Fiscal 2008 Outlook

- Revenues are expected to range between $145 million and $149 million. This revenue guidance assumes zero revenues from Bear Stearns and that its pending sale will not result in any additional revenues at new or exiting clients. This estimate might be conservative since it’s not unusual for displaced FactSet users to resurface at existing clients, or prospect’s firms, and for some ASV to carry over and remain at a purchasing firm in a merger.

- Operating margins are expected to range between 30.5% and 32.5%. Operating margin guidance includes $900,000 of expenses related to the bi-annual FactSet Engineering Conference scheduled for May 2008.
- Other income is expected to be between $700,000 and $1.3 million. The midpoint of this range represents a 53% decline compared to the third quarter last year.
- The effective tax rate is expected to range between 34% and 35%, and assumes the R&D tax credit is not reenacted.
- Capital expenditures net of landlord contributions should range between $35 million and $41 million.

Key questions and answers from the second quarter fiscal 2008 earnings call conducted by FactSet Research Systems Inc. on March 18, 2008.

Peter Alford (Goldman Sachs): Could you comment on the drivers of password’s growth? Is the growth related to new versus existing clients?

Philip A. Hadley: The majority of our password growth comes from existing clients, and in the first half, and even in this quarter, it was both buy and sell side growth. But it’s traditionally large clients expanding our footprint. Marquee happens to be a driver of that in many of our clients.

Peter Alford (Goldman Sachs): The revenue per password is down a little bit on a year-to-year basis in the current quarter risks. How do I interpret that?

Philip A. Hadley: It goes back to the most important metric being looking at total ASV—any time we have growth in passwords in large clients, like we did this quarter, it’s going to be lower than the average total password. A new client that comes on with two passwords, those two passwords are more expensive than a marginal password. It’s a mixed--on a quarter to quarter, but not anything I would go on beyond that.

Peter Alford (Goldman Sachs): What should we anticipate in terms of cost growth in the next four to six quarters? As you implemented the change in the computer systems, normally there’s a higher depreciation expense. Should we look for percentage growth rates and expenses to accelerate a little bit over the next several quarters?

Peter Walsh: The beauty of our ASV model is that it provides visibility in time to adjust our investment rates to correlate to future revenue growth. If you look historically, it’s not unusual for ASV to closely track revenues on an LTN basis six months into the future. That’s important and valuable. The FactSet compensation represents 65% of our total cost. If our ASV growth rate changes substantially up or down, our focus on ASV will allow us to be thoughtful and calibrate our plans to adjust our expense level, which is most likely to be in the area taken.

Peter Alford (Goldman Sachs): Can you provide any incremental thoughts in terms of the Thomson Werner transaction? Given that they’ve identified the products and areas that they might have to exit, what are the opportunities for you from an acquisition or a product expansion standpoint?

Philip A. Hadley: Certainly from an acquisition perspective, it hasn’t taken place yet so it hasn’t affected the marketplace in any material way, yet. That’s yet to come. We certainly are monitoring with the regulatory buyers, the values they’ve put out in the market place, but at this point, I can’t comment on any thing that FactSet is doing.

Kevin Doherty (Banc of America Securities): What impact, if any, you might be seeing from some of the self-evaluating methods? Have you seen much of an impact yet, and when might that start to become a little more material in your business?

Philip A. Hadley: The impact for us, as far as being able to notice something different in the marketplace, probably started last summer. It’s 22% of our business, it’s been softer in the first half than it probably had been in the year before, but at the same time, we grew seats in client count in that area. We’re much better positioned in this cycle than we were in prior cycles to provide a better solution for our clients. This cycle we have got IBCentral. Our content in the sell side, in what we’re able to sell there, is significantly expanded from the last cycle. Lastly we have a wireless product that extends out from our key products that has been very popular. I think all of those things provides greater opportunity in this cycle than we had in the last cycle.

Kevin Doherty (Banc of America Securities): Could you talk about some of the growth opportunities you see now with your investment management customers, as well as with the IB clients? What areas you’re most excited about here that might have changed over the trends you’ve seen over the last year or so?

Philip A. Hadley: Certainly the fact is that the trends tend to be very long-term trends. Our product cycle from creation to the point where it makes impact on our product — it seems to be it’s five years before we create a product and it starts to become what we think of as a material product driver. Now, whether that be PA or Marquee, they all tend to have a very long cycle to them. That’s just because it takes a long time to create a product that is valuable to many as opposed to valuable to a few. For us, the key product drivers are very consistent. Obviously the PA suite is very material to us. It continues to broaden, so it’s not just attribution and it has many other features.

Kevin Doherty (Banc of America Securities): You mentioned some of the proprietary content. Are there any new areas you’re continuing to explore, where might you be concentrating more of your resources these days?

Philip A. Hadley: No, I would say making what we have better is always the focus. It’s one where the goal posts continue to move when it comes to content and what was accessible as a level of content a year ago, and a year from now, the content is a moving target. All of our content areas require continued focus.

Randy Hugen (Piper Jaffray Companies): Have you been getting any pushback, specifically from the sell side on the 3% price increases this year?

Philip A. Hadley: No. it was viewed as a normal and it was also a buy side increase.