The paragraph details the opening of FactSet's first fiscal quarter 2025 earnings conference call. The operator informs participants about the procedures for asking questions and mentions that the call is recorded. Yed He, the interim head of investor relations, introduces the event, noting that slides and a replay are available on their website. The call is scheduled for one hour, and participants are asked to limit themselves to one question initially. Listeners are advised to review legal notices and risk disclosures related to forward-looking statements and non-GAAP financial measures. Reconciliations to GAAP measures are provided in the presentation appendix and the earnings release. Performance metrics discussed during the call compare with the fiscal 2024 period unless stated otherwise.

In the first quarter of fiscal 2025, FactSet reported strong operating performance with a 4.5% year-over-year growth in organic ASV, a 37.6% adjusted operating margin, and an adjusted diluted EPS of $4.37. Despite macroeconomic uncertainties and cost pressures, FactSet observed positive trends and anticipates ASV growth to be more robust in the second half of the fiscal year. CEO Phil Snow highlighted the company's strategy of enhancing financial intelligence and client support through technology and innovation, maintaining confidence in meeting medium-term targets. The company will also focus on reporting organic ASV and its recurring revenue nature going forward.

During the first quarter, the company maintained strong performance metrics with ASV retention over 95% and client retention at 91%. The client base grew to nearly 8,250, and the user count surpassed 218,000, driven by expansion in wealth. In the Americas, ASV grew by 5% due to new business in wealth, hedge funds, and asset owners, despite some budget reprioritization by clients. EMEA saw 4% growth, driven by partnership wins and improved retention, while Asia Pacific maintained a 7% growth rate through improved seasonal hiring and banking, despite lower retention among asset manager clients. Wealth's organic ASV growth was slower in Q1, but user numbers increased significantly. The company expects growth to reaccelerate due to a strong pipeline of opportunities. In banking, seasonal hiring remains a drag on growth, but new products are expected to drive acceleration in the second half of the year.

FactSet is experiencing positive momentum with its Gen AI-powered pitch creator ahead of its 2025 launch, marked by two client wins in Q1 and strong growth in private equity and venture capital driven by competitor displacements and their Cobalt tool. They recently acquired ON to enhance solutions for investor relations professionals, resulting in increased client interest. FactSet achieved a significant seven-figure win in the institutional buy side, showcasing their portfolio analytics and managed services capabilities. While facing budget scrutiny and vendor consolidation pressures in asset management, particularly with smaller firms, they are partnering with JPMorgan Security Services to tackle total cost ownership by integrating various solutions. Additionally, partnerships in CGS are seeing steady growth.

The paragraph discusses FactSet's accelerated growth attributed to improved retention, larger wins with partners, and a robust issuance market. The company is viewed as an innovation partner, helping clients with insights, cost reduction, and increased productivity. FactSet is harnessing Gen AI to enhance speed, accuracy, and efficiency, launching conversational AI through FactSet Mercury to offer actionable insights across data assets. Clients seek practical solutions to boost productivity, prompting new workflow solutions throughout the year. Growth is expected later in the year, with optimism for improved conditions in 2025 as clients adjust budgets.

In the discussed quarter, the company experienced several positive developments, such as increased client engagement in banking and strengthened data solution sales. They maintain a strong pipeline and have reaffirmed their fiscal 2025 guidance. Organic ASV grew by 4.5%, and GAAP revenue increased by 4.9% to $569 million, with organic revenue up 4.7% to $568 million. Growth in organic revenue varied across regions, with the Americas at 5%, EMEA at 3%, and Asia Pacific at 6%. Operating expenses rose 6.8% due to factors like intangible asset amortization and acquisition-related costs, with adjusted expenses rising at the same pace as revenue.

The paragraph discusses the financial dynamics of a company, highlighting that technology-related expenses increased by 18% due to software amortization and investments in generative AI, driving technology costs to nearly 10% of revenue. Employee expenses remained a significant portion of revenue despite a 2% increase and headcount stability. Overall, people-related costs dropped to 39% of revenue. The company has reduced real estate and operational costs while making strategic investments. Operating margin on a GAAP basis dropped by 120 basis points to 33.6% due to one-time items, but remained flat at 37.6% on an adjusted basis. Service costs declined, and SG&A expenses rose due to higher people expenses and professional fees.

In Q1, the effective tax rate increased to 16.5% from 15.2% due to a foreign deferred tax asset revaluation. GAAP diluted EPS rose 1.3% to $3.89, while adjusted EPS increased 6.1% to $4.37, driven by higher revenue but offset by margin compression and a higher tax rate. EBITDA grew by 5% to $230 million due to higher net income and add-back items. Free cash flow dropped 56% to $60 million, primarily due to a resolved sales tax dispute, vendor payment timing, and higher capital expenditures. The company remains focused on capital allocation, repurchasing 104,000 shares for $49 million and paying a $1.04 dividend per share. They reduced their term loan by $62.5 million, aiming to repay it by the end of Q2, and uphold investment-grade metrics while reaffirming prior guidance.

The paragraph discusses the positive developments at FactSet towards the end of the first quarter, noting increased client engagement and willingness to make purchasing decisions. The company has taken steps in pricing and packaging to boost competitiveness, particularly against hedge funds and PEVC firms, leading to increased new business. FactSet is testing multiple pilots aimed at replicating success across different markets globally. The sales pipeline is strong, with promising demand for their new AI products and enterprise solutions, indicating potential for distinct growth phases over the year. The paragraph concludes with confidence in delivering long-term shareholder value by leveraging data and technology investments to enhance client financial insights. During the Q&A, Alex Kramm from UBS questions the optimism for the second quarter, suggesting some softer performance in Q1 and anticipation of larger deals in Q2.

Phil Snow discusses the positive momentum in ASV growth and strategic focus areas for the company. He highlights the strength in wealth management, which constitutes half of their top ten deals, and mentions significant opportunities in private equity, venture capital, and hedge funds. The acquisition of Owen contributes to growth in corporate markets. Snow anticipates potential growth of about 10% in these sectors during the year. While banking remains uncertain, he notes successful renewal conversations in middle markets and positive client feedback on their AI-powered pitch creator product, which aids in securing renewals.

In the paragraph, Goran Skoko discusses the improvements in sales activity, highlighting a 23% increase in trials in the Americas and a 13% increase in Europe, along with a 30% year-over-year increase in RFPs for Q1. Phil Snow notes that while the CPI increase they can capture this year is lower due to decreased inflation, the sales team has worked effectively to close this gap. He also mentions that the buy-side business, despite cost pressures, has developed a stronger pipeline for the second half of the year, leading to optimism about future prospects. In a follow-up question, Shlomo Rosenbaum from Stifel requests clarification on the company's ASV growth, which is 4.5%, while individual components are reported as lower.

In the paragraph, Helen Shan discusses a calculation adjustment related to CGS (Corporate Governance and Securities) issuance in the ASV (Annual Subscription Value) growth rate. Previously, CGS issuance growth wasn't included in buy side and sell side calculations, but due to significant issuance this quarter, it contributed 25 basis points to the organic ASV growth, reaching 4.5%. This accounts for a discrepancy where the buy side is at 4.3% and the sell side at 3.5%. Following this, Kelsey Xu from Autonomous asks about the impact and strategy of managed services on the buy side ASV. Phil Snow responds, noting momentum and key deals, including a partnership with JPMorgan that includes managed services, highlighting their strategic focus in this area.

The paragraph discusses the company's opportunity linked to its product suite, particularly the analytics suite traditionally used by the buy side. The platform's openness allows firms to leverage their performance solutions significantly. Goran Skoko elaborates on the unique demand for their services, which differ from typical managed services due to their highly skilled talent that assists clients in performance and risk reporting. This approach helps clients reduce total ownership costs and focus on high-value activities, especially in cost-sensitive environments. The services have gained traction over five to six quarters, with considerable potential due to a lack of direct competition. Helen Shan notes that the attach rates for these newer services, including risk and reporting, are strong as clients increasingly rely on them for scalability.

In the paragraph, Faiza Alwy from Deutsche Bank asks about the feedback on Gen AI products and their impact on ASV (Annual Subscription Value) growth. Phil Snow responds by indicating that they expect Gen AI monetization to contribute 30 to 50 basis points of growth in FY 2025, which is included in their guidance, but acknowledges it could exceed expectations. He mentions that most of the impact is expected in Q2 through Q4, and so far, they have monetized six or seven products, including a conversational API and banking products, which have received positive feedback.

The paragraph discusses the company's initiatives to enhance productivity and monetize AI through tools like Pitch Creator and tombstone creator, which are designed to alleviate the workload of junior bankers. These tools have received positive feedback and have started contributing to renewals. The company has successfully sold data for a Gen AI product and engaged in an AI partner program, securing their first commitment, which will materialize after Q1. They have a strong pipeline and are excited about scaling monetization efforts starting January. They acknowledge market skepticism regarding monetization speed, but express confidence in their products' potential and note growing demand.

In the discussion, Ashish Sabadra inquires about budget trends and future client budgets, prompting Phil Snow and Goran Skoko to respond. Skoko notes that client budgets are expected to remain flat with a focus on cost management. However, there's optimism due to increased client engagement in new technology, tools, and content, indicating productive client interactions. Scott Wurtzel then asks about the financial impact of the Irwin acquisition, to which Helen Shan responds that the acquisition won't significantly affect revenue and is thus not highlighted in financial results.

The paragraph is part of a corporate earnings call where Phil Snow and Helen Shan discuss the company's business and margin outlook. Phil Snow mentions that an acquisition is performing at or above expectations for the fiscal year ending in August. Jeffrey Silver from BMO Capital Markets asks about the company's margin projections for 2025, noting a slight decrease. Helen Shan responds, explaining that they experienced favorable conditions in the current quarter due to lower personnel costs and favorable third-party credits. However, expenses are expected to increase starting in the second quarter due to higher personnel costs, technology and infrastructure investments, and cloud-related expenses, which could lead to margin compression. She expects the margins for the first half of the year to be around the midpoint of their guidance range.

Toni Kaplan asked about challenges in the wealth sector, such as elongated decision-making and competitive pressures. Phil Snow explained that a large deal in the previous Q1 wasn't matched this quarter, but he assured that the market remains strong with ongoing momentum. Goran Skoko added that although no similar-sized deal occurred, they expect wealth to reaccelerate throughout the year, noting increases in new business and seat growth. He emphasized successful competition displacement, geographic expansion in Switzerland and the UK, and deeper workflow penetration, expressing confidence in the sector's continued success.

The paragraph is a segment from an earnings call transcript. Owen Lau from Oppenheimer asks about a recent seven-figure client win from a key competitor. Phil Snow responds, highlighting the quality of their technology, analytics solutions, and partnership approach as key reasons for the win. He notes the importance of their multi-asset class capabilities and managed services. Helen Shan adds that their ability to partner and the flexibility of their open platform were also crucial in securing the deal. The operator then moves to the next question from Manav Patnaik of Barclays, who inquires about pricing and packaging strategies against competitors.

Helen Shan discusses strategies for improving conversion rates in a competitive environment, such as targeting specific firms with adjusted pricing structures and enhancing product quality, particularly in the private markets. While this approach has led to lower price realization, it has increased ASV, notably in the Americas and EMEA, by using packaging and pricing as competitive tools. Additionally, enterprise solutions have been effectively leveraged during renewals. After Shan's explanation, Andrew Nicholas inquires about the company's interest in M&A and whether AI investments influence their M&A strategy. Phil Snow responds by acknowledging a strong interest in M&A.

The paragraph is part of a discussion about the company's business strategy, particularly regarding their product suite and AI investments. The speaker notes that while they are focused on filling gaps in their product lineup, most opportunities they are exploring are not AI-related. However, having a robust technology stack is crucial. They've invested significantly in AI to empower employees, contributing to their success. Helen Shan agrees, highlighting their strong balance sheet and strategic capital allocation, allowing for both internal developments and potential acquisitions. Surinder Thind from Jefferies LLC asks about the monetization of AI products, seeking insights into client value propositions, impact on revenue, and client savings, noting that Gen AI solutions can be costly due to rapid budget consumption on credits or tokens.

The paragraph discusses a company's focus on enhancing client value and efficiency through its solutions. Phil Snow highlights their aim to prove value to clients by saving them time and preventing cost spikes, rather than selling expensive AI solutions. The company's offerings, such as the portfolio commentary solution and pitch creator product, help clients by automating tasks that would otherwise take much longer, thereby improving efficiency. Goran Skoko emphasizes the significant efficiency gains, especially in processes like month-end asset management commentary delivery.

The paragraph discusses the company's pricing strategy and expectations for the fiscal year. The company's pricing model is a mix of subscription and consumption-based fees, offering clients transparency and improved productivity. Helen Shan, responding to a question from Craig Huber, notes that while the realized pricing is expected to remain flat compared to the previous year due to CPI-related headwinds, there is potential for revenue growth in the second half of the year due to a strong sales pipeline. Although new business and renewals may show slight deviations, overall volume increases are expected to compensate for any reduced price realization against their rate card.

The paragraph discusses an increased focus on client retention efforts, leading to an improvement in the retention rate to 91% this quarter. Although retention has historically correlated with accelerated Annual Subscription Value (ASV), that wasn't the case this quarter. Goran Skoko attributes the improved retention to fewer client cancellations, particularly in the Americas' investment management sector. They have implemented processes to enhance client retention and anticipate continued improvement over upcoming quarters, although immediate effects on ASV have not been observed yet.

In the paragraph, a speaker addresses questioner Jason Haas's concerns about client engagement and budget expectations. While there is optimism regarding client engagement and a better pipeline, the company expects clients' budgets to remain flat and focused on costs. This might limit immediate budget increases despite good equity market performance and anticipated M&A activity, which could improve macro conditions and banking fees over time. The speaker admits their earlier comment might have been too pessimistic and acknowledges potential budget growth as macroeconomic conditions improve throughout the year.

The paragraph discusses a company's strategy to perform well in both favorable and challenging market conditions, particularly through managed services and efficiency enhancements via Gen AI tools. Despite flat budget expectations, there is optimism due to improving M&A activity and an increase in technology budgets. The company is shifting its focus to engage with CTOs and is seeing opportunities for market share gains as clients reassess their service providers. Helen Shan notes that while budget increases are not significant yet, early discussions with clients show potential. George Tong from Goldman Sachs then asks about expected performance improvements among different client segments.

In the paragraph, the speaker discusses the growth prospects for different parts of FactSet's business. They note strong growth in smaller sectors like PEVC and hedge funds and positive expectations for the wealth management sector. However, there is more uncertainty in the banking sector and the buy side beyond hedge funds, especially in active management. FactSet's revenue is somewhat lagging behind the banks' revenues, but there is optimism for increased banking activity and AI product adoption. The speaker highlights efforts to build the pipeline and address past gaps. Shlomo Rosenbaum then asks about a recent noticeable increase in decision-making among clients, questioning if it's due to stronger product resonance or increased optimism post-presidential elections.

In Paragraph 28, the discussion revolves around the positive impact of having the presidential election behind them, leading to optimism in the market and anticipating favorable conditions for mergers and acquisitions (M&A) activity. Phil Snow suggests that reduced regulatory burdens may benefit their clients and operations. Goran Skoko adds that increased client engagement and efforts to boost sales activities have contributed to market optimism and improved their business pipeline. Overall, both foresee a promising outlook for the industry and FactSet, leading to satisfaction with the company's performance at the start of fiscal 2025.

The speaker expresses optimism about future growth despite market uncertainty, highlighting strong client interactions and a robust pipeline. They mention progress on strategic goals set at Investor Day, which boosts confidence in meeting FactSet's medium-term outlook. The speaker thanks employees for their efforts and extends holiday wishes, concluding the conference call.

This summary was generated with AI and may contain some inaccuracies.