FactSet Reports Results for Second Quarter 2022
- Q2 revenues of
$431.1 million, up 10.0% from Q2 2021
- Organic Q2 ASV plus professional services of
$1.7 billion, up 9.4% year over year
- Operating margin of 28.6% and adjusted operating margin of 33.7%
- Diluted EPS of
$2.84, up 13.6% from the prior year; adjusted diluted EPS of $3.27, a 20.2% increase from the prior year.
- Completed CUSIP Global Services acquisition on
March 1, 2022for $1.925 billion, financed in part by our investment grade inaugural senior notes offering of $1.0 billion
- FactSet Investor Day will be held on
April 5, 2022in New York City
Second Quarter Fiscal 2022 Highlights
- Revenues increased 10.0%, or
$39.3 million, to $431.1 millionfor the second quarter of fiscal 2022 compared with $391.8 millionfor the same period in fiscal 2021. The increase was primarily due to higher sales of research and advisory and analytics solutions. Organic revenue, which excludes the effects of acquisitions and dispositions completed within the last 12 months and foreign currency movements, grew 9.9% to $430.8 millionduring the second quarter of fiscal 2022 from the prior year period.
- Annual Subscription Value (ASV) plus professional services was
$1.8 billionat February 28, 2022, compared with $1.6 billionat February 28, 2021. Organic ASV plus professional services, which excludes the effects of acquisitions and dispositions completed within the last 12 months and foreign currency movements, was $1.7 billionat February 28, 2022, up $146.3 millionfrom the prior year at a growth rate of 9.4%.
- Organic ASV plus professional services increased
$44.8 millionover the last three months. The primary contributors to this growth were higher sales of research and advisory and analytics solutions. Please see the “ASV + Professional Services” section of this press release for details.
- Operating margin decreased to 28.6% compared with 29.6% for the same period last year, driven by charges related to vacating certain leased office space and costs related to the CUSIP Global Services (CGS) acquisition, partially offset by growth in revenues, lower compensation costs and computer depreciation. Adjusted operating margin improved to 33.7% compared with 32.6% in the prior year period, primarily due to lower compensation expenses and decreased data costs
- Diluted earnings per share (EPS) increased 13.6% to
$2.84compared with $2.50for the same period in fiscal 2021. Adjusted diluted EPS increased 20.2% to $3.27compared with the prior year period, primarily due to higher revenues, margin expansion and a decreased tax rate.
- EBITDA increased to
$146.8 million, up 11.1% for the second quarter of fiscal 2022, compared with $132.2 millionfor the same period in fiscal 2021. FactSet is providing this metric to allow additional transparency for its equity and debt investors.
- The Company’s effective tax rate for the second quarter decreased to 9.9% compared with 15.7% a year ago, primarily due to lower projected levels of income before income taxes and a tax provision reduction related to the lower rate compared with the three months ended
February 28, 2021.
- FactSet completed its acquisition of CGS, a standard in the global securities marketplace, on
March 1, 2022. Related to the acquisition, on March 1, 2022, FactSet issued its inaugural investment grade senior notes consisting of $500 millionprincipal amount of 2.90% senior notes due 2027 and $500 millionprincipal amount of 3.45% senior notes due 2032. In addition, on March 1, 2022, FactSet entered into a new credit agreement providing for term and revolving credit facilities.
- FactSet updated its annual outlook for fiscal 2022. Please see the “Annual Business Outlook” section of this press release for details.
“I’m pleased to report that FactSet once again delivered impressive quarterly results, reflecting the continuing momentum in our business,” said
Key Financial Measures*
|(Condensed and Unaudited)||Three Months Ended|
|(In thousands, except per share data)||2022||2021||Change|
|Adjusted operating income||$||145,139||$||127,843||13.5||%|
|Adjusted operating margin||33.7||%||32.6||%|
|Adjusted net income||$||126,675||$||105,080||20.6||%|
|Adjusted diluted EPS||$||3.27||$||2.72||20.2||%|
* See reconciliation of
"Again, our accelerating top-line growth and focus on cost and productivity initiatives delivered adjusted margin expansion,” said
Annual Subscription Value (ASV) + Professional Services
ASV at any given point in time represents the forward-looking revenues for the next twelve months from all subscription services currently supplied to clients. Professional services is revenue derived from project-based consulting and implementation.
ASV plus professional services was
Buy-side and sell-side organic ASV growth rates for the second quarter of fiscal 2022 were 8.4% and 12.6%, respectively. Buy-side clients, who primarily include asset managers, asset owners, wealth managers, hedge funds, corporations, and channel partners, accounted for approximately 84% of organic ASV while the remainder came from sell-side firms that include broker-dealers, banking and advisory, private equity and venture capital firms. Supplementary tables covering organic buy-side and sell-side ASV growth rates may be found on the last page of this press release.
Segment Revenues and ASV
ASV from the
ASV from the EMEA region was
ASV from the
Segment ASV does not include professional services, which totaled
Operational Highlights – Second Quarter Fiscal 2022
- Client count as of
February 28, 2022was 7,172, a net increase of 413 clients in the past three months, primarily driven by an increase in corporate clients. The count includes clients with ASV of $10,000and more.
- User count increased by 9,180 to 171,341 in the past three months, primarily driven by an increase in research and advisory users.
- Annual ASV retention was greater than 95%. When expressed as a percentage of clients, annual retention was 92%.
- Expense highlights include recognition of
$9.7 millionin impairment charges related to Factset's continued focus on right-sizing its real estate footprint to reflect its hybrid work environment. FactSet anticipates additional impairment charges over the remainder of fiscal year 2022 in relation to exiting office space in several locations and expects these charges in the third fiscal quarter to total approximately $45 million. In addition, the Company incurred $5 millionin expenses related to the CGS acquisition in the second quarter and anticipates an additional $14 millionof acquisition expenses in the third quarter.
- Employee count was 10,784 as of
February 28, 2022, up 1.2% over the last twelve months, primarily driven by increased hiring in the Company's content and technology organizations.
- Net cash provided by operating activities decreased to
$122.0 millioncompared with $140.7 millionfor the second quarter of fiscal 2021, primarily due to higher estimated tax payments. Quarterly free cash flow decreased to $110.1 millioncompared with $130.2 milliona year ago, a decrease of 15.5%, primarily due to higher estimated tax payments.
- A quarterly dividend of
$31.1 million, or $0.82per share, was paid on March 17, 2022to holders of record of FactSet’s common stock at the close of business on February 28, 2022.
- FactSet completed the acquisition of CGS for
$1.925 billionin cash on March 1, 2022. The acquisition is expected to significantly expand FactSet’s critical role in the global capital markets. As part of FactSet, CGS will continue to carefully steward the CUSIP system in close partnership with the American Bankers Association. FactSet’s financial results will include CGS, which will function as a part of FactSet’s Content and Technology Solutions (CTS) business.
- FactSet closed its offering of
$500 millionprincipal amount of 2.90% senior notes due 2027 and $500 millionprincipal amount of 3.45% senior notes due 2032 (both rated investment grade) and entered into new term and revolving credit facilities on March 1, 2022. The net proceeds of the senior notes offering, together with borrowings under the new credit facilities and cash on hand, were used to finance the consideration for the CGS acquisition, repay FactSet’s prior revolving facility, and pay transaction fees and expenses related to the CGS acquisition, the notes offering and the new credit facilities.
- FactSet entered into a multi-year partnership with BlackRock to integrate Portware’s execution management system (EMS) capabilities with the Aladdin® platform, BlackRock’s end-to-end investment management and operations platform. The joint offering will provide common clients with a seamless experience across multi-asset portfolio and risk management, and trading execution, including access to Portware’s high-performance electronic trading and automation capabilities via API.
- FactSet will host an Investor Day on
Tuesday, April 5, 2022, from 8:00 a.m. to 1:00 p.m. EDT. The event will be dually hosted in New York Cityand via livestream. FactSet will provide an in-depth look into the Company’s strategy, industry dynamics, growth initiatives across workflow solutions, and financial outlook. There will also be demonstrations of FactSet’s broad suite of solutions across the investment lifecycle, as well as question and answer sessions.
Share Repurchase Program
FactSet did not repurchase any of its common stock during the second quarter under the Company's existing share repurchase program and has suspended share repurchases under the program, except for potential minor repurchases to offset dilution from grants of stock options, until at least the second half of fiscal 2023 to prioritize the repayment of debt. As of
Annual Business Outlook
FactSet is updating its outlook for fiscal 2022. The following forward-looking statements reflect FactSet's expectations as of today's date. Given the risk factors, uncertainties, and assumptions discussed below, actual results may differ materially. FactSet does not intend to update its forward-looking statements prior to its next quarterly results announcement.
Fiscal 2022 Expectations
- Organic ASV plus professional services is expected to increase in the range of
$130 millionto $150 millionover fiscal 2021.
- Revenues is expected to be in the range of
$1,800 millionto $1,830 million.
- Operating margin is expected to be in the range of 25.5% to 26.5%.
- Adjusted operating margin is expected to be in the range of 33% to 34%.
- FactSet's annual effective tax rate is expected to be in the range of 12.5% to 13.5%.
- Diluted EPS is expected to be in the range of
$9.75to $10.15. Adjusted diluted EPS is expected to be in the range of $12.75to $13.15.
Both Operating margin and Diluted EPS guidance do not include certain effects of any non-recurring benefits or charges that may arise in fiscal 2022. Please see the back of this press release for a reconciliation of GAAP to adjusted metrics.
The Company will host a conference call today,
An archived webcast with the accompanying slides will be available at the Company’s investor relations website for one year after the conclusion of the live event. The earnings call transcript will be available via FactSet CallStreet. An audio replay of this conference will also be available until
This news release contains forward-looking statements based on management's current expectations, estimates, forecasts and projections about industries in which FactSet operates and the beliefs and assumptions of management. All statements that address expectations, guidance, outlook or projections about the future, including statements about the Company's strategy for growth, product development, revenues, future financial results, anticipated growth, market position, subscriptions, expected expenditures, trends in FactSet’s business and financial results, are forward-looking statements. Forward-looking statements may be identified by words like "expects," "believes, " "anticipates," "plans," "intends, " "estimates, " "projects," "should," "indicates," "continues," "may" 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
About Non-GAAP Financial Measures
Financial measures in accordance with
FactSet uses these adjusted financial measures both in presenting its results to stockholders and the investment community and in its internal evaluation and management of the business. The Company believes that these adjusted financial measures and the information they provide are useful to investors because they permit investors to view the Company’s performance using the same tools that management uses to gauge progress in achieving its goals. Investors may benefit from referring to these adjusted financial measures in assessing the Company’s performance and when planning, forecasting and analyzing future periods and may also facilitate comparisons to its historical performance. 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.
Adjusted revenues exclude the impact of the fair value of deferred revenues acquired in a business combination. Organic revenues further excludes the effects of acquisitions and dispositions completed in the last 12 months and foreign currency movements in all periods presented. Adjusted operating income and margin, adjusted net income, EBITDA, and adjusted diluted earnings per share exclude intangible asset amortization, the impact of the fair valuing of deferred revenues acquired in a business combination and non-recurring items. The Company believes that these adjusted financial measures better reflect the underlying economic performance of FactSet.
Cash flows provided by operating activities, has been reduced by capital expenditures to report non-GAAP free cash flow. FactSet uses this financial measure both in presenting its results to stockholders and the investment community and in the Company’s internal evaluation and management of the business. Management believes that this financial measure is useful to investors because it permits investors to view the Company’s performance using the same metric that management uses to gauge progress in achieving its goals and is an indication of cash flow that may be available to fund further investments in future growth initiatives.
FactSet (NYSE:FDS | NASDAQ:FDS) delivers superior content, analytics, and flexible technology to help more than 162,000 users see and seize opportunity sooner. We give investment professionals the edge to outperform with informed insights, workflow solutions across the portfolio lifecycle, and industry-leading support from dedicated specialists. We're proud to have been recognized with multiple awards for our analytical and data-driven solutions and repeatedly scored 100 by the Human Rights Campaign® Corporate Equality Index for our LGBTQ+ inclusive policies and practices. Subscribe to our thought leadership blog to get fresh insight delivered daily at insight.factset.com. Learn more at www.factset.com and follow us on Twitter: www.twitter.com/factset.
Investor Relations Contact:
+33 (0)6 01 02 57 82
|Consolidated Statements of Income (Unaudited)
|Three Months Ended||Six Months Ended|
|(In thousands, except per share data)||2022||2021||2022||2021|
|Cost of services||199,395||195,523||406,544||383,611|
|Selling, general and administrative||108,376||80,132||203,291||159,219|
|Total operating expenses||307,771||275,655||609,835||542,830|
|Other income (expense)|
|Interest expense, net||(1,673||)||(1,814||)||(3,167||)||(2,843||)|
|Other income, net||281||347||(956||)||578|
|Income before income taxes||121,956||114,666||241,886||234,898|
|Provision for income taxes||12,018||18,023||24,301||37,049|
|Diluted earnings per common share||$||2.84||$||2.50||$||5.63||$||5.12|
|Diluted weighted average common shares||38,761||38,620||38,628||38,658|
|Consolidated Balance Sheets (Unaudited)|
|Cash and cash equivalents||$||773,012||$||681,865|
|Accounts receivable, net of reserves of
|Prepaid expenses and other current assets||57,786||50,625|
|Total current assets||1,090,659||933,578|
|Property, equipment and leasehold improvements, net||114,789||131,377|
|Intangible assets, net||135,042||134,986|
|Lease right-of-use assets, net||206,237||239,064|
|Accounts payable and accrued expenses||$||90,262||$||85,777|
|Current lease liabilities||31,010||31,576|
|Total current liabilities||293,238||315,705|
|Deferred revenues, non-current||7,233||8,394|
|Long-term lease liabilities||233,275||259,980|
|TOTAL STOCKHOLDERS’ EQUITY||$||1,215,981||$||1,016,353|
|TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY||$||2,374,157||$||2,224,940|
|Consolidated Statements of Cash Flows (Unaudited)|
|Six Months Ended|
|CASH FLOWS FROM OPERATING ACTIVITIES|
|Adjustments to reconcile net income to net cash provided by operating activities|
|Depreciation and amortization||32,827||30,962|
|Amortization of lease right-of-use assets||22,172||21,517|
|Stock-based compensation expense||25,937||22,327|
|Deferred income taxes||(3,264||)||(2,802||)|
|Accounts receivable, net of reserves||(37,704||)||(15,421||)|
|Accounts payable and accrued expenses||10,183||(724||)|
|Taxes payable, net of prepaid taxes||(21,824||)||16,688|
|Lease liabilities, net||(23,863||)||(20,549||)|
|Net cash provided by operating activities||194,952||229,936|
|CASH FLOWS FROM INVESTING ACTIVITIES|
|Purchases of property, equipment, leasehold improvements and internal-use software||(20,546||)||(28,758||)|
|Acquisition of businesses, net of cash and cash equivalents acquired||(50,018||)||(41,916||)|
|Purchases of investments||(250||)||(1,250||)|
|Proceeds from maturity or sale of investments||—||2,176|
|Net cash used in investing activities||(70,814||)||(69,748||)|
|CASH FLOWS FROM FINANCING ACTIVITIES|
|Repurchases of common stock||(18,639||)||(114,640||)|
|Proceeds from employee stock plans||56,928||28,526|
|Other financing activities||(3,258||)||(2,359||)|
|Net cash used by financing activities||(26,417||)||(146,659||)|
|Effect of exchange rate changes on cash and cash equivalents||(6,574||)||3,550|
|Net increase in cash and cash equivalents||91,147||17,079|
|Cash and cash equivalents at beginning of period||681,865||585,605|
|Cash and cash equivalents at end of period||$||773,012||$||602,684|
Financial measures in accordance with
The table below provides a reconciliation of revenues to adjusted revenues and organic revenues.
|(Unaudited)||Three Months Ended|
|Deferred revenues fair value adjustment(a)||(62||)||181|
|Currency impact (c)||1,589||—|
(a) The amortization effect of purchase accounting adjustment on the fair value of acquired deferred revenue.
(b) Revenues from acquisitions completed within the last 12 months.
(c) The impact from foreign currency movements over the past 12 months.
Operating Income, Operating Margin, Net Income, and Diluted EPS
The table below provides a reconciliation of operating income, operating margin, net income and diluted EPS to adjusted operating income, adjusted operating margin, adjusted net income, EBITDA and adjusted diluted EPS.
|(Unaudited)||Three Months Ended|
|(In thousands, except per share data)||2022||2021||Change|
|Deferred revenues fair value adjustment||(62||)||181|
|Intangible asset amortization||6,291||5,914|
|Real estate charges||9,734||—|
|Business acquisition costs||5,048||—|
|Transformation costs (a)||580||4,654|
|Restructuring / severance||200||961|
|Adjusted operating income||$||145,139||$||127,843||13.5||%|
|Adjusted operating margin (b)||33.7||%||32.6||%|
|Deferred revenues fair value adjustment||(55||)||148|
|Intangible asset amortization||5,543||4,843|
|Real estate charges||8,578||—|
|Business acquisition costs||4,448||—|
|Transformation costs (a)||512||3,813|
|Restructuring / severance||177||787|
|Income tax items||(2,466||)||(1,154||)|
|Adjusted net income (c)||$||126,675||$||105,080||20.6||%|
|Interest expense, net||1,673||1,815|
|Depreciation and amortization expense||13,395||15,672|
|Non-recurring non-cash expenses (d)||9,734||—|
|Diluted earnings per common share||$||2.84||$||2.50||13.6||%|
|Deferred revenues fair value adjustment||0.00||0.00|
|Intangible asset amortization||0.14||0.13|
|Real estate charges||0.22||—|
|Business acquisition costs||0.11||0.00|
|Transformation costs (a)||0.01||0.10|
|Restructuring / severance||0.01||0.02|
|Income tax items||(0.06||)||(0.03||)|
|Adjusted diluted earnings per common share (c)||$||3.27||$||2.72||20.2||%|
|Weighted average common shares (Diluted)||38,761||38,620|
(a) Costs primarily related to professional fees associated with the ongoing multi-year investment plan.
(b) Adjusted operating margin is calculated as adjusted operating income divided by adjusted revenues as shown in the revenues table above.
(c) For purposes of calculating adjusted net income and adjusted diluted earnings per share, intangible asset amortization, deferred revenues fair value adjustments and other items were taxed at the quarterly effective tax rates of 11.9% for fiscal 2022 and 16.9% for fiscal 2021.
(d) Costs related to impairment charges of our lease right-of-use assets and Property, equipment and leasehold improvements associated with vacating certain leased office space.
Business Outlook Operating Margin, Net Income and Diluted EPS
|Annual Fiscal 2022 Guidance|
|(In millions, except per share data)||Low end of range||High end of range|
|Intangible asset amortization (a)||26||26|
|Real estate charges||55||55|
|Business acquisition costs||40||42|
|Restructuring / severance||9||9|
|Transformation costs (b)||5||5|
|Adjusted operating income||$||594||$||622|
|Adjusted operating margin (c)||33.0||%||34.0||%|
|Intangible asset amortization (a)||22||22|
|Real estate charges||48||48|
|Business acquisition costs||35||35|
|Restructuring / severance||8||8|
|Transformation costs (b)||4||4|
|Discrete tax items||(1||)||(1||)|
|Adjusted net income||$||492||$||507|
|Diluted earnings per common share||$||9.75||$||10.15|
|Intangible asset amortization||0.58||0.58|
|Real estate charges||1.26||1.26|
|Business acquisition costs||0.91||0.91|
|Restructuring / severance||0.20||0.20|
|Transformation costs (b)||0.11||0.11|
|Discrete tax items||(0.06||)||(0.06||)|
|Adjusted diluted earnings per common share||$||12.75||$||13.15|
(a) The income tax effect related to intangible asset amortization is
(b) Costs primarily related to professional fees and software development associated with the ongoing multi-year investment plan. The income tax effect related to this item is
(c) Adjusted operating margin is calculated as adjusted operating income divided by adjusted revenues as shown in the organic revenues table above.
Free Cash Flow
|(Unaudited)||Three Months Ended|
|Net Cash Provided for Operating Activities||$||122,034||$||140,659|
|Free Cash Flow||$||110,071||$||130,234||(15.5)%|
Supplementary Schedules of Historical ASV by Client Type
The following table presents the percentages and growth rates of organic ASV by client type, excluding the impact of currency movements, and may be useful to facilitate historical comparisons. Organic ASV excludes acquisitions and dispositions completed within the last 12 months and the effects of foreign currency movements. The numbers below do not include professional services.
|% of ASV from buy-side clients||83.6||%||83.1||%||83.2||%||83.8||%||84.0||%||84.0||%||83.8||%||84.1||%|
|% of ASV from sell-side clients||16.4||%||16.9||%||16.8||%||16.2||%||16.0||%||16.0||%||16.2||%||15.9||%|
|ASV Growth rate from buy-side clients||8.4||%||8.5||%||6.5||%||5.6||%||5.5||%||5.1||%||5.4||%||4.8||%|
|ASV Growth rate from sell-side clients||12.6||%||13.2||%||12.0||%||8.0||%||6.3||%||4.4||%||4.6||%||5.6||%|
The following table presents the calculation of organic ASV plus professional services.
(Details may not sum to total due to rounding)
|As reported ASV plus Professional Services (a)||$||1,750.2|
|Currency impact (b)||0.9|
|Acquisition ASV (c)||(7.2||)|
|Organic ASV plus Professional Services||$||1,743.9|
|Organic ASV plus Professional Services growth rate||9.4||%|
(b) The impact of foreign currency movements.
(c) Acquired ASV from acquisitions completed within the last 12 months.