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): January 5, 2022
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of | (Commission | (I.R.S. Employer | ||||||||||||
| incorporation or organization) | File Number) | Identification No.) | ||||||||||||
(Address of principal executive offices) (Zip code)
Registrant’s telephone number, including area code: (203 ) 810-1000
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)) | |||||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbols(s) | Name of each exchange on which registered | ||||||
Item 7.01 Regulation FD Disclosure
FactSet Research Systems Inc. (“FactSet” or the “Company") hereby furnishes the Investor Presentation that the Company intends to use from time to time on or after January 5, 2022 with respect to its proposed acquisition of CUSIP Global Services. FactSet may use the Investor Presentation with investors, analysts, lenders, creditors, insurers, vendors, clients, employees and others. The Investor Presentation is furnished herewith as Exhibit 99.1 and also will be made available on the Company’s website at factset.com.
The information contained in the Investor Presentation is summary information that should be considered in the context of the Company's Securities and Exchange Commission (“SEC”) filings and other public announcements that the Company may make, by press release or otherwise, from time to time. The Investor Presentation is current as of the date of this Current Report on Form 8-K. To the extent that estimates, targets or other forward-looking statements are included in the Investor Presentation, the Company specifically disclaims any duty or obligation to publicly update or revise such information, although it may do so from time to time.
The information in this Current Report on Form 8-K, including Exhibit 99.1, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that Section, nor shall it be deemed 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 filing. The furnishing of this information hereby shall not be deemed an admission as to the materiality of any such information.
Item 9.01 Financial Statements and Exhibits
(d) Exhibits
Exhibit No. | Description | |||||||
| Investor Presentation of Factset Research Systems Inc. dated January 5, 2022. | ||||||||
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) | |||||||||||||||||
| January 5, 2022 | By: | /s/ LINDA S. HUBER | |||||||||||||||
| Linda S. Huber Executive Vice President, Chief Financial Officer (Principal Financial Officer) | |||||||||||||||||
Copyright © 2022 FactSet Research Systems Inc. All rights reserved. January 5, 2022 FactSet to Acquire CUSIP Global Services (“CGS”)
Copyright © 2022 FactSet Research Systems Inc. All rights reserved. Forward-Looking Statements and Non-GAAP Measures This presentation contains forward-looking statements based on management's current expectations, assumptions, estimates, forecasts and projections, as of the date such statements are made, about future events or circumstances. All statements that address expectations, guidance, outlook or projections about the future, including statements about FactSet's strategy, future financial results, anticipated growth, expected expenditure and trends, 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 numerous risks, uncertainties and assumptions. These statements include, but may not be limited to, statements about the CUSIP Global Services acquisition and the funding of such acquisition, including the expected timing for the consummation of such transactions. Various risks and uncertainties may cause actual results to differ materially from those stated, projected or implied by any forward-looking statements, including the failure of the S&P Global and IHS Markit merger to be consummated. Factors that will influence the impact on our business and operations include, without limitation, risks and uncertainties described in our most recent Form 10-K filed with the SEC available on our website at http://investor.factset.com and on the SEC’s website at http://www.sec.gov. FactSet believes its expectations and assumptions are reasonable, but there can be no assurance that the expectations reflected herein will be achieved. Unless legally required, we undertake no obligation to update any forward-looking statements made in this presentation whether because of new information, future events or otherwise. This presentation and oral statements made in connection with this presentation may reference non-GAAP financial measures as defined under SEC rules. Forward-looking non-GAAP financial measures reflect management’s current expectations and beliefs, and we are not able to reconcile such non-GAAP measures to reported measures without unreasonable efforts because it is not possible to predict with a reasonable degree of certainty the actual impact or exact timing of items that may impact comparability. Non-GAAP measures should be considered in addition to, not as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP, as more fully discussed in FactSet's financial statements and filings with the SEC, as these non-GAAP measures include and/or do not include certain items not included and/or included in the most directly comparable GAAP measure. As used herein, “GAAP” refers to accounting principles generally accepted in the United States of America. 2
Copyright © 2022 FactSet Research Systems Inc. All rights reserved. Jonathan Reeve EVP, Head of Content & Technology Solutions Today’s Speakers Linda S. Huber EVP, Chief Financial Officer 3 Philip Snow Chief Executive Officer
Copyright © 2022 FactSet Research Systems Inc. All rights reserved. Acquisition to significantly expand FactSet’s critical role in the global capital markets • Purchase price of $1.925 billion • FactSet expects to receive an estimated tax benefit of approximately $200 million 1 • Transaction to be funded via a combination of cash-on-hand and committed financing Transaction Summary • CGS generates approximately $175 million of annual revenue • CGS revenue growth in the mid-to-high single digit range • Expected to be immediately accretive to FactSet’s adjusted operating margins • Expected to be accretive to FactSet’s adjusted diluted EPS in the first year of ownership • Transaction expected to close during the first calendar quarter of 2022 • Subject to customary closing conditions and consummation of S&P Global and IHS Markit merger Purchase Price and Sources of Funds Financial Detail Timing / Closing Conditions • FactSet to acquire CUSIP Global Services (“CGS”) from S&P Global • CGS manages a database of 60 different data elements uniquely identifying more than 50 million global financial instruments • Continue to steward CUSIP in close partnership with the American Bankers Association (ABA) 1. FactSet expects to receive a step up in tax basis resulting in an annual deduction over the next 15 years with an estimated tax benefit of approximately $200 million on a present value basis. 4
Copyright © 2022 FactSet Research Systems Inc. All rights reserved. CGS is the operator of market standard security identifies for more than 50 years CGS Overview CGS Has Deep Industry Alliances CGS Offers Three Core Types of Identifiers CUSIP Committee on Uniform Security Identification Procedures (CUSIP) is a 9-character identifier assigned for issuers and their financial instruments in the U.S. and Canada ISIN • Relied upon worldwide as the industry standard provider of reliable reference data for 50+ years • Serves as the backbone for security master files among both vendor and user firms • Managed on behalf of the American Bankers Association (ABA) American Bankers Association (ABA) The ABA launched the CUSIP system and CGS was formed shortly afterwards in 1968 to administer the system • Municipal Securities Rulemaking Board (MSRB) • National Association of Insurance Commissioners (NAIC) • Canadian Depository for Securities (CDS) • Bermuda Stock Exchange (BSX) • Cayman Islands Stock Exchange (CSX) • Derivatives Service Bureau (DSB) CINS CUSIP International Number System (CINS) is a 9-character identifier that uses the same format as CUSIP and is the local identifier of more than 30 markets outside of North America International Securities Identification Number (ISIN) is a 12-character global identifier assigned by CGS in its role as National Numbering Agency for the US 1 1. CGS is also a Substitute Numbering Agency for 35+ other countries. • Saudi Credit Bureau (SIMAH) • Depository Trust & Clearing Corporation (DTCC) • Loan Syndications and Trading Association (LSTA) • Euromoney TRADEDATA • Securities Industry and Financial Markets Association (SIFMA) • SIX Financial • Templum Markets Association of National Numbering Agencies (ANNA) CGS is co-operator of the ANNA Service Bureau (ASB), a database containing identifier data for over 34M instruments, providing ISIN coverage across 200+ jurisdictions 5 Source: CGS
Copyright © 2022 FactSet Research Systems Inc. All rights reserved. Expanding breadth and depth of coverage as new financial instruments are added over time Equity Debt Other • Common / Ordinary Shares • Preferred Shares • ADRs and GDRs • Exchange Traded Funds • Indices • Limited Partnerships • Listed Options – US/Canada • Mutual Funds • REITs • Rights • Warrants • Unit Investment Trusts • Corporate Bonds • Municipal Bonds • US Treasury and Agencies • Sovereign Debt • Supranational Agencies • Bankers Acceptances • Commercial Paper • Medium-Term Notes • Certificates of Deposit • Mortgage-Backed Securities • Asset-Backed Securities • CLOs / CDOs • Syndicated Bank Loans • Credit Derivatives • Market Agreed Coupon (MAC) Swaps • Hedge Funds • Physical Precious Metals • Restricted 144A and Reg S Securities • Other Private Securities (including digital/tokenized) • Structured and Hybrid Products • Variable Annuities • Other Insurance-Related Products 6 Source: CGS
Copyright © 2022 FactSet Research Systems Inc. All rights reserved. 6% 19% 75% 17% 8% 10% 13% 19% 33% CGS’s financial profile features robust margins and consistent revenue growth rates Summary Financial Metrics Business Mix (% of 2020 ASV 1) By Segment Americas EMEA APAC Investment Managers Investment Banks Redistributors Commercial Banks Insurance Non-FI / Others By Customer Type Revenue Retention 95%+ Subscription Revenue 85%+ Annual Revenue Revenue Growth ~ $175M Mid-to-High Single Digit 1. Annual Subscription Value (“ASV”). 7 Source: CGS
Copyright © 2022 FactSet Research Systems Inc. All rights reserved. Purpose: Drive the investment community to see more, think bigger, and do its best work Client Obsession: Provide open, flexible, adaptive, solutions as part of our open ecosystem with hyper- personalized digital products to provide the next best action across the investment lifecycle Content Refinery: Provide the most comprehensive and connected inventory of client, proprietary, and third-party content in our industry Next Generation Workflows: Build differentiated next generation solutions to streamline our clients’ workflows and deliver tangible efficiencies for the front, middle, and back office Scale Up Our Content Refinery Drive Next-Gen Workflow Solutions Client Obsession 8
Copyright © 2022 FactSet Research Systems Inc. All rights reserved. 20% • Listings • Securities • Entities • People • Transactions • Relationships • ESG • Prices • Performance FactSet Proprietary Content • Concordance to FactSet permanent entity identifiers • Consolidated contractual process • Sandbox for testing • Global coverage • Core Content: Speed • Core Content: Depth Open Content Platform • Award winning Research Solutions • Best-in-class portfolio analytics software for performance, attribution, and risk across asset classes, including equity and fixed income. • The destination for more than 200 best-in-class data feeds, APIs, and products that give investment professionals an edge. Client Centric Access 25 Core Proprietary Content Sets 800+ Third Party Data Vendors 4M+ Client Portfolios DIVERSE DATA MARKET LEADING SYMBOLOGY SCREENED & CONNECTED BY FACTSET INSIGHTS & IDEA GENERATION Comprehensive and connected inventory of client, proprietary and third-party content will be enriched by the addition of the CGS business FactSet’s content refinery expands the universe of knowledge that our clients trust 9
Copyright © 2022 FactSet Research Systems Inc. All rights reserved. CGS is a natural extension of FactSet’s content refinery FactSet’s Data Management Solutions (Today) • Security- and entity-level symbology • Comprehensive entity reference data • Unify disparate sources of information • Expose direct / indirect relationships and hierarchies • Concordance service via API, feed or web app Current FactSet Data Feed Coverage Group Count Type Equity 14.5M Securities Fixed Income 9.1M Securities Entities 6.4M Entities Parent Entities 0.6M Entities Ultimate Parent Entities 4.2M Entities CGS further enhances symbology, concordance, and reference data management, delivered through FactSet’s Content & Technology Solutions (CTS) 10
Copyright © 2022 FactSet Research Systems Inc. All rights reserved. CGS scales FactSet CTS to more than $425M ASV 1 • Enhance CTS value proposition across multiple buy-side and sell-side end markets • Highly complementary to DMS and RBICs solutions, furthering impact across industry • CGS has meaningful presence across middle and back-office workflows and is well positioned to drive penetration in broad addressable market • Combination will result in opportunity to accelerate sales driving greater ASV and related revenue growth Additional Opportunities for Growth • Explore opportunities to expand beyond traditional security identifiers • Actively drive innovation to accelerate initiatives in emerging growth areas • Reinvestment mindset focused on growing CGS’s influence and reach Stewardshi p of ABA’s IP Strategic vision to further CGS’s unique market position and accelerate CTS growth Data Management Solutions (DMS) Revere Business Industry Classifications (RBICs) 1. Annual Subscription Value (“ASV”). 11
Copyright © 2022 FactSet Research Systems Inc. All rights reserved. CGS acquisition is aligned with FactSet’s longer-term capital structure optimization • FactSet is committed to optimizing its longer-term capital structure • Opportunity to accelerate optimization plan by funding the “right” deal - CGS’s strategic fit, accretive margin and strong cash flow serves as catalyst • Well-prepared to execute with strong backing of key relationship banks (PNC Bank and Bank of America) 2 Steps: - Initial: $2 billion committed financing to fund the acquisition at closing - Potential bond issuance: contemplating approximately $1 billion inaugural bond issuance to partially replace initial bank financing Initial transaction financing and longer-term capital allocation 12 1 2 1.01.0 1.01.0 0.6 0.3 0.3 Today (11/30/21) Initial Potential Bond Issuance Bonds 18-Month Term Loan 3-Year Term Loan Drawn Revolver $575 million $2.25 billion $2.25 billion Funded Debt ($ billions) 1 2 Pro forma for closing of CGS acquisition and financing transactions
Copyright © 2022 FactSet Research Systems Inc. All rights reserved. FactSet has secured $2 billion in committed financing to fund the CGS acquisition at closing • Purchase price funded through combination of new debt and cash on hand • Commitment in place for $2 billion loan facility from PNC Bank and Bank of America - $1 billion 3-Year Term Loan A (SOFR + 137.5 bps 2) - $1 billion 18-Month Term Loan A (SOFR + 125 bps 2) • Replacing and resizing existing revolving credit facility in conjunction with financing - Resized $500 million 5-Year revolving credit facility; new $750 million accordion feature • Following closing of CGS acquisition, we intend to suspend share repurchases for the remainder of fiscal 2022 3 Initial transaction financing 1. Currently $575 million of $750 million existing revolver is drawn 2. Based on loan facility pricing grid with estimated net leverage ratio at acquisition closing 3. Excluding minor share repurchases to offset dilution impact from stock option grants Sources $ million New 3-Year Term Loan A $1,000 New 18-Month Term Loan A $1,000 New Revolver Drawn $250 Cash on Hand $250 Total Sources $2,500 Uses $ millions Purchase Price $1,925 Refinance Existing Revolver 1 $575 Total Uses $2,500 13 1
Copyright © 2022 FactSet Research Systems Inc. All rights reserved. • FactSet to pursue credit ratings in conjunction with potential bond issuance - Shelf-registration statement (Form S-3) filed on Tuesday, January 4 - Rating agency meetings to be scheduled during January - Considering bond issuance of approximately $1 billion - Bank of America and PNC Bank would lead any anticipated bond issuance • Anticipated Bond issuance proceeds used to replace initially committed bank financing (namely, the 18-Month Term Loan A) • Following closing of CGS acquisition and financing transactions: - Prioritize excess cash flow to repay debt - Will suspend share repurchases for the remainder of fiscal 2022 1 - No change to dividend policy 2 FactSet contemplating inaugural bond issuance Longer-term capital structure 14 1. Excluding minor share repurchases to offset dilution impact from stock option grants 1.01.0 1.01.0 0.3 0.3 Initial Potential Bond Issuance Bonds 18-Month Term Loan 3-Year Term Loan Drawn Revolver $2.25 billion $2.25 billion Funded Debt ($ billions) 2 Pro forma for closing of CGS acquisition and financing transactions 3 3
Copyright © 2022 FactSet Research Systems Inc. All rights reserved. We maintain a balanced approach to capital allocation 15 Investment in growth and return of capital Capital Allocation Philosophy • Capital to re-invest in capabilities and product innovation • Creating long-term value for shareholders • Ensuring financial flexibility and risk management Acquisitions (M&A) Dividends Buybacks Investments (R&D) Investing in Growth Opportunities Return of Capital
Copyright © 2022 FactSet Research Systems Inc. All rights reserved. Key Takeaways • FactSet’s strategy remains unchanged; this acquisition reflects our continued commitment to invest in our clients’ content and workflow needs • Experienced leadership at FactSet and CGS to further CGS’s unique market position and drive sustainable, long-term value • Market standard with a path to future growth via additional asset classes and other expansion opportunities within FactSet • Natural combination of trusted identifiers with FactSet’s neutral ecosystem to accelerate FactSet’s open data strategy • Meaningfully expands FactSet CTS to more than $425 million of ASV with avenues for additional growth • Enhances FactSet’s financial profile with an underlying growth rate in-line with FactSet’s and an accretive margin and adjusted diluted earnings in the first full year of ownership • CGS acquisition is catalyst for FactSet to consider inaugural bond offering which is aligned with longer-term capital structure optimization 16
Copyright © 2022 FactSet Research Systems Inc. All rights reserved. Questions & Answers