side had positive user growth for the first time in a long number of years for this quarter, but the buy-side was very strong as well. It was actually the bigger contributor of the two numbers for the quarter.

So there weren’t any sort of like one-off large client wins and that sort of drove that number in the quarter?

No, they were good single to 10, 20 digit users.

Got it. And then just maybe a little bit of color on what you're seeing in the PA suite, any way to frame the momentum there relative to the ASV growth and have you seen any change comparatively obviously, Bloomberg rolled out a product some time ago, but any traction there?

We're still very competitive in the PA space. We just continue to add more and more functionality to that application and again the addition of fixed income really rounds out the offering and allows people to look at either equity fixed or balance funds and with the risk on top of it. So analytics is doing well and that's being driven by every asset class.

Okay. Thank you.

Thank you. And our last question here comes from Shlomo Rosenbaum from Stifel. Your line is now open.

Hi thank you for squeezing me in for one more. I just wanted to follow up on a question that was asked beforehand because the clients have been asking this as well. What percentage of our revenue is now coming from soft dollar payments as opposed to hard dollar payments?

Shlomo, it's Peter. I have to get back with the actual percentage, but my guess is that it's around 20% and I'll come back and look at that from that back with you.

The 20% soft dollar is your rough guess? Hello?

Yes, it's a question that hasn’t been asked in long time. I think it's roughly 20% from soft dollars through the buy-side.

Okay. I can tell you it has only trended down in my career starting at 100% in 1985 and down to something that we don’t track regularly at this point.

Okay. Very good.

Thank you. See you in 90 days.

Thank you. Happy holidays everybody.

Thank you. And this concludes today's conference. Thank you for joining and you may now disconnect.