Operator: Thank you. [Operator Instructions] Our next question comes from the line of Heather Balsky from Bank of America.
Heather Balsky: Hi, Thank you for taking my question. I was just hoping you could talk a little bit about how you’re thinking first-half versus second-half and the different drivers between the two? I guess, parts of the year. You know, in prior — I guess, last earnings, you kind of had us think about the recovery into the back half. It sounds like it’s maybe pushed out a bit, but when do you see capital markets come back? Kind of what’s baked into the first-half versus the second half? Thanks.
Linda Huber: Yes. Heather, it’s Linda. I actually listened to an interview with Brian Moynihan on the way up this morning, so maybe we’ll quote you back your own firm’s information here. I think the question is the timing of the turn, and I don’t think anyone can predict that particularly clearly. If they can, they should be, of course, running a hedge fund. But in any case, we have thought this might come a little bit sooner. What we’re trying to say is that the turn is going to come a little bit later in the year than we had thought. It should be noted that investment banking and banking hiring is a lagging indicator, okay? So we’ve had 500 basis points of interest rate increases. Times got tougher and so hiring is in fact a lagging indicator There is a view that I also heard this morning, not from your boss, that Jay Powell shot the bears last week.
So, how long will it take for capital markets to come back? If you speak to various institutions, they’re saying they’re seeing much greater activity right now. The tenure this morning was at 3.9, which beats the heck out of 5. So we would expect that things will turn up. How quickly will that happen? Very difficult to say. So we’re trying to be realistic about what we think about the pacing of that turn. But we do particularly with the Fed announcement last week, we do think that it is coming. It just may take a bit longer than we thought. And there’s a lot of focus on AI. We have incredible conversations going on with our clients, and we’ll be speaking more about that as others might want to ask about it. But we do see the turn coming. It’s just a question of when.
So I hope that makes things a bit clearer, but we appreciate your boss’s interview this morning.
Heather Balsky: Thank you, I appreciate the color.
Operator: Thank you. [Operator Instructions] Our next question comes from the line of Shlomo Rosenbaum from Stifel.
Shlomo Rosenbaum: Hi, good morning. Thank you for taking my question. Linda, specifically for you, you talked about what you’re doing in terms of cost cutting. But I was wondering, just as I look at various levers that might still be available, when I think about it, like how much can you gain efficiency by AI? I think a lot of the AI you’re talking about are for clients. What about the company’s own ability to influence some AI internally? I hear from other companies that they can gain efficiency that way? And then just again, the Centers of Excellence, you’ve got 68% of head count over there. Is that kind of peeked out over there or is that another lever that can continue to be pushed and where does that max?
Linda Huber: Yes, Shlomo, I’ll let Phil talk a little bit about how far we can go with the Centers of Excellence. But you’re right, we have good representation in those Centers of Excellence and that’s working really, really well for us. We do have our thoughts on efficiency coming from GenAI. Probably a little bit premature to talk about that. We’re going to focus on the client side first and that’s really where we’re looking hardest right now, but efficiency for engineers is really important, efficiency for our you know our help desk kind of function is very, very important and in future calls we’ll talk more about that. Shlomo, to answer a question you didn’t ask, we did want to thank you for your noting that we had improved free cash flow and that we collected about $50 million more in cash collection than we did in the previous period last year.
So in addition to our giant macro calls that we have to make, we also have to make sure we’re collecting our cash appropriately. So appreciate your note on that, but I’m going to turn it over to Phil on COEs and also on the GenAI opportunity for ourselves. Phil?
Phil Snow: Yes, thanks. Thanks, Shlomo. Yes, so I think there are three good buckets of cost opportunity internally for generative AI. One is engineering, so we have a lot of engineers at FactSet and we’ve successfully piloted GitHub Copilot with a number of groups and I think we’re deploying that more broadly now. So like other firms we’re seeing great efficiency just in terms of the amount of code that someone can produce in the same amount of time. So that is a good opportunity for us. On the content and collection side, there’s also a good opportunity. And, you know, over the decades, we have continued to automate more and more of content collection. So this is just a bit of an inflection point. But I was in India, you know, a couple of months ago and sat down with a number of teams and all of them were able to demonstrate to me in some way, shape or form really good efficiency that they could get from collecting all kinds of different databases.
And then on the sales front, similarly, I sat down with someone on a help desk and we have a copilot for them, which is really good about generating a code that a user might want. And 50% of our help desk calls tend to be coding calls. So you can imagine that, that’s a great efficiency. So the question for us and for any other firm, frankly, if you ask anyone about this, is whether or not you have that efficiency go through to margin or if you use it in other ways, right? So we have a long list of things we’d like to do on the product side. So we’re still, a, evaluating how much efficiency we can get and how we’d want to spend that money. Any real impact from those three things, I wouldn’t expect to see until FY ‘25 next fiscal year, but we might be able to recognize some of it in — like later in the second half of this year.
The Centers of Excellence, we have great employees there. I think the question is, just can you continue to go up the value chain in terms of what you do in those locations? So we’re always evaluating our people and location strategy. And I think we’ve all learned in the last three years that there are even more options open to us than they might have been in the past. So overall, I’m very optimistic about what we can continue to do to drive efficiency and drive the top line through more product.
