Good day. Thank you for standing by. Welcome to the FactSet First Fiscal Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during this session, you will need to press star one one on your telephone. Please be advised that today's conference is being recorded. I would like to hand the conference over to your host today, Kendra Brown, Senior Vice President, Investor Relations. Please go ahead. Thank you. Good morning, everyone. Welcome to FactSet's First Fiscal Quarter 2023 Earnings Call. Before we begin, I would like to point out that 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. The slides will be posted on our website at the conclusion of this call. 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 two, 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 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. Good morning, everyone. Thanks for joining us today. I'm pleased to share our first quarter results. We grew organic ASV plus professional services by 8.8% year-over-year, achieving adjusted diluted EPS of $3.99 and an adjusted operating margin of 38.3%. These results demonstrate our continued momentum coming out of fiscal 2022 and lay a solid foundation for executing on our full-year targets. Last year's Q1 ASV growth was a record for us, and this quarter's performance was a strong result for what is usually our seasonally lowest revenue quarter. The biggest contributors to this quarter's growth came from banking, asset owners, and private equity and venture capital clients, all of which exhibited double-digit growth rates. Small and medium-sized deals across client types drove ASV growth this quarter. Our investments in content and technology, including deep sector, private markets, APIs, and analytics solutions, continue to support client retention rates and expansion. It's important to acknowledge the continued uncertainty in global markets. While conditions have been supportive, we are starting to see a more challenging environment for our clients, and we are closely watching for signs indicating a prolonged change in conditions. These signs could include reduced client budgets, elongated sales cycles, material layoffs, and a reduction in new firm creation. However, FactSet has a proven history of stability and growth in volatile markets, and we remain confident that our strategy and ability to execute will position us well even in a choppy economic cycle. As we look ahead, we remain focused on building the leading open content and analytics platform, reinforcing our position as an anchor partner for clients, allowing us to grow our share of the addressable market. At the foundation of our strategy is our commitment to further scaling our content refinery. We continue to grow and invest in critical content. For example, within our Content and Technology Solutions business, our cloud-based real-time solutions are gaining traction with the launch of ticker plants in Europe and Asia, and our recently announced relationship with BMLL for enhanced tick history. The connectivity of our data powers hyper-personalized solutions that puts key information and analytical tools in the hands of investment professionals, enabling them to generate alpha across all market conditions. FactSet is an essential partner for our clients as they advance their digital transformations to increase efficiency and be more competitive. These transformations are critical. Clients are prioritizing investments in technology and data to drive performance, giving us further confidence in the resilient nature of our business. Turning to our performance for the quarter, we continue to see strength in ASV growth across all our regions. The Americas remains the biggest contributor, with organic ASV growth of 8.5%. Growth was diverse across firm types, driven primarily by higher retention in banking. Private equity and venture capital clients also drove growth with Cobalt, our leading portfolio monitoring solution, plus the Workstation securing client wins. Organic ASV growth accelerated to 8.8% in EMEA, marking the region's strongest Q1 in recent history and the seventh quarter of increasing LTM growth. Performance was driven by higher retention among asset managers, asset owners, and banking. Asset managers also saw a higher expansion across the product portfolio. We also continued to see healthy demand for our wealth solutions with Advisor Dashboard driving key wins. Finally, in Asia Pacific, we delivered organic ASV growth of 11.1%, driven primarily by expansion among asset managers and new business wins with asset owners. However, we also experienced headwinds in the region from macro factors, including regional COVID policies, which resulted in slower decision-making among clients. In summary, I'm pleased with our first quarter results. We recognize the uncertainty in the market and are closely monitoring the macro environment for any signs of weakness. As we head into the start of calendar 2023, we expect to get a clearer picture of our second half as client budgets are finalized. Using our downturn playbook as a guide, we are focused on disciplined expense management, and later in the call, Linda will share the actions we've proactively taken. FactSet maintains a long-term view of our strategy, and we will continue investing to sustain growth. We have a healthy pipeline of opportunities, and as such, we are reaffirming our guidance. I'll now turn it over to Linda to discuss our first quarter performance in more detail. Thanks, Phil. Hello to everyone on the call. As you've seen from our press release this morning, we reported high single-digit organic ASV growth and double-digit year-over-year growth in revenue and adjusted diluted EPS. I'll now share more details on our first quarter performance. Consistent with our definition of organic revenues and ASV, we exclude any revenue and ASV associated with CUSIP Global Services when reporting organic-related metrics for the 12 months following the acquisition date. We will, however, provide some specifics on CGS so you can continue to understand its performance as part of FactSet. Beginning March 1st, 2023, the first anniversary of the CGS acquisition, it will be included in our organic results as a component of our CTS business. As Kendra noted, a reconciliation of our adjusted metrics to comparable GAAP figures is included at the end of our press release. We grew organic ASV plus professional services by 8.8%. As Phil stated earlier, this is a strong start to our fiscal year as compared to our typically lower revenue first quarter. Our performance reflects increased demand for our content and solutions, higher retention, and continued expansion. We saw strength in the Workstation for banking, key client wins with our enterprise solutions, and our subscription-based ASV continued to support value-based pricing. GAAP revenue increased by 18.9% to $505 million for the first quarter. Organic revenue, which excludes any impact from foreign exchange and acquisitions, increased 8.3% to $460 million. Growth was driven primarily by CGS and our analytics and trading and research and advisory solutions. All regions saw notable growth. From our geographic segments, on an organic basis, revenue growth for the Americas was at 7.6%, EMEA grew at 7.2%, and Asia Pacific came in at 14.9%. All regions primarily benefited from increases in analytics and trading and research and advisory solutions. GAAP operating expenses grew 10% in the first quarter to $333 million. Let me now review our expenses based on our primary cost buckets. Starting with people, our expenses grew 4% year-over-year, primarily due to increased salary expenses for existing employees and higher stock-based compensation expense. As a percentage of revenue, this was 572 basis points lower year-over-year, demonstrating our continued focus on achieving a sustainable balance of investment in our talent and productivity. Next, real estate costs decreased by 21% year-over-year, driven by the right-sizing exercise we performed in fiscal 2022. As a percentage of revenue, this was 181 basis points lower year-over-year. Third, technology expenses increased this quarter by 11%, driven by increased cloud spending. As a percentage of revenue, growth was 51 basis points lower year-over-year. Finally, third-party data content costs decreased by more than 12% year-over-year, driven by our continued focus on financial discipline and data governance. As a percentage of revenue, growth was 156 basis points lower year-over-year. While this is a good result for the first quarter, we expect the annual rate to grow at 5%-6% in line with the outlook we gave at our April 2022 Investor Day. Compared to the previous year, our GAAP operating margin increased by 517 basis points to 34.1%, and our adjusted operating margin increased by 471 basis points to 38.3%. Improvement was driven by higher revenue, lower personnel costs as compared to revenue, and lower content and real estate costs. These expenses were offset by higher technology expenses and costs related to the integration of CGS. Regarding our first quarter margin, I want to remind everyone that our first quarter margins tend to be seasonally higher than in subsequent quarters. While we've had a strong first quarter margin performance on both a GAAP and adjusted operating basis, we remain committed to balancing investment in our business with returning value to shareholders. As such, we continue to anticipate 50-75 basis points of margin expansion for the full fiscal year 2023. We expect our fiscal 2023 adjusted operating margin to be between 34% and 35%. This means we anticipate that margins will likely be lower in the subsequent quarters of fiscal 2023. You will 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 sales was 380 basis points lower than last year on a GAAP basis, and 450 basis points lower on an adjusted basis. On a GAAP basis, SG&A was 140 basis points lower year-over-year as a percentage of revenues, and 20 basis points lower on an adjusted basis. Moving on, our tax rate for the quarter was 13.4% compared to last year's rate of 10.2%. Our higher rates primarily due to higher pretax income and an increase in the U.K. statutory tax rate from 19%-25%, which will continue for the foreseeable future. GAAP EPS increased 26.2% to $3.52 this quarter versus $2.79 in the prior year. Adjusted diluted EPS grew 22.8% to $3.99. Both EPS figures were driven by higher revenue and margin expansion and were partially offset by increased interest expense and a higher tax rate. As noted in our press release, adjusted EBITDA increased to $200 million, up 38.2% from the same period in fiscal 2022. Finally, free cash flow, which we define as cash generated from operations less capital spending, was about $89 million for the quarter, an increase of 37.8% over the same period last year. This was due to higher net income, partially offset by increased capitalization costs related to internal use software. Before moving on, I want to provide additional financial housekeeping items to help with modeling. First, CGS continued to perform well, adding $3 million in incremental ASV for the quarter. We expect it to grow in the mid to high single digits. As a reminder, we will update guidance next quarter to include CGS. Once it is included as part of our organic results, we will no longer report on CGS separately. Interest expense for the quarter was $16 million. For the full year, we expect to end fiscal 2023 with interest expense of about $66 million. As a reminder, we paused share repurchases to prioritize debt repayment following the CGS acquisition. As such, no additional shares have been purchased since the first quarter of 2022. As of the end of November 2022, our weighted average diluted share count was 39 million shares. Moving on to the bonus accrual. Given our performance so far, we expect the bonus pool for fiscal 2023 to be about $100 million. Our operating income benefited from the strength of the U.S. Dollar versus major currencies we hedge. However, we expect exchange rates to be volatile throughout the year, so the impact will fluctuate. As a reminder, 95% of our revenue and most of our expenses are denominated in U.S. dollars. Next, we ended the fiscal quarter with capital expenditures of about $18 million, up $9 million from the prior year period. This was driven by increases in capitalization as well as technology expenditures. As we discussed on our last earnings call, we expect an increase in CapEx this fiscal year to be about $68 million at the midpoint as we move to our hybrid cloud strategy, increase focus on capitalization, and consolidate our offices in Paris as part of our real estate strategy. Finally, we expect our dividend program to continue delivering value to shareholders. Fiscal 2022 marked 23 consecutive years of growth, and we paid a quarterly dividend of $0.89 on December 15th. Our ASV retention for the first quarter remained greater than 95%. We grew the total number of clients by 13% compared to the prior year, driven by corporate, wealth, and private equity and venture capital clients. Our client retention remains at 92% year-over-year, reflecting the stickiness of our content and digital platform. Turning now to our balance sheet. We continue to pay down the term loan related to the acquisition of CGS. In the first fiscal quarter, we made another planned prepayment of $125 million, bringing our gross leverage ratio down to 2.7x from the initial 3.9x level when we financed the CGS acquisition. Following our next planned prepayment of $125 million in the second fiscal quarter, we expect to be within our target leverage ratio of 2x-2.5x. The strength of our net income and adjusted EBITDA has allowed us to move faster than expected to reach this target. As a reminder, while we may make minor share repurchases to offset the dilutive impact of stock option grants during this time, we do not intend to resume our share repurchase program until at least the third fiscal quarter. I'd like to discuss our downturn playbook. As Phil mentioned, we are still experiencing supportive end markets. FactSet has historically fared well during periods of volatility. Should anything change, our downturn playbook gives us levers to reduce our operating expenses by 2%-3% or $24 million-$36 million. Given market uncertainty, we have proactively implemented parts of our downturn playbook to protect margins and prioritize investments. Actions taken to date include limiting travel to client engagements and essential business needs, revisiting our real estate footprint, and focusing on the continued reduction of third-party content costs. We are also monitoring our open positions to ensure focus on roles that are essential to our business. We've restructured our cloud budget as part of our hybrid cloud strategy, which will use both cloud and on-premise computing to run our core platforms. This change will save more than $20 million over the next five years, including $7 million this fiscal year. In closing, we are confident in our ability to navigate the changing market conditions. While it's still early in the fiscal year, we have confidence in our pipeline as we look ahead. As stated before, we are reaffirming our guidance for 2023. With that, we're now ready for your questions. Operator? Thank you. To ask a question, you will need to press star one one on your telephone. We ask that you please limit yourself to one question and one follow-up question. Please stand by while we compile our Q&A roster. Our first question comes from the line of Manav Patnaik with Barclays. Your line is open. Please go ahead. Thank you. Good morning. Linda, you know, you gave us the kind of the what to expect from margins, I guess, looking forward. I was just wondering, is there any cadence for ASV throughout the year based on what you see in the pipeline? Or is there any seasonality to pricing perhaps that we should keep in mind? Sure, Manav. Let me talk a little bit about margin and our expectations, and then I'll let Phil go back on ASV and pricing, if that's okay. To set the stage on margin, for the first quarter, we had 570 basis points of margin expansion. 470 basis points of margin expansion as compared to last year. About half of that has come from CUSIP. In looking forward, as we get past March 1st, we will have lapped CUSIP, so we won't have that additive margin increase from CUSIP. The rest of the margin increase came from the organic business, which is great, and it is performing well. If we look at our cost buckets, Manav, a couple of things that we note here. Our third-party data costs are doing very nicely and in fact have moved down. Our real estate costs have moved down as well. Our tech costs are up, we've had a good replanning of our cloud strategy, which will result in $7 million of savings this year. The big bucket to watch here is our people expenses. We've got to keep a close eye on headcount and on compensation. We will look forward to staying within our adjusted operating margin guidance of 34%-35% for the year. As we said in the script, we expect that margins might be lower for the next three quarters of this year than they've been for the first quarter. I hope that answers the margin question. Sorry to go a bit backward, Phil can now handle ASV and price. Great. Hey, Manav. Thanks for the question. Yeah. So for the rest of the year, at least, what, you know, we're looking at today, we're still looking more positive for Q2 and Q3 and Q4 than we were this time last year. Some of that is certainly supported by price. We, as I indicated on the last call, we said we were gonna go out at more than a 4% price increase. Conversations are going well with clients. Clearly, they're all going through their own introspection about, you know, trying to figure out what's happening in the markets and budgets, you know, I believe are getting finalized now, so we'll have more visibility. It's hard to argue, frankly, with the amount of investment FactSet has put into our platform over the last few years. We've got great relationships with clients. Conversations are going well. You know, we do believe that we'll be successful in executing on the price increase. You know, there's a lot going on in the markets right now. I'm cautiously optimistic our strategy is a good one. We'll get more information, particularly as we head into January, in terms of what the rest of the year looks like. We have better visibility on Q2 and Q3, and as you know, Q4 is such a big quarter for us. We need a bit more information in terms of how that's gonna play out. Got it. If I could just follow up, Phil, just quickly on the sell side. I mean, you guys have been doing, you know, really well there. Obviously, the narrative there seems to be changing, but, you know, you guys are a little bit more enterprise than the console, because I was just hoping, sorry, that you could help us, you know, kind of filter through, you know, the noise we would anticipate and a lot more layoffs versus, you know, maybe how secure your contracts are on the sell side. Sure. Yeah. The sell side continues to accelerate. That may surprise some of you, but we're really healthy there. We're not as exposed to capital markets as some other companies. Most of our users, as you know, are in investment banking. In the conversations I've been having, you know, it doesn't feel like the banks are laying off massive amounts of staff in investment banking. Maybe they're hoping for a soft landing here, and within, like, the next six months or so, M&A activity will pick up. I'm, again, I'm optimistic there that we'll be able to hang in, particularly in that part of the banks. As you pointed out, we've begun to diversify our solutions for the sell side. I just took a look at this, you know, for the next six months, and it looks like we have a very good CTS pipeline on the sell side. We're now going in and being able to take the value that we create and integrate it into client systems for their back and middle offices. This is a theme I would say across most client types, is that the data that our clients wanna see, they wanna see consistency, right? In terms of the workstations they're using, whatever interfaces and the data that's going through the systems. We're beginning to benefit from that, particularly on the sell side. Got it. Thank you. Yeah. Thank you. One moment for our next question. Our next question comes from the line of Toni Kaplan with Morgan Stanley. Your line is open. Please go ahead. Thanks so much. I also wanted to ask one on sell side, really, really strong over the last six quarters. I know last quarter you had called out upsell, and so I wanted to see if there were any sort of solutions that were particularly in demand. I know you just called out the CTS pipeline, but, you know, just anything that is just different now that you're able to upsell to sell side versus historically or things that they're demanding more than normal? Most of it seats Toni. I think, you know, what you're seeing there is the investment that we've made in deep sector and private markets. Those new or newer content sets for FactSet that are getting expanded out are allowing us to get into maybe different parts of the bank, more users than we might have historically, and just give us a good competitive advantage. That's really helping with renewals, and it's helping us gain new users at the banks. Yep. Okay, great. Phil, you mentioned a couple of times the uncertain environment and starting to see this more challenging environment for clients. Is it the hiring that's sort of driving your comments there, or is it this like slower to pull the trigger, slower sales cycle? I guess, what are the things that are really going on there? Yeah, a bit of both. You know, we're gonna I imagine see less hiring on the buy side. We're also, you know, within institutional asset management, I should say, and for the larger transformations clients are going through, we're not seeing a lot of this yet, but I imagine that some of them may be deciding to pause some of these transformations that they're going to go through. I don't think it's negotiable with them. They have to go through these transformations. We're confident that the solutions we're providing are the right ones. It could be as they're trying to figure out their own futures, they may be pausing on some of these larger deals. Very helpful. Thank you. Thank you. One moment for our next question. Our next question comes from the line of Andrew Nicholas with William Blair. Your line is open. Please go ahead. Hi, good morning. Thanks for taking my questions. I first wanted to just follow up on Toni's question and just ask if you're seeing any difference in terms of kind of end market health on a regional basis. There was obviously some disparate growth between the different regions, but just curious if your comments are pretty uniform across geographies or if there's anything to call out on a region by region basis. Say they're pretty uniform, Andrew. Europe did have an exceptionally strong quarter this quarter. As I look out into the next six months, there are different puts and takes there by region. Asia looks a little bit stronger, frankly, for the next six months, maybe than the Americas and EMEA. I wouldn't say that there's any one region that's dramatically different than others. In terms of, you know, where we might see more effects from recession, I would imagine that Europe, you know, just generally might get hit harder than other regions. We haven't, we don't see a lot of impact from that yet. Got it. Thank you. For my follow-up, I wanted to ask about the digital strategy. You know, I know you hired a new CTO, Kate Stepp, you know, half a year ago. Wondering if there are any major takeaways from her involvement with the strategy. Sounds like you're restructuring the cloud budget, and that's going to result in some cost savings. Any more color on what's happening under the hood there, that'd be great. Thank you. Linda's been spending a lot of time with Kate. Yeah. First of all, Andrew, Kate has been with the company for quite a number of years. She has changed position, she's not a new hire. What we did was we sat down, we looked at the cloud budget, we concluded that not everything needs to be on the cloud. We have kicked up our CapEx, as I said, in the housekeeping, we are looking to move a few items back into data centers. We've had to buy some new servers, things like that. We think the long-term balance for the company is better with some on-premises computing, core capability as well as cloud capability. We've rebalanced that. Over the next five years, we'll save $20 million with that change. We'll save $7 million this year, which is very helpful. Again, it's just a rebalancing of what we're doing with the cloud versus on-premise computing. Kate has been very helpful as we've thought through what we wanna do with the technology budget. Hope that helps you. Yes. Thank you very much. Thank you. One moment for our next question. Our next question comes from the line of Ashish Sabadra with RBC Capital Markets. Your line is open. Please go ahead. Hi, this is John filling for Ashish. Thanks for taking my question. Maybe just quickly on the people cost, it seems like headcount's up around 7% over the last 12 months, really focused in content, intellectual trading and sales. Could you maybe talk about any potential benefits you're seeing on just hiring technology talent as well as just the people bucket as a whole? Thanks. I'll start. I'm sure Linda will have some comments. This is a great market for talent, frankly. We've been very successful at hiring who we wanted to hire over the last few months, and attrition has come down. Linda and I are watching this day to day. You know, we wanna be careful that we're not running hot here, but we do have an opportunity here to continue to upgrade our talent and lean in and continue to invest. We're, we're hopeful, right, that we don't have to kind of slam on the brakes too hard here from a talent standpoint. As we've done in previous cycles, if you're able to keep investing, and not go through too much pain on the people side, it definitely helps you in the long run. As Phil said, John, we're watching headcount day by day. It's very important that we get that right and not run too hot. As Phil said, our attrition has come down very nicely. Some of that is the result of the market being a little bit more employer-friendly and some of the moves we made in our compensation last year to make sure that we're rewarding our people and our high performers appropriately. We got that right. You're right, we have increased headcount quarter-over-quarter for the first quarter. About 65% of that headcount is in centers of excellence, so our lower cost locations. We've been very careful about bringing on that headcount, largely to support our deep sector effort, which we've talked about before, to help with the sales effort and to assist with analytics and trading. So far so good, but the trends are attrition down and hiring has to be sized accordingly to make sure we don't get out over our skis. We're seeing a much healthier retention picture than we did at this time last year, which is a really nice thing. Hope that gives you a bit more clarity. Yes, that's great color. Thank you. Maybe quickly, could you just talk about the wealth pipeline and maybe if there's been any change in tone around client conversations as well as the sales cycle? Yeah. The wealth pipeline continues to be healthy. You know, we have a good mix of larger deals that we continue to work. You know, in terms of markets, you know, that's one of the markets where we just feel like in the long run, we've got just such a great opportunity, and more tailwinds. Great. Thanks. Thank you. One moment for our next question. Our next question comes from the line of Alex Kramm with UBS. Your line is open. Please go ahead. Yeah. Hey. Hello, everyone. Just coming back to what you're seeing in different client segments or regional, can you also expand your comments on the pricing side? Is it pretty uniform? Any sort of pushback you're getting? One of the things that we've heard, for example, is in Europe with all the FX changes year-over-year, you know, asking them for more when in dollar terms, when their currency has devalued so much over the last year is increasingly harder. Just curious if there's any, anything you would call on pricing by customer set or region. Thanks. Yeah, nothing I'd call out yet, Alex. Similar to last year, not, you know, not a lot of conversations have reached my desk, which you know, is a good sign in terms of how the conversations are going. As I, you know, as I said, you know, it's very hard for clients to argue with the value that FactSet has put into the product. My, you know, my sense is that clients are understanding this. Everyone's seeing it everywhere in terms of inflation. We're coming in, I believe, at a very moderate place relative to what clients may be seeing from other providers, which gives us a great opportunity to capture more market share. We've certainly gotten some inbound opportunities as a result of that, for sure. That's helpful. Thank you. Maybe, just one follow-up on the wealth side, and this may be too much in the, in the weeds, but you called out in your press release the Model Center launch, which I think was at the beginning of November. Sounds to me like when I look at what you're describing here, that this is something very much like a, like a, shelf, like something like an Envestnet has, for example. My question is, A, can you talk about the revenue model in that business? Again, it's obviously very early days. Is this a sign of you really expanding the scope of the workflows you wanna offer the wealth segment versus just obviously repurposing FactSet terminal or other services to wealth, but really getting deeper into that end market? Maybe talk about some of the things you envision yourself doing that you're not doing today. Yeah, it is absolutely a sign of that, Alex, and consistent across the other firm types that we're servicing. FactSet is continuing to push beyond being just a Workstation company. We've gone way beyond that already. We're giving a lot of thought to within each client type, you know, what adjacencies can we get into? As we open up the platform and work with other partners, what more can we do for clients? Wealth is a relatively newer firm type for us. There's a lot more, I think, room for us to expand than some other firm types where we're more well established. That's a probably a good follow-up with Kendra later in terms of the detail on the model. It's probably a little bit too much detail for this call. If you wanna have a follow-up with our wealth team, I'm sure they'd be very happy to talk to you about what they're doing there. All right. Sounds good. Thank you very much. Thank you. One moment for our next question. Our next question comes from the line of George Tong with Goldman Sachs. Your line is open. Please go ahead. Hi. Thanks. Good morning. You noted that clients are pausing on larger deals. Are there any large deals coming up for renewal this fiscal year or any competitive large RFPs that you're involved in? There are. Yeah. Hey, George. Thanks for the question. There are deals like that every year. I think this year, and Kendra or Linda can get into this later if we need to, but I believe there are less large renewals this year than we might have seen in previous years. There are definitely a couple, and there are a couple of very interesting deals that we're working on that are larger in Q2 and Q3 and Q4 for this year. Some sell side related, some partner deals. Got it. Secondly, you mentioned you're seeing longer sales cycles, a little bit slower hiring. Can you talk a bit about what you're seeing with overall client enterprise budgets, the direction that those are moving in? Yeah. I said, you know, these are things that we're watching out for. We're not seeing a lot of them yet, right? There, there are indications that it may be happening. And again, we're You know, I don't know if you saw that Financial Times article, which was a good one, that came out a few weeks ago. But it was an article, I think it was titled Asset Managers Pour Money into Technology Platforms, and really speaks to the investment that a lot of the, a lot of asset managers are having to make to be competitive. This plays really well into FactSet's hands in terms of all the work we've done on the PLC, all the work we've done to open the platform, all the work that we're doing with partners in the space, some of which we've been public about, some of which we haven't. These transformations are not going to stop, and clients are not going to completely cancel these. It's just a question of the pace at which they go. Overall, I'm very optimistic about, you know, our position in the marketplace for these deals, and our ability to execute. Great. Very helpful. Thank you. Thank you. One moment for our next question. Our next question comes from the line of Craig Huber with Huber Research. Your line is open. Please go ahead. Yes, good morning. First question, can you just comment some more on the marketplace, the traditional buy side out there? Just talk a little more specifically about the pressure points maybe that might be building there, the longer potential sales cycles. Just what's going on with that traditional part of your legacy business? I'll start there. Overall, it's pretty healthy, Craig. We, you know, there's less hiring than there was last year, but I don't believe it's down significantly. You know, the buy side number that you see in our press release has a lot of components to it, maybe it's helpful to sort of go through that so everyone understands what we're looking at. The two firm types where we're seeing the most headwinds now and less revenue than last year are corporates. We did add a number of corporates this year. They make up a good part of the new firm creation for the quarter, but it's a lot less than it was in the prior year. We had a really lumpy quarter with partners. That's some of what that's what's in the buy side number that you're seeing. You know, above that, I would say that institutional asset management, hedge funds and wealth are all kind of a little bit less than last year or on par with last year in terms of what we're seeing in the environment. On the, on the plus side, asset owners are doing exceptionally well. Asset owners typically have a much longer view, and we're crushing it in asset owners versus last year. That's very encouraging in terms of the work that we're doing there on the PLC and working with partners. We're seeing great adoption of multi-asset class solutions from the asset owners, and we're seeing positive signs on the fixed income side. Hopefully that's helpful in terms of thinking about the overall buy side number that we give you. Linda, if I could ask on the cost side of things. I'm scratching my head a little bit here. Your fiscal fourth quarter costs were meaningfully higher than the third quarter costs or the quarter you guys just finished here by roughly $30 million if you take out the various one-time items and stuff. I know you've called out last time we spoke on this that about, say, an extra $6 million or so was incentive compensation in August quarter versus the May quarter, the total cost here in the November quarter, in a good way, fell back down to the May levels and stuff from last year and stuff. The lumpiness here of the costs, maybe you could just talk about that and maybe just a little more specific about how we should think, model out the costs for the rest of the year versus this lower number in the first quarter? Thank you. Yeah. Thanks for that, Craig. Your observations are correct. In the fourth quarter, we really worked hard to ensure that we had compensation right. You saw a couple of things. You saw a merit pool which was stronger than usual to deal with inflationary adjustments in a number of countries and the U.S. You also saw bonuses which were quite fulsome because we had a very strong FY 2022, and then you saw that we also worked harder on equity and equity-based compensation moved up as well in FY 2022. The goal there, while we were running strong, was to make sure we had the compensation picture correct for our employees coming off the great resignation. As we move forward into this year, we're watching our costs very carefully. The entire situation has shifted, Craig, to one of conservatism around costs. I talked about our three buckets that are going well and are nicely controlled. I think the place where we watch here very closely is our people bucket, which includes both headcount and compensation costs. We're watching those very carefully, as Phil said. Couple of things to notice on the revenue side for the first quarter. Last year, we had a record ASV level in Q1 that was about $17 million. This year, we're running at about half that. The timing change matters to us in terms of how the revenue comes through later in the year. That makes my job just that much more exciting to make sure that we're managing correctly for the margin. We're doing that. The other thing, Craig, to take a look at is the dollar had been very strong. Recently, the dollar's been retracing about a third of that strength. We have to be careful on the impacts of the later ASV on timing and the conversion to revenue. We also have to be careful on what's happening with FX, which has been unusually bouncy, as we have moved through the last couple of quarters. Hope that helps, but we've got an eagle eye on those cost buckets, and you know, we did pretty nicely managing them in the first quarter. I'm happy to have the 38.3% margin in the bank, and that will help us as we move through the rest of the year. Prudence is the name of the game here. Hope that helps. Great. Yeah, that's good. Thanks, guys. Thank you. One moment for our next question. Our next question comes from the line of Faiza Alwy with Deutsche Bank. Your line is open, please. Yes. Hi. Good morning. I wanted to ask about the competitive environment. You know, over the last several years, my perception is that you've gained share as some of your competitors have been busy integrating deals and you've been investing. It looks like there's now, you know, new products that they're rolling out. I'm curious, as we head into a potentially more challenging environment, how would you characterize your competitive positioning across your various products? Hi, Faiza. Thanks for the question. I'd characterize it as being exceptionally strong. If you just start with the FactSet Workstation, you know, all of the investments we've made in content are in there, as well as, you know, we've really upgraded a lot of the applications that our clients use in terms of ease of use, searchability, alerting clients. You see that reflected, frankly, in our Workstation numbers, across a number of firm types, and that's grown significantly over the last five years. On the analytics front, we continue to do great things with the portfolio life cycle and work with, you know, asset services and other partners in the space to go in and really be the core of, or anchor partner for our clients in terms of what they want to achieve from the back middle to front offices. There's a lot of runway for that, frankly. The market's looking for creative solutions. They're looking for companies that are ahead in terms of technology and innovation, FactSet checks all those boxes. On the CTS front, we've done a lot and to expand that product suite. One of the things we're very excited about is real time. That's a pretty small piece of CTS today, but there's billions of dollars of market share out there on the real-time space. You might have seen that we made a recent investment in BMLL, which is a very good tick history product, which you need to do, you know, you need to complement real time. This is an area of great opportunity. There's just more and more ways we can help our clients. The investment that we've made over the last three years and continue to invest really put us in good stead. You know, I'd be remiss not to sort of mention, you know, the FactSet relationships that we have with our clients. Many of our clients are trusted partners. They've been with us for a long time. This is the type of environment, frankly, where they need help. We've been there for them in the past, and we'll be there for them in the future. I feel as good, frankly, as about our competitive position as I have, in almost my entire tenure at FactSet. Great. Thanks for that. Then just as a follow-up, I wanted to ask about, you know, capital allocation and the interest expense guide that you provided, Linda. Just wanna confirm, are you assuming sort of no further debt paydown? I think you raised the interest expense guide, and I understand that rates are a little bit higher, but I feel like you've also been paying down debt. Just wanted to clarify sort of what any assumptions behind that guide. Yeah. Yeah. Faiza, I think we mentioned this a bit in the script. Let's talk about our leverage levels and go back and think about that. When we purchased CUSIP, our gross leverage level went up to 3.9x. We've made a number of paydowns of $125 million, basically per quarter. Now our gross leverage ratio is 2.7 x. We're looking to get back within what would be considered typical for our level of investment-grade rating, which is 2.5 x to 2 x. We have one more payment to make, which is what is anticipated to get inside that leverage level. Then we may not continue at the exact same pace of pay down prepayment on that term loan as we had done before. At that point, we're going to speak to the rating agencies, be cleared to resume our share buybacks. We'll think about what we wanna do with that. The remaining board authorization, I wanna be crystal clear here. Authorization is $181 million. That doesn't mean that's what we're going to spend. That means that's what the authorization is. You can note that. We're going to think about what we wanna do with this after we have those conversations. The interest expense presumes all those things that I had mentioned. If we do get back into the share repurchase market, please note that's going to be back-end loaded. It won't move the average share count all that much for FY 2023 as a whole. It will be helpful as we move into FY 2024. Hope that that gives you all the detail that you need, Faiza. Yes. Thank you, Linda. Thank you. One moment for our next question. Our next question comes from the line of Kevin McVeigh with Credit Suisse. Your line is open. Please go ahead. Great. Thanks so much. Hey, just wanna circle back. On the downturn playbook, very helpful. Of the $24 million-$36 million, can you tell us how much you've implemented? Like, is it a 1/3? The $7 million this year is obviously incremental to that, Linda. Is that right? I just wanna make sure. I think you were clear. I just wanna make sure I heard the comments right. I think it'd be good, Kevin, to think about sort of the midpoint of that amount. I think it'd be fair to say we've probably implemented about a 1/3. We're taking a close look at what we wanna do with T&E because, obviously, the top line is paramount here. We've gotta get that right. We're looking at some of the other things that we need to do mostly around people. We're being extremely cautious on new hires, as we had said. We'll see what happens with the bonus line. It's too difficult to tell at the end of the first quarter how that will lay out. Just to be clear, the bonus line we are expecting, as I had said in the housekeeping section, about $100 million. We have booked about $24 million for the first quarter. Generally, that number's ramped up a bit as we move through the year, so maybe you go from $24 million to $26 million in the fourth quarter if things play out the way that they have in previous years. That's a question mark. We'll think about what happens with that. If we don't do as well as we expect, and the center point of our guidance matches what our bonus targets are, it's all very clear-cut. If we come in light, perhaps, you know, our bonus line comes down by $10 million, which would save about another 1/3. It's way too early to talk about that right now. The solution is to make sure we've got it right in terms of the pace of hiring, keep that focus on the technology budget, and we're gonna take another pass through our real estate footprint probably as we get towards the fourth quarter. Any change we make in that real estate footprint, though, the expense saves will be something we'll see in FY 2024. For the most part, it will come in later in fiscal year 2023, so not gonna be of too much help to us in that bucket. As I said before, eagle eye on all these buckets and, you know, we've got to support growing the top line. Our second and third quarter pipelines look even better than last year, as Phil had said. Just wanna reemphasize that. Mainly, we've had a bit of a timing shift, so we're dealing with that and making sure we're matching the costs accordingly. I hope that's helpful, Kevin. Very, very helpful. Just a quick follow-up. I know you talked about the centers of excellence. Is there any way to think about how the kind of the current employee footprint is today and where you think that can get to over time? Hey, Kevin, it's Phil. Hey, Phil. If you're talking about, you know, where the talent is located? Yes. Yeah. The last few years have been very interesting, right, from a talent standpoint. We've learned a lot. you know, we've taken the approach of having a hybrid work environment, which is why Linda's talking to you about real estate expense. Right. We do have more options globally. You know, we have very good centers of excellence in India and the Philippines. Those continue to crank. As we move forward, we wanna make sure that we're, you know, we have the very best talent we can globally and that we're exploring all of our opportunities there. We've made some moves actually to make it possible for us to hire employees in more locations if we needed to, and that's a piece of work that we're in the middle of right now. Very helpful. Thank you. Yep, you're welcome. Thank you. One moment for our next question. Our next question comes from the line of Stephanie Moore with Jefferies. Your line is open. Please go ahead. Hi, this is Hans Hoffman on for Stephanie. For my first question, you know, given you guys sort of noted a, you know, sort of a more challenging environment, could you just update us on, you know, what you're seeing in terms of client cancellation trends? Well, so far it's been okay, we're just being, you know, cautious as we go into the year, clients are finalizing their budgets. You know, you can see in the press release that we're net positive on users, we're net positive on funds. We're continuing to grow our business. The numbers are down, you know, from last year in terms of absolute numbers. We're not seeing, like, a lot of panic out there in the client base, we're seeing that we're very competitive. I wanna emphasize that these are signs we're looking for. We're managing our business well. We're, you know, we feel really good about our ability to execute, no matter what the market environment is. FactSet has a strong history of that, as you all know. Got it. That's helpful. Then just, you know, for my follow-up, could you just talk a bit about, you know, where you sort of see the biggest opportunity, you know, in this sort of next stage of investment in technology and content? There's a great opportunity, you know, given that we've opened up the platform. We've done some press releases about partnerships we have, but really taking all of the components of FactSet and going in and being the anchor partner for, you know, the very largest firms is a big opportunity. When you look at the buy side, institutional asset management, we're doing very well in what we call our premier book. Our premier book also extends to the sell side, but it's close to our top 100 clients. That client base is doing actually very well on a relative basis to last year. Some of the weakness that we might see has to do more with smaller firms in the middle markets and, you know, I think less small firms getting created or potentially some firms going out of business. Overall, within the clients that are much larger, where we have a big percentage of our ASV and a big percentage of our opportunity, we're seeing very positive signs there. No one has asked us about the CUSIP business to this point in the call, and I wanna make sure that we're clear that we also see opportunity coming from the CUSIP business. It's not technology exactly as the last questioner had asked, but let me just point out some interesting points on CUSIP. We're very happy with the acquisition. We're very happy with the team, and we're very happy with our relationship with the American Bankers Association, which is going great. We were just down to see them a few weeks ago. CUSIP's growth, $48 million contributed in revenue in Q1, about $42 million of that from subscriptions and the rest from the issuance business, about $6 million, which is a little bit slower, but still really good growth in the things you don't think about, like municipal bond issuances and also certificates of deposit, which have grown very dramatically as interest rates continue to grow on those types of investments for individuals. Done very well with that. Overall, 7.6% growth, and we're very pleased with that. We see more growth opportunities coming from CUSIP. The retention grew, contributed about 2/3 of that growth and new logos about 1/3 of that growth. As we've said before, we see very good opportunities in a couple of areas. One is expanding CUSIP to the private markets. Second would be expanding CUSIP to the leverage markets. Third, potentially as different packages of ESG, for example, carbon credits are traded, we see growth there. CUSIP has done a really good job for us. We will lap it, as we said, the 1st of March. We come off our technical services agreement. The only, the only blip there with CUSIP is the day sales outstanding that has extended a bit. As we move into the lapping on March 1st, we are going to tighten up on those days sales outstanding. Hope that's helpful to everyone, our biggest acquisition to date, and we're pleased with its performance. We have one more quarter where we'll give you the details on CUSIP. After that, it is, subsumed in the CTS business, as we said. With that, I may have front-run some of Shlomo's questions, but, maybe we can move on. One moment for our next question. Our next question is from Shlomo Rosenbaum with Stifel. Your line is open. Please go ahead. Thank you. Yeah, Linda, you absolutely did front-run the AR DSO question. I was gonna ask you about that coming back up again. I want to shift it just a little bit. Historically, the sell side has been a lot more volatile in downturns than the buy side. Is there any difference in the combination or the composition of what's in the sell side right now that would lead you to believe that the case would not be the same, you know, if we end up in, you know, some of the banks just decide not to hang on to people the same way? Is there some way that you would think that we wouldn't start to go, you know, start to see that be more of a drag on the growth as opposed to being, a, you know, a positive for the growth? If there are, if there are large layoffs, Shlomo, in investment banking, that certainly would affect us. As I mentioned earlier, right, the CTS business, we're beginning to sell more than just workstations to the banks. That's a very, a very positive sign that there's other things we can sell them in terms of workflows and other departments we can go into. Again, the investment that we've made in content for deep sector and private markets just put her in a much stronger position and potentially open up new users for us. The other thing that I haven't spoken about that's in the sell side number is our private equity and venture capital firm side. That's not massive, but it is growing very quickly. Over time, I expect it to be a meaningful contributor. That is definitely something to keep an eye on. We called it out this quarter as being, you know, one of the drivers of the quarter. As I look out into the next six months, it's private equity venture capital firms, you know, the sell side and asset owners that look the strongest. I think the PEVC and the CTS piece in particular are just a couple of things that will be a hedge if big layoffs do occur in investment banking. Shlomo, just a couple of things to note. The M&A pipeline is still very strong, so there might be some interest in making sure headcounts stay pretty fulsome at the investment banks. Some of the trimming you're seeing now, those firms have not engaged in that what would be more normal trimming through the pandemic. It's been a couple of years since they did that, and you're seeing some of that happen. Again, there's the question of headcount versus compensation for them. We'll see what happens next. Analyst classes look to be about the same size. The lesson learned through the pandemic is that those more junior employees are important. They have to be brought on and trained. Just a few more points there that might help you. Okay. Thank you. Just I'm trying to make sure I understand the tone which sounds more conservative with some of the comments that you've made about the strong pipelines. Is the cost actions that you took to implement some of the downturn strategy just looking at the world around you versus what you're actually seeing happening with your pipeline and with your sales cycles? Is that what's going on? It seems like, you know, the sales seem to be going pretty well. At least that's what the narrative sounds like. Well, one is we're just taking a long-term view here to sustainable margin expansion. Linda's, I think, come in and really put in a good framework for us. Some of that is just sort of our multi-year effort to make sure that we expand our margin, you know, on a reasonable basis. You know, attrition has come way down because of all of the great actions we took through the year, and people expense is our biggest expense. I think that's the thing we're keeping an eye on the closest, is just making sure that our headcount expense is moving ahead at the right pace. Yeah, there's so much news out there right now about possible recession and layoffs and cost-cutting. We, you know, we're positioned well relative to a lot of other companies just in terms of our business model and our investment. We just wanna make sure that we're being conservative enough as we get into January when clients will be printing their budgets. We still don't have great visibility on what the budgets of our clients are gonna look like. That's the thing that I think will give us a lot more confidence in terms of the numbers that we can, that we can project. Okay. Thank you very much. Yep. Thank you. Well, one moment for our next question. Our next question comes from the line of Keith Housum with Northcoast Research. Your line is open. Please go ahead. Thank you. Good morning, Phil and Linda. Appreciate it. In terms of just trying to understand, I guess, going forward, if we do hit more of a downturn, where are the risk is greatest for FactSet in terms of customers closing? You know, I know that like PE and VC firms, you know, who I would think we most likely would close, you guys are doing very healthy in now. Where do you see the biggest risks of losing customers if we do go into a severe downturn? Well, I think, yeah, firms that are not being competitive, the smaller firms, you know, there's risk of firm closure. Hedge funds could be one example. So far, hedge funds, I'd sort of put them in the medium, middle of the pack here for us in terms of the next six months, but hedge funds seem to be doing okay. That's another firm type, where we're doing well from a CTS standpoint. And, you know, it's unusual that FactSet loses completely a large asset manager or a bank that's out there. We have some footprint. Really for us to win, you know, and what we're focused on is just taking market share within those firms. Firm closure doesn't worry me so much. You know, more of a It's hard to control that, frankly. More of our focus has to be on the, on the largest accounts that have the largest amount of opportunity for us moving forward. Great. I appreciate that. In terms of your revenue stream, remind me, I know most of it's going to be recurring, what portion of your revenue is non-recurring, and how did that do in the quarter versus, I guess, obviously, the recurring part? It's a very small percentage of our revenue. I mean, I think it's probably less than 2%. It's something we're taking a closer look at, and if that would be more helpful to break out, that's something we're certainly gonna consider moving forward. Great. It might have been a little down. I mean, it typically it's gonna trend with ASV, right? And very much trends with the analytics business. Most of the professional services comes out of the analytics implementations. Great. Thank you. Good luck. Thanks. Thank you. One moment for our next question. Our last question comes from the line of Owen Lau with Oppenheimer. Your line is open. Please go ahead. Thank you for taking my questions. Could you please give us an update on your ESG initiatives? How should we think about the impact of your ESG initiatives to your revenue and expense this fiscal year? Thank you. Hey, Owen. You know, FactSet's overall or overarching ESG strategy is just to be an agnostic agent in, you know, in the ecosystem for our clients. ESG is so fragmented. There's different focuses, you know, region by region globally. We, you know, we probably have the best selection of ESG in the market, and we integrate so many other providers. In fact, that adds its value in terms of concording that data so that firms that are creating their own ESG composites don't have to go through all the pain of managing the data. Building applications on top of that, to provide clients their own tools, to create their own view, that's primarily what we're focused on. It's not a meaningful contributor to ASV today. I think some of it, you know, probably doesn't show up, you know, directly as ASV, as its own product, but there's a lot of value that we put into the Workstation. I believe most users that subscribe to a workstation, can access whatever ESG products they're subscribing to in the market. That's, that's really where our primary focus is right now. Got it. That's it for me. Thank you for taking my questions, and happy holidays. You too. Yep. Thank you all for joining us today. We're off to a good start in fiscal 2023. While economic uncertainty persists, we are constantly talking to our clients and are really well prepared to respond to any market environment. I'm confident in our ability to drive continued sustainable growth, and FactSet is a consistent performer with a proven history of successfully navigating volatility. We have a resilient business with an innovative product mix, differentiated content, and diverse end markets, and we are only further strengthening our offerings as we continue to invest in our products to enhance our competitive position and the value we deliver to clients. Before wrapping up, I really wanna thank all FactSetters globally for their continued high level of execution engagement. And hopefully everyone at the firm is having fun. I know I am. I think most FactSetters are. We've invested, and we have a great culture, so it's a good place to be right now. Please be well this holiday season. We look forward to speaking with you again next quarter. In the meantime, feel free to contact Kendra Brown with any additional questions. Operator, this ends today's call. This concludes today's conference call. Thank you for participating. You may now disconnect. Everyone, have a great day.