FactSet Research Systems Earnings Call NUGGETS: Cross-Sell Opportunity, StreetAccount Employees

On Tuesday, FactSet Research Systems, Inc. (NYSE:FDS) reported its fourth quarter earnings and discussed the following topics in its earnings conference call. Take a look.

Cross-Sell Opportunity

Shlomo Rosenbaum – Stifel Nicolaus: Could you just, Peter, talk a little bit about the breakdown from StreetAccount’s ASV between the buy side and the sell side?

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Philip A. Hadley – Chairman and CEO: I think probably the best way to describe it would be that the mix is very consistent with our client base, so it didn’t really change the percentage for the quarter and probably won’t going forward as well.

Shlomo Rosenbaum – Stifel Nicolaus: And how much of your existing client base already uses StreetAccount? And so what I am getting at is like what’s cross-sell opportunity now?

Philip A. Hadley – Chairman and CEO: I think we see an exciting cross-sell opportunity. I don’t think at this point I’m – there is probably two ways to look at it. There is the user opportunity and the client opportunity. They have a much larger client base than we do. We didn’t include it in our client metrics just because it would have skewed the client count and really until we get the metrics in line where we think that can be useful, we didn’t include the numbers, but we didn’t include the users as well. So, there is lots of clients for us to go sell and new relationships to build upon, and then there are additional users within our current clients as well that create a great opportunity for us.

Shlomo Rosenbaum – Stifel Nicolaus: And then in terms of – I know you guys said that the acquisition is not material for fiscal year ’13 EPS. What about for next quarter? Does it make a difference on the periphery like $0.01 up or $0.01 down or anything like that?

Philip A. Hadley – Chairman and CEO: I don’t think it’s material at this point.

Shlomo Rosenbaum – Stifel Nicolaus: And then just in terms of the environment, the environment seems to be particularly tough, especially on the sell side. Are you seeing increased price competition or anything like that? I’d say you had a very respectable user count increase despite what’s going on I am just trying to dig in underneath that a little?

Philip A. Hadley – Chairman and CEO: Yeah, I think maybe I’ll give some macro color and then turn it over to Mike. I think the macro, at least from what I saw this year, the market for us really reset really in the first quarter. It obviously takes a whole year for it to flow through and that’s why you continue to see deceleration throughout the year, but the deceleration really happened in one quarter; it was the beginning of last year. It hasn’t really changed much; a little choppy, hard to see what’s going on in the future, but we feel very comfortable about where we are and being able to build from here going forward as the comparable is getting easier. As far as what’s going on in our client base, I guess, as an observation certainly the buy side is going to have a good year when it comes to the revenues. The opposite happened last fall when the market took a huge negative. And the sell-side, I think, all of you are living in this as well certainly trading volume are (hurt) on the research side of the business and the big banks really haven’t figured out how to make as much money as they used. So, there is definitely a lot of cost pressure in these firms. I think we are doing very well on a competitive adjusted basis you’ll see it in our client count, and you’ll see it in our user growth and maybe I’ll just turn it over to Mike for just more color at each of the groups level.

Michael D. Frankenfield – EVP and Director of Global Sales: Through sell-side we saw very much of a flattish year, the fourth quarter was similar to the way most of the year has been. The biggest clients in the fourth quarter we had a mix of some really good wins and one or two clients that we went backwards on. The good news about the biggest clients going forward is that we had good visibility into the agreement out one, two, three years in some cases. So, we feel like we’ve got a great base established amongst (indiscernible) clients which gives us opportunities to sell into new user groups within those firms, new departments. We have small penetration among the senior bankers, we have low penetration in areas like sales and trading, wealth management. So, we see good opportunities going forward. If you are looking at the client acquisition this quarter, we had a very positive quarter on the buy side and that happened in all geographies both in the U.S. and internationally. We think that’s the combination of multiple factors, it is certainly a function of overdoing to our product, our content acquisition and growth of our content has taken a lot of friction out of the selling process. Our front end and UI combined with our iPad functionality making it easier for FactSet to use and increasing the appeal to clients that want to purchase the product. No doubt that overall market indices are making it – creating a little bit of a tailwind for us and we hope that continues to drive growth.

Shlomo Rosenbaum – Stifel Nicolaus: I’m going to leave with one last thing just in terms of you talked about the broad based growth, how much is fixed income PA is that becoming more material as time is going on as a percentage of your growth rate? And then I’ll get off the question queue.

Michael D. Frankenfield – EVP and Director of Global Sales: Fixed income is affecting us the couple of ways; one is, this is giving us great opportunities within our existing accounts to expand our presence and help our clients solve a very, very difficult problem that existed in our work flow. The second thing it’s doing is it is creating greenfield opportunities for us and allowing us to go after firms that we previously didn’t have a solution off to our firms that manage exclusively fixed income assets. It’s still not a hugely material contributor, though it is increasingly important, but we are very, very pleased with the progress that we are making.

StreetAccount Employees

Peter Heckmann – Avondale Partners: When I look at the 280 employees that were added in the quarter, how many of those roughly were from StreetAccount?

Peter G. Walsh – EVP and COO: 49 employees from StreetAccount that we acquired through the acquisition.

Peter Heckmann – Avondale Partners: Should we assume that the majority of the other employees are primarily in content creation in international markets or kind of across the board?

Peter G. Walsh – EVP and COO: Related to the remaining, we typically hire from college into our consulting and software engineering groups that we had strong hiring this summer in those groups, and we also did embellish our content operation. So, I would call it a mix among those two areas in the remaining.

Peter Heckmann – Avondale Partners: Have you started to discuss with your clients yet plans for potential price increase for 2013, and if so could you share us how you view that shaking out?

Michael D. Frankenfield – EVP and Director of Global Sales: This is Mike. We have not begun those discussions with clients. We – normally we can kick that process off in October. Our requirements are – typically we have 90-day terms on (pricing) applications, so that communication will be happening in probably next week at this point.

Peter Heckmann – Avondale Partners: And then, are there opportunities – StreetAccount is primarily a U.S. product. My understanding at this point are there opportunities to add some content and take that over to your international customers in the near-term?

Philip A. Hadley – Chairman and CEO: You’re correct. Its current focus has been primarily for U.S., though they cover the major companies around the world. I think our focus definitely is to expand its coverage and make sure it matches with our – the needs of our global client base.

Peter Heckmann – Avondale Partners: And just one follow-up, as regard with that $11.4 million of ASV from StreetAccount, is that net of the revenue from FactSet related to the distribution deal, or is that gross and if it’s gross, is it material?

Philip A. Hadley – Chairman and CEO: No, that’s net. So that’s…

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