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Good day, and thank you for standing by. Welcome to the FactSet Fourth Quarter Fiscal 2023 Earnings 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 conference is being recorded. I would now like to hand the conference over to your speaker today, Kendra Brown, Senior Vice President, Investor Relations. Please go ahead.

Thank you, and good morning, everyone. Welcome to FactSet's fourth fiscal quarter 2023 earnings call. Before we begin, the slides we will reference during this presentation can be accessed via the webcast on the Investor Relations section of our website at factset.com and are currently available on our website. A replay of today's call will also be available on our website and via phone. After our prepared remarks, we will open the call to questions from investors. This call is scheduled to last for one hour. To be fair to everyone, please limit yourself to one question. You may re-enter the queue for additional follow-up questions, which we will take if time permits. Before we discuss our results, I encourage all listeners to review the legal notice on Slide 2, which explains the risk 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 comparable GAAP measures are in the appendix of 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. We will also be joined by Helen Shan, Chief Revenue Officer, for the Q&A portion of today's call. I will now turn the discussion over to Phil Snow.

Thank you, Kendra, and good morning, everyone. Thanks for joining us today. I'm pleased to share our fourth quarter and full year results. We ended fiscal 2023 with organic ASV plus professional services growth of 7%, and we delivered annual revenue of $2.1 billion and adjusted EPS of $14.55. In 2023, we grew our business on the strength of our enterprise offerings that drove large strategic wins across several workflows. We expanded our presence with existing clients, while adding new logos and new users, both on and off platform. On the buy side, our industry-leading analytics and middle office solutions drove a significant performance deal, as asset managers and asset owners rely on FactSet to serve more of the portfolio lifecycle. Additionally, a large real-time deployment at an institutional asset manager underscored growing demand for cloud-native market data services. On the sell side, deep sector drove a key banking deal in the fourth quarter and continue to be a deciding factor in renewals, situating us well to increase market share in banking. Our strategy to deliver the leading open content and analytics platform continues to resonate and drive growth. But the pace of change is accelerating. While we have been innovating with machine learning and AI for a long time, the recent advances in generative AI have made it possible for us to step up our development. In the second half of 2023, we began moving significant resources to GenAI in anticipation of directing further investment to this area in fiscal 2024, putting it among our top initiatives. FactSet's content refinery provides us with a real competitive advantage. We have one of the most extensive suites of proprietary and third-party data in the industry, and we continue to invest in new categories of data to further power the workflows of our clients. On top of our content refinery, we are reimagining the FactSet user experience and actively exploring innovative solutions. For example, a conversational user interface that allows bankers to ask questions, discover and source information, and initiate tasks. Generative AI will also help us evolve our productivity suite, further deepening our competitive moat. Second, on the buy side, we are enhancing our portfolio manager bot to answer questions in conversation with asset managers. Thirdly, in the front office, we are harnessing generative AI to create code in FactSet's programmatic environment, reducing the need to know Python. This will make the power of that programmatic environment available to more users. For wealth managers, we are developing solutions to drive the next best action and to create portfolio summaries for proposal generation and client engagement, and we are establishing GenAI-ready data bundles, allowing clients to augment their own large language models, or LLMs, with our connected auditable data. We also see significant opportunity for cost savings as a result of GenAI projects targeting our efficiency. In fiscal 2023, we began to pilot AI coding initiatives to improve the productivity of our technologists. We also started using our agent assist bot to help with client queries and we are accelerating the collection of unstructured data across our content refinery with our recent acquisition of idaciti, giving us industry-leading expertise. As we enter fiscal 2024, we will build on our strategic investments in content, generative AI, and technology to drive growth and forge deeper client relationships. On the buy side, we intend to use our leading portfolio analytics and middle office solutions to grow our front office market share. We expect our new portfolio manager workstation and open programmatic environment to drive growth. We also see opportunities for FactSet to provide some targeted managed services based on our years of experience. On the sell side, we believe that deep sector and private markets offerings will drive workstation wins across banking, corporate, and private equity and venture capital clients. We see an opportunity to capture additional seats in underpenetrated areas with solutions for senior bankers and investor relations professionals, and we expect increased adoption of Cobalt, an anchor product for private equity and venture capital funds. In wealth, we anticipate capturing more market share as we focus on portfolio management, proposal generation, and intelligent prospecting to expand our addressable market. Our open and flexible platform will power business development and reporting solutions to connect advisors with clients seeking new sources of insight. Finally, we expect the demand for our off-platform solutions to continue to drive growth across firm types. Turning now to our fourth quarter results. Growth was driven by Analytics & Trading and CTS, with improved expansion across most firm types. Asset owners continue to have momentum with new logos, transactional revenue from Portware and data feeds. While macro uncertainty continue to contribute to elongated sales cycles and slower decision-making across all firm types, our sales team successfully executed on several large wins and renewals as we ended the fiscal year. And looking across our regions, organic ASV growth in the Americas was 7%. Performance was driven by asset owners and CTS wins among partners and hedge funds. This was offset by weakness among asset and wealth management clients where retention remained under pressure and expansion was lower. As expected, we also saw lower seasonal banking hiring, which was a common theme across all regions. In EMEA, our organic ASV growth was close to 8%. We saw growth in asset owners, driven by analytics, middle office solutions. Wealth growth was also driven by Wealth Workstation and Advisor Dashboard wins. Gains were partially offset by softer expansion in banking and asset management. Finally, Asia Pacific delivered organic ASV growth of 8%, driven by strong growth in Japan, where we saw an increase in large deals, analytic wins, and strength in channel partners. However, muted expansion in Australia and India from fewer asset management wins and lower seasonal hire in banking were headwinds to growth. Turning now to our workflow solutions. Analytics & Trading organic ASV grew by 9%. Growth among asset owners accelerated the most, driven by middle office solutions, workstations, and feeds. CTS, which is now part of Data Solutions, grew fastest, with organic ASV growth slightly over 9%. Performance was driven by channel partners and asset management clients, although partially offset by lower professional services and decreased retention in banking. Our data management solutions, company data, and real-time offering were the major contributors to growth. CGS also contributed to performance with healthy expansion and new business. Among asset managers, workstation erosion was offset by analytics and CTS wins, coupled with a higher price increase. Research & Advisory grew organic ASV by 5%. In banking, workstation and deep sector wins were offset by increased erosion. Private equity and venture capital clients continued their track record of double-digit growth despite market headwinds that offset improved pricing realization. For corporates, reduced client budgets were an obstacle. Looking ahead, we are focused on diversifying our solutions for our corporate clients. And finally, in wealth, we saw strong execution on several renewals in the face of clients' cost-cutting exercises. As discussed last quarter, we have reorganized our business by firm type to better align our operations with those of our clients. As of September 1, Analytics & Trading has become our institutional buy side organization, focusing on asset managers, asset owners, and hedge fund workflows. Also, as of September 1, Research & Advisory has become our dealmakers and wealth organization, focusing on banking and sell side research, wealth management, corporate and private equity and venture capital workflows. And we've combined our Content and Content & Technology Solutions groups to create one Data Solutions organization. Going forward, we will also be aligning our partnerships in CUSIP Global Services organizations for the purposes of discussing ASV, as they are both key parts of our growth strategy. You can find ASV and ASV growth rates from the perspective of our realignment in the appendix of today's presentation. As we look ahead to fiscal 2024, we expect the year will be a tale of two halves. Unlike previous years, where clients had higher budgets to spend before the calendar year-end, we expect continued caution for the rest of 2023. Starting in the new calendar year, we expect an improved operating environment to drive a strong second half. As such, we are guiding to organic ASV growth of 7% for fiscal 2024. Linda will provide more detail on guidance shortly. Looking forward, we have started seeing green shoots of market recovery, particularly in new business. New logos in the fourth quarter showed an improvement over the reduced deal volumes seen earlier in the fiscal year. We expect this trend to continue as the new business pipeline and potential ASV for wealth management, private equity and venture capital clients and partners are all outpacing the pipeline at the same time last year. As client sentiment improves and markets stabilize, we believe we are in a great position. Our new structure, best-in-class solutions and content sets us apart as the partner of choice for our clients. I'll now turn it over to Linda to take you through the specifics of our fourth quarter and full year performance.

Thanks, Phil, and hello to everyone. As you've seen from our press release this morning, we delivered Q4 organic ASV plus professional services growth of $145 million. With 43 consecutive years of top-line growth, FactSet has a proven history of stability during market volatility, which is clearly demonstrated in our performance. I'll now share additional details on our fourth quarter and full year performance. As Kendra noted, a reconciliation of our adjusted metrics to comparable GAAP figures is included at the end of our press release. The 7% growth rate for organic ASV plus professional services was in line with our most recent guidance for the year. Our sales team executed well, building on a strong first half and a higher price increase across a larger client base. However, during the second half of the fiscal year, the team had to deal with increased erosion, softer expansion, and a slight decrease in new business. Turning to revenue. Our full year revenue of $2.1 billion was also within our guidance range of $2.08 billion to $2.1 billion. To help offset the weaker top-line, we carefully and thoughtfully trimmed our headcount, which helped to expand our adjusted operating margin by 230 basis points to 36.2%. This increase exceeded the top end of our guidance range of 36% and our previous medium-term outlook goal of 36% by the end of FY '25. Finally, both GAAP and adjusted EPS were impacted by a one-time charge of $6.8 million and an approximately $20 million provision for confirmed and expected unrealizable tax assets. This higher tax rate provision had a $0.68 negative impact on fiscal '23 adjusted EPS, resulting in an adjusted EPS growth of 8.3% to $14.55. Without this one-time adjustment, adjusted EPS would have been approximately $15.25, or 13.6% growth. I'll provide more detail during the tax discussion later in the call. Turning now to our fourth quarter results, as Phil noted, we grew organic ASV plus professional services by 7% year-over-year, as higher price increases offset erosion and new business began to pick up. We also continue to improve pricing discipline, which is driving stronger price realization. For the quarter, GAAP revenue increased 7% to $536 million. Organic revenue, which excludes any impact from acquisitions and dispositions over the last 12 months and foreign exchange movements, increased 7% to $535 million, driven primarily by Analytics & Trading. For our geographic segments, organic revenue grew by 6% in the Americas, 9% in EMEA, and 10% in Asia Pacific. Growth was primarily driven by Analytics & Trading and Research & Advisory in the Americas and Asia Pacific, and by Content & Technology Solutions and Analytics & Trading in EMEA. GAAP operating expenses increased 14% year-over-year to $419 million, driven by higher facilities impairment expense and restructuring costs. Compared to the previous year, GAAP operating margin decreased by 460 basis points to 22%, primarily due to those non-recurring charges and higher technology costs, partially offset by lower third-party content costs and lower FX impact. Excluding both non-recurring costs, GAAP operating margin was about 800 basis points higher than the prior year. On an adjusted basis, operating expenses grew 4%, driven primarily by technology expense, which increased 26% year-over-year. This was mainly due to higher amortization of internal-use software, increased third-party software costs, and accelerated cloud spend as part of our hybrid cloud strategy. We also invested in our content refinery expansion and other strategic areas, such as generative AI. We have continued to invest in technology to drive growth, with technology costs now representing 9% of revenue, consistent with our medium-term outlook of these costs being 8.5% to 9.5% of revenue. People expense grew 3% year-over-year, primarily due to increased salaries for existing employees. As a percentage of revenue, our people expense was 168 basis points lower than the prior year, driven by a lower bonus accrual, partially offset by higher salary expenses. We ended fiscal 2023 with a bonus pool of $105 million and with 67% of our employees operating in our Centers of Excellence. Adjusted operating expense growth was partially offset by a reduction in our third-party content costs, which decreased 4%. Our team continues to do a stellar job proactively managing and negotiating contracts. As a percentage of revenue, growth in third-party content costs was 57 basis points lower year-over-year. Finally, our efforts to right-size our real estate footprint resulted in a 7% decrease in facility expense year-over-year. As a percentage of revenue, this was 50 basis points lower than the previous year. Overall, adjusted operating margin improved by 210 basis points to 33.6%. You'll find an expense walk from revenue to adjusted operating income in the appendix of today's earnings presentation. As a percentage of revenue, our cost of services was about 75 basis points lower than last year on a GAAP basis and 85 basis points lower on an adjusted basis, largely due to personnel costs, expenses related to CGS, and technology costs. And SG&A as a percentage of revenue was 385 basis points lower year-over-year on a GAAP basis and about 125 basis points lower on an adjusted basis, primarily due to decreases in professional services, partially offset by increased personnel costs. Facilities impairments as a percentage of revenue were around 440 basis points higher year-over-year on a GAAP basis. Turning now to tax. Our tax rate for the quarter was 39.9%, compared to last year's rate of 10.3%. This increase was due to several factors. First, we had higher pre-tax income, which increases the overall tax rate, as credits related to R&D and foreign earned income are less impactful. We also saw a diminishing benefit from tax incentives in our Centers of Excellence. Finally, the finalization of prior-year returns came into play. Our fourth quarter results include an out-of-period adjustment related to an ongoing review and analysis of certain tax positions, resulting in a one-time charge of $6.8 million and $20 million provision. We believe this $20 million provision represents the maximum remaining amount of net unrealizable tax assets. Upon completion of our review and prior to filing our Annual Report on Form 10-K, we plan to take a one-time charge with respect to this provision to reflect the confirmed actual amount of net unrealizable tax assets. The final amount of this charge is not expected to differ significantly from the current $20 million provision. At this time, we've concluded that this adjustment is not material to the current period financial statements. The adjustment relates to the accounting of tax balance sheet accounts, including deferred tax assets and liabilities. All local, federal, and foreign taxes payable have been paid in a timely manner, subject to normal audits of open years. The increase in tax provision was partially offset by higher benefits from stock option exercises and refunds from amended returns. Looking ahead, we expect that higher pre-tax income will increase our overall tax rate. In addition, our foreign tax rate is expected to be higher due to the increase in the UK statutory rate. We've taken strategic measures intended to offset our overall rate and are guiding to 17% to 18% effective tax rate for fiscal '24. GAAP EPS decreased 37.5% to $1.68 this quarter versus $2.69 in the prior year, driven by non-recurring charges and the higher tax provision, which had a $0.68 impact. On an adjusted basis, EPS decreased 6.4% to $2.93. Adjusted EBITDA increased to $172 million, up 8.6% year-over-year, due to higher income tax add-backs and impairment charges, partially offset by lower net income. And finally, free cash flow, which we define as cash generated from operations less capital spending, was $156 million for the quarter, an increase of 15% over the same period last year. This was primarily driven by the timing of income tax payments, partially offset by higher capital expenditures. For the fourth quarter, ASV retention remained greater than 95% and client retention was 91%, which speaks to the stickiness of our solutions. We ended the quarter with almost 8,000 clients with 383 new logos added year-over-year. And user count increased by about 10,000, primarily within banking, corporate and private equity and venture capital firms. For the quarter, we repurchased 264,400 shares for $109.6 million at an average price of $414.63. At the end of fiscal '23, we had $4.5 million available for share repurchase. As a result, our Board authorized a new share repurchase program of up to $300 million, which became effective on September 1. We intend to continue our share repurchases in FY '24 with a target to repurchase $250 million spread ratably throughout the year. We remain disciplined in our buyback program and committed to returning long-term value to our shareholders. Combining our dividends and share repurchases, we returned $315.3 million to our shareholders over the last 12 months. As a reminder, we also increased our dividend by 10% in the third quarter, marking the 24 consecutive year of dividend increases. And finally, turning to our guidance for fiscal 2024, as Phil discussed earlier, we expect a weaker first half of fiscal '24 and a stronger second half, driven by improved client sentiment. As client budgets reset at the turn of the calendar year. We expect to execute on our existing pipeline. Given these expectations, we are guiding to incremental organic ASV plus professional services of $130 million to $175 million, reflecting 7% growth at the midpoint. And with respect to modeling income and expenses for the year, please note that for the full year, we expect interest expense to be $60 million to $65 million and capital expenditures are expected to be in the range of $90 million to $95 million. We expect adjusted operating margin of 36.3% to 36.7%. At the midpoint, this provides 30 basis points of continued margin expansion. While we have already met our adjusted operating margin medium-term outlook of 36%, we are committed to balancing continued sustainable margin expansion with investments to drive top-line growth. Finally, adjusted EPS is expected to range from $15.65 to $16.15, which represents 9% growth at the midpoint. In closing, we are encouraged by the opportunities before us. In 2024, we anticipate that our investments in generative AI, connected refined content and digital solutions will drive expanded market share and increased retention. We are equipping our teams to harness the rapid pace of innovation to remain the partner of choice for our clients. We're now ready for your questions. Operator?

Thank you. [Operator Instructions] Our first question comes from the line of Seth Weber with Wells Fargo. Your line is now open.

Hi, good morning, and thanks for taking the question. I wanted to ask for a little bit more color on the wealth business, if you could. I saw the ASP was really strong, up 9%. But then I thought I heard in your comments some comments about some client cost cutting. So, I'm just trying to understand really what the message is there. And if you could just give any more detail on larger accounts versus smaller and the broader competitive environment? Thank you.

Sure. Hey, Seth, it's Phil. I'll start, and I'm sure Helen has some additional comments. So, we're very bullish on the wealth space. As we've talked about before, we think there's a lot of opportunity and a lot of addressable market for us. We've been very successful with our core FactSet offering for advisors. We've layered on Advisor Dashboard. And we believe the bigger opportunity moving forward is to get into some adjacent workflows in the wealth space that traditionally we haven't served. So, we view it as a good opportunity. I'll start with that. I would say across most firm types this year we did see more pressure. Wealth was not excluded from that. So, I think we grew wealth probably close to 13% last year and maybe 9% this year. So, we still grew well. We didn't get as many new logos as we had. I don't think there was as new -- as much new firm creation in this environment. And we may not have had one of those mega deals that we might have had in previous years. But overall, we feel good about the space. And Helen, do you want to add on to that?

Yeah. No, thank you for that. Phil is exactly right. I mean, we do have a pretty healthy pipeline, and it is a mix. We have some very large opportunities with full deployments and then we've got smaller ones, which may be more seat-driven. If you compare it to 2022, where there was a lot more hiring going on, that's a bit of the difference. And as noted, we didn't have a mega deal this year per se, but there's a lot of opportunity in the pipeline that supports that. So, we feel very strongly about wealth. And quite frankly, if you look at where a lot of the clients are focused on, they're all focused on their wealth businesses also.

Okay. And do you feel like you're gaining share there? Is that still the opportunity as well?

Yeah, absolutely. We feel like we're gaining market share, yeah. Most of the wins are displacements of other competitors, yeah.

Perfect. Okay. Thank you very much.

Thank you. Our next question comes from the line of Manav Patnaik with Barclays. Your line is now open.

Thank you. Linda and Phil, I was hoping you'd just help with the '24 guidance a bit, particularly your comment that you assume that budgets improve in the second half. Let's just say they don't improve, I guess, how much of the impact is that that you've assumed in guidance? And if you could just clarify within the 6% to 8%, the confidence level and what the pricing assumption is?

Yeah, we feel good about the 6% to 8%, Manav, that's why we put it out there. I think if we break it down by firm type, we anticipate doing about the same level of growth on the buy side as we did this year. And as you know, we've been evolving into more of a solutions provider for our clients. So, despite headcount pressure, which we certainly did see on the buy side, we still think there's a great opportunity to take market share. We are anticipating slower growth within banking. There are some things in the pipeline that I think Helen might be able to speak to. But we're not anticipating a blockbuster hiring here in banking as part of our algorithm. We just spoke about wealth, so we're definitely anticipating some acceleration on the wealth side. And then, in the partners part of our business, which we're now separating out a bit, we're expecting a more constructive environment there. We actually had -- it wasn't a great year for us in that part of the business. I'm not talking about CGS, CUSIP, I'm talking about the rest of the partners business. So, Helen, do you want to give some more commentary on the pipeline?

Yeah. You made a -- Manav, hi. You had a question around pricing. I mean, we continue to have and been making good progress on capturing the value that our clients are receiving for our solutions. In '23, we actually improved our price realization across our workstation packages by over 100 basis points through the renewals in our new sales. So, we're continuing to resonate well there. And as you know, our annual price increase takes place in January for Americas and April for outside of the Americas, with contractual base of higher CPI of 3%. So, with inflation moderating and a larger book, we would expect some impact from price increases to be less than '23, but still a healthy contributor. So, we'll report more on -- out on that when we get to Q2 and Q3, as we've done in the past.

Thank you. Our next question comes from the line of Jeff Silber with BMO Capital Markets. Your line is now open.

Thank you so much. In your prepared remarks, you mentioned that the adjusted operating margin guidance for '24 is already ahead of where you thought you'd be in 2025. I'm not going to ask you about your 2025 numbers. But maybe just longer term, how do you get that margin expansion going forward? What kind of levers can you pull?

Yeah. Hi, Jeff, it's Linda. We have made very good progress and we're quite proud of that. As we move forward, we feel that our workforce -- our people is a big potential contributor to this. So, as we said for FY '24, we think the growth in that bucket will be about 3% to 4%; real estate, probably 3%; and third-party growth -- data growth of about 3% to 4%. So, all of those are pretty modest numbers and we feel like we've made really good progress. On technology, it's a different story. We are a technology company. We're driving harder for AI. And so, we had talked about a 24% increase in the technology budget for FY '24. A lot of that is the increase in amortization for third-party -- for our own software, increased third-party data purchases and, most importantly, increases in cloud expense as we have some facilities now on-prem and we're getting ready for increased usage for GenAI. So, what I think will happen in the future is we'll see the technology line start to flatten out as we get to peak amortization and then things start to move down in that regard. But again, really, really great control over three of the cost items. And then in technology, we just have to continue to invest. So, hope that helps you out.

Thank you. Our next question comes from the line of Kelsey

Hey, good morning. Thanks for taking my question. So, CTS, including CUSIP, grew by 9%. I was wondering what the growth rate would look like for the original CTS business and CGS. And then I think when you acquired the asset, you were guiding for a mid-to-high single digit growth for CUSIP. Is that pretty much still the goal going forward? Thanks.

Yeah. Hey, Kelsey, it's Phil Snow. Yes, I'm happy to provide those numbers. So, the CTS -- the Content & Technology Solutions business, which is now part of Data Solutions, that grew at close to 11% on a year-over-year basis, which actually, if you compare it to last year, it was a little bit lower, but almost the same. So, I would characterize this year as being a very good year for CTS and really speaks to the value of our data and the myriad of ways in which we deliver it to the market. The CUSIP Global Services business, or CGS, grew a little -- from an ASV standpoint, grew slightly under the growth rate of the firm. So, I think you'd probably have a pretty good idea of the size of that business based on data we've given in the past. So, I think you should be able to triangulate everything that you just asked me pretty well.

Thank you. Our next question comes from the line of Alex Kramm with UBS. Your line is now open.

Yes. Hi, good morning, everyone. Just coming back to the guidance for a second. You talked about these, like, two halves. So, maybe you can be a little bit more specific around maybe like the near-term trajectory here. I know it's early in this current quarter, but maybe what are you seeing? How are the pipelines shaping up? And then, maybe more specifically, clearly, some of these banks have delayed hiring. So, I'm just wondering, if we assume that some of these hires that didn't come in the 4Q maybe now come in the second quarter, is there a dollar amount that you feel like slipped in the fourth quarter that could come? So, just trying to figure out some of the swing factors maybe in the near-term here.

Hey, Alex, it's Helen. Yeah, I'm happy to try to answer that question, so thank you. You're right, we're early in the year, and -- but we have greater visibility, of course, in our first half. So, I'll talk to that specifically. We are expecting current market conditions in the first half, but I'm going to go by firm type here. So, when you talk about buy side, we actually finished the year quite strong with both asset owners and hedge funds. So, the three things that we see right now in the pipeline is, one, we're continuing to gain traction in the middle office. So, building off of some of the great wins we had in the asset servicing space, we would expect that to continue. Second, we're seeing strong demand in the data feeds business, so both for company data, as well as our data management solutions, where we're really leveraging the strength of our concordance for content for clients. We had two significant wins, one in real-time, one in tech data, both displacing competitors. And as a result, we're getting inbound discussions around that. So that's also filling up our pipeline. And then, third, as Phil mentioned earlier, the strength in offerings we have in the front office are also gaining traction. Part of our GenAI enhancements will be supporting that. And so, we expect to be able to get greater market share in that space. And we actually think that will help on the retention front as well. On the banking, you're absolutely right. We are seeing -- we're going to have a challenging H1 comparison, Alex, because the banking workforce reductions really didn't impact us until our second half, because they came through more in the early spring timeframe. And we also expect most of the impact potentially from any reductions from Credit Suisse to happen more in the early calendar year as well. So, that's going to impact our H1 results. There have been some positives in the capital markets activity, but we're not building a recovery in the first half. So, to your point, we do think that there will be a potential uplift in the second half, but not in the first half. We actually did fine in banking overall, because we had two huge wins: one in equity research in bulge bracket, and the other in a large investment bank. And then wealth, I already spoke to. We have more activity. Our land and expand strategy is working pretty well. We are finding when we're there, we're building on both feed and our CRM solution. So, we expect to see continued cost rationalization, but the pipeline looks decent as we are starting our new year.

Thank you. Our next question comes from the line of Faiza Alwy with Deutsche Bank. Your line is now open.

Yes. Hi, thank you. Good morning. I wanted to ask about GenAI. Phil, you mentioned a number of new products that you're working on. And so, I'm wondering, how you're thinking about the timing of commercialization of these products? And do you view this as a new product revenue opportunity? Or should we think about it more as something that's going to help improve retention? And relatedly, it seems like there is a number of smaller new companies that are out there that are introducing GenAI products that folks seem to be willing to pay for. How should we think about your approach to M&A to enhance your position within GenAI products?

Great. Yeah, thanks, Faiza. I was hoping someone would ask about this. So, I have a lot to say here. We're all in on GenAI and AI. The thing that I'll probably stress first for everyone is the value of data. We believe strongly that the winners in this environment are going to be the ones that have the broadest suite of data and the most well-connected data, the most trusted data, and the data that can be source-linked back to where the answers came from. And that's what FactSet has always been about and really at the foundation of what we're building here. So, to answer your question a little bit more, we believe it's going to be a combination of things. So, we are working on a lot of pilots, and I would anticipate that some of those will be coming to market this year. I do believe that it's going to radically improve the experience of most FactSet users that are using the workstation and, as you pointed out, really help increase retention and maybe drive new desktops, right, at the clients we serve. But we also think there's going to be an opportunity for new products. One of those really is just off-platform, essentially. So, we're thinking carefully about this. But there are lots of ways for us to take all of the valuable data we have, bundle it up with some GenAI capabilities and deliver it to clients. So, we're going to create a great experience for clients on our platform, where they're able to search, converse with FactSet, go mile deep for their particular workflow. But we also recognize that some of the larger firms out there are going to want to build some of their own environments. So, as we've always been, we plan to be a pretty neutral here in the ecosystem and provide the best of both worlds. But it's still early days. We're still thinking about this very carefully, but we're very excited about the potential opportunity for us.

Thank you...

It's Linda. We've had an effort to go out to talk to many clients early on in this process, about 25 of them. So, maybe Phil and Helen, you might want to speak a little bit more about the clients.

Yeah, happy to do that. Thanks for the prompt. And yes, so in using GenAI [columns there] (ph). Yeah. So, we've had 25 to 30 under knees tables -- knees-under-table meetings with our clients. We've seen a lot of enthusiasm from all firm types. And a lot of that has to do with our capabilities, the data, the technology, and our relationships with clients. But there's a desire out there to codevelop some things. So, we're working very closely with some large banks. There's opportunities there for bank automation. I think everyone's always felt that, although the processes that are out there haven't evolved much over the years. But I think this is the time they will. On the buy side, I mentioned in my earlier comments, there's an opportunity to radically improve the life of a portfolio manager or a research analyst that's having to sift through so much information. And on, the wealth management side, we talked earlier about other workflows, right? So, can we get into proposal generation? Can we get into augmented prospecting for our clients? These are all great opportunities. So, we're very encouraged and we're moving very quickly.

Thank you. Our next question comes from the line of George Tong with Goldman Sachs. Your line is now open.

Hi, thanks. Good morning. At the midpoint of your guidance for ASV plus professional services organic growth of 7% for next year, that guide is essentially unchanged from growth that you saw this year for fiscal '23. And you mentioned that the first half of the fiscal year, we'll see some pressure, followed by improvement in the second half of the year. Does that suggest that you expect trends to get worse compared to this quarter before they get better such that you land at that 7% growth at the midpoint next year? And can you talk about which areas of the business you're assuming undergoes the most inflection over the course of next year?

Hi, George, it's Helen. I'll take that. So, I won't -- I would not necessarily say it gets worse. I think what I mentioned in particular on banking is the comparison, H1 over H1. So last year, a lot of the hiring that was very, very strong, continued on. And so, if you may -- you probably recall how strong we were in our first half of last year. So, in comparison, the impact from the changes in workforce reduction will impact this current fiscal '24 H1. So, when we talk about a stronger H2, we are assuming that there is not an inflection, I will say, necessarily of a pick-up in banking back to '22 levels, but overall hiring and budgets being more open, and that's why we're talking about the fact that we had this fiscal year-end of August, their calendar year clients are generally starting to then make -- open up decisions in what will be our H2, and that's what we were referring to.

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

Hi, good morning. Thanks for taking my question. I wanted to circle back to the GenAI topic, but focus maybe more on the cost side. It does sound like, Linda, that there is an increase in the technology budget to account for some of these investments. Are there any cost savings coming from GenAI maybe operationally within the SG&A line, or just some of the organizational infrastructure you have that you expect to come from these investments? And is that something that that would be embedded in '24, or is that a '25, '26 type benefit if it's there? Thank you.

Maybe I'll start and then I'm sure Linda will add some additional comments. So, we've been looking at how we work ourselves and thinking about how can we be more efficient ourselves internally. We have a lot of engineers at FactSet, a lot of people that code that are even client-facing. So, I think it's pretty common knowledge that there should be some efficiency here, right? So, we're piloting a lot of copilot solutions with our technologies to kind of understand what that means at different levels of the organization. We have a large client service and support group here at FactSet. We've released a tool to about 400 people that are the front-line support for our clients that assist them in generating answers for clients. So, that's in the beginning stages there. And then, of course, we collect tons of data. So, about half of FactSet's employees are in the Content or Data Solutions part of our business. So, we see a lot of opportunities there. So, we do see significant opportunity. The question is the timing and how much of that we'd like to reinvest, right, in terms of some of the new products that we're thinking about to drive growth.

Yeah. Andrew, it's Linda. It's a great point and a great question. I think your view on timing is largely correct. So, we're looking for internal efficiencies maybe to start showing up more in FY '25. Our initial focus will be client-facing in keeping with the way we think about everything here at FactSet. So, what we'll do is look to move some of those tools we're building for our clients and look to apply those to ourselves. But we do think that's probably going to show up in a bigger way in FY '25. You've heard the guidance for FY '24. So, hope that helps.

Thank you. Our next question comes from the line of Ashish Sabadra with RBC Capital Markets. Your line is now open.

Thanks for taking my question. Just wanted to go back to the ASV guidance and just better understand the headwinds and tailwinds. As I understand, when we think about some of the headwinds from like the investment banking and [CAS] (ph), as well as increased erosion and pricing normalization, we were thinking that could be in the range of like a 2 points to 3 points of headwind. And obviously, you've talked a lot about the new win momentum, the share gains. Just wondering, is that enough to offset the headwinds as we get into fiscal year '24? Thanks.

Hi, Ashish, it's Helen. Thank you for that question. I think from our perspective, I don't want to say we've hit a bottom. That's too strong of a word. But when I think about this year and last year, I would expect that two things to happen. One is that the erosion reduction will actually be more leveled off, and I think that's an important thing to sort of keep in mind. Banking is key, but we actually grew the number of seats in banking overall. Please keep in mind that part of that isn't just around the clients that we have, but the new clients that we win, and we have a couple of very good opportunities. So, we look at that as part of our -- when we talk to firm type. The second is pricing, which, in the past, I think we've talked about a third, a third, a third. I think from a pricing perspective, it actually added more this year from a percent basis than in the past. We see it continuing to add in 2024, although closer back down to maybe a quarter or less than a third. And I think that's probably more of the -- a bit of a headwind that I would look to than necessarily just thinking about seats. So, that's how I would take a look at some of what's built into our guidance. We have some large deals in there. We'll see if those come through. They got pushed from '23 to '24. And then, there will be, I'm sure, continued focus on costs by our clients.

Thank you. Our next question comes from the line of Heather Balsky with Bank of America. Your line is now open.

Hi, thank you for taking my question. Just another question on the first half versus second half revenue outlook. You talked about the hiring assumptions. When you think about the back half versus the first half on the wealth and buy side, I'm curious what's kind of baked in your outlook in terms of customer sentiment. And you talked earlier about sort of formation of -- on the wealth side, whether or not that potentially picks up. Just what should we take into account? Thanks.

Sure, I'll take that. Thank you for your question. So, as it relates to the buy side, I think it's a similar piece. What -- our more complex deals take longer. And right now, with the offerings that we have, they are more complex. So, when I talk about delayed decisions, that's where you're seeing a fair number of them as it relates to the analytics business for the buy side. I would see -- again, more of the pickup on hiring will help us. We had erosion in both asset management and wealth. So, if we see increased hiring, which we would expect in the second half of the year, that's where -- that's the driver on that front. On wealth, wealth is an interesting one. Wealth, we have -- as I mentioned, some large deals are in the pipe. So, we could see that come through, but a similar situation, if the -- as the markets recover, we would expect to see the hiring to pick up again in the second half of the year.

Thank you. Our next question comes from the line of Shlomo Rosenbaum with Stifel. Your line is now open.

Hi, thank you for taking my question. Main question is, I wanted to ask a little bit if you can go back to the comment about some green shoots that you're seeing. And if you can give us a little more specificity? Are those green shoots that you're seeing kind of macro-wise specifically within the clients that you have specifically in your pipeline? Can you just give us a little bit more color on that? And then, maybe just a housekeeping thing. Is there additional interest expense from idaciti acquisition? Is that the way we should think about that?

Yeah, I'll talk a bit about the green shoots. The areas that we are seeing some pick-up a little bit, which is always a bit of a harbinger for us, is on the new business. So, in Q4, new business started to make a bit of a recovery in terms of number of transactions. So, we see that as a positive. The one positive also, I would say, overall, even for new business, is that if I look at the average size of the transaction throughout the year, the volume was lower, but the average was pretty much the same. And that, I think, is a testament to the value that clients are seeing. So, we take that as a positive. The other area is around managed services, which we have seen an uptick there. I've been mentioning asset servicers as something that's a positive, but we will continue to see that as one. And then also, as I can see in the pipeline, what we call data management solutions has also been a driver -- we expect to be a driver for us, and that's been picking up as well. So, when you look at all those pieces, I think that that's really where the benefits come in. And of course, your second question, it's probably best to have that with Ali and Kendra afterwards.

Thank you. Our next question comes from the line of Toni Kaplan with Morgan Stanley. Your line is now open.

Thanks so much. I was hoping you could talk about your increase in employee count, was about 5% this quarter year-over-year. Is that sort of a normal increase for you now organically, or is it maybe a little bit light? And should we expect sort of around that level for '24? And maybe you could go into, are you hiring sort of more salespeople or technology or product development? Just trying to understand where the growth areas within the employee base are. Thanks.

Hey, Toni, it's Linda. You're right, headcount growth was actually around 5% for the quarter, you're correct. For the whole year, FY '23, it was 9.2%. For FY '24, we're expecting that we're going to continue to add heads at about that 5% rate. But the mix is very, very heavily leaning toward our Centers of Excellence, maybe up to even 80% of those additional folks in our Centers of Excellence. So, in terms of the people costs, we actually took them down by 3% through what we call our Project Blue. We talked about thoughtfully and carefully trimming a bit on the employee base. And we will be looking to do about 5% in terms of hiring for FY '24, but again, very, very heavily leaning toward the Centers of Excellence. I'll ask Helen to talk about any potential hiring for the sales organization. So, Helen?

Thank you. I'm going to ask our CFO if I can do more hiring. No, I think one of the benefits of what we've done this year, which is really to become closer to the client, is to have ourselves go to market by firm type and also by workflow solutions. And what that gives us is the ability to actually become more productive. So, our ability now is not covering different types of firm types and talking about things from a product perspective, but rather knowing the workflow and being able to leverage that across clients. And we've actually gotten some very good feedback from clients on that piece. And maybe I'll just add back to a point that Phil and Linda made around GenAI and our client discussions with a larger -- the top 25. What comments we got back, which I thought was very encouraging, is, one, which differentiates us from some of our competitors and some of these smaller upstarts, that the way we talk to them about how GenAI can help them was about their workflow, not about a product, not about something that they are yet to build, and then we were able to show them how we're already incorporating it into the products we have today. So, I think both of those resonate well, and that's going to help as we go to market with the current sales force that we have.

I'm going to pile on just for a second here on the talent front. So, we're finding this a great environment for talent. So, our retention has improved significantly. Our realignment has allowed a lot of FactSeters to take on new additional responsibilities. But we've also found this a great environment to find some exceptional technology and product management talent from the industry, which is going to be accretive, we think, moving forward.

Thank you. Our last question comes from the line of Craig Huber with Huber Research Partners. Your line is now open.

Great. Thank you. Linda, question for you. Given you guys' outlook for revenue second half of the year being better than the first half on a year-over-year basis, I'm curious, on the cost side of things, how are you thinking about cost growth on a year-over-year basis? Is it pretty even you're thinking over the course of fiscal '24, or more back-half weighted? Thank you.

Craig, I think we'll look to our usual pattern of seasonality. Generally, the spend builds throughout the year. And as Helen said, we're looking for the back half to be stronger than the first half, so we'd like to sort of match that with our expense growth. So, I think what we want to do is be very careful on expense growth in the first half of the year. I think that's really important that we try to match up revenue growth with our expense growth. So, we're going to be very thoughtful in the first half of the year. The second half of the year, I think as we build into our technology budget and some things with GenAI start to catch, I think you should look for our normal trend, that expense growth would be heavier toward the back half of the year and, particularly, in Q4. So, hope that is helpful in terms of your phasing.

Thank you. I would now like to turn the conference back over to Phil Snow for closing remarks.

Thank you. Before we wrap up, I want to announce the return of our flagship user conference, FOCUS '24, in Miami next April. We're looking forward to bringing key clients and stakeholders together to network and share ideas on the theme of innovation. Innovation is our focus for the coming year, and I'm very optimistic about our opportunity. And in closing, I really want to thank all FactSeters and our teams for a job well done in fiscal '23. I'd also like to thank Kendra Brown for her excellent work, leading Investor Relations over the past two years. And going forward, she will be heading our Banking and Sell-Side Research business. And as previously announced, Ali van Nes will take over the Investor Relations role. You can contact Ali with any follow-up questions after today's call. Thank you all for joining us today. We look forward to speaking with you again next quarter. Operator, that ends today's call.