FactSet Research Systems Revenues Rise 21% for First Quarter of Fiscal Year 2006
NORWALK, Conn., Dec 20, 2005 (BUSINESS WIRE) -- FactSet Research Systems Inc. (NYSE: FDS), a major supplier of computer-based financial and economic data to the investment community, today announced results for its first quarter of fiscal 2006.
For the quarter ended November 30, 2005, revenues increased 21.1% compared to the prior year period to $89.7 million. GAAP operating income for the quarter rose to $27.4 million from $25.8 million in the same period of fiscal 2005. GAAP net income advanced to $19.2 million. This compares to GAAP net income of $16.4 million a year ago. GAAP diluted earnings per share increased to $0.38, up from $0.33 in the same period of fiscal 2005.
Non-GAAP operating income for the quarter was $29.9 million, up 15.8%. Non-GAAP net income advanced 17.6% to $19.3 million and non-GAAP diluted earnings per share increased 16.1% to $0.38. Certain GAAP financial measures including operating income, net income and diluted earnings per share have been adjusted to exclude charges related to stock-based compensation, a gain related to the sale of company-owned real estate and an income tax benefit related to the closure of previously filed tax returns. A reconciliation between GAAP and non-GAAP financial measures is presented on page 7 of this press release. For a further understanding of this presentation, please refer to the section titled "About Non-GAAP Financial Measures" on page 3.
In the first quarter of fiscal 2006, the stock-based compensation pre-tax charge was $2.5 million, while results from operations prior to fiscal 2006 did not include stock-based compensation expense. Tax benefits related to stock-based compensation of $0.8 million have been excluded from non-GAAP net income and non-GAAP diluted earnings per share. The after-tax gain from the sale of company-owned real estate and the income tax benefit related to the closure of previously filed tax returns was $0.9 million and $0.8 million, respectively.
FactSet Research Systems Inc.
Consolidated Statements of Income (Condensed and Unaudited)
Three Months Ended
November 30,
(In thousands, except per share data) 2005 2004 Change
-------- -------- ------
Revenues $89,654 $74,063 21.1 %
Total operating expenses 62,251 48,218 29.1
Income from operations 27,403 25,845 6.0
Net income 19,195 16,397 17.1
Diluted earnings per common share $0.38 $0.33 17.0
Diluted weighted average common shares 50,061 50,024
"We are very pleased with FactSet's first quarter results," said Philip A. Hadley, Chairman and CEO. "Our subscription growth remained strong throughout the quarter, representing the strength of our products and client service model."
Subscriptions rose $9.0 million during the past three months and totaled $361.9 million at quarter end. On a constant currency basis, the subscription increase was $10.5 million. Of this total, subscriptions from FactSet's domestic operations were $261.0 million, while overseas operations were $100.9 million. As of November 30, 2005, the Company serviced 1,614 clients, including 5 new firms via the StreamVPN acquisition. Excluding these firms, net client additions totaled 33 during the quarter. Users rose to 27,100 professionals. FactSet's client retention rate continued to be above 95%. "Subscriptions" at any given point in time represent the forward-looking revenues for the next 12 months from all subscription services currently being supplied to clients.
Other operational highlights of the first quarter of fiscal 2006 include:
-- On September 1, 2005, FactSet acquired all the outstanding share capital of StreamVPN Limited for a total purchase price of $27.0 million. FactSet's first fiscal quarter 2006 financials include the operating results of StreamVPN.
-- Revenues from FactSet's European and Pacific Rim operations were $19.7 million and $4.4 million, up 24.4% and 23.9% respectively, from the same period a year ago.
-- Demand for FactSet's PA Workstation application continued to rise, with over 430 clients consisting of approximately 3,400 users, subscribing to this service as of November 30, 2005.
-- An agreement with Thomson Financial was signed to extend the distribution of multiple content sets via FactSet for a 4.5 to 6 year period.
-- An agreement was concluded with MSCI Barra to redistribute Barra Models and Analytics in FactSet's Portfolio Analytics suite of products.
-- FactSet successfully held its fifth annual Client Symposium in November 2005.
Business Outlook
The following forward-looking statements reflect FactSet's expectations as of December 20, 2005. Given the number of risk factors, uncertainties and assumptions discussed below, actual results may differ materially. The Company does not intend to update its forward-looking statements until its next quarterly results announcement, other than in publicly available statements.
Second Quarter Fiscal 2006 Expectations
-- Revenues are expected to range between $91.0 million and $93.0 million.
-- Operating margins are expected to range between 30% and 32%, including the impact from SFAS 123(R). Excluding stock-based compensation, operating margins would be between 32.5% and 34%.
-- The effective tax rate is expected to range between 36.2% and 36.8%.
Full Year Fiscal 2006
-- Capital expenditures should total approximately $18 million to $22 million.
Forward looking statements
This news release contains forward-looking statements based on management's current expectations, estimates and projections. All statements that address expectations or projections about the future, including statements about the Company's strategy for growth, product development, market position, subscriptions, expected expenditures and financial results are forward-looking statements. Forward-looking statements may be identified by words like "expected," "anticipates," "plans," "intends," "projects," "should," "indicates," "continues," "subscriptions" and similar expressions. These statements are not guarantees of future performance and involve a number of risks, uncertainties and assumptions. Many factors, including those discussed more fully elsewhere in this release and in FactSet's filings with the Securities and Exchange Commission, particularly its latest annual report on Form 10-K, as well as others, could cause results to differ materially from those stated. These factors include, but are not limited to, the ability to hire qualified personnel; maintenance of the Company's leading technological position; the impact of global market trends on the Company's revenue growth rate and future results of operations; the negotiation of contract terms with corporate vendors, data suppliers and potential landlords; retention of key clients; the successful resolution of ongoing audits by tax authorities; the continued employment of key personnel; the absence of U.S. or foreign governmental regulation restricting international business; and the sustainability of historical levels of profitability and growth rates in cash flow generation.
About Non-GAAP Financial Measures
Certain GAAP financial measures including operating income, net income, diluted earnings per share and cash flows from operations have been adjusted to exclude charges related to stock-based compensation, a gain from the sale of company- owned real estate and a tax benefit from the closure of previously filed tax returns. FactSet's management believes that these non-GAAP financial measures provide meaningful supplemental information regarding our financial results and investors benefit from referring to these non-GAAP financial measures in assessing FactSet's performance and when planning, forecasting and analyzing future periods. These non-GAAP financial measures also facilitate comparisons to FactSet's historical performance and to our competitors' operating results.
FactSet uses the following measures defined as non-GAAP financial measures by the SEC including non-GAAP operating income, non-GAAP net income, non-GAAP diluted earnings per share and non-GAAP cash flows from operations. The presentation of this financial information is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. For more information on these non-GAAP financial measures, please see the tables on page 7 of this release captioned "Reconciliation of GAAP and non-GAAP Financial Measures."
Conference Call
The Company will host a conference call today, December 20, 2005 at 11:00 a.m. (EST) to review the first quarter fiscal 2006 earnings release. To listen, please visit the investor relations section of the Company's website at www.factset.com.
About FactSet
FactSet Research Systems Inc. is a leading provider of global financial and economic information, including fundamental data on tens of thousands of companies worldwide. Combining more than 200 databases into its own dedicated online service, the Company also provides the tools to download, combine and manipulate the data for investment analysis.
The Company, headquartered in Norwalk, Connecticut, was formed in 1978 and now conducts operations, along with its affiliates, from more than twenty-two locations worldwide, including Boston, New York, Chicago, San Mateo, London, Frankfurt, Paris, Tokyo, Hong Kong, and Sydney.
FactSet Research Systems Inc.
Consolidated Statements of Financial Condition
(In thousands) November 30, August 31,
2005 2005
------------ -----------
(unaudited)
ASSETS
Cash and cash equivalents $51,071 $59,457
Investments 17,183 16,566
Receivables from clients and clearing
brokers, net 57,005 54,029
Deferred taxes 5,335 5,277
Other current assets 3,071 3,819
------------ -----------
Total current assets 133,665 139,148
Property, equipment, and leasehold
improvements, net 50,428 52,359
Goodwill 127,654 110,793
Intangible assets, net 44,715 41,660
Deferred taxes 830 722
Other assets 2,190 2,847
------------ -----------
Total assets $359,482 $347,529
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued expenses $16,785 $20,400
Accrued compensation 7,795 18,726
Deferred fees 17,923 17,835
Dividends payable 2,420 2,417
Taxes payable 10,841 4,307
------------ -----------
Total current liabilities 55,764 63,685
Deferred taxes 8,004 6,657
Notes payable 1,618 -
Deferred rent and other non-current
liabilities 9,036 9,079
------------ -----------
Total liabilities 74,422 79,421
------------ -----------
Stockholders' Equity
Common stock 545 545
Capital in excess of par value 105,422 100,795
Retained earnings 322,410 305,636
Treasury stock (137,076) (136,820)
Deferred compensation (1,691) (1,806)
Accumulated other comprehensive loss (4,550) (242)
------------ -----------
Total stockholders' equity 285,060 268,108
------------ -----------
Total liabilities and stockholders'
equity $359,482 $347,529
============ ===========
FactSet Research Systems Inc.
Consolidated Statements of Income
Three Months Ended
November 30,
(In thousands, except per share data and unaudited) 2005 2004
--------- --------
Revenues $89,654 $74,063
--------- --------
Operating expenses
Cost of services 27,268 22,007
Stock-based compensation expense 796 -
Total cost of services 28,064 22,007
--------- --------
Selling, general and administrative 32,445 26,211
Stock-based compensation expense 1,742 -
Total selling, general and administrative 34,187 26,211
--------- --------
Total operating expenses 62,251 48,218
--------- --------
Income from operations 27,403 25,845
Other income 1,702 168
--------- --------
Income before income taxes 29,105 26,013
Provision for income taxes (includes tax benefit
from stock-based compensation expense under SFAS
123(R) of $763 for Q1 FY'06; $0 for Q1 FY'05) 9,910 9,616
--------- --------
Net income (includes stock-based compensation of
$1,775, net of tax, due to the adoption of SFAS
123(R) in the first quarter of fiscal 2006) $19,195 $16,397
========= ========
Basic earnings per common share $0.40 $0.35
========= ========
Diluted earnings per common share $0.38 $0.33
========= ========
Weighted average common shares (Basic) 48,373 47,592
========= ========
Weighted average common shares (Diluted) 50,061 50,024
========= ========
FactSet Research Systems Inc.
Consolidated Statements of Cash Flows Three Months Ended
November 30,
(In thousands and unaudited) 2005 2004
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $19,195 $16,397
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization 5,675 4,593
Stock-based compensation expense 2,538 --
Excess tax benefits from stock option
exercises (343) 4,113
Deferred income taxes (1,014) 1,073
Gain on sale of company-owned real estate (1,342) --
Changes in assets and liabilities, net of effects
of acquisitions
Receivables from clients and clearing brokers,
net (1,740) (3,390)
Accounts payable and accrued expenses (5,694) (3,459)
Accrued compensation (10,982) (9,407)
Deferred fees (949) (1,368)
Taxes payable 6,477 1,449
Other working capital accounts, net 235 2,271
--------- ---------
Net cash provided by operating activities 12,056 12,272
CASH FLOWS FROM INVESTING ACTIVITIES
(Purchases) proceeds from sales of investments,
net (621) 1,976
Acquisition of businesses, net of cash acquired (21,163) (46,157)
Proceeds from sale of company-owned real estate 2,910 --
Purchases of property, equipment and leasehold
improvements (1,417) (3,957)
--------- ---------
Net cash used in investing activities (20,291) (48,138)
CASH FLOWS FROM FINANCING ACTIVITIES
Dividend payments (2,378) (2,082)
Repurchase of common stock (256) (31)
Proceeds from employee stock plans 1,822 10,434
Excess tax benefits from stock option exercises 343 --
--------- ---------
Net cash (used in) provided by financing
activities (469) 8,321
Effect of exchange rate changes on cash and cash
equivalents 318 (673)
--------- ---------
Net decrease in cash and cash equivalents (8,386) (28,218)
Cash and cash equivalents at beginning of period 59,457 78,580
--------- ---------
Cash and cash equivalents at end of period $51,071 $50,362
========= =========
Reconciliation of GAAP and non-GAAP Financial Measures
Certain GAAP financial measures including operating income, net income, diluted earnings per share and cash flows from operations have been adjusted to exclude charges related to stock-based compensation, a gain from the sale of company owned real estate and a tax benefit from the closure of previously filed tax returns. FactSet's management believes that these non-GAAP financial measures provide meaningful supplemental information regarding our financial results and investors benefit from referring to these non-GAAP financial measures in assessing FactSet's performance and when planning, forecasting and analyzing future periods. These non-GAAP financial measures also facilitate comparisons to FactSet's historical performance and to our competitors' operating results.
I. Consolidated Statements of Income
For the three months ended
November 30,
2005 2004 Change
---------- ---------- ----------
GAAP Income from operations $27,403 $25,845
FAS 123(R)(a) 2,538 -
---------- ----------
Non-GAAP Income from operations $29,941 $25,845 15.8%
GAAP Provision for income taxes $9,910 $9,616
FAS 123(R)(b) 763 -
Tax benefit from closure of
previously filed tax
returns (c) 755 -
Tax related to gain from sale
of company-owned real
estate (d) (403) -
---------- ----------
Non-GAAP Provision for incomes
taxes $11,025 $9,616 14.7%
GAAP Net income $19,195 $16,397
FAS 123(R)(e) 1,775 -
Gain from sale of company-owned
real estate, net of tax (f) (939) -
Tax benefit from closure of
previously filed tax
returns (c) (755) -
---------- ----------
Non-GAAP Net income $19,276 $16,397 17.6%
Non-GAAP Diluted EPS $0.38 $0.33 16.1%
GAAP Diluted weighted average
common shares 50,061 50,024
FAS 123(R)(g) 597 -
---------- ----------
Non-GAAP Diluted weighted
average common shares 50,658 50,024 1.3%
(a) To add-back $2.5 million of stock-based compensation charges.
(b) To add-back $0.8 million of tax expense related to stock-based
compensation charges.
(c) To add-back $0.8 income tax benefit from closure of previously
filed tax returns.
(d) To eliminate $0.4 million of tax expense related to gain on sale
of company-owned real estate.
(e) To add-back $2.5 million of stock-based compensation charges, net
of related tax benefits of $0.8 million.
(f) To eliminate $0.9 million after-tax gain on sale of company-owned
real estate.
(g) To add-back 597 common shares to the diluted weighted average
shares outstanding for the period. Under the treasury stock method,
the after-tax charge for stock-based compensation related to unvested
options is included in the proceeds utilized for the calculation of
assumed shares repurchased.
II. Consolidated Statements of Cash Flows
For the three months ended
November 30,
2005 2004 Change
---------- ---------- ----------
GAAP Net Cash provided by
operating activities $12,056 $12,272
FAS 123(R)(h) 343 (4,113)
---------- ----------
Non-GAAP Net Cash provided
by operating activities $12,399 $8,159 52.0%
(h) To add-back $0.3 million and $4.1 million of excess tax benefits
from stock option exercises in the first quarter of fiscal 2006 and
2005, respectively. This amount is reported in cash flows from
financing activities in accordance with SFAS 123(R). Previously, it
was included in cash flows provided by operating activities. There is
no impact on the net change in cash during each respective period.
IR_FDS
SOURCE: FactSet Research Systems Inc.
FactSet Research Systems Inc. Peter Walsh, 203-810-1000
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