Factset Research Systems 2026 Q4 Earnings Call

Please go ahead. Thank you, and good morning, everyone.

Welcome to FactSet's Fourth Quarter and Fiscal 2026 Earnings Call. Before we begin, the slides we reference during this presentation can be found through the webcast on the investor relations section of our website at factset.com. A replay of today's call will be available on our website. After our prepared remarks, we will open the call to questions. The call is scheduled to last for one hour. To be fair to everyone, please limit yourself to one question. You may re-enter the queue for additional follow-up questions, which we will take if time permits. Before we discuss our results, I encourage all listeners to review the legal notice on Slide 2. Discussions on this call may contain forward-looking statements. Such statements are subject to risks and uncertainties that may cause actual results to differ materially from results anticipated in these forward-looking statements.

Additional information concerning these risks and uncertainties can be found in our Forms 10-K and 10-Q. Our slide presentation and discussions on this call will include certain non-GAAP financial measures. For such measures, reconciliations to the most directly comparable GAAP measures are in the appendix to the presentation and in our earnings release issued earlier today, both of which can be found on our website at investor.factset.com. During this call, unless otherwise noted, relative performance metrics reflect changes as compared to the respective fiscal 2025 period. Joining me today are Sanoke Viswanathan, Chief Executive Officer, and Josh Warren, Chief Financial Officer. I will now turn the discussion over to Sanoke.

Thank you, Kevin. Good morning, everybody, and thank you for joining the call. Fiscal 2026 was strong. We achieved the highest Q4 ASV performance in FactSet's history. For the year, organic ASV grew at 7% or $168 million to $2.56 billion, exceeding the high end of our guidance with robust growth across all regions and client types. For fiscal 2026, adjusted operating margin was 34.5%, reflecting the investments we made this past year. Adjusted diluted EPS was $18.01, up 6% year-over-year. It was an important year for FactSet. We launched several new products. Trusted FactSet data through MCP servers, multi-asset class risk models, new capabilities in our quant modeling environment, and agents for banking, buy side, and wealth management clients were just a few.

We reorganized around a unified product organization, strengthened our leadership bench, and sharpened commercial execution to accelerate top-line growth while boosting workforce productivity with the help of AI to improve operating leverage and drive future margin expansion. The more widely our clients deploy AI, the more valuable are our foundational strengths. Connected data, embedded workflows, service excellence, and broad and deep distribution, as we see in this quarter's adoption, engagement, and growth trends. Our client wins this quarter demonstrate the strength of our platform as leading global financial institutions consolidate more of their data, workflows, and mission-critical operations with FactSet. Our strategic investments are making an impact, securing six and seven-figure deals involving new products such as AI for Banking, MCP, Deep Sector content, trading solutions, and real-time data. In banking, we continue to win significant mandates by displacing major competitors.

Just three months after launching FactSet AI for Banking, a bulge bracket investment bank selected our full agentic banking stack across its global footprint. We have since signed additional AI for Banking deals indicating wider adoption. We also won a mandate to displace a long-standing incumbent at a large regional bank, a deal that includes MCP and Deep Sector content with a clear path for expansion. On the buy side, we secured several significant eight-figure enterprise deals. We renewed a large global asset manager in a new enterprise deal that includes transactional services, MCP, and data feeds. Another global asset manager expanded its managed services agreement into new capabilities for end-to-end performance and holdings-based analysis for equity, multi-asset, and fixed income. We also displaced an incumbent at a European quant fund with our data feeds and programmatic environment API.

In wealth management, we secured two major competitive displacements across workstations and real-time data feeds. With these wins, we now serve Canada's five largest wealth managers and have also gained traction among independent firms. We also expanded our relationship with a leading U.K. wealth manager, which selected FactSet's performance reporting solution, showcasing the strength of our solutions across the end-to-end portfolio life cycle. AI-related solutions made up a double-digit share of new ASV this quarter, exceeding fiscal 2025's total AI contribution. We are seeing early evidence that it is complementing our existing product offerings. Among clients with an established workstation relationship, the majority increased total ASV after adding MCP. Our client wins throughout the year demonstrate that our investments are paying off. We are attracting new clients and expanding our existing relationships.

Q4 capped a year of solid execution against the three priorities guiding our business transformation: commercial excellence, productivity improvement, and long-term strategy. We are delivering stronger commercial outcomes, real productivity gains, and an AI strategy that is differentiating FactSet in the market. The impact of our commercial excellence initiative is clear, with strong new business growth, continued ASV retention of over 95%, and strong expansion. Data ASV delivered through direct feeds, APIs, MCP, or through a partner continued to grow at double digits, with AI adoption driving new logo acquisition and enterprise adoption boosting retention and expansion among our largest clients. We continue to accelerate the shift of our business model from seat-based contracts to flexible enterprise agreements.

In Q4, the majority of renewed ASV was secured as enterprise agreements or in contracts with terms of 3 years or longer, increasing average contract length by roughly 30%, while broadly preserving pricing. This underscores how our flexible engagement model is leading to longer duration, higher value contracts. Second, we continue to streamline operations and reduce complexity as we scale our productivity initiative. This translated into net headcount reduction in FY 2026, a real sign of operating leverage inherent in our business. We are taking the freed-up capacity, redeploying most of it into new product and growth opportunities, and returning a portion of it to the bottom line. In Q4, we continued to scale AI across our product and engineering teams, expanding AI-enabled projects by roughly 40%. The token governance and optimization measures we put in place last quarter are driving further efficiency gains.

Token use related to coding assistance grew more than 80% quarter-on-quarter, with token spend growing at only half that pace. A key area of investment in our data refinery is private markets data. In Q4, we re-engineered a pipeline that integrates and delivers content from dozens of providers, covering millions of global private companies. Platform consolidation, combined with agent-assisted engineering, cut processing times in this area by more than 75%, halved the onboarding effort, and more than doubled delivery speed, freeing engineering resources for document enrichment and data labeling that further strengthen our AI foundation. The client assist agent I talked about a couple of quarters ago has been fully rolled out to all clients as of Q4 and now resolves over 30% of all user-initiated requests without human interaction. These initiatives are all driving faster delivery and improved quality at a lower cost.

We expect these to scale in FY 2027 and further enhance our operating leverage. We are rolling out a differentiated AI strategy that leverages the high quality of our connected data and the deep embedding of our analytics and software in client workflows. Our strategy is resonating with clients, and our momentum is strong. For example, MCP adoption is accelerating across clients of every size. Over 650 clients were actively engaged under contracts or trials to consume our data sets through MCP as of fiscal year-end. API call volume continues to expand rapidly, with Q4 volumes at 7 times the level we experienced last quarter. We expect this to continue as we make more data sets available through MCP. In Q4, we launched our first Portfolio Analytics MCP, extending our market-leading portfolio analytics into agentic workflows.

We believe this will unlock tremendous value for buy-side clients as they deploy agents in performance measurement, risk, and reporting. It's not just MCP. Clients using our AI solutions grew their ASV twice as fast as the rest of our client base in Q4. We continue to invest in real-time data and pricing and reference data as clients prepare for 23x5 trading. Our acquisition of BCC Group, a leading platform for distributing and managing real-time feeds, significantly expands our addressable market by opening up new opportunities across the real-time data ecosystem. We'll go deeper into the strategy and how it translates into our medium-term growth and financial targets at our upcoming Investor Day on November 10. I'm looking forward to sharing more there.

I'll now turn the call over to Josh to discuss our Q4 and fiscal 2026 performance in more detail, as well as our FY 2027 guidance.