FactSet Reports Solid Results for First Quarter 2021
First Quarter Fiscal 2021 Highlights
- Revenue increased 5.9%, or
$21.5 million , to$388.2 million compared with$366.7 million for the same period in fiscal 2020. The increase is primarily due to higher sales of analytics and content and technology solutions (CTS). Organic revenues grew 5.1% to$386.7 million during the first quarter of fiscal 2021 from the prior year period. - Annual Subscription Value (ASV) plus professional services was
$1.56 billion atNovember 30, 2020 , compared with$1.48 billion atNovember 30, 2019 . The organic growth rate, which excludes the effects of acquisitions, dispositions, and foreign currency movements, was 5.0%. The primary contributors to this growth rate were higher sales in FactSet's research workflow solutions offset by lower sales in wealth and analytics. Please see the “ASV + Professional Services” section of this press release for details. - Operating margin increased to 31.2% compared with 30.9% for the same period last year. Adjusted operating margin improved to 34.3% compared with 33.9% in the prior year period primarily as a result of reduced employee-related operating expenses due to the coronavirus pandemic.
- Diluted earnings per share (EPS) increased 7.8% to
$2.62 compared with$2.43 for the same period in fiscal 2020. Adjusted diluted EPS rose 11.6% to$2.88 compared with$2.58 in the prior year period primarily driven by an improvement in operating results. - The Company’s effective tax rate for the first quarter increased to 15.8% compared with 13.6% a year ago, primarily due to an income tax benefit from a change in the foreign tax rate in the prior year as well as benefits related to finalizing the Company's tax returns with no similar event for the three months ended
November 30, 2020 . - FactSet acquired Truvalue
Labs, Inc. , a pioneer in AI-driven environmental, social, and governance (ESG) data, inNovember 2020 . - FactSet reaffirms its annual outlook for fiscal 2021. Please see the “Annual Business Outlook” section of this press release for details.
- As previously disclosed on
June 25, 2020 ,Scott Billeadeau retired from the Company's board of directors effectiveDecember 17, 2020 .Lee Shavel has been appointed the new chair of FactSet's audit committee.
“We have more conviction in our end markets than we did when we started the fiscal year,” said
Key Financial Measures*
(Condensed and Unaudited) | Three Months Ended | |||||||
(In thousands, except per share data) | 2020 | 2019 | Change | |||||
GAAP revenues | $ | 388,206 | $ | 366,658 | 5.9 | % | ||
Organic revenues | $ | 386,651 | $ | 367,874 | 5.1 | % | ||
Operating income | $ | 121,031 | $ | 113,186 | 6.9 | % | ||
Adjusted operating income | $ | 133,003 | $ | 124,722 | 6.6 | % | ||
Operating margin | 31.2 | % | 30.9 | % | ||||
Adjusted operating margin | 34.3 | % | 33.9 | % | ||||
Net income | $ | 101,206 | $ | 93,957 | 7.7 | % | ||
Adjusted net income | $ | 111,283 | $ | 99,655 | 11.7 | % | ||
Diluted EPS | $ | 2.62 | $ | 2.43 | 7.8 | % | ||
Adjusted diluted EPS | $ | 2.88 | $ | 2.58 | 11.6 | % |
* See reconciliation of
“We continue to execute our plan diligently, with increased productivity and lower discretionary spend helping to fund our investment plans,” said
Annual Subscription Value (ASV) + Professional Services and Segment Revenue
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 are revenues derived from project-based consulting and implementation.
ASV plus professional services was
Buy-side and sell-side ASV growth rates for the first quarter of fiscal 2020 were 5.1% and 4.4%, respectively. Buy-side clients accounted for approximately 84% of organic ASV while the remainder was derived from sell-side firms that perform mergers and acquisitions advisory work, capital markets services, and equity research. Supplementary tables covering organic buy-side and sell-side ASV growth rates may be found on the last page of this press release.
ASV from the
ASV from the EMEA region was
ASV from the
Operational Highlights – First Quarter Fiscal 2021
- Client count as of
November 30, 2020 was 5,939, a net increase of 64 clients in the past three months, primarily driven by an increase in corporate and wealth management clients. The count includes clients with ASV of$10,000 and above. - User count increased by 5,187 to 138,238 in the past three months, primarily driven by an increase in wealth advisory users.
- Annual ASV retention was greater than 95%. When expressed as a percentage of clients, annual retention was 90%.
- Employee count was 10,622 as of
November 30, 2020 , up 7.7% over the last twelve months. Excluding theTruvalue Labs acquisition, headcount grew by 7.3% primarily driven by increased hiring in the Company's sales and content organizations. - Net cash provided by operating activities decreased to
$89.3 million compared with$95.8 million for the first quarter of 2020. Quarterly free cash flow increased to$70.9 million compared with$69.0 million a year ago, an increase of 2.8%, primarily due to lower capital expenditures. - Capital expenditures decreased to
$18.3 million , compared with$26.8 million a year ago, primarily due to reduced facilities spend. - A regular quarterly dividend of
$29.1 million , or$0.77 per share, was paid onDecember 17, 2020 , to holders of record of FactSet’s common stock at the close of business onNovember 30, 2020 . - FactSet acquired Truvalue Labs, a
San Francisco based company that applies AI-driven technology to over 100,000 unstructured text sources in 13 languages, including news, trade journals, and nongovernmental organizations and industry reports, to provide daily signals that identify positive and negative ESG behavior. - The Company launched content and analytics for Danish covered bonds across its distribution channels, including the FactSet workstation. FactSet is working with Scanrate, a leading provider of fixed income software, models, and data for the Danish bond market, to deliver increased coverage of the Danish market.
Share Repurchase Program
FactSet repurchased 131,800 shares of its common stock for
Annual Business Outlook
FactSet provided its outlook for fiscal 2021 on
Fiscal 2021 Expectations
- Organic ASV plus professional services is expected to increase in the range of
$55 million and$85 million over fiscal 2020. - GAAP revenue is expected to be in the range of
$1,570 million and$1,585 million . - GAAP operating margin is expected to be in the range of 29.5% and 30.5%.
- Adjusted operating margin is expected to be in the range of 32.0% and 33.0%.
- FactSet's annual effective tax rate is expected to be in the range of 15.0% and 16.5%.
- GAAP diluted EPS is expected to be in the range of
$10.05 and$10.45 . Adjusted diluted EPS is expected to be in the range of$10.75 and$11.15 .
Both GAAP operating margin and GAAP diluted EPS guidance do not include certain effects of any non-recurring benefits or charges that may arise in fiscal 2021. Please see the back of this press release for a reconciliation of GAAP to adjusted metrics.
Conference Call
The Company will host a conference call today,
833.726.6487 | |
International Participants: | 830.213.7677 |
Passcode: | 9276789 |
An archived webcast with the accompanying slides will be available at FactSet Investor Relations for one year after the conclusion of the live event. The earnings call transcript will also be available via the FactSet workstation or web. An audio replay of this conference will also be available until
Forward-looking Statements
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.
Organic revenues exclude 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 and adjusted diluted earnings per share exclude both intangible asset amortization and non-recurring items. The Company believes that these adjusted financial measures better reflect the underlying economic performance of FactSet.
The GAAP financial measure, cash flows provided by operating activities, has been adjusted for 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.
About FactSet
FactSet
Media & Investor Relations Contact:
Rima Hyder
+1.857.265.7523
rima.hyder@factset.com
Consolidated Statements of Income (Unaudited) |
|||||||
Three Months Ended | |||||||
(In thousands, except per share data) | 2020 | 2019 | |||||
Revenues | $ | 388,206 | $ | 366,658 | |||
Operating expenses | |||||||
Cost of services | 188,088 | 164,957 | |||||
Selling, general and administrative | 79,087 | 88,515 | |||||
Total operating expenses | 267,175 | 253,472 | |||||
Operating income | 121,031 | 113,186 | |||||
Other expense | |||||||
Interest expense, net | (1,029) | (3,131) | |||||
Other (expense) income, net | 230 | (1,314) | |||||
Income before income taxes | 120,232 | 108,741 | |||||
Provision for income taxes | 19,026 | 14,784 | |||||
Net income | $ | 101,206 | $ | 93,957 | |||
Diluted earnings per common share | $ | 2.62 | $ | 2.43 | |||
Diluted weighted average common shares | 38,697 | 38,587 |
Consolidated Balance Sheets (Unaudited) |
||||||
(In thousands) | 2020 | 2019 | ||||
ASSETS | ||||||
Cash and cash equivalents | $ | 560,137 | $ | 585,605 | ||
Investments | 18,166 | 19,572 | ||||
Accounts receivable, net of reserves | 156,218 | 155,011 | ||||
Prepaid taxes | 25,908 | 38,067 | ||||
Prepaid expenses and other current assets | 43,660 | 43,675 | ||||
Total current assets | 804,089 | 841,930 | ||||
Property, equipment, and leasehold improvements, net | 135,121 | 133,102 | ||||
|
738,575 | 709,703 | ||||
Intangible assets, net | 134,896 | 121,095 | ||||
Lease right-of-use assets, net | 257,591 | 248,929 | ||||
Other assets | 29,154 | 28,629 | ||||
TOTAL ASSETS | $ | 2,099,426 | $ | 2,083,388 | ||
LIABILITIES | ||||||
Accounts payable and accrued expenses | $ | 84,738 | $ | 82,094 | ||
Current lease liabilities | 30,954 | 29,056 | ||||
Accrued compensation | 36,486 | 81,873 | ||||
Deferred fees | 46,439 | 53,987 | ||||
Dividends payable | 29,266 | 29,283 | ||||
Total current liabilities | 227,883 | 276,293 | ||||
Long-term debt | 575,511 | 574,354 | ||||
Deferred taxes | 18,444 | 19,713 | ||||
Deferred fees | 9,147 | 9,319 | ||||
Taxes payable | 28,795 | 27,739 | ||||
Lease liabilities | 279,723 | 272,269 | ||||
Deferred rent and other non-current liabilities | 7,350 | 7,326 | ||||
TOTAL LIABILITIES | $ | 1,146,853 | $ | 1,187,013 | ||
STOCKHOLDERS’ EQUITY | ||||||
TOTAL STOCKHOLDERS’ EQUITY | $ | 952,573 | $ | 896,375 | ||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 2,099,426 | $ | 2,083,388 |
Consolidated Statements of Cash Flows (Unaudited) |
||||||
Three months ended | ||||||
(In thousands) | 2020 | 2019 | ||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||
Net income | $ | 101,206 | $ | 93,957 | ||
Adjustments to reconcile net income to net cash provided by operating activities | ||||||
Depreciation and amortization | 15,290 | 14,390 | ||||
Amortization of right-of-use asset | 10,697 | 10,700 | ||||
Stock-based compensation expense | 11,317 | 9,814 | ||||
Deferred income taxes | 437 | (6,624) | ||||
Loss on sale of assets | 8 | — | ||||
Changes in assets and liabilities, net of effects of acquisitions | ||||||
Accounts receivable, net of reserves | (342) | 875 | ||||
Accounts payable and accrued expenses | 2,240 | 13,165 | ||||
Accrued compensation | (45,858) | (45,780) | ||||
Deferred fees | (9,724) | (6,483) | ||||
Taxes payable, net of prepaid taxes | 13,302 | 16,616 | ||||
Lease liabilities, net | (10,007) | (3,761) | ||||
Other, net | 710 | (1,078) | ||||
Net cash provided by operating activities | 89,276 | 95,791 | ||||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||||
Acquisition of business, net of cash and cash equivalents acquired | (41,916) | — | ||||
Purchases of property, equipment and leasehold improvements, net of proceeds from dispositions | (18,333) | (26,780) | ||||
Purchases of Investments | (250) | (2,620) | ||||
Proceeds from maturity or sale of investments | 2,177 | 2,257 | ||||
Net cash used in investing activities | (58,322) | (27,143) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||
Repurchases of common stock | (43,144) | (84,423) | ||||
Dividend payments | (29,103) | (27,259) | ||||
Proceeds from employee stock plans | 17,993 | 16,727 | ||||
Other financing, net | (2,123) | — | ||||
Net cash used in financing activities | (56,377) | (94,955) | ||||
Effect of exchange rate changes on cash and cash equivalents | (45) | 2,725 | ||||
Net (decrease) increase in cash and cash equivalents | (25,468) | (23,582) | ||||
Cash and cash equivalents at beginning of period | 585,605 | 359,799 | ||||
Cash and cash equivalents at end of period | $ | 560,137 | $ | 336,217 |
Reconciliation of
Financial measures in accordance with
Revenues
(Unaudited) | Three Months Ended | ||||||||
(In thousands) | 2020 | 2019 | Change | ||||||
GAAP revenues | $ | 388,206 | $ | 366,658 | 5.9 | % | |||
Deferred revenue fair value adjustment (a) | 60 | 1,216 | |||||||
Acquired revenues (b) | (375 | ) | — | ||||||
Currency impact (c) | (1,240 | ) | — | ||||||
Organic revenues | $ | 386,651 | $ | 367,874 | 5.1 | % |
(a) The adjustment relates to deferred revenue fair value adjustments from purchase accounting.
(b) Acquired revenues from acquisitions completed within the last 12 months.
(c) The impact from foreign currency movements over the past 12 months.
Operating Income, Margin, Net Income and Diluted EPS
(Unaudited) | Three Months Ended | ||||||||
(In thousands, except per share data) | 2020 | 2019 | Change | ||||||
GAAP Operating income | $ | 121,031 | $ | 113,186 | 6.9 | % | |||
Intangible asset amortization | 5,699 | 5,152 | |||||||
Deferred revenue fair value adjustment | 60 | 1,216 | |||||||
Other non-recurring items (a) | 6,213 | 5,168 | |||||||
Adjusted operating income | $ | 133,003 | $ | 124,722 | 6.6 | % | |||
Adjusted operating margin (b) | 34.3 | % | 33.9 | % | |||||
GAAP Net income | $ | 101,206 | $ | 93,957 | 7.7 | % | |||
Intangible asset amortization (c) | 4,797 | 4,181 | |||||||
Deferred revenue fair value adjustment (c) | 51 | 987 | |||||||
Other non-recurring items (a)(c) | 5,229 | 4,011 | |||||||
Income tax (expenses) / benefits (d) | — | (3,481 | ) | ||||||
Adjusted net income | $ | 111,283 | $ | 99,655 | 11.7 | % | |||
GAAP Diluted earnings per common share | $ | 2.62 | $ | 2.43 | 7.8 | % | |||
Intangible asset amortization | 0.12 | 0.11 | |||||||
Deferred revenue fair value adjustment | 0.00 | 0.03 | |||||||
Other non-recurring items (a) | 0.14 | 0.10 | |||||||
Income tax (expenses) / benefits (d) | — | (0.09 | ) | ||||||
Adjusted diluted earnings per common share | $ | 2.88 | $ | 2.58 | 11.6 | % | |||
Weighted average common shares (Diluted) | 38,697 | 38,587 |
(a) GAAP operating income in the first quarter of fiscal 2021 was adjusted to exclude
(b) Adjusted operating margin is calculated as adjusted operating income divided by GAAP revenues plus the deferred revenue fair value adjustment.
(c) For purposes of calculating adjusted net income and adjusted diluted earnings per share, intangible asset amortization, deferred revenue fair value adjustments and other non-recurring items were taxed at the annual effective tax rates of 15.8% for fiscal 2021 and 19.0% for fiscal 2020.
(d) GAAP net income in the first quarter of fiscal 2020 was adjusted to exclude
Business Outlook Operating Margin, Net Income and Diluted EPS
(Unaudited) | |||||||
Annual Fiscal 2021 Guidance | |||||||
(In millions, except per share data) | Low end of range | High end of range | |||||
GAAP Operating Income | $ | 468 | $ | 479 | |||
GAAP Operating margin | 29.5 | % | 30.5 | % | |||
Intangible asset amortization (a) | 25 | 25 | |||||
Other non-recurring items (b) | 14 | 14 | |||||
Adjusted Operating Income | $ | 507 | $ | 518 | |||
Adjusted operating margin | 32.0 | % | 33.0 | % | |||
GAAP Net income | $ | 386 | $ | 402 | |||
Intangible asset amortization (a) | 21 | 21 | |||||
Other non-recurring items (b) | 12 | 12 | |||||
Discrete tax items | (5 | ) | (5 | ) | |||
Adjusted net income | $ | 415 | $ | 430 | |||
GAAP Diluted earnings per common share | $ | 10.05 | $ | 10.45 | |||
Intangible asset amortization | 0.55 | 0.55 | |||||
Other non-recurring items | 0.30 | 0.30 | |||||
Discrete tax items | (0.15 | ) | (0.15 | ) | |||
Adjusted diluted earnings per common share | $ | 10.75 | $ | 11.15 |
(a) The income tax effect related to intangible asset amortization is
(b) GAAP operating income for the full fiscal 2021 year is adjusted to exclude
Free Cash Flow
(Unaudited) | Three Months Ended | |||||||||
(In thousands) | 2020 | 2019 | Change | |||||||
Net cash provided by operating activities | $ | 89,277 | $ | 95,791 | ||||||
Capital expenditures | (18,333 | ) | (26,780 | ) | ||||||
Free cash flow | $ | 70,944 | $ | 69,011 | 2.8 | % |
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.
Q1'21 | Q4'20 | Q3'20 | Q2'20 | Q1'20 | Q4'19 | Q3'19 | Q2'19 | |||||||||
% of ASV from buy-side clients | 84.0 | % | 83.8 | % | 84.1 | % | 84.1 | % | 83.9 | % | 83.7 | % | 84.2 | % | 83.9 | % |
% of ASV from sell-side clients | 16.0 | % | 16.2 | % | 15.9 | % | 15.9 | % | 16.1 | % | 16.3 | % | 15.8 | % | 16.1 | % |
ASV Growth rate from buy-side clients | 5.1 | % | 5.4 | % | 4.8 | % | 4.5 | % | 4.0 | % | 4.8 | % | 5.2 | % | 5.3 | % |
ASV Growth rate from sell-side clients | 4.4 | % | 4.6 | % | 5.6 | % | 2.9 | % | 4.0 | % | 6.3 | % | 6.8 | % | 9.2 | % |
The following table presents the calculation of the above-mentioned ASV growth rates from all clients.
(Details may not sum to total due to rounding)
(In millions) | Q1'21 | Q1'20 | |||||
As reported ASV plus Professional Services (a) | $ | 1,562.5 | $ | 1,477.9 | |||
Currency impact (b) | (0.4 | ) | — | ||||
Acquisition ASV (c) | (4.9 | ) | $ | — | |||
Organic ASV plus Professional Services total | $ | 1,557.2 | $ | 1,477.9 | |||
Total Organic ASV plus Professional Services growth rate | 5.0 | % |
(a) ASV includes
(b) The impact from foreign currency movements was excluded above to calculate total organic ASV.
(c) Acquired ASV from acquisitions completed within the last 12 months.