FactSet Q2'16 Earnings Conference Call: Full Transcript

Operator: Welcome and thank for standing by. At this time all participants are in a listen-only mode. [Operator Instructions]. Now I will hand the call over to Ms. Rachel Stern. Ma'am, you may begin. Rachel Stern: Senior Vice President, Strategic Resources and General Counsel: Thank you, operator. Good morning and thanks to all of you for participating today. Welcome to FactSet's Second Quarter 2016 Earnings Conference Call. This is conference call is being transcribed in real time by FactSet's CallStreet service and is being broadcast live via the Internet at FactSet.com. A replay of this call will also be available on our website. Our call will contain forward-looking statements reflecting management's expectations based on currently available information. Actual results may differ materially. More information about factors that could affect FactSet's business and financial results can be found in FactSet's filings with the SEC. Annual subscription value or ASV, is a key metric for FactSet. Please recall that ASV is a snapshot view of client subscriptions and represents our forward-looking revenues for the next 12 months. Lastly, FactSet undertakes no obligation to update publicly any forward-looking statements as a result of new information, future events, or otherwise. Joining me today are Phil Snow, Chief Executive Officer; Scott Miller, Director of Global Sales; and Maurizio Nicolelli, FactSet's Chief Financial Officer. And now I'd like to turn the discussion over to Phil. Philip Snow: Chief Executive Officer: Thank you, Rachel. Good morning, everyone and welcome to today's call. As FactSet we're committed to bringing the world's best insight in information to investment professionals. Our historical and recent track record of success has been built on two foundations. One, we have a real passion for understanding our clients' needs and are driven to deliver an paralleled customer experience; and two, we invest our time and people into developing superior analytics technology and content to meet those needs. And as a result, throughout our history, we've able to consistently produce significant growth for our company and value for our shareholders. This past quarter was no different. In a tough beginning to the markets this calendar year, we produced solid growth. We have increasingly diverse suite of enterprise and work station solutions that enable us to weather a challenging time. In the second quarter our organic growth picked up to 9.5% from 9.4% in Q1 and excluding foreign exchange, ASV rose $29.8 million versus $25.4 million in the same quarter last year. ASV growth rate has been on an upward trend every quarter over the last nine quarters and risen a 100 basis points since February of 2015. The buy side and the sell side both grew at 9.5% this quarter and the buy side increased 20 basis points from 9.3% to 9.5% and to just remind everyone, we define a buy-side as traditional asset management clients, hedge funds, and wealth managers, we also include our CTS Portware and Market Metrics businesses into that number and on the sell-side, it's defined as M&A Advisory Capital Markets and Equity Research. Let's break down the key contributors to our growth in the second quarter. We have positive ASV changes related to broad-based growth globally from both the buy-side and sales side businesses and we saw solid growth in our core buy-side client base in all three of our regions; the Americas, EMEA, and Asia-Pac, and on the sell-side, the growth is primarily driven with our middle market segment. This year our annual price increase contributed $9 million in the Americas and as we've mentioned in the past, the number of clients affected by the price increase since second quarter, has been declining because more and more of our clients have been experiencing our price increase at the time of renewal and re-negotiation of their contracts with us. And as a result price increases occurred throughout the year and are not a significant item in the second quarter as they had been in prior years. Portware in its first full quarter being owned by FactSet performed well as we made strides in both integrating the group in to the FactSet organization and executing on its strong pipeline of new opportunities as we take advantage of cross selling the Portware solution to FactSet's blue-chip global buy-side client base. CTS had an exceptionally good quarter. To remind everyone a CTS suite provides FactSet content and analytics outside of the terminal product and we had strong contribution this quarter from our core investment management client base, the CTS. Lastly, the continued strong performance of our analytics suite contributed to buy-side growth. Multi-asset class offering, performance risk, quantitative analysis, production and managed services, all make up an excellent suite of analytics products that we can sell in to our clients at the enterprise level and this boosted sales in all regions within the investment management business. Our recent analytics roadshows in all three regions gave over 150 clients a first look at the next generation of our portfolio analytics suite. These products are core to our buy-side clients and continues to be a large piece of what's driving that business. Moving forward our expectation of continued growth is based upon two main drivers that have historically produced consistent results. First, demand for our value-added applications is strong. This includes analytics, CTS, Portware, and RMS, our research management solution suite. We are connecting more dots within our client base with solutions for an increasing number of workflows. In parallel we are laser focused on our core workstation business. Even in a challenging or tightening market, we view that we still have a relatively low share of front office users on both the buy-side and the sell-side and over time, there is still tremendous opportunity to capture more users in portfolio management, research, banking, wealth and trading. We remain committed to understanding our clients' needs and continue to provide them superior solutions that help them make smarter decisions every day. The Portware acquisition is a great example. Portware's innovative suite of trade automation solutions coupled with our expertise in portfolio analytics will enable us, will enable clients to streamline the operations and focus on key decisions. We continue to push innovations while succeeding as servicing current client needs by investing in our people and developing then to succeed. We are really proud to announce that FactSet was recognized for the eighth time in a row on Fortune's 100 Best Companies to Work For list. We view the investment in our employees as critical to providing the best service possible to our clients, to enable continued growth of our overall business. The investment industry is facing more challenging times. FactSet is a trusted partner for our clients and we are uniquely positioned to give them the tools and support to weather market volatility. At our heart FactSet is a productivity tool. We make our clients' workflows more efficient by providing a broad range of enterprise solutions and providing excellent service. Our solid and expanding business enables us to reinvest and partner effectively with our clients to meet their needs for smarter investment decision and in doing so, we'll continue to drive organic revenue growth and return capital to our shareholders. Let me turn it over now to Maurizio, who will give us some more detailed look into our second quarter performance. Maurizio Nicolelli: Senior Vice President, Chief Financial Officer: Thank you, Phil and good morning to everyone on the call. As you heard from Phil, our client-centric solutions enabled our business to continue to excel during the choppy period in the markets. Here's a breakdown of our second quarter results both from a revenue perspective as well as from an operational view. Revenues grew in the second quarter to $281.8 million. Excluding revenues acquired from acquisitions completed within the last 12 months and the effects of foreign currency, organic revenues grew 9.5% over the last year. During the just completed second quarter, US revenues grew to $190 million. Excluding revenue acquired from recent acquisitions, organic revenues in the US were up 9.4% compared to the year ago second quarter. Non-US revenues increased to $92 million. Revenues from our Europe and Asia Pacific regions were $69 million and $23 million respectively. Excluding foreign currency and acquired revenues from recent acquisitions completed in the last 12 months, the international growth rate was 9.6%. This growth rates breaks down into 7.3% from Europe and 17.6% from Asia Pacific respectively. As noted in the press release, beginning this quarter, we have changed our non-GAAP reporting by adjusting for deal related amortization. Adjusted operating income and margins, adjusted net income and adjusted diluted earnings per share, will exclude both deal related amortization and non-reoccurring items. This change is intended to better reflect the underlying economic performance of the business. A quarterly schedule reflecting this information, retroactive to the first quarter of fiscal 2015 had been included on page 10 of the press release. Included in our second quarter results were the following non reoccurring items. First, operating expenses include both a $2.4 million pretax charge from restructuring actions as well as incremental $1.4 million charge for a stock-based compensation expense related to a change in the best performance-based stock options. Together they increased operating expenses by $3.8 million. Secondly, income tax expense includes a $7.3 million benefit related to the permanent reenactment of the US Federal R&D Income Tax Credit which occurred in our just completed second quarter and was retroactive to January 1, 2015. Adjusted operating income which excludes $3.8 million in non-reoccurring items and $4.1 million in deal-related amortization, grew to $93 million, an increase of 9% from the second quarter last year. Adjusted net income which excludes non-reoccurring item and deal related amortization grew 10% to $66 million while adjusted diluted EPS grew 12% to $1.59. Now, let's take a look at the expense side. Total operating expenses for the second quarter were $197 million. Our adjusted operating margin this quarter was 33.1% which excludes non-reoccurring items and deal related amortization. Second quarter cost of services expressed as a percentage of revenues increased by 380 basis points compared to the year ago period. The increase was driven by higher compensation including stock-based compensation and amortization of intangible assets. Employee compensation expense grew due to the non-reoccurring restructuring cost that changed in the vesting of performance based stock option, our headcount expansion from new hires, and the addition of Portware. The increase in amortization of intangible assets primarily related to the recent acquisition of Portware. SG&A expenses expressed as a percentage of revenues decreased by 160 basis points in the second quarter compared to the year-ago period due to lower compensation expense from employees performing SG&A roles and a reduction in global occupancy costs. At the end of our second fiscal quarter, we had 8,093 employees, an increase of 16% in global headcount during the past twelve months. We hired 160 new employees this quarter primarily from our engineering and consulting recruiting classes in the US and Europe and our content collection classes in Hyderabad and Manila. The second quarter of effective rate was 20.2% down from 24.1% a year ago due to a $7.3 million income tax benefit related to the permanently reenactment of the Federal R&D Income Tax Credit. Excluding discreet benefits in both years, our effective tax rate was 28.8%, down a 160 basis points over last year. Free cash flow during the last three months was $81 million, an increase of $39 million from the same period last year. This increase represents our highest ever of second quarter of free cash flow in company history. Our cash investments balance was $198 million, down $5.2 million during the quarter. We define free cash flow as cash generated from operations less capital spending. Free cash flow was up 90% year-over-year due to higher levels of net income, lower income tax payments, and higher client receivable collections. Our DSOs were 33 days at the end of the second quarter compared to 36 days in the prior year period. During the second quarter, we repurchased 465,000 shares in the open market at an average price of a $150--$153 per share. Our diluted weighted-average shares decreased by 527,000 shares as a result of our ongoing repurchase activity and a lower share price, reducing the dilution from existing share based compensation. As Phil mentioned at the beginning of call, throughout our history we have been able to consistently produce significant growth for our company and value for our shareholders. Although the markets have been volatile, our business model has proven to be resilient and continues to outperform within our industry. Our client-centric approach and diversified offerings help us remain strong in weak and strong markets. Now let's turn to our guidance for the third quarter of fiscal 2016. We expect that revenues will range between $286 million and $289 million. GAAP operating margins should range between 31% and 32% which includes a 120 basis point reduction from the operations of Portware. Adjusted operating margin should range between 32.5% and 33.5%. We expect our annual effective tax rate to range between 28.5% and 29.5%. GAAP EPS is expected to range between $1.54 and $1.58. Adjusted EPS is expected to range between $1.60 and $1.64. The midpoint of this range suggests an 11% year-over-year increase. In conclusion, the first half of fiscal 2016 was strong. Our growth rate accelerated to higher levels while we continued to invest in our future growth opportunities. Thank you for joining our call this morning. We are now ready for your questions. Question & Answer Operator: Thank you. [Operator Instructions] Rachel Stern: Operator, I don't see any questionnaires in the queue currently. Can you please make sure that that functionality is available to all of our listeners? Operator: Yes. Yes, it is available but let me go ahead and double check. [Operator Instructions]. At this time, there are no questions on queue. Rachel Stern: Operator, I'm getting some messages from the dialers on our call that the functionality is not working. They've sent me emails saying that the functionality is not working. Can you please check that? Operator: Would you like me to open the lines Rachel? Rachel Stern: Yes, absolutely. Please. Operator: Okay. I'll open the line just give me one big second. Rachel Stern: So if you're a caller trying to ask a question, would you please keep trying? Operator: Rachel, all lines are now open. Rachel Stern: Operator, I don't think that's working. You should turn them off. Operator: Okay. Rachel Stern: Let me ask the caller again if you are trying to ask a question, please can you hit the directions the operator gave you at the beginning of the call.. Operator I think we have few questions now. Could you please introduce first question? Operator: Okay. Our first question comes from Mr. David Chu from Bank of America -- oh, I am sorry. Mr. Shlomo Rosenbaum from Stifel. Shlomo Rosenbaum: Stifel Nicolaus: Hi. Good morning. Thank you for taking my questions. If you can just comment a little bit on what the ASV and revenue growth would be if you excluded any incremental growth in quarter from Portware so we can get an idea if the business including Portware is accelerating, decelerating, or staying the same as in... Maurizio Nicolelli: Sure Shlomo. It's Maurizio. As you see in our historical organic revenue or organic ASV calculations, we include the incremental changes after an acquisition but we do pull out from our calculation any the amount that we acquire in ASV. Now we have not changed that calculation so we have included the changes in Portware in the organic number. Keep in mind baseline not material at the end of the day. There are--Portware is less than 5% of overall ASV but we don't break that out in our organic calculation. I will ask Phil to give us a little bit of color on how Portware is doing. Philip Snow: Yes sure thanks Maurizio. Thanks for the question, Shlomo. Yes, so Portware is executing very well in its business plan. Just to remind everyone when we made the acquisition, they had a very strong pipeline of large investment managers. So these are big sales. We continue to make big, good progress on the pipeline and from a profitability standpoint, they are doing better than expected. So if you look at adjusted EPS, over $0.02 accretive to our results whereas if you look at on a GAAP basis, we'd be $0.02 dilutive and that's a little bit ahead of what we thought we'd be at this point. Shlomo Rosenbaum: Phil, let me ask the question different way. The business excluding Portware accelerating or decelerating? Philip Snow: Performing well. I mean we're--as we have said on the call, we are executing well. As you could see in the results that the number of workstations was down compared to the second quarter of last year but we're doing exceptionally well with the broad range of products that we sell to our clients. The analytics suite, CTS, RMS, Portware, they're all contributing to our growth. Shlomo Rosenbaum: Okay and what impact--can you repeat again the FX impact and ASV in the quarter? I just missed that. Maurizio Nicolelli: More than 95% of our ASV is built in US dollars. There is an FX piece to it. There is small portion of our ASV that's built in pounds and also small portion of it built in yen, but it was immaterial to the overall number. We do exclude that small piece from our organic growth rate calculation. Shlomo Rosenbaum: And then I would just leave at the last one, can you talk a little bit about the trends in the business through the quarter? In other words, there is definitely chopped in the quarter I guess at different times and as you entered the quarter, how did it look versus exciting the quarter in terms of the environment in you're...? Scott G. Milller: Executive Vice President, Global Director of Sales: Hey Shlomo. It's Scott speaking. Clearly market volatility was a theme for us. There is both a good and a bad to that. The challenge with market volatility is that we do see typically a slight slowdown in the sales cycle and the closed cycle. So we did see some pipeline pushed into the second half. In general, we saw a lot more opportunity than we saw challenges because the volatility opened up lots of conversations around our analytical suite of problems--of solutions data, a lots of conversations around our CTS product. So in general, we kept focused on the sales cycles like we have been going through the previous quarters but we face some of the challenges head on and I was very happy with the way that we executed through the quarter. Shlomo Rosenbaum: Okay, great. Thank you very much. Operator: Our next question comes from Mr. David Chu. Mr. Chu you may now proceed. David Chu: BofA Merrill Lynch: Hi. Thank you. So in terms of the slightly slower subscriber growth, in the quarter was this primarily from the sell-side? It looked like the sell-side growth slowed a little bit. Scott G. Miller: Hey, David its Scott. It was a mix. We did see a little bit in the buy-side as well. It tends to be with our same store sales, our current client base where we were up-selling. What we did see was a nice uptick in new business conversations and new business closes though there was a mix going on, yes there was some push but we saw an uptick in terms of closes as well. David Chu: Okay, great. And then in terms of just a macro, so are you seeing from just kind of cuts spend in aggregate at this point? Scott G. Miller: Not dramatically different than we have seen in the previous quarters. We are clearly as we said over the last couple of questions, market volatility gets people thinking and pausing a little bit but we haven't seen a dramatic shift in the spending. When you do see markets go the way they did in many cases there is a requirement for more analytics and more data. So we're approaching it from a proactive standpoint and we haven't really see a dramatic shift in spending? Philip Snow: I will add to that as well. We live thorough volatility of the markets at FactSet and whenever we have a tightening, it really gives our sales team with the relationships that we have with our clients and opportunity to sit down, discuss their total cost of ownership and really review what they are spending. So it's--we have that great relationship with our clients and our sales people can really sometimes benefit from these types of market conditions. David Chu: Okay, great and just lastly is the 2Q run rate or amortization of the related intangibles in 2Q, is that a decent run rate for the rest of the year? Philip Snow: Correct. David Chu: Okay. Thank you, guys. Philip Snow: Thanks. Operator: Thank you and our next question comes from Mr. Alex Kramm of UBS. Alex Kramm: UBS: Yeah good morning. Sorry I am at a conference. Hopefully you can hear me okay. First off, can you just talk about buy-side versus sell-side, it seems like the sell-side in these choppy environments tends to be a little bit quicker in cutting in the buy-side, so can you, I think when the sell-side large firms get some minimum. So can you talk through kind of like the volatility you can take before it actually starts hitting your business and then on the buy-side, given the lag, do you get a little bit more incrementally concerned about the second half or nothing to worry at this point, at this place? Thanks. Scott G. Miller: Yeah it's Scott. Sell-side was mixed. You know there was a lot of M&A activity going on obviously in the last couple of quarters and so we saw some really great conversations going on in that space. There was clearly pressure on areas like the trading floor which is less of an exposure to us. In the research area we got some good stuff going on there as well. So it was mixed. Buy-side, yes there was a slowdown in some conversations but that was a push in pipeline in to the second half so we feel we still feel really good about the second half. Philip Snow: Alex this is Phil Snow. So you know there are pieces of our business that are tied more to cyclicality than others and the sell-side business is definitely more heavily levered to headcount versus our buy-side business and as we made in our comments at the beginning, our buy-side business in becoming less levered to headcount and we have products that are very sticky at the enterprise levels and if you went back 5 or 10 years ago, it wasn't necessarily the case. Alex Kramm: Okay. That's helpful, thanks. And then just one of the positives we continue to see is that the ASV per user of a client is ticking up and made another jump this quarter or quarter-over-quarter. I know to some degree this is Portware but I mean is it a reflection of cross selling. I mean is there an incremental push that you are doing right now or is it just a noise and it can jump around the ASV per user? Scott G. Miller: It is noise. It's a very hard one to dig into but I think if you just go back to the comments I made on the previous question it could be very much related to that. Alex Kramm: Okay and then just lastly a quick one can you just remind us how big hedge funds are within your buy-sides community considering that those things will be struggling a little bit more at the start of the year? Philip Snow: We don't breakup the number explicitly in terms of clients' side. I will that we started really good activity in the hedge fund space in the quarter. Yes, there is pressure on that market thereof is when is volatility but we saw some great new business wins in that space. Alex Kramm: Much appreciated. That's it from me. Take care. Philip Snow: Thank you. Operator: Thank you. Our next question comes from Mr. Peter Heckmann from Avondale. Sir, you may proceed. Peter Heckmann: Avondale: Thank you. Good morning, everyone. One observation and then a couple of questions and I think before asking around the edges but on a first half basis, this year user adds are down pretty materially from the first half of last fiscal year and so the two questions would be; one, what we are seeing there? Is it just a natural lumpiness or are we seeing the push out or would you say that they were areas of the business that saw some offsets and then number two, is it--how should we think about the business as it becomes less directly dependent on users? I mean you've never said directly how much of the revenue is based on users. We've kind of estimated about a third but it seems like it's even decreasing from that and would that be more bundled enterprise licenses on the buy-side or more bundle deals that--it creates a situation where even if users aren't growing as fast, you're--within clients is making up the difference? Philip Snow: Yes I think that's a good example is our CTS business. With CTS we can offer beads of content or analytics or APIs where clients can get back to value outside of the workstation and those types of solutions tend to extremely sticky once they're in the clients. Peter Heckmann: Could you remind me did you provide any user count at all on Portware? Philip Snow: No. Peter Heckmann: Or can have that later in the numbers? Philip Snow: That's not -- we don't include Portware users in our user count. It's really kind of what you think of as the core fact at workstation. We also don't include users of our RMS suites so we have three product lines in there. Two of them are locally deployed, one as Code Red that's traditionally we sold more to the buy-side, hedge funds, big client sponsors, and our partner solutions which is on the sell-side. We also have web solutions that we sell our clients when we have typically have not broken those values. So there are a lots of other people using FactSet other than the number that we report in our press release. Peter Heckmann: Got it. Okay, that's helpful. Thank you. Operator: Our next question comes from Toni Kaplan of Morgan Stanley. Sir, you may begin. Toni Kaplan: Morgan Stanley: Hi, thank you. You had strong hiring again this quarter of about 14% excluding Portware. Was the hiring again focused on sales people, on consultants and is there a certain area that they are focused on or is it just general like selling and training? Maurizio Nicolelli: The 160 new employees, net new employees that we had during the period, is really focused around our consulting and engineering classes in the second quarter which is what we do every year and also a piece of that hiring was also our content collection classes in Manila and Hyderabad. So it's really part of our second quarter employee headcount growth. Toni Kaplan: Okay. It was just a up a lot year-over-year so okay that's fine. And then just could you give us an update on how you view your total addressable market and fixed income whether it'd be in terms of dollars or number of clients or however it is that you look at it. Maurizio Nicolelli: We view the numbers as extremely big and I think in a lot of markets where we don't feel that we have more than 5% or 10% of the addressable market shares so we tend to think of the overall market as being around $25 billion which gives us sort of less than 5% market share. Not all of that is readily addressable but if you add a market share of our major competitors that's really what the industry is spending. Toni Kaplan: Thanks a lot. Operator: Thank you. Our next question comes from Tim McHugh from William Blair. You may proceed. Tim McHugh: William Blair & Company: Hi yes, thank you. For I guess people have asked differently about the environment so I may try one more. You just talked about wanted to get 10% growth and obviously you've been a kind of slowly accelerating the last year. Is this environment conducive to that continuing as we think forward or in this environment would you say that's the you probably need a better environment to continue to see that at the to get to double digit growth. Philip Snow: So typically the way we think about growth is just we just want to do very well relative to our competitors in the market place. I think that's the way we typically think of it. We don't view our market share as necessarily early expanding. We really about taking market share and we're just going to continue to execute as well as we can against our competitors. But we're not going to put out any numbers there in terms of what we think we're going to do in terms of sales growth beyond the revenue guidance that Maurizio gave for Q3. Scott G. Miller: Hey. This is Scott. On the sell-side the opportunities that we've seen for a while a while now are still very much all there. We've got some great stuff going on, some new business and from up selling in current client base and none of that has moved. The market volatility it causes in some cases. Yes it has some impact on the direct workstation but the overall opportunities out there have not changed for us in many cases it actually increased because of the market volatility. So, we were still very confident with the business growth. Tim McHugh: And can I ask, I think this is you came in kind of in the lower half of the guidance range which your history is given the visibility, you usually are at top or half and I think last quarter was the same thing, and you said it was just kind of more back-end loaded bookings. Is that true again this quarter and if you see this for two quarters, is there a trend in there is something about what product are selling or the environments that we should infer from that? Maurizio Nicolelli: Hi Tim its Maurizio. We actually did have a significant portion of our ASV recorded towards the January, February period during the quarter so it lowered our, lightly lowered our revenue for the quarter and we're also have about $0.5 million of deferred revenue adjustment from accounting that's still coming to our revenue line from the Portware acquisition that lowers overall revenue. So when you take those two items were slightly lower than where the consensus estimate was. Tim McHugh: Okay and then the just one math one that another R&D tax credit is permanent. I guess if this 29% the right tax rate that we could use going forward, is that how you think about, I guess steady state? Maurizio Nicolelli: 29% is right around steady state and our range is between 28.5% and 29.5% and 29% is really right at that middle of that range. Tim McHugh: Thanks. Operator: Thank you. Our next question is from Keith Housum from Northcoast Research. Sir, you may proceed. Keith Housum: Northcoast Research: Great. Thanks for taking my question appreciate it. There is two questions for you if you don't mind. First what was the FX impact on the bottom line I guess on the EPS for the quarter year-over-year.? Maurizio Nicolelli: FX did benefit us slightly during the quarter but it was immaterial to our results at the end of the day. We did get a benefit from our pound and euro exposure but just from the overall results it was immaterial. Keith Housum: Okay and I think the last comment in your board and your press release regarding getting in to the index business, can you guys could elaborate a little bit more on what your aspirations with that and where you see yourself playing and perhaps where you guys could go with it? Scott G. Miller: Hey Keith this is Scott. So where we are spending some great effort in the ETS spare both from a thought leadership and a data and an analytics perspective. One of the thought from that is for us to be looking at the index space as well. It's not core to our strategy going forward right now but it's something we find really interesting. We've had a number of our clients ask us about it and some partners who wanted to do some things with us in that space. So it's something that we are looking at. I put more emphasis on what we are doing the ETS space as opposed to index. Philip Snow: Keith that's Phil Snow. I agree with that and the ETS effort that we have really is a function of the Revere acquisition that we made a couple of years back so Revere has an incredibly economy to classify companies and at a much deeper level than another products that are out there in the market place and a lot of ETS providers have come to us to build universes of companies for them for in a particular types of ETF that they're creating and that's what you saw with state and the innovative technology to ETF. Keith Housum: Great. Thank you. Operator: Thank you and our next question is from Greg Bardi from Barclays. You may proceed. Greg Bardi: Barclays Capital: Hi this is actually Greg calling on for--just wanted to ask about the international growth. Looked like Europe slowed down a bit maybe some pressures from both bracket banks but APAC was really strong. So any color that you can provide those two markets? Scott G. Miller: Yes Greg I think your comments were right we just see a slight slowdown in across the MBA. In was really in a pockets was pretty broad based nothing that I would draw particular attention and Asia-Pac continues to be great growth market for us. We saw some really good stuff going on in non-core markets in China and Korea and areas like that we saw some stuff going on so we like what we see out of Asia-Pac. Greg Bardi: Okay and then I just want to ask on what you're seeing in the M&A market and whether recent choppiness is providing any new opportunities and maybe an update on what you're seeing from a valuation perspective as well. Philip Snow: So on M&A front not much has changed for us today. We continue to focus on strategic acquisition around unique content and adjacent workflows but we continue to see quite a few opportunities that we're interested but there is nothing transformative that we're looking at this time. Greg Bardi: Okay and one more from me just any color you can provide on what the restructuring charge was yes I guess just what the restructuring charge was. Maurizio Nicolelli: Sure, it's Maurizio. So we went through and reviewed our large employee groups to--on there is--to realize from productivity gains in order to make this more efficient into the future and so that the $2.4 million charge really relates to just our overall restructuring process that we completed in Q2. And it's something that we go through every year to every 12 to 24 months. Greg Bardi: Okay. Thank you. Operator: Our next question comes from Mr. Andre Benjamin from Goldman Sachs. Sir, you may begin. Andre Benjamin: Goldman Sachs: Thank you. Good morning. First question I had I know you had mentioned that most of the growth in the sell-side was from the middle markets. So I was just trying to understand what do you find successful in that segment and is it really more function of just lower penetration or is there something special that they find that the value proposition for that business that part of the market versus your larger customer. Philip Snow: It's a mix Andre of those two. So we are picking up market share in that space and we are also diversifying a little bit the user types and some of the different solutions, things like our RMS and our partner solutions are getting traction in that space and we are expanding beyond just the analyst user type in there as well. So its mix to both of what you are talked about. Andre Benjamin: And then are you doing anything I know you have been investing a lot in the data procurement so is there anything we should be aware of that you are trying to may be leverage some of that data and changes your economics or value proposition in terms of you are collecting fundamentally versus and to the back of there. We continue to invest heavily in content and that's where I think you saw some of the head count growth coming from and we just continue to pull more and more value into the workstation of a content standpoint so. Having unique contents and best of content is a big piece value proposition and we know that the standing still for that is really not an option for us. Scott G. Miller: And Andre it's Scott I would to that, we're getting, we're doing more packaging of the content as well from a data feed perspective, specifically for the regulatory space and we saw some great traction on the back of that over the last couple of quarters. Andre Benjamin: Thank you. Operator: Thank you. Our next question is from Joseph Foresi. Sir, you may begin. Mike Reid: Cantor Fitzgerald: So the 51. Operator: Sir, you may proceed. Mike Reid: Cantor Fitzgerald: Okay. Hi this is. Rachel Stern: Operator I think we lost the question. Can you please ask the folks who have been in the queue to put their questions in again. Operator: [Operator Instructions]. Rachel Stern: Yeah I think we had a question from Joe Foresi coming up so when you see him in the queue. There we go, he should see the next question. Operator. Mike Reid: Hey can you hear me guys? Philip Snow: Yes. Mike Reid: Okay, thanks. This is Mike Reid on Joe. I appreciate you taken call. Just had a quick question about the 51 new clients. Is there any difference you're seeing in the makeup or is it generally the same as it's kind of been? Scott G. Miller: It's Scott, Mike, a not a dramatic shift. We did see some good wins in the wealth space and particularly some good wins in the insurance space, which was off the back of our multi-asset class and fixed income solutions. Those are probably the two that I would highlight. Other than that, it was fairly broad-based. We've had a number of initiatives in terms of new business pipeline generation over the last couple of quarters and we're starting to see that come through quite well now. Mike Reid: Okay and then just another one, it's sort of been asked about the micro environment, but do you or do you think you see any effects just from the general slowdown in the IPO cycle different from I guess other macro concerns? Scott G. Miller: It's Scott again Mike. I don't see it as a particular factor for us in the M&A activities biz can descend it, I don't see it as a particular factor, no. Mike Reid: Okay. Great, thanks guys. Scott G. Miller: Thank you. Philip Snow: Thank you. Operator: Thank you. And our next question comes from Patrick O'Shaughnessy from Raymond James. Sir you may begin. Patrick O'Shaughnessy: Raymond James: Hi. So a couple months ago there was a story out there that JP Morgan was apparently looking to replace several thousand terminals, Bloomberg Terminals with Thomson Reuters. Curious if that is something that you're basically also trying to participate on. And then more probably, do you see a trend as some of the major banks, as they are increasingly focused on cost to try to rip out some of the Bloomberg, replace it with alternative lower price solutions? Philip Snow: Hi Patrick, it's Phil Snow. I would say generally when we're out there talking with the C level executives at the bigger banks, there's definitely a focus on total cost of ownership and that could come from any type of vendors. So, whenever somebody's paying a lot of money and they feel that they not getting the most value out of that, they're going to look for alternatives and that's -- I think if you go back to one of the comments earlier on the call, in an environment like this, it really gives us great opportunity to sit down with clients and look at their overall spend. Patrick O'Shaughnessy: Okay. And then specifically with JP Morgan, is that something that they sense that you're going after or is that kind of a product set that maybe terms of orders could fit other than what you guys could offer? Scott G. Miller: We've got a good relationship with all the major banks and we've got some great conversations going on with all of them. Patrick O'Shaughnessy: Alright, thank you. Operator: Thank you. And our next question is from Peter Appert from Piper Jaffray. Sir, you may proceed. Analyst: Hi, this is actually Steven dialing for Peter. Thank you for taking my question. I just want to ask a little bit more about the password growth. In the quarter we see a deceleration of the password growth. Is that a function of comparative dynamics, more challenging comp or is the user market environment getting more difficult? Scott G. Miller: Hi it's Scott. I don't see it as a result of competitive at all. If anything, it was somewhat market-driven with the volatility in the market. Again, we don't see it as a concern. The great thing about our business is that we got incredibly diversified portfolio of solutions out there that can offset any market condition downturns and workstation growth. We've also got some good plans in place to build up that workstation growth in the coming quarters as well. So non-major concern. Analyst: Great and then just another question I was just wondering what kind of growth are you seeing revenue such as data speeds and is there any significant differences in the profitability and non-terminal? Philip Snow: Thanks for the question so traditionally we've just not broken that growth rate but one good product reflecting lot of confidence for our terminal product is that we can then turn around in a lot of cases and monetize that for fees. So I would say there is some good profitability associated with our CTS business. Analyst: Okay Great thanks. Philip Snow: Thanks. Operator: Thank you and our next question is from Mr. Shlomo Rosenbaum. Sir, you may proceed. Shlomo Rosenbaum: Hi thank you for squeezing me back in. I just want to ask a little bit in terms of the competitive environment and specifically to Thomson Reuters it looks at least from the data that I have that they might have actually increased workstations for the time sequentially since 2008. I just want know if there is change of occur you're noticing comparative change on their side in terms even more aggressive pricing or anything like that and then I have one other follow up question after that. Scott G. Miller: Shlomo, its Scott we haven't in the last quarter haven't seen a dramatic change as lot going on in the competitor environment. I haven't seen any dramatic change in pricing strategy now is the short answer. Shlomo Rosenbaum: Okay what exactly is the insurance product sale? Scott G. Miller: It is not terribly different to our typical investment management sales more emphasis clearly on the fixed income space because of the assets that they typically have under management and so it's a portfolio analytics, portfolio risk sale our core product along the portfolio services but a big focus on multi asset class and fixed income. Andy Benjamin: Okay. Thank you. Operator: That concludes today's conference. Thank you all for participating. You may now disconnect.