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FactSet Research Systems Inc (NYSE:FDS)
Q1 2020 Earnings Call
Dec 19, 2019, 11:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the FactSet Q1 2020 Earnings Conference Call. [Operator Instructions] After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions]

I would now like to hand your conference over to your speaker today, Rima Hyder. Please go ahead, madam.

Rima Hyder -- Vice President, External Communications

Thank you, Marcella and good morning, everyone. Welcome to FactSet's First Fiscal Quarter 2020 Earnings Call. We are joining you today from our brand new global headquarters in Norwalk, Connecticut. 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.

After our prepared remarks, we will open the call to questions from investors. To be fair to everyone, please limit yourself to one question, plus a 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 are in the appendix to the presentation

and in our earnings release issued earlier today.

Joining me today are Phil Snow, Chief Executive Officer and Helen Shan, Chief Financial Officer.

Right now, I'd like to turn the discussion over to Phil Snow.

Philip Snow -- Chief Executive Officer

Thanks, Rima and good morning, everyone. We begin our fiscal '20 with growth across most of our businesses and I want to remind everyone that our first quarter is typically the smallest of the year and it's important to look at the half and full-year performance as more appropriate measures of progress. I'm pleased that we have a healthy pipeline for the first half of our fiscal year, especially against the backdrop of sustained industry pressures.

On our last earnings call, we outlined a three-year plan to accelerate the breadth and depth of our investments in targeted areas within content and technology with the goal of driving higher top line growth over the long term. Our team has hit the ground running, delivering encouraging early progress in Q1. Within content, our deep sector and private markets efforts are proceeding at pace, and we hired more technical [Phonetic] experts following the launch of our successful banking regulatory data.

We're making good progress integrating third-party private markets data into FactSet and are expanding our valued StreetAccount coverage into new markets. We believe this expansion of coverage will resonate across all of our business lines, particularly research as well. Our continued efforts to grow our tech stack are also yielding early results. We've tripled the number of APIs available since the start of the fiscal year and are on track to release more in the second quarter. Our migration to the public cloud is well under way and we have identified opportunities to reduce our fixed data center costs in the long run.

From a product perspective, we are building momentum in analytics with multi-asset class risk, fixed income and Vault, our new performance measurement product, each showing particular strength. We're also very pleased with our wealth pipeline and the positive response from clients.

Finally, we see growing demand for our open solutions. We announced this quarter, the FactSet is now available on OpenFin and we're proud to be the first market data provider to do so. As early adopters of the shift to more open and flexible product to access, we believe the wind is on our backs and we will continue to deliver information to clients where, when and how they want it.

In sales, we've evolved our compensation plan and sharpened our focus on client retention and expansion. These changes include growing our strategic client group, which looks at for our top accounts to cover more clients and build upon the strong C-level relationships we have in the industry. We're also expanding our new business and sales and engineering teams that capitalize on increasing technology opportunities. While these corrective measures will take time to impact our top line as the industry evolves, we're continuing to take proactive steps from our position of strength to ensure continued growth.

Looking at ASV in total, ASV + Professional Services grew at 4%. This growth rate reflects a decrease in ASP in the quarter driven by higher than expected cancellations in research and a decrease in our add-on business where we sell to -- cross-sell to existing clients. In addition, new business sales increased year-over-year as we added more clients this quarter. Overall, we see continued cost pressures among institutional asset managers and churn within our banking clients.

However, it's important to remember that the large banks are long withstanding clients of FactSet and when they hire later in our fiscal year next summer, we accordingly expect the benefit. This quarter, once again, we saw growth in users from corporate and private equity firms, an area where we're investing.

In the Americas, we saw a healthy growth in wealth, asset owners and hedge funds. This was offset by a seasonal banking churn in our research business. Americas had a tougher comparison versus the first quarter of 2019 when we had larger deals that contributed to higher ASP. We remain optimistic about the Americas as we deepen existing client relationships and capitalize on new business opportunities.

In EMEA, we had positive momentum with the buy side with the wealth and institutional asset managers. This region is facing some of the same cost pressures we have previously seen in the Americas and uncertainty with regulations and the political environment. Our pipeline looks healthy for the year with institutional asset managers, asset owners and wealth managers, as we see a demand for our analytic solutions.

CTS was the main driver of the 10% growth in Asia-Pacific as we sold data feeds across the region, primarily to local data providers. The opportunity in Asia-Pac, is with the buy side, driven by risk solutions for asset owners and our analytics offerings for the institutional asset managers, especially for the investment portfolio lifecycle. We continue to be bullish about our opportunity in this region and we're investing appropriately to capitalize on its potential.

In the first quarter, we also saw promising growth in Wealth, CTS and Analytics. Wealth was the largest contributor as we continue to have market share in this space. Analytics was another bright spot driven by the strong performance of fixed income and risk products, while CTS continued to see solid demand for core and premium data feeds.

Our adjusted operating margin and adjusted EPS came in strong this quarter, and we believe that for this year, we will be more in line with our annual guidance as we continue to execute throughout the year in accordance with our investment plan.

In closing, I want to reiterate that our fiscal year is a tale of two halves. Our pipeline is healthy, and we believe that we are on sound footing to deliver on the first half of our fiscal '20 and are well positioned for the year. We have a proven track record of returning consistent long-term value to shareholders, a record that we firmly believe we will continue. It is also increasingly clear that clients are demanding more open, flexible and efficient technology to help them manage change, an area where we continue to excel. And as we execute our three-year plan, early signs indicate that we are taking a winning path to ensure continued growth through expanded opportunities with existing clients, higher retention and new business.

Let me now turn the call over to Helen, who will discuss the specifics of our first quarter performance.

Helen Shan -- Chief Financial Officer

Thank you, Phil and good morning. It is great to be here with all of you. We begin our fiscal 2020 with a solid operating performance, 10% earnings growth and operating margin that continues to reflect the productivity and efficiency improvements made throughout 2019. While we are at the beginning of our three-year investment plan, we are on pace as we start to ramp up hiring and spend.

I will now walk us through the specifics of the quarter's results. GAAP and organic revenue increased by 4% to $367 million and $368 million respectively. Growth was driven primarily by Wealth, CTS and Analytics.

For our geographic segments, over the last 12 months, Americas revenue grew 4% and International revenue grew 5% organically. Americas benefited from increases in Wealth, Analytics and CTS. International revenue was largely driven by Analytics and CTS.

GAAP operating expenses for the first quarter totaled $253 million, a 1% growth over the previous year. With revenues growing faster than expenses, our GAAP margin increased 230 basis points to 31%. Adjusted operating margin increased to 34%, a 240 basis point improvement versus last year. As a percentage of revenue, the expense improvement came largely from our cost to services, which was 240 basis points lower than last year on a GAAP basis. On an adjusted basis, the improvement was 210 basis points. Contributing factors include decreases in employee compensation, reflecting the continued mix shift from high-to-low cost locations, as well as lower contractor fee. This benefit was partially offset by an increase in computer-related expenses, as we continue to upgrade our technology stack.

SG&A expenses, expressed as a percentage of revenue, grew 10 basis points over the prior-year period on a GAAP basis. On an adjusted basis, we saw an improvement of 30 days. This result is driven primarily by expense reductions in travel and entertainment, professional fees and lower bad debt expense, and partially offset by higher employee compensation and higher rent expense associated with our move to the new headquarters.

We have been improving our operating margin over the past four quarters, reflecting our efforts to maintain disciplined expense management and to both grow and sustain productivity gains through our planned workforce mix. We are pleased with the progress that we have made as it has given us the ability to redeploy capital back into the business and the key areas of content and technology.

On the last earnings call, we provided financial targets for FY '22. To recap, our investments build incrementally at $15 million per year in each of the next three years, totaling an additional $45 million and the FY '22 expense rate. As we noted, we expect our ASV growth rate to be in the high-single digit adjusted EPS growth at 10% plus and adjusted operating margin at 33% plus in FY '22. We have begun to execute on these projects as Phil noted earlier. The spend will be building over the course of the year.

For fiscal year 2020, the majority of the cost will be people-related. We expect the level of expense the ramp up. We're heavily weighted in the second half of the year as we build out the resources and capabilities. We believe it will be in line with our FY '20 guidance of 31.5% to 32.5% in operating margin, given the phasing of the incremental investment. We remain confident in our investment strategy and plan.

Moving on, our tax rate for the quarter was 13.6%. This rate included a few one-time items related to finalization of prior-year tax return and a change in tax rate in one of our foreign jurisdictions. Excluding one-time adjustments, our quarterly tax rate would have been 17.3%. Please keep in mind that when we provided annual guidance for fiscal 2020, we did not include any one-time adjustments in the tax rate.

GAAP EPS increased 12% to $2.43 this quarter versus $2.17 in the first quarter of 2019, primarily attributable to higher revenue and improved margin. Adjusted diluted EPS grew 10% to $2.58, the reconciliation of our adjustments to GAAP EPS exposed at the end of our press release.

Free cash flow, which we define as cash generated from operations, less capital spending was $69 million for the quarter, an increase of 88% over the same period last year. The improvement was primarily due to higher net income, an increase in cash collection and the timing of payables, partially offset by higher capital expenditures.

As noted on past calls, our capex is higher this year, due to planned investments in technology, as well as new office space build out for some of our locations where existing leases have neared expiration.

Last quarter, we looked to update our annual ASV retention metrics. On further review, we have determined that the current methodology is aligned with our client retention metric and remains an accurate measure of ASV retention. For the first quarter, our annual ASV retention continues to be over 95%. We are also pleased to report that our client retention, the number of clients we retained over the last 12 months, remained at 89% and our client count grew 6% year-over-year.

Looking at our share repurchase program for the first quarter, we repurchased 343,000 shares for $84 million at an average share price of $246 per share. Over the last 12 months, we have returned approximately $345 million to our investors in the form of dividends and share repurchase. We remain committed to creating long-term value for our shareholders and plan to repurchase shares at a steady pace in line with last year.

The improvement in our operating results over the course of fiscal year 2019 and the first quarter of this year, reflect our progress on operational discipline and in the sustainability of the productivity gains. We believe our plan to invest in more comprehensive and integrated content and in digital technology will fuel future topline growth, which in turn is key to long-term value for our clients, employees and our shareholders.

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

Questions and Answers:

Operator

[Operator Instructions] Your first question comes from the line of Peter Heckmann from D.A. Davidson & Co. Your line is open.

Peter Heckmann -- D. A. Davidson & Co. -- Analyst

Hey, good morning. Thanks for taking my questions. So just trying to make sure I am understanding correctly, I mean significant upside maybe the spending to ramp as quickly as expected, but is this -- does your guidance then imply that we should see negative adjusted earnings-per-share growth in the back half of '20? And how do you then think about -- I know we had 2022, but how do you think about that transitioning that into the first couple of quarters of '21?

Helen Shan -- Chief Financial Officer

Hi, thanks for your question. This is Helen. So, no, I don't -- what we're essentially going to be doing, because we believe we will still end up with the same amount of spend for the year, is that as it ramps up, it will still be within that range. And then at that run rate, we will continue to see that through the first two quarters of '21.

Let me just give a little bit more color. Most of the expense for this year are much more people-related, so it takes time to ramp up. I would say, if you look over the phasing of the year, it's roughly -- let's call it 30%, will be in the first half and the balance in the second half. And so that's and then the technology spend is more in the latter half of the three-year investment plan. So it will be a little bit slow out of the gate and it takes time to hire, but we don't expect that to be an issue as we think about the guidance we've given for the year.

Peter Heckmann -- D. A. Davidson & Co. -- Analyst

Okay. That's helpful. And then just while I have you, could -- you haven't talked too much about [Indecipherable] and the Company's efforts in trading. Can you just give us a quick update there?

Philip Snow -- Chief Executive Officer

Yeah. Hey, Peter. It's Phil Snow. So yes, we are seeing very positive momentum in the trading space over the last few quarters, and a lot of that is attributed to I think the integration now of EMS capabilities within core FactSet. We're also seeing good momentum with our OMS offering as well. So just to remind everyone, we have execution capabilities, we have order management capabilities, and we've integrated those now into a portfolio management platform, which is also beginning to gain some traction. So these are not big numbers right now, but the trend is positive and we're very excited about that part of our analytics suite.

Peter Heckmann -- D. A. Davidson & Co. -- Analyst

Great. Thank you very much.

Philip Snow -- Chief Executive Officer

Sure.

Operator

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

Manav Patnaik -- Barclays -- Analyst

Thank you. My first question is just these cancellations that you called out this quarter. Were the contemplated in your full-year guidance, and I was just hoping if you could just help, maybe give us a little bit more color on how much of the guidance is, assuming that you win a bunch of contracts over the course of the year?

Philip Snow -- Chief Executive Officer

Hey Manav, it's Phil. So I think that cancellations that we called out in Q1 was a little bit more of an expected cancellations within the sell side across banking, as well as research. And very often that's difficult to predict given the numbers are pretty large, and you're not -- you're never sure sort of coming out of the hiring and into Q1, what that's going to look like. And I think when we look at Q1, it's typically a smaller quarter for us, as I said in my script. We could go back $2 million or $3 million this quarter, but if you go back even a couple of years into fiscal 2018, that was a fairly small quarter for us as well. So when we look out for the rest of the half, it's significantly weighted, that's a Q2. And when we look at the pipeline versus the pipeline last year, we feel very good about our opportunities as we head into the second quarter.

Manav Patnaik -- Barclays -- Analyst

Got it. And then maybe just -- your comments on growth in Wealth, what were the drivers there? Was it just the ramp of the BAML contract or was it a lot of single wins here and there? I'm just curious if you could give a little bit more color there.

Philip Snow -- Chief Executive Officer

Yeah. So, no, I mean we're doing very well at BAML. I think that was obviously a great deal for us and was a significant contributor to Q1 of last year. So I think you could have expected some deceleration in this quarter, just given that was a tougher comp. But we've had some very nice wins in Wealth at larger firms within the Americas, and we also are doing very well in the middle markets part of Wealth and the pipeline is very healthy. So there are some larger deals out there for us, which are a little bit more binary, but just going back to the previous question, we're not relying on any like massive deals to -- to come within the guidance range that we gave at the end of the year.

Manav Patnaik -- Barclays -- Analyst

Right. Thank you there.

Philip Snow -- Chief Executive Officer

Yeah, thanks.

Operator

Your next question comes from the line of Hamzah Mazari from Jefferies. Your line is open.

Mario Cortellacci -- Jefferies -- Analyst

Hi, this is actually Mario Cortellacci filling in for Hamzah. Just kind of wanted to piggyback off the Wealth question. And you mentioned that there are some binary wins and it sounds like you're doing well in the middle market channel. But just wondering if -- say there is a larger deal and more consolidation in -- among the wirehouses, just -- didn't know how you guys are positioned and obviously when it -- everything is as it is, like you said binary, but how are you positioned and how do you think you'll fare if there is some consolidation among the much bigger players?

Philip Snow -- Chief Executive Officer

I think it will fare well. This is a greenfield area for us. It's an area that we're not defending essentially right, it's all offense. I think the product that we have is exceptional. We put a lot of effort into it. A big piece of our investment strategy for the next three years is to just continue to bolster the Wealth offering in terms of content, as well as -- and technology. There were some things that we're going to do there I think, to make the life of the next generation of a financial advisor and wealth advisor so much easier. And some of that's integrating our risk capabilities, some of that's taking cognitive computing to essentially make the life of the wealth advisor and the financial advisor much more efficient. So this is a space we're super excited about.

Typically when there's consolidation, it means disruptions and is an opportunity for a new newcomer like FactSet to come in and take a crack. So we're in lots of RFPs. These are big firms, they are long contracts, you don't win them overnight, but we feel exceptional about this piece of our business and the opportunity in front of us.

Mario Cortellacci -- Jefferies -- Analyst

Great. And just one more and I'll turn it over. So like you said, there is a lot of white space in Wealth and maybe this other part of the business isn't as big of a focus for you. But how much do you think your products render [Phonetic] themselves to say, commercial banking or insurance? Or maybe you can give us a sense of how much you've explored those markets as well?

Philip Snow -- Chief Executive Officer

So commercial banking is really interesting. We had a pretty good win there, I think it was last year in Asia-Pac. And that was a lot of seats [Phonetic], but admittedly at a lower cost. But our web offering proved very good for that market and I think we will continue to explore some opportunities there. We have pretty good business and insurance right now. So what resonates with our insurance clients is our Analytics products. We've got a great multi-asset class risk product, which we continue to invest in. And risk is one of the things I talked about in my script is, we've got a lot of good momentum in the risk space, the pipeline for risk looks really good, and some of that is at insurance companies.

Mario Cortellacci -- Jefferies -- Analyst

Great. Thank you.

Philip Snow -- Chief Executive Officer

Yeah.

Operator

Your next question comes from the line of Andrew Nicholas from William Blair. Your line is open.

Andrew Nicholas -- William Blair & Company, LLC -- Analyst

Hi, good morning. In terms of the Wealth pipeline, it sounds like you're waiting on a few larger decisions. Any color on when you expect those decisions to be made?

Philip Snow -- Chief Executive Officer

Some of them are of this fiscal year. Some of them are further out.

Andrew Nicholas -- William Blair & Company, LLC -- Analyst

Okay. And then I was wondering if you could provide an update on momentum in Analytics, particularly as it relates to kind of the sales force realignment? As that gets further and further in the rear view mirror, just wondering if you could update us on progress with respect to sales momentum?

Philip Snow -- Chief Executive Officer

Yeah. Thanks, Andrew. It's a good question. So -- yeah, so fixed income had very good quarter and we have a very good strong pipeline for fixed income and that was one of the areas that we did worse than last year than we hoped. And the movement of the specialist back into the analytics area has really paid off. So we've got some great leadership there, the team is excited. The areas that really are showing very strong momentum of fixed income, risk, Vault, and Vault to remind everyone, is kind of a combination of the BISAM performance product with traditional PA. That is gaining a lot of momentum, we're having a lot of unit sales with Vault.

The APIs within Analytics are doing very well, we see a ton of momentum there. And as I mentioned, we tripled the number of APIs that we had in Q1, and so a lot of that is around Analytics APIs. So all-in-all, we feel good about Analytics. I also mentioned our momentum there in the trading space and a lot of these are really the workflow solutions and the portfolio lifecycle. So we've made a bunch of acquisitions three years ago. It has taken us longer than I expected to get those integrated, but I think what we're seeing now and out into the rest of the fiscal year, is great momentum in those areas. The workflow solutions and helping the larger clients be more efficient from a technology standpoint.

Andrew Nicholas -- William Blair & Company, LLC -- Analyst

Got it. Thank you.

Philip Snow -- Chief Executive Officer

Yeah.

Operator

Your next question comes from the line of Toni Kaplan from Morgan Stanley. Please, your line is open.

Toni Kaplan -- Morgan Stanley -- Analyst

Thanks very much. Wanted to ask another question on the research cancels. Was it related to firms getting out of equities or banking, or consolidation, or firms closing, or competitive losses, or just any sort of extra color you could give on what led to the cancels?

Philip Snow -- Chief Executive Officer

Yeah. Thanks, Toni. It's Phil. So -- yeah, I think these are -- a lot of the cancels are typical in terms of the seasonal banking. There were a couple of firms where we had some things happen that we didn't anticipate. One was at a larger sell side firm and the other was at a middle markets firm. As a sell-side firm, it happened that we have a very strong relationship with, I'm very excited about the opportunities moving forward. I can't get into the specific details, but clearly this pressure, particularly on the bigger firms, we're feeling some of that. I think that's what you're seeing in the numbers for Q1, but we're doing lots of things, right, to work our way up the stack as these bigger firms provide more solutions and it's going to be a little bit choppy at some of them, but we feel good about the longer term opportunity for us.

Toni Kaplan -- Morgan Stanley -- Analyst

That's great. And then for my follow-up, just want to find out how much FX benefited margins this quarter and if there was anything one-time, if it wasn't FX that helped the margins just because they were a lot stronger than expected? Thanks.

Helen Shan -- Chief Financial Officer

Yeah, sure. Toni, thanks for your question. So this quarter, the benefit of OpEx was about $1 million, which is actually less than in the previous year and obviously a lot less than the cost [Phonetic] of FY '19. So that was not a material impact. If you compare our margin this quarter to Q4, we're exactly the same, 33.9%. So I think it's reflecting more of the consistency of the actions that we've put forth over the course of the year.

Toni Kaplan -- Morgan Stanley -- Analyst

Thank you.

Helen Shan -- Chief Financial Officer

You're welcome.

Operator

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

Alex Kramm -- UBS -- Analyst

Yes, hi, good morning everyone. Phil, you talked about your excitement of, I think 2Q launch of some of the more in-depth data around financial services or banks. Can you just talk about the appetite there a little bit? I think this is supposed to be a little bit of a SNL competitor, but one of the things that I'm also hearing is that competitor has a lot more different industries that they cover, so some firms might still wait until you have the full breadth. So I guess, how much of this is going to be a niche solution for now and maybe in a few years is going to be a real -- real competitor? Can you just touch it out a little bit? Thanks.

Philip Snow -- Chief Executive Officer

Yeah. Thanks, Alex. So we've -- so we're attacking around eight sectors, I believe, over the next three years. To your point, we can't get them all done this year. So we have a very methodical plan to work our way through wage sectors and we're doing it in the order that we think will have the biggest impact for us. We've already hired all from the outside, industry experts for each of these sectors. So they are on board already this quarter. So I think we did an exceptional job there hiring, and it's going to depend on the firm essentially. So some firms may just want one or two sectors, some may want all eight, some may be very happy with 80% of the fund -- 20% of the functionality, but 80% of the value. But we are seeing a very healthy appetite for more choice in this area and we feel that we're going to have some impact this fiscal year. In fact, we already had I think one very good win. I can't remember if it's in Q1 or in the pipeline for Q2 with another firm for the financial data that we have.

Alex Kramm -- UBS -- Analyst

Okay, great. Thank you for the color. And then just secondly, again on the opportunity side, I mean, you mentioned the tough environment, which obviously all of us on this call probably know about. I've been hearing a little bit more of an effort to reduce costs when it comes to the really expensive competitors of yours. So I think you've been benefiting from that to some degree. And I think you've done this all along over the last few years, but are you seeing an acceleration in focus on cutting some of your more expensive competitors and is that going to be something that's going to help in the next couple of quarters or is it business as usual from that perspective?

Philip Snow -- Chief Executive Officer

I think we are seeing more of an appetite for that and -- I was on a recent trip to Europe, I had a couple of good meetings at larger firms, where I think historically, people have been given choice and it's been a little bit more of a grassroots effort to do this. But I'm -- what I'm feeling at a lot of these firms that are having more cost pressures is that there's going to be more of a top-down push to save costs and to do some of what you just described.

Alex Kramm -- UBS -- Analyst

Okay. Thanks for confirming.

Philip Snow -- Chief Executive Officer

Yeah. Thank you.

Operator

Your next question comes from the line of Joseph Foresi from Cantor Fitzgerald. Your line is open.

Joseph Foresi -- Cantor Fitzgerald -- Analyst

Hi. It seems like you're going through, sort of, maybe a portfolio shift because some of the buy side stuff and sell side stuff isn't working as well. I'm sure we can all understand that. When do you think you'll hit an inflection point where organic growth starts to accelerate, because the portfolio has been right sized?

Philip Snow -- Chief Executive Officer

Well, I'm hoping Joe, that this is the inflection point and that when we talked to you in Q2, we can point to that. Obviously it's hard to predict the future, but when I look at what I just described in terms of Analytics, when I think about our CTS product suite, which we haven't talked a lot about today, but we're having exceptional momentum there selling our content. The Wealth pipeline, our efforts to fill out the portfolio lifecycle, all of that is really great. I think we are seeing obviously people pressure in our industry and a lot of pressure on the research side. So that's the piece that's a little bit harder to kind of predict, but we feel like we've got the right strategy and we've got a team that's sort of really excited to execute even in what is a tough environment.

Joseph Foresi -- Cantor Fitzgerald -- Analyst

Yeah. I guess my follow-up will be an old question. Maybe we could start to get a breakdown from a percentage of revenue, or you could just give us rough ballpark numbers around the new pieces of the business and what they're growing versus sort of the old pieces of the business, so that we can kind of start to model out the inflection point ourselves. I'm just wondering if there's any thoughts around that or if there is any general numbers because you said you hope that there is the inflection point that we're at right now. Thanks.

Helen Shan -- Chief Financial Officer

Hi, this is Helen. Thank you for your question. I mean a lot of what we provide is -- even when we talk to the client, are bundled as well. So, what we do try -- we don't actually have plans right now to be breaking that out, but certainly we'll give you updates as we go on each call as we can.

Joseph Foresi -- Cantor Fitzgerald -- Analyst

Thank you.

Helen Shan -- Chief Financial Officer

Welcome. Thank you.

Operator

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

Shlomo Rosenbaum -- Stifel Nicolaus & Company, Inc. -- Analyst

Hi, good morning. Thank you for taking my questions. Hey Phil, just a quick question. Not to beat that research cancellations to death, but is it people that are just no longer there or they are moving to a different platform? I just want to understand that dynamic a little bit more?

Philip Snow -- Chief Executive Officer

I don't have all of that detail, Shlomo. I imagine some of it is just people pressure right, within the research side that does sort of less hiring going on. Some of it may be competitive pressure. I think there are situations there where we're taking market share and others are taking it from us. Again, I'll point to the fact that it's typically a smaller quarter. So we're calling it out this quarter just because it's one of the larger numbers, but in the big picture, when you think about our numbers for Q2 and Q4 especially, I wouldn't read too much into that for this quarter.

Shlomo Rosenbaum -- Stifel Nicolaus & Company, Inc. -- Analyst

But it's not -- I guess, what people are trying to figure out, is there any pickup in Refinitiv, is there anything going on in -- on the Cap IQ side that's becoming kind of nipping at your heels? Is there any change in any of that stuff? I guess, that's what I'm trying to get to, or is it just really...?

Philip Snow -- Chief Executive Officer

We still -- when I look at the competitive win-loss, we're still I think doing well from a market share -- taking market share standpoint.

Shlomo Rosenbaum -- Stifel Nicolaus & Company, Inc. -- Analyst

Okay. And then just Open FactSet, are there any additional metrics you can give us besides, maybe some of the APIs, how that's tracking? Are you starting to generate any meaningful revenue over there? It just -- it seems like an interesting part of the business I want to delve into more.

Philip Snow -- Chief Executive Officer

Yeah. So we're beginning to get some momentum there. There's -- there are different pieces to it. So the piece that's generating, I think, the growth in CTS is really the data exploration platform that we've created. So it's really the ability to come in and look at our content in addition to some of the Open providers that we've added, some of the alternative data. But a lot of the growth you're seeing is really from FactSet-owned content and we're beginning to see a pretty healthy pipeline for some of the alternative data providers that are combined with that. I think as much the model and the ability to come in and begin programming in Python using Tableau kind of what the analyst of the future and the data scientists in the future is going to want to use, that's really the most exciting piece of it.

Joseph Foresi -- Cantor Fitzgerald -- Analyst

All right. Thank you very much.

Philip Snow -- Chief Executive Officer

Thanks.

Operator

Your next question comes from the line of Bill Warmington from Wells Fargo. Your line is open.

Bill Warmington -- Wells Fargo Securities, LLC -- Analyst

Good morning, everyone. So you had mentioned the strength in Analytics, CTS and Wealth. and by application, I would take it that Research had turned negative this quarter. I just wanted to confirm that and ask if that was really the result of the churn that you've mentioned and to ask how long you think it will take to return to low-single digit type target growth?

Philip Snow -- Chief Executive Officer

Yeah. So you're right, Bill. The other three businesses were positive this quarter, and Research is negative. Again, it's a smaller quarter. So again, it's hard to predict. We feel good about the Research business as we look out to the rest of the year and on our last quarter, we gave sort of longer-term guidance for what we think that business can do. The investments we're making in deep sector, in private markets and StreetAccount, all will, we believe, bolster that business and allow it to grow over time.

Bill Warmington -- Wells Fargo Securities, LLC -- Analyst

Okay. Then a follow-up question for you on the data feeds business. That seems like a business that could potentially become commoditized, and so I wanted to ask about what you guys are doing to differentiate your offerings there?

Philip Snow -- Chief Executive Officer

Yeah. So some of the data is unique, some is -- other people have it. I think the value that FactSet has always brought to the marketplace over the last 40 years is the integration of content. So you can deliver data sets all day out of a marketplace or a library, but the hard work is integrating the data so that you can use that as one data base and providing the tools to analyze the data. So that's what we do. We do very well. Of course, it's great to have our own content as well to monetize, but the real value for our content is how well it plays together and how well we can integrate it with other data sets and within other people systems.

Bill Warmington -- Wells Fargo Securities, LLC -- Analyst

Well. Thank you very much.

Philip Snow -- Chief Executive Officer

Thanks, Bill.

Operator

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

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

Thank you. So related to a previous question, can you just provide some color on what you're seeing in terms of client budgets overall? I mean, is cost cutting more in focus versus let's say a year ago?

Philip Snow -- Chief Executive Officer

Hi, David. Yes, I believe it is. I think we -- the active managers in particular, continue to be under cost pressure and it's up to FactSet to provide them tools that allow them to be more efficient. And that's really -- that's the -- that's where it is with active managers. If I -- so if we think about other client types that are out there, we're making a lot of exciting progress in asset owners, which include planned sponsors and sovereign wealth funds, that's an area of growth for us.

We're doing very well with hedge funds. I mentioned that we were positive this quarter. We're selling hedge funds a lot of CTS product. We are seeing good momentum in private equity. So that's an area that we're investing, but it's a smaller area of our business, but that's one that's going pretty rapidly. We're doing well in the corporate space. That continues to build momentum for us. So we're obviously active managers or a big piece of FactSet's business. We're providing good long-term solutions for them, but there are other markets that we're going into, that are -- that have a lot of great momentum.

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

Okay, that's helpful. Thank you. And Helen, is the 1Q capex number a proper run rate for the year?

Helen Shan -- Chief Financial Officer

Thank you for that question. Yeah, it's about that. We are expecting to be up year-on-year. So I think we ended last year around $60 million and we are looking more like an $80 million for this year.

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

Perfect. Okay, thanks.

Helen Shan -- Chief Financial Officer

Thank you. Next.

Operator

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

Keith Housum -- Northcoast Research Holdings, LLC -- Analyst

Good morning. Hey Phil, as we look at the research environment, customers are getting rid of some of their employees, how protected is FactSet if one of your customers just goes from say 100 employees, down to 50 employees. Do you guys have minimums baked into your contracts that you're protected or not?

Philip Snow -- Chief Executive Officer

We do -- we do in some cases. So as clients have gotten larger and our footprint has gotten bigger with them, they look for I think more certainty within their budgets over time, and we do have floors in at some point. The other thing that we've made a toward, and that continues is, a bigger and bigger percentage of our ASV is tied to more workflow solutions and less people. So the majority of what I just described in the Analytics business has a lot less to do with seat count and a lot more to do with workflow and enterprise solutions. And the feeds is the same thing. So obviously, it's an evolution. It won't happen overnight, but I think it's the right strategy for us and one that we're already capitalizing on.

Keith Housum -- Northcoast Research Holdings, LLC -- Analyst

Okay. So do I understand then if as research can say consolidates further next year you as well as some protection with some of your contracts based on some of the floors [Indecipherable]?

Philip Snow -- Chief Executive Officer

Yes, I think that's right.

Keith Housum -- Northcoast Research Holdings, LLC -- Analyst

Okay, great. And then if I -- just turning to the international side. International revenue is down compared to last two quarters. Was there anything unique I guess at the end of last year that affected that revenue or anything unique in this quarter that your revenue declined actually sequentially?

Philip Snow -- Chief Executive Officer

Yeah, I don't think there's anything unique. Europe clearly is under, I think, probably more pressure than the Americas and Asia-Pac. We see a ton of opportunity in Asia-Pac. It's hard to imagine that not continuing if we make the right moves there. But Europe -- Europe is under a lot of pressure for a lot of different reasons.

Keith Housum -- Northcoast Research Holdings, LLC -- Analyst

Great. Thank you.

Helen Shan -- Chief Financial Officer

As Philip mentioned -- yeah, as Philip mentioned before, I mean I think the pipeline is healthy. We have seen some good new business growth. So as we think for the rest of the year, we would -- we're feeling more positive about the growth rate.

Operator

Your next question comes from the line of Kevin McVeigh from Credit Suisse. Your line is open.

Kevin McVeigh -- Credit Suisse -- Analyst

Great, thanks. Hey Phil with obviously with Refinitiv change in hands twice within the last 18 months or so, as you become part of the LSE any thoughts from a competitive perspective? Does that change the behavior on the continent at all or even in the current form as part of Blackstone, have you seen any competitive dynamic shift?

Philip Snow -- Chief Executive Officer

Yeah, thanks Kevin. I've obviously thought a lot about that. It doesn't feel to me that the combination of LSE and Refinitiv is going to be much different frankly to us than what we've been dealing with from a competitive standpoint with Refinitiv over the last couple of decades. So there is still uncertainty I would think within both the client base and their employee base in terms of what's happening, and we're just capitalizing on that uncertainty right now.

Kevin McVeigh -- Credit Suisse -- Analyst

And with that I'll kind of lay the opportunity to the extent for any -- as you're kind of integrating would you see competitive advantage on that? If you were to look at other points in history, does that free up incremental opportunity or no?

Philip Snow -- Chief Executive Officer

I'm not sure I understand the question.

Kevin McVeigh -- Credit Suisse -- Analyst

I guess was there consolidating I'm sure they see disruption in their sales force, do you take advantage of that. Is there an opportunity to capture incremental share?

Philip Snow -- Chief Executive Officer

Yeah, I think so. Yeah, I think that's what I was trying to describe, yes, there is uncertainty in the client base and in then their employee base, there is opportunity for us to go into clients and have conversations and take market share.

Kevin McVeigh -- Credit Suisse -- Analyst

Got it. And then just quick follow-up, the investments you're making in kind of the research product, when do you think the earliest you'll see start to see the revenue benefit from that?

Helen Shan -- Chief Financial Officer

So overall, when we think about both the content and technology we see minimal in this year, but as it ramps up, in general, we would expect to see about 25% of the total growth coming in year two, excuse me, 2021 with the balance coming into 2022. So it's more of a back-ended in terms of the list.

Kevin McVeigh -- Credit Suisse -- Analyst

Understood. Thank you.

Helen Shan -- Chief Financial Officer

Welcome.

Operator

Your next question comes from the line of Craig Huber from Huber Research Partners. Your line is open.

Craig Huber -- Huber Research -- Analyst

Yes, hi. I think I missed the first few minutes of your comments, but I wanted to here, was there any major cancellation fees that showed up in your revenues in the quarter you guys just reported here?

Philip Snow -- Chief Executive Officer

Cancellation fees?

Craig Huber -- Huber Research -- Analyst

Well, for many clients of yours the remaining revenue that was pulled forward to account for revenues up to $2.5 million sequentially, your ASV of course was down slightly versus three months ago, I guess only the third time in the last 20 years or so. I'm just wondering if there is any clients that canceled any revenues that were recognized pulled forward, maybe to some degree in the November quarter, the first question?

Helen Shan -- Chief Financial Officer

Sure, this is Helen. No, we don't see that there is no pull forward due to cancellation from clients. So that's not how our model works, so that's not a driver at all.

Craig Huber -- Huber Research -- Analyst

Okay. Then, thank you for that. My other question again with the ASV down slightly versus three months ago, you went through your confidence level of wealth in CTS etc., it sounds like you're still comfortable with the $65 million to $85 million increase in ASV. Is that your thinking that's more back-end weighted for the year?

Philip Snow -- Chief Executive Officer

Yes, correct. So we believe that this year in particular it's always back-end weighted, I think if you go back historically, it may be somewhere between 60-40 just in terms of the split. But the way that we thought about this year and the way that we've sort of modeled out our plan, we believe that the second half of the year is going to be more heavily weighted than typical. And we're still, feeling good about the guidance range that we issued last quarter.

Craig Huber -- Huber Research -- Analyst

And then I think you said this three-year investment program to enhance the product in excess of $45 million of extra costs, I guess by the time we get to the end of fiscal 2022. How much of that you think will fall into this year versus next year?

Helen Shan -- Chief Financial Officer

So, to go through, let me reiterate how that works. So we have $15 million in each of the years that we will be investing in for '20, '21 and '22. So in terms of what falls into the first year, it's $15 million.

Craig Huber -- Huber Research -- Analyst

And very little of that was obviously in the first quarter?

Helen Shan -- Chief Financial Officer

Right. Because much of the spend is people related and it takes time to hire, especially for the capabilities that we're building, which has to do as Phil talked about in terms of content, the expertise there and also on the technical sides related to digital capabilities.

Operator

Your last question comes from the line of George Tong from Goldman Sachs. Your line is open.

George Tong -- Goldman Sachs -- Analyst

Hi. Thanks. Good morning. Organic ASV plus professional services growth is decelerated to its lowest level in years. You talked a bit about client budgets coming under pressure and some sell-side headcount reductions. Can you elaborate on changes you're seeing with buyside headcount in both the US and internationally?

Philip Snow -- Chief Executive Officer

Yeah. Hey, George. It's Phil. So yeah, I think we're seeing the pipe -- we are seeing pressure on headcounts in the front office. I think that's pretty well known. I think portfolio managers, traders research analysts, I think over time our thesis is that we'll see sustained pressure in terms of the number of people and that clients are going to want to go to more efficient solutions and more of a technology type solution.

George Tong -- Goldman Sachs -- Analyst

Got it. That's helpful. You noted a decrease in your add-on business where you cross sell to existing clients. Can you discuss broader trends you're seeing with new product uptake versus your expectations and traction with the client wallet penetration?

Philip Snow -- Chief Executive Officer

Yes. So a lot of that really had to do with the large deal, but we had in Q1 last year that was booked as an add-on business that was an existing client. So I think that was the vast majority of this and as I mentioned in my script and throughout the call we're seeing a lot of very positive momentum for analytics product for feeds and on the wealth side a lot of it's driven by used account.

George Tong -- Goldman Sachs -- Analyst

Great. Thank you.

Philip Snow -- Chief Executive Officer

Thanks, George.

Operator

There are no further questions at this time. I turn the call back over to Phil.

Philip Snow -- Chief Executive Officer

Thanks everyone. I'd like to thank you all for joining us today. It's clear that the changes in our industry are happening and speed and we remain well placed to lead the charge. Our efforts are already taking root as we position the Company for the future, which is reflected in our new global headquarters here in Norwalk, Connecticut. And I'm very proud of the efforts we've made to create space that fuels innovation and collaboration and truly mirrors our Company and values. Demand for open flexible solutions is growing and I want to conclude by reiterating our conviction in our outlook for the year and happy holidays to all of you. If you have additional questions, please call Rima Hyder and we look forward to speaking to you next quarter. Operator, that ends today's call.

Operator

[Operator Closing Remarks]

Duration: 51 minutes

Call participants:

Rima Hyder -- Vice President, External Communications

Philip Snow -- Chief Executive Officer

Helen Shan -- Chief Financial Officer

Peter Heckmann -- D. A. Davidson & Co. -- Analyst

Manav Patnaik -- Barclays -- Analyst

Mario Cortellacci -- Jefferies -- Analyst

Andrew Nicholas -- William Blair & Company, LLC -- Analyst

Toni Kaplan -- Morgan Stanley -- Analyst

Alex Kramm -- UBS -- Analyst

Joseph Foresi -- Cantor Fitzgerald -- Analyst

Shlomo Rosenbaum -- Stifel Nicolaus & Company, Inc. -- Analyst

Bill Warmington -- Wells Fargo Securities, LLC -- Analyst

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

Keith Housum -- Northcoast Research Holdings, LLC -- Analyst

Kevin McVeigh -- Credit Suisse -- Analyst

Craig Huber -- Huber Research -- Analyst

George Tong -- Goldman Sachs -- Analyst

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