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

Good morning, ladies and gentlemen. Thank you for standing by, and welcome to the FactSet Investor Conference Call. [Operator Instructions] I would now like to turn the conference over to your speaker host, Kendra Brown, Head of Investor Relations. Please go ahead.

Thank you and good morning, everyone. Welcome to FactSet's conference call to discuss the proposed acquisition of CUSIP Global Services, which was announced on December 27, 2021. We will be in various remote locations today and may have some audio quality issues. We appreciate your patience should we experience a disruption. 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. A replay of today's call will be available via phone and on our website. After our prepared remarks, we will open the call for Q&A. [Operator Instructions] Before we begin the discussion, I encourage all listeners to review the legal notice found on Slide 2 and at the end of the press release issued on December 27, 2021, which explains the risks of forward-looking statements and the use of non-GAAP financial measures. In particular, we are making forward-looking statements about the CUSIP Global Services acquisition and the related funding. This includes the expected timing of the -- for the completion of these transactions. There are various risks and uncertainties that may cause actual results to differ materially from those stated, projected or implied by any forward-looking statements, including the failure of the S&P Global and IHS Markit merger to be consummated. 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. Joining me today are Phil Snow, Chief Executive Officer; Jonathan Reeve, Head of Content & Technology Solutions; and Linda Huber, Chief Financial Officer. With that, I will turn the discussion over to Phil Snow.

Thank you, Kendra, and good morning, everyone. Thanks for joining us today. I'm excited to discuss our definitive agreement to acquire CUSIP Global Services, the trusted originator and operator of market-standard security identifiers, including CUSIP, CINS and ISIN. To begin, I'd like to give you a brief overview of the transaction. And as we announced last week, FactSet has entered into a definitive agreement to acquire CUSIP Global Services, otherwise known as CGS, from S&P Global for $1.925 billion, which we will fund through a combination of cash on hand and committed financing. We also expect to receive an estimated tax benefit of approximately $200 million on a present value basis in connection with this transaction. Linda will walk you through more detail on funding in a few minutes. This is FactSet's largest transaction to date. It will be immediately accretive to our adjusted operating margins and is expected to be accretive to our adjusted diluted EPS within the first full year of ownership. As part of FactSet, CGS will continue to carefully steward the CUSIP system in close partnership with the American Bankers Association to ensure a seamless transition and continued innovation. The transaction, which is subject to customary closing conditions, including the completion of the anticipated S&P-IHS Markit merger and other regulatory approval, is expected to close during the first calendar quarter of 2022. Upon closing, CGS will maintain the same autonomy that is in place today to fulfill its obligations and responsibilities under its agreement with the ABA. This includes keeping separate sales forces and solutions for FactSet and CGS. Additionally, CGS' products will be exclusively managed by the CGS product team and will essentially continue to function as they do now. CGS will continue to maintain neutrality with their redistribution clients, including FactSet. Finally, FactSet's core products will continue to carry CGS identifiers. We look forward to welcoming the approximately 100 global professionals who are part of the CGS to the FactSet family. They will continue to be led by Scott Preiss and the current CGS management team and will be part of CTS. Jonathan Reeve, EVP and Head of CTS, has significant experience with the CGS business from his time at S&P Global. He previously held management responsibility for CGS and had the privilege of overseeing its activities with Scott Preiss reporting to him. We anticipate that the strong working relationship and respect between Scott and Jonathan will be a significant asset towards successfully transitioning CGS to FactSet. Jonathan will walk through the opportunities we see for CGS as part of FactSet later in the presentation. Turning to the next slide. I want to provide more detail about what CGS is, its services and why we found it to be such an attractive asset. The ABA launched CUSIP in 1968. Since its inception, CGS has operated the CUSIP system on behalf of the ABA. And for more than 50 years, CUSIP has been widely recognized as the gold standard identifier for securities. Today, CGS manages a database of 60 different data elements, identifying more than 50 million global financial instruments. Its identifiers serve as the backbone for security master files that are a critical part of front-, middle- and back-office workflows. In doing so, CGS provides mission-critical solutions across the capital market spectrum, including to many of our clients. It is a unique asset with tremendous market recognition and deep alliances with market participants across the financial service industry. CGS has extensive coverage of all types of financial instruments with new entities being added all the time. And a key area of anticipated growth is to continue to embed CUSIP into new and alternative asset classes. CGS' financial profile features robust margins and consistent revenue growth rates in the mid- to high single digits. It generates approximately $175 million in annual revenue, most of which is from recurring subscriptions with a retention rate greater than 95%. As you can see from the graphs on the right-hand side of the slide, CGS' operations are global with a substantial majority located in the Americas. They also have a diversified customer base that will complement and augment FactSet's very well. While it is a significant transaction for FactSet, our strategy remains unchanged. We remain focused on the 3 strategic pillars of our digital platform: Scaling up our content refinery to provide the most comprehensive and connected set of industry proprietary and third-party data for the financial market; enhancing the client experience by delivering hyper-personalized solutions so clients can discover meaningful insights faster; and lastly, driving next-generation workflow-specific solutions for investment professionals. CGS is a financial standard. Its ubiquitous nature aligns with our growth strategy and these strategic pillars. At FactSet, we strive to meet the information needs of our customers by providing the most comprehensive and connected information in the industry. Equally, CGS has a 50-year pedigree in helping the investment community understand and make actionable the ever-broadening investment landscape. Together, FactSet and CGS can remain at the forefront of the investable universe and innovate as our industry explores new frontiers. Our content refinery is what differentiates us in the market. Today, FactSet collects about 25 proprietary core content sets. Around half of our employees are in the business of collecting content. Coupled with that, we have more than 800 third parties that provide data into our ecosystem. And finally, our clients trust us with their own data, a great example being the more than 4 million client portfolios on our systems. Our advantage is connecting that data and making sense of it for clients. The velocity of data is moving more quickly, and our core competency is our ability to ingest structured and unstructured content, connect it to other data and get it back to clients in a way that creates tangible efficiencies and helps them discover alpha. This acquisition reflects our continued commitment to invest in our clients' content and workflow needs. CGS will significantly expand the breadth and reach of our robust suite of data management solutions, advancing our open-data and off-platform strategy. CGS' position in the global securities market, coupled with the benefits it brings us, makes this a strategic investment that will enable us to be more competitive and a better, more critical business partner to our clients. I will now turn it over to Jonathan Reeve to walk you through how CGS fits into our strategy.

Thank you, Phil, and hello to everyone on the call. I had the pleasure of working with CUSIP first when I was at the Canadian Depository for Securities and then while running Product and Content at S&P Global. For most of my career, I have counted on CUSIPs and ISINs to ensure proper data mapping and overall good data governance. I further learned to appreciate the importance of the CUSIP system, CGS' employees and the relationship with the ABA when this business reported to me for 5 years, which is a head start that will undoubtedly accelerate the CGS transition to FactSet. CGS is a market leader in reference data strategy, and the plan is to continue to build on its incredible brand to advance FactSet's position in the reference data space. I am excited to welcome CGS to FactSet. CGS is a natural extension of FactSet's content refinery. Their core competency in securities identification aligns well with our industry-leading data management capabilities, complementing our strength in symbology, concordance and reference data management. CGS is an excellent fit given our substantial investments in reference data, our 4 decades of experience acquiring and integrating and managing content. This experience will ideally position us to address our clients' growing needs while enhancing the value we add to their essential workloads. As mentioned at the top of the presentation, CGS will function as a part of CTS. On a pro forma basis, the acquisition will result -- will increase CTS' annual subscription value, or ASV, to more than $425 million. This will scale CTS to be greater than 20% of FactSet's overall ASV. Organically, CTS is our fastest-growing business unit, reflecting industry demand for our off-platform solutions and some of the most innovative workflow solutions in the market. The addition of CUSIP to the CTS product lineup will enhance the FactSet customer experience and accelerate our ability to innovate. CGS' capabilities, talents and resources complement our own. It will further strengthen and diversify our superior service, enhancing our value proposition across both buy-side and sell-side markets. FactSet's offerings, such as DMS, our Data Management Solutions; and RBICs, our Revere Business Industry Classifications product line, are complementary solutions for clients with CGS-related products, allowing us to further build our growth momentum, particularly in CTS. This combination will result in the opportunity to accelerate sales, driving greater ASV and related revenue growth for CTS. We believe there are many areas that CGS can provide to supplement our services, including expanding beyond traditional security identifiers, actively driving innovation to accelerate initiatives in emerging growth areas and focusing on our reinvestment mindset on growing CGS' influence and reach. In addition, the reputational benefits from owning CGS represent a considerable opportunity to grow our broader data management offerings, raise prospect awareness and enhance our brand in highly desirable markets, including security issuance, settlement, back office and trading. And with that, I will turn the call over to Linda.

Thanks, Jonathan. It's been an exciting 12 weeks for me at FactSet. I join Jonathan and Phil in our excitement to welcome the CGS team as future colleagues. FactSet is an excellent company with outstanding performance and a strong culture, and it's a great time to join. Turning to our capital structure. This acquisition aligns with our longer-term optimization of FactSet's balance sheet. Funding will consist of $2 billion in initial committed transaction financing from PNC Bank and Bank of America, the primary banks in our existing credit facility, as you can see in column #1 on the slide. Additionally, as you can see on column #2, we are considering a potential $1 billion bond issuance to replace some of the initial bank financing. Timing on this issuance will be subject to regulatory approvals. On Slide 13, as I just mentioned, to fund the CGS acquisition, FactSet secured $2 billion in committed financing from PNC Bank and Bank of America. The financing facility consists of a $1 billion 3-year term loan A and $1 billion 18-month term loan A. Also in connection with the financing, we will replace and resize our existing 5-year $750 million revolving credit facility with a new $500 million 5-year revolving credit facility with a $750 million additional accordion feature. Following the acquisition closing, we intend to suspend our share repurchase program for the remainder of our fiscal 2022, which, to remind you, ends on August 31. That excludes potential minor share repurchases to offset the dilution impact from stock option grants. Turning now to Slide 14. As for our longer-term capital allocation plan, we intend to pursue credit ratings in conjunction with our potential $1 billion bond issuance. Proceeds of this issue will be used to replace the $1 billion 18-month term loan, as you can see at item #2. We filed a shelf registration statement yesterday and intend to hold rating agency meetings this month. Once we've completed the CGS acquisition and related financing, we intend to prioritize free cash flow for the repayment of debt to reduce our net leverage. We do not anticipate that there will be any change to our dividend policy. And on Slide 15, our capital allocation priorities will continue to be balanced and focused on investing in our business, creating value for shareholders, ensuring financial flexibility and mitigating risk. This represents our current view of our capital allocation philosophy. First, our businesses have a strong, proven track record that require reinvestment to ensure that we have the best products for our clients. Second, regarding share repurchases. As we stated before, we will temporarily cease share repurchase activities with the exclusion of potential minor share repurchases to offset the dilution impact from stock option grants. Third, we are a growth company with a healthy dividend, and we will continue to return value to our shareholders through our dividends. And finally, we will continue to look at acquisitions. FactSet has prudently managed its capital structure with significant capacity to expand our balance sheet when opportunities arise. This acquisition will not limit us from being an active participant in the M&A part of our industry and from pursuing attractive opportunities if and when they are appropriate. And now I'll turn the call back over to Phil for final remarks before opening the line for Q&A.

Thanks, Linda. In summary, the acquisition of CGS aligns well with our strategy to invest in content and technology, capitalize on market trends and address client needs. As part of CTS, we have the leadership and vision to further CGS' market position and drive long-term value. CGS is an industry-recognized resource with a path to future growth via additional asset classes and other expansion opportunities within FactSet. Additionally, naturally combining trusted identifiers with FactSet's neutral ecosystem will accelerate our open-data strategy and provide avenues for additional growth opportunities. It will also enhance FactSet's financial profile with an underlying growth rate in line with FactSet's and an accretive margin and adjusted diluted earnings in the first full year of ownership as well as expand FactSet CTS to more than $425 million of ASV. Finally, the acquisition is a catalyst for FactSet to consider our inaugural bond offering and pursue a credit rating aligned with longer-term capital structure optimization. That concludes our prepared remarks. We will now open the line for questions and answers. Operator?

[Operator Instructions] Our first question, coming from the line of Manav Patnaik with Barclays.

Congratulations. I just had one -- my first question is just on the numbers, Linda, if you could help maybe. The $175 million in annual revenue, should that be consider a similar number for ACV? And also, you said robust margins and accretive. Can you just help us with what that number might look like?

Sure, Manav. $175 million in revenue, we will need to think a little bit further about whether that -- how that equates with ASV. We just started the process with this acquisition late in October, so we've moved very fast to get to where we are today. Perhaps Phil or Jonathan might be able to comment further on that. We are not speaking specifically to the margins in the CGS business other than to say that they're very healthy. This is a standards business. We will bring this business on board subject to a 1-year services agreement with S&P. And we think that after we do that and bring it on board here at FactSet, the margins will look similar to what the margins look like in other standards businesses. So I hope that's helpful.

Yes. That's helpful. And then just to clarify, I think I get the CUSIP identification part, the attractiveness of that. I'm just trying to understand in terms of the actual data. You mentioned reference data, like just trying to appreciate the proprietariness of the content in there.

Sure. Perhaps Phil or JR could probably...

Yes. JR, do you want to take that one?

Yes. I can take that one. So as a part of the numbering process, other useful data items are collected. And so there's around -- up to 60 data items that are collected in the creation of those numbers. So for example, if you're providing a CUSIP on a bond, you'd start to collect the coupon and the maturity date and whether it had any features and so on and so forth. So those additional features, or you might call them terms and conditions, while the security identifier is being created, provide additional value to CGS' customer base.

And our next question, coming from the line of Toni Kaplan with Morgan Stanley.

Just from a product perspective, just so I understand. Are there any alternatives for CUSIPs? Or really, everyone has to get the CUSIPs from formerly S&P but now will be you guys? And just trying to understand that from the point of view of it seems like there shouldn't be any lost revenue from a transition, but is there any incremental revenue as well? And obviously, you talked about selling additional data and expanding relationships. But just on the actual CUSIPs part, it seems like everyone who's trading in these securities has to have this data.

Yes -- oh, go ahead, JR.

Yes. So CUSIP -- sorry. Yes, CUSIP -- so CUSIP is the National Numbering Agency for the U.S. And as such, any equity trading on an exchange or bond issuance out of the U.S. requires a CUSIP number. So that won't change in the transition from S&P to us. But equally, there are -- as the universe of investable securities expands, there are other useful uses for these identifiers. And so in fact, the breadth of CUSIP coverage now spans 30 or 40 asset classes beyond what you might traditionally think of as a -- of an equity listing or fixed income. And so it's that expansion of the investable community that is obviously what we'd be looking for towards the future. But from a transition perspective, everything should remain stable.

Great. And wanted to ask about the 15% of revenue that's not subscription-based. Is it based on volumes of trades in different securities markets? Or how should we think about just the usage-based component or volume-based component of the model?

Right. So I'm happy to take that one as well. So the 15% is the revenue that's derived upon the CUSIP application. So when an issuer needs a CUSIP for either bond equity or security type, they need to submit paperwork so that, that identifier can be created. And so those, to some extent, are onetime base fees, and they're obviously driven by issuance in the market. And then the other 85% is the subscription part of the business. So that's really the issuance fees when people are applying or firms are applying for a CUSIP number.

Our next question coming from the line of Ashish Sabadra with RBC Capital Markets.

Congrats on the deal as well. And Phil and JR, thanks for providing a lot of color around the cross-sell opportunities. I was wondering, as you think about these opportunities, how should we think about the revenue growth for CGS? From the current mid- to high single digit, how should we think about it over the midterm? And also if it's possible to quantify the revenue synergies also on the FactSet side by ability to sell FactSet into the CGS customer base.

Hey, Ashish, it's Phil. And JR, feel free to add on. So we view this deal as additive from a revenue standpoint. So as we mentioned in the scripts, right, the growth profile of the company is very similar to what FactSet has been doing over the last few years. But we do see a lot of opportunity to extend our DMS capabilities, which is a very fast-growing piece of the CTS business, get into more types of user workflows within our existing clients. And there are going to be other types of firms that you use CUSIP that FactSet might have very little experience or penetration with today that open up further opportunities. So it's hard to comment on sort of like the exact revenue synergies, but we do feel like there's tremendous opportunity across a number of different vectors to take this great franchise, which is healthy by itself, and add more capabilities to it, and of course, continue to invest in new areas.

That's very helpful color. And maybe, Linda, if I can ask a question on the earnings accretion. The acquisition is expected to be accretive in the first year itself. But as we think here about out years, particularly calendar year '23, I was wondering if you could provide any color on how should we think about the accretion there. We were estimating close to a mid-single-digit earnings accretion. Wondering if we are in the right ballpark there. Any color would be helpful.

Ashish, I think we're going to stick to 2022 and make sure that we have that right before we comment on 2023. I think part of this will depend on the synergies we're able to realize as we move forward on this. And it's very attractive in terms of the financials for FactSet given the immediate accretion and the very healthy margins of the acquired business. So we're optimistic, but we'd rather not get into what 2023 accretion would look like at this point. Thanks.

No worries. Congrats once again.

Thank you.

And our next question coming from the line of Alex Kramm with UBS.

Given that this is a little bit of a, I guess, utility-type business, just wondering what type of pricing power this company has, has had in the past. Or is this -- or if there's not much to do on the pricing side, maybe how much pricing has been a contributor to that mid- to high single-digit growth.

Sure. I'll take a shot at this, Alex, and then let JR and Phil add to it as necessary. I think it would be fair to say that the CUSIP business has been managed in a way that is conservative, and pricing has changed modestly over time. I think we have a lot to learn about what can be done with pricing in this business. But given that it is a utility, as you note, I think we need to learn a little bit more before we make decisions about what we're going to do on pricing. However, as a standards business, Alex, as you point out, it does have the ability to take pricing in a value-driven way. But I think we might need to learn a little bit more before we see what we can do with it. And I'll ask JR to comment further, and Phil may want to as well.

No. I think you essentially covered it. It's a valuable industry capability. But until we learn a little more, it's probably -- I think Linda's answer covered it.

All right. Fair enough. And then, Linda, as well for you, maybe talk a little bit more about leverage going forward. If my number -- if my math is right, I think you're going to be sitting around, I think, a little over 3x gross and I think mid-2s on a net basis. Clearly, you just said you want to pay down debt to be ready for other things. So how do you think about leverage, a, on a net or gross basis, where FactSet should be? And then where it could go for any additional kind of opportunities in the marketplace?

Sure, Alex. Thanks for the question. As we had talked about, it's an exciting time to be able to look to optimize FactSet's balance sheet. So as part of this, we're doing quite a few things. We're looking to refinance and change up the nature of our revolver. We're looking to potentially do our first bond issuance with ratings. And we're looking to think about our long-term capital structure. So we're going to be in an unusual situation as we deal with the initial leverage from this deal. As we said, free cash flow will be very much primarily committed to paying down the debt levels. And in terms of how the ratings play out, that's completely up to the rating agencies. So we'll see what we get back. In terms of longer-term leverage levels, I think that we would expect that this company will be an investment-grade company, somewhere around the BAA/BBB level. We'll refine that as we move forward. But we're going to move through this initial period of looking to deal with the debt from this transaction and move forward from there. So hope that's helpful enough.

So no number for us to think when you can go back and buy back stock? I guess it's still to be determined?

Yes. Still to be determined. Let me give you this number, which is helpful. We estimate our free cash flow at about $400 million. So you can look at some of the math there. However, as we said, we're just beginning our conversations with the rating agencies, and we don't want to get ahead of that discussion.

Our next question coming from the line of Kevin McVeigh with Credit Suisse.

Congratulations. Is there any way to think about, beyond CTS, what -- how this can impact the core research and analytics business? I guess said another way, the core run rate of the business is $175 million. Is there any way to think about what it can be as you scale it across the existing platform? I know that's a little theoretical, but was there a certain range to think about, as the business starts to kind of season and become more scaled within FactSet, what the potential revenue run rate of the business can look like?

JR, you want to take that one?

Yes. So we're talking about -- first of all, thank you for the question, Kevin. So we talked about the benefit to CTS and specifically to our Data Management Solutions. But it's important to note that, that infrastructure that drives CTS is the same infrastructure that drives our workstation and analytics business. So in other words, when we build out content or coverage, generally, we try to do that in a symmetrical way and create parity so that whether people want to consume FactSet content in a desktop or in a data feed or an API or in the cloud, they can get that content in either format. So in other words of saying that, as we build out coverage or as we provide coverage to new and evolving asset classes, you should expect that kind of coverage to appear both in CTS products and our desktop products. So you're absolutely right. There'll be a benefit there from a coverage perspective, although we're sort of highlighting CTS here because that's where CUSIP is going to sit. But the build-out of content is really across all platforms.

That's very helpful. And this may be more of a basic question. But the dynamic with the ABA, can you just help us understand that? And at some point, is there some expense synergy there? Does that change over time? I mean, it sounds like it's a relationship that dates back to the late '60s. So just the dynamic with the ABA and how that kind of -- if that gets impacted at all as you kind of transition from S&P to FactSet.

Yes. So the ABA is really the owner of the CUSIP brand, right? And S&P was the operator and now FactSet will be the operator. And so in terms of a relationship, it's a very close partnership, working relationship. So I can tell you from my time at S&P, I would go down to D.C. and meet with them to provide business and product updates. And they do very much want to be involved, and our intention is to manage that relationship in absolutely the same way, work with them both on updating them with respect to how business is going but also on new product concepts. So they're very much involved, and the plan is to maintain that relationship much like S&P did.

Our next question coming from the line of Andrew Nicholas with William Blair.

My first one, just a point of clarification. It sounds like CGS gives you some operational capabilities. There's certainly some revenue cross-sell opportunities as well. Is there any benefit to owning the CGS data specifically? Does that provide you any opportunities that weren't available to you as a licensor of that data or a subscriber to that data feed? And if so, are there any examples that you can provide on that front?

So in terms of CGS' product portfolio, right, so we as FactSet consume CGS products and so do many other investment banks or other data vendors. And so in terms of access to products, we are another consumer of CGS' products just like anyone else. And so there's no unique ability to have access to that, and CGS needs to treat FactSet just like any other data vendor. And that happened at S&P, and that will continue to happen while at FactSet. But obviously, being part of the same company and presumably in the same virtual room, there's an opportunity to collaborate and talk and think about where the industry is going, whether that's new asset classes and the like. But in terms of product assets, that has to sort of stay neutral and be provided similarly across all data vendors.

Understood. And then for my follow-up, you talked a little bit about price as a driver of the growth algorithm. Is there any other way to describe kind of the rest of it, or kind of segment it off? Is the vast majority of the additional growth from new products and asset classes which you hope to kind of keep expanding? Or are there other pieces to this growth algorithm that come above that?

Yes. So I think there's definitely other ways. So CUSIP is continuously thinking about having -- how to add coverage in terms of asset classes or even the fields that go along with that CUSIP identifier. So for example, right, the CUSIP business is starting to add flags around green bonds, right? So which bonds have been flagged as green and therefore meet some sort of ESG criteria, right? So that would be available as a product from CUSIP to the industry. But equally, as you folks know from being on these calls and after acquiring Truvalue, FactSet has a very robust ESG program. And so our ability to create new and interesting products, leveraging the -- potentially the green bond information, just as an example, from CUSIP, along with our own FactSet ESG strategy, are just some of the product ideas. And you can sort of go on and on across the various content initiatives that FactSet has running at this time, from deep sector to private markets. So I don't want to get too deep into product innovation, but we're sort of excited to think about what all the possibilities could be.

Our next question coming from the line of Shlomo Rosenbaum with Stifel.

This first one, I think, is probably for JR as well. I just want to piggyback after the -- off of the last question. I'm trying to understand some specifics about how you could accelerate the growth of CUSIP, kind of a practical on-the-ground extension of the business being part of FactSet versus where it was with S&P beforehand. And if you have to run the business pretty separate and treat FactSet as really a customer or separate sales force, I guess, product development, like how does this -- like how do you accelerate the growth versus what they had before? Or how do you innovate more than you could have, just with licenses? I just -- it's just not clear to me. If you can kind of expand on that and maybe give just a real-life example, one thing that doesn't kind of give away too many secrets.

Yes. So I think the ability to innovate and bring new product to market is of interest. And so there are areas that -- and partnerships that CGS has worked on in the past where we can accelerate. So I gave you one example around ESG bonds and I mentioned other initiatives. So I think what FactSet is very interested in understanding is, what are the product ideas that the CGS group has on hand and which ones of those do we think have legs. And then because of the FactSet strategy and how we are investing, especially in content, we can choose from those CGS ideas and figure out which ones are the ones we want to add some fuel to the fire and invest on. But it's definitely too early to pick. Of the number of things that are on the CGS road map, it's too early to pick which one of those we'd pursue. But there's definitely ideas afoot. And obviously, we'd have to wait until they're part of the team in order to start to analyze those.

Okay. And as a follow-up. I'm trying to understand, maybe Linda, you can help me with this, making the bridge to $425 million of ASV. I think we ended the year at like $218 million for CTS. 1 quarter in -- you don't break it out quarterly, but we're going -- you're adding about -- let's assume all the revenue goes into ASV, you're at $175 million. You have another $32 million that the CTS ASV is going to have gone up. If I just take the change between the fourth quarter ASV and the first quarter ASV, you're only up like $18 million. So I'm trying to kind of bridge us all and try to understand, did ASV go down dramatically in one of the other units? Or what am I missing in kind of trying to understand what's going on with ASV?

Sure. Thank you...

I can take that one, Shlomo. So -- yes. So Shlomo, at the end of Q4, when we refactored the business lines into 3, there was a piece of the digital solutions group that was -- used to be part of wealth that ended up coming into the CTS business. So I believe if you go to one of the final slides in the Q4 presentation, we did that math for everybody. So I think the number exiting last year was closer to $280 million. It might have been $278 million or $279 million in that presentation, which meant that we brought about $60 million or so over from the wealth group. Does that help?

Okay. I'll go back over that.

Next question coming from the line of Craig Huber with Huber Research.

Great. Maybe I missed this, but are there any material cost synergies you want to highlight here?

Craig, we think it's a little early to go into that. I think it's important to note that the purchase price is $1.925 billion. As we said, we expect approximately a $200 million tax benefit from this transaction given the way it's going to be brought into FactSet. And so we feel that we have acquired a mid- to high single-digits grower with very healthy margins. And if you do that math, Craig, we view that we've paid sort of in the -- multiple in the high teens for this business, which is a very attractive level given where deals in the sector are going. But synergies, we have to hold these 2 businesses separate until the S&P-IHS Markit deal closes. So kind of hard to get too deeply under the covers and make commitments on synergies right now. So let us come back to you on that as we go into the next quarter's earnings call and as we do our Investor Day in April.

Just a bookkeeping question. The $175 million of revenue you talk about here, I mean, FactSet licenses this data, correct? So I mean that's going to be a piece of the revenues of the CUSIP underneath S&P. Is it almost immaterial, though? Or asked differently, is the $175 million sort of a net incremental number for you guys?

I think most of it is net incremental. Phil or JR may have a sense of what the net would be. I don't think there's all that much difference, but maybe JR or Phil [ could answer that. ]

Well, yes, happy to address that. It's sort of -- and it sort of doesn't really matter, right? Because from a business perspective, they need to be kept separate. So FactSet's obligations as it relates to its dues for using CUSIP in its products will remain unchanged. And so that relationship existed in S&P and would exist here at FactSet, too.

And my last question, if I could just ask. The other -- you said -- talked about other asset classes that CUSIP has moved into and may move into some other ones in the future. What are some of the main ones you're talking about there outside of fixed income and equities?

Yes. I mean, they offer numbers on all sorts of derivatives. They also, for example, have created CUSIP numbers for precious metals and sort of any structured instrument that's out there and loans and that sort of thing. So as I'm sure all of you know, the world of investable securities is expanding sort of on a regular basis. And so as that universe of investable securities expands, people need security in making sure, as they identify those securities for their systems or they're trading with another partner, that they're actually talking about the same entity. And so as that universe of investable securities, then so does the options for having a CGS-based number. And that's where I think some of the future lies.

Craig, also just in terms of equities, the types of instruments within both equity and fixed income also continue to expand. So you might want to think about SPACs, special-purpose acquisition company, which have been very popular and have sort of mushroomed in terms of usage in the last year or so.

Next question coming from the line of Keith Housum with Northcoast Research.

Just want to unpack the relationship with ABA a little bit more. I just want to get a confirmation that there's no risk that this business goes elsewhere. I mean, as ABA is the owner of the CUSIP brand, what's the -- I guess, is there a long-term relationship or a long-term contract, that FactSet will now have, after the acquisition, that there's no risk this business goes elsewhere?

Let me start on that. Oh, I was just going to say that we...

Yes, that's -- yes, go ahead. So -- go ahead, Linda.

I'm sorry, just going to say, yes, there is a long-lived contract here. And that part of the acquisition, Phil can speak a little bit more about it.

Yes. So I just -- again, just building on the previous comments here, Keith. We're not -- we don't anticipate that anything is going to change there. We expect to have a very fruitful and long-term relationship with the ABA the same way that S&P did. So we're very excited to partner with them, but it's difficult to disclose too many of the terms of that agreement. It wouldn't be appropriate. Okay. Well, thank you all for joining us today. In closing, I want to reiterate how excited we are to welcome CGS to FactSet. This is a natural extension of FactSet's strategy as a neutral, open ecosystem. And we look forward to working collaboratively with the ABA to enhance the CUSIP standard further and ensure a seamless transition of CGS. I wish everyone a happy New Year. And if you have additional questions, please reach out to Kendra Brown. Operator, that ends today's call.

Thank you. Ladies and gentlemen, that does conclude our conference for today. Thank you for your participation. You may now disconnect.