FactSet Research Systems Inc. (FDS) Q2 2019 Earnings Report, Transcript and Summary

Good morning. My name is Stephanie, and I will be your conference operator today. At this time, I would like to welcome everyone to the FactSet Second Quarter 2019 Conference Call. All lines have been placed on mute to avoid any background noise. After the speakers' remarks, there will be a question-and-answer session [Operator Instructions]. Thank you. Rima Hyder, Vice President of Investor Relations. You may begin your conference.

Thank you, Stephanie, and good morning, everyone. Welcome to FactSet’s second fiscal quarter 2019 earnings conference call. Before we begin, I would like to point out that the slides we will reference during the course of this presentation can be accessed via the Webcast on the Investor Relations section of our Web site at factset.com. The slides will be posted on our Web site at the conclusion of the call. A replay of today’s call will be available via phone on our Web site. After our prepared remarks, we will open the call to questions from investors. To be fair to everyone, please limit yourself to one question plus one follow up. Before we discuss our results, I encourage all listeners to review the legal notice on Slide 2, which explains the risks of forward-looking statements and the use of non-GAAP financial measures. Additionally, please refer to our forms 10-K and 10-Q for a discussion of risk factors that could cause actual results to differ materially from these forward-looking statements. Our slide presentation and discussions on this call will include certain non-GAAP financial measures. For such measures, reconciliation to the most directly comparably GAAP measures are in the appendix to the presentation and in our earnings release issued earlier today. Joining me today are Phil Snow, Chief Executive Officer and Helen Shan, Chief Financial Officer. Now, I'd like to turn the discussion over to Phil.

Thanks, Rima, and good morning to everyone. We closed the first half of our fiscal year on a solid note. We continued our track record of steady growth with increases to our top line and bottom line as well as operating margin improvement. We executed well against our strategy of providing smarter connected data and technology solutions and saw positive results across all our businesses. Our broadening suite of innovative solutions continue to resonate with the market. We're laser-focused on working with our clients to drive efficiency in their processes and delivering content and analytics in new ways, all while providing FactSet's best-in-class service. We're encouraged by an increasing number of high-level conversations with our largest clients regarding our entire solution set as they navigate a challenging economic backdrop. In our second quarter, we increased our organic ASV and professional services at a growth rate of 6%. Organic revenue also grew 6% and adjusted operating margin came in at 33.2%, 180 basis point improvement year-over-year. We're pleased with our overall cost discipline allowing us to improve our margin and make meaningful progress towards our goal of 100 basis points improvement for the year. Adjusted diluted EPS increased 14% to $2.42, primarily due to stronger operating results. Turning to ASV. Analytics and CTS were the main drivers this quarter, along with the annual price increase for our Americas clients. Both analytics and CTS have been sources of growth for several years due to the competitive strength of our Analytics Suite and the increasing demand for high-quality integrated data in the marketplace. Within analytics, our core portfolio Analytics Suite had a strong quarter and provided our sales team with many opportunities to increase ASV with the existing clients. Analytics drove the majority of the increase this quarter. CTS was the second largest contributor in the second quarter as it continues to increase its sales of core data feeds such as FactSet Fundamentals. And within the Open:FactSet Marketplace, data exploration is removing friction from the trial and evaluation process to evaluate content. Wealth also had a positive quarter as it continues to expand and take market share. The brand's rollout at Merrill is complete and was successfully implemented in under 6 months. We believe the wealth team has a growing number of significant opportunities in this space. Within research, we saw a healthy increase in users on the sell-side. Additionally, we saw growth of our RMS solutions across both the buy side and sell side. We're also pleased with the results of the detailed banking sector data we rolled out last quarter. We've more than doubled the users for this new content and plan to add new content in other sectors. Lastly, our overall cancellation rate remains stable this quarter versus a year ago. Looking at our Americas and international businesses. Americas delivered a solid growth rate of 6%, driven by our leading analytics and expanded CTS offering. We also see an increase in enterprise discussions across our client base for our workflow solutions. The EMEA region grew 4% this quarter, primarily as a result of analytics and CTS. Cancellations in one market drove a decrease in the growth compared with the first quarter of 2019. We have a good pipeline for the second half of the year, and we believe we will reach our goals for this region. In Asia Pac, we had a strong second quarter with analytics and CTS, again, as the main drivers followed by research, resulting in an 11% growth rate for the region. Additionally, the cancellation rate in Asia Pac is also trending positive. We believe we have significant opportunities in various markets in Asia Pac, especially with CTS and analytics. As we close the first half of the year, we're pleased with our financial metrics and progress on ASV relative to last year. At the same time, we remain cautious as client cost pressures remain. For the second half of the year, we'll continue to execute on our 2019 goals and are making good progress integrating our products for a seamless investment portfolio life cycle platform, in enhancing our risk offering and unbundling our products to provide open and flexible solutions. Our broad suite of offerings is resonating well with clients who are looking to increase productivity through smarter connected data and gives us confidence in our growth trajectory. As I said before, it's important to look at our company performance on a half-yearly basis. We anticipate that our growth for the full fiscal year could be more concentrated towards our fourth quarter. We reaffirm our outlook for 2019 and look forward to a successful second half. Now let me turn the call over to Helen to talk in more detail about our financial results.

Thank you, Phil, and good morning, everyone. It's great to be here with you all again. We delivered a solid second quarter. Both organic revenue and organic ASV plus professional services grew at 6%. We expanded our GAAP and adjusted operating margin year-over-year and grew adjusted diluted EPS by 14%. As I go through this quarter's results, please keep in mind that our GAAP net income and EPS in the second quarter of our prior fiscal year were impacted by onetime tax expenses related to U.S. tax reform. I'll expand on this a little later when I report out on the tax rate. I'll now walk us through our second quarter. GAAP and organic revenue increased 6% to $355 million and $357 million, respectively, versus the prior year. The growth was driven primarily by analytics, CTS and wealth. Note that our solid first quarter ASV results are a contributor as prior period ASV is more fully recognized as revenue in the second quarter. For our geographic segment, Americas revenue grew 7% and international revenue grew 4% organically. Americas benefited from an increase in wealth, analytics and CTS. And international revenue was largely driven by analytics and CTS. ASV plus professional services increased to $1.44 billion at the end of our second quarter at a growth rate of 6% year-over-year and $21 million since the end of our first quarter. The growth was driven primarily by analytics and CTS and reflects our annual price increase in the Americas. The price impact was approximately $10 million, in line with prior year. Adjusted operating margin increased to 33.2%, 180 basis point improvement from the second quarter of 2018. This expansion is driven in part by tighter expense management and increased productivity. Some of this improvement comes from the restructuring efforts we took in prior quarters and the continued mix of resources between higher and lower-cost regions. Favorable movement in foreign exchange rates were a notable driver as the dollar strengthened against some of the currencies we are most exposed to, such as the pound sterling, the euro and the Indian rupee. We believe that we remain on target to achieve the 100 basis point margin expansion for the full year. Operating expenses for the second quarter totaled $246 million, an increase of 3% over the prior year. This increase is lower than our revenue growth and as a result, we were able to expand our operating margin. As a percentage of revenue, the expense improvement came from our cost of services, which was positively impacted by lower compensation expense and a decrease in data costs. These reductions were partially offset by higher technology costs supporting our infrastructure spend. Additionally, the higher productivity from the restructuring actions taken last year continues to have a favorable impact on cost of service. SG&A expenses, expressed as a percentage of revenue, were in line with the prior year. Lower discretionary spend in marketing and office expenses were partially offset by higher compensation and bad debt expense. Our tax rate for the quarter was 18.8%, impacted by a onetime settlement with tax authorities. Excluding this discrete item, our tax rate would be 17.6%. In the second quarter of our fiscal 2018, our tax rate was 42.4%, reflecting the onetime toll tax that we had to pay on unremitted foreign earnings as a result of the U.S. tax reform. Excluding this and other discrete items, the effective tax rate for that period was also 17.6%. GAAP EPS increased 65% to $2.19 this quarter versus $1.33 in the second quarter of 2018. This increase is attributable to higher revenue, improved margins, a lower effective tax rate and to a lesser extent, lower share count offset by higher interest expense. Last year's EPS was negatively impacted by $0.57 due to the aforementioned toll tax adjustment. Adjusted diluted EPS grew 14% to $2.42. A reconciliation of our adjustment to GAAP EPS is disclosed at the end of our press release. Free cash flow, which we define as cash generated from operations less capital spending, was $87 million for the quarter, an increase of 1% over the same period last year, primarily due to higher net income and partially offset by the timing of tax payments and higher capital expenditures. We increased the net number of new clients this quarter versus the prior quarter by 108, resulting in a total of over 5,400 clients. The drivers of the growth were mainly due to an increase in corporate and wealth management clients. Looking at our share repurchase program for the second quarter. We repurchased 215,000 shares for $44 million at an average share price of $205. We have $137 million remaining in our share repurchase program, and we remain committed to buying back shares at a steady pace and continue to balance our capital allocation between business investment and shareholder returns. We are changing our guidance for a few metrics. First, we are lowering our annual effective tax rate for the full year. It is now expected to be between 17% to 18%. Second, we are tightening our GAAP diluted EPS guidance to be between $8.70 and $8.85 and our adjusted diluted EPS guidance to be in the range of $9.50 and $9.65. There is no change to our annual guidance for GAAP revenues, organic ASV plus professional services and GAAP and adjusted operating margin. In summary, we are pleased with our quarter and with our first half results, where we had over 6% growth in both revenue and organic ASV plus professional services, an adjusted operating margin of 32.4% and a 15% increase in adjusted diluted EPS. We continue to demonstrate successful execution against our strategy, both client collaboration and service and on disciplined cost management. As we look ahead to the remainder of this fiscal year, we will make investments to drive business growth, to streamline our cost structure and to return long-term value to our shareholders. So with that, we are now ready for your questions. Stephanie?

[Operator Instructions] Your first question comes from Manav Patnaik with Barclays.

This is Greg calling on for Manav. I just wanted to ask about the sales pipeline in a couple of ways. Just wondering if there were any delayed buying decisions in the second quarter, given what we saw in December. And then also a little bit of a rationale for why the growth will be tilted towards the fourth quarter.

Greg, it's Phil Snow. So I don't think we saw anything noticeable in terms of delays as a result of what happened in December, nothing measurable that I can point to. And as I said in my script, we really do think about our business in halves. When we look at the pipeline in any given year, it's typically much more heavily weighted towards Q4 and this year is no different.

And then on the margin side, pretty nice results. We had always thought of the margins as kind of being a steady tick-up every quarter, but the second quarter was already above your guidance. So any color on timing that happened in the third quarter or how we should think about the margin trajectory from here?

I'll take that. This is Helen. We're very comfortable with where we are for the first half of the year. It really was driven by things that we've been executing on which is good discipline on discretionary spend, on employee productivity improvements, which we've seen from, as we noted, the employee mix as well as some of the actions that we've taken over the previous quarters. And then also we benefited from foreign exchange favorable rates, largely exposed to the ones that we're most open to, which is the pound, the euro and the rupee. As we think about it going forward, we're just going to continue to execute on the same plan on getting operational efficiencies. And so that gives us comfort of being able to meet our target for the year and to be within the range that we've given you guidance on. Any other questions?

Your next question comes from Peter Heckmann with Davidson.

Phil, I was curious on the M&A front. It will be almost two years since the company's last acquisition. When you look at the marketplace, are you changing some of your thoughts about organic versus nonorganic growth? Or is there something else, like valuations, that's keeping you from closing deals?

So I think I'll just start with we did make a number of acquisitions within a couple of years, more software. So we, sort of, intentionally decided to pause and really get those integrated. And I think what you're going to see in the second half of this year is some real new exciting products coming out from FactSet within the analytics and trading space. And we're already beginning to monetize some of those. So that's been a big focus for us. When we think about M&A, we're always looking at everything that's out there in the market. There isn't a deal that gets done that typically doesn't come across our desk. And I think we're always interested in content. FactSet does an exceptional job of integrating content, monetizing content. But yes, the high valuations certainly don't help where we don't want to overpay for anything, but we are continuing to scan the market for interesting tuck-in opportunities.

And then can you comment on the Burton-Taylor study, which came out recently, talked about an estimate of 2018 data growth of the market of about 5.5% in constant currency and about 10% for data streams. Both of those pretty much matched your ASV growth for fiscal '18. And I guess that's a difference from historical patterns where FactSet grew faster than the market. Any comment there in terms of your perception of maybe their forecast versus your performance?

So I haven't had a close look at that yet, Peter. I think we don't address the entire market. So there may be some segments of the market that are growing faster than the segments that we address. And it doesn't mean that we can't get into those markets, but I don't think I can give you a great answer until I've looked at that in more detail. What I can say is that when we're facing the competitors that we're facing in the markets that we serve today, I see that we're winning more than losing. So I think, for the piece of the Burton-Taylor report, that FactSet -- that's our addressable market, we're doing well in that piece of it.

Your next question comes from Toni Kaplan with Morgan Stanley.

I wanted to ask about margins as well. So just given the strong results in the quarter, I was a bit surprised that maybe you didn't raise the operating margin guidance for the year. Is there anything that specifically held you back from raising it? Was there anything onetime in the quarter that sort of led you to stay where you are?

Thanks, Toni, for your question. So I think there are a couple of things to consider. When you talk about some of the operational efficiencies we've achieved, we take that all into consideration. That puts us above 32% for Q2, which is an increase both quarter-over-quarter on a year basis as well as sequentially. But I think the foreign exchange favorable rates also added about 1 point, which works well when it works your way. But we're not in the business of trying to forecast going forward. So when we look at the first half at 32.4%, which shows real good progress we made against our target, to us, that feels like the right place for us to be. And as we operate going forward, we don't -- we're going to continue to make the right long-term decisions for the growth of the business and not necessarily trying to manage to a margin.

And then, you mentioned how strong analytics was this quarter and follows the later first quarter. So did something change? Or was it more timing related? Or any additional color you could give on that would be helpful.

Well, Toni, this is Phil. So again, it's a tale of two halves. In the first half, we're typically much more heavily weighted to the second quarter. Obviously, we have that significant deal in Q1 of this year. But on the analytics side, we did very well with our core PA product, traditional PA. The seats grew. A lot of what was driving that was new risk clients that we've closed and some more enterprise deals that are actually then sort of resulting in more PA deployment within clients. And we were positive on both the risk and fixed income side in terms of driving ASV.

Your next question comes from George Tong with Goldman Sachs.

Organic revenue growth in the quarter decelerated a bit to 5.7% from 6.4% in the prior quarter, despite easier comps in the year-ago period. Can you just elaborate on which areas of the business contributed to this deceleration and how you expect trends to change as you move through the year?

So if you're talking about the quarter-over-quarter growth, I think we had that very large wealth deal in Q1. So I think that's the -- on a quarter-to-quarter basis, that's skewing the numbers. On a year-over-year basis, I believe we're pretty much comparable to last year, sort of 5.9% or 6% and right in the middle of our guidance range for the year. So we're reaffirming our annual guidance from an ASV standpoint and feel good about that range.

And really, we want to -- we look at, as Phil mentioned, first half, where we look -- we look at the first half as opposed to just the quarter. So I think that's probably another way you should think about it as well.

And then you previously indicated that visibility into large deals should improve as we move through the year. Can you provide us an update on the progress of these large deal conversions, how this compares with your internal expectations and when you may be in a position to update guidance to reflect progress with these larger deals?

Yes. So I think we have good visibility now on the second half, but typically we're -- it's not clear to us, more than 6 months out on some of that stuff. So based on what we see in the pipeline, for the large deals, we're reaffirming our guidance for the year around the midpoint of the guidance.

Your next question comes from Shlomo Rosenbaum with Stifel.

Helen, I just want to make sure I understood you correctly. Of the margin expansion year-over-year of 180 basis points, around 100 is from currency and 80 is from actions that the company took on its own, between restructuring, better use of resources, efficiency, mix of where work is done, stuff like that. Is that right?

Yes. I think that is correct.

And then, just could you talk a little bit about what was going on internationally? Usually, I expect international organic revenue growth to be faster than Americas. And I thought there was some kind of comment about a cancellation or something. Can you give a little bit more detail as to kind of what's going on over there?

Yes. Shlomo, it's Phil. So we actually had a very good quarter in the U.K. But there was one market on the continent where we had a significant cancel that accounts for the majority of the difference that you were seeing in the EMEA region. And I believe we accelerated our growth in Asia Pac slightly this quarter. We had a good quarter in Asia Pac.

Was it cancel or loss? Or what was going on over there? I know it's competitive, obviously.

Yes, we don't give a lot of detail sort of on the cancellation. So it was a significant step backwards, yes.

Your next question comes from Hamzah Mazari with Macquarie.

My first question is just around the client environment. I know you mentioned client cancellations are stable. But any thoughts as to where do you think we are in terms of buy-side consolidation? And maybe just in relation to that, if you could just talk about, has it been negative for you or positive for you as you look at the consolidation that's sort of already occurred?

Yes. Hamzah, it's Phil. So yes, I'm not sure exactly where we are. I think that as we look further out, we're going to see continued cost pressures for the clients. In some cases, consolidation does help FactSet. We've got great relationships with our clients. Very often it forces kind of the new combined entity to sit down and look at everything they have. And we have a much broader suite of solutions now that we can offer clients. So obviously, there's cost pressure. When firms consolidate, they're looking for efficiencies. So it's a mixture of things. But this is an environment that we're used to operating in now, and I'm so pleased with how we performed and all of the products that we have coming to market. I continue to feel like there's more new and interesting product coming out from FactSet than we ever had. And even in an economic backdrop, which is difficult, I feel that we have a good chance of really continuing to take good market share.

And just a follow-up. You had mentioned unbundling of products to provide more open solutions. Just any thoughts as to what that means, where you are in that unbundling process.

Sure. So I've talked about this a little bit before, but we're no longer just a workstation product. FactSet has done a lot of investment in our technology stack and that's allowed us to do a lot of interesting stuff. So one is we have this great new web product, which we're beginning to monetize in wealth and other markets. The result of that is we're actually able to break up pieces of that if we wanted to and deploy those in interesting ways, which we're already doing. We're opening up more APIs to our clients. So a good example is our Analytics API. If you wanted to take the engine that powers PA and plug it into your own system, we can help you with that now. And then, of course, we have our Open:FactSet Marketplace, which is another example of us sort of delivering content in new and interesting ways. So I'd say we're sort of at the beginning of that journey of unbundling. We think that's the way the world is going, and we're -- that's the way we're going as well.

Your next question comes from Peter Appert with Piper Jaffray.

So Phil, the change in ownership of Thomson's F&R business is pretty dramatic change in the competitive landscape. Any commentary in terms of anything you're seeing in terms of that change maybe specifically in terms of opportunity or threat or even more broadly in terms of the competitive universe?

So I don't think much has changed there. So we've been competing with Thomson Reuters in some way, shape or form for a couple of decades now. We continue to feel good about our product offering versus theirs in the markets that we compete in. And I think -- I haven't seen much of a change to date in terms of how they are coming to market.

And then, Helen, I think you said -- you made a comment about not managing to margin, which I think is consistent with what the company has said historically. But that said, given your tenure now at this point, do you have a thought in terms of what you think maybe the appropriate level of margin for the FactSet business is longer term?

Thanks for your question. I can only use my early tenure for so long. But I think what we're seeing right now is that we continue to have opportunities on the operational front. I think as I noted, we really need to think about our long-term growth. We already are making investments back into the business, whether it's on infrastructure, on product, on even facilities. So from my perspective, I don't know that I have a particular target. I do think we continue to have operational productivity improvements that we can make.

Your next question comes from Joseph Foresi with Cantor Fitzgerald.

This is Drew Kootman on for Joe. You mentioned earlier the Merrill deal is done. I was wondering if you could touch on any color around how that process went and if you're seeing any flow-through into the model already.

Yes. Drew, it's Phil. So the process went exceptionally well. So we did it in under 6 months. I've heard that deployments of that scale historically were sometimes 2 or 3x that long. So we feel really good about how efficient we were there in terms of deploying the product. I, myself, actually went and observed one of the advisers getting trained and that was a real thrill for me to sort of see their action to our product versus what they had. And our team was amazing. So we had a lot of our existing FactSet consultants go out and do this and did a phenomenal job. All the feedback we got was exceptional. Our pipeline is building for other deals like this. And we feel really good about this as a new market for us and one that we think will be core to our business moving forward.

And then in terms of the Americas, looks like you guys keep having some strong strength there. Could you maybe touch on a little more detail about the demand there and what you see moving forward?

Our Americas team had a really good first half. I think you saw our banking number, too. So that's been driven globally, but we're seeing really good growth in our users on the sell side, which might surprise some people, but we have a great product. Our deep sector strategy is paying off. We released that in October of last year, and we have thousands of users using that data already. So it's picking up momentum very quickly.

Your next question comes from Bill Warmington with Wells Fargo.

So I just want to ask, the employee count was down quarter-to-quarter, while the user count was up. So it would imply that perhaps the ramp in the BofA business required less implementation staff than we had expected, maybe that it's ultimately higher margin business than we first thought. Is that the right way to think about that?

I'll take the first part of that question. When you think about our employee growth rate over time, on an organic basis, I think it is important to look in the past, there've been acquisitions, right, that had helped drive that growth rate. But overall, it is down, but in part, if you think about the fact that we do have a larger base of employees, too. So I think we have to be careful about just looking at the rate. I also think that we have become more productive, whether it's in content or in engineering. So we've been able to use automation and technology to be able to drive greater productivity. And also keep in mind, we did have some restructuring actions that we had taken in previous quarters, and so when you start looking comparatively, that's also going to make an impact as we think about total numbers. I don't know that we would tie it back specifically with what we've done with BAML. We had folks -- as we've always talked about, this was an organic deal, so we had people who were working overall, focused their efforts on the BAML win, which was very successful. And so as that winds and completes, they will refocus their efforts on new business.

And second question is longer term. The organic ASV growth is running around 6%. The margins are in the process of rebounding to the mid-30s. Historically, because of the competitive environment, there's a need to reinvest in R&D and customer service and keep those margins around there. So mathematically, with the 6% growth and now -- and without margin expansion, how do you maintain double-digit EPS growth?

I'll take the first shot at that. So thank you for your question. I think for us, I mean, we're continuing, as you even note, to invest back in the business. Phil talked about the new products and the open nature of our products that we're putting to market. So that will drive, I think, growth. We continue to use cash as we think about capital allocation to also buy back shares. And that will help as well as we think about returning value to shareholders. So I think those are all the different levers that we'll look at to continue on our performance.

Your next question comes from Tim McHugh with William Blair.

Just want to know if you could elaborate on the sell side. I know you mentioned some of the new products there, but I guess how much is the wealth management deal? How much are you just seeing hiring, I guess, within some of your investment banking clients? Maybe just elaborate, I guess, what's driving the sell-side ASV to such a strong number lately.

Sure, Tim. It's Phil. So actually just one point of clarification is the wealth business, we put in the buy side. So none of the wealth users or the BAML users are included in that sell-side number. So we're really driving a lot of new seats in banking. I think that might have been up by well over 1,000 in this quarter, and we had one significant deal in Asia Pac as well that actually used our web platform. So we were able to deploy that very easily to a large number of users in the Asia Pacific region. So I think it's just a combination of the excellent software we have for banking and all of the investment that we're making in content for those users.

And then within Europe, you talked about the cancellation, but absolutely a choppier macro environment in Europe. Is that flowing at all into the client discussions and the pipeline as you think about the growth rate outside of the U.S. going forward?

Yes, there's obviously a lot going on in Europe, right, in terms of Brexit as well as MiFID II and other stuff. So it's hard to tie any of it, honestly, to whether or not we're going to see a deceleration there. We've got a great team. We've got a great product. And I think we sort of view that market not that much differently than Americas, honestly, right now. And if that changes, we'll be sure to highlight it for you on the next call or two.

Your next question comes from Keith Housum with Northcoast Research.

Helen, just a little bit color on the operating margins. For the first half of the year, 32.4%, top end of your guidance. Obviously, you've got some FX tailwinds at your back. Do you have those FX tailwinds baked into your guidance for the rest of the year? Or is that for potential upside?

Yes. So thanks for your question. We look at that in a number of different ways. I mean, if you take a look at some of our larger currencies of exposed currencies where the dollars have strengthened in the back half of the year, so when we compare that to where we think we would be, that's already baked in. Now that being said, it can work for us or it can work against us. So we really don't try to project, but if markets were to stay the same as where they are in -- where they are today, we'd expect to be in the range that we've given you.

Maybe related to that, asking a question on the op margins, were there any expenses you didn't incur in the quarter that perhaps you foresee that you have to require in the second half of the year?

Not necessarily. I think nothing that we necessarily haven't already baked into our view.

And if I could ask one question to Phil. Phil, you've mentioned historically that you ought to be able to get to 10% ASV growth over the long term. We're here a little over 2 years now, we've been stuck in the 6% ASV growth area, and obviously the markets have been a challenge and quite frankly, I'm not quite sure if they're going to get any better for any of us. But any change to your hope or expectation for long-term growth? And if so, what do you need to get there if consumer markets will probably remain challenged?

Yes. So we feel good about how we're performing in this market and our growth rate. But we're always focused on acceleration. So for us, the #1 metric that we're focused on as a company is our top line growth. And sometimes it takes a while for new products to take hold. The environment is not getting any easier, but we do feel that some of our product sets -- I might point to wealth and CTS as 2 that are really getting a lot of traction recently and have good momentum, so I'm optimistic as we sort of come out of the second half that we'll have good momentum going into the next fiscal year.

Do you think there is a new long-term growth, say 8% instead of 10%, that perhaps you guys are shooting for?

Yes, I'm not going to give you a number today. I think we're doing a lot of work on our long-term strategic plan. If we feel like we want to come out with any longer-term guidance for you, like in terms of long-term top line growth rate, we'll do that.

Your next question comes from David Chu with Bank of America.

So how much incremental ASV was added from the BofA contract in the quarter? Is it something small like 5% of the total? Or is it something more meaningful?

I don't think we're going to break that out exactly. But it was -- most of the ASV was already attributed for in Q1 of last year -- of this year, sorry.

And then just in terms of the ERP system implementation, where do you guys stand today? And when do you expect it to go live?

It's Helen. As it relates to the -- on the finance side, we'll continue to work on it. We're looking towards fiscal '20 when it would go live. As it relates to the HR system, we actually have gone live on that. And so we're very pleased with the progress we've made there.

And do you expect this to be like a cost-saving benefit over time? Or are you already seeing it? Or do you expect to see that play out over time?

We don't have it baked in at this point. I mean, right now, I think it's too early for us to be talking about savings. What we're looking at here is productivity and being able to have greater insights in how we manage the business. And so we'll see how that works out over time.

Your next question comes from Ashish Sabadra with Deutsche Bank.

Phil, a question on the comment that you had made around the banking data that you rolled out last quarter. I was wondering if you could help us understand how does this new product now compare to your competitor, SNL Financial, like from a competitive perspective. And then you talked about doubling the number of users as well. So as you think about the target market there, how do you think about ability to gain more users on that front?

Yes, so I would say it's very early days. We've just begun to invest here. So I'm not sure exactly what our competitors have, but what I can tell you is we're really encouraged by the data that we do have and the uptick we've seen in terms of users and sort of the demand from the market for us to do more of this. So that, I think, gives me a lot of confidence that this sort of data and investing in not just FIG but in some other areas is a good strategy for our company.

That's helpful. And then maybe just a quick follow-up. You also called out that maybe other sectors, other things that are on your priority list that you talked about. Is there anything that you can share in terms of which sectors would be equally as important as the financial or the banking data?

Yes, I think we're just looking across all sectors right now. When we have more clarity on that, we'll be very happy to share it with you.

Okay. That's helpful. And maybe just a quick follow-up. And like with this new data around new sectors, what does that mean for your CTS business? Does it help on that front as well?

It certainly does. We're great at monetizing data both in workstation to web as well as off platform. So sometimes the more detailed the data, the better, right, in terms of how quantum data scientists want to look at it. So as we build that up, we'll be able to turn that around very easily and sell it in the feeds over time.

Your next question comes from Alex Kramm with UBS.

Just a couple of follow-ups, I guess, on the margin. First, I think you mentioned discretionary spending helping this quarter, and I look back and I see that the quarter, obviously, started in December, which was a really choppy period. So just wondering, did you pull back some spending pretty quickly? And I guess what -- I'm asking because it's just one of those things where it actually shows how you can react, which is a positive, obviously, right, to choppier markets if you need to and what flexibility you have. And then obviously, as you maybe didn't ramp fast enough, the ramping is now happening throughout the rest of the year. You know what I'm trying to say?

Sure. Thanks for your question, Alex. So I think as it relates to certain spend you can't hold back on, certain things are really in flight, right? So things like professional fees was really much more of an active strategy of how we manage that. I think similarly for marketing, although that one, as to your point, you can pull back a bit. T&E is another one that you can spend more judiciously. And so I think we try to pull off some of those levers. I don't think -- I would not say it was because of December in particular. I think it's more about us executing on the plan we set forth for the year.

And then just lastly, you mentioned your restructuring actions and how those have been bearing fruit. I mean, are we basically done with that now? And I guess I'm asking to some degree because you continue to have restructuring charges every quarter, but if this is an ongoing thing, at something -- at some point, it's regular business. So I guess I'm saying are you kind of -- do we have this behind us at some point? Or where do we stand with kind of like the plan that the management team has laid out?

Yes, sure. So I think for us, the program around more material restructuring was in Q4. And so we may have had small pieces after that, but I wouldn't look at that as being something that we're continuing every quarter. I think what's probably a bigger driver as we think about the productivity gain is also the mix, which -- the employee mix change. So we're growing in terms of people, much more in our centers of excellence, which are outside the U.S., as I mentioned, more in -- perhaps in lower-cost countries. And that's been a driver. And I think that's been more material per se, and we would expect that to be going forward as well.

Your last question comes from Glenn Greene with Oppenheimer.

Just two quick questions. And obviously, your margin's been a big profile for this call and tracking to all your expectations at least year-to-date. I think you had an expectation for 100 basis points of margin expansion in fiscal '20. Is that still the case? And then the secondary question relates to the cancellation in Europe to the extent, Phil, you're comfortable commenting on it, but was it in any way MiFID related or competitive? I'm just trying to get a confidence that this was sort of a onetime isolated issue, and we wouldn't sort of expect any other sort of like large cancellations in Europe going down the road.

Yes, at our last Investor Day, we did say that our plan was to improve margins for the next 2 years. So Helen's new. We're continuing to think about our long-term strategy. It's something as we go into the end of the year and we think about our multi-year plan whether or not that's something we want to continue to do or if we want to invest more in the business for high growth. And in terms of the EMEA region, yes, it was a onetime thing. It was competitive. But there are lots of situations where we win onetime deals versus competitors as well. So I think we're entering an age right now where FactSet is competing for 7-figure deals, in some case 8-figure deals, on a much more frequent basis than we used to with our largest clients. And I think some of this lumpiness is what we may continue to see over time. Thank you, everyone, for joining us on the call today. We want to thank all of our employees for delivering solid results and express our appreciation to both our clients and shareholders with many of whom we've had long-term relationships. If you have additional questions, please call Rima Hyder. We look forward to speaking with you all next quarter.

Thank you. This concludes today's conference call. You may now disconnect.