Managing Director and Senior Equity Analyst at RBC Capital Markets, LLC
Ashish Sabadra is a Managing Director and Senior Equity Analyst at RBC Capital Markets, specializing in coverage of financial services, industrials, technology, consumer, and energy sectors. He covers specific companies including Automatic Data Processing, Verra Mobility, CoStar Group, Capital One Financial, Discover Financial Services, and American Express, with a strong performance record such as a 62% success rate and +6.3% average return per rating, and a best recommendation yielding a 134.8% return on Verra Mobility. Sabadra began his analyst career in the late 2010s, previously serving at Credit Suisse Securities before joining RBC Capital Markets in 2021. He holds FINRA registrations and is recognized as a top-ranked analyst by platforms like TipRanks and Anachart, noted for his high price target accuracy and consistent investment returns.
Ashish Sabadra inquired about the moderation in software ARR, despite strong ACV bookings, and how this ACV is expected to convert into ARR in fiscal 2026.
CFO Steve Weber stated that FICO expects to see an acceleration of ARR as early as Q1 2026, as recently booked deals go live.
Ashish Sabadra asked about the moderation in software ARR despite strong ACV bookings, and how ACV will convert into ARR in fiscal 2026.
CEO Will Lansing stated that FICO expects to see an acceleration of ARR as early as Q1 of fiscal 2026, as new deals go live, directly contributing to ARR.
Ashish Sabadra from RBC Capital Markets asked about opportunities for new FICO score use cases, such as in the securitization market, and about the company's competitive moats in the non-GSE market.
CEO Will Lansing confirmed FICO is actively exploring ways to provide refreshed scores to the securitization market. He identified FICO's primary moat as having the most predictive score, which is critical for any entity managing credit risk, combined with its long-standing position as the industry standard.
Ashish Sabadra of RBC Capital Markets asked about the expected timing for converting the strong recent ACV bookings into recognized ARR. He also sought clarification on whether the auto origination revenue saw only a partial benefit from pricing in the quarter, with more to come.
CFO Steve Weber estimated a 6-to-9-month timeframe for ACV to begin converting to revenue, with VP of Investor Relations Dave Singleton adding it could be 9-to-12 months for a full ramp-up. Weber confirmed that, like other repricing events, the auto price increase effective January 1 can take time to fully roll in, suggesting an ongoing benefit.
Ashish Sabadra of RBC Capital Markets asked about the expected timeline for converting ACV bookings to ARR and sought clarification on whether the auto origination revenue reflected the full impact of recent pricing changes.
CFO Steve Weber estimated a 6-to-9-month period for ACV to begin converting to revenue, while VP of IR Dave Singleton noted a full ramp-up takes closer to 9-to-12 months. Weber confirmed that the auto price increase, effective Jan 1, feathers in over time and may not have been fully reflected in the quarter.
David Paige, on behalf of Ashish Sabadra, asked about the competitive dynamics in the auto and card score markets and FICO's capital allocation priorities for 2025.
CEO Will Lansing stated that the competitive landscape for auto and card scores remains largely unchanged, with little new activity from competitors. On capital allocation, he reaffirmed FICO's long-standing strategy of returning capital to shareholders through stock buybacks, noting that despite a high stock price, the company still considers its shares a "screaming value" and plans to continue the repurchase program.
Ashish Sabadra asked how often LLMs come up in client conversations as an alternative to Gartner. He also inquired about differences in retention trends or new business growth across the different insight access tiers (reference, advisor, guided).
Gene Hall (Chairman and CEO, Gartner) stated that LLMs rarely come up as an alternative to Gartner in client conversations; the main AI-related topic is helping clients get value and ROI from AI. He confirmed that traditional retention trends across reference, advisor, and guided tiers have held, showing similar patterns historically.
Ashish Sabadra asked how frequently Large Language Models (LLMs) are brought up by customers as an alternative to Gartner in conversations. He also inquired about any differences in retention trends or new business growth across Gartner's various insight access tiers (reference, advisor, guided).
Chairman and CEO Gene Hall stated that LLMs very rarely come up as an alternative to Gartner in client discussions; instead, clients' primary interest regarding AI is in achieving value and ROI from their AI investments. He noted that the traditional retention trends across the reference, advisor, and guided insight access tiers have remained consistent with historical patterns.
Ashish Sabadra inquired about the drivers of continued strength in ICE's data services and solutions businesses, the nature of customer appetite (quantity of data consumed versus pricing), and the potential impact of new high-value data sets like sentiment indicators on future growth in these segments.
Chris Edmonds, President of Fixed Income and Data Services at Intercontinental Exchange, attributed the strength to a comprehensive playbook, mission-critical data, trusted delivery channels, and the ability to integrate content from over 750 data sources. He noted that strategic investments in these capabilities are yielding results, enabling clients to effectively incorporate these opportunities into their operational workflows.
Ashish Sabadra from RBC Capital Markets inquired about the key drivers behind the sustained strength in ICE's data services and solutions businesses, the nature of customer appetite (quantity vs. pricing), and whether new high-value data sets like sentiment indicators represent a new growth catalyst for these segments.
Chris Edmonds, President of Fixed Income and Data Services, explained that the strength is driven by a comprehensive playbook, including mission-critical data, flexible delivery channels, and the ability to integrate additional content from 750 data sources. He noted that investments in these capabilities are paying off, enabling clients to incorporate opportunities into their operational workflows.
Ashish Sabadra asked for a breakdown of energy open interest growth between commercial and financial clients and how a potential Russia-Ukraine peace might affect volumes.
President Benjamin Jackson emphasized that ICE's energy markets are heavily focused on commercial users, with many contracts being physically settled, which ensures a strong commercial base. He stated that a geopolitical resolution is unlikely to change hedging demand, as numerous other structural risks—such as supply chain resets, energy security concerns, and growing demand from new sources like AI—will continue to drive activity.
Ashish Sabadra of RBC Capital Markets asked about the current state of Encompass contract minimums relative to 2024 origination volumes and the level of market recovery needed to see a significant 'coiled spring' benefit.
CFO Warren Gardiner explained that while a minority of customer volumes are above their minimums, the situation has been improving quarterly due to a combination of modest market recovery and lower renewed minimums. He reiterated previous commentary that a return to a more normal market of 7-10 million industry loans could generate an incremental $200 million to nearly $500 million in revenue.
Ashish Sabadra asked about the size and impact of the EDM and ThinkFolio divestiture on Market Intelligence's revenue growth and margins, and how the With Intelligence acquisition affects the prior midterm guidance of 7-9% MI revenue growth.
Eric Aboaf, CFO and EVP, stated that EDM and ThinkFolio were "not material" to consolidated financials and their revenues were "relatively small" for MI. The divestiture will be "slightly accretive" to MI organic revenue growth and margins in 2026. He noted it's premature to discuss 2026 guidance or multi-year targets, but With Intelligence is expected to accelerate MI growth.
Ashish Sabadra asked for the size of the EDM and ThinkFolio divestiture and its impact, and whether the prior midterm guidance of 7-9% MI revenue growth still holds given current performance and the With Intelligence acquisition.
Eric Aboaf, CFO and EVP, stated that EDM and ThinkFolio were not material to consolidated financials, but their divestiture would be slightly accretive to MI organic revenue growth and margin in 2026, helping reshape the portfolio. He noted that it's premature to discuss 2026 guidance or multi-year targets, but the company is confident in MI's stabilization and accelerating organic growth.
Ashish Sabadra followed up on Market Intelligence, asking if competitive displacements were driven more by product innovation or sales execution, and requested color on the strong 10% organic growth in the Enterprise Solutions sub-segment.
President & CEO Martina Cheung explained that competitive wins were driven by a combination of strong sales execution, including single account ownership, and broad uptake across the full product range, highlighting the successful integration of Visible Alpha on CapIQ Pro. CFO Eric Abouaf added that the Enterprise Solutions growth was fueled by strong performance in workflow solutions like Wall Street Office and Notice Manager, which benefited from recent product reinvestments.
Ashish Sabadra followed up on the Market Intelligence segment, asking if competitive wins were driven more by product innovation or sales execution, and also inquired about the drivers of the strong 10% organic growth in Enterprise Solutions.
President & CEO Martina Cheung attributed the competitive wins to a combination of strong sales execution, such as establishing single account ownership, and broad uptake of the full product range, including the well-received Visible Alpha integration. CFO Eric Abouaf added that Enterprise Solutions growth was driven by strong performance in workflow solutions like Wall Street Office and Notice Manager, which have benefited from recent product reinvestments.
Ashish Sabadra asked about the underlying assumptions for the flat billed issuance guidance for the second half of the year, particularly regarding M&A, issuance pull-forward, and high-yield market conditions.
CEO Martina Cheung clarified that the full-year outlook is now more cautious, assuming 2025 refinancing activity proceeds but with less pull-forward from 2026, especially in high-yield. M&A-related issuance is now assumed to be flat year-over-year. She acknowledged potential upside from pent-up M&A demand, but the timing remains uncertain.
Ashish Sabadra of RBC Capital Markets questioned the drivers behind the strong 2025 margin guidance and asked about the outlook for incremental margins in the coming years.
President and CEO Martina Cheung attributed the strong margin outlook to disciplined expense management, efficiency efforts, and productivity gains from internal AI tools like Spark Assist. Interim CFO Chris Craig added that the company closely watches incremental margins, noting they are in the high double digits for market-driven businesses.
Ashish Sabadra asked about the choppy execution in the Market Intelligence (MI) segment, the potential for further portfolio rationalization, and the strategy to achieve more consistent performance.
Incoming President and CEO Martina Cheung attributed the performance to cyclical end-market headwinds, such as pricing pressure and longer sales cycles with smaller customers, rather than internal execution. She affirmed that portfolio optimization is a continuous, disciplined process and expressed confidence that the value of their offerings will drive a recovery as the market cycle turns.
Ashish Sabadra asked about the difficulty in comparing against last year's hurricane-driven revenue in Q4, estimating a 100 basis point tailwind last year. He also inquired if strong sales momentum would translate into Q4 revenue or contribute more to 2026 and beyond.
Elizabeth Mann, Verisk's Chief Financial Officer, confirmed that Q4 will face a tough comparison due to last year's hurricanes Helene and Milton, and this year is shaping up to be a light weather year. She noted that some sales momentum and new product adoptions will continue into next year. Lee Shavel, President and Chief Executive Officer, reiterated confidence in long-term growth targets.
Ashish Sabadra asked about the expected headwind in Q4 from tough comparisons to last year's hurricanes Helene and Milton, and whether strong sales momentum would translate into Q4 revenue or contribute more to 2026 and beyond.
CFO Elizabeth Mann confirmed that Q4 will face a tough comparison due to last year's hurricanes and that light weather is likely to persist. She noted that some of the strong sales momentum and new product adoptions will continue into next year.
Ashish Sabadra of RBC Capital Markets asked about the potential for revenue cyclicality at AccuLinks and sought details on the planned investments for the business post-acquisition.
CEO Lee Shavel stated that analysis indicates low cyclicality for AccuLinks, as its business is tied to the stable residential housing stock rather than new construction. CFO Elizabeth Mann noted some seasonality in winter months and explained that investments will focus on building out public company functions and driving product synergies, while maintaining the business's attractive margin profile.
Speaking for Ashish Sabadra, David Paige of RBC Capital Markets asked about Verisk's outlook for share buybacks for the remainder of 2025.
CFO Elizabeth Mann stated that Verisk does not provide a specific forecast for buybacks. She reiterated the company's capital allocation framework, which prioritizes organic investment, M&A, and dividends, with buybacks used to return excess capital to shareholders. She confirmed the commitment to return capital when not needed for other priorities.
Ashish Sabadra inquired about M&A, asking about further opportunities for portfolio rationalization and the current state of the acquisition pipeline.
President and CEO Lee Shavel stated that the M&A pipeline is relatively unchanged with high valuations. He added that as Verisk opens its business ecosystem, it gains better insights into potential targets and how they could integrate, which enhances the company's ability to evaluate opportunities and create value.
Ashish Sabadra asked for a way to estimate the financial tailwind from Hurricanes Helene and Milton in Q4 and the ongoing impact on the property estimating solutions business.
Chief Financial Officer Elizabeth Mann explained that it is too early to quantify the precise impact, though the combined insured losses could be similar to Hurricane Ian. She cautioned that the revenue flow-through can vary. Crucially, Mann highlighted that the ongoing conversion of transactional contracts to subscription models in the property estimating business may dampen the transactional revenue swings from single storm events, as more clients' usage will be covered under their subscriptions.
Ashish Sabadra requested additional information on the recent acquisition of Pequity, including the strategic rationale, anticipated benefits, and its financial profile.
Maria Black (President and CEO) explained that Pequity enhances ADP's "best-in-class HCM technology" by providing innovative compensation management software, which will be integrated into existing offerings for clients. Peter Hadley (CFO) noted that Pequity is a "small company today," so its financial profile is "not meaningful" for the current fiscal year and was already "contemplated in the outlook."
Ashish Sabadra questioned if the full-year guidance for PEO revenue excluding pass-throughs implied conservatism for Q4, and asked for an update on progress with Generative AI.
CFO Don McGuire noted that while Q3 PEO results were better than expected, there are some puts and takes for Q4 but no major signals. CEO Maria Black expressed excitement about GenAI progress, highlighting the award-winning ADP Assist and a broad strategy to embed AI across products and internal operations, while noting it is still 'very early days.'
Ashish Sabadra inquired about the Basic Industries and Paper businesses, focusing on their anticipated return to growth in 2026. He asked for more details on how shifting resources, innovation, and share gains would help offset end market weakness.
Christophe Beck, Ecolab's Chairman and CEO, acknowledged that while these businesses have good margins, consolidation and mill closures have impacted growth. He noted that the consolidation process is slowing, and underlying performance, driven by innovation, is improving. Beck expressed optimism that the Paper segment is reaching the bottom of its cycle and should return to growth in the next few quarters. For Basic Industries, he mentioned regrouping resources and driving critical mass to capture market share as the market recovers, expecting a similar turnaround.
Ashish Sabadra inquired about the strategy for Ecolab's Basic Industries and Paper businesses to return to growth in 2026, specifically asking how shifting resources, innovation, and share gains would offset end market weakness.
Christophe Beck, Chairman and CEO of Ecolab, acknowledged that the main issue in the paper industry is consolidation and mill closures, which impact growth despite share gains in existing and new mills. He expressed optimism that the consolidation process is slowing, and underlying performance, driven by innovation, is improving, suggesting the paper cycle is nearing its bottom. For Basic Industries, Beck noted regrouped resources and efforts to capture market share as the market recovers, anticipating a return to growth for both businesses in the coming quarters.
Ashish Sabadra of RBC Capital Markets asked for an update on the Pest Elimination business, focusing on the rollout of the Pest Intelligence digital model and its future growth implications.
Christophe Beck, Chairman & CEO, detailed the strategic shift to 'Pest Intelligence,' highlighting a successful pilot with a major U.S. retailer that improved the pest-free ratio to 98-99%. He confirmed the model is working and being expanded, which is expected to drive significant growth and margin expansion over the next few years as the business transitions to a digitally-driven service.
Ashish Sabadra of RBC Capital Markets questioned the demand trends within the Institutional & Specialty segment, specifically regarding foot traffic, and how digital solutions might offset potential weakness.
Christophe Beck, Chairman and CEO, reported that the Institutional & Specialty (I&S) business is performing very well, with the core Institutional division growing at a steady 5%. He noted that the reported numbers are slightly dampened by the inclusion of Healthcare and the discontinuation of a private label business in Specialty. Beck highlighted that the segment's margins are at an all-time high and are expected to continue improving, driven by strong innovation and helping customers reduce their own operating costs.
Ashish Sabadra questioned the volume growth expectations for 2025, including any color by segment and the potential impact from tariffs.
Christophe Beck, Chairman and CEO, stated that tariffs are not a significant concern due to Ecolab's localized production model, where 92% of products are made in the regions they are sold. For 2025, he guided to a volume growth trajectory of around 2%, contributing to an overall organic growth of 4% or more. He highlighted the U.S. as the company's largest, most profitable, and best-performing market, expecting it to strengthen further.
Ashish Sabadra asked about the expected benefits from growth investments in frontline sales, digital technology, and service capabilities as the company approaches fiscal year 2025.
CEO Christophe Beck explained that these investments are key to accelerating sales growth towards the 5-7% target and achieving the 20% OI margin. He stressed that the company plans to invest 20-30 basis points of sales in growth initiatives while simultaneously delivering a net SG&A productivity improvement of 20-30 basis points. This balanced approach allows for fueling top-line growth while still delivering 12-15% EPS growth.
Ashish Sabadra inquired about the pipeline for the fourth quarter, the current sales cycle dynamics, and the momentum observed in Index and Analytics net new subscription sales.
Andy Wiechmann, Chief Financial Officer, MSCI, noted that the overall environment and market backdrop remained relatively stable, with sustained favorable market momentum being constructive. He highlighted strong results in the Americas, particularly in Index and Analytics, fueled by product innovation. He expressed encouragement regarding the healthy product pipeline and accelerated product development supporting strong client engagement across various segments. He also mentioned that dynamics in sustainability are expected to continue in the near term.
Ashish Sabadra asked about the pipeline for the fourth quarter and sales cycle dynamics, particularly given the strong momentum in index and analytics net new subscription sales in Q3.
Andy Wiechmann (CFO, MSCI) noted stable market dynamics, constructive sustained favorable market momentum, and strong Americas results in index and analytics. He highlighted a healthy product pipeline and accelerating product development supporting client engagement, while expecting sustainability dynamics to continue in the near term.
Ashish Sabadra asked for more details on the softer overall retention rate, particularly in the Analytics and Sustainability segments, and the outlook for retention for the remainder of the year.
CFO Andrew Wiechmann explained that quarterly cancels can be lumpy and the lower retention was driven by Analytics and Sustainability, due to client events and budget pressures. He noted that lower retention in Real Assets, Sustainability, and with hedge funds is expected to continue, while highlighting that retention with asset managers remains solid at around 96%.
Ashish Sabadra inquired about current pricing trends for both renewals and new sales across the firm.
Chief Financial Officer Andrew Wiechmann explained that the contribution from price increases to new sales in Q1 was roughly in line with the prior year but slightly lower than in 2023. He emphasized that price increases are often tied to product enhancements and broader usage rights, and that MSCI considers client health and the overall environment to act as a strong partner.
Ashish Sabadra requested more detail on the improving sales pipeline and constructive environment, specifically asking about sales cycle trends and growth drivers on the Index front, such as custom indices.
CFO Andrew Wiechmann confirmed that elevated markets are boosting client confidence and budgets, particularly in the U.S., leading to some improvement in sales cycles. He highlighted strong growth momentum with hedge funds, wealth managers, and asset owners. For the Index segment, he noted that custom index subscription growth was in the mid-teens, with strong traction in non-market cap products and direct indexing.
Ashish Sabadra asked for more detail on the ESG and Climate segment, specifically about when the cyclical headwinds might ease and if the new leadership could accelerate sales momentum.
Chairman and CEO Henry Fernandez described the current weakness as a 'cyclical drought' caused by a short-term global focus on inflation and geopolitical issues. He reiterated his strong belief in the long-term, secular need for ESG and Climate solutions, predicting Climate will recover sooner than ESG. He affirmed that the company is investing for this long-term trend and the new leadership is key to that strategy.
Ashish Sabadra focused on the regtech momentum, asking about conversations with bank customers regarding regulatory technology solutions and the broader benefits of the CFTC partnership outside of the CFTC itself.
Adena Friedman, Chair and CEO, highlighted strong momentum in AxiomSL and Surveillance. For AxiomSL, clearer regulatory environments and ongoing global regulatory changes drive demand, exemplified by a recent global tier one cloud deployment. For Surveillance, the CFTC partnership creates a network effect: regulators using Nasdaq's technology catalyze member firms to adopt the same, driving sales conversations. This network effect is also seen across Calypso and AxiomSL, expanding the business.
Ashish Sabadra focused on the momentum in Regtech, asking about conversations with bank customers regarding regulatory technology solutions and the broader benefits of the CFTC partnership.
Adena Friedman, Chair and CEO of Nasdaq, noted strong momentum in both AxiomSL and Surveillance, driven by clearer regulatory environments and ongoing global regulatory changes. She highlighted a recent AxiomSL cloud deployment for a global tier one bank and explained that regulators like the CFTC using Nasdaq's market surveillance technology can catalyze adoption among member firms, creating a network effect for sales across various solutions.
Ashish Sabadra of RBC Capital Markets asked about capital allocation, specifically focusing on the M&A pipeline and the potential for tuck-in acquisitions.
EVP & CFO Sarah Youngwood reiterated Nasdaq's capital priorities: reinvesting for organic growth, maintaining a progressive dividend, and opportunistically managing debt and share repurchases. She emphasized that the company is currently focused on its 'organic growth trajectory for now,' suggesting M&A is not an immediate priority.
Ashish Sabadra requested more detail on the expected impact of sales delays on Q2 revenue and whether growth would improve in Q3 or be more back-end loaded for the year.
CEO Adena Friedman declined to provide a specific quarterly outlook but reiterated that Q2 faces a challenging year-over-year comparison in Capital Markets Technology due to a large renewal in Q2 2024. She acknowledged that longer approval times for some large deals could impact Q2 growth. However, Friedman expressed confidence in achieving the full-year medium-term outlook for the FinTech division, citing healthy client engagement and the mission-critical nature of Nasdaq's solutions.
Ashish Sabadra asked for clarification on the difference between ARR and revenue growth in 2024 and the expected quarterly cadence of benefits from the expanded expense synergy program in 2025.
Sarah Youngwood, CFO, attributed the ARR vs. revenue growth differential to two factors: the impact of professional services fees across FinTech and the timing of on-premise revenue recognition for Calypso. Regarding expenses, she stated the efficiency program will provide a ~2 percentage point benefit to 2025 expense growth but declined to provide a specific quarterly breakdown.
Ashish Sabadra inquired about the softness observed in the uniform direct sale business during the quarter and its future trends, and also asked about the M&A pipeline, including tuck-in deals and larger opportunities, and if Cintas would consider diversifying into newer areas.
President and CEO Todd Schneider explained that the uniform direct sale business (2.6% of revenue) is strategic for cross-selling all route-based services to customers, though its revenue can be lumpy due to large program rollouts. He stated that M&A is important, with a good pipeline, and while they are always evaluating new areas, the immense opportunity within their current businesses means they don't necessarily need to diversify to achieve growth.
Ashish Sabadra asked for more details on the softness observed in the uniform direct sale business during the quarter and comments on its future trend.
Todd Schneider, President and CEO, described the uniform direct sale business as strategic, despite being only 2.6% of revenue, because it opens doors to selling all route-based services (rental, first aid, fire) to those customers (e.g., front-of-house hotel leading to back-of-house rental opportunities). He acknowledged its lumpiness due to large program rollouts but reiterated its strategic importance. For a follow-up on M&A, Mr. Schneider emphasized the importance of M&A for Cintas, leveraging its balance sheet for good companies that offer capacity or synergies. He noted that while Q1 M&A was not as significant as the past 12 months, the funnel looks good. He stated Cintas is primarily focused on immense opportunities within its current businesses but always evaluates diversification if the 'right opportunities' arise, given its capabilities.
Ashish Sabadra asked about the softness observed in the uniform direct sale business during the quarter and its future trends. He also inquired about the M&A pipeline, including both tuck-in and larger deals, and Cintas' consideration of diversifying into newer areas.
Todd Schneider, President and CEO, described the uniform direct sale business as strategic, despite being only 2.6% of revenue, due to its role in cross-selling route-based services. He acknowledged its lumpiness due to large program rollouts. Regarding M&A, he emphasized its importance, a good funnel, and Cintas' ability to leverage its balance sheet for capacity and synergies. He stated that Cintas is primarily focused on its current businesses due to immense opportunity but is always evaluating new areas.
Ashish Sabadra of RBC Capital Markets requested an update on Cintas's four strategic verticals and asked for more color on the accelerated growth seen in the First Aid and Safety business.
President & CEO Todd Schneider stated that all strategic verticals are expected to grow above the company average. EVP & COO James Rozakis highlighted how organizing around verticals drives innovation, citing healthcare solutions like scrub dispensing and privacy curtains. For the First Aid business, Mr. Schneider credited momentum in recurring revenue products like AEDs and eyewash stations, but also noted a temporary spike in the training business contributed to the strong quarterly result.
Ashish Sabadra from RBC Capital Markets requested an update on Cintas's four strategic verticals and the drivers behind the recent acceleration in the First Aid business.
President & CEO Todd Schneider confirmed all strategic verticals are performing well and are expected to outpace the company's average growth. EVP & COO James Rozakis highlighted innovations like scrub dispensing and privacy curtains as benefits of the vertical strategy. For the First Aid business, Schneider attributed the strong performance to momentum in recurring revenue products like AEDs and eyewash stations, while also noting a one-time spike in training revenue contributed to the quarterly result.
Ashish Sabadra of RBC Capital Markets questioned the outlook for incremental margins for the remainder of the year, given the strong Q1 results. He also asked about the M&A pipeline and the company's appetite for a large-scale acquisition.
EVP and CFO Mike Hansen reiterated the target incremental margin range of 25% to 35%, noting quarterly results will vary within that range. President and CEO Todd Schneider stated that while Cintas is open to deals of all sizes, a specific large potential acquisition ([Vestis]) would be challenging because it has been an 'uninvested asset,' making it difficult to generate expected value.
Ashish Sabadra inquired about the sustained strength in FactSet's wealth management segment, particularly regarding the potential for more seven-figure deals and the ability to increase revenue through improved attach rates at existing clients.
Sanoke Viswanathan, CEO, highlighted secular trends favoring FactSet's growth in wealth management, driven by increasing application of analytics and AI in business development and efficient book management. Goran Skoko, Chief Revenue Officer, added that the 'land and expand' strategy is effective, citing two seven-figure expansion deals in the quarter from upselling data and expanding into additional departments, with significant opportunities remaining for AI solutions and geographic expansion.
Ashish Sabadra inquired about the sustained strength in FactSet's wealth segment, particularly regarding future growth opportunities from securing more seven-figure deals and enhancing attach rates with existing clients.
Sanoke Viswanathan, CEO & Director, FactSet, noted that secular trends in wealth management favor FactSet's continued growth, driven by increasing application of analytics and AI in business development and efficient management of existing client books. Goran Skoko, EVP & Chief Revenue Officer, FactSet, added that the 'land and expand' strategy is effective, citing two seven-figure expansion deals in the quarter for data and additional departments, with significant opportunities for AI solutions and geographic expansion.
Ashish Sabadra asked about the sustained strength in FactSet's wealth segment, including the potential for more seven-figure deals and increased attach rates at existing clients, particularly given successful incumbent displacements.
Sanoke Viswanathan, CEO, highlighted favorable secular trends in wealth management, driving demand for analytics in business development and portfolio management. Goran Skoko, Chief Revenue Officer, confirmed the effectiveness of FactSet's 'land and expand' strategy, citing two seven-figure expansion deals in Q4 through data upselling and departmental expansion. He emphasized significant opportunities for AI solutions, geographic expansion, and prospecting tools, positioning wealth as a long-term growth driver.
Ashish Sabadra from RBC Capital Markets asked for more color on headwinds from asset owners who are optimizing costs and how FactSet plans to drive growth within this client group.
CEO Philip Snow acknowledged it's a competitive area that was a headwind in Q3 but noted the Q4 pipeline looks stronger. Chief Revenue Officer Goran Skoko characterized the quarter as an outlier and expects improvement, highlighting that investments in LiquidityBook and total portfolio solutions will help address client needs.
Ashish Sabadra sought clarification on the pricing environment, asking about the impact of lower CPI on the annual price increase and how price realization is trending for new versus existing business.
CFO Helen Shan explained that the lower CPI rate directly impacts the annual price increase, which is based on the higher of CPI or 3%. While this creates a headwind, she noted that new business volume is up nearly 25%, driving total ASV from new business higher. She also mentioned that rate cards were raised in January, leading to higher price realization in specific firm types like corporates and hedge funds.
Ashish Sabadra asked for details on areas where clients are deprioritizing budgets and for early commentary on how client budgets are shaping up for calendar year 2025.
Chief Revenue Officer Goran Skoko stated that early signs suggest client budgets will remain largely flat with a continued focus on cost control. However, he noted that clients remain engaged in technology transformation, evidenced by a significant year-over-year increase in trials and RFPs, which provides reason for optimism.
Ashish Sabadra from RBC Capital Markets asked for clarification on areas where clients are deprioritizing budgets and inquired about the early outlook for customer budgets in calendar year 2025.
Chief Revenue Officer Goran Skoko stated that client budgets are expected to remain largely flat, with a continued focus on cost. However, he noted increased client engagement in technology transformation and a significant rise in trials and RFPs, indicating optimism and productive conversations for the remainder of the year.
Ashish Sabadra questioned why the fiscal 2025 ASV guidance implies no improvement over 2024, despite expectations for second-half acceleration and a potentially better macro environment.
Executive Frederick Snow explained that while they see green shoots, headwinds are expected to continue for the next few months. He noted that FactSet's business is traditionally weighted towards the second half of the fiscal year and that clients will reset budgets after the calendar year ends. Executive Goran Skoko added that a strong pipeline of new products launched in Q4 is expected to contribute to the second-half acceleration.
Ashish Sabadra from RBC Capital Markets questioned the revised second-half base growth forecast, asking if the expected decline was broad-based or concentrated in specific verticals due to policy uncertainty. He also inquired about the potential impact of Generative AI on client hiring plans.
CFO Steven Marks confirmed the revised outlook is due to a broad-based "wait and see" sentiment driven by policy uncertainty (tariffs, immigration), not a single vertical. CEO Scott Staples added that this sentiment is tied to Washington policy, not GenAI. Marks noted that while GenAI is changing how companies hire, it's too early to identify a major macro trend from it.
An associate for Ashish Sabadra questioned whether the company's expectation for base revenue growth to turn neutral-to-positive in the second half of the year has changed due to recent market and macro volatility.
CFO Steven Marks stated that the base growth assumption has not materially changed, noting that Q1 base performance of -5.5% was slightly better than expected and that comps get easier in the second half of 2025. CEO Scott Staples added that the conversion of new logo and upsell/cross-sell wins from the prior 12 months into the base revenue calculation will also provide a tailwind.
Ashish Sabadra from RBC Capital Markets highlighted the significant growth acceleration in India from Q1 to Q2 and asked for more detail on the outlook for the second half of the year, in context of the company's mid-term goal of 20%+ growth.
President and CEO Chris Cartwright expressed strong optimism about India, noting the Q2 acceleration from 1% to 8% growth was expected as consumer lending momentum returns. He stated the team is confident in hitting 10% growth for the full year, implying a return to high-teens growth by Q4. He attributed this to the RBI's pro-growth stance, manageable delinquencies, and the immense long-term opportunity for financial inclusion and innovation, reaffirming the potential for 20%+ growth in the medium term.
Ashish Sabadra of RBC Capital Markets requested more color on the outlook for the India business in the second half of the year, given its Q2 acceleration and long-term growth targets.
President and CEO Chris Cartwright expressed high confidence in India's continued recovery, noting the Q2 growth acceleration to 8% was expected. He stated the company is on track for 10% full-year growth, implying high-teens growth by Q4. He attributed this to the Reserve Bank of India's pro-growth stance, rate cuts, and the return of non-bank lenders, reaffirming a long-term potential for 20%+ growth.
Ashish Sabadra asked if the pull-forward of demand seen in the auto segment in March also occurred in other financial services areas like consumer lending.
President and CEO Christopher Cartwright responded with a direct 'no.' He elaborated that the strength in consumer lending is not a pull-forward but a sustained rebound, driven by well-funded fintechs capitalizing on a strong, counter-cyclical opportunity for debt consolidation among consumers with high credit card balances.
Ashish Sabadra focused on margins, asking how TransUnion plans to balance targeted growth investments with operating leverage to achieve more robust margin expansion over the medium term.
CFO Todd Cello detailed the drivers of the EBITDA outlook, explaining that the company is absorbing normal cost inflation while making intentional investments in technology, product innovation like TruAudience, sales specialists, and international expansion. He stated this reflects a long-term approach to building future growth, while still benefiting from transformation savings and healthy flow-through on revenue.
Ashish Sabadra of RBC Capital Markets asked about the factors driving the expected improvement in the Emerging Verticals segment in the fourth quarter and the potential for future momentum from OneTru-related innovations.
President and CEO Christopher Cartwright explained that the Q3 growth of 3% was muted by lumpiness in public sector business and tough comps in media. He stated that the segment is expected to re-accelerate to mid-single-digit growth in Q4, driven by a return to growth in insurance, solid performance in tenant/employment screening, and improving momentum overall. He added that the segment is well-positioned as it sells many marketing and fraud solutions.
Ashish Sabadra inquired about the various factors impacting Moody's Analytics' Decision Solutions segment, including headwinds from a strategic partnership termination in KYC and an account loss in insurance, and the outlook for ARR growth in the second half of the year.
CEO Robert Fauber detailed the specific attrition events but highlighted strong underlying growth drivers for the second half. He pointed to the CreditLens lending product, boosted by the Numerated acquisition, a strong insurance pipeline, and robust KYC cross-selling. CFO Noémie Heuland added that the sales pipeline is up significantly year-over-year, positioning the segment for growth.
Ashish Sabadra from RBC Capital Markets asked for details on the revised issuance guidance, specifically the new assumptions for M&A volume growth compared to the previous 50% estimate, and whether refinancing volume assumptions had changed.
CEO Robert Fauber explained that uncertainty from tariffs and a more headline-driven market has led to issuance delays. He stated that the M&A growth assumption has been revised down from 50% to 15% for the year, with activity expected to be back-end loaded. He also noted that assumptions regarding maturity walls, which support future issuance, remain unchanged.
Ashish Sabadra from RBC Capital Markets inquired about the medium-term outlook for Moody's Investors Service (MIS) margins, noting they are already in the low 60% range, and what this implies for future earnings growth.
CFO Noemie Heuland explained that higher incentive compensation in 2024 provides a margin tailwind for 2025 after rebaselining. She emphasized that Moody's continues to make long-term investments in the Ratings business, including in workflow automation, analytical tools, risk and resiliency programs, and growth areas like private credit and sustainable finance.
Ashish Sabadra asked for an early outlook on 2025, questioning whether the strong secular and cyclical issuance tailwinds could offset headwinds from tough comparisons and potential issuance pull-forward.
CEO Robert Fauber provided a preliminary 2025 view, stating that while not formal guidance, he believes the balance of tailwinds to headwinds favors the tailwinds. He cited declining spec-grade default rates, tight spreads, significant refunding walls, and an expected M&A recovery as positive drivers that should support issuance despite tough comps from a record 2024.
Ashish Sabadra asked about the USIS non-mortgage business, specifically inquiring if strong auto growth involved any pull-forward and what is driving the momentum in the B2B offline marketing business.
CFO John Gamble confirmed that the auto business has performed well and is expected to continue doing so, attributing it to good overall performance beyond just pricing. He noted the offline business has seen broad-based growth in prescreen and marketing, benefiting from new product introductions, but has not seen a material increase in account review activity, which would signal economic weakening.
Speaking on behalf of Ashish Sabadra, David asked if Equifax is seeing any shifts in competitive dynamics related to the merger of background screeners First Advantage and Sterling.
CEO Mark Begor avoided commenting on specific customer impacts from the merger. He emphasized that Equifax views both companies as strategic partners and maintains strong relationships with them and others across the background screening industry.
Ashish Sabadra of RBC Capital Markets sought two clarifications: first, whether the announced $70 million in cost savings was all OpEx, and second, whether the 5% mortgage inquiry growth expectation for 2025 already incorporated potential Fed rate cuts.
CFO John Gamble clarified that the $70 million in savings represents total spending reductions, which includes some CapEx. He and CEO Mark Begor then emphasized that the 5% mortgage inquiry growth figure was not formal guidance but a simple extrapolation of current run-rates with seasonality applied. They explicitly stated it does not forecast or bake in any future interest rate changes.
Ashish Sabadra inquired about the trend in checks per client during Q4, the expectation for fiscal 2026, and the anticipated impact of restructuring expenses on cash flow for the upcoming year.
CFO Bob Schrader confirmed that checks per client were softer in Q4 and that the fiscal 2026 plan assumes this metric will be down. He also clarified that most one-time restructuring costs are complete and future adjustments will be non-cash, allowing free cash flow to grow in line with earnings.
Ashish Sabadra from RBC Capital Markets asked about the trend in checks per client during Q4, expectations for fiscal 2026, and the potential impact of restructuring expenses on cash flow.
CFO Bob Schrader confirmed that checks per client trended softer in Q4 and that the fiscal 2026 plan assumes this metric will be down. He also clarified that most one-time restructuring costs are complete and future adjustments are primarily non-cash, so free cash flow is expected to grow in line with earnings.
Ashish Sabadra asked about the trend in PEO direct insurance costs on a per-worksite-employee basis and inquired about seasonal hiring trends this year.
An executive and CEO John Gibson acknowledged that direct costs are up, driven by worksite employee growth and broad healthcare inflation, which the company is actively managing. EVP Robert Schrader added that overall hiring has been in line with their modest expectations for the year.
Speaking for Ashish Sabadra, David Paige Papadogonas asked for more color on the drivers of growth in cost of service revenues and the outlook for that line item.
Executive Robert Schrader clarified that total expenses were up 3%, driven primarily by higher PEO direct insurance costs related to strong growth in worksite employees and insurance revenues. He noted that excluding these PEO-related costs, total expenses were essentially flat, reflecting the success of cost optimization efforts initiated last year to offset the ERTC earnings headwind while continuing to invest in the business.
Ashish Sabadra asked for perspective on how 0 DTE (zero days to expiration) options trends might evolve, given VIX normalization and growing investor adoption.
Global President David Howson described the shift to shorter-dated options as a secular trend driven by the need for nimble risk management, citing strong year-over-year growth in SPX and XSP 0 DTE products. He characterized the ecosystem as robust, diverse, and balanced, with a healthy outlook for continued growth from new international users and use cases.
Ashish Sabadra of RBC Capital Markets asked about potential options pricing increases in 2025 and how growing retail adoption could impact revenue per contract.
Global President David Howson differentiated between multi-list options, where pricing is dynamic to optimize revenue, and proprietary index options, where changes are less frequent and more targeted. He noted that while retail adoption of products like 0DTE options drives volume, the company's focus is on balancing market share and capture, supported by education and global distribution efforts.
Ashish Sabadra from RBC Capital Markets sought more detail on the DnA segment's acceleration, specifically asking about the expansion plans for Dedicated Cores and the rollout status of the Cboe Global Cloud.
COO Chris Isaacson provided a clear roadmap. He explained that Dedicated Cores, successful in U.S. equities, will be rolled out to Europe in Q4, Australia in Q1 2025, and then Japan and Canada. For Cboe Global Cloud, he noted that its growth is strong and primarily international, serving as a key precursor to transaction revenue as global clients seek U.S. market data before trading.
Ashish Sabadra from RBC Capital Markets asked for the outlook on the energy business given strong April volumes, and for updated thoughts on the competitive positioning of WTI versus Brent and U.S. natural gas.
Derek Sammann, Senior Managing Director, detailed strong performance, with Q1 energy volume up 20%. He attributed this to a structural shift positioning WTI and Henry Hub as global benchmarks, driven by record U.S. exports. He noted strong client adoption in Europe and Asia and provided competitive metrics, stating WTI's share versus Brent was static at 73%, while WTI options share grew to 91%.
Ashish Sabadra asked for an update on the strategic review, including the options being considered and any comment on recent media reports. He also inquired about the current demand environment, the health of the sales pipeline, and any changes in the sales cycle.
CEO Anthony Jabbour declined to comment on specific reports but stated the board is open to any structure that maximizes shareholder value. CFO Bryan Hipsher added that portfolio evaluation is ongoing. Jabbour described the demand pipeline as consistent but acknowledged some client and employee hesitation due to the process. He also highlighted AI as a significant tailwind, noting strong early demand for the new Chat D&B solution.
Ashish Sabadra asked about the drivers of the 20%-plus growth in Third Party Risk Management, inquiring about macro slowdown impacts, regulatory tailwinds, and the balance between cross-selling and winning new clients. He also asked if other legacy products beyond Credibility and Digital Marketing were a drag on growth.
CEO Anthony Jabbour acknowledged the slower sales environment seen across the industry since late 2023 but noted rising client optimism. He stated that new regulations typically create more opportunities for D&B to solve client problems. For growth, he highlighted a focus on cross-selling successful use cases, such as providing credit limits at onboarding to increase client ROI, to the entire customer base. Jabbour clarified that the company's focus is squarely on fixing the challenged 10% of revenues, as significant work has already been done to migrate clients from other legacy solutions.
Ashish Sabadra from RBC Capital Markets asked if the company would consider strategic portfolio rationalization or other strategic options if the stock continues to be undervalued, following the announcement of the share repurchase authorization.
CEO Anthony Jabbour affirmed that the management team is highly shareholder-focused and open to any actions that would create value for shareholders. He emphasized that the team is aligned with shareholders, highlighting his personal practice of using his salary and bonuses to buy company shares since the IPO as a testament to this alignment.
Ashish Sabadra asked about the drivers behind the expected 2025 organic ACV inflection and the key criteria for the ongoing strategic review of the business.
CFO Jonathan Collins stated that the primary criterion for the strategic review is unlocking shareholder value by potentially monetizing assets that are undervalued in the current structure. Regarding ACV growth, he explained it will be driven by a combination of factors, with the largest benefit expected from the payoff of multi-year investments in core products like Web of Science, Cortellis, and Derwent AI.
Speaking on behalf of Ashish Sabadra, David Paige asked management to parse out how much of the recent weakness was driven by macro headwinds versus internal execution issues.
CFO Jonathan Collins stated it was a combination of both factors, with market headwinds being higher than anticipated. CEO Matti Shem Tov detailed internal opportunities for improvement, including creating more specialized sales roles, realigning territories, and investing more in customer success to boost renewal rates.
Ashish Sabadra from RBC Capital Markets inquired about the company's ability to maintain its 3-4% pricing power in 2025, both for consumer and commercial segments, given that other service companies are seeing price normalization. He also asked for color on the quarterly cadence of growth investments and their effect on 2025 incremental margins.
CFO Ken Krause expressed confidence in achieving pricing above CPI, similar to recent years, citing the essential nature of their services. Regarding investments, Krause guided that the first half of 2025 would see a 'slightly elevated level' of growth spending, creating a tougher margin comparison that will ease in the second half as they lap the initial ramp-up. He also noted rising fleet costs as a minor headwind.
An analyst on behalf of Ashish Sabadra asked about untapped potential in the residential space and the company's M&A strategy regarding new verticals or geographies.
President and CEO Jerry Gahlhoff stated the primary focus remains on proven strategies, such as adding sales staff to cross-sell services like recurring termite control, rather than introducing revolutionary new services. On M&A, EVP and CFO Kenneth Krause reiterated the goal of 2-3% annual revenue growth from acquisitions, emphasizing that the company will remain committed to the large and fragmented pest control market rather than expanding into new verticals.
Ashish Sabadra asked about the expected impact of business mix shifts on performance in the first quarter and for the remainder of fiscal 2025.
CEO Patrick Zammit detailed the expected mix, stating that within Endpoint Solutions, PCs should have a positive impact while mobile demand is likely to be muted, particularly in Europe. For Advanced Solutions, he anticipates a recovery in traditional compute and networking, with continued strength in cloud and security. He concluded that based on current trends, the Advanced Solutions portfolio should grow slightly faster than Endpoint Solutions.
Ashish Sabadra highlighted the decline in core bookings and asked about the resulting impact on revenue for the upcoming year and any potential offsetting factors.
CFO Christian Lown acknowledged that in a subscription business, lower net bookings mechanically flow through to the following year's revenue. He advised investors to pay close attention to net bookings in Q4 and the first half of 2025 to get a line of sight on growth for the second half of 2025 and into 2026. He emphasized that re-engaging and investing in the core sales force is key to offsetting the headwind.
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