Thank you for standing by and welcome to the FactSet Second Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's call is being recorded. [Operator Instructions] I would now like to hand the call over to Kendra Brown, SVP, Investor Relations. You may begin.

Thank you, and good morning everyone. Welcome to FactSet’s second quarter 2022 earnings call. Before we begin, I would like to point out that the slides we will reference during this presentation can be assessed via the webcast on the Investor Relations section of our website at factset.com. The slides will be posted on our website at the conclusion of this call, and a replay of today’s call will be available via phone and on our website. 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 statement 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 comparable 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 Linda Huber, Chief Financial Officer. I will now turn the discussion over to Phil Snow.

Thank you, Kendra, and good morning, everyone. Thanks for joining us today. Before I begin my remarks, I want to remind everyone that we are hosting an Investor Day on Tuesday, April 5th both in-person in New York City and via livestream. We look forward to sharing more about our business strategy, growth initiatives, and long-term financial outlook at this event. To register, please see our website. You may also reach out to Kendra for additional details. I hope to see many of you there. I am pleased with our impressive second quarter and first half results as we executed on our pipeline and built on our strong momentum from Q1. Our organic ASV plus professional services growth accelerated to 9% in the second quarter, led by growth in workstations and portfolio analytics and our capturing higher price increases in the Americas. We also saw several large renewals, which further affirmed the strength of our offering and investments in product and content. Our strategy continues to drive top-line growth and allows us to capture more share of wallet with our clients. Growth this quarter was strongest among our buy-side clients, with the biggest contributions coming from asset managers and wealth clients. All buy-side firm types experienced accelerated growth in the second quarter, with broad-based strength across all workflow solutions. We continued to see double-digit growth from banking, wealth, hedge fund, and corporate clients, along with private equity and venture capital funds and partners. Retention was a key driver this quarter, with our investments in content and technology continuing to resonate. New business accelerated globally, led by the Americas. While we had success with larger deals, we also continue to see a higher volume of small and medium-sized client wins. We are pleased that our performance resulted in a 20.2% increase…

Thank you, Phil, and hello to everyone on the call. We’ve been extremely busy in the second quarter, as we worked to close the acquisition of CGS, went to market with our investment grade inaugural senior notes offering, negotiated our new credit facility, and put the finishing touches in place for our April 5th Investor Day. I join Phil in recognizing the efforts put forth each day by our FactSet employees. Our teams have done amazing work. It has been an exciting time in the company's evolution. As you have seen from our press release this morning, we are pleased to report acceleration in our top line, with double-digit revenue growth and high single-digit growth in organic ASV plus professional services. I will now share more details on our second-quarter performance. Consistent with our definition of organic revenues and ASV, we will exclude any revenue and ASV associated with CGS when reporting organic-related metrics for the 12 months following the acquisition date. As Phil stated earlier, we grew organic ASV plus professional services at 9%, an acceleration reflects increased demand for our digital solutions, disciplined execution on our sales pipeline and pricing strategy, and a supportive external environment with tailwinds from the capital markets and overall economic growth. Benefits from our investments in both content and functionality are validated by our annual price increase. For example, in the Americas, our price increase yielded $21 million, $7 million more than the prior year. While an inflationary environment did enable us to raise the rate of price increases above our historical 3% to 4%, we also realized these price increases across a wider base of clients. GAAP revenue increased by 10% to $431 million for the second quarter. Organic revenue, which excludes any impact from foreign exchange, acquisitions and deferred revenue amortization…

Thank you. [Operator Instructions] Our first question comes from the line of Manav Patnaik of Barclays. Your question please.

Yes, hi. Good morning. Linda, just on the CUSIP contribution to guidance, $5 million of ASV. I guess can you just help us bridge the nature of their revenue contracts? I thought the contribution would be a little larger. And similar question around the margins, 50 basis points. Is there some other kind of integration costs that you're assuming in there? .

Sure, Manav. I think we probably should be just a bit clearer about what's happening with CUSIP here. First of all, our organic measure of ASV, of course, does not include CUSIP. So, what did we buy when we bought the CUSIP business, which closed on March 1st? And the ASV from CUSIP for a full year will be $159 million. And looking at the half year, in other words, the two quarters that we're getting from CUSIP, we expect to see about $80 million of ASV as -- for the last two quarters of this year. On the revenue line, which is a little bit different, we saw about -- we'll see about $180 million of revenue coming from CUSIP; about $80 million is recurring and about $10 million is one-time. So, the $5 million that we quoted, we should have wrote -- written a bit more effectively in the script to explain that, that $5 million is additional incremental growth above and beyond what we bought in CUSIP when we closed it on March 1st. So, the ASV run rate initially, $159 million. Growth for the back half of the year above that from CUSIP will be $5 million. And contribution to you as well. So, sorry if we weren't as clear as we should have been about that, Manav.

That's super helpful. And then just maybe if you could talk about -- I think you alluded to it, but just what the potential FactSet downturn playbook could look like should the macro get weaker for all of us? .

Yes. Sure, Manav. We don't have an official downturn playbook yet, but I think there are a couple of things that we would look to do. We've been investing pretty strongly in our business. And I think we would think about which of those investments are most core if we did find ourselves in a downturn. As you can see, and I'm sure we'll talk about a little bit later. We've been pretty thoughtful about our real estate footprint change. We've taken a $10 million charge this quarter. We took about a $9 million charge last quarter. And we're letting everyone know that we expect a $45 million charge in real estate as we get to Q3. So, the real estate footprint, when we're finished with all this, we'll have reduced the run rate on real estate costs by about 40%. We'll talk a bit more about this in Investor Day, which, again, matches what our employees want with a hybrid work environment. Of course, if we hit an air pocket, our bonuses would proportionately come down, and I think we look a little bit more carefully at some of our other costs. But pretty typical stuff, take a look at core investments, take a look at the real estate footprint, bonus pool comes down, and I think we'd reprioritize a bit.

All right. Thank you very much.

Thank you. Our next question comes from Toni Kaplan of Morgan Stanley. Your question please.

Thank you. I wanted to actually follow-up on that adjusted operating income margin guidance. You raised it by 50 bps for the year. I would have thought that CGS would have added about 100 bps since it's only in there for six months, and you've been running above guidance in the first half as well on margins. So is the organic margin guidance in second half lower than what you were previously expecting, or is there conservatism, or what's driving the only 50 basis points increase in the margin guidance?

Toni, let me take a shot at that, and Phil will add some comments to it. I think we're being thoughtful about this, but we would note that this is an historically very difficult to predict sort of time frame here for the back half of the year. Obviously, the geopolitical situation is tense and changing every day. And with the Fed, obviously, looking at 5%, 6% increases in interest rates, we do have a period here, which is unsettled. We've been thoughtful. We've been a bit conservative that might be fair, but we've only owned CUSIP now for 23 days. So, we're still trying to figure out what we have there and how that business will react to these conditions as well. So, we have obviously increased the guidance. We are optimistic, but we're also thoughtful that we are not in control of either the Fed or world events. And with that, I'll pass it over to Phil.

Yes. So, thanks Linda. I mean what I might also add to that, Toni, is we're being thoughtful about our employees as well. So, we did invest quite a bit in compensation and equity for some employees in Q2. Our attrition is ticking a little bit higher than it was pre-pandemic. So, nothing to be too concerned about, but we definitely recognize that there's a lot of movement on the talent front. So, we want to make sure that we're prepared for that and doing everything we can for all that FactSetters that are adding great value to our company.

And Toni, one other thing with CUSIP. Quite honestly, we built in several million dollars of expense for transition costs for CUSIP. Some of that around the technology transfer and some of that around the movement of the employees over to FactSet as a critical part of the financial system, obviously, the CUSIP system, has to remain working perfectly. And because of that, we were sure that we funded that well enough so that the transition goes smoothly and that we have no hiccups.

Yes. Great.

I think that sums that up.

Perfect. I just wanted to also touch on -- you mentioned the recent volatility in the market. There's been a slowdown in M&A. I know, Phil, you highlighted how the product is actually really valuable during these types of times. Just wanted to understand if you've had any sort of change in client conversations in the recent weeks since we've seen this a little bit more uncertainty. And I know you talked about small and medium-sized client wins during the past quarter or so. Is that something that's a little bit more at risk going forward, or I just wanted to hear about if anything has changed yet or if you think it just won't. Thanks.

Nothing much yet, Toni. So I've spoken to Helen a lot about this. So I think as you highlighted, FactSet always does very well in times of volatility. And where we're beginning to see some more strength, which is very encouraging, is within the institutional asset management client type. So actually, that drove a lot of the acceleration this quarter from a firm type standpoint. And that really wasn't from seats necessarily. It was more from analytics and enterprise solutions. So that ongoing trend of our biggest clients wanting to rely on less partners and consolidate on to platforms like FactSet is certainly out there. And I believe in times like this, it really forces that conversation and really is to our benefit in terms of the relationship we have with them and all that we've done to invest. So nothing to be concerned about yet, and we've got a very broad portfolio here to win with. We might expect a little bit more, I think, if it was to hit anywhere, it'd probably be Europe in terms of decision-making, but so far, so good.

Toni, just to follow up on that. Rebalancing of portfolios is going on at quite an intense rate right now. And as we see the increases in interest rates, that would potentially make fixed income more attractive. So what we do is provide tools to help investors and investor owners look at those transitions. The other thing is many of our clients are banks. And as interest rates move up, net interest margin, or NIM, for banks is growing. So banks are in a relatively healthy place with that addition to NIM. And the fact that there is volatility might be helpful to active managers as opposed to indexers and that may be helpful to the uptake on our products as well. So volatility is not necessarily a problem and, in fact, may be a tailwind for FactSet.

Thank you.

Thank you. Our next question comes from Andrew Nicholas of William Blair. Your line is open.

Hi. Good morning. Thanks for taking my questions. The first one I had was on a comment you made, I think, Linda, on price realization in the Americas in the quarter. Just wondering -- or I think more specifically, you said that you were getting a wider range of clients with price increases. Could you flesh that out a bit more? Where were you able to get price this past quarter that you hadn't been able to historically? And maybe what you would attribute that to? Was that inflationary pressures or specific value-based enhancements from some of your investments over the past couple of years? Any more color there would be great.

Yes, I'll take a shot at it, Andrew, and then Phil will add. We've been working very hard on value-based pricing and appropriate bundling of our services as we move forward. The 3% to 4% price increase has been sort of our rack rate. Our realization has been somewhat less than that because of various factors. And with additional discipline and focus and really good communication and training of our sales team, our realization has gotten better. We've moved first in the US regarding this sort of activity. And we'll move on to the rest of the world as we get into the third quarter and later in the year. So the fact that our realization is going up is very, very important to the top line, and we're quite happy with this effort. But a lot of it involves better analytics for clients, better information and data on usage and those sorts of things. So pricing is important. Value-based pricing is important, but the effort will continue around the globe and expand as we move into the third quarter. But we're quite happy with what we're seeing in the investments in our product, our products that's really made them more valuable to customers. And maybe, Phil might want to add a bit more about that.

I think you said that perfectly. Not a lot extra to add there, Linda.

Great. No, that's helpful. And then, maybe for my follow-up, and I apologize if I missed it. I think I cut out a little bit during the prepared remarks, but could you update us on how you're thinking about the balance sheet and optimizing the balance sheet, having now gone through the debt offerings. Is there any better sense for your level of comfort on the leverage front or a range for us to think about in the medium to long term? Thank you.

Sure. We're pretty excited that we were able to purchase the CUSIP business. It provided strong cash flow to us, and we were able to go to the public markets with a $1 billion bond deal split into five and 10-year tranches. And we did that on February 15 prior to the geopolitical situation getting worse. We were noticing, if we did that deal today, rather than at the time that we did, the 10-year has moved about 36 basis points and spreads have widened about 25 basis points. So our timing was fortunate and we felt really good about what we've been able to do. So a couple of comments on leverage, so everybody can, kind of, follow along here. Our gross leverage, that is leveraged before we take into account cash balances, is about 3.9 times right now. And we've made commitments that we will reduce that leverage as quickly as we can. So our plan is basically to look at paying back about $125 million a quarter. That may vary a bit. And so, our thinking is that, that leverage will come down to about 2.5 times gross leverage by this time next year. And at that point, it would be right to start conversations about what we would think about resuming share repurchase. With 2.5 times gross leverage, we're much closer to typical investment-grade leverage. So our target is 2 to 2.5 times gross leverage and we think we can get there over the next year. We've made commitments on that, and we're quite serious about getting there. The other piece for this, which is interesting is, on our floating rate exposure, we've hedged -- excuse me, 80% of that. So our bond pieces are fixed rate, and we've hedged our floating rate pieces at the balance of 80%. So we think that puts us in a pretty good place as interest rates continue to move up. So we're pretty happy with that posture, as the yield curve is moving around, flattening out. But we think for an inaugural offering, we did pretty well, and we're pretty pleased about it. So I hope that helps you with a full and complete answer.

Very much so. Thank you.

Thank you. Our next question comes from Ashish Sabadra of RBC. Your question, please.

Thanks for taking my question. Just wanted to follow-up on the CGS acquisition. Based on the prospectus, it seems like the CGS margins were high 50%. And I understand there's some investments that you're making in trying to make sure you transition some of the technology and back office work within FactSet. But as we think about normalized margins for that business once you've done the transition, how should we think about those margins? And any thoughts on accretion now that you've owned it for less than a month, but as we have better clarity on the funding costs and margins, how should we think about the accretion on an annualized basis going forward? Thanks.

Sure. I think you're in the right ZIP code. One attractive feature of the CUSIP business is that it does have fulsome margins. I think the answer to your question though, Ashish, is we're going to have to see. We need to finish the transition process with the integration. As you've heard, we're running a technical services agreement with the seller of the business that could last up to a year's time. We're hoping we're able to transition off of that a little bit more quickly. And potentially, at that time, we might have a better view on what additional accretion would be. But I think we're going to have to -- we're going to have to live together now that we're married. And so we're going to have to see how that plays out. But for right now, I think you're in the right ZIP code.

Thanks Linda. And then maybe just a quick question on analytics. You flagged that analytics was strong across all regions. I was just wondering if you can talk about the pipeline there going forward and give any additional color on -- if there are certain products within the analytics, which are driving the strength of certain areas, end markets, which are driving that strength in analytics. Thanks.

Hey Ashish, it's Phil. Yes, so I'm happy to talk about that. As I pointed out, I believe, on the last earnings call, we have good momentum in analytics. I see that carrying through into the second half. We certainly have a very high-quality pipeline for the second half, and a lot of that are greater than $1 million deals and analytics has a big part to do with that. In terms of what drove analytics this quarter, I'd highlight our portfolio services product. And also, we had a very good quarter in risk. Those are the two that I think stood out to me in terms of driving the acceleration from Q2.

Thanks Phil and congrats on a solid quarter. Thank you.

Thank you.

Thank you. Our next question comes from Owen Lau of Oppenheimer. Please go ahead.

Good morning and thank you for taking my questions. Linda, sorry to go back to CUSIP, but I recall from the last presentation slide. This business generates about $175 million. And I think you just mentioned you expect the revenue to be $159 million. I'm just wondering what drove the delta? And how should we think about the growth of this business going forward? Thank you.

Sure. Owen, I think the difference there is the $159 million is the annual subscription volume for the business. The $175 million that you mentioned is the annual revenue that comes from the business. So, these are two slightly different things. For the half year on the revenue, I mentioned that $80 million comes from subscription revenue and $10 million, basically, for the half year comes from new CUSIPs that are assigned. I think it's that difference that you should think about. And the growth rate that we've talked about is $5 million on ASV, which is incremental. So the growth rate we've talked about as being in the mid to high single digits, similar to FactSet's core growth. And again, as we get more experience with this, we'll be able to talk a little bit more in detail about what we're expecting about that growth rate. Right now, we're just starting to look at new business opportunities with CUSIP. And we need to spend some more time on that, think about it, get those implemented very carefully and then see where we go. So I hope that explains a little bit more clearly.

Got it. That's very helpful. Thank you, Linda. And then on another topic, could you please talk about whether FactSet is interested in like things like the crypto data display business. And I think at least one of your competitors have started to provide more crypto data on their desktop. I'm just wondering whether FactSet has any interest in this area. And have you heard of any demand from the clients in this product? Thank you.

Owen, it's Phil. Yeah, so it's certainly of interest. We're actually taking a very close look at that now as part of our annual strategic refresh. So we've got a group looking at that. And at a minimum, I think you would expect to kind of be able to see some quotes on the system. And of course, we're beginning to see a crypto show up in all the client portfolios or some of the client portfolios that are on our system. So just making that work within the analytics suite would be important. And then beyond that, I believe there's some good opportunity. But we'll have probably a little bit more to talk about that, I would say, probably closer to the end of this fiscal year when we get through our strategic planning process.

Got it. Thank you very much.

Not a ton of demand yet from the clients, but we anticipate it's going to become more of a topic, for sure.

Got it. Thank you.

Thank you. Our next question comes from Craig Huber of Huber Research Partners. Your line is open.

Great. Thank you. Linda, I'm just curious, I'd like to hear your thoughts on this after six months at the company. Maybe you could just tell us where you think the biggest opportunities are from your seat, which your overall impression so far given your 20-plus year industry experience here? What are you seeing so far that you can share with us?

Thanks, Craig. It's been a great six months at FactSet. We've been able to do some pretty terrific things on the balance sheet. And frankly, I was hopeful when I joined that we'd be able to find a strong cash flowing acquisition to get rated and be able to access the public markets. So we're ready for when interest rates move up. So I think we've accomplished that really, really well. On the product side, it's pretty exciting to see how the clients are reacting to the investments that we're making. I think deep sector where we're basically building out incredibly deep and broad information, starting with financial services and now moving on to different industry groups, energy and health care with some beta clients on in that area. That's pretty great stuff and better product, I think, than anyone else in the industry can offer. There's some housekeeping things we have to do here. You heard me talk a little bit about making sure the price realization comes through, and that we have good discipline on pricing. I think we're making some great strides on that, Craig. Retention is very high. The products are very sticky. And the client obsession really allows us to continue to have a lot of loyalty from the clients even when some of the junior bankers move on to other firms. They still want to use FactSet, which is really, really great. So I think we're on a really good trajectory. We're looking forward to providing some more guidance on Investor Day, growing the top line is first and foremost, and we're making progress and some margin expansion, of course, will be something we're looking to, and we'll have more to say again on that on Investor Day. And for right now, no share repurchase, but we hope to get back to it once we get our leverage levels back down to where we were. So, lots to do, but all good so far.

That's great. My final question, if I could. You guys talked an awful lot about the non-traditional areas of your clients' private equity, venture capital, wealth, hedge funds, corporations and so forth, and said a lot of those were growing north of 10% here. If you add that whole group of clients up right now, I'm curious, what rough percentage of your overall revenue does that represent right now?

Yes, that's not something we've traditionally broken out, Craig. We'll give some more thought to that, but I appreciate the question.

Okay. Thanks guys.

Welcome.

Thank you.

Thank you. Our next question comes from Kevin McVeigh of Credit Suisse. Your line is open.

Okay. Thanks so much. Hey, Phil, I may have misheard you on the call, but I thought you talked about a lot of the outsized growth coming from the buy-side. But when I look at the supplement schedule, it's actually pretty interesting, because it looks like the ASV growth, if I'm reading it right, the sell-side is outpacing the buy-side. Am I right on that, or is that -- was that current quarter maybe revenue versus ASV, or just any thoughts, because it seems like the ASV on the sell-side has started to come on pretty strong.

Yes. So I think we saw a little bit of a downturn on the sell-side growth this quarter, and we saw more strength in the buy-side. There are a lot of different client types in the buy-side. So I was talking about institutional asset management, in particular, which is the biggest piece of that, for sure. And the piece that is not growing in double digits, but I'm very encouraged by the strength that we saw within our largest client type and the one that we've spent a lot of focus on in terms of the portfolio life cycle. But in terms of the attribution to those numbers, I think if you have a call later with Kendra, I think, she could probably get into that in a little bit more detail for you.

Great. Great. And then just can we talk about the partnership with Aladdin, because that seems pretty interesting in terms of integrating Portware into Aladdin. And is that a template for something that continues, or -- and what are the economics like how does that work in terms of the partnership with Aladdin? And can you use that as a template for like State Street, so on and so forth?

Sure. Yes. Thanks for the questions. So we do have -- as part of our buy-side number, we do have a pretty big business with partners, and this would be a good example of that. And there are lots of instances in our industry, as you know, where we would sit alongside Aladdin and lots of other firms in our space. So we have a good relationship with them, and we're going to coexist at a lot of clients. So if they want to use our execution management system, we want to provide that choice in the industry. And we are definitely talking to lots of firms about this type of partnership. I mean, another example is what we've done with Snowflake and Amazon, for example, but this is really, I think, a very good example of all of the work that we've done to invest in our technology and open up the platform and become more plug-and-play in the ecosystem. So I'm very excited about the partnership and some of the other conversations we're having. And I just think it just gives us more channels to monetize the value that we're creating at the company.

Totally does. In terms of like what's the revenue recognition on it, just so we get a sense of how it kind of sits within FactSet?

Yes, we won’t – so whenever we do these partnerships, there's a whole different variety of different ways that both firms will benefit from this, but we're not going to talk about the specific economics of any given deal, but I think both sides are excited about it and it certainly gives more choice in the client base.

Thank you.

Welcome.

Thank you. Our next question comes from George Tong of Goldman Sachs. Please go ahead.

Hi, thanks. Good morning. You mentioned that pricing is stepping up this year. Can you discuss how much you expect pricing to contribute to full-year growth and how pricing increases compare with input cost increases that you're seeing?

Hey, George, it's Phil. So I think it was in the script but we increased pricing from 3% to 4% this year, within the Americas in Q2, I would expect something similar for the EMEA and Asia-Pac regions which hits in Q3, so we did see a bit of an uplift in Q2. I think it was $6 million or $7 million from price above and beyond what we did last year, and as Linda mentioned earlier, we're getting better price realization through just how we sell normally, so we don't capture all of that typically, because we'll have another contracts that are out there, but that's typically what's in the majority of the smaller and medium-size deals, so we do have a lot of pricing power. I think we've been pretty conservative with our clients. We want to build that long-term relationship and continue to cross-sell, so a little bit of an uplift from this year, and I think the ratio would be similar to what you might have seen in prior year's between Q2 and Q3.

Yes, and George, it's Linda. Nice to hear from you. On margin expansion, we have seen some of the drivers include the strong top line this quarter. Our compensation costs have been a little bit lower, particularly on the salary line, which has been down a few million dollars, whereas the bonus line has been up a bit and the equity line has been up a bit. The reason for that as Phil said, while we've moved through this time when it's a bit tougher to hire, we've moved a little bit more slowly in terms of the number of people we've been able to hire and we expect that to grow as we move into the back half of the year. On the bonus line, we've put up about $21 million for bonus for second quarter. It was the same in the first quarter, but we're running strong. We're looking at about $85 million for the full bonus line for this year. But if we do continue to punch above our weight in terms of what our guidance has been. We, of course, have to take that bonus line up. So just keep an eye on that. But our cost for content have been managed pretty well. To this point in the year, we've been happy that they've actually come in a little bit lighter than we expected. Now as others are looking to increase their prices, we're going to have to manage that very carefully. And of course, we look really closely at do we want to build and capture our own data or do we want to buy it or rent it from others. So as prices go up, we have to think about that a little bit more carefully. But for right now, under good control.

That's very helpful. Thanks for the color. And maybe sticking with the topic of margins. You talked about some of the puts and takes, some of the accretion from CUSIP investments that you're making. Is it possible to provide a bit of a bridge for margins, quantifying some of those puts and takes in terms of basis points impact?.

Sure. Let me try to do this compared to where we were at this time last year. And the incremental EPS from this quarter last year is $0.55. And the main drivers of that are $0.27 due to revenue increase and $0.10 due to margin increase. That's pretty important. We're getting the uplift from the business and from working on the margin. The tax rate has helped us to the tune of $0.19. But again, the bulk of that $0.55, $0.37 of it is coming from the business. So I just want to be very clear about that. At this point, George, one of my homework assignments is to better tie investments to what's going on with ASV growth and margin. Don't have great detail on that at this minute. It's something the FP&A team is working on. But suffice it to say the evidence is there that the investments are paying off really nicely. We've got to do a better job of ticking and tying that though for you. So point taken.

Got it. Very helpful. Thank you.

Thank you. Our next question comes from Keith Housum of Northcoast Research. Your line is open.

Thank you. Appreciate. Just, Linda, expanding on the previous commentary there in terms of the benefit from the lower taxes this quarter, this year. How should we think about that going forward? I mean, should we expect your effective tax rate to creep back up to prior levels, or is this lower tax rate sustainable?

Sure. I think, Keith, you're going to have to go with what we guided toward for the rest of the year. ETR of 12.5% to 13.5%. Now we've got some tricky things in here. Part of it is what is going to be options exercise, tough to know. It depends on where the stock price goes. Part of this also goes to where the bonus calculation goes. And you see that we're taking some charges in terms of real estate and the acquisition cost, which will bring the rate back down. So please work with 12.5% to 13.5%. One of the things we're not going to do at Investor Day is give any longer term guidance on the tax rate because we don't control the tax rates, it's pretty bouncy. So let's work with 12.5% to 13.5% for the rest of the year and just kind of keep it there. We're pretty happy with that, but it's a tough thing to predict for the longer term. I hope that's helpful.

It is. It is. Just in terms of your customer service and travel, I mean, one of the things that FactSet has always been known for is it's great customer service and it includes getting into the offices of its customers. And, obviously, this has changed during COVID. But as you guys think about your travel strategy going forward and your customer service, is there a pronounced change in your efforts to -- or your, I guess, permission is that big travel as it was, or how do you guys think about travel going forward and perhaps the impact it has in the overall business, both from a revenue generation as well as expense line?

Yeah, I think -- well, we've learned that we can do everything virtually fairly well, you can see that in terms of our growth. But that is a big piece of FactSet's culture and our clients really appreciate that high-touch service we give them. So I think we'll see a good balance there. I don't expect we'll get back to anything like what we used to have from a T&E expense. But I recently just visited all of our US offices and spoke to a lot of our new hires. So people are jumping at the bit to get out there. Some of it is just based on what the clients are comfortable having us in their office, but that's going to continue to be a big piece of what we do as a company.

Yeah. We had run about $15 million on G&A for the year. The first half of the year, the spending on that is less than $3 million. We're redirecting a little bit of the T&E spend to some other things we need to do in enterprise solutions to make sure we're able to do everything, Helen and the sales team needs to do for price realization and usage tracking amongst other things. So we're making very good use of slightly lighter T&E dollars. But we want to get everyone back to face-to-face meetings is still set as soon as we can. So, hopefully, that gives you some sense of the dimension of the spend as well.

Hey guys. I appreciate the color. Thank you.

I assume you're a FactSet user, and we'd be happy to visit whenever you like.

We are. We are.

Thank you. Our next question comes from Shlomo Rosenbaum of Stifel. Your question please.

Hi, this is Adam on for Shlomo. Commentary in the press release with around 413 sequential increase in clients is primarily due to the corporate. We had close to 200 increase in user count was due to the research and advisory. Is the implication that the higher user count is largely coming from increased hiring at existing clients?

The client -- the users, sorry?

Yes.

Yes, it was a little unclear that I couldn't hear you very well. But yes, the users -- so we had a big uptick in users. We had actually a very large wealth deal that closed and the users are using the product that's been deployed and we'll recognize the revenue for that, I think, later in the year. So, it wasn't a driver of the quarter in terms of revenue. But the user count you're seeing that came from pretty big wealth deal and some other great wins on the wealth side as well as an uptick in corporate clients. So, that was what was driving the user count number. And then on the client count number, it was a nice mixture of corporate, private equity, venture capital firms, and wealth clients.

Okay. And for the CUSIP contribution, can you talk a little about the impact on the ASV side, any kind of -- how much of the guidance raise was from -- on the EPS side, I think from CUSIP?

I think we'll talk a little bit more to spell that out at Investor Day, Shlomo, that would be okay with you. Frankly, we've had to move through all of this pretty quickly. So, we'll speak about that a little bit more and give you good reason to come see us on April 5th, if you could. I wanted to make sure we get a couple of housekeeping matters out of the way here before we close the call. Just wanted to remind everyone that we typically look at our dividend in the third quarter. So, please factor that into your thinking. We have talked with the rating agencies about our thoughts on dividend and so all of that will move along. On bad debt, it's ticked up a bit. Some of that is a result of Russia, about $200,000, more of it due to a bit slower payment from China, about $500,000, and it's part of the cycle of when we bill. So, nothing unusual there, but bad debt is something we're keeping a close eye on here as we move through the Russian situation. So, please think about that a little bit. Also on the facilities situation, as we reduce this cost, the charges that we've taken, we're hoping we're going to be able to increase investment availability by about $10 million to $14 million over the next three to five years. The idea is we're taking money away from funding large square footages of real estate. I'm going to put some of that back in to some of the investments we need to make. So, a redirection there of our real estate costs. I think that's about it. And I thought maybe it might be helpful in closing if Phil could do a little bit of a commercial for our ESG business plays through True Value Labs because we haven't received any questions on that.

Yes. So yes, so our ESG business is doing well. It's grown about 75% since the acquisition, which I think was in the last -- the end of calendar 2019. So, we're excited about that, and we've got some nice products that are in the pipeline that are that are coming to market soon.

So, I guess, I'll just wrap up here. So thank you all for joining us today. In closing, I want to reiterate how proud I am of our accomplishments in the second quarter. As a company, we accelerated the top line and had a stellar first half with strong momentum that will carry us into the third and fourth quarters. We worked across the organization to close the acquisition of CGS, our largest acquisition to date, financed in part by our investment grade in overall senior notes offering of $1 billion. Finally, we continue to invest in our greatest asset, our people. I look forward to seeing many of you on Tuesday, April 5, please come to our Investor Day. In the meantime, please call Kendra Brown with additional questions, and we'll speak to you next quarter. Operator, that ends today's call.

Thank you, sir. This concludes today's conference call. Thank you for participating. You may now disconnect.