FactSet Research Systems Inc. (FDS) Earnings Call Transcript & Summary

Good afternoon to our European listeners. And an early good morning to the folk in North America. For those of you that I have not met in person, my name is Manav Patnaik, and I'm Barclays' business and information services analyst. Now typically, at this time every year, I would be frustrated at how I flew all the way to London just to watch Arsenal lose yet another game. And as much as I would rather have that and considering the new normal, I'm delighted to at least have the conference go ahead virtually with a record 14 of our coverage universe willing to participate. And I couldn't be happier to start the proceedings today with FactSet. And with us, we have Phil Snow, CEO; and Helen Shan, CFO. So Phil and Helen, thank you both very much for being here with us.

Our pleasure, Manav. It's great to be here virtually with you.

Thank you. And just before we begin our virtual fireside chat, just one logistical item for the listeners. You obviously know the WiFi password and where the restrooms are. So all I wanted to point out was that there will not be any live Q&A. If you do have any pressing questions during the session, do e-mail me, and I will try to squeeze that in.

So with that, let's just get started here. Phil, maybe I can start with asking you a broader question on how and when FactSet prepared for this near-complete work-from-home situation that was forced upon us by the crisis. While it seems easy to think that everyone just goes home and logs in from their computers, it's obviously not as simple on an enterprise level. So if you could just walk us through the heavy lifting and management effort that was required, that would be helpful to start here.

Sure. I'd be happy to do that. And again, thanks for having us. Yes, so like I think many of -- many firms in the industry, we had very robust business continuity plans, which kicked in, in the middle of March. I don't think we would have imagined that we would be having our over 60 offices in over 20 countries moving to working from home so quickly, but it worked well. So we were able, mid-March essentially, to move the vast majority of our employees, all but a few critical employees, to working from home. Most of us have laptops. So logging in, connectivity wasn't an issue. I would say the 1 -- the 2 areas that we had to spend more time focused on back out there were in India and the Philippines, where we have so many of our employees that collect content. But we've been executing flawlessly during this earnings season. We have no backlog. So I'm really proud of the company and all of the different teams that made that possible, especially our employees who are in some cases working from home under difficult circumstances.

And just out of curiosity, what were the challenges in India and Philippines specifically? Is that just as you would expect, connectivity or access to computers?

I think, yes, like many firms, does everyone have all the hardware at home that they typically have in the office and do they have the connectivity.

Got it. And Helen, maybe just from your perspective, like I'm sure everyone had their -- every finance organization had their downturn playbooks at hand, but I still mention, no one prepared for all 60 of your offices to be shut. So how quickly did you guys have to adjust there?

Yes. Thanks for the question and hope everyone is doing well. You're absolutely right. Timing is certainly everything. We have a February year-end close. So when we started working from home in March, as you can imagine, that's when we end up having to do closing our books, getting ready for earnings, so on and so forth. And from a finance perspective, that's a lot to be taken on. But fortunately, for some of the infrastructure that we had already invested in, like moving to Workday, I think we've talked about this on other calls, being able to do things remotely, do it on the cloud, having improved our processes along the way, it actually allowed us, I think, to be fairly, I'll use the term, seamless. I'm not sure it's the exact word. It was very stressful. But that being said, we were able to adapt and be able to execute, I think, pretty well given all the circumstances. So from a finance perspective, we were well, able to adapt quite quickly.

Got it. And Phil, I think you and many other CEOs have noted how positively surprised they've been from the productivity being shown from everyone working from home. Do you think this is a new normal even beyond when there is a vaccine for the COVID-19?

Yes, I do believe it is. So we have seen good productivity during this period. It's still very early. So we're figuring out what are the best ways to measure that, but I do think there are some efficiencies to be gained in terms of how we work. And a lot of that will depend on how our clients decide to work, but my sense is many firms like yours, Manav, and many firms on the buy side, are probably, as we speak, thinking about how they're going to emerge out of the pandemic and work differently. So FactSet is a very resilient company. We have a great business model. It's a subscription-based model, and we've always had a high-touch model with our clients in terms of supporting them, and that's not changed during this crisis. So we're in constant contact with our clients. We're trying to understand what's different about their workflows and what products we can accelerate in terms of development to meet those needs.

Got it. And Helen, tied to that, so clearly, you'll have some real estate cost to find here, a saving -- cost savings to find here. But outside of that, and clearly, T&E is self-adjusted for everyone. Are there any other new normals from the cost side you anticipate to consider going forward?

Yes. No. It's an important question from the expense-control perspective. I think the way we've been thinking about this is, in some ways, continuing as well as accelerating what we've been doing over the last 18 months. So what that means is thinking through as it relates to both productivity improvements as well as managing overall expenses and giving that accountability. So you're right, T&E is one that we have seen come through, and we'll continue to see, I think, even as, as Phil talked about, how the new normal might be going back. But if you think about some of our larger expense items, we want to continue to invest. We're committed to investing for our 3-year plan. And so in order to do that, we've got to manage our, I'll call it our BAU, our run-the-business. So that's going to be including things like our third-party content costs, where we are carefully managing, anything that we add on, that we're actually reducing, I'll say, at a pace that's faster than that. And that includes looking at the scrutiny around, is the data that we're purchasing as effective or as -- or is there any duplication going on, on that front. And then similarly, we're looking at all other kind of discretionary, so hiring -- our people cost is clearly our biggest. And so the migration that we've continued to see from high- to low-cost is going to continue. Every new hire, whether that comes really, again, really from our investment versus our BAU is also going to be driving that. So that's how we're looking at managing the expenses as we go forward.

Got it. That's helpful. And maybe just to dig in on some of those points a little bit more. Phil, maybe just to start with you. You guys were one of the first to report after the COVID-19 hit us. And so perhaps you could just give us an update on if there's anything different you're hearing from your customers now. You mentioned they were equally prepared, I guess, to work from home, but how is that impacting the usage and demand for your services?

So we did see -- we've seen an increased usage of our products, and we've seen increased volume to our support, whether that's through chat, e-mail or voice. And our clients have been relying on us during this period. So our product worked really well. One of the things we did was we launched something called FactSet anytime, anywhere. That's our web product, which we've had a lot of success with, particularly in the wealth market, we were able to deploy to a lot of clients that needed access to market data and analytics during this period. And in some cases, they weren't able to access the products that they might have been used to accessing in the office. So we were there to help our clients, and we've seen some good uptick in terms of our web product and getting that deployed to people. And we've also seen, obviously, a lot of new ways of working. So we're on Zoom here. We use a different chat platform at FactSet. But the use of video and chat has, I think, doubled and tripled easily within the client base over this period, and we're thinking very carefully about how can we evolve our product to meet the needs of our clients in that way as well.

Got it. I think S&P and a bunch of other companies also noted that the virtual interaction has been a positive surprise. But they also said the new sales pipeline, I guess, it's not that easy to convert those. Have you seen the same experience, Phil?

Well, I spoke on the last call about how positive I felt about our second half pipeline and that it was the strongest pipeline we've seen in a number of years. And I'm very encouraged actually, Manav, in terms of our ability to execute on that pipeline. We've done well in terms of executing on it. And Q4 is our biggest quarter, so it's still a little bit early. But I feel still good about the pipeline we have for the second half and the sales team's ability to execute and close the deals, particularly that were already in play.

Got it. And Helen, you guys reduced your ASV guidance by about $25 million in March. Could you just walk us through the moving pieces and how you made that decision, given all the uncertainties out there?

Yes. Happy to do that. So we did shift the range. We think about the midpoint of the midpoint, that was about $12.5 million on that. And that really does reflect, as we had gone through sort of a top-down, bottoms-up approach, as we outlined in the call, which is to look at our largest deals as well as, we'll call it, the bulk of how that made impact from a sales cycle, a lengthening perspective and which ones we think -- we thought would be impacted looking at also even from a product basis, implementations and where, in some cases, will that slow down less from our perspective because we have the ability to do much of that remotely, but sometimes from a client perspective. And then we looked at our exposure from the perspective of our banking deal. Certainly, we know that there's some seasonality as it relates to headcount, and especially summer hires on the investment banking side as well as in the fall. And so by taking some of that into consideration, Manav, and certainly from a haircut perspective, we did, again, a bottoms-up and a -- top-down and a bottoms-up approach. And using those 3 metrics is how we came up with what we believed was our risk. Now there will be delays, but -- both from a cancellation perspective that were there in our favor as well, so we took that into account also.

And just, I guess, the delays I can understand. In terms of the headcount variability, was that just -- you talked about the banking customers in terms of the summer hiring maybe slows down. But did you make an estimate that your end-customer base will be smaller at the end of the year as well?

No. I think it was really much more -- keeping in mind that we do have a cancellation policy that does have a 90-day window, so that kind of helped us a little bit in thinking about what that impact might be at the end of the year. The biggest variability really from a user perspective is more on the banking side. And so that was really where our focus was in terms of trying to guesstimate what the number of users were.

Got it. And Phil, from your perspective, in talking to your customers or hearing from them, especially the buy-side, long-only base that you have, how do you think they're faring through this? Like is there risks to that base down towards the end of the year?

Well, we're seeing great momentum in that part of our business. As I spoke about on the last call, we've seen a very strong year from our Analytics Suite. So the products that are really doing well there are our risk products, some of our multi-asset class products, our performance and reporting products. So that momentum has continued. And I do think that the buy side has obviously been under pressure, Manav, and I don't think that's going to change. It's encouraging that the markets are back up a little bit. That obviously relieves some of the pressure. But our working thesis is there'll be continued cost pressure on the buy side and that firms are going to really have to innovate in order to compete against the passive strategies that are out there. But we feel very confident in the suite of products that we've developed to help investment managers. Whether or not consolidation will accelerate as part of what's going on, I'm not sure, but I don't think the cost pressures are going to abate by any means.

Got it. And in terms of the impacts that Helen talked about, was there any specific line item disproportionately hit? Like would it be fair to say that the research gets hit more than analytics and CTS and so forth?

I think that the research or kind of traditional workstation product is the most competitive part of the industry. But as I mentioned a little bit earlier, we've been, I think, very aggressive about getting our footprint out there. And if firms do decide to lower their headcount dramatically, it would impact that part of our business. But we've shifted more to workflows over time and more of our open technology. So I think any pressures we're feeling there, I think we can overcome with the rest of the product suite.

Got it.

And Manav, the other thing to consider also is just the makeup of the pipeline in the book of which analytics, as Phil said, is a big driver. So -- and CTS. So naturally, those are going to be ones that we've looked at, in particular, that would have been impacted as we think about how we're going to execute on the rest of the pipeline.

Got it. And Phil, you brought up the workflow concept from workstation to workflow. Can you just talk about your contract structures? Like how many of them are multiyear? Or are they all renew every year, per-seat, enterprise? Just some flavor there, please?

Yes. Most of the larger firms are multiyear contracts. And the smaller firms will be on annual contracts. And typically, that's a 90-day cancellation policy with an order renewed for 1 year. So I think you asked me on the last call about the last financial crisis and how we thought about this differently. So one of the things that's in our favor versus '08, '09 is really just the level of contracts we have with our clients and some of the terms that we have there.

Got it. And I want to get back to the '08, '09 comparison in a second but just before we lose this thought, Helen, in terms of the guidance and the cost controls and the margins, the investment program that you outlined in your fourth quarter, that continues, and I'll get to that in a second. But just beyond that, what are the pluses and minuses in controlling the costs? And should this get worse, like is there a next step you can take as well?

Yes. No, I think that's a fair one. And as you might guess, we're going through our own scenario planning as well. We've got our upside and our downside cases. I outlined the things that we're doing right now that we can see from a near-term perspective. But clearly, if we think about a longer term, if this becomes more severe or deeper, then we would look at point by point our biggest cost. So where is hiring, how do we manage through that, how do we get more either productivity or really differentiate between the must-haves and the nice to haves. We've taken into account that attrition, in a way, will likely slow as we go forward to our normal churn rate in terms of our own people. So that's already been taken into consideration also as we're now thinking through our hiring decisions. And then other discretionary spend as it relates to either marketing. Incentive compensation is a big piece of our total comp. So that's a big people cost that would -- that's not a lever we would like to, but that's certainly a lever to be thought about. And then back to the point around data costs, that will be one that, in some ways, flexes with revenue. So there is a chunk that is variable. But that being said, we would likely take even further steps on managing that down.

Got it. And then maybe just switching gears a little bit to the investment program. Phil, over the years, you guys have been upgrading your infrastructure as you've grown as a company. But specific to this investment program, can you just lay out the 3 buckets and the philosophy behind why you decided to do it last -- or beginning of last year, at least?

Yes. So we view -- we see many of our clients going through their own digital transformations and the investment managers and banks that are going to win are the ones that are willing to invest in technology, to sort of help them with efficiencies and uncovering new ideas. We want to meet our clients where they are, and we also want to be more efficient ourselves in terms of how we operate and how we create product. So the 3 big areas of investment for us as part of our own digital transformation are opening up the platform, which we've already started to do. So philosophically creating APIs for all of the different analytics and content that are on FactSet. So we're well underway with that program. Second one is move to the public cloud. So tons of clients are moving to the public cloud. I think any trepidation people had about that is mostly gone, and we see massive efficiencies moving forward in terms of compute and storage and interacting and plugging in with our clients getting there over 3 years. And the third one is really just personalization, which is even more magnified, I think, in today's environment. So how can you surface what's important to people more intuitively rather than people configuring the software that's in front of them? So those are 3 of the main areas. There's a lot of underlying detail and of course, we didn't anticipate a pandemic, but we're really looking at what's going on around us and trying to figure out, okay, do we even go harder here in terms of how we accelerate. I think I heard Microsoft's Satya Nadella said they've seen 2 years of digital transformation in 2 months, so -- right? So that -- I think everyone is experiencing that and rethinking how we need to operate and where we need to go.

Yes. And I think obviously given your resilience as a company, you clearly have the opportunity to invest more in the near-term for the longer-term. So I think that could make sense. But Helen, just directly to that point, you control the screws a little bit on the spend that happens in this program. Do you foresee a scenario -- or what will make you shift or delay the spending, which seems pretty critical for the longer term?

Yes, we -- in our worst-case scenario, I suppose, or the net downside, we've given that some thought. I mean right now, there are just so many pieces of that investment strategy that is key to, I would say, even for the run-the-business. So if you think about the content spend that we have, and that is what our clients need, and so we will continue to push forward on that. Would that end up taking a bit longer? Perhaps. And if it took longer, it would be, I would suspect, on the hiring side. There are certain capabilities and certain expertise that is needed. So I could see that potentially being a lever to pull. But commitment-wise, we'll continue to invest across all 3 because I don't think any of that -- and 3, meaning people, content and technology, any of that is able to be pulled back in any material way.

Got it. And somewhat tied, and maybe, Phil, you can start with it, is just your thought process on M&A. Presumably, a lot of smaller competitors will not have the same financial wherewithal as you guys have. And it's an opportunity. I'm sure now the valuation is very far apart from the buyer and seller. But eventually, do you think you could get more active in M&A or probably more of the same?

Potentially. I mean we've not done a transaction in some time now as we've been integrating many of the software companies that we acquired 3-plus years ago. But I do think there's some interesting, unique content out there that we could take advantage of. And we -- part of our business model is really to integrate thousands of content sets that are out there and work very closely with third parties but if we can find some stuff that really does help us differentiate, that becomes interesting in terms of M&A.

Got it. And maybe we can shift gears into the whole past recession analysis, Phil. I think obviously you guys did decelerate back then, but you still grew, but you were also a much smaller company with a different mix. So compared to today, can you just give a flavor of what FactSet was?

Yes. So back then, FactSet was -- we had a workstation product. And our business model really was to add on to that workstation with value-added products, really analytics, so portfolio analysis. Back then, it was mostly an equity-based product. And our feed business, which is now CTS, was really a very customized proposition. And in a lot of cases, we didn't have a lot of our own content. So our value is really configuring custom files for clients with the third-party data that they subscribe to from third parties. So we've moved on from -- we've come a long way. We've collected a lot of our own content, so we're able to monetize that very aggressively through the CTS product. And we've created more seamless workflows, particularly on the buy side with the portfolio life cycle. So connecting research to portfolio management, to trading, to risk, to client reporting, all of that now can go straight through on FactSet. And the acquisitions that we made, which are now really beginning to bear fruit, allow us to go in and do an enterprise sale. So instead of really selling to 10 users in a particular group, we're selling to the group itself, and they're taking those products. So the combination of the enterprise software and content that we provide complemented with some desktop products.

Got it. And Helen, maybe a similar question for you, but on the cost side. You came in recently, you obviously made a lot of changes and moves on the cost side from the finance side. Anything notable today in terms of flexibility, variability versus maybe what you observed in the last recession from the books?

Yes. It's hard. As Phil said, fundamentally, we are a different company and our end markets are different from that perspective as well. So in terms of changes in costs, I think it's really along the way that we process, the way that we have accountability when we only had 1 P&L in a way then and no one was really necessarily being able to get down to a lower level and having the empowerment to say, these are costs that we don't need versus before everything was held at one. Now that we've got different P&Ls and having different people accountable, we're able to identify things that we can reduce more quickly than we would have in the past. And so I think that gives us an additional flexibility that we wouldn't have had back in '08.

Got it. And before we go into kind of segment-by-segment real quickly here. Phil, maybe just some thoughts, everyone loves to ask the question, competitive backdrop, any changes, you're having some change of ownership. But everyone, maybe this accelerated digitization puts people either on even playing field or disparity, but just anything you're observing so far there?

I mean it's still early days. So things don't change that quickly. So as I mentioned earlier, I think where we will see probably the most competition amongst all of us is in the front office with the fundamental analysts and the PMs. We feel really good about our position in the middle office. So all of the investment we've made in analytics around risk and performance and reporting and so on, that is, in my mind, differentiating for FactSet. On the feed side, we feel that's primarily a greenfield opportunity for us, where it's early days for us versus some of our competition. So we feel really good about the backbone that we've created there, the infrastructure and our ability to get our content out and monetize it in the marketplace. On the wealth side, similarly, I believe that's still pretty much a greenfield opportunity for us. And we're not really defending there. We're just -- we're attacking in terms of going out in the marketplace with the next-generation product for wealth advisers.

Got it. And just tied to that -- tying that to your long-term high single-digit targets. You mentioned your end-customer base has always been challenged, that's not going to change. So what needs to go right for you guys to get to that high single-digit target?

Well, on the analytics side, I'll start -- maybe I'll go segment by segment here. So in analytics, as we've mentioned, we've seen a lot of momentum in terms of the acquisitions that we've done and our ability to go in and sell enterprise products and provide good multi-asset class solutions for our clients, particularly risk. So investment managers moving forward are getting more and more sophisticated in terms of portfolio construction and how they think about the passive piece of their portfolio versus the active piece. And I feel excellent about the product suite that we have to meet the needs of those clients moving forward. So there -- many of these firms are digitally transforming. And our workflows that we've created as well as our philosophy of being open and delivering the analytics to the clients how, where and when they want it, that I feel great about. And that will be a big piece of how we get back to high single digits, is executing on that. On the feed side, that should continue to be the fastest-growing piece of FactSet. So maintaining that very high growth rate with CTS and monetizing the content that we create will be important. Working with partners like Snowflake will be important. So we've done a deal with them where we're taking our content and not just putting it up into our store for monetization, but putting it in other places out there in the financial information ecosystem. On the wealth side, we're going to need to continue to take market share there in terms of wealth advisers. So a steady diet of sort of good midsized deals and some very large deals will be important. And on the research side, I think it's just really creating that next-generation workflow for fundamental analysts as well as the quantamental analysts that we're beginning to see emerge, right, as part of the new wave that our clients sort of research and look at content. So if we get all of that right, I mean, we've got a good thesis around all of those groups, I think we stand a very good chance in the long run of getting back to high single digits.

Got it. And then, Helen, from a margin perspective, how would you have us think about the right cadence there? Like if you get to high single-digit growth, I would imagine there has to be some natural margin expansion. And at the same time, in the last 2 years, at mid-single-digit growth, you've kind of kept investing and margins have been flat to obviously down with this big investment program. So what is the right framework we should have in our mind?

Yes. I think there's a couple of pieces of that. You're right. As we get to top line, the whole goal is to have expense growth be faster than -- sorry, your revenue growth to be faster than expense growth. And when we come out of this, we would expect that to be the case. Remember that part of our spend is going to allow us to have more variable and lower cost. So for example, as we're moving to the cloud, we have to maintain our data centers. And so at some point, during this period of time, we've got double costs going on. But as we're able to reduce our footprint, those savings are meant to help drive our total margin expansion. Similarly as we're investing into machine learning and more automation, that is going to allow us to do things like collect content more efficiently, to be able to consume and analyze and ingest, when we think about our private markets investment, all of that data, which is multitude of times of what we do today. Again, that will also allow us to be able to do things more efficiently and then help margin. So it really is 2-pronged, Manav, on that perspective. So it's not just the top line, and it's not just the investment falls off to drive top line, we actually need to invest to allow us to be more efficient and productive.

Got it. And Phil, maybe we can start off with the segments. So let's start with your fastest-growing segment you called out, or should be, the CTS business. You said you had a backbone, and that's doing really well but in terms of the content that you need to collect there, is that -- I presume there's a daily buy-versus-build decision, but to speed that up, like do you think M&A needs to be part of that process?

Not necessarily. So we're continuing to collect a lot of content. A big piece of our 3-year plan is to invest in content. So that's the second half of the plan. So in September of last year, we committed to something we call deep sector. So that's filling out 8 or 9 sectors with much more granular detail around some of the KPIs or -- and so on for different industries. So that will be a big piece of our strategy on the sell-side in particular, but it will -- we'll be able to monetize it through the feeds. In fact, we've already built a feed from some of the FIG data that we created on the financials side. So that's it. On the wealth front, we're continuing to collect some of our own content there in wealth. So we'll be able to monetize that through feeds. And it's still very early days for private markets. That's a new beachhead for us honestly. We've done a great job this year of building out the team, of coming up with the investment thesis. We've begun to reimagine how we're going to collect content, which will be important for private markets. But over time, we'll be able to monetize that as well. So I think just in terms of the momentum we're seeing and the stuff we collect today, which continues to get better every year, plus these new areas, that should be enough to maintain the high teens or even low 20s that we talked about.

And do you think the feeds business has the potential or is maybe cannibalizing desktop a little bit? Because we've heard that from a few companies where feed is not widespread.

Yes, I don't think so, not really. I mean we had this own internal debate with ourselves when we started to sell consolidated benchmark feeds and we were worried that it was going to cannibalize the portfolio analytics business. There's such a thirst for data and content in our industry. Some folks are going to want to consume it through a configurable front end or a personalized front end. But others are going to need to consume it through APIs or through feeds or just integrate it with other systems. So as long as you're really pricing the value that you're delivering to the client and you're continuing to create value, it shouldn't really matter how it's delivered as long as you've got the right business model. So one of the things I didn't mention that I should have on the CTS side is we're now releasing APIs for our own content. So even the stuff that we've sold through just the comma-delimited flat files to clients, that same content is now available through APIs, which is going to open up a new piece of the market for us for the exact same content that we already have on the shelf.

Got it. And how about Open:FactSet, that sits in this line item, what's the update there?

Yes. So we continue to add third parties into our marketplace. We're beginning to see some good momentum in terms of the original business model, which was for people to put stuff in our store and for us to share the revenue. We're seeing particularly good momentum with ESG and some other unique content that's up there. And it's proven to be just a great place for people to come in and explore our content and for the quantamental analysts to program against our content using Python and some other techniques before they make a business decision. So it's really clapped for sales cycle, for monetizing or purchasing FactSet content. And as we're -- in this new world, I think that's the business model that we'll be sort of heading towards for all of our products, not just the CTS product.

Got it. And I don't know who wants to take the first part of this question, but the second part is for you, Helen. But the first time we heard Snowflake was on your conference call, and now I seem to see it everywhere. But just real 101 for us, what is Snowflake? And then how does that benefit on the delivery and margin front of the equation is more the question for Helen.

Yes. So I'm not a technologist myself. Snowflake is a cloud-agnostic provider where I think clients can much more easily take content that's out in the marketplace and link it to their own content. So I think we saw one of our most innovative clients that's always sort of using the newest stuff on FactSet, was very enthusiastic about this platform that their firm is using. And we've had a lot of good conversations with Snowflake. We're putting more of our content into their cloud-based system. And we imagine that channels like that are going to be very important for us moving forward.

Got it. And Helen, maybe just how does doing that versus making your own shift to the cloud, which requires a little bit of expense, like is there a con and benefit analysis to do there?

Yes. I mean it's a little bit early days on this. But the way we think of it, in a way, it's like another distribution. And so it allows us to use a -- I'll just say a third party to be able to sell our products, our solutions. And so from the -- you asked the question around margin and growth. I have that same question. So we're going to be seeing how that plays out. But certainly, from the perspective of selling more, then that will help us from a top line perspective. And the cost that we have upfront just for connection and things of that case, that's more of an upfront and maintenance going forward. So more to come on that one, and I'm as curious as how successful it can be.

Got it. That's helpful. Phil, moving on to the wealth business real quickly. The Bank of America Merrill Lynch contract was obviously a really big announcement. It drove a lot of buzz in the investment community, if you call it, and I think there was this anticipation that now that you've got that, almost every month, we will hear another contract announcement from your end. You've obviously still been very positive on the wealth business, but maybe just some updates on what the contract pipeline wins, losses, opportunity look like there.

So we have had some meaningful wins in the wealth business, not quite the size of Merrill. I'm not sure we've been public in -- on all of those, but we continue to get exceptional feedback about the product suite and the service that we provide along with it. And we've been involved in a few RFPs for larger-type deals, and these are difficult decisions for our end clients. And I would say if there was sort of one area that -- it's going to be hard for a very large wealth firm to say that we're going to move thousands of advisers over before they sort of see how things settle down in the new environment. That might extend the sales cycle for some of those deals that we've been working on. But I do think that in the long run, at the end of the day, the best product in the marketplace to meet the needs of the wealth adviser of the future is going to win. But these are larger deals that take a long time to materialize in some cases. But further down the stack, we're seeing a lot of really good wins for hundreds, in some cases thousands, of users and very good momentum in family offices and so on. So we feel great about the product that we have there. And on the wealth side, I think we've just scratched the surface in terms of what we can help in terms of workflows for the wealth advisers.

Got it. And we've asked the question before in terms of what you think of the TAM on the wealth business. And I don't think you've put a number to it. But -- so maybe another way to ask the question, like, is the -- what is the competitive landscape? Is all your wins going to have to come from taking away from competition? Or how should we think about what that landscape looks like?

That's a really great question. And I think at the beginning, I think the obvious one is to take market share away from the existing firms that are in the space. But I do think the wealth adviser workflow is going to be disrupted over time. And what we're experiencing now is going to accelerate that. So in some ways, I think, reimagining what a wealth adviser is going to need at the end of the day to meet the needs of their clients could provide some new market opportunities for us. And there may be firms that are not in the wealth business today that decide that they want to get into it, right? And sort of working closely with them would be one way to increase the addressable market. At the end of the day, I think it's easily 10x what we have today in terms of our footprint. So whether it's 10x or 20x or even more times than that, it doesn't really matter for us. It's just a lot of opportunity in front of us to go gain market share.

Got it. Helen, maybe I can start with you on the analytics business. I think the wealth business is easy to understand what that product is, feeds is what it is. And then research, we all imagine as the heavy desktop business. Does analytics have any component of desktop? Or what sits there in terms of how you segment that business?

Yes, I mean I think they are very much interrelated in a sense that we deliver the firm, right? And so there are pieces of analytics that are -- clearly can be more, I'll use the term, stand-alone, right? And those are some of the areas, in fact, that have been growing our performance and reporting and even some of the risk. And so the way that we see analytics growing, it is a general and a maturing product, unlike wealth, where we've really made some great inroads, as Phil talked about, and CTS, which we built over time. Analytics is more mature, but the growth, and it's continued to grow, is off of what I'll call the backbone of the workstation, the workflow from that. And a lot of the growth, I would say, as you think about retention, expansion and new, it's the expansion piece that's helped a lot. So our existing clients that are now filling out, let's call it, the PLC or back to the middle office, which is what Phil alluded to earlier. So when I break out those pieces, those would -- that's where I see more growth, which is definitely on the expansion front and really leveraging the acquisitions that we've made that had taken some time to, I'd say, fully integrate and be understood but -- and have longer sales cycles, honestly, but that's beginning to kick in. We've seen some of that in the first half, and we'll certainly, hopefully, be able to execute against that going forward.

Got it. And Phil, maybe when we think of analytics, equity PA, just given your legacy strength there, comes first. But can you just talk about the breadth of analytics solutions you have in there, whether it's for asset class or solutions. Just some flavor there would be helpful.

Yes. So it's way more than equity. In fact, the piece of the Analytics Suite that has the most momentum behind it is the multi-asset class and fixed-income pieces. So we have a very robust offering for public markets on the risk side in terms of risk and performance. I do think there's an opportunity in private markets moving forward, and we've integrated some alternative asset types into the risk models that we have. We integrate a lot of third-party data. So we have risk models from at least 3 other third parties on FactSet. And we have a lot of our own capabilities now given the BISAM acquisition that we did a few years ago. The acquisition of Vermilion really kind of boosted our performance capabilities, so our ability to create performance and reporting solutions for our clients. So I think it's just going back to the PLC and understanding that we can handle a lot more of the workflow for the buy side and do it in a multi-asset-class capacity, which is important.

Got it. All right. We're almost out of time, but we have a few questions that came in. So let me just ask you quickly. So Phil, you talked about Microsoft talking about 2 years of digitization done in 2 months. Just -- the question is more around where is FactSet, like how digitized or how much are you on the cloud? Like how would you frame how digital FactSet is at the moment?

Well, we have a full-blown web product. So I think in a way, we already have sort of the digital capabilities there. And turning -- moving to the cloud, I would say we're probably in the second or third inning of moving to the public cloud, but we've got a lot of stuff that we do with AWS and some with Microsoft Azure. Many of the acquisitions that we made over the last 3 years were local solutions. We ported many of them now up to the public cloud. In fact, those were some of the first things we chose to do. So we kind of have parallel tracks. We're moving aggressively. And I think we're very encouraged already in terms of the cost savings that we've seen for the pieces that we have moved over to the public cloud. So we've got a robust plan. All the investment is set aside for that, and they don't see us sort of slowing down and in fact, you may argue that we should accelerate that.

Yes.

And in fact, right now, I'd say, like all of our new products starting in this year are cloud-native. So that gives you a sense of, migration has to come in different forms, but new products are now in the cloud, and that will help us as we go forward.

Got it. And the next question is just a geographic question. Again, for the most part, we think U.S., FactSet, but this obviously is a European conference technically. So just some thoughts on the competitive landscape positioning, how you see Europe and maybe Asia as growth drivers.

So we're seeing, I think, some good momentum in Europe coming into the second half. And I think in Asia, which has been our fastest-growing segment, we continue to believe that will be the case. They were the first to get hit with the COVID crisis and probably are going to be the first to emerge. In Asia, we see a big opportunity there for wealth. So when we think about competition, maybe a little bit different over there, to your original question, Manav, is that the competitive set in Asia may be actually different than it is in Europe and Americas, as we see an emerging middle class. So I think there's going to be more movement in the middle class in Asia, and then it's going to be a question of whether or not folks there are going to be interested in investing more in public markets than maybe they have historically. So we see the competition in Asia being a little bit more fragmented. And in Europe, we feel good about the momentum that we're seeing there in the second half of this year.

Got it. That's helpful. And then the last question is just around ESG. It obviously is a very hot topic. A couple of weeks ago, we just hosted a full-day event that was well attended. And this is more a question from your solution side as opposed to what you're doing internally, but if you want to comment on that, that's fine as well. But what is the strategy with ESG in terms of the solution revenue-driving kind of opportunities?

Well, so up to this point, we've really stuck to kind of historically what we've done, which was integrating a lot of third-party content. So a lot of the big names in ESG, you can get integrated through the FactSet workstation. A lot of the open FactSet providers that have gotten momentum in terms of us selling feeds have been the ESG providers. So there's a lot of ESG data on FactSet. Believe there's an opportunity to create kind of a more consolidated front end for people to analyze all the data. I don't think there's consensus yet amongst like what are the right ESG metrics. So that is a gap in the market. And we do think that we've got a lot of data that we collect for lots of workflows that we can repurpose for ESG. So it is an area of focus for us and one that we're thinking carefully about as we move into next fiscal year.

Got it. All right. Well, I think we're just about out of time here. So thank you again very much, Helen and Phil, for joining us virtually, and hope you have some good meetings the rest of the day.

Thanks. Okay. Just to wrap up, Manav, I just wanted to kind of summarize, resilient business model, we're committed to our investment plan, and we've got lots of options in terms of capital allocation. So thanks for having us, and we look forward to either seeing you virtually or in person at some point in the near future.

Yes. Hopefully, soon. Thanks a lot, guys. Take care.

All right. Thank you. Take care. Bye-bye.