FactSet Research Systems Earnings Call Insights: Pricing Environment and Addressable Markets

FactSet Research Systems, Inc. (NYSE:FDS) recently reported its first quarter earnings and discussed the following topics in its earnings conference call.

Pricing Environment

Suzanne Stein – Morgan Stanley: Can you just talk a little more about the pricing environment I’m just curious what the recent conversations have been like, with clients suppose on the buy-side and the sell-side and has there been any change in the competitive environment either from Thomson or Cap IQ?

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Michael D. Frankenfield – EVP and Director of Global Sales: Hi, Suzi, it’s Mike Frankenfield. We haven’t seen significant changes in the pricing environment. Certainly clients are interested more than ever in optimizing their spend making sure they get full value. But we’ve continued to build enhancements into core FactSet and we continue to release add-on applications that are selling quite well. Next quarter we plan to do a modest price increase to the U.S. investment management business and so far, we haven’t seen any significant pushback on that price increase. We anticipate the amount of that increase will be similar in the aggregate to last year and we would be able to share the full results with you next quarter.

Philip A. Hadley – Chairman and CEO: It’s Phil. On the competitive environment, I think for us we really see the Bloomberg GR and S&P as a player in the space, and the dynamic and the market place really hasn’t changed in the last several years. Everybody is out there about scrapping hard for all the ASVs that they can create in the market place and it’s certainly a choppy environment. But I think, when I think about where we are I guess, the people continue to talk about deceleration I think if you really look at, we’ve actually flattened out. For me, the deceleration happened in the first quarter of last year and it takes the year forward to roll through GAAP revenues on a subscription model. If you look at our ASV this year versus fourth quarter, where we are at 7% this quarter, we were 7% last quarter, I think that’s actually where the market currently is and we’ll wait and see as to how the year turns out.

Addressable Markets

Peter Heckmann – Avondale Partners: Just in regards to the Wealth Management offering, can you talk a little bit about the addressable market there? Historically FactSet has primarily been focused on the research analysts, whether they would be the sell-side or the buy-side and creating another product for more of the sales and trading or retail sales and trading is interesting. Would you characterize is the FactSet right and if so, can you talk about generally what type of pricing you are thinking there on a per user basis? Then lastly of the total market which sometimes people characterize is roughly a million potential users, would the Wealth Manager market be a third of that? Can you quantify in sizing?

Michael D. Frankenfield – EVP and Director of Global Sales: It’s Mike. The big macro trend that’s happening in the wealth space that I think plays right into FactSet’s hand is the increasing sophistication and need for complex financial information systems. The level of sophistication is increasing, both on the part of the managers and on part of the clients, and we’re really focused on the segment of the wealth community that is focused on the more sophisticated investors, high net-worth, the ultra-high net-worth investors. These managers are operating almost identically to our core institutional asset managers, so it’s a very logical product extension for us. We’ve made small tweaks to the product to try and address specific workflows in that area and the price points are marginally lower than our core FactSet workstation. While we view the market as being very, very large, hundreds of thousands of users potentially, and I think we’re in the early stages of going after that opportunity.

Peter Heckmann – Avondale Partners: Is it fair to say that you’ve really had very little concerted marketing effort to this segment in the past?

Michael D. Frankenfield – EVP and Director of Global Sales: Historically, it’s not been a segment that we’ve focused on and it’s really been in the last several years that we’ve begun to ramp up that opportunity. All the development we’ve done in the real-time space and the news space has really increased the appeal of the workstation for that segment.

A Closer Look: FactSet Research System Earnings Cheat Sheet>>