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Executives

Rachel R. Stern - Senior Vice President, General Counsel and Secretary

Peter G. Walsh - Chief Operating Officer and Executive Vice President

Michael D. Frankenfield - Executive Vice President and Director of Global Sales

Philip A. Hadley - Chairman and Chief Executive Officer

Maurizio Nicolelli - Principal Financial Officer, Senior Vice President and Director of Finance

Analysts

Suzanne E. Stein - Morgan Stanley, Research Division

Peter J. Heckmann - Avondale Partners, LLC, Research Division

Stephen Sheldon

Peter P. Appert - Piper Jaffray Companies, Research Division

Alex Kramm - UBS Investment Bank, Research Division

Shlomo H. Rosenbaum - Stifel, Nicolaus & Co., Inc., Research Division

Bethany Caster

FactSet Research Systems (FDS) Q1 2013 Earnings Call December 18, 2012 11:00 AM ET

Operator

Welcome, and thank you for standing by. [Operator Instructions] Now I'll turn the meeting over to your host, Senior Vice President, Strategic Resources and General Counsel, Ms. Rachel Stern. Ma'am, you may begin.

Rachel R. Stern

Thank you, operator. Good morning, and thanks to all of you for participating today. Welcome to FactSet's First Quarter 2013 Earnings Conference Call.

Joining me today are Phil Hadley, Chairman and CEO; Peter Walsh, Chief Operating Officer; and Mike Frankenfield, Director of Global Sales.

This conference call is being transcribed in real time by FactSet's CallStreet service and is being broadcast live via the Internet at factset.com. A replay of this call will also be available on our website.

Our call will contain forward-looking statements reflecting management's expectations based on currently available information. Actual results may differ materially. More information about factors that could affect FactSet's business and financial results can be found in FactSet's filings with the SEC.

Consistent with previous quarters, we have included a table at the end of the press release that reconciles non-GAAP measures to GAAP. Annual Subscription Value, or ASV, is a key metric for FactSet. Please recall that ASV is a snapshot view of client subscriptions and represents our forward-looking revenues for the next 12 months.

Lastly, FactSet undertakes no obligation to update publicly any forward-looking statements as a result of new information, future events or otherwise.

I'd like to turn the discussion over now to Peter Walsh, Chief Operating Officer.

Peter G. Walsh

Thank you, Rachel, and good morning, everyone. Here's how I plan to spend our time today. First, we'll review our first quarter results; second, I'll provide guidance for the second quarter; third and finally, we'll end with your Q&A.

Before we dive into details of the first quarter, I'd like to spend a moment to discuss general market conditions. We are proud that FactSet is showing healthy growth against a difficult backdrop. The macro news is not all bad within our client base. Let's break it into the key segments.

The sell-side headwinds are stronger year-over-year. Specific to our user base in equity research and in M&A, trading volumes and global M&A deal volumes are both down approximately 20% in 2012. This has not translated into new and significant ways of headcount reductions because these operations have already been running very lean. Nevertheless, it makes the selling environment more difficult for all vendors.

More importantly, the buy-side business environment is more constructive than the sell-side, and we believe that profitability of large buy-side firms is improving. Year-to-date equity returns are double digits across the large majority of exchanges in the U.S., Europe, Australia and in Asia. This has offset outflows to fixed income and is driving operating margins higher in 2012. It's important to note that our clients do sell fixed income products too and the FactSet product suite has diversified over the years to target fixed income opportunities.

While 1 year is not a trend, it's a positive sign that equity is one of the best performing asset classes over the last 12 months. The buy-side represents 81% of our revenue.

Now let's turn to the first quarter results. Q1 was a solid quarter for us. Once again, this quarter every key metric was up: ASV, clients, users and EPS. We grew organic ASV by $5 million or 7% organically over the last year, bringing our total ASV to $847 million at November 30.

For our U.S. operations, ASV grew to $578 million and in our international operations, ASV rose to $269 million. Domestic ASV accounted for 68% and non-U.S. ASV accounted for 32% of the total. Buy-side clients accounted for 81% of ASV, while the remainder came from sell-side firms, primarily M&A advisory and equity research businesses.

Diluted EPS increased to $1.11 this quarter, up 12% from a year ago. Our acquisition of StreetAccount in June 2012 did not have an impact on EPS, and we're proud that this is our 10th consecutive quarter of double-digit EPS growth. We continue to believe that our healthy growth reflects a solid business model that's remained consistently positive over a number of years even during recent downturns.

This quarter, free cash flow, which is defined as cash generated from operations less capital spending, was $45 million, down from $49 million in the same quarter last year. Drivers of free cash flow in the quarter were higher levels of net income and non-cash expenses, partially offset by an increase in client receivables. Over the past 12 months, free cash flow was 6% higher than net income, which we believe underscores the high quality of our earnings.

Accounts receivable increased by $5 million compared to the same period last year. Our DSOs were 34 days at quarter end compared to 30 days a year ago. The increase in DSOs relates all to billings in October and November including an uptick in client invoices sent for annual and semiannual periods.

FactSet's cash and investment balance totaled $225 million at quarter end, up $22 million from Q4. This quarter, we spent $6 million in capital expenditures. Also, we repurchased 270,000 shares of FactSet stock for a total of $25 million, leaving $164 million authorized for future share repurchases at November 30. At quarter end, there were 44.3 million shares outstanding. We also paid a regularly quarterly dividend of $14 million or $0.31 per share. If you aggregate dividends paid in share repurchases, we have returned $219 million to shareholders over the past 12 months.

Let's now turn to the P&L. This quarter, FactSet's revenues rose to $211 million, an increase of 7.5% compared to the year ago quarter. Operating income advanced to $71 million, an increase of 7%. Net income grew 9% to $50 million during the quarter compared to $46 million a year ago.

U.S. revenues rose to $144 million in the first quarter, up 7% compared to the same period a year ago. First quarter revenues included $2.7 million from StreetAccount. Excluding StreetAccount, revenues rose 6% compared to the year ago quarter. Non-U.S. revenues rose to $67 million, an increase of 8% over last year.

First quarter revenues from Europe and Asia Pacific regions were $52 million and $16 million, respectively, with growth rates in each region of 7% and 12%, respectively, year-over-year.

Let's take a look at the growth drivers for this quarter. We were pleased with our rate of close within the wealth management segment. Over the past 1.5 years, we've been working on configuring a solution for the wealth management workflow. We believe we have a great offering for this segment and some of our newest clients and users have recognized it. This business line had added clients and users this past quarter.

Our Portfolio Analytics suite of products continues to be an attractive selling point for us. This suite includes such applications at Portfolio Publisher, SPAR, Fixed Income in PA, risk and quant tools and thousands of global benchmarking indices. With our Fixed Income in PA product, we continue to solve complicated problems around analysis of portfolios of fixed income securities. In addition, our risk optimizer products were in demand as clients searched for ways to understand and manage market uncertainty and volatility.

Our Market Metrics business continues to be a strong contributor. Our local market share suite of products continues to perform well. Market Metrics products include mutual fund, variable annuity and life insurance analytical products and applications for wholesalers. In addition, Market Metrics has also begun to expand into the European marketplace.

Our client count rose to 2,401 this quarter with 9 net new clients in Q1. Our total user count increased by 105 users, excluding StreetAccount, to 49,605 at quarter end. User expansion from buy-side clients were -- was partially offset by user reductions among our Global Banking and Brokerage business.

Consistent with last year and with prior quarters, our annual client retention was greater than 95% of ASV. In terms of the number of clients, our retention rate remained at 92%. These statistics demonstrates to me that the retention of existing business and ASV is very stable and accelerating net ASV growth is more a function of the rate of new sales.

Our fee business of FactSet proprietary data continues to grow, albeit from a small base. Our gratifying success is enabling us to monetize our investment in proprietary content for distribution directly to the back end of our clients' internal systems and not just through our workstation.

Let's take a look at the expense side now. For Q1, our operating expenses were $140 million, up 8% from $130 million a year ago. Operating margins were 33.7% compared to 34% last quarter and for the first quarter of 2012. The reduction this quarter is attributable to our acquisition of StreetAccount in June 2012, which reduced Q1 margins by 40 basis points.

Cost of services as a percentage of revenues increased 90 basis points over the same period last year. We can trace this increase to higher compensation expense for new hires in software engineering, consulting and content collection in addition to the new StreetAccount employees acquired in June. Higher compensation expense was partially offset by lower computer maintenance costs and a decrease in depreciation from computer hardware becoming fully depreciated.

During the quarter, our SG&A expense as a percentage of revenues decreased 50 basis points compared to the same period last year due to decreased variable compensation and lower stock option expense. These decreases were partially offset by losses on hedges of the Indian rupee.

This quarter, our global headcount surpassed the 6,000 mark for the first time as we grew to 6,020 employees at November 30, a net increase of 285 employees this quarter. Year-over-year, our headcount increased 10% excluding the StreetAccount workforce. Approximately 75% of our new employees hired in the past 3 months joined our content collector -- content collection operations and the rest joined our sales and consulting team.

For Q1, the effective tax rate was 30.4% compared to 32.1% a year ago. The lower tax rate was driven by an excess foreign tax credit recognized from repatriation of cash back to the U.S.

Now let's turn to our guidance for the second quarter of fiscal 2013. Revenues are expected to range between $212 million and $215 million. Operating margin is expected to range between 33.5% and 34%. GAAP diluted EPS should range between $1.11 and $1.13, the midpoint of the range represents 10% growth over last year's second quarter. Our annual effective tax rate should range between 31.5% and 32.5%. We continue to expect that capital expenditures for the full 2013 fiscal year should range between $20 million and $28 million net of landlord contributions.

To sum it up, this quarter demonstrates the strength of FactSet's business model. Against a difficult operating environment, we delivered double-digit EPS growth and all our key metrics reached record highs. We've diversified our product line, and we've demonstrated our ability to grow whether equities or fixed income is in favor. At the same time, we continue to invest for the future. Our headcount grew 10% over the last year and our disciplined reinvestment back into the business is resulting in market share gains.

We have a lot of work ahead, but we're excited and focused on a forward opportunity that we believe is enormous relevant to our current size.

Thank you, and we are now ready for your questions.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question comes from Ms. Suzi Stein of Morgan Stanley.

Suzanne E. Stein - Morgan Stanley, Research Division

Can you just talk a little more about the pricing environment? I'm just curious what the recent conversations have been like with clients both on the buy-side and the sell-side. And has there been any change in the competitive environment, either from Thomson or Cap IQ?

Michael D. Frankenfield

Suzi, it's Mike Frankenfield. We haven't seen significant changes in the pricing environment. Certainly, clients are interested more than ever in optimizing their spend, making sure they get full value. But we've continued to build enhancements into core FactSet, and we've continued to release add-on applications that are selling quite well. Next quarter, we plan to do a modest price increase to the U.S. Investment Management business. And so far, we haven't seen any significant pushback on that price increase. We anticipate the amount of that increase will be similar in the aggregate to last year, and we'll be able to share the full results with you next quarter.

Philip A. Hadley

Suzi, it's Phil. On the competitive environment, I think for us, we really see the [indiscernible], TR and S&P as the players in our space and the dynamic in the marketplace really hasn't changed in the last several years. Everybody's up there above scrapping hard for all the ASPs that they can create in the marketplace. It's certainly a choppy environment. But I think when I think about where we are and I guess the people continue to talk about deceleration, I think if you really look at it, we've actually flattened out. For me, the deceleration happened in the first quarter last year, and it takes a year for it to roll through GAAP revenues on a subscription model. And if you look at our ASV this year versus fourth quarter, we're at 7% this quarter, we were 7% last quarter. I think that's actually where the market currently is, and we'll wait and see as to how the year turns out.

Operator

Our next question comes from Mr. Peter Heckmann of Avondale Partners.

Peter J. Heckmann - Avondale Partners, LLC, Research Division

As regard to the wealth management offering, can you talk a little bit about the addressable market there? Historically, FactSet has primarily been focused on the research analyst, whether it be the sell-side or the buy-side and creating another product for more of the sales and trading or retail sales and trading is interesting but would you characterize it as a FactSet light? And if so, can you talk about generally what type of pricing you're thinking there on a per user basis? And then lastly, of the total market, which sometimes people characterize as roughly 1 million potential users, would the wealth management market be 1/3 of that? Can you quantify in sizing?

Michael D. Frankenfield

Peter, it's Mike. The big macro trend that's helping in the -- happening in the wealth space that I think plays right into FactSet's hands is the increasing sophistication and need for complex financial information systems. The level of sophistication is increasing both on the part of the managers and on the part of the clients. And we're really focused on the segment of the wealth community that is focused on the most sophisticated investors, the high-net worth -- the ultra high-net worth investors. These managers are operating almost identically to our core institutional asset managers. So it's a very logical product extension for us. We've made small tweaks to the product to -- trying to address specific workflows in that area, and the price points are marginally lower than our core FactSet Workstation. But we view the market as being very, very large, hundreds of thousands of users potentially. And I think we're in the early stages of going after that opportunity.

Peter J. Heckmann - Avondale Partners, LLC, Research Division

Is it fair to say that you've really had very little concerted marketing effort to the segment in the past?

Michael D. Frankenfield

Historically, it's not been a segment that we've focused on, and it's really been in the last several years that we've begun to ramp up that opportunity. All the development we've done in the realtime space and the news space has really increased the appeal of the Workstation for that segment.

Operator

Our next question comes from Mr. Tim McHugh of William Blair.

Stephen Sheldon

This is Stephen Sheldon in for Tim today. Just regarding the revenue guidance for the second quarter, we've calculated an organic growth rate of about 5.7% year-over-year at the midpoint of the guidance. So I was just wondering if you could touch on the subscription value growth of about 7% for the last 2 quarters and maybe the difference you're seeing between that and the revenue guidance.

Peter G. Walsh

I think the best way to think about organic growth rate is to look at the ASV growth rate. And if you say Q4 at 7% and Q1 at 7%, I think if you really focus on organic growth, that would be the number I'd focus on.

Stephen Sheldon

Okay. And just one more if I could. I'm just curious how big the non-equity portions of the business are now for just fixed income and commodities, and just any color there would be appreciated.

Philip A. Hadley

We continue to invest heavily in our fixed income product. I don't think we've -- we certainly don't break out the revenue opportunity. But our fixed income product line continues to extend both on the content and the analytics area, and it's been an area of growth for us.

Operator

Our next question comes from Mr. Peter Appert of Piper Jaffray.

Peter P. Appert - Piper Jaffray Companies, Research Division

So Phil, I know you've said in the past that revenue per password isn't necessarily a metric you're intensely focused on. But I do notice that the growth in that metric has slowed a little bit. And I'm wondering if you could give us any color in terms of whether pricing or price pressure versus mix is driving that.

Philip A. Hadley

I can't really sincerely honestly answer this, Peter. I haven't the slightest idea because it's not a metric I have actually looked at. I think the revenue per password is really driven by just the mix of business that comes in. If we have a high user quarter relative to a high product quarter, then the revenue per password goes down. Wealth clients can certainly affect it. ID clients affect it dramatically. So it's just a whole bunch of different factors.

Peter P. Appert - Piper Jaffray Companies, Research Division

So I guess in the context of greater focus on the wealth management market, then it might be reasonable to assume that revenue per password are not necessarily going to come down, but that would be a pressure point on that number.

Philip A. Hadley

I'm really just -- as a metric, I'm leery to make a comment on it just because if I think about it, there are so many things in our password revenue that we have that have nothing to do with passwords. And we have a pretty good sized chunk of our business that is not password dependent.

Peter P. Appert - Piper Jaffray Companies, Research Division

Right. Can you quantify that, Phil, in terms of how big the fee business is at this point?

Philip A. Hadley

I knew I was going to get that question.

Peter P. Appert - Piper Jaffray Companies, Research Division

You left yourself open to that one, Phil.

Philip A. Hadley

I did. It's fair game. So if you take Market Metrics, the fee business and what I think of as off platform revenue for us, which wouldn't be core FactSet, it adds up to a pretty good number at this point. I'm not going to give you the hard number, but it's material.

Peter P. Appert - Piper Jaffray Companies, Research Division

Okay. And then just one last thing, Phil. So Bloomberg's been making a lot of noise about their fabulous new Portfolio Analytics offering. Any comment specifically on what you're seeing from them and what you're hearing back from customers competitively?

Philip A. Hadley

Certainly for us, it's actually a thrill to be in a conversation with Bloomberg and to think that we're a threat for them and that they need a new creative port product to combat us in the marketplace. I think we're seeing tremendous success with our PA suite and it's certainly the premium product in the marketplace and is the premier solution for our clients. Are they in the marketplace with their port product? They're a huge company, they've got lots of sales people out there. They certainly do a lot -- they're out there poking around. And we certainly feel it, but I think it's one where we stay focused on where we sit in the marketplace and really haven't seen workflows move from our product to theirs.

Peter P. Appert - Piper Jaffray Companies, Research Division

Are you still seeing unit growth or password growth from that product?

Philip A. Hadley

Yes.

Operator

Our next question comes from Mr. Alex Kramm of UBS.

Alex Kramm - UBS Investment Bank, Research Division

Just, I know there's been a couple of questions on the guidance already, the revenue guidance. I just wanted to flesh it out or try to flesh out a little bit more. When I look at your ASV number and I divide that by 4, I guess, I get to $212 million. Your guidance is $212 million to $215 million, I believe. I think historically, it's been -- the first quarter has seen a little bit more of a tick up. So just wondering what's going into the guidance. Is it a lot of the pricing increases that you expect there? Is it maybe a lower user growth than in previous years? Or maybe just talk about the -- that maybe there's a little bit of disconnect here.

Philip A. Hadley

I'm going to take a swing at it, and then maybe Maurizio is going to help me out. I think there are several factors. I know for -- in particular this quarter, our ASV came in at the end of the quarter. So the mix of when it comes in, in the quarter affects actually GAAP revenues. But if you're an analyst and you're following our business, the ASV number is the one that's by far the best metric to track because it really is the run rate of the business at a snapshot in time. There are other non-subscription revenues that come in and out that make that number slightly choppy. But I would focus on -- as far as our growth rate, I would focus on the ASV number. Would you agree with that, Maurizio, or no?

Maurizio Nicolelli

Yes, yes.

Alex Kramm - UBS Investment Bank, Research Division

All right. No, that's fair. While we're on ASV then just a quick housekeeping here, I guess. The international ASV number, if my numbers are right, actually declined sequentially. And I don't know if there was a big pull forward in the fourth quarter or something. So maybe you can just talk that a little bit on a quarter-over-quarter basis.

Maurizio Nicolelli

I think that's factual. I mean, our growth in Q1 was just more U.S. than outside U.S. So it was basically flat out.

Alex Kramm - UBS Investment Bank, Research Division

And then maybe lastly, I don't know if you break this out, but can you remind us or give us some color about in your buy-side clientele, how big hedge funds are? I mean, over the last week or so even, we heard about pretty high-profile hedge funds closures. Hedge funds, in total, I think haven't really done that well this year relative to long only. So maybe just put some color around how that group is doing, what you're expecting there, in particular, if maybe there's a little bit more redemptions coming in early next year.

Philip A. Hadley

So it's less than 5% of our total ASV. And it's a very choppy group of clients for us. I'd say, firm closure is the classic reason for client loss in that area. And it's certainly one where it is not a growth rate for us at this point and hasn't been for 5 years, but it's not material to our total ASV.

Operator

Our next question comes from Shlomo Rosenbaum of Stifel.

Shlomo H. Rosenbaum - Stifel, Nicolaus & Co., Inc., Research Division

I was wondering if you could just give us a little bit more color on the ASV in the quarter or how we should think of what's going on in the market. Or is it sell-side going down, buy-side kind of flattish, and you guys are growing in the wealth management in the fixed income side? I mean, can you just give us a little bit more color on that?

Michael D. Frankenfield

Shlomo, it's Mike. I think Peter summed it up really well in his opening comments when he spoke to our retention rate and the fact that we're doing a good job servicing our existing clients and our existing client base continues to find value in what we're doing. The first quarter is normally a slow quarter for us. Our sales force pushes pretty hard at the end of our fiscal year, which ends in August. And it's natural that there's a little bit of a let up in Q1. What we saw this quarter was strong client retention but a little bit of a slowdown in terms of new firm generation, a little bit of a slowdown in same-store sales. There's certainly pockets that are performing very well. You alluded to wealth. I would also point out our fixed income products, our risk products continued to perform well. Definitely, softness on the sell-side. You've seen headlines that reflect a lot of headcount reductions. Most of those headcount reductions don't directly affect the user groups and the workflows that FactSet's servicing. But having said that, there is not a lot of new higher creation going on in those firms and, as a result, not a lot of new ASV generation happening on that side of the business.

Shlomo H. Rosenbaum - Stifel, Nicolaus & Co., Inc., Research Division

Okay. When I normalize for the StreetAccount acquisition, what it looks like on the ASV is that the sell-side ASV actually picked up a little bit sequentially. Is that and what you saw as a little bit more of a slowdown on organic basis on the buy-side, I'm wondering, is that just a vagary of I don't have the decimals as far out as you guys have, or is that actually what's going on.

Philip A. Hadley

I think so. I think it's your decimals. I think Mike's color is more accurate.

Shlomo H. Rosenbaum - Stifel, Nicolaus & Co., Inc., Research Division

Okay. And then, what was going on in the tax rate in the quarter? Can you -- I know you commented about that. Can you give me just a little bit more color on that?

Peter G. Walsh

Shlomo, it's Peter. During the quarter, we repatriated cash back from the U.S. And when you do that, we have to recalculate our U.S. tax rate, and we were able to capture some additional deductions related to the amortization of intangibles and stock option expense specifically related to our U.K. operations.

Shlomo H. Rosenbaum - Stifel, Nicolaus & Co., Inc., Research Division

Okay. Usually when I hear repatriation, I hear about taxes going up but I didn't realize that, that's something that you can do to have your taxes go down.

Peter G. Walsh

I would agree with you on the macro picture there. But for us, it was positive event.

Shlomo H. Rosenbaum - Stifel, Nicolaus & Co., Inc., Research Division

Okay. And the last housekeeping item, just the StreetAccount acquisition. Where did the weight on the margins come exactly from that? Was it at a gross margin side? Was it acquisition intangibles? I just wonder how to think about that.

Peter G. Walsh

It's mostly in compensation is where the weight is, which is in most -- in cost of services.

Operator

[Operator Instructions] Our next question comes from Ms. Bethany Caster of Raymond James.

Bethany Caster

Can you talk about international areas of strength in terms of geographies and asset classes and client types?

Michael D. Frankenfield

Outside of the U.S., we continue to see growth in the emerging economies in Asia Pacific. The historical contributors have been also the U.K. The continent as you would expect is not a significant growth area for us, but we continue to do a good job for our clients there. Outside the U.S., the information that we provide, it's more complicated. There's currencies, there's a greater interest in fixed income. And it's a good opportunity for us because the problems are more complex, and we can really help our clients add value by selling these very complicated problems.

Bethany Caster

Okay. And on the last call, you talked about a new pricing scheme that you've been using since the beginning of the year for new clients, and it entails a $24,000 base fee and approximately $12,000 per workstation. How is that helping you with client adds? Just any answers around that would be appreciated.

Philip A. Hadley

The goal of that pricing is certainly to make things simpler, make it easier for our clients to purchase our products. As I think I said last time, we really view it as an evolution of our pricing model not a wholesale change. We're definitely using it to help attract new clients, and it does simplify the purchase of FactSet. We continue to make progress with it, and we'll roll it out opportunistically in select markets.

Operator

Our next question comes from Mr. Alex Kramm of UBS.

Alex Kramm - UBS Investment Bank, Research Division

Just had a couple of follow-ups. You talked about the wealth management opportunity earlier in the call and seemed pretty excited about it. Can you just -- how much of your business is that today? Is it still a very, very early business like you said 5% of hedge fund, that kind of same range? Or where is that business today?

Philip A. Hadley

It's still very small. It's not material.

Alex Kramm - UBS Investment Bank, Research Division

Okay. And then maybe while I have you on a follow-up here. Buybacks, some people I talked to this morning thought the buyback number was a little bit lower than expected. So given what the stock did during the quarter, selling off as much as to the high 80s or so, can you just talk about like how opportunistically you bought back the stock? And given where the stock is today, how you feel about buybacks and maybe accelerating that a little bit?

Peter G. Walsh

Alex, it's Peter. Thanks for the question. I think, if you studied our pattern on buybacks over the last 3 years, you would see that it really does ebb and flow from quarter to quarter. The range over the last 3 years has been allocating somewhere between 15 million and 85 million. This quarter, we did -- we certainly were below the average of roughly 45 million over that 3-year period. We allocated 28 million. We look at capital allocation as a puzzle that we need to solve in order to maximize EPS accretion, and we continue to evaluate that puzzle all the time in terms of acquisitions, dividends and buybacks. And so we certainly are confident that given that interest rates are just about 0 that buybacks are very accretive for FactSet.

Operator

Our next question comes from Mr. Shlomo Rosenbaum of Stifel.

Shlomo H. Rosenbaum - Stifel, Nicolaus & Co., Inc., Research Division

Just one last question. Can you just tell us about how you think about the impact of the flows on the buy-side going more towards ETFs over the last couple of years and what kind of impact that has on your business. Does that have an impact on your decision to focus more on wealth management?

Philip A. Hadley

I think the move for -- the move of assets around whether they're from equity to fixed or fixed to passive is something that's always happening in the marketplace. And we certainly look at those as opportunities for us. So there's been a reasonably large shift, if you look at the mutual fund flows from equities to fixed, obviously, we've been investing heavily in fixed income and get to participate in that asset class, and that's not historically where we've been. When it comes to ETFs and passive management, actually we have products that fit into that because, depending on how they're constructed, they certainly benefit FactSet. And I would say, the only other one that comes to mind when it comes to ETFs is it feels like that a portion of that ETF flow is coming from what you used to think as the financial adviser doing stock picking, puts his clients or her clients into ETFs instead of into stocks. So I think it's an opportunity.

Operator

Okay. As of this time, there are no further questions. I would now like to hand the call back to our speakers for any closing remarks.

Peter G. Walsh

Thank you very much, everyone. Happy holidays.

Philip A. Hadley

Thanks.

Operator

That concludes today's conference. Thank you for participating. You may now disconnect.

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