Ladies and gentlemen, thank you for standing by, welcome to the FactSet Q1 2020 earnings conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there'll be a question and answer session. To ask a question during the session, you'll need to press star one on your telephones. If you require any further assistance, press star zero. I would now like to hand your conference over to your speaker today, Rima Hyder. Please go ahead, madam.
Thank you, Marcella. Good morning, everyone. Welcome to FactSet's first fiscal quarter 2020 earnings call. We join you today from our brand-new global headquarters in Norwalk, Connecticut. Before we begin, I would like to point out that the slides we will reference during the course of this presentation can be accessed via the webcast on the investor relations section of our website at factset.com. The slides will be posted on our website at the conclusion of this call. A replay of today's call will be available via phone and on our website. After our prepared remarks, we will open the call to questions from investors. To be fair to everyone, please limit yourself to one question plus a follow-up.
Before we discuss our results, I encourage all listeners to review the legal notice on slide two, which explains the risks of forward-looking statements and the use of non-GAAP financial measures. Additionally, please refer to our Form 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. I'd now like to turn the discussion over to Phil Snow.
Thanks, Rima, and good morning, everyone. We begin our FY 2020 with growth across most of our businesses, and I want to remind everyone that our first quarter is typically the smallest of the year, and it's important to look at half and full-year performance as more appropriate measures of progress. I'm pleased that we have a healthy pipeline for the first half of our fiscal year, especially against a backdrop of sustained industry pressures. On our last earnings call, we outlined a three-year plan to accelerate the breadth and depth of our investments in targeted areas within content and technology with the goal of driving higher top-line growth over the long term. Our team has hit the ground running, delivering encouraging early progress in Q1.
Within content, our Deep Sector and private markets efforts are proceeding at pace. We've hired more sector experts following the launch of our successful banking regulatory data. We're making good progress integrating third-party private markets data into FactSet and are expanding our valued StreetAccount coverage into new markets. We believe this expansion of coverage will resonate across all of our business lines, particularly research and wealth. Our continued efforts to grow our tech stack are also yielding early results. We've tripled the number of APIs available since the start of the fiscal year and are on track to release more in the second quarter. Our migration to the public cloud is well underway, and we've identified opportunities to reduce our fixed data center costs in the long run.
From a product perspective, we are building momentum in analytics with multi-asset class risk, fixed income involved, our new performance measurement product, each showing particular strength. We're also very pleased with our wealth pipeline and the positive response from clients. Finally, we see growing demand for our open solutions. We announced this quarter that FactSet is now available on OpenFin, and we're proud to be the first market data provider to do so. As early adopters of the shift to more open and flexible products at access, we believe the wind is in our backs, and we will continue to deliver information to clients where, when, and how they want it. In sales, we've evolved our compensation plan and sharpened our focus on client retention and expansion.
These changes include growing our strategic client group, which looks after our top accounts to cover more clients and build upon the strong C-level relationships we have in the industry. We're also expanding on new business and sales engineering teams to capitalize on increasing technology opportunities. While these collective measures will take time to impact our top line as the industry evolves, we're continuing to take proactive steps from a position of strength to ensure continued growth. Looking at ASV in total, ASV Professional Services grew at 4%. This growth rate reflects a decrease in ASV in the quarter, driven by higher than expected cancellations in research and a decrease in our add-on business where we cross-sell to existing clients. In addition, new business sales increased year-over-year as we added more clients this quarter.
Overall, we see continued cost pressures among institutional asset managers and churn within our banking clients. However, it's important to remember that the large banks are long-withstanding clients of FactSet, and when they hire later in our fiscal year next summer, we accordingly expect to benefit. This quarter, once again, we saw growth in users from corporate and private equity firms, an area where we're investing. In the Americas, we saw a healthy growth in wealth, asset owners, and hedge funds. This was offset by seasonal banking churn in our research business. Americas had a tougher comparison versus the first quarter of 2019, when we had larger deals that contributed to higher ASV. We remain optimistic about the Americas as we deepen existing client relationships and capitalize on new business opportunities. In EMEA, we have positive momentum with the buy side with wealth and institutional asset managers.
This region is facing some of the same cost pressures we have previously seen in the Americas, and uncertainty with regulations and the political environment. Our pipeline looks healthy for the year, with institutional asset managers, asset owners, and wealth managers, as we see a demand for our analytic solutions. CTS was a main driver of the 10% growth in Asia Pacific as we sold data feeds across the region, primarily to local data providers. The opportunity in Asia Pac is with the buy side, driven by risk solutions for asset owners and our analytics offerings for the institutional asset managers, especially for the investment portfolio lifecycle. We continue to be bullish about our opportunity in this region, and we're investing appropriately to capitalize on its potential. In the first quarter, we also saw promising growth in wealth CTS and analytics.
Wealth was the largest contributor as we continue to earn market share in the space. Analytics was another bright spot, driven by the strong performance of fixed income and risk products, while CTS continued to see solid demand for core and premium data feeds. Our adjusted operating margin and adjusted EPS came in strong this quarter. We believe that for this year we'll be more in line with our annual guidance as we continue to execute throughout the year in accordance with our investment plan. In closing, I want to reiterate that our fiscal year is a tale of two halves. Our pipeline is healthy. We believe that we are on sound footing to deliver on the first half of our FY 2020 and are well-positioned for the year.
We have a proven track record of returning consistent long-term value to shareholders, a record that we firmly believe we will continue. It is also increasingly clear that clients are demanding more open, flexible, and efficient technology to help them manage change, an area where we continue to excel. As we execute our three-year plan, early signs indicate that we are taking a winning path to ensure continued growth through expanded opportunities with existing clients, higher retention, and new business. Let me now turn the call over to Helen, who will discuss the specifics of our first quarter performance.
Thank you, Phil, and good morning. It is great to be here with all of you. We begin our fiscal 2020 with a solid operating performance, 10% earnings growth, and an operating margin that continues to reflect the productivity and efficiency improvements made throughout 2019. While we are at the beginning of our three-year investment plan, we are on pace as we start to ramp up hiring and spend. I will now walk us through the specifics of the quarter's results. GAAP and organic revenue increased by 4% to $367 million and $368 million, respectively. Growth is driven primarily by wealth, CTS, and analytics. For our geographic segments over the last 12 months, Americas revenue grew 4%, and international revenue grew 5% organically. Americas benefited from increases in wealth, analytics, and CTS. International revenue was largely driven by analytics and CTS.
GAAP operating expenses for the first quarter totaled $253 million, a 1% growth over the previous year. With revenues growing faster than expenses, our GAAP margin increased 230 basis points to 31%. Adjusted operating margin increased to 34%, a 240 basis point improvement versus last year. As a percentage of revenue, expense improvement came largely from our cost of services, which was 240 basis points lower than last year on a GAAP basis. On an adjusted base, the improvement was 210 basis points. Contributing factors include decreases in employee compensation, reflecting the continued mix shift from high to low-cost locations, as well as lower contractor fees. This benefit was partially offset by an increase in computer-related expenses as we continue to upgrade our technology stack. SGA expenses, expressed as a percentage of revenue, grew 10 basis points over the prior year period on a GAAP basis.
On an adjusted basis, we saw an improvement of 30 basis points. This result is driven primarily by expense reduction in travel and entertainment, professional fees, and lower bad debt expense, and partially offset by higher employee compensation and higher rent expense associated with our move to the new headquarters. We've been improving our operating margin over the past four quarters, reflecting our efforts to maintain disciplined expense management and to both grow and sustain productivity gain through our planned workforce mix. We are pleased with the progress that we have made, as it has given us the ability to redeploy capital back into the business in the key areas of content and technology. On the last earnings call, we provided financial targets for FY 2022.
To recap, our investments build incrementally at $15 million per year in each of the next three years, totaling an additional $45 million in the FY22 expense rate. As we noted, we expect our ASV growth rate to be in the high single digits, adjusted EPS growth at 10% plus, and an adjusted operating margin of 33% plus in FY22. We've begun to execute on these projects, as Phil noted earlier. The spend will be building over the course of the year. Fiscal year 2020, the majority of the cost will be people-related. We expect the level of expense to ramp up, heavily weighted in the second half of the year as we build out the resources and capabilities. We believe we will be in line with our FY20 guidance of 31.5%-32.5% in operating margin, given the phasing of the incremental investment.
We remain confident in our investment strategy and plan. Our tax rate for the quarter was 13.6%. This rate included a few one-time items related to finalization of prior year tax returns and a change in tax rate in one of our foreign jurisdictions. Excluding one-time adjustments, our quarterly tax rate would have been 17.3%. Please keep in mind that when we provided annual guidance for fiscal 2020, we did not include any one-time adjustments in the tax rate. GAAP EPS increased 12%, $2.43 this quarter versus $2.17 in the first quarter of 2019, primarily attributable to higher revenue and improved margin. Adjusted diluted EPS grew 10% to $2.58. A reconciliation of our adjustments to GAAP EPS is disclosed at the end of our press release.
Free cash flow, which we define as cash generated from operations less capital spending, was $69 million for the quarter, an increase of 88% over the same period last year. The improvement was primarily due to higher net income, an increase in cash collections, and the timing of payables, partially offset by higher capital expenditures. As noted on past calls, our CapEx is higher this year due to planned investments in technology as well as new office space build-out for some of our locations where existing leases have neared expiration. Last quarter, we looked to update our annual ASV retention metric. On further review, we have determined that the current methodology is aligned with our client retention metric and remains an accurate measure of ASV retention. For the first quarter, our annual ASV retention continues to be over 95%.
We are also pleased to report that our client retention, the number of clients we retained over the last 12 months, remained at 89%, and our client count grew 6% year-over-year. Looking at our share repurchase program for the first quarter, we repurchased 343,000 shares for $84 million at an average share price of $246 per share. Over the last 12 months, we have returned approximately $345 million to our investors in the form of dividends and share repurchases. We remain committed to creating long-term value for our shareholders and plan to repurchase shares at a steady pace in line with last year. The improvement in our operating results over the course of fiscal year 2019 and the first quarter of this year reflect our progress in operational discipline and in the sustainability of the productivity gains.
We believe our plan to invest in more comprehensive and integrated content and in digital technology will fuel future top-line growth, which in turn is key to long-term value for our clients, employees, and our shareholders. With that, we are now ready for your questions. Marcella, over to you.
At this time, I'd like to remind everyone, in order to ask a question, please press star and the number one on your telephone keypad. Your first question comes from the line of Peter Heckmann from D.A. Davidson & Co. Your line is open.
Hey, good morning. Thanks for taking my question. Just trying to make sure I'm understanding correctly. Significant upside, maybe the spending didn't ramp as quickly as expected. Does your guidance then imply that we should see negative adjusted earnings per share growth in the back half of 2020? How do you then think about, I know we have the 2022, but how do you think about that transitioning then into the first couple quarters of 2021?
Hi. Thanks for your question. It's Helen. No, what we're essentially going to be doing, because we believe we will still end up with the same amount of spend for the year, is that as it ramps up, we'll still be within that range. Then at that run rate, we'll continue to see that through the first two quarters of 2021. Let me just give a little bit more color. Most of the expense for this year are much more people related, so it takes time to ramp up. I would say if you look over the phasing of the year, it's roughly, let's call it 30% will be in the first half and the balance in the second half. Then the technology spend is more in the latter half of the three-year investment plan.
It'll be a little bit slow out of the gate because it takes time to hire, but we don't expect that to be an issue as we think about the guidance we've given for the year.
Okay, that's helpful. Just while I have you haven't talked too much about Portware and the company's efforts in trading. Can you just give us a quick update there?
Yeah. Hey, Peter. It's Phil Snow. Yes, we're seeing very positive momentum in the trading space over the last few quarters. A lot of that is attributed to, I think, the integration now of the EMS capabilities within [co-FactSet], and we're also seeing good momentum with our OMS offering as well. Just to remind everyone, we have execution capabilities, we have order management capabilities, and we've integrated those now into a portfolio management platform, which is also beginning to gain some traction. These are not big numbers right now, but the trend is positive, and we're very excited about that part of our analytics suite.
Great. Thank you very much.
Sure.
Your next question comes from the line of Manav Patnaik from Barclays. Your line is open.
Thank you. My first question is just these cancellations that you called out this quarter, were they contemplated in your full year guidance? I was just hoping if you could just maybe give us a little bit more color on how much of the guidance is assuming that you'll win a bunch of contracts over the course of the year.
Hey, Manav, it's Phil. I think the cancellations that we called out in Q1 was a little bit more of an expected cancellations within the sell side, across banking as well as research. Very often that's difficult to predict, given the numbers are pretty large and you're never sure sort of coming out of the hiring and into Q1, what that's going to look like. I think when we look at Q1, it's typically a smaller quarter for us, as I said it in my script. We did go back $2 million or $3 million this quarter. If you go back even a couple of years into fiscal 2018, that was a fairly small quarter for us as well. When we look out for the rest of the half, it's significantly weighted as a Q2.
When we look at the pipeline versus the pipeline last year, we feel very good about our opportunities as we head into the second quarter.
Got it. Maybe just your comments on growth in wealth. What were the drivers there? Was it just the ramp of the BAML contract, or was it a lot of single wins here and there? Just curious if you could give a little bit more color there.
Yeah. No, we're doing very well at BAML. I think that was obviously a great deal for us and was a significant contributor to Q1 last year. I think you could've expected some deceleration in this quarter just given that was a tougher comp. We've had some very nice wins in wealth, at larger firms within the Americas. We also are doing very well in the middle markets part of wealth. The pipeline is very healthy. There are some larger deals out there for us, which are a little bit more binary. Just going back to the previous question, we're not relying on any massive deals to come within the guidance range that we gave at the end of the year.
All right. Thank you, Dave.
Yeah. Thanks.
Your next question comes from line of Hamza Mazari from Jefferies. Your line is open.
Hi, this is actually Mario Cortellacci filling in for Hamza. Just kind of wanted to piggyback off the wealth question, and you mentioned that there's some binary wins. It sounds like you're doing well in the middle market channel. Just wondering if, say, there's a larger deal and more consolidation among the wirehouses, just didn't know how you guys are positioned and obviously a win if things as is are, like you said, binary, but how are you positioned and how do you think you'll fare if there is some consolidation among the much bigger players?
I think we'll fare well. This is a greenfield area for us. It's an area that we're not defending essentially, right? It's all offense. I think the product that we have is exceptional. We've put a lot of effort into it. A big piece of our investment strategy for the next three years is to just continue to bolster the wealth offering in terms of content as well as and technology. There are some things that we're going to do there, I think, to make the life of the next generation of financial advisor and wealth advisors so much easier. Some of that's integrating our risk capabilities. Some of that's taking cognitive computing to essentially make the life of the wealth advisor and the financial advisor much more efficient. This is a space we're super excited about.
Typically, when there's consolidation, it means disruption and there's an opportunity for a newcomer like FactSet to come in and take a crack. We're in lots of RFPs. These are big firms. They're long contracts. You don't win them overnight. We feel exceptional about this piece of our business and the opportunity in front of us.
Great. Just one more, and I'll turn it over. Like you said, there's a lot of white space and wealth and maybe this other part of the business isn't as big of a focus for you, but how much do you think your products lend themselves to, say, commercial banking or insurance or maybe you can give us a sense of how much you've explored those markets as well.
Commercial banking's really interesting. We had a pretty good win there, I think it was last year in Asia Pac. That was a lot of seats, but admittedly at a lower cost. Our web offering proved very good for that market, and I think we'll continue to explore some opportunities there. We have pretty good business in insurance right now. What resonates with our insurance clients is our analytics products. We've got a great multi-asset class risk product, which we continue to invest in. Risk is one of the things I talked about in my script. We've got a lot of good momentum in the risk space. The pipeline for risk looks really good, and some of that is at insurance companies.
Great. Thank you.
Yep.
Your next question comes from the line of Andrew Nicholas from William Blair. Your line is open.
Hi, good morning. In terms of the wealth pipeline, it sounds like you're waiting on a few larger decisions. Any color on when you expect those decisions to be made?
Some of them are this fiscal year, some of them are further out.
Okay. I was wondering if you could provide an update on momentum and analytics, particularly as it relates to kind of the sales force realignment. As that gets further and further in the rearview mirror, just wondering if you could update on progress with respect to sales momentum.
Yeah. Thanks, Andrew. That's a great question. Yeah, so fixed income had a very good quarter, and we have a very good strong pipeline for fixed income. That was one of the areas that we did worse in last year than we hoped. The movement of the specialists back into the analytics area has really paid off. We've got some great leadership there. The team's excited. The areas that really are showing very strong momentum are fixed income, risk, Vault. Vault, to remind everyone, is kind of the combination of the BISAM performance product with traditional PA. That is gaining a lot of momentum. We're having a lot of unit sales with Vault. The APIs within analytics are doing very well. We see a ton of momentum there.
I mentioned we tripled the number of APIs that we had in Q1. A lot of that are analytics APIs. All in all, we feel good about analytics. I also mentioned our momentum there in the trading space. A lot of these are really the workflow solutions and the portfolio life cycle. We made a bunch of acquisitions three years ago. It has taken us longer than I expected to get those integrated. I think what we're seeing now and out into the rest of the fiscal year, is great momentum in those areas, the workflow solutions and helping the larger clients be more efficient from a technology standpoint.
Got it. Thank you.
Yep.
Your next question comes from the line of Toni Kaplan from Morgan Stanley. Your line is open.
Thanks very much. I wanted to ask another question on the research cancels. Was it related to firms getting out of equities or banking or consolidation or firms closing or competitive losses? Just any sort of extra color you could give on what led to the cancels?
Yeah. Thanks, Toni. It's Phil. Yeah, I think a lot of the cancels are typical in terms of the seasonal banking churn, and there were a couple of firms where we had some things happen that we didn't anticipate. One was at a larger sell side firm, and the other was at a middle markets firm. The sell side firm, it happened that we have a very strong relationship with, I'm very excited about the opportunities moving forward. I can't get into the specific details, but clearly there's pressure, particularly on the bigger firms. We're feeling some of that. I think that's what you're seeing in the numbers for Q1.
We're doing lots of things, right, to work our way up the stack at these bigger firms, provide more solutions, and it's going to be a little bit choppy at some of them, but we feel good about the longer-term opportunity for us.
That's great. For my follow-up, just want to find out how much FX benefited margins this quarter, and if there was anything one-time, if it wasn't FX, that helped the margins, just because they were a lot stronger than expected. Thanks.
Yeah, sure, Toni. Thanks for your question. This quarter, the benefit of FX was about $1 million, which is actually less than in the previous year, and obviously a lot less than during the course of FY 2019. That was not a material impact. If you compare our margin this quarter to Q4, we're exactly the same, 33.9%. I think it's reflecting more of the consistency of the actions that we've put forth over the course of the year.
Thank you.
You're welcome.
Your next question comes from the line of Alex Kramm from UBS. Your line is open.
Yes. Hey, good morning, everyone. Phil, you talked about your excitement of the, I think, 2Q launch of some of the more in-depth data around financial services or banks. Can you just talk about the appetite there a little bit? I think this is supposed to be a little bit of a SNL competitor. One of the things that I'm also hearing is that competitor has a lot more different industries that they cover, some firms might still wait until you have the full breadth. I guess how much is this going to be a niche solution for now and maybe in a few years it's going to be a real competitor? Can you just flesh it out a little bit? Thanks.
Thanks, Alex Kramm. We're attacking around eight sectors, I believe, over the next three years. To your point, we can't get them all done this year. We have a very methodical plan to work our way through eight sectors. We're doing it in the order that we think will have the biggest impact for us. We've already hired, all from the outside, industry experts for each of these sectors. They're on board already this quarter. I think we did an exceptional job there hiring. It's going to depend on the firm, essentially. Some firms may just want one or two sectors. Some may want all eight. Some may be very happy with 20% of the functionality, but 80% of the value. We are seeing a very healthy appetite for more choice in this area.
We feel that we're going to have some impact this fiscal year. In fact, we already had, I think, one very good win, I can't remember if it's in Q1 or in the pipeline for Q2, with another firm for the financial data that we have.
Okay, great. Thank you for the color. Then just secondly, again, on the opportunity side, you mentioned the tough environment, which obviously all of us on this call probably know about. I've been hearing a little bit more of an effort to reduce costs when it comes to the really expensive competitors of yours. I think you've been benefiting from that to some degree, and I think you've done this all along over the last few years. Are you seeing an acceleration in focus on cutting some of your more expensive competitors, and is that going to be something that can help, in the next couple of quarters, or is it business as usual from that perspective?
I think we are seeing more of an appetite for that. I was on a recent trip to Europe. I had a couple of good meetings at larger firms where I think historically people have been given choice, and it's been a little bit more of a grassroots effort to do this. What I'm feeling at a lot of these firms that are having more cost pressures is that there's going to be more of a top-down push to save costs, and do some of what you just described.
Okay. Thanks for confirming.
Yep. Thank you.
Your next question comes from the line of Joseph Foresi from Cantor Fitzgerald. Your line is open.
Hi. It seems like you're going through sort of maybe a portfolio shift because some of the buy-side stuff and sell-side stuff isn't working as well, and I'm sure we can all understand that. When do you think you'll hit an inflection point where organic growth starts to accelerate because the portfolio's been right-sized?
I'm hoping, Joe, that this is the inflection point, and that when we talk to you in Q2, we can point to that. Obviously, it's hard to predict the future, but when I look at what I just described in terms of analytics, when I think about our CTS product suite, which we haven't talked a lot about today, but we're having exceptional momentum there selling our content. The wealth pipeline, our efforts to fill out the portfolio life cycle, all of that is really great. I think we are seeing obviously people pressure in our industry and a lot of pressure on the research side. That's the piece that's a little bit harder to kind of predict. We feel like we've got the right strategy, and we've got a team that's sort of really excited to execute even in what is a tough environment.
Yeah. I guess my follow-up will be an old question. Maybe we could start to get a breakdown from a percentage of revenue, or you could just give us rough ballpark numbers around the new pieces of the business and what they're growing versus sort of the old pieces of the business so that we can kind of start to model out the inflection point ourselves. I'm just wondering if there's any thoughts around that or if there's any general numbers, because you said you hope that there's the inflection point that we're at right now. Thanks.
Hi, this is Helen. Thank you for your question. A lot of what we provide is, even when we talk with clients, are bundled as well. While we do track, we don't actually have plans right now to be breaking that out. Certainly we'll give you updates as we go on each call as best we can.
Okay. Thank you.
Welcome. Thank you.
Your next question comes from the line of Shlomo Rosenbaum from Stifel. Your line is open.
Hi, good morning. Thank you for taking my questions. Hey, Phil, just a quick question, not to beat that research cancellation to death, but is it people that are just no longer there, or they're moving to a different platform? I just want to understand the dynamic a little bit more.
I don't have all of that detail, Shlomo. I imagine some of it is just people pressure, right, within the research side that there's sort of less hiring going on. Some of it may be competitive pressure. I think there are situations there where we're taking market share and others are taking it from us. Again, I'll point to the fact that it's typically a smaller quarter, so we're calling it out this quarter just because it's one of the larger numbers. In the big picture, when you think about our numbers for Q2 and Q4 especially, I wouldn't read too much into that for this quarter.
I guess what people are trying to figure out, is there any pickup in Refinitiv? Is there anything going on in the Capital IQ side that's becoming kind of nipping at your heels? Is there any change in any of that stuff? I guess that's where I'm trying to get to.
When I look at the competitor win-loss, we're still, I think, doing well from a taking market share standpoint.
Okay. Just open FactSet, are there any additional metrics you can give us besides maybe some of the APIs, how that's tracking? Are you starting to generate any meaningful revenue over there? Just that seems like an interesting part of the business I want to delve into more.
Yeah. We're beginning to get some momentum there. There's different pieces to it. The piece that's generating, I think, the growth in CTS is really the data exploration platform that we've created. It's really the ability to come in and look at our content, in addition to some of the open providers that we've added, some of the alternative data. A lot of the growth you're seeing is really from FactSet-owned content. We're beginning to see a pretty healthy pipeline for some of the alternative data providers that are combined with it. I think it's as much the model and the ability to come in and begin programming in Python using Tableau, kind of what the analyst of the future and the data scientist of the future is going to want to use. That's really the most exciting piece of it.
All right. Thank you very much.
Thanks.
Your next question comes from the line of Bill Warmington from Wells Fargo. Your line is open.
Good morning, everyone. You had mentioned the strength in analytics, CTS, and wealth, and by implication, I would take it that research had turned negative this quarter, and I just wanted to confirm that and ask if that was really the result of the churn that you've mentioned, and to ask how long you think it'll take to return to low single-digit type target growth.
Yes. You're right, Bill. The other three businesses were positive this quarter, and research was negative. Again, it's a smaller quarter, so again, it's hard to predict. We feel good about the research business as we look out for the rest of the year, and on our last quarter, we gave sort of longer-term guidance for what we think that business can do. The investments we're making in Deep Sector, in private markets, and StreetAccount all will, we believe, bolster that business and allow it to grow over time.
Okay, a follow-up question for you on the data feeds business. That seems like a business that could potentially become commoditized, I wanted to ask about what you guys are doing to differentiate your offerings there.
Yeah. Some of the data's unique, some other people have it. I think the value that FactSet has always brought to the marketplace over the last 40 years is the integration of content. You can deliver data sets all day out of a marketplace or a library, but the hard work is integrating the data so that you can use it as one database, and providing the tools to analyze the data. That's what we do. We do it very well. Of course, it's great to have our own content as well to monetize. The real value for our content, is how well it plays together, and how well we can integrate it with other data sets and within other people's systems.
All right. Well, thank you very much.
Thanks, Bill.
Your next question comes from the line of David Chu from Bank of America. Your line is open.
Thank you. Related to a previous question, can you just provide some color on what you're seeing in terms of client budgets overall? I mean, is cost-cutting more in focus versus, let's say, a year ago?
Hi, David. Yes, I believe it is. I think active managers, in particular, continue to be under cost pressure and it's up to FactSet to provide them tools that allow them to be more efficient. That's where it is with active managers. If we think about other client types that are out there, we're making a lot of exciting progress in asset owners, which include plan sponsors and sovereign wealth funds. That's an area of growth for us. We're doing very well with hedge funds. I mentioned that we were positive this quarter. We're selling hedge funds a lot of CTS product. We're seeing good momentum in private equity. That's an area that we're investing, but it's a smaller area of our business, but it's one that's growing pretty rapidly. We're doing well in the corporate space. That continues to build momentum for us.
Obviously, active managers are a big piece of FactSet's business. We're providing good long-term solutions for them, but there are other markets that we're going into that have a lot of great momentum.
Okay. That's helpful. Thank you. Helen, is the 1Q CapEx number a proper run rate for the year?
Thank you for that question. Yeah, it is about that. We are expecting to be up year-over-year. I think we ended last year around $60 million. We're looking more like an $80 million for this year.
Perfect. Okay, thanks.
Thank you. Next.
Your next question comes from the line of Keith Housum from Northcoast Research. Your line is open.
Good morning. Hey, Phil, as we look at the research environment, customers getting rid of some of their employees, how protected is FactSet if one of your customers just goes from, say, 100 employees down to 50 employees? Do you guys have minimums baked into your contracts that you're protected, or not?
We do in some cases. As clients have gotten larger and our footprint has gotten bigger with them, they've looked for, I think, more certainty within their budgets over time. We do have floors in at some clients. The other thing that we've made a transition towards, and that continues, is a bigger percentage of our ASV is tied to more workflow solutions and less people. The majority of what I just described in the analytics business, has a lot less to do with seat count and a lot more to do with workflow and enterprise solutions. The feeds is the same thing. Obviously, it's an evolution. It won't happen overnight, but I think it's the right strategy for us and one that we're already capitalizing on.
Do I understand then if, as research consolidates further next year, you guys will have some protection with some of your contracts based on some of the floors, some of you may not?
Yes. I think that's right.
Okay, great. Just turning to the international side. International revenue is down compared to the last two quarters. Was there anything unique, I guess, the end of last year that affected that revenue or anything unique in this quarter that their revenue declined actually consequentially?
Yeah, I don't think there's anything unique. Europe clearly is under, I think, probably more pressure than the Americas and Asia-Pac. We see a ton of opportunity in Asia-Pac. It's hard to imagine that not continuing if we make the right moves there. Europe's under a lot of pressure for a lot of different reasons.
Great. Thank you.
As Phil's mentioned before, I think the pipeline is healthy, and we have seen some good new business growth. As we think for the rest of the year, we're feeling more positive about the growth rate.
Your next question comes from the line of Kevin McVeigh from Credit Suisse. Your line is open.
Great. Thanks. Hey, Phil. Obviously, Refinitiv's changing hands twice within the last 18 months or so. As they become part of the LSE, any thoughts from a competitive perspective? Does that change the behavior on the continent at all? Even in the current form as part of Blackstone, have you seen any competitive dynamic shift?
Yeah, thanks, Kevin. I've obviously thought a lot about that. It doesn't feel to me that the combination of LSE and Refinitiv is going to be much different, frankly, to us than what we've been dealing with from a competitive standpoint with Refinitiv over the last couple of decades. There's still uncertainty, I would think, within both the client base and their employee base in terms of what's happening, and we're just capitalizing on that uncertainty right now.
With that, I'll kind of allow you the opportunity to the extent for any, as you're integrating, would you see competitive advantage on that? If you were to look at other points in history, does that free up incremental opportunity or no?
I'm not sure I understand the question.
I guess, as they're consolidating, I'm sure they see disruption in their sales force. Do you take advantage of that? Is there opportunity to capture incremental share?
Yeah.
As you're integrating.
Yeah, I think so. Yeah, I think that's what I was trying to describe. Yes, there's uncertainty in the client base and in their employee base. There's opportunity for us to go into clients and have conversations and take market share.
Got it. Just quick follow-up. The investment you're making in kind of the research product, when do you think the earliest you'll start to see the revenue benefit from that?
Overall, when we think about both the content and technology, we see minimal in this year. As it ramps up, in general, we would expect to see about 25% of the total growth coming in year two, excuse me, 2021, with the balance coming into 2022. It's more of a back end in terms of the lift.
Understood. Thank you.
Your next question comes from the line of Craig Huber from Huber Research Partners. Your line is open.
Yes. Hi, I think I missed the first few minutes of your comments, but I'm wondering here, were there any major cancellation fees that showed up in your revenues in the quarter you guys just reported here?
Cancellation fees?
Well, from any clients of yours, any revenue that was pulled forward to account for revenues up to $2.5 million sequentially, your ASV, of course, was down slightly versus three months ago, I guess only the third time in the last 20 years or so. I'm just wondering if there's any clients that canceled, were any revenues that were recognized, pulled forward maybe to some degree, in the November quarter? The first question.
Right. Sure. This is Helen. No, we don't see that. There was no pull forward due to cancellation from clients. That's not how our model works, and so that's not a driver at all.
Thank you for that. My other question again, with the ASV down slightly versus three months ago, you went through your confidence level of wealth and CTS, et cetera. It sounds like you're still comfortable with the $65 million to $85 million increase in ASV. Is that your thinking that's more back-end weighted for the year?
Yes, correct. We believe that this year in particular, it's always back end weighted. I think if you go back historically, it's maybe somewhere between 60-40, just in terms of the split. The way that we thought about this year and the way that we've sort of modeled out our plan, we believe that the second half of the year is going to be more heavily weighted than typical, and we're still feeling good about the guidance range that we issued last quarter.
I think you said this three-year investment program to enhance the product, an extra $45 million of extra costs, I guess, by the time we get to the end of fiscal 2022. How much of that you think will fall into this year versus next year?
To go through, let me reiterate how that works. We have $15 million in each of the years that we'll be investing in for 2020, 2021, and 2022. In terms of what falls into the first year, it's $15 million.
Very little of that was obviously in the first quarter.
Right, because much of the spend is people related, and it takes time to hire, especially for the capabilities that we're building, which has to do, as Phil talked about in terms of content, the expertise there, and also on the technical side as it relates to digital capabilities.
Your last question comes from the line of George Tong from Goldman Sachs. Your line is open.
Hi, thanks. Good morning. Organic ASV plus professional services growth has decelerated to its lowest level in years. You talked a bit about client budgets coming under pressure and some sell-side headcount reductions. Can you elaborate on changes you're seeing with buy-side headcount in both the U.S. and internationally?
Yeah. Hey, George, it's Phil. Yeah, I think we're seeing pressure on headcounts in the front office. I think that's pretty well known. I think portfolio managers, traders, research analysts, I think over time, our thesis is that we'll see sustained pressure in terms of the number of people, and that clients are going to want to go to more efficient solutions and more of a technology type solution.
Got it. That's helpful. You noted a decrease in your add-on business where you cross-sell to existing clients. Can you discuss broader trends you're seeing with new product uptake versus your expectations and traction with client wallet penetration?
Yeah. A lot of that really had to do with the large deal that we had in Q1 last year that was booked as an add-on business. That was an existing client. I think that was the vast majority of it. As I mentioned in my script and throughout the call, we're seeing a lot of very positive momentum for analytics product, for feeds. On the wealth side, a lot of it's driven by user account.
Great. Thank you.
Thanks, George.
There are no further questions at this time. I turn the call back over to Phil.
Well, thanks, everyone. I'd like to thank you all for joining us today. It's clear that the changes in our industry are happening at speed, and we remain well-placed to lead the charge. Our efforts are already taking root as we position the company for the future, which is reflected in our new global headquarters here in Norwalk, Connecticut. I'm very proud of the efforts we've made to create space that fuels innovation and collaboration and truly mirrors our company and values. Demand for open and flexible solutions is growing, and I want to conclude by reiterating our conviction in our outlook for the year. Happy Holidays to all of you. If you have additional questions, please call Rima Hyder, and we look forward to speaking to you next quarter. Operator, that ends today's call.
This concludes today's conference call. You may now disconnect.