fds20170328_8k.htm

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

 

Washington, D.C. 20549

 


Form 8-K


 

CURRENT REPORT

 

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

 

Date of report (Date of earliest event reported): March 28, 2017

 


FactSet Research Systems Inc.

(Exact name of Registrant as specified in its charter)


 

 

Delaware

 

1-11869

 

13-3362547

(State or other jurisdiction of

 

(Commission

 

(I.R.S. Employer

incorporation or organization)

 

File Number)

 

Identification Number)

         

601 Merritt 7

Norwalk, Connecticut 06851

(Address of principal executive offices)

 

(203) 810-1000

(Registrant’s telephone number, including area code)

 


 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

   

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

   

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

   

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 
 

 

 

Item 2.02 Results of Operations and Financial Condition 

 

On March 28, 2017, FactSet Research Systems Inc. issued a press release announcing its results for the three and six months ended February 28, 2017. A copy of the press release is filed as Exhibit 99.1 hereto and incorporated by reference herein. This information shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

 

Exhibit 99.1 to this report contains certain financial measures that are considered non-GAAP financial measures as defined in the SEC rules. Exhibit 99.1 to this report also contains the reconciliation of these non-GAAP financial measures to their most directly comparable financial measures calculated and presented in accordance with generally accepted accounting principles, as well as the reasons why Registrant’s management believes that presentation of the non-GAAP financial measures provides useful information to investors regarding the Registrant’s results of operations and, to the extent material, a statement disclosing any other additional purposes for which Registrant’s management uses the non-GAAP financial measures.

 

 

Item 9.01 Financial Statements and Exhibits

 

(d) Exhibits

 

Exhibit No.

 

Description

99.1

 

Press Release of FactSet Research Systems Inc., dated March 28, 2017, announcing its results for the three and six months ended February 28, 2017

     

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.

 

 

       

FACTSET RESEARCH SYSTEMS INC.

(Registrant)

       

Date: March 28, 2017

     

By:

 

/s/ Maurizio Nicolelli

           

Maurizio Nicolelli

           

Senior Vice President, Chief Financial Officer

           

(Principal Financial Officer)

 

 
 

 

 

Exhibit No.

 

Description

99.1

 

Press Release of FactSet Research Systems Inc., dated March 28, 2017, announcing its results for the three and six months ended February 28, 2017

 

 

ex99-1.htm

Exhibit 99.1

 

 

 

News Release |  For Immediate Release 

 

 

FactSet Reports Solid Revenue and Earnings Growth in Second Quarter 2017

Contact:

Rima Hyder

FactSet

857.265.7523

 

NORWALK, Connecticut, March 28, 2017 - FactSet (the “Company”) (NYSE:FDS) (NASDAQ:FDS), a global provider of integrated financial information, analytical applications, and industry-leading service, today announced its results for the second quarter ended February 28, 2017.

 

Second Quarter 2017 Highlights

 

 

Revenues increased 4.5% or $12.6 million to $294.4 million compared with $281.8 million for the same period in 2016. The second quarter of 2016 includes revenues from the Market Metrics business, which was sold in FactSet’s fourth quarter of 2016. Organic revenues grew 7.0% to $291.5 million during the second quarter of 2017 from the prior year period.

 

 

Operating income increased 7.5% or $6.4 million to $91.7 million compared with $85.3 million in the prior year period. Adjusted operating income for the second quarter increased 4.5% or $4.2 million to $97.4 million compared with the prior year period.

 

 

Operating margin increased to 31.2% compared to 30.3% in the prior year period. Adjusted operating margin remained consistent year over year at 33.1%.

 

 

Net income decreased 1.6% or $1.1 million to $66.7 million compared with $67.8 million for the second quarter of 2016. Adjusted net income increased 8.7% or $5.8 million to $71.8 million for the second quarter compared with the prior year period.

 

 

Diluted earnings per share (“EPS”) increased 3.1% to $1.68 compared with $1.63 for the same period in 2016. Adjusted diluted EPS for the second quarter rose 13.8% to $1.81 compared with the second quarter of 2016.

 

 

Annual Subscription Value (“ASV”) increased to $1.19 billion at February 28, 2017 compared with prior year ASV of $1.14 billion. Organic ASV, which excludes the effects of acquisitions, dispositions and foreign currency increased 6.5%.

 

 

The Company’s effective tax rate for the second quarter was 25.5%, a decrease from 28.8% a year ago, primarily due to FactSet’s global operational realignment effective September 1, 2016.

 

 

FactSet announced two transactions recently. FactSet completed the acquisition of BISAM Technologies S.A. (“BISAM”) for cash consideration of $205.2 million on March 17, 2017. The transaction is expected be accretive by $0.02 to adjusted diluted EPS and dilutive by $0.06 to GAAP diluted EPS for the remainder of fiscal 2017. Additionally, FactSet agreed to acquire Interactive Data Managed Solutions (“IDMS”) on January 26, and the acquisition is expected to close in the Company’s third quarter of fiscal 2017. The acquisition of IDMS is expected to have an immaterial impact to GAAP diluted EPS and adjusted diluted EPS for FactSet’s fiscal 2017.

 

 

FactSet entered into a new credit agreement on March 17, 2017 with PNC Bank National Association (“PNC”) and borrowed $575 million to fund the BISAM transaction and retire its existing outstanding debt.

 

“FactSet continues to be a leading technology partner for the investment community delivering another quarter of growth in a market that remains challenging for the financial industry. Through product innovation and acquisition, we believe we are well positioned to offer a broad suite of solutions across the enterprise for our clients critical workflows,” said Phil Snow, FactSet CEO.

 

 
 

 

 

 

News Release |  For Immediate Release 

 

 

Non-GAAP Measures

                       

(Condensed and Unaudited)

 

Three Months Ended

         
               

(In thousands, except per share data)

 

February 28, 2017

   

February 29, 2016

   

Change

 
                         

Organic revenues

  $ 291,514     $ 272,561       7.0 %
                         

Adjusted operating income

  $ 97,420     $ 93,260       4.5 %
                         

Adjusted operating margin

    33.1 %     33.1 %      
                         

Adjusted net income

  $ 71,844     $ 66,081       8.7 %
                         

Adjusted diluted EPS

  $ 1.81     $ 1.59       13.8 %
                         

 

Maurizio Nicolelli, FactSet CFO added, “In the second quarter, we continued to grow ASV by deepening our relationships with our clients and delivered double-digit growth for adjusted diluted EPS at the high end of our guidance. In a market that remains challenging in certain segments, we believe that we will be able to grow ASV and maintain cost discipline as evidenced by our steady operating margins.”

 

Annual Subscription Value (ASV) and Segment Revenue

 

ASV was $1.19 billion at February 28, 2017, up 6.5% or $71.1 million organically from prior year. Organic ASV, which excludes the effects of acquisitions, dispositions and foreign currency, increased $16.3 million over the last three months. 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.

 

Buy-side and sell-side ASV growth rates for the second quarter of fiscal 2017 were 6.8% and 4.9%, respectively. Buy-side clients account for 83.2% of ASV while the remainder is 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 page 12 of this earnings release.

 

ASV from U.S. operations was $773.7 million, increasing 0.9% over prior year of $766.4 million and 5.4% organically. U.S. revenues were $191.6 million compared with $189.7 million. Excluding the effects of acquisitions and dispositions completed in the last 12 months, the U.S. revenue growth rate was 5.9%. ASV from international operations was $413.2 million, increasing 10.8% over prior year of $372.8 million and 8.4% organically. International ASV now represents 34.8% of total ASV, an increase of 2.1% over prior year. International revenues rose to $102.7 million compared with $92.1 million from the second quarter of 2016. Excluding the effects of acquisitions and dispositions completed in the last 12 months and foreign currency, the international revenue growth rate was 8.9%.

 

Operational Highlights

 

 

Client count as of February 28, 2017 was 4,404, a net increase of 143 clients in the past three months. As of the second quarter, FactSet changed its client count definition to capture clients with ASV greater than $10,000 versus the previous threshold of ASV greater than $24,000. Please see page 12 of this press release for historical data based on the new definition.

 

 

User count grew 1,503 to 85,788 in the past three months. As of the second quarter, FactSet also changed its user count definition to account for users from workstations previously not captured due to certain product bundling, and additionally, users of the StreetAccount web product. Please see page 12 of this press release for historical data based on the new definition.

 

 

Annual client retention was greater than 95% of ASV. When expressed as a percentage of clients, annual retention was 93%.

 

 
 

 

 

 

News Release |  For Immediate Release 

 

 

 

Employee count was 8,592 at February 28, 2017, up 499 people in the past 12 months. Excluding the acquired Vermilion and CYMBA workforces and employees of the sold Market Metrics business, headcount increased 7.0% from a year ago.

 

 

Quarterly free cash flow was $71.4 million compared with $81.1 million for the second quarter of 2016. Operating cash flow for the second quarter was $76.9 million compared with $93.1 million for the second quarter of 2016.

 

 

Capital expenditures decreased to $5.5 million, compared with $12.1 million a year ago primarily from the build out of office space last year.

 

 

A regular quarterly dividend of $19.7 million, or $0.50 per share, was paid on March 21, 2017, to common stockholders of record as of February 28, 2017.

 

 

FactSet launched the Global FinTech Index, which provides a benchmark to track the performance of companies engaged in financial technologies, particularly in the areas of software and consulting, data and analytics, digital payment processing and transfer, and payment-related hardware. The Global FinTech Index has been licensed to Nikko Asset Management as the benchmark for the Global Fintech Equity Fund.

 

 

The Company strengthened its existing relationship with Axioma, a leading provider of enterprise risk management, portfolio construction and risk and regulatory reporting solutions, to expand its strong fixed income and multi-asset class analytics, performance, and risk offerings. The enhanced offerings include making Axioma’s linear fixed income and multi-asset class model available on FactSet and expand the multi-asset class risk models already available through FactSet.

 

 

Earlier this month, FactSet unveiled its new brand campaign, See the Advantage, which identifies the Company as a premier partner, helping clients see and seize new opportunities every day. This new brand statement is a fresh articulation of FactSet’s nearly four-decade mission to solve its clients’ greatest challenges with the power of collaboration.

 

 

Share Repurchase Program

 

FactSet repurchased 479,822 shares for $81.1 million during the second quarter under the Company’s existing share repurchase program. Over the last 12 months, FactSet has returned $485.2 million to stockholders in the form of share repurchases and dividends, funded by cash generated from operations and the sale of the Market Metrics business. On March 27, 2017, the Board of Directors of FactSet approved a $300 million expansion to the existing share repurchase program. Including this expansion, $336.5 million is currently available for future share repurchases.

 

 

Recent Transactions

 

On January 26, 2017, FactSet announced that it had entered into an agreement to acquire IDMS from Intercontinental Exchange (NYSE: ICE). With a client base of large financial institutions across Europe and the U.S., IDMS is a leading managed solutions and portal provider for the global wealth management industry. IDMS supports the wealth management marketplace across a variety of workflows and functions, from advisors to their clients. IDMS offers real-time market data desktops, customizable web-based portals, and a broad range of mobile solutions. The transaction is expected to close in the Company’s third quarter of fiscal 2017 and have an immaterial impact to GAAP diluted EPS and adjusted diluted EPS for FactSet’s fiscal 2017. FactSet considers wealth management an area of strong growth for the Company and this acquisition adds significant scale to its already growing wealth management business.

 

On March 17, 2017, the Company completed the acquisition of BISAM for cash consideration of $205.2 million. With more than 160 employees worldwide, BISAM is a leading provider of portfolio performance and attribution, multi-asset risk, GIPS composites management and reporting. B-One, BISAM’s award-winning, market-leading cross-asset solution, is an outstanding complement to both FactSet’s portfolio analytics suite and client reporting solutions. Simultaneously, its Cognity (or Finanalytica) product enhances FactSet’s risk analysis for derivatives and quantitative portfolio construction. BISAM’s annual revenues as of December 31, 2016 were over $28 million.

 

FactSet borrowed $575 million under a new revolving credit facility with PNC on March 17, 2017 to fund the BISAM transaction and retire its existing outstanding debt. BISAM is expected to be accretive by $0.02 to adjusted diluted EPS and dilutive by $0.06 to GAAP diluted EPS for FactSet’s fiscal 2017.

 

 
 

 

 

 

News Release |  For Immediate Release  

 

 

Business Outlook

 

The following forward-looking statements reflect FactSet’s expectations as of today’s date and includes the recently completed BISAM acquisition. Given the risk factors, uncertainties and assumptions discussed below, actual results may differ materially. FactSet does not intend to update its forward-looking statements until its next quarterly results announcement, other than in publicly available statements.

 

Third Quarter Fiscal 2017 Expectations:

 

 

GAAP Revenues are expected to be in the range of $301 million and $307 million. BISAM is expected to add approximately $6 million in third quarter revenues.

 

 

GAAP operating margin is expected to be in the range of 30.0% and 31.0%, which includes a 90 basis point reduction from BISAM. Adjusted operating margin is expected to be in the range of 32.0% and 33.0%, which includes a 30 basis point reduction from BISAM.

 

 

The annual effective tax rate is expected to be in the range of 25.0% and 26.0%.

 

 

GAAP diluted EPS is expected to be in the range of $1.68 and $1.74. Adjusted diluted EPS is expected to be in the range of $1.80 and $1.86. The midpoint of the adjusted EPS range represents 12% growth over the prior year.

 

 

 

Conference Call

 

The Company will host a conference call today, March 28, 2017 at 11:00 a.m. Eastern Time to discuss the second quarter results with its investors. The call will be webcast live at http://investor.factset.com/investors/audiocasts. The following information is provided for investors who would like to participate:

 

U.S. Participants:

877.201.0168

International Participants:

647.788.4901

Passcode:

77870058

Moderator:

Rima Hyder, Vice President, Investor Relations 

 

An archived webcast with the accompanying slides will be available at investor.factset.com for one year after the conclusion of the live event. The earnings call transcript will also be available via FactSet CallStreet. An audio replay of this conference will also be available until April 4, 2017 via the following telephone numbers: 800.585.8367 in the U.S. and 416.621.4642 internationally using passcode 77870058.

 

 
 

 

 

 

News Release |  For Immediate Release  

 

 

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 "expects," "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 and quarterly reports on Form 10-Q, as well as others, could cause results to differ materially from those stated. These factors include, but are not limited to: the current status of the global economy; the ability to integrate newly acquired companies and businesses; the stability of global securities markets; the ability to hire qualified personnel; the maintenance of the Company's leading technological position and reputation; 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; the retention of key clients; 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

 

Financial measures in accordance with U.S. GAAP including revenue, operating income and margin, net income, diluted earnings per share and cash provided by operating activities have been adjusted.

 

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 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, including acquisition costs. 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 to report non-GAAP free cash flow that includes the cash cost for taxes and changes in working capital, less capital expenditures. 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 (NYSE:FDS | NASDAQ:FDS) delivers superior analytics, service, content, and technology to help more than 85,000 users see and seize opportunity sooner. We are committed to giving investment professionals the edge to outperform, with fresh perspectives, informed insights, and the industry-leading support of our dedicated specialists. We're proud to have been recognized with multiple awards for our analytical and data-driven solutions and repeatedly ranked as one of Fortune's 100 Best Companies to Work For and a Best Workplace in the United Kingdom and France.  Subscribe to our thought leadership blog to get fresh insight delivered daily at insight.factset.com. Learn more at www.factset.com and follow on Twitter: www.twitter.com/factset.

 

 
 

 

 

 

News Release |  For Immediate Release  

 

 

Consolidated Statements of Income – Unaudited

 

   

Three Months Ended

   

Six Months Ended

 
             

(In thousands, except per share data)

 

February 28, 2017

   

February 29, 2016

   

February 28, 2017

   

February 29, 2016

 
                                 

Revenues

  $ 294,354     $ 281,796     $ 582,417     $ 552,300  
                                 

Operating expenses

                               

Cost of services

    131,635       123,911       258,885       238,647  

Selling, general and administrative

    70,973       72,541       141,467       141,001  

Total operating expenses

    202,608       196,452       400,352       379,648  
                                 

Operating income

    91,746       85,344       182,065       172,652  
                                 

Other expense

                               

Loss on sale of business

    (1,208 )     -       (1,223 )     -  

Interest (expense), net of interest income

    (1,048 )     (424 )     (1,532 )     (331 )

Total other expense

    (2,256 )     (424 )     (2,755 )     (331 )
                                 

Income before income taxes

    89,490       84,920       179,310       172,321  
                                 

Provision for income taxes

    22,780       17,157       46,017       44,594  

Net income

  $ 66,710     $ 67,763     $ 133,293     $ 127,727  
                                 

Diluted earnings per common share

  $ 1.68     $ 1.63     $ 3.34     $ 3.06  
                                 

Diluted weighted average common shares

    39,700       41,536       39,900       41,799  

 

 
 

 

 

 

News Release |  For Immediate Release  

 

 

Consolidated Statements of Comprehensive Income – Unaudited

 

   

Three Months Ended

   

Six Months Ended

 
             

(In thousands)

 

February 28, 2017

   

February 29, 2016

   

February 28, 2017

   

February 29, 2016

 
                                 

Net income

  $ 66,710     $ 67,763     $ 133,293     $ 127,727  
                                 

Other comprehensive income (loss), net of tax

                               

Net unrealized gain (loss) on cash flow hedges*

    1,401       (1,819 )     1,848       (2,236 )

Foreign currency translation adjustments

    861       (10,364 )     (10,636 )     (16,750 )

Other comprehensive income (loss)

    2,262       (12,183 )     (8,788 )     (18,986 )
                                 

Comprehensive income

  $ 68,972     $ 55,580     $ 124,505     $ 108,741  

 

 

*For the three and six months ended February 28, 2017, the unrealized gain on cash flow hedges was net of tax expense of $817 and $1,078, respectively. For the three and six months ended February 29, 2016, the unrealized loss on cash flow hedges was net of tax benefits of $1,068 and $1,311 respectively.

 

 
 

 

 

 

News Release |  For Immediate Release  

 

 

Consolidated Balance Sheets - Unaudited

 

   

February 28,

   

August 31,

 

(In thousands)

 

2017

   

2016

 
                 

ASSETS

               

Cash and cash equivalents

  $ 155,351     $ 228,407  

Investments

    30,003       24,217  

Accounts receivable, net of reserves

    130,825       97,797  

Prepaid taxes

    4,760        

Deferred taxes

    2,693       3,158  

Prepaid expenses and other current assets

    20,408       15,697  

Total current assets

    344,040       369,276  
                 

Property, equipment, and leasehold improvements, net

    89,450       84,622  

Goodwill

    506,832       452,915  

Intangible assets, net

    104,695       93,161  

Deferred taxes

    8,862       13,406  

Other assets

    7,950       5,781  

Total Assets

  $ 1,061,829     $ 1,019,161  
                 

LIABILITIES

               

Accounts payable and accrued expenses

  $ 51,121     $ 45,836  

Accrued compensation

    33,183       51,036  

Deferred fees

    37,252       33,247  

Taxes payable

    13,056       7,781  

Deferred taxes

    767       291  

Dividends payable

    19,709       20,019  

Total current liabilities

    155,088       158,210  
                 

Deferred taxes

    2,947       1,708  

Taxes payable

    10,029       8,782  

Long-term debt

    365,000       300,000  

Deferred rent and other non-current liabilities

    35,535       33,080  

Total Liabilities

  $ 568,599     $ 501,780  
                 

STOCKHOLDERS’ EQUITY

               

Common stock

  $ 517     $ 512  

Additional paid-in capital

    704,522       623,195  

Treasury stock, at cost

    (1,512,127 )     (1,321,700 )

Retained earnings

    1,377,659       1,283,927  

Accumulated other comprehensive loss

    (77,341 )     (68,553 )

Total Stockholders’ Equity

    493,230       517,381  

Total Liabilities And Stockholders’ Equity

  $ 1,061,829     $ 1,019,161  

 

 
 

 

 

 

News Release |  For Immediate Release 

 

 

Consolidated Statements of Cash Flows – Unaudited

 

(In thousands)

 

Six Months Ended

 
   

February 28, 2017

   

February 29, 2016

 

CASH FLOWS FROM OPERATING ACTIVITIES

               

Net income

  $ 133,293     $ 127,727  

Adjustments to reconcile net income to net cash provided by operating activities

               

Depreciation and amortization

    20,649       18,260  

Stock-based compensation expense

    13,611       15,027  

Loss on sale of business

    1,223        

Deferred income taxes

    3,032       732  

Loss on sale of assets

    142        

Tax benefits from share-based payment arrangements

    (8,995 )     (10,804 )

Changes in assets and liabilities, net of effects of acquisitions

               

Accounts receivable, net of reserves

    (30,998 )     (5,683 )

Accounts payable and accrued expenses

    3,352       1,930  

Accrued compensation

    (17,699 )     (10,180 )

Deferred fees

    1,152       913  

Taxes payable, net of prepaid taxes

    10,561       15,138  

Prepaid expenses and other assets

    (3,982 )     1,816  

Deferred rent and other non-current liabilities

    2,774       9,372  

Other working capital accounts, net

    (57 )     (22 )

Net cash provided by operating activities

    128,058       164,226  
                 

CASH FLOWS FROM INVESTING ACTIVITIES

               

Acquisition of businesses, net of cash acquired

    (71,689 )     (264,087 )

Purchases of investments

    (25,149 )     (12,530 )

Proceeds from sales of investments

    19,501       12,423  

Purchases of property, equipment and leasehold improvements, net of

proceeds from dispositions

    (18,046 )     (26,438 )

Net cash used in investing activities

    (95,383 )     (290,632 )
                 

CASH FLOWS FROM FINANCING ACTIVITIES

               

Dividend payments

    (39,568 )     (36,132 )

Repurchase of common stock

    (166,427 )     (115,695 )

Proceeds from debt

    65,000       265,000  

Sale of business

    (1,223 )      

Debt issuance costs

          (12 )

Proceeds from employee stock plans

    34,725       26,848  

Tax benefits from share-based payment arrangements

    8,995       10,804  

Net cash (used in) provided by financing activities

    (98,498 )     150,813  
                 

Effect of exchange rate changes on cash and cash equivalents

    (7,233 )     (8,151 )
                 

Net (decrease) increase in cash and cash equivalents

    (73,056 )     16,256  
                 

Cash and cash equivalents at beginning of period

    228,407       158,914  

Cash and cash equivalents at end of period

  $ 155,351     $ 175,170  

 

 
 

 

 

 

News Release |  For Immediate Release 

 

 

Reconciliation of U.S. GAAP Results to Adjusted Financial Measures

 

Financial measures in accordance with U.S. GAAP including revenues, operating income and margin, net income, diluted EPS and cash provided by operating activities have been adjusted below. 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. Adjusted measures may also facilitate comparisons to FactSet’s historical performance.

 

Revenues

 

(Unaudited)

 

Three Months Ended

         
               

(In thousands)

 

February 28, 2017

   

February 29, 2016

   

Change

 

GAAP Revenues

  $ 294,354     $ 281,796       4.5 %

Less acquired revenues (a)

    (3,067 )              

Less Market Metrics revenues

          (9,235 )        

Less Currency impact (b)

    227                

Organic revenues

  $ 291,514     $ 272,561       7.0 %

 

(a)

Acquired revenues from acquisitions completed within the last 12 months.

 

(b)

The impact from foreign currency movements over the past 12 months was excluded to calculate total organic revenues.

 

 

Operating Income, Margin, Net Income and Diluted EPS

 

(Unaudited)

 

Three Months Ended

 
       

(In thousands, except per share data)

 

February 28, 2017

   

February 29, 2016

   

Change

 

GAAP Operating income

  $ 91,746     $ 85,344       7.5 %

Intangible asset amortization (a)

    4,230       4,078          

Other non-recurring items (b)

    1,444       3,838          

Adjusted operating income

  $ 97,420     $ 93,260       4.5 %

Adjusted operating margin

    33.1 %     33.1 %        
                         

GAAP Net income

  $ 66,710     $ 67,763       (1.6 )%

Intangible asset amortization (a)(e)

    3,156       2,903          

Other non-recurring items (b)(c)(e)

    1,978       2,732          

Income tax benefits (d)

 

      (7,317 )        

Adjusted net income

  $ 71,844     $ 66,081       8.7 %
                         

GAAP Diluted earnings per common share

  $ 1.68     $ 1.63          

Intangible asset amortization (a)(e)

    0.08       0.07          

Other non-recurring items (b)(e)

    0.05       0.06          

Income tax benefits (d)

 

      (0.17 )        

Adjusted Diluted earnings per common share

  $ 1.81     $ 1.59       13.8 %

Weighted average common shares (Diluted)

    39,700       41,536          

 

 
 

 

 

 

News Release |  For Immediate Release

 

 

(a)

GAAP operating income in the second quarter of fiscal 2017 was adjusted to exclude $4.2 million of pre-tax intangible asset amortization, which reduced net income by $3.2 million and diluted earnings per share by $0.08. GAAP operating income in the second quarter of fiscal 2016 was adjusted to exclude $4.1 million of pre-tax intangible asset amortization, which reduced net income by $2.9 million and diluted earnings per share by $0.07.

 

(b)

GAAP operating income in the second quarter of fiscal 2017 was adjusted to exclude $1.4 million of pre-tax non-recurring acquisition costs related to the IDMS and BISAM acquisitions, which reduced net income by $1.1 million and diluted earnings per share by $0.03. GAAP operating income in the second quarter of fiscal 2016 was adjusted to exclude a pre-tax charge of $2.4 million from restructuring actions initiated by the Company and $1.4 million of pre-tax expense related to a change in the vesting of performance-based stock options, which collectively reduced net income by $2.7 million and diluted earnings per share by $0.06.

 

(c)

GAAP net income in the second quarter of fiscal 2017 was adjusted to exclude an after-tax loss of $0.9 million from the final working capital adjustment related to sale of FactSet’s Market Metrics business in the fourth quarter of fiscal 2016. This adjustment reduced diluted earnings per share by $0.02.

 

(d)

The U.S. Federal R&D tax credit, which had previously expired on December 31, 2014, was permanently reenacted and retroactive to January 1, 2015. The reenactment resulted in discrete income tax benefits of $7.3 million or $0.17 per diluted share during the second quarter of fiscal 2016.

 

(e)

For the purposes of calculating adjusted net income and adjusted diluted earnings per share, intangible asset amortization and non-recurring acquisition costs were taxed at the annual effective tax rates of 25.4% for fiscal 2017 and 28.8% for fiscal 2016.

 

 

 

Free Cash Flow

 

(Unaudited)

 

Three Months Ended

         
               

(In thousands)

 

February 28, 2017

   

February 29, 2016

   

Change

 

Net cash provided by operating activities

  $ 76,945     $ 93,139          

Capital expenditures

    (5,509 )     (12,053 )        

Free cash flow

  $ 71,436     $ 81,086       (11.9 )%

 

 
 

 

 

 

News Release |  For Immediate Release

 

 

Supplementary Schedules of Historical ASV by Client Type

 

The following table presents the percentages and growth rates of organic ASV by client type, excluding currency, 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.

 

   

Q2’17

   

Q1’17

   

Q4’16

   

Q3’16

   

Q2’16

   

Q1’16

 

% of ASV from buy-side clients

    83.2%       83.0%       82.6%       83.0%       82.8%       82.4%  

% of ASV from sell-side clients

    16.8%       17.0%       17.4%       17.0%       17.2%       17.6%  
                                                 

ASV Growth rate from buy-side clients

    6.8%       8.3%       9.0%       10.3%       9.9%       9.5%  

ASV Growth rate from sell-side clients

    4.9%       6.3%       7.6%       8.1%       10.0%       10.3%  

Total Organic ASV Growth Rate

    6.5%       7.9%       8.8%       9.9%       9.9%       9.7%  

 

The following table presents the calculation of the above-mentioned ASV growth rates from all clients.

 

(In millions)

 

Q2’17

   

Q2’16

 

As reported ASV

    $1,186.9       $1,139.2    

Less acquired ASV (a)

    (14.7)          

Less Market Metrics ASV (b)

          (38.2)    

Less Currency impact (c)

    (0.1)          

Organic ASV total

    $1,172.1       $1,101.0    

Total Organic ASV Growth Rate

    6.5%            

 

(a)

Acquired ASV from acquisitions completed within the last 12 months.

  

(b)

Adjustment to remove ASV related to sale of the Market Metrics business in the fourth quarter of fiscal 2016.

 

(c)

The impact from foreign currency movements over the past 12 months was excluded above to calculate total organic ASV.

 

 

 

Supplementary Schedules of Historical Client and User Count

 

The following table presents the current and historical client and user count under the new definition adopted by FactSet as of its second quarter of 2017. FactSet changed its client count definition to capture clients with ASV greater than $10,000 versus the previous metric of clients with ASV greater than $24,000. FactSet changed its user count definition to account for users from workstations previously not captured due to certain product bundling, and additionally, users of the StreetAccount web product.

 

 

Q2’17

Q1’17

Q4’16

Q3’16

Q2’16

Q1’16

Q4’15

Q3’15

Clients

4,404

4,261

4,205

4,041

3,954

3,812

3,712

3,552

Users

85,788

84,285

83,936

81,314

81,301

81,067

80,145

76,229

 

 

The following table presents the historical client and user count under the previous definition of clients and users.

 

 

Q1’17

Q4’16

Q3’16

Q2’16

Q1’16

Q4’15

Q3’15

Clients

3,116

3,092

3,075

3,057

3,006

2,976

2,915

Users

66,963

65,655

63,535

63,500

63,169

62,205

58,995