FactSet Research Systems Inc (FDS) Q3 2021 Earnings Call Transcript

FactSet Research Systems Inc  (NYSE: FDS) Q3 2021 earnings call dated Jun. 29, 2021.

Corporate Participants:

Rima Hyder — Head of Investor and Media Relations

Philip Snow — Chief Executive Officer

Helen Shan — Chief Financial Officer and Chief Revenue Officer

Analysts:

Manav Patnaik — Barclays — Analyst

Owen Lau — Oppenheimer — Analyst

Toni Kaplan — Morgan Stanley — Analyst

Andrew Nicholas — William Blair — Analyst

Ryan Gunning — Jefferies — Analyst

Alex Kramm — UBS — Analyst

Kevin McVeigh — Credit Suisse — Analyst

Shlomo Rosenbaum — Stifel — Analyst

George Tong — Goldman Sachs — Analyst

David Chu — Bank of America — Analyst

Keith Housum — Northcoast Research — Analyst

Craig Huber — Huber Research Partners — Analyst

Presentation:

Operator

Good day, and thank you for standing by. Welcome to the FactSet Third Quarter 2021 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 the conference over to your speaker today, Rima Hyder. Please go ahead.

Rima Hyder — Head of Investor and Media Relations

Thank you, Joelle and good morning everyone. Welcome to FactSet’s third fiscal quarter 2021 earnings call. We continue to be in various remote locations today. We may have some audio quality issues and we appreciate your patience should we experience a disruption.

Before we begin, I would like to point out that the slides we will reference during this presentation can be accessed via the webcast on the Investor Relations section of our website at factset.com. 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 one follow-up.

Before we discuss our results, I will 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 and Chief Revenue Officer. And now, I’d like to turn the discussion over to Phil Snow.

Philip Snow — Chief Executive Officer

Thank you, Rima and hello everyone. Thanks for joining us today. I’m pleased to share our third quarter results headlined by strong top line growth. This has allowed us to increase our organic ASV plus professional services guidance for this fiscal year. Building on last quarter’s momentum, we grew organic ASV plus professional services by 5.8% this quarter. The investments made in both content and technology over the past seven quarters have strengthened our product portfolio. And as a result demand for our solutions is increasing, further supported by our clients’ own digital transformation needs.

Our growth this quarter was strongest with wealth managers, banking clients and asset owners. The acceleration in ASV reflects solid execution from the sales team who increased wallet share with existing accounts and further improve client retention. Our strategy to build the industry’s leading open content and analytics platform continues to make an impact in the market. We remain on track with our multiyear investment plan. We continue to build out our content offering with particular focus on deep sector, private markets, ESG and data for wealth managers.

Growth in workstations this quarter was driven by deep sector and private markets data, especially with banks and corporate clients. The expansion of our StreetAccount coverage in Canada and Asia as well as more fund data collection has generated greater demand from wealth managers. And clients are using our data management solutions, which include entity mapping and data concordance services to manage their own content. These offerings are key differentiators often sought by asset management clients.

Our migration to the cloud is progressing as planned, and gives us the opportunity to build new products that support ASV growth. One example is the adviser dashboard which is being well received by wealth managers as evidenced by new wins and solid pipeline. Clients are seeking personalized tools like the adviser dashboard that can surface insights, increase efficiency and help users identify the next best action.

In addition, we provide greater flexibility to clients by further opening up our platform. Our broader API offerings allow clients to leverage core and alternative data sets, tap into our robust portfolio analytics engine, build digital portals and gain access to proprietary signals. We have seen strong demand for our analytics APIs, as well as fundamental company data APIs for CTS. We are also seeing more data sales through cloud-based platforms such as Snowflake and having success with CRM integrations.

This growth in our digital solutions can be attributed to our technology investments. Looking at our regions, I’m pleased to say that our ASV growth rate increased in the Americas and EMEA across the majority of our business lines. The Americas growth rate increased to 6% with strength across CTS, research and analytics. Acceleration was driven primarily by strong workstation sales to our banking clients and overall demand for premium and core data feeds. We benefited from an increase in hiring of middle market and bulge bracket banks due to robust M&A and equity capital markets.

EMEA’s growth rate accelerated to 5% improving over the past two quarters. We experienced stronger results in research and analytics reflected in part by higher retention of our asset management and wealth firms. In addition, we captured greater international price increases as clients continue to affirm the value of our solutions. Asia Pac’s growth remained at 9% driven largely by research and analytics. Results include strong cross sales to asset management firms, as well as increases to global banks who are hiring more to accommodate increased capital markets activity. The region also benefited from higher price increases.

In summary, we enter the end of fiscal ’21 with good momentum and have good visibility into our fourth quarter. We have a strong pipeline weighted most heavily towards institutional asset managers, broker-dealers and wealth managers and are increasing our organic ASV guidance to $85 million to $95 million for this fiscal year.

Overall, we are encouraged by market trends. Clients are showing more willingness to spend against the backdrop of anticipated economic recovery. Decisions on more complex deals that had been delayed are now beginning to be reconsidered as clients look to execute on their own digital transformations. We see increased demand for enterprise-wide technology upgrades and data management as CIOs and CTOs look to future proof their technology stacks.

This gives us conviction in the long-term benefit of our multiyear investment plan and our path to higher growth. This month marks FactSet’s 25th year as a public Company. I’m proud to reflect on our team’s strong performance, the culture of continuous innovation we have fostered, and the significant value to shareholders we have created over the years. We will continue to push ourselves to create smarter, more adaptive and more personalized solutions that make us the trusted enterprise partner for clients.

I’ll now turn it over to Helen who as many of you know, has taken over the leadership of our sales organization as Chief Revenue Officer, while continuing to serve as our CFO. She will take you through the quarter in more detail.

Helen Shan — Chief Financial Officer and Chief Revenue Officer

Thank you, Phil and hello everyone. As you’ve seen from our press release this morning, we are pleased to report an acceleration in our top line, both in terms of revenue and organic ASV, plus professional services. Our quarterly results also reflect increased year-over-year spending in people and technology, in line with our investment plan as well as anticipated higher ASV performance. We believe the progress made in our own digital transformation is enhancing our ability to help clients do the same.

I will now share more details on our third quarter performance and provide an update to our annual outlook. We grew organic ASV plus professional services by 5.8%, reflecting in part the client demand for our solutions driven by their own digital transformation needs. In addition, our ability to realize higher pricing is a direct reflection of the value our products provide to clients.

To that point, in line with the $14 million captured last quarter with the Americas price increase, we added $8 million from our international price increase this quarter. Our investments in content technology have further strengthened our product offerings with clients, as reflected in both higher levels of client retention and cross-selling. Focused execution from our sales team in delivering key workflow solutions also accelerated our growth. All of these factors underpin our results year-to-date.

For the quarter, GAAP revenue increased by 7% to $400 million. Organic revenue which excludes any impact from foreign exchange, acquisitions and deferred revenue amortization increased 6% to $397 million. Growth was driven primarily by our analytics and CTS solutions, which have been the drivers of ASV in prior quarters. As a reminder, ASV represents the next 12 months of revenue. So there is a lag between the recording of ASV and the realization of revenue.

For our geographic segments, organic revenue growth for the Americas grew to 6%, EMEA grew to 5% and Asia Pacific to 11%. All regions primarily benefited from increases in our analytics and CTS solutions. GAAP operating expenses grew 12% in the third quarter to $282 million, impacted by higher cost of services. Compared to the previous year, our GAAP operating margin decreased by 300 basis points to 29.5%, and our adjusted operating margin decreased by 390 basis points to 31.6%. As a percentage of revenue, our cost of services was 570 basis points higher than last year on a GAAP basis and 560 basis points higher on an adjusted basis.

This increase is driven by higher compensation and technology costs. Compensation growth is comprised of higher salary expenses for existing employees, new hires to support our multiyear investment plan and higher bonus accrual in line with stronger than anticipated ASV performance. This higher technology spend relates to our planned migration to the public cloud. We have been experiencing higher cloud usage and costs due to increased client trials, enterprise hosting and new product development.

We anticipate this level of elevated expenses to continue as clients adopt our digital solutions. SG&A expenses when expressed as a percentage of revenue improved year-over-year by 270 basis points on a GAAP basis and 170 basis points on an adjusted basis. The primary drivers include reduced facility expenses, lower spend due to office closures and a decrease in professional fees, offset in part by higher compensation costs, reflecting the same factors as noted in the cost of services.

Moving on, our tax rate for the quarter was 12% compared to last year’s rate of 15% primarily due to lower operating income this quarter, and a tax benefit related to finalizing prior year’s tax returns. GAAP EPS was almost flat to last year at $2.62 this quarter versus $2.63 in the prior year. Adjusted diluted EPS decreased 5% to $2.72. Both EPS figures were largely driven by higher operating expenses, partially offset by higher revenue. A reconciliation of our adjustments to GAAP EPS is included at the end of our press release.

Free cash flow which we define as cash generated from operations, less capital spending was $122 million for the quarter, a decrease of 13% over the same period last year. This decrease is primarily due to higher capital expenditure from higher investment in internal software and the timing of certain tax items. For the third quarter, our ASV retention continued to be above 95%, and our client retention improved to 91% which speaks both to the mission criticality of our solutions and the solid efforts and focused execution of our sales teams.

We grew our total number of clients by 7% compared to the prior year to over 6,100 clients, largely due to the addition of more wealth and corporate clients, including private equity and venture capital firms. And our user count grew 11% year-over-year and crossed the total of 155,000, primarily driven by wealth and corporate users. For the third quarter, we repurchased over 178,000 shares of our common stock for a total of $58 million, at an average share price of $323.

We also increased our quarterly dividend by 6.5% to $0.82 per share, marking the 22nd consecutive year that we have increased our dividend. We remain disciplined in our buyback program and committed to returning long-term value to our shareholders. The impact of our multiyear investment plan is reflected in our results. The demand for our strong content offerings, digital solutions and open platform is accelerating growth.

Given our strong performance this quarter, and our confidence that we will execute successfully on a healthy pipeline as we close out the fiscal year, we are increasing our full-year organic ASV plus professional services guidance range to $85 million to $95 million. We are also reaffirming the other metrics in our annual outlook. Given its timing and nature, an increase in ASP in the fourth quarter will not materially change revenue in fiscal year ’21, but would result in a higher bonus accrual.

The related expense would impact our margins by an incremental 60 basis points to 75 basis points. We believe that we will remain within our stated annual guidance ranges. In closing, from the vantage point of now overseeing FactSet sales and marketing organization, I can attest to the diligent focus and efforts we have made this year, helping clients leverage our offerings, building a stronger and broader pipeline and converting opportunities to sales.

I have confidence in our ability to continue to execute on all these fronts and grow our market share as we finish the year. And with that, we are now ready for your questions. I’ll turn it back to the operator.

Questions and Answers:

Operator

Thank you. [Operator Instructions]. Our first question comes from Manav Patnaik with Barclays. Your line is now open.

Manav Patnaik — Barclays — Analyst

Thank you. Good morning. I just had one question and that is, you know, it sounds like the end markets, let’s say [Phonetic] clients are pretty positive compared to what they were in the prior few years. And so I was just curious on what you are seeing on the competitive side. Is that — is it — are budgets of clients increasing because of that, is competition increasing? Just some overall dynamics there would be helpful.

Philip Snow — Chief Executive Officer

Hey Manav, it’s Phil. Thanks for the question. So I’d say it’s a combination of things. We’re really excited about the movement in our top line, and I attribute that really to the investments that we’ve made over the last year or two in both content and technology. So we’re seeing a lot of good uptick in the research part of our business and the digital transformation in terms of opening the platform is allowing our clients to consume value from FactSet in new and interesting ways.

So the APIs are really driving some of the momentum we’re seeing in both CTS and showing some strength now in the analytics business. And I do believe we’re taking market share on the wealth side. I think it’s pretty well understood who we’re competing with there. And for the desktop business, that’s a combination of firms, and analytics, again, it’s a combination of firms.

But overall, I feel really good about the top line and how we are stacking up versus the competitors in the marketplace. And overall, yeah, I think we’re seeing that clients are — we can all see a return to some sort of normalcy in terms of how we’re working and the underlying trends in the market are definitely positive.

Manav Patnaik — Barclays — Analyst

I guess then just related to that, maybe can you just talk about your current pipeline and compare it to maybe the prior couple of years?

Philip Snow — Chief Executive Officer

Sure. So yeah, we’ve got confidence in Q4. We’ve booked more ASV at this time than we had last year. And we have a stronger weighted pipeline. So there is a higher confidence in the pipeline and a lot more bigger deals. And it’s well distributed amongst all the different business lines.

Manav Patnaik — Barclays — Analyst

All right. Thank you guys.

Operator

Thank you. Our next question comes from Owen Lau with Oppenheimer. Your line is open.

Owen Lau — Oppenheimer — Analyst

Good morning. Thank you for taking my question. So the expense in the third quarter was a bit more than expected. And I think Helen you called out a couple of things like salary, bonus and technology. But for the technology, could you please add a bit more color on — for lack of a better term, how much of that will be like one-time or non-recurring in nature?

Helen Shan — Chief Financial Officer and Chief Revenue Officer

Yeah, sure. Happy to talk about that, and thanks for your question. When we think about the higher cost and technology, I would say, in part, it’s really driven also by higher cloud related costs. And the drivers of the cloud costs include the migration of our existing data and applications, which is always planned, client related activities such as hosting and trials and then new product development, as we’re doing new products which is going directly to the cloud. And we monitor these pretty closely. But we’re learning along the way. And the cloud allows us to monitor our usage better.

I would say most of the higher costs are really related to client activity and new product development. And I think that reflects the faster adoption, probably a bit faster than we had planned. So it’s — it’s in line with clients who will also need to make their own digital transformation. And so we would expect all of this to give us an indication really linked to future ASV growth as opposed to this year specifically. But I would say, if we think about the higher costs on the cloud side, a portion of it is just related to future top line growth.

Owen Lau — Oppenheimer — Analyst

Got it. That’s very helpful. And then switching gear to — I want to go back to Truvalue Labs, the Sustainable Development Goals monitor. And I think the monitor it’s free [Phonetic] but could you please talk about how you’re going to monetize these data set. Is it through data feeds, or any other products? Thank you.

Philip Snow — Chief Executive Officer

Yeah, hey Owen. Yeah, so absolutely, we will continue to sell the data feeds and APIs that Truvalue Labs had developed before the acquisition. And we’ve been doing hard work to get all of that integrated into the broader FactSet suite, so that the Truvalue Labs data and analytics can be available throughout FactSet. So that’s a big piece of the strategy.

Owen Lau — Oppenheimer — Analyst

All right. Thank you very much.

Operator

Thank you. Our next question comes from Toni Kaplan with Morgan Stanley. Your line is open.

Toni Kaplan — Morgan Stanley — Analyst

Thank you so much. Wanted to ask about the 8% sell side growth in the quarter. Was there anything particular to call out there? Was it more a couple of client wins or was it more broad based? And you mentioned the more willingness to spend by clients, so that seems positive. So just wanted to hear about your visibility into the new hiring class as well at the banks. Thank you.

Philip Snow — Chief Executive Officer

Sure. So yes, it is broad based Toni. And I think we’ve seen the benefits of hiring this far into our fiscal year. And a lot of that is really driven by the investment that we’ve made in content and the core platform to support the extra workstations. And there are still quite a few large banks that we don’t have perfect visibility yet on the hiring classes and those are going to come in, I think in the next month or two.

But we feel optimistic about that just given the trends that we see in the market. So a couple of other things I’d point out for the sell side. One is, we’re beginning to monetize feeds and analytics in the sell side, which previously we’ve not done much of. So that is supporting some of the growth. And then in terms of new logos, we’re positive this quarter for sell side firms, whereas Q3 of last year we were negative. So we’ve seen a good relative — even though we’ve closed more corporate and wealth clients, we’re seeing good relative performance in terms of new logos for the sell side.

Toni Kaplan — Morgan Stanley — Analyst

That’s great. And now that you’re seeing things sort of normalize a little bit, can you just give us an update on, if you’ve changed your thinking at all on the transformation targets in terms of either magnitude or timing. Just any sort of extra color from those targets that you had previously laid out before COVID. Thanks.

Philip Snow — Chief Executive Officer

So, you mean the three year targets that we laid out?

Toni Kaplan — Morgan Stanley — Analyst

Yes, yes.

Philip Snow — Chief Executive Officer

Yeah, we’re — I think as we said last quarter or maybe a couple of quarters in a row, we’re not going to revisit those right now. But let me get to Q4, we’ll be able to give you some guidance like we do every year for fiscal year ’22.

Toni Kaplan — Morgan Stanley — Analyst

Fair enough. Thank you.

Operator

Thank you. Our next question comes from Andrew Nicholas with William Blair. Your line is open.

Andrew Nicholas — William Blair — Analyst

Hi, good morning. Wanted to follow up on the strong sales side, ASV growth a little bit further. Specifically curious how much you would attribute that acceleration to the deep sector rollouts, and maybe what’s a reasonable expectation for the timing of new deep sector rollouts going forward or anything else you can share on areas of focus there.

Philip Snow — Chief Executive Officer

I would definitely attribute some of it to that. We had one significant win that was related to the deep sector, and we are on track with that program. So the team did a tremendous job of laying out over a three-year period, a number of sectors that we would be developing. And we’re on track with that program. So seven quarters into it, we feel really good about the momentum there. We’ve done a lot of hard work to partner with a lot of firms, to bring that data and integrate it into FactSet, which is something we always do really well. And then for other datasets, we’re going out and collecting it ourselves.

So overall, we’re really thrilled with that program. The team has done an amazing job, and it’s beginning to have a real impact for us on the sell side. But it’s not just the sell side, we will be able to monetize this data within the corporate space, within the buy side as well.

Andrew Nicholas — William Blair — Analyst

Got it. Makes sense. And then, for my follow-up, I know you touched on it here and there in the answer to other questions. But just maybe broadly speaking if you could update us on the selling environment right now, you’ve talked in past quarters about lengthening of the sales cycles and analytics, some longer implementation cycles. So any changes there over the past couple of months as things have kind of picked up momentum or anything to call out there on a relative basis? Thank you.

Philip Snow — Chief Executive Officer

We’re beginning to see some real positive signs there for analytics. So I think, if you look at that space for our competitors as well, I think it was an area that slowed down for many firms. But we’ve had a good quarter for analytics and the pipeline looks really strong. So they’ve got a really good suite there of things we’ve been working on. So the core PA product is actually doing well. We’re adding new logos and seats for that. I mentioned APIs already, we have a new Quant research environment that we are releasing which has gotten tremendous feedback from the market, and our front office solutions are beginning to show some green shoots as well.

So analytics is definitely stabilizing, and clients are willing to now revisit a lot of these decisions for some of these longer sales cycles deals. So, and obviously clients are beginning to open up, we are as well as a firm, I think the sales team is itching to get back out there.

Andrew Nicholas — William Blair — Analyst

Great. Thank you.

Philip Snow — Chief Executive Officer

Okay.

Operator

Thank you. Our next question comes from Hamzah Mazari with Jefferies. Your line is open.

Ryan Gunning — Jefferies — Analyst

Hi, thanks for taking my questions. It’s actually, Ryan Gunning filling in for Hamzah today. First, can you just talk about how you’re thinking about your pricing model today, and whether you believe enterprise wide versus seat [Phonetic] based is better, and how your model currently works?

Helen Shan — Chief Financial Officer and Chief Revenue Officer

Sure. Ryan, I’ll take that question, it’s Helen. So I think we have a pretty good mix. We do both in some cases seat-based and other cases usage-based on our larger deals, larger clients where you would see more perhaps of an enterprise pricing model. We do that, but we do that via bands. So therefore if the users go up or down within the band, the pricing is the same, then if they go to the next tier, it goes up.

So I would say for our largest clients, that’s where many — that’s how many of them are first set up. Again it’s a blend of — in some cases usage, but in other cases users. And we’ve seen good growth. We can tell from the pricing increases that we’ve had our annual price increase again for international is up. So we’ve been able to capture more of that value that the clients have put into our products. So we would continue to see our mix there be sustainable.

Ryan Gunning — Jefferies — Analyst

Got it. That’s very helpful. Thank you. And then I guess switching gears, can you give us an update on how you’re thinking about larger scale M&A? Obviously, we’ve seen a good bit of deals in the info [Phonetic] services space, more recently, but any update there?

Helen Shan — Chief Financial Officer and Chief Revenue Officer

Sure, I’ll take that one. As it relates to larger deals and we don’t — we don’t comment on that. As you know, as we’ve talked about, our focus has been on content and in technology. We look to where we think we’ve got the best use of perhaps gaps that we can help fill in. So we always look at buy versus build versus partner. In terms of acquisition, we just completed a small one, it’s called [Indecipherable] investment technologies, which provides a platform for more behavior-based analysis and targeting asset managers and asset owners.

So while it’s small, it really fits into our strategy as it relates to the front office and as it relates to helping, as Phil had talked about in his opening remarks and making that next best decision. So we’re going to be very disciplined in how we’re approaching the potential acquisitions that are out there, even though we are looking at all of them as they come through.

Ryan Gunning — Jefferies — Analyst

Great. Thank you so much.

Helen Shan — Chief Financial Officer and Chief Revenue Officer

Thank you.

Operator

Thank you. Our next question comes from Alex Kramm with UBS. Your line is open.

Alex Kramm — UBS — Analyst

Yes. Hello everyone. Just a couple of things on the margin side. First of all, Helen, can you just — you made a comment at the end there about the fourth quarter, I think 60 basis points to 75 basis points. Was that relative to what we just saw in the third quarter, or how would you characterize that 60 basis points to 75 basis points?

Helen Shan — Chief Financial Officer and Chief Revenue Officer

Right. So the way I think about it is really 60 basis points to 75 basis points for the year. So in this particular quarter, because once we have greater visibility Alex into where we would see, where we anticipate it for the year, then we had to both true-up for the first half as well as increase for Q3. But what I wanted to give was, what is that impact for the entire year. We would say it’s somewhere between, we think 60 basis points to 75 basis points depending on where we end up. And that is based not only on top line, but also on margins.

Alex Kramm — UBS — Analyst

Okay. So it should be reflected in the run rate if I heard you correctly now, because you’ve started to true-up.

Helen Shan — Chief Financial Officer and Chief Revenue Officer

Right.

Alex Kramm — UBS — Analyst

Okay. And then secondarily also a very quick one, you talked about this, the cloud and the cost associated with that. It sounded very much like this is spend [Phonetic] to grow. But I thought, I was also under the impression that there were some duplicate cost as you’ve been migrating to the cloud. Just can you remind us, are there still duplicate costs today? If they are, when are they, I mean how big are they and when are they supposed to tail off? And would you just reinvest those savings eventually, or would you actually expect that to flow to the bottom line if there are savings to be realized. Thank you.

Helen Shan — Chief Financial Officer and Chief Revenue Officer

Yeah. Sure, happy to answer that. So our cost is related to the cloud. I would say, a portion of it is part of our investment plan and you’re absolutely right, it is a duplication that’s happening, because we are not able to get out of our on-premise data center costs at this point. Now, the way that we’ve looked at it is, that is meant drop off as we complete our total migration. So that will drop off we think towards the end of FY’22, or the end of our third year. That’s where it was meant to happen.

And at that point, we’ll make a decision around as those drop off whether or not any portion of that gets reinvested, but that is part of the savings that we would have expected going forward as well. We’re not — we’ve not really talked about the dollar for dollar, but most of this is, as I said, the increase in the spend on the cloud is really to your point, client-related.

Alex Kramm — UBS — Analyst

All right, fair enough. Thank you very much.

Helen Shan — Chief Financial Officer and Chief Revenue Officer

Thank you.

Operator

Thank you. Our next question comes from Kevin McVeigh with Credit Suisse. Your line is open.

Kevin McVeigh — Credit Suisse — Analyst

Great, thanks. Hey Phil, you talked about kind of demand for open content and analytics fueling growth as your clients are pursuing digital transformations. Is there anyway to frame what the potential market for that can be as it relates to FactSet? And is it — can it shift the organic growth 100 basis points or just, was there a way to just maybe tighten that comment up particularly around the digital solutions kind of the current and how you see that playing out over time?

Philip Snow — Chief Executive Officer

Yeah. I mean, I think that — I mean, we play in a big market today, all right. So I think it’s at least a $30 billion market that FactSet participates in. And the trends definitely are moving to clients putting together, I think more customized workflows for themselves using open technology stack. So, I think it’s really just an evolution honestly of how our clients consume content and analytics today. And our strategy, we believe strongly is the right one in terms of creating these lego blocks that clients can then use to stitch together to differentiate themselves from their competitors.

So those are the conversations we’re having with our clients. The workstation is not going away. I think there’s always going to be a place for that in the market. But the firms that they are going to win are the ones that are being able to plug in as needed for the clients across their entire workflows, whether it’s buy side, sell side, wealth, you name it.

Kevin McVeigh — Credit Suisse — Analyst

Helpful. And then just anything to call out, it seems like the ASV retention was around 95%, but you saw some nice improvement on the client retention. Any dynamics to call out there just around retention client relative to ASV overall?

Philip Snow — Chief Executive Officer

I just think it speaks to the strength of our product, the investment we’ve made, and how well the sales team has been executing. We are interacting more and more with our clients, the virtual environment in some way has upped the amount of interactions we have with them. So I think it just really speaks to the product, and the fact that clients like working with us.

Kevin McVeigh — Credit Suisse — Analyst

Great. Thank you.

Operator

Thank you. Our next question comes from Shlomo Rosenbaum with Stifel. Your line is open.

Shlomo Rosenbaum — Stifel — Analyst

Hi, thank you for taking my questions. Hey Helen. Can you talk a little bit more about some of the costs for the client trials? Are those increased people costs, increased technology costs? How does that work? It seems like it’s a precursor to future revenue to come. And I thought maybe we can discuss that a little bit, and then I have a follow-up.

Helen Shan — Chief Financial Officer and Chief Revenue Officer

Sure. Happy to do that. So I would think the majority of that is more along the technology costs. One of the nice things around the trials and the data exploration in an odd way, it shortens the sales cycle. So what used to take much more time and involvement with our sales and implementation folks now can be done in a matter of hours versus weeks or months.

And so I would say, in some ways, there is people who help on that front. But the cost driver to your direct question is much more on the technology side.

Shlomo Rosenbaum — Stifel — Analyst

Okay. So is there like hosting costs, I’m sorry, I’m just on the same question.

Helen Shan — Chief Financial Officer and Chief Revenue Officer

[Speech Overlap]. Yeah, sorry, I should be clearer. Yeah, it’s more around the hosting, the cloud costs.

Shlomo Rosenbaum — Stifel — Analyst

Okay, very good.

Helen Shan — Chief Financial Officer and Chief Revenue Officer

[Speech Overlap] And yeah, the cloud bodes for data as well as for computation, but it is cloud.

Shlomo Rosenbaum — Stifel — Analyst

Got it. And then, so I’m assuming that those are good things that can lead to future revenue growth. I mean that’s the way that I — we should be looking at that, that just to finish up that question.

Helen Shan — Chief Financial Officer and Chief Revenue Officer

Yeah, I think that, that is. I mean, the higher activity, the more they’re trucking out the different various feeds, we’re seeing that lead to more, even if they are looking at alternative data feeds on our — on our open FactSet, they often end up buying our own dataset, data feeds. So I would say that is a feeder into that.

Shlomo Rosenbaum — Stifel — Analyst

Got it. Okay. And then, one other thing, just kind of a housekeeping item. It seems like the — there is some kind of reallocation of revenue amongst the segments in the last year quarter when I go back in what’s in the press release for Americas versus EMEA versus Asia-Pac, the revenue is much higher in the prior year, what’s being reported now in Americas has been less than the other two. So is it something that prompted that reallocation or was there something that was talked about that I missed over the last couple of quarters?

Helen Shan — Chief Financial Officer and Chief Revenue Officer

You’re saying the actual dollars?

Shlomo Rosenbaum — Stifel — Analyst

Yeah. If you look at the dollars, you got…[Speech Overlap].

Helen Shan — Chief Financial Officer and Chief Revenue Officer

Sorry, you finish your question sorry.

Shlomo Rosenbaum — Stifel — Analyst

No, I was just going to say if you look at the dollars as what was reported in let’s say Americas last year in the 10-Q, it was like, it may be $7.5 million lower.

Helen Shan — Chief Financial Officer and Chief Revenue Officer

Yeah, right.

Shlomo Rosenbaum — Stifel — Analyst

Than what’s now, and the other ones were higher and it seems to be reallocation. Did something also change for the fourth quarter? I’m just trying to figure out for modeling how I should be handling that.

Helen Shan — Chief Financial Officer and Chief Revenue Officer

Sure. No, thank you for that question. Yes, there are some things that were re-classed in part due to where the clients are based. Rima can give you much more detail on that. But that is a reclassification.

Shlomo Rosenbaum — Stifel — Analyst

Okay. And that’s something that’s going to be for the fourth quarter as well that the year-over-year comp is going to be different than what we saw, if you take out the K and you subtract the first three quarters from it?

Helen Shan — Chief Financial Officer and Chief Revenue Officer

I’m going to say yes, because of the way that the movement of — these are existing clients that move, but again if you spend a little time with Lima, she can talk you through it.

Shlomo Rosenbaum — Stifel — Analyst

Great, thank you.

Helen Shan — Chief Financial Officer and Chief Revenue Officer

Yeah. You’re welcome.

Operator

Thank you. Our next question comes from George Tong with Goldman Sachs. Your line is now open.

George Tong — Goldman Sachs — Analyst

Hi, thanks, good morning. I wanted to follow up on the margin question earlier and the impact of higher bonus accruals. The 60 bps to 75 bps of margin impact full year, can you clarify if that’s relative to your original margin expectations for fiscal 2021, which would imply you would land in the bottom half of your guidance range? And perhaps discuss if there are any offsetting factors to the upside, that might mitigate that impact?

Helen Shan — Chief Financial Officer and Chief Revenue Officer

Sure. Thanks for your question. So yes, the impact for the year is higher. So the 60 bps-75 bps would have been beyond what we would have provided in terms of our original plan. There are offsets as we managed both from a people perspective, some of the productivity, lower professional services fees that we think. And we’ll see how Q4 ends up. But we had expected a certain level of T&E for Q4 and we’ll see where that goes. We do think from a margin perspective though overall we’ll be on the lower end of our range. So I think that that is a fair way of thinking about it.

I would also add, what we’re seeing come through that likely on the tax rate side will be on the lower end as well. So we should take both of those into a bit of consideration.

George Tong — Goldman Sachs — Analyst

Got it. Very helpful. And then you’re continuing to invest in content and technology. Earlier, I believe you had mentioned plans for the full year of about $25 million, $26 million. Can you talk about your plans over the next 12 months? You had laid out a three-year investment plan where it’s $15 million on average per year. So how is that shaping up? Do you think your three investments might be similar or would it step down from this year’s levels?

Helen Shan — Chief Financial Officer and Chief Revenue Officer

Yeah, so we’ll — as Phil had alluded to earlier, we’ll give greater guidance on this later on after Q4. Our focus right now is obviously trying to execute and convert everything in — for this fiscal year. I will say the way to think about it, our investment plan is in terms of what we gave in the beginning two years ago, we’re on target, both milestones as well as in general spend. That being said, the cadence, the mix, made the hiring which was slower in the first year, caught up mainly in the second year, but that — some of that might bleed into the third year. But we’ll give more guidance on that when we complete the year and have our call next time.

George Tong — Goldman Sachs — Analyst

Got it. Thank you. Very helpful.

Helen Shan — Chief Financial Officer and Chief Revenue Officer

You’re welcome.

Operator

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

David Chu — Bank of America — Analyst

Hi, thanks. So when you guys first launched the accelerated investments, I think, Helen, you noted 25% of revenue should benefit should be in year two, with like 75% in year three. Is this still the expectation? Or have you seen some of it pull forward, given — it seems like it’s really helping the ASV growth?

Helen Shan — Chief Financial Officer and Chief Revenue Officer

Thanks for your question. I mean I do — we do think, in general, that we’ll see more of the benefit in the third year as things are built, as Phil talked about, a lot of underpinning some of the acceleration is on the technology and cloud-based side. So it’s a little hard to point to any particular dollar or deal. I think we’re still in that general range as I’ve given before, that most of it’s coming in the third year. But yeah, we’re really pleased of where we are at this point, given the higher ASV growth thus far.

David Chu — Bank of America — Analyst

Okay. Great. And then, just on employee headcount. So it looks like it was up about 6% over the past 12 months ex the Truvalue. It sounds like that’s slightly down from the last quarter about like 7.5%. So just thoughts on how should we think about that over the like next year or so?

Helen Shan — Chief Financial Officer and Chief Revenue Officer

Yeah, I think — I mean, we’ve continued to do a lot of hiring for the investments and this churn that’s happening as well. So I think that’s a fairly — I mean we have a general cadence that you’ll see by quarter. So I wouldn’t necessarily apply — I would say it’s on par from the previous year for this quarter. So I would expect to see that continue.

David Chu — Bank of America — Analyst

Okay, great. Thank you.

Helen Shan — Chief Financial Officer and Chief Revenue Officer

You’re welcome.

Operator

Thank you. Our next question comes from Keith Housum with Northcoast Research. Your line is open.

Keith Housum — Northcoast Research — Analyst

Good morning. Helen, I was hoping you can provide a bit of context, it’s obviously been four quarters in a row now where you guys have benefited from lower facility costs and T&E. How much of that benefiting operating margins this quarter? And how do we think about that going forward as you guys resume back to, I guess, a more normalized world, however that normalized wold is going to be?

Helen Shan — Chief Financial Officer and Chief Revenue Officer

Right. Thank you for the question. Yeah, it’s one of those where — when we first set our guidance, we were thinking around the fact that the back half of this year, we would be much more, I’ll call it, back to whatever that new normal is. So we did expect an uptick. We didn’t see that come in Q3, but we’re also lapping. So I think on a go-forward basis, when we think about the amount of savings on a run rate, it will be somewhere in that, call it, 25 basis points to 50 basis points, based off of our FY ’19 run rate. We can’t look at last year in particular. So that’s how I would think about that.

The hybrid model allows us to manage our facility’s footprint and expenses much better. And honestly, the learnings from operating virtually in terms of client interaction, implementation, which we can do remotely now, as we’ve shown in several of our larger wealth implementations and internal meetings are just going to allow us to have that much more productivity.

Keith Housum — Northcoast Research — Analyst

Okay. Appreciate it. And then just as a follow-up and changing gears on you. Congratulations on the move over to the CRO role. I guess any thoughts now as you approach the Chief Revenue Officer position in terms of the sales — direction of the sales department and the marketing strategy? I guess, any thoughts on the move over?

Helen Shan — Chief Financial Officer and Chief Revenue Officer

Yeah, no, thanks for that. I’m really pleased and honored to be able to take on this role. The nice part is we’ve got a really talented sales organization and a solid leadership team. And so, I think our FY ’21 results to date reflect the focused execution in what still remains to be a challenging, albeit somewhat improving environment.

And so from my perspective, the areas that we’ll look to accelerate our efforts will be on the solutions that we bring to market from our investment plan. So ESG, wealth analytics, private markets. And to increase the wallet share in our targeted clients, I think we talked a little bit about retention earlier, but expansion, that’s been a big driver for us this year, and we’re just selling more things to our existing clients.

And then lastly, the focus would be more also on the enterprise discussion with senior executives. Our aim is to really provide our platform for their own digital transformation. So I don’t look at major changes as much as to really enhance what we’ve got going on thus far.

Keith Housum — Northcoast Research — Analyst

Great. Thank you. Good luck.

Helen Shan — Chief Financial Officer and Chief Revenue Officer

Thank you.

Operator

Our last question comes from Craig Huber with Huber Research Partners. Your line is open.

Craig Huber — Huber Research Partners — Analyst

Great. Thank you. Can you just clarify a little bit further your costs for the May quarter? They look like they’re up about $9 million or so as I look at them versus the February quarter. Was there anything of onetime in nature? Just go through that a little bit further how we should think about as we try to think about cost for your August quarter. I can see your guidance for margins, but is there anything onetime in nature to call out here that won’t repeat like a catch-up for accruals, for incentive comp? Thank you.

Helen Shan — Chief Financial Officer and Chief Revenue Officer

The largest piece of that — Thanks for your question. The largest piece of that really is compensation. So the compensation, meaning the bonus accrual. So we had to do a catch-up from the first half of the year. But now that we have greater visibility to where we’ll end, I mean we are a pay-for-performance culture. So we — if we expect higher performance, then we will increase our bonus accrual as a result. So that’s what you’re really seeing in Q3, and that again reflects both the catch-up as well as the higher accrual for the quarter.

Craig Huber — Huber Research Partners — Analyst

Are you able to quantify that for us?

Helen Shan — Chief Financial Officer and Chief Revenue Officer

I think as we have said for the year, it’s around 60 basis points to 75 basis points for the year. If we had not had the improvement, and if we did not add in the bonus accrual, the increase, that would have been a 150 basis points for the quarter.

Craig Huber — Huber Research Partners — Analyst

Okay. And then my other question, please, that $10 million to $15 million higher expectation for ASV organic growth for the year. Is there a way for you to break down that within the segments or revenue with [Phonetic] the extra $10 million to $15 million might come from as you look at it, please?

Philip Snow — Chief Executive Officer

Yeah, we don’t — I don’t think we typically do the segments by quarter. But we are — we’ve seen very good momentum within the research business this year. So I think I would expect research to have a very strong quarter. The CTS business, the feed business is doing really well, particularly as we go to digital, there’s just more ways to monetize the data. I spoke about analytics, showing some stabilization there. And then on the wealth side, we see a pretty strong pipeline there in terms of some exciting deals. So I would just say it’s pretty broad-based.

Craig Huber — Huber Research Partners — Analyst

Great. Thank you.

Operator

Thank you. I’m not showing any further questions at this time. I would now like to turn the call back over to Phil Snow for closing remarks.

Philip Snow — Chief Executive Officer

Thank you all for joining us today. We look forward to speaking with you again in next quarter. In the meantime, please call Rima Hyder with additional questions. Operator, that ends today’s call.

Operator

[Operator Closing Remarks].