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FactSet Research Systems Inc. (NYSE:FDS)
Q1 2019 Earnings Conference Call
Dec. 18, 2018, 11:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning. My name is Matthew and I will be your conference operator today. At this time, I'd like to welcome everyone to the FactSet First Quarter 2019 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. If you'd like to ask a question at this time, simply press * then the number 1 on your telephone keypad. If you'd like to withdraw your question, press the # key. Thank you.

Rima Hyder, vice president of investor relations, you may begin your conference.

Rima Hyder -- Vice President of Investor Relations

Thank you, Matthew, and good morning, everyone. Welcome to FactSet's first fiscal quarter 2019 earnings conference call.

Before we begin, I would like to point out that the slides we will reference during the course of 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. This conference call is being transcribed in real-time by FactSet's CallStreet Service and is being broadcast live at factset.com. After our prepared remarks, we will open the call to questions from investors. To be fair to everyone, please limit yourself to one plus one follow up.

Before we discuss our results, I encourage all listeners to review the legal notice on Slide 2, which explains the risks 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 is in the appendix to the presentation and in our earnings release issued earlier today.

Joining me today are Phil Snow, chief executive officer, and Helen Shan, chief financial officer. Now I'd like to turn the discussion over to Phil.

Phil Snow -- Chief Executive Officer

Thanks, Rima, and good morning to everyone. We begin fiscal '19 with a positive first quarter and are encouraged by the continuing demand for our data and technology offerings. Clients are turning to us for smarter, better-connected solutions to drive their investment workflows.

Our wealth business drove higher results than usual for the quarter with strong support from our Content and Technology Solutions, or CTS business. We ended the year with good momentum and a strong product pipeline to execute on our growth strategy, but remain cautiously optimistic given the current uncertainty in global markets.

This quarter, we deliver ASV and professional services at $11 million. This includes both organic ASV and professional services for a total of $1.24 billion and a growth rate of 6.6%. As we explained last quarter, professional services are a component of our sales goals, and as a reminder, when we give guidance or refer to our top line growth rate, we will be referring to ASV plus professional services.

Moving on to other key metrics, organic revenue grew over six percent, and adjusted operating margin for the first quarter came in at 31.5%, 20 basis points better than the fourth quarter of 2018. We continue to target 100 basis point margin improvement year-on-year as we get benefits from greater productivity from ongoing investment in solutions and infrastructure and tighter expense management.

This fiscal year adjusted diluted EPS increased 15% to $2.35, primarily boosted by the US tax reform and higher revenues this quarter. Wealth and CTS were the two largest drivers of ASV growth this quarter. Last quarter, we said that we expected most of the impact of the Bank of America Merrill Lynch wealth deal to come in the first half of our fiscal 2019 and the majority of the incremental impact to ASV came in this quarter.

CTS saw increased sales of enterprise feeds and trials of FactSet Data Exploration, a cloud-based data platform we launched this past summer has shown high demand. Open:FactSet, our marketplace for unique and diversified datasets, continues to capture growing client interest with ESG and sentiment data feeds garnering the most attention. In research, workstations grew this quarter, mainly from adding more buy-side and corporate users. This was partially offset by seasonal churn in banking, which is typical at this point in the year.

Analytics started the year with softer results relative to last year. We're excited about our analytics product line as we head further into 2019. New solutions include opening up our portfolio analytics suite through APIs, a unified risk platform, and the Vault. We also see continued success with risk, adding a number of new multi-asset class clients this quarter. We believe our analytics solutions will result in higher growth in the quarters ahead.

We were aware of a few larger cancellations coming into the quarter, and outside of these, the rate of churn remained flat and in line with last year. Our sales team, particularly in the Americas region, has worked hard to minimize the rate of cancellations and their efforts have improved client retention in our largest region, and our overall client retention remains very high at over 95%.

We've enjoyed high client retention for many years and we're seeing that clients want to partner with us for the next generation of smarter workflow solutions. A recent example of this is within our research group. This quarter, we launched the first of our deep sector strategy solutions by introducing detailed banking industry data and are encouraged by its initial demand. We're excited about this product and plan to go deeper into other sectors over time.

Turning to our geographic breakdown, our Americas organic ASV growth rate improved this quarter to over six percent, AMEA experienced faster growth than the prior quarter at over five percent, and Asia PAC continued its double-digit growth rate, growing at over 10%.

In summary, we're pleased with our performance this quarter and excited about the opportunities we have for the remainder of 2019. We are keeping a close eye on headwinds and client cost pressures, but remain very well positioned given our expanding and innovative product suite and industry-leading client service. Our strategy and philosophy of providing open and flexible solutions is resonating with the market and is proving to be a compelling value proposition for our clients.

Let me no turn the call over to Helen to talk in more detail about our financial results.

Helen Shan -- Chief Financial Officer

Thank you, Phil, and good morning. It is great to be here with all of you with a full quarter now under my belt.

We're off to a solid start in fiscal 2019. We delivered growth in organic ASV plus professional services of over six percent, improved our margin from the fourth quarter by 20 basis points, and grew adjusted EPS by 15%.

Beginning with this quarter, we adopted the new accounting rule, ASC 606, Revenue from Contracts of Customers, which should not have a material impact on our financial results.

I will now go through how we performed in the first quarter. Revenues increased seven percent to 352 million on a GAAP basis and over six percent to 353 million on organic basic versus the prior year. The growth was driven primarily by wealth and CTS. For our geographic segments, Americas revenue grew above six percent, and international increased seven percent organically. Americas was largely driven by wealth through higher cross-selling, both to existing and new clients, while international was driven by analytics and CTS.

ASV plus professional services increased to 1.42 billion at the end of our first quarter. Organic ASV increased by more than six percent year-over-year and 11 million since the end of the fourth quarter. This increase was primarily driven by wealth and CTS.

Our GAAP operating margin increased by 150 basis points over the prior year to 28.6%. Adjusted operating margin was at 31.5%, an improvement from the fourth quarter of 2018, but lower than the prior year by 20 basis points.

Operating expenses for the first quarter total 251 million, an increase of five percent over the prior year, primarily driven by higher employee benefits, data costs, and infrastructure investments. However, as a percentage of revenue, costs were lower on a year-over-year basis.

Breaking this down further, cost of services expressed as a percentage of revue decreased by 170 basis points compared with the prior year as a result of higher revenues and lower compensation expense. The higher productivity from the restructuring actions last year had a favorable impact in the quarter. These lower expenses were partially offset by increased spend directly related to revenues such as variable data costs and hiring needed for enterprise deals.

SG&A expenses expressed as a percentage of revenues were in line with the prior year. Lower employee-related cost and marketing expenses were partially offset by increased spend in professional fees, higher bad debt expense, and travel and entertainment costs.

Moving on to tax, our effective tax rate was 12.1% this quarter compared to 18.3% a year ago, largely due to the US tax reform. Our tax liability this quarter was significantly impacted by divesting of restricted stock and the exercises of employee stock option and the refinement of our prior year toll tax charge.

Keep in mind that in our annual guidance for our tax rate, we include an estimated amount for our stock-based compensation benefit. There's still uncertainty with regard to the US tax reform, and hence, we maintain our guidance of 17.5-18.5%.

GAAP EPS increased 23% to $2.17 this quarter versus $1.77 in the first quarter of 2018. The increase was primarily attributable to the lower tax rate, partially offset by higher interest expense. Excluding intangible asset amortization, the deferred revenue fair value adjustment, and other non-recurring items, adjusted EPS grew 15% to $2.35.

 Free cash flow, which we define as cash generated from operations less capital spending, was 37 million for the quarter, a decrease of approximately 18 million over the same period last year. The drivers here include an increase in receivables, timing of payments, higher annual employee bonuses, and higher capital expenditures for the build-out of new office space and technology upgrades. This decrease is partially offset by higher revenue and a lower effective tax rate.

Our client and workstation counts were both up this quarter versus our fiscal fourth quarter of 2018. Our client count increased by 155 and was primarily driven by a change in our methodology, whereby we now include clients from the April 2017 acquisition of Interactive Data Managed Solutions. We also added new sell-side and corporate clients this quarter. We added over 23,000 users, driven by wealth. We now have approximately 5,300 clients and over 115,000 users, crossing the 100,000 mark for the first time in the company's history.

Looking at our share repurchase program, we repurchased 275,000 shares in the quarter for 60 million at an average share price of $220.00. We have 181 million remaining in our share repurchase program.

We remain confident about our outlook for 2019 and are reaffirming the guidance given on our fourth quarter call. As we look ahead to the remainder of this fiscal year, we continue to make investments to drive business growth, to optimize our cost structure, and to return long-term value to our shareholders.

With that, we are now ready for your questions. Matthew, back over to you.

Questions and Answers:

Operator

Thank you. At this time, I'd like to remind everyone, in order to ask a question, please press * then 1 on your telephone keypad. Our first question comes from the line of Joseph Foresi with Cantor Fitzgerald. Your line is open.

Joseph Foresi -- Cantor Fitzgerald -- analyst

Hi, I wonder if you could start by talking about, the market's had some recent volatility. How has that impacted demand? It sounded like the buy-side was good, but there are some investment banking churn and any thoughts on how that activity or that volatility could play out in 2019.

Phil Snow -- Chief Executive Officer

Hey, Joe, it's Phil Snow. Yes, definitely, there's been some volatility in the market. I'm not sure we've seen any difference, really, in the end markets up to this point. That doesn't mean if it continues that we wouldn't see that, but it has not really changed things. I think we're still seeing strong demand for our products and our sell-side business is actually pretty healthy. We saw a good addition of new clients on the sell-side. The amount of churn that we saw was actually a little bit better, I think, than it was last year in banking, so overall, we're encouraged by what we're seeing in banking and we continue to build out and release new product to that segment of the market, and we also saw an uptick in sell-side research users this quarter versus the same quarter last year.

Joseph Foresi -- Cantor Fitzgerald -- analyst

Okay, that's helpful, and then I know you held to this idea of expanding margins 100 basis points per year. Maybe you could break down the drivers of that 100 basis point margin improvement in '19 and where you're expecting it to come from so we can get a good sense of how achievable the target is. Thanks.

Helen Shan -- Chief Financial Officer

Hi, this is Helen. Thanks for your question. Let me talk a bit about Q1 and that hopefully will help lead to talking about what we think for the year. We're executing on growing our business and managing our expenses tightly. The sequential improvement from Q4 reflects those actions. This quarter, we had some expense drivers related to employee-related costs such as medical and upgraded technology stack, but there are costs also tied closely to revenue such as data cost and increased hiring to support new client wins, but for us, it's about really maintaining tight control on costs. We're seeing, as I said, some positive impact from some of the actions that we took at the end of last year, and that's coming through, as well as continued benefits from integrating our acquisitions.

Joseph Foresi -- Cantor Fitzgerald -- analyst

Okay, thank you.

Helen Shan -- Chief Financial Officer

You're welcome.

Operator

Our next question comes from the line of Toni Kaplan with Morgan Stanley. Your line is open.

Toni Kaplan -- Morgan Stanley -- Analyst

Good morning. Phil, I know you mentioned that the majority of the BAML contract is now in ASV. Is there any additional contract value that you would expect that's not yet realized, meaning, are all the workstations in there, but maybe not all of the feeds, or just any sort of additional color on what we could expect in future quarters, or maybe it's just, like you said, the majority is already in there? Any color would be helpful.

Phil Snow -- Chief Executive Officer

Yeah, the majority is in there -- thanks, Toni -- but with any large client, we always have lots of cross-selling opportunities that are available, so I think it's deepened our relationship with that particular firm and that's our strategy when we work with lots of other firms, but in terms of the users and so on, you're right that this is an enterprise deal, a multi-year deal, and that most of it has been recognized already and from an ASV standpoint.

Toni Kaplan -- Morgan Stanley -- Analyst

Okay, and just directionally, because I know you don't want to give us the actual incremental size of it, but, excluding the contract, would your organic ASV have decelerated this quarter, or, how should we just think of that directionally?

Phil Snow -- Chief Executive Officer

I think the core clients on the buy-side and the sell-side are very healthy, so there were a couple of lumpy things in there this quarter. As I've talked about before, we do have an SP&A business, which we sell FactSet content and some other pieces of our product offering to other types of firms, and this was one of those quarters where there was some lumpy stuff in there, but yeah, overall, we're very encouraged by the underlying trends that we see on the buy-side and the sell-side, and our product suite across all of our different business lines is resonating.

Toni Kaplan -- Morgan Stanley -- Analyst

Great, and just for my follow up, your employee count increased by just under two percent this quarter. It's the lowest that we've seen it. Could you just give some additional color on what areas where you've slowed in terms of hiring, whether it be in sales force or product development or back office? That'd be very helpful, thank you.

Phil Snow -- Chief Executive Officer

Yeah, I don't think there's any one particular area that we're cutting back on. I think we're just sort of looking at our business and trying to be the most efficient that we can across the different business lines.

Toni Kaplan -- Morgan Stanley -- Analyst

Thank you.

Operator

Our next question comes from the line of Manav Patnaik with Barclays. Your line is open.

Manav Patnaik -- Barclays -- Analyst

Thank you, good morning. Phil, I just wanted to clarify, you talked about, I think, how you were aware of several closures coming into the quarter, but then the incremental closures with in line with the pace of last year, so I'm just trying to -- I was just hoping to get a little bit more color in terms of maybe what you've assumed in your guidance, I suppose.

Phil Snow -- Chief Executive Officer

Yeah, so I think I did mention -- Thanks Manav -- in Q4 that there were some -- we have a lot of multi-year agreements with large firms and there are a fair number of those that we were renegotiating, so I'd say we're encouraged by how that's trending, which I think gives us a confidence that we will still be in the same range that we guided you to from a top line standpoint, and as we get further into Q2 on our next call, if we have more information to share, then we could talk about it then, but I think, overall, there are a large number of these and we're feeling pretty good about how we're doing.

Manav Patnaik -- Barclays -- Analyst

Okay, and then, could you also just elaborate on why analytics maybe started out softer than you would have thought and why you're confident it'll make up in the rest of the year?

Phil Snow -- Chief Executive Officer

Yeah, so Q1, as you know, is typically a lighter quarter, so that could -- for any of our businesses, it could end up being that Q1 just is not as material as it was the previous year. Analytics is doing really well. They had a very strong Q4, so there were a lot of deals that closed at the end of the fiscal year. We did sell, I think, eight of our multi-asset class risk solutions in Q1, so that is obviously a product that we're very excited about, risk in general. We released version two in our MAC model and that's resonating really well with the client. It's a broad product suite. A lot of the acquisitions that we did are in that group and we're getting those integrated, and we're really excited about the product pipeline as we move through the year and what that group can achieve for us.

Manav Patnaik -- Barclays -- Analyst

Great, thank you.

Operator

Our next question comes from the line of Hamzah Mazari with Macquarie Capital. Your line is open.

Hamzah Mazari -- Macquarie Group -- Analyst

Good morning. Thank you. My first question is just, any color you can give as to how correlated you think your business is to headcount growth in both buy-side and sell-side relative to the last cycle? And the reason I ask is your mix has shifted to workflows. There's some other stuff probably going on that maybe makes your business more resilient relative to headcount growth, but maybe you want to add some color there.

Phil Snow -- Chief Executive Officer

Yeah, Hamzah, thanks for the question. Yeah, I think you're right on the money that our business over time has become less correlated to headcount growth as we move from workstation to workflow. You saw our CTS business do very well this quarter, and CTS typically is not as correlated to headcount as users are, but we did see a great uptick in our users this quarter. We're really encouraged by what we're seeing in wealth. I think the deal that we did just paves the way for us to do more of those types of deals and we're seeing a lot of interest, and all of the work that we're doing to put deeper sector content into the workstation, all the work that we're doing from a technology standpoint to sort of light up the workstations for FactSet, all of that's really positive and we're seeing good demand for our products across users, as well as on the technology side for workflow, so we're hitting it from both sides.

Hamzah Mazari -- Macquarie Group -- Analyst

Okay, great, and my follow up question is just around potential client outsourcing opportunities. I think you had mentioned that that may be an area that's sort of not baked into your overall addressable market, and as well, you had talked about potentially some more front office opportunities as you look at ASV growth long-term, so just curious on those two items; outsourcing opportunity and front office work, what you're seeing there, or is that in sort of early innings? Thank you.

Phil Snow -- Chief Executive Officer

Yeah, so I think when you say outsourcing opportunity, maybe you mean FactSet going through other third parties in what we've called SP&A, is that right?

Hamzah Mazari -- Macquarie Group -- Analyst

Right, right.

Phil Snow -- Chief Executive Officer

Yeah, so I think a lot of opportunities do exist. As we unbundle our product offering and go to market with more of an open strategy, we have more than just content feeds to offer now within the marketplace, so I think you're right. The buy-side and the sell-side, I think, are looking for innovative ways to consume value. We're delivering that through -- by ourselves by unbundling our offering and going to market in new and interesting ways, but that also gives us the opportunity to work with third parties that we historically wouldn't have. We are a very collaborative firm. We're out there, we're talking to a lot of technology companies, a lot of firms in our space, and our approach is to be open, so I think that is a good opportunity for us as we move forward, and one that we're obviously focused on. What was the second part of your question? Sorry.

Hamzah Mazari -- Macquarie Group -- Analyst

Yeah, the second part of the question was just what you're seeing in terms of opportunities in the front office for FactSet.

Phil Snow -- Chief Executive Officer

Yeah, that was what I was referring to a little bit was our analytics suite. Getting -- releasing our portfolio management platform, which you will see in the second half where a portfolio manager, essentially can turn a fact set from a read-only experience to a read-write experience, and look at their holdings, model a trade, enter a trade, execute a trade. You can do all of those things in FactSet with the different pieces we have, but it's gonna be a really elegant integrated solution through our front end. I think we're gonna see a very positive response to that. We've had equity only single trade out there for a little bit, but we're quickly building out multi-asset class, multi-portfolio, and I think that for us is going to give us a great opportunity to link traditionally what we've done with research through to the performance [inaudible], and create that end to end solution that clients are looking for in this market.

Hamzah Mazari -- Macquarie Group -- Analyst

Great, thank you.

Phil Snow -- Chief Executive Officer

Yep.

Operator

Our next question comes from the line of Shlomo Rosenbaum with Stifel. Your line is open

Shlomo Rosenbaum -- Stifel -- Analyst

Hi, good morning, thank you for taking my questions. Hey, Phil, I'm just trying to reconcile 23,000 incremental users with 5 million of incremental ASV, it's just -- if you kind of do the math it's like 18 bucks a month per user. Are some of the ASV going into the professional services section of the ASV or how should I think about that, is there to be counted as a user, a different qualification versus being counted as ASV?

Phil Snow -- Chief Executive Officer

I think the organic incremental ASV was more like $11 million. I think Helen can probably explain some things that went on there from an FX standpoint, I think 5 is understating it, and yes, within segment of the wealth market, I think the price is lower than traditionally what we've captured, but I think the opportunity that we get in terms of just getting a wider footprint of users of our product and the railroad tracks that lays down for us to kind of upsell within to that ecosystem is very compelling. Now, Helen, do you want to hit the FX piece of it?

Helen Shan -- Chief Financial Officer

Sure, I think that -- remember that the 11 million is made up of both ASV and professional services, so it's the combined number and to Phil's point, that was on an organic basis, which as you know excludes the FX impact with the FX, that's how the 5 million comes through.

Phil Snow -- Chief Executive Officer

So, we've talked about this a little bit before, but I think looking at our business from an ASV per user metric, it's a difficult way to analyze our business just because we sell for so many different types of users and so many different types of clients.

Shlomo Rosenbaum -- Stifel -- Analyst

Okay, and then I just wanted to move a little bit toward the open is the pace of new data sets coming on accelerating, particularly from third parties, and is there any update you can give us a little bit more on client response and the opportunities there?

Phil Snow -- Chief Executive Officer

Sure, there are two parts to that, one is what we call the data exchange. We continue to add more third parties into that ecosystem, the two areas that I eluded to in my comments earlier were, we're seeing a lot of interest in the ESG, and sentiment providers in particular, and the data is also up there with all of FactSet's core content. So, the other piece we've launched is something called data exploration. Within that ecosystem you can come in and you can explore the data, all of it, and you can use products like Tableau, you can code in Python. That's really sort of where a lot of the analysts of the future are going to be doing their research is in an ecosystem like that. We have seen a lot of interest. We've got a lot of people trailing us. It isn't material yet in terms of what it's delivering in ASV, but we're very encouraged by what it means for the future.

Shlomo Rosenbaum -- Stifel -- Analyst

Okay, thank you.

Phil Snow -- Chief Executive Officer

And just to add on Shlomo, to your question about the size of that deal and what it means it's great for us to be in the big banks, it opens doors for us. I think we're creating relationships that traditionally FactSet hasn't had, and it really allows us to cross-sell the suite of solutions that we have. We traditionally within a little bit more of bottoms up in terms of how we sell, but as we develop relationships with these bigger firms at a higher level I think it means good things for our company.

Shlomo Rosenbaum -- Stifel -- Analyst

Thank you very much.

Phil Snow -- Chief Executive Officer

Sure.

Operator

Our next question comes from the line of George Tong with Goldman Sachs. Your line is open.

George Tong -- Goldman Sachs -- Analyst

Hi, thanks. Good morning. I'd like to drill down into your underlying business, excluding the BAML contract. You've indicated that you saw some lumpiness in the quarter with ASV performance. If you include the impact of the lumpiness, can you discuss whether ASV organic growth was positive or negative in the quarter and whether you foresee additional lumpiness that could impact organic ASV over the remainder of the year?

Phil Snow -- Chief Executive Officer

It was positive. If you take out a couple of big things that happened, and as I mentioned, we're feeling encouraged by the negotiations that we're having for the large multi-year contracts that we have for the rest of the year, and just to restate it, feel pretty good about the guidance that we gave at the beginning of the year and can give you more color at the end of Q2.

Helen Shan -- Chief Financial Officer

And one thing I would add, as we think about the business, we do think of BAML as part of our organic growth. I'm not sure whether when you think about taking it out, but the reality is, it is part of -- we put our resources toward that deal, and it's just part of how we normally run our business.

George Tong -- Goldman Sachs -- Analyst

Got it, that's helpful and just as a follow up, you've indicated that you have several large deals in the pipeline from both the renewal and new client perspective, can you elaborate on how much of these large deals are renewals versus new clients and then what assumptions on the conversion rate of these large deals you're currently incorporating into your full year guidance?

Phil Snow -- Chief Executive Officer

That's basically a really good mix of both. Our sales team is really good, I think, about wading these from a probability standpoint, and it just gives us confidence in the guidance that we gave you in terms of what we're gonna deliver. We've got a very broad-based suite of products, we've got a broad-based client mix that we're going into. Some of these are large deals, but we have a very good middle market business, and we close a lot of interesting small clients every year as well, so it's very diversified.

George Tong -- Goldman Sachs -- Analyst

Very helpful, thank you.

Operator

Our next question comes from the line of Ashish Sabadra with Deutsche Bank. Your line is open.

Ashish Sabadra -- Deutsche Bank -- Analyst

Thanks for taking my question. Just a question on the professional services ASV that was pretty strong on the year on year basis. Should we expect that kind of momentum going forward or was that more related to the BAML deal?

Phil Snow -- Chief Executive Officer

You're asking specifically about professional services?

Ashish Sabadra -- Deutsche Bank -- Analyst

Yes, professional services ASV, which was a --

Phil Snow -- Chief Executive Officer

Yeah, that was a very small piece of our incremental ASV organic this quarter. It was, well, less than $1 million and it wasn't material in Q1 of last year either. Most of what you saw in Q1 was prescription based revenue on a forward-looking basis.

Ashish Sabadra -- Deutsche Bank -- Analyst

Okay, that's helpful and then maybe just to follow up a broader question on the competitive environment, have you seen any changes in the competitive environment either from Bloomberg getting more aggressive the research or on the sell-side firm or Thomson Reuters with branded as Refinitiv have you seen any change in dynamics there?

Phil Snow -- Chief Executive Officer

No, we're not seeing any material change in the competitive environment, so we still feel really good about how we're doing and taking -- believe that we're taking market share from the majority of the competitors that are out there.

Ashish Sabadra -- Deutsche Bank -- Analyst

Thanks.

Phil Snow -- Chief Executive Officer

And just to make sure we clarify your question, BAML is not in our -- there's no professional services revenue from the BAML deal.

Ashish Sabadra -- Deutsche Bank -- Analyst

Okay, that's helpful thanks.

Operator

Our next question comes from the line of David Chu with Bank of America. Your line is open.

David Chu -- Bank of America Merrill Lynch -- Analyst

Thank you. Phil, you just mentioned that organic ASV ex BAML was positive if you take out a few big things that happened, can you just speak to that? Is it just that lumpiness of those particular projects or what else was the, quote-unquote, these big things in the quarter.

Phil Snow -- Chief Executive Officer

Yeah, I spoke about one earlier it was some activity within our SP&A business which is not buy-side and sell-side.

David Chu -- Bank of America Merrill Lynch -- Analyst

That was a --

Phil Snow -- Chief Executive Officer

You're defining core as buy-side and sell-side, we accelerated.

David Chu -- Bank of America Merrill Lynch -- Analyst

Okay, and then just in terms of margins how should we think about the cadence of margin expansion over the course of the year? I mean, should we expect sequential improvements?

Helen Shan -- Chief Financial Officer

Hi, this is Helen, thanks for your question. I think it depends a bit on the investment that we're making. We have investments that are more in the first half of the year, so we expect to see some greater -- that's more of a timing perspective and so I would say that we should expect steady improvement through the course of the year, but as you know, we give annual guidance and not quarterly guidance.

David Chu -- Bank of America Merrill Lynch -- Analyst

Got it, OK, thanks.

Helen Shan -- Chief Financial Officer

You're welcome.

Operator

Our next question comes from the line of Peter Appert-Piper Jaffray. Your line is open.

Peter Appert -- Piper Jaffray -- Analyst

Good morning, a question for Helen, on the free cash flow conversion, a little bit depressed in the current quarter, you mentioned receivables and a few other things. I'm wondering if the conversion rate to free cash flow's gonna be a little bit different this year or is it gonna be consistent with historic?

Helen Shan -- Chief Financial Officer

Right, thanks for your question. I think I would look at a number of things that we saw this quarter. We experienced higher levels of client receivables, we had the timing of both vendor and tax payments that came through, higher employee bonuses which as you know come through. We pay out in the first quarter and higher capital expenditures as well, and that CapEx is related to build-outs that we've got outside the US as we really prepare for the growth I wouldn't necessarily look at this quarter as something that is different, but we did have things that occurred that provide some of that volatility or seasonality.

Peter Appert -- Piper Jaffray -- Analyst

Okay, but specifically that you would think the free cash flow conversion, the EBITA to free cash flow would be similar this year to historic levels?

Helen Shan -- Chief Financial Officer

Yeah, I would, but we do have as I said, some higher CapEx we're making investments back into the business.

Peter Appert -- Piper Jaffray -- Analyst

Okay, and then Phil, you called out a fewer larger cancelations in the first quarter, I'm just wondering if there's any common theme in terms of the clients that choose to not renew, in terms is it generally about price, is it generally about specific other vendors, any commonality you can cite?

Phil Snow -- Chief Executive Officer

No, we have large deals with some clients that are SP&A related or not, and there's no theme there that I can speak to.

Peter Appert -- Piper Jaffray -- Analyst

And the first quarter not -- I mean, the cancelation rates in the first quarter, do you view them as unusual or sort of typical business as usual?

Phil Snow -- Chief Executive Officer

No, I don't. I think if you look at the majority of our business I think we were -- we did well.

Peter Appert -- Piper Jaffray -- Analyst\

Okay, thank you.

Operator

Our next question comes from the line of Peter Heckmann with Davidson. Your line is open.

Peter Heckmann -- Davidson -- Analyst

Hey, good morning. Most of my questions have been asked. I just wanted to follow up on one area within OMS, EMS systems on the trading desk we've seen a bit of consolidation there with all three of your larger competitors changing hands over the last year. Have you seen any change in the competitive dynamic maybe the buyers trying to bundle those services either portfolio accounting or funding administration services, that might require you to change your marketing approach?

Phil Snow -- Chief Executive Officer

This is a new area for us. I think what we're seeing demand for is an integrated solution and consistent data and analytics all the way from research through to performance reporting. I think that's what we're good at and when we made the acquisitions of EMS and OMS, that's what we were most excited about was getting those integrated. Yeah, we see consolidation, I would say that our integration has not gone as quickly as we would have liked, but I feel really good about where it sits now and the product that we have coming to market, and we are beginning to see more demand for our OMS product in particular then we had over the last year.

Peter Heckmann -- Davidson -- Analyst

Got it, that's helpful, and then just as a follow-up, and forgive me if I missed it, but in terms of just the timing of the one large go-live during the quarter, does that happen first, second, third months of the quarter?

Phil Snow -- Chief Executive Officer

That's a good question I don't have that exactly and maybe Rima can answer that one for you later to that.

Peter Heckmann -- Davidson -- Analyst

Okay, thank you.

Phil Snow -- Chief Executive Officer

Yep.

Operator

Our next question comes from the line of Tim McHugh with William Blair. Your line is open.

Tim McHugh -- William Blair -- Analyst

All right, thanks. Just the numbers one to start. I guess you said you changed the definitions I guess for the user and client count to include the digital business. Can you give us a clean number perhaps? I'm not sure how much those impacted those two metrics.

Phil Snow -- Chief Executive Officer

Sorry, Keith, can you repeat that?

Tim McHugh -- William Blair -- Analyst

Sorry, I believe you changed the definition of the client count and I believe maybe user count as well to include acquisition from the prior year and so it's not a clean comparison when we look at the sequential of the year over year growth rates of those numbers. I wasn't sure if you could give us a clean number to adjust for that factor.

Phil Snow -- Chief Executive Officer

Yeah, so the wealth -- the majority of the new clients were wealth related to FDSG. Outside of that, I think our clients that we added were 23 this quarter and if you look at the mix of those, I think it was heavily weighted toward the banking area was up and corporate clients were up as well.

Tim McHugh -- William Blair -- Analyst

Okay, thank you and then on the mention of more renewals this year, I guess including through the second quarter this year, can you give us any sense how outside of the norm, I guess is the renewal risk or opportunity either way you want to look at it this year versus a normal year for you?

Phil Snow -- Chief Executive Officer

I don't think it's that much different, think we've got a lot of big clients and a lot of them come up for renewal every year.

Tim McHugh -- William Blair -- Analyst

Okay, thank you.

Phil Snow -- Chief Executive Officer

Thanks for the question.

Operator

Our next question comes from the line of Keith Housum with Northcoast Research. Your line is open.

Keith Housum -- Northcoast Research -- Analyst

Good morning, just one question for you here, more on the international side of business, if I look at how the international ASV has grown, I guess this quarter compared to, say, the past eight quarters, it seems that the international growth has been kind of slowing down from the ASV perspective, any color on -- are you guys reaching maturity in those markets, or international markets are more challenging in the US? Just any color you can give on that growth.

Phil Snow -- Chief Executive Officer

Yeah, thanks for the question, Keith. We continue to see double-digit growth in Asia, it was a little bit lighter than I think the previous quarter, but it's still over 10% and again, Q1s typically not a big quarter for us. I think in Europe, we're actually doing pretty well. I think it might have kicked up actually in Europe and despite the environment over there, I think that we're encouraged by the activity and what we're seeing and by no means are we tapped out. I think there's a tremendous opportunity for FactSet in general across the markets and we're very excited about all of our opportunities globally.

Keith Housum -- Northcoast Research -- Analyst

Got you, thank you, appreciate it.

Phil Snow -- Chief Executive Officer

Thanks.

Operator

Our next question comes from the line of Alex Kramm with UBS. Your line is open.

Alex Kramm -- UBS -- Analyst

Yeah, hey, good morning everyone. Sorry to come back to the ASV bridge, but I quite frankly am still a little bit confused, because I feel like there are a few different ways you've been talking about this. If I just step back, I think you said quarter over quarter is the increased 11 million, but if we look at the stated number I think it's 5 to 6 million, so I guess 5 million or so FX headwind, so maybe you just confirm that but secondly if I then look at excluding BAML, would quarter over quarter actually would have been negative or would have been positive on a stated basis, I know there were some losses, but on a stated basis would it have been positive or negative?

Phil Snow -- Chief Executive Officer

So, I think you're right there were about 5 or 6 million in headwinds from an FX standpoint, and if you exclude the some of the SP&A, activity that I spoke about we would have been positive.

Alex Kramm -- UBS -- Analyst

Right, but basically if the SP&A was in there it would have been negative. That -- forgetting about that impact for a minute, that brought it negative, I guess is the point.

Phil Snow -- Chief Executive Officer

Yeah, I think the thing to focus on is that we grew ASV by $11 million and I think that's great, we grew and if you try to think of BAML as non-core, I think that's the wrong way to think about it. This is an interaction of our product suite that's opening up a new market for us. I would focus on the fact that we're growing and that we're getting into new markets, and there's a lot of opportunity for the company.

Alex Kramm -- UBS -- Analyst

Yeah, totally agree. I think there was just some confusion so I just wanted to clear that up, thank you. Secondly, on the wealth side, Phil, think you made the point that you are getting a lot of incomings, I guess and anecdotally speaking we're hearing that to that it definitely raised the bar, the BAML deal, but maybe you could just talk about, a little bit more the detail in terms of where is it coming from, what are you seeing, what are the discussions, but then also maybe talk a little bit more broadly about the go-to strategy on wealth now, because BAML's obviously the largest one out there, you have maybe two more firms above 10,000, then maybe less than a handful in the mid thousand and then you have a very long tail, so how's the sales approach actually now focused in terms of tapping really into wealth because it's a very diverse market?

Phil Snow -- Chief Executive Officer

Yeah, it's a diverse market but this deal I think has provided great visibility for us and we're seeing a lot of interest. You're right that there may be only a few firms that have greater than 10,000, but we're seeing very good interest from firms that have thousands of users. I think the product that we went to market with is really a step change in terms of what the functionality that the advisors now have access to. Now, this is a long runway, I mean, these deals take a little while to get through. I

I'm not sure I would anticipate a big impact from it at FY '19, but I think as you look forward into FY '20 this could be a really positive thing for us in terms of our growth.

Operator

Our next question -- our last question, sorry, comes from Bill Warmington with Wells Fargo. Your line is open.

Bill Warmington -- Wells Fargo -- Analyst

Good morning everyone. I wanted to ask about the multi-asset risk side, maybe you could talk a little bit about the new winds there, give us some color in terms of the types of clients that are signing up and then also maybe a little color in terms of what competitors are losing the business.

Phil Snow -- Chief Executive Officer

Yeah, great question. The multi-asset class risk, I think we're seeing demand for that across our institutional asset management clients, both small medium and large. We're seeing a lot of interest for it, asset owners globals, so those are the two primary firms that we're seeing interest from, types of firms and I think the competitive market is -- sometimes these are in-house solutions, sometimes it's the usual suspect. I think why people are coming to FactSet and why they're excited is the integrated solution that we have and some of the innovative things that we're introducing to the market as a result of acquiring the Cognity team as part of our BISAM acquisition. So, that's an exciting thing for us and we're seeing a lot of interest in a scenario that we continue to invest in.

Bill Warmington -- Wells Fargo -- Analyst

Excellent, well, thank you very much for that color.

Phil Snow -- Chief Executive Officer

Thank you and thanks to everyone for joining us on the call today, If you have additional questions please call Rima Hyder and we look forward to talking to you next quarter. Operator, that ends today's call.

Operator

This concludes today's conference call and you may now disconnect.

Duration: 47 minutes

Call participants:

Rima Hyder -- Vice President of Investor Relations

Phil Snow -- Chief Executive Officer

Helen Shan -- Chief Financial Officer

Joseph Foresi -- Cantor Fitzgerald -- Analyst

Toni Kaplan -- Morgan Stanley -- Analyst

Manav Patnaik -- Barclays -- Analyst

Hamzah Mazari -- Macquarie Group -- Analyst

Shlomo Rosenbaum -- Stifel -- Analyst

George Tong -- Goldman Sachs -- Analyst

Ashish Sabadra -- Deutsche Bank -- Analyst

David Chu -- Bank of America Merrill Lynch -- Analyst

Peter Appert -- Piper Jaffray -- Analyst

Peter Heckmann -- Davidson -- Analyst

Tim McHugh -- William Blair -- Analyst

Keith Housum -- Northcoast Research -- Analyst

Alex Kramm -- UBS -- Analyst

Bill Warmington -- Wells Fargo -- Analyst

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