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 third
quarter ended May 31, 2018.
Third Quarter Fiscal 2018 Highlights
- Revenues increased 8.9% or $27.8 million to $339.9 million
compared with $312.1 million for the same period in fiscal 2017.
Organic revenues grew 5.7% to $332.5 million during the third
quarter of 2018 from the prior year period. The increase is
primarily due to higher sales of analytics products, content and
technology solutions (CTS) and wealth management solutions.
- Annual Subscription Value (ASV) increased to $1.36 billion at
May 31, 2018 compared with prior year ASV of $1.28 billion. The
organic ASV growth rate, which excludes the effects of
acquisitions, dispositions, and foreign currency, was 5.3%.
- Operating margin decreased to 27.4% compared with 28.1% in the
prior year period. The decrease in operating margin is primarily
related to restructuring actions and certain one-time
administrative expenses. Adjusted operating margin decreased to
31.0% compared with 31.9% in the prior year period.
- Diluted earnings per share (EPS) increased to $1.91 compared
with $1.66 for the same period in fiscal 2017. Adjusted diluted EPS
for the third quarter rose 17.8% to $2.18 compared with $1.85 in
the prior period boosted primarily by the U.S. Tax Cuts and Jobs
Act (“TCJA”).
- The Company’s effective tax rate for the third quarter was
16.5%, as compared with 23.2% a year ago, primarily due to the
TCJA.
- FactSet increased its quarterly dividend by $0.08 or 14.3% per
share to $0.64 marking the 13th consecutive year the Company has
increased dividends, highlighting its continued commitment to
returning value to shareholders.
“We are making progress integrating and
cross selling our acquisitions resulting in important wins this
quarter, particularly within Analytics. We continue to innovate
with the launch of the Open:FactSet marketplace and enhancing our
risk offering. We believe we have a solid pipeline for the fourth
quarter and expect to finish fiscal 2018 in our guidance range,”
said Phil Snow, FactSet CEO.
Key Financial Measures*
(Condensed and Unaudited) |
|
Three Months EndedMay 31, |
|
|
|
|
|
|
|
|
|
|
(In thousands, except
per share data) |
|
2018 |
|
|
2017 |
|
Change |
|
GAAP revenues |
$ |
339,911 |
|
$ |
312,120 |
|
|
8.9 |
% |
Organic revenues |
$ |
332,508 |
|
$ |
314,453 |
|
|
5.7 |
% |
Operating income |
$ |
93,265 |
|
$ |
87,642 |
|
|
6.4 |
% |
Adjusted operating
income |
$ |
105,681 |
|
$ |
100,331 |
|
|
5.3 |
% |
Operating margin |
|
27.4 |
% |
|
28.1 |
% |
|
|
Adjusted operating
margin |
|
31.0 |
% |
|
31.9 |
% |
|
|
Net income |
$ |
74,746 |
|
$ |
65,414 |
|
|
14.3 |
% |
Adjusted net
income |
$ |
85,113 |
|
$ |
72,949 |
|
|
16.7 |
% |
Diluted EPS |
$ |
1.91 |
|
$ |
1.66 |
|
|
15.1 |
% |
Adjusted diluted
EPS |
$ |
2.18 |
|
$ |
1.85 |
|
|
17.8 |
% |
|
|
|
|
|
|
|
* See reconciliation of U.S. GAAP to adjusted key
financial measures in the back of this press release
Maurizio Nicolelli, FactSet CFO added, “We made
good progress on our annual and medium term goals this quarter. The
restructuring actions we initiated this quarter help us
to optimize costs and benefit margins in the future.
With our balanced capital allocation framework including our robust
share buyback program and an increase in dividends, we continued to
return value to shareholders.”
Annual Subscription Value (ASV) and Segment Revenue
ASV was $1.36 billion at May 31, 2018, up $67.6
million organically from the prior year. The organic ASV growth
rate was 5.3%. ASV excludes professional services fees billed in
the last 12 months, which are not subscription-based. Organic ASV,
which excludes the effects of acquisitions, dispositions and
foreign currency, increased $9.0 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
third quarter of fiscal 2018 were 5.3% and 5.0%, respectively.
Buy-side clients accounted for 84.4% 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 the last page of this earnings
release.
ASV from U.S. operations was $843.6 million,
increasing 4.4% over prior year of $807.8 million and 4.4%
organically. U.S. revenues for the quarter were $210.3 million
compared with $197.8 million in the third quarter last year.
Excluding the effects of acquisitions and dispositions completed in
the last 12 months, the U.S. revenue growth rate was 5.0%. ASV from
international operations was $512.6 million, increasing 8.1% over
prior year of $474.3 million and 6.7% organically. International
ASV now represents 37.8% of total ASV, up from 37.0% a year ago.
International revenues were $129.6 million compared with $114.3
million from the third quarter of fiscal 2017. Excluding the
effects of acquisitions and dispositions completed in the last 12
months and foreign currency, the international revenue growth rate
was 6.9%.
Operational Highlights – Third Quarter Fiscal 2018
- Client count as of May 31, 2018 was 4,975, a net increase of 80
clients in the past three months, primarily driven by the Company’s
wealth management business. The count includes clients with ASV of
$10,000 and above.
- User count increased by 860 to 89,506 in the past three months
primarily driven by an increase in wealth workstation sales.
FactSet defines users as workstation and StreetAccount users.
- Annual client retention was greater than 95% of ASV. When
expressed as a percentage of clients, annual retention was
90%.
- Employee count was 9,197 as of May 31, 2018, up 3.5% in the
past 12 months.
- Net cash provided by operating activities was $125.7 million
compared with $92.3 million for the third quarter of 2017.
Quarterly free cash flow was $119.7 million compared with $84.3
million a year ago, an increase of 41.9% primarily due to improved
cash collections.
- Capital expenditures decreased to $6.0 million, compared with
$7.9 million a year ago.
- A regular quarterly dividend of $24.6 million, or $0.64 per
share, was paid on June 19, 2018, to common stockholders of record
as of May 31, 2018. The $0.08 per share or 14.3% increase marked
the 13th consecutive year the Company has increased dividends,
highlighting its continued commitment to returning value to
shareholders.
- FactSet launched Open:FactSet Marketplace, a new online
platform that offers both financial and alternative data such as
satellite, sentiment, and environmental, social, and governance
(ESG) data to address the growing demand for integrated data.
- The Company released its first annual Corporate Social
Responsibility Report, which covered the fiscal year ending August
31, 2017. The report highlights FactSet’s recent achievements and
sets a trajectory for the future CSR goals.
- FactSet expanded its global footprint by opening a new office
in Shanghai, China. The Shanghai office will support FactSet's
presence in the rapidly expanding, sophisticated, and
technology-driven Chinese market.
Share Repurchase Program
FactSet repurchased 620,000 shares for $122 million during the
third quarter under the Company’s existing share repurchase
program. Over the last 12 months, FactSet has returned $369 million
to stockholders in the form of share repurchases and dividends,
funded by cash generated from operations. In its second quarter of
2018, the Company increased its share repurchase program to be in
the range of $325 million to $375 million. This is an increase of
approximately $100 million to the annual spend on share repurchases
due to the repatriation of foreign earnings. Under the Company’s
existing share repurchase program, $309.3 million is currently
available for share repurchases.
Annual Business Outlook
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 until its next quarterly results
announcement, other than in publicly available statements.
Fiscal 2018 Expectations
- Organic ASV is expected to increase in the range of $65 million
and $85 million implying a growth rate in the range of 4.9% to 6.5%
compared with fiscal 2017.
- GAAP Revenues are expected to be in the range of $1.34 billion
and $1.36 billion.
- GAAP operating margin is expected to be in the range of 27.5%
and 29.0%.
- Adjusted operating margin is expected to be in the range of
31.0% and 32.5%.
- FactSet’s annual effective tax rate is expected to be in the
range of 18.0% and 19.5% primarily as a result of the TCJA. This
range excludes the one-time deemed repatriation tax on historical
unrepatriated foreign earnings, amongst other provisions related to
the TCJA. The Company’s fiscal year end is August 31st, resulting
in a blended federal statutory tax rate for the full 2018 fiscal
year.
- GAAP diluted EPS is now expected to be in the range of $6.92
and $7.17. Adjusted diluted EPS is now expected to be in the range
of $8.37 and $8.62.
Both GAAP operating margin and GAAP diluted EPS
guidance do not include the effects of any non-recurring benefits
or charges that may arise in the fourth quarter of fiscal 2018.
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, June 26, 2018 at
11:00 a.m. Eastern Time to discuss the third quarter results. The
call will be webcast live at FactSet Investor Relations. The
following information is provided for those who would like to
participate:
U.S. Participants:
833.231.8259 International Participants:
647.689.4104 Passcode:
9179188Moderator:
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 July 3, 2018 via the
following telephone numbers: 800.585.8367 in the U.S. and
416.621.4642 internationally using passcode 9179188.
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. 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 89,000 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.
FactSetContact:Rima
Hyder857.265.7523rima.hyder@factset.com
Consolidated Statements
of Income (Unaudited) |
|
|
|
|
|
|
|
|
Three Months EndedMay 31, |
|
Nine Months EndedMay 31, |
(In thousands, except
per share data) |
|
2018 |
|
|
|
2017 |
|
|
|
2018 |
|
|
|
2017 |
|
|
|
|
|
|
|
|
|
Revenues |
$ |
339,911 |
|
|
$ |
312,120 |
|
|
$ |
1,004,283 |
|
|
$ |
894,537 |
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
|
|
|
|
|
Cost of
services |
|
165,073 |
|
|
|
146,426 |
|
|
|
489,829 |
|
|
|
405,311 |
|
Selling,
general and administrative |
|
81,573 |
|
|
|
78,052 |
|
|
|
236,606 |
|
|
|
219,519 |
|
Total
operating expenses |
|
246,646 |
|
|
|
224,478 |
|
|
|
726,435 |
|
|
|
624,830 |
|
|
|
|
|
|
|
|
|
Operating income |
|
93,265 |
|
|
|
87,642 |
|
|
|
277,848 |
|
|
|
269,707 |
|
|
|
|
|
|
|
|
|
Other expense |
|
|
|
|
|
|
|
Loss on
sale of business |
― |
|
|
― |
|
|
― |
|
|
|
(1,223 |
) |
Interest
expense, net of interest income |
|
(3,754 |
) |
|
|
(2,413 |
) |
|
|
(9,945 |
) |
|
|
(3,945 |
) |
Total other
expense |
|
(3,754 |
) |
|
|
(2,413 |
) |
|
|
(9,945 |
) |
|
|
(5,168 |
) |
|
|
|
|
|
|
|
|
Income before income
taxes |
|
89,511 |
|
|
|
85,229 |
|
|
|
267,903 |
|
|
|
264,539 |
|
|
|
|
|
|
|
|
|
Provision for income
taxes |
|
14,765 |
|
|
|
19,815 |
|
|
|
69,641 |
|
|
|
65,832 |
|
Net
income |
$ |
74,746 |
|
|
$ |
65,414 |
|
|
$ |
198,262 |
|
|
$ |
198,707 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per
common share |
$ |
1.91 |
|
|
$ |
1.66 |
|
|
$ |
5.01 |
|
|
$ |
5.00 |
|
|
|
|
|
|
|
|
|
Diluted weighted
average common shares |
|
39,104 |
|
|
|
39,457 |
|
|
|
39,543 |
|
|
|
39,736 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Statements of Comprehensive Income (Unaudited) |
|
|
|
|
Three Months EndedMay 31, |
|
Nine Months EndedMay 31, |
(In thousands) |
|
2018 |
|
|
|
2017 |
|
|
2018 |
|
|
|
2017 |
|
|
|
|
|
|
|
|
Net income |
$ |
74,746 |
|
|
$ |
65,414 |
|
$ |
198,262 |
|
|
$ |
198,707 |
|
|
|
|
|
|
|
|
Other comprehensive
income (loss), net of tax |
|
|
|
|
|
|
|
Net
unrealized (loss) gain on cash flow hedges* |
|
(2,361 |
) |
|
|
2,385 |
|
|
(4,105 |
) |
|
|
4,233 |
Foreign
currency translation adjustments |
|
(20,126 |
) |
|
|
21,316 |
|
|
(2,260 |
) |
|
|
10,680 |
Other
comprehensive income (loss) |
|
(22,487 |
) |
|
|
23,701 |
|
|
(6,365 |
) |
|
|
14,913 |
Comprehensive
income |
$ |
52,259 |
|
|
$ |
89,115 |
|
$ |
191,897 |
|
|
$ |
213,620 |
|
|
|
|
|
|
|
|
*For the three and nine months ended May 31,
2018, the unrealized loss on cash flow hedges was net of tax
benefits of $976 and $2,166, respectively. For the three and nine
months ended May 31, 2017, the unrealized gain on cash flow hedges
was net of tax expense of $1,485 and $2,563, respectively.
|
|
|
|
Consolidated Balance Sheets (Unaudited) |
|
|
|
|
|
|
|
|
May 31, |
August 31, |
|
(In
thousands) |
|
|
|
2018 |
|
2017 |
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
213,061 |
$ |
194,731 |
|
Investments |
|
30,485 |
|
32,444 |
|
Accounts receivable, net of reserves |
|
145,255 |
|
148,331 |
|
Prepaid taxes |
|
|
9,236 |
|
7,076 |
|
Deferred taxes |
|
― |
|
2,668 |
|
Prepaid expenses and other current assets |
|
|
31,573 |
|
24,127 |
|
|
Total
current assets |
|
|
429,610 |
|
409,376 |
|
|
|
|
|
|
|
|
|
Property, equipment, and leasehold improvements, net |
|
94,380 |
|
100,454 |
|
Goodwill |
|
|
|
704,807 |
|
707,560 |
|
Intangible assets, net |
|
|
|
155,776 |
|
173,543 |
|
Deferred taxes |
|
|
|
7,916 |
|
7,412 |
|
Other assets |
|
|
|
14,683 |
|
14,970 |
|
|
Total
Assets |
|
|
$ |
1,407,172 |
$ |
1,413,315 |
|
|
|
|
|
|
|
|
LIABILITIES |
|
|
|
Accounts payable and accrued expenses |
$ |
62,772 |
$ |
59,214 |
|
Accrued compensation |
|
|
40,257 |
|
61,083 |
|
Deferred fees |
|
|
57,528 |
|
47,495 |
|
Taxes payable |
|
|
12,670 |
|
9,112 |
|
Deferred taxes |
|
― |
|
2,382 |
|
Dividends payable |
|
|
24,566 |
|
21,853 |
|
|
Total
current liabilities |
|
|
197,793 |
|
201,139 |
|
|
|
|
|
|
|
|
|
Deferred taxes |
|
|
|
23,627 |
|
24,892 |
|
Deferred fees |
|
|
|
7,007 |
|
3,921 |
|
Taxes payable |
|
|
|
29,010 |
|
11,484 |
|
Long-term debt |
|
574,739 |
|
575,000 |
|
Deferred rent and other non-current liabilities |
|
39,663 |
|
37,188 |
|
|
Total
Liabilities |
|
$ |
871,839 |
$ |
853,624 |
|
|
|
|
|
|
|
|
STOCKHOLDERS’ EQUITY |
|
|
|
|
|
Total
Stockholders’ Equity |
|
$ |
535,333 |
$ |
559,691 |
|
|
Total
Liabilities and Stockholders’ Equity |
$ |
1,407,172 |
$ |
1,413,315 |
|
|
|
|
|
|
|
|
Consolidated Statements of Cash Flows (Unaudited) |
|
|
|
(In
thousands) |
Nine Months EndedMay 31, |
|
|
|
|
2018 |
|
|
|
2017 |
|
|
CASH FLOWS
FROM OPERATING ACTIVITIES |
|
|
|
|
|
|
|
Net
income |
|
$ |
198,262 |
|
|
$ |
198,707 |
|
|
Adjustments to reconcile net income to net cash provided by
operating activities |
|
|
|
|
Depreciation and amortization |
|
42,848 |
|
|
|
33,770 |
|
|
Stock-based compensation expense |
|
23,241 |
|
|
|
20,873 |
|
|
Loss on sale of business |
― |
|
|
|
1,223 |
|
|
Deferred income taxes |
|
848 |
|
|
|
8,829 |
|
|
Loss on sale of assets |
|
18 |
|
|
|
33 |
|
|
Tax benefits from share-based payment arrangements |
― |
|
|
|
(9,798 |
) |
|
Changes in assets and liabilities, net of effects of
acquisitions |
|
|
|
|
Accounts receivable, net of reserves |
|
|
|
3,067 |
|
|
|
(29,310 |
) |
|
Accounts payable and accrued expenses |
|
|
|
3,423 |
|
|
|
1,548 |
|
|
Accrued compensation |
|
(20,629 |
) |
|
|
(17,299 |
) |
|
Deferred fees |
|
13,027 |
|
|
|
2,638 |
|
|
Taxes payable, net of prepaid taxes |
|
25,928 |
|
|
|
6,081 |
|
|
Prepaid expenses and other assets |
|
(11,503 |
) |
|
|
440 |
|
|
Deferred rent and other non-current
liabilities |
|
621 |
|
|
|
2,766 |
|
|
Other working capital accounts, net |
|
191 |
|
|
|
(189 |
) |
|
Net cash provided by operating activities |
|
|
279,342 |
|
|
|
220,312 |
|
|
|
|
|
|
|
|
CASH FLOWS
FROM INVESTING ACTIVITIES |
|
|
|
|
|
Acquisition of businesses, net of cash acquired |
― |
|
|
|
(301,843 |
) |
|
Purchases
of investments |
(9,608 |
) |
|
|
(29,982 |
) |
|
Proceeds
from sales of investments |
9,872 |
|
|
|
23,399 |
|
|
Purchases
of property, equipment and leasehold improvements, net of proceeds
from dispositions |
(18,375 |
) |
|
|
(25,981 |
) |
|
Net cash used in investing activities |
|
|
(18,111 |
) |
|
|
(334,407 |
) |
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS
FROM FINANCING ACTIVITIES |
|
|
|
|
|
Dividend
payments |
|
|
(65,037 |
) |
|
|
(59,124 |
) |
|
Repurchase
of common stock |
|
|
(235,869 |
) |
|
|
(214,766 |
) |
|
Proceeds
from debt |
|
|
― |
|
|
|
575,000 |
|
|
Repayment
of debt |
|
|
― |
|
|
|
(300,000 |
) |
|
Debt
issuance costs |
|
|
― |
|
|
|
(437 |
) |
|
Proceeds
from employee stock plans |
|
|
|
57,529 |
|
|
|
42,159 |
|
|
Tax
benefits from share-based payment arrangements |
|
|
― |
|
|
|
9,798 |
|
|
Other
financing activities |
|
|
|
2,218 |
|
|
|
(1,223 |
) |
|
Net cash used in financing activities |
|
|
|
(241,159 |
) |
|
|
(51,407 |
) |
|
|
|
|
|
|
|
|
Effect of
exchange rate changes on cash and cash equivalents |
|
|
(1,742 |
) |
|
|
(3,961 |
) |
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents |
|
|
18,330 |
|
|
|
(66,649 |
) |
|
|
|
|
|
|
|
|
Cash and
cash equivalents at beginning of period |
|
|
|
194,731 |
|
|
|
228,407 |
|
|
Cash and
cash equivalents at end of period |
|
|
$ |
213,061 |
|
|
$ |
161,758 |
|
|
|
|
|
|
|
|
|
|
|
|
|
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 (Details may not sum to total
due to rounding)
|
|
|
(Unaudited) |
|
Three Months EndedMay 31, |
(In thousands) |
|
|
2018 |
|
|
2017 |
|
Change |
|
GAAP revenues |
|
$ |
339,911 |
|
$ |
312,120 |
|
8.9 |
% |
Deferred revenue fair
value adjustment (a) |
|
|
1,488 |
|
|
2,531 |
|
|
Acquired revenues
(b) |
|
|
(6,985 |
) |
|
(198 |
) |
|
Currency impact
(c) |
|
|
(1,906 |
) |
|
― |
|
|
Organic
revenues |
|
$ |
332,508 |
|
$ |
314,453 |
|
5.7 |
% |
|
|
|
|
|
|
|
|
|
|
- The adjustment relates to deferred revenue fair value
adjustments from purchase accounting.
- Acquired revenues from acquisitions and divestitures completed
within the last 12 months.
- The impact from foreign currency movements over the past 12
months.
Operating Income, Margin, Net Income and Diluted
EPS (Details may not sum to total due to
rounding)
|
|
|
(Unaudited) |
|
Three Months EndedMay 31, |
|
|
|
(In thousands, except
per share data) |
|
|
2018 |
|
|
2017 |
|
Change |
|
|
GAAP Operating
income |
|
$ |
93,265 |
|
$ |
87,642 |
|
6.4 |
% |
|
Intangible asset
amortization (a) |
|
|
6,215 |
|
|
5,779 |
|
|
|
Deferred revenue fair
value adjustment (b) |
|
|
1,488 |
|
|
2,531 |
|
|
|
Other
non-recurring items (c) |
|
|
4,713 |
|
|
4,379 |
|
|
|
Adjusted
operating income |
|
$ |
105,681 |
|
$ |
100,331 |
|
5.3 |
% |
|
Adjusted operating margin (d) |
|
|
31.0 |
% |
|
31.9 |
% |
|
|
|
|
|
|
|
|
GAAP Net income |
|
$ |
74,746 |
|
$ |
65,414 |
|
14.3 |
% |
|
Intangible asset
amortization (a)(e) |
|
|
5,190 |
|
|
4,305 |
|
|
|
Deferred revenue fair
value adjustment (b)(e) |
|
|
1,242 |
|
|
1,886 |
|
|
|
Other
non-recurring items (c)(e) |
|
|
3,935 |
|
|
3,262 |
|
|
|
Income tax items
(f) |
|
|
- |
|
|
(1,918 |
) |
|
|
Adjusted net income |
|
$ |
85,113 |
|
$ |
72,949 |
|
16.7 |
% |
|
|
|
|
|
|
|
GAAP Diluted earnings
per common share |
|
$ |
1.91 |
|
$ |
1.66 |
|
15.1 |
% |
|
Intangible asset
amortization (a)(e) |
|
|
0.13 |
|
|
0.11 |
|
|
|
Deferred revenue fair
value adjustment (b)(e) |
|
|
0.03 |
|
|
0.05 |
|
|
|
Other
non-recurring items (c)(e) |
|
|
0.10 |
|
|
0.08 |
|
|
|
Income tax items
(f) |
|
|
- |
|
|
(0.05 |
) |
|
|
Adjusted
diluted earnings per common share |
|
$ |
2.18 |
|
$ |
1.85 |
|
17.8 |
% |
|
Weighted average common
shares (Diluted) |
|
|
39,104 |
|
|
39,457 |
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) GAAP operating income in the third
quarter of fiscal 2018 was adjusted to exclude $6.2 million of
pre-tax intangible asset amortization, which reduced net income by
$5.2 million and diluted earnings per share by $0.13. GAAP
operating income in the third quarter of fiscal 2017 was adjusted
to exclude $5.8 million of pre-tax intangible asset amortization,
which reduced net income by $4.3 million and diluted earnings per
share by $0.11. The income tax effect related to intangible asset
amortization was $1.0 million in the third quarter of fiscal 2018
compared with $1.5 million for the same period in fiscal 2017.
(b) The adjustment for the third quarter
of fiscal 2018 relates to deferred revenue fair value adjustments
from purchase accounting. The income tax effect related to deferred
revenue fair value adjustments was $0.2 million in the third
quarter of fiscal 2018 compared with $0.6 million from the prior
year period.
(c) GAAP operating income in the third
quarter of fiscal 2018 was adjusted to exclude $4.7 million of
pre-tax expenses primarily related to severance, stock-based
compensation acceleration, other restructuring actions and legal
matters, which reduced net income by $3.9 million and diluted
earnings per share by $0.10. GAAP operating income in the third
quarter of fiscal 2017 was adjusted to exclude $4.4 million of
pre-tax expenses primarily related to the BISAM and FDSG
acquisitions, which reduced net income by $3.3 million and diluted
earnings per share by $0.08. The income tax effect related to the
other non-recurring items was $0.8 million in the third quarter of
fiscal 2018 compared with $1.1 million for the same period in
fiscal 2017.
(d) Adjusted operating margin is
calculated as adjusted operating income divided by GAAP revenues
plus the deferred revenue fair value adjustment.
(e) 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 16.5% for fiscal 2018 and 25.5% for fiscal 2017.
(f) Fiscal 2017 GAAP net income was
adjusted to exclude $1.9 million of income tax benefits related to
finalizing previous years’ tax returns and other discrete items.
GAAP diluted EPS was adjusted to exclude $0.05 from these same
income tax benefits.
Business Outlook Operating Margin, Net Income and
Diluted EPS
|
|
|
(Unaudited) |
|
|
|
|
Annual Fiscal 2018 Guidance |
|
|
|
(In thousands, except
per share data) |
|
Low end of range |
|
High end of range |
|
GAAP Operating
margin |
|
|
27.5 |
% |
|
29.0 |
% |
Intangible asset
amortization (a) |
|
|
0.6 |
% |
|
0.6 |
% |
Deferred revenue fair
value adjustment (b) |
|
|
1.8 |
% |
|
1.8 |
% |
Other
non-recurring items (c) |
|
|
1.1 |
% |
|
1.1 |
% |
Adjusted
operating margin |
|
|
31.0 |
% |
|
32.5 |
% |
|
|
|
|
|
|
|
|
GAAP Net income |
|
$ |
268,000 |
|
$ |
278,000 |
|
Intangible asset
amortization (a) |
|
|
19,750 |
|
|
19,750 |
|
Deferred revenue fair
value adjustment (b) |
|
|
6,080 |
|
|
6,080 |
|
Other
non-recurring items (c) |
|
|
11,076 |
|
|
11,076 |
|
Income tax items
(d) |
|
|
21,310 |
|
|
21,310 |
|
Adjusted
net income |
|
$ |
326,216 |
|
$ |
336,216 |
|
|
|
|
|
GAAP Diluted earnings
per common share |
|
$ |
6.92 |
|
$ |
7.17 |
|
Intangible asset
amortization (a) |
|
|
0.49 |
|
|
0.49 |
|
Deferred revenue fair
value adjustment (b) |
|
|
0.14 |
|
|
0.14 |
|
Other
non-recurring items (c) |
|
|
0.29 |
|
|
0.29 |
|
Income tax items
(d) |
|
|
0.53 |
|
|
0.53 |
|
Adjusted
net income |
|
$ |
8.37 |
|
$ |
8.62 |
|
|
|
|
|
|
|
|
|
(a) GAAP operating income for the full
fiscal 2018 year was adjusted to exclude $24.7 million of pre-tax
intangible asset amortization, which reduced the GAAP operating
margin by 0.6%, GAAP net income by $19.8 million and GAAP diluted
earnings per share by $0.49. The income tax effect related to
intangible asset amortization was $4.9 million for the period
presented above.
(b) The adjustment relates to deferred revenue fair value
adjustments from purchase accounting. The income tax effect related
to deferred revenue fair value adjustments was $1.6 million for the
period presented above.
(c) GAAP operating income for the full
fiscal 2018 year was adjusted to exclude $14.1 million of pre-tax
expenses primarily related to severance, stock-based compensation
acceleration, other restructuring actions and legal matters, which
reduced net income by $11.1 million and diluted earnings per share
by $0.29. The income tax effect related to other non-recurring
items was $3.0 million for the period presented above.
(d) GAAP net income for the full fiscal
2018 year was adjusted to exclude $21.3 million of
tax charges primarily related to the one-time deemed
repatriation tax on foreign earnings. This reduced diluted earnings
per share by $0.53.
Free Cash Flow
|
|
|
|
(Unaudited) |
|
Three Months Ended May 31, |
|
|
|
|
|
(In thousands) |
|
|
2018 |
|
|
2017 |
|
Change |
|
Net cash provided by
operating activities |
|
$ |
125,654 |
|
$ |
92,253 |
|
|
Capital
expenditures |
|
|
(6,000 |
) |
|
(7,935 |
) |
|
Free cash
flow |
|
$ |
119,654 |
|
$ |
84,318 |
|
41.9 |
% |
|
|
|
|
|
|
|
|
|
|
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.
|
|
Q3’18 |
Q2’18 |
Q1’18 |
Q4’17 |
Q3’17 |
Q2’17 |
% of ASV from buy-side clients |
84.4 |
% |
84.4 |
% |
84.2 |
% |
84.1 |
% |
84.4 |
% |
83.2 |
% |
% of ASV from sell-side clients |
15.6 |
% |
15.6 |
% |
15.8 |
% |
15.9 |
% |
15.6 |
% |
16.8 |
% |
|
|
|
|
|
|
|
ASV Growth rate from buy-side clients |
5.3 |
% |
6.0 |
% |
5.3 |
% |
5.9 |
% |
5.7 |
% |
6.8 |
% |
ASV Growth rate from sell-side clients |
5.0 |
% |
4.6 |
% |
3.9 |
% |
4.6 |
% |
5.8 |
% |
4.9 |
% |
Total Organic ASV Growth Rate |
5.3 |
% |
5.8 |
% |
5.1 |
% |
5.7 |
% |
5.7 |
% |
6.5 |
% |
|
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) |
Q3’18 |
Q3’17 |
As reported ASV (a) |
$ |
1,356.2 |
|
$ |
1,282.2 |
Currency impact (b) |
|
1.6 |
|
|
8.0 |
Organic ASV total |
$ |
1,357.8 |
|
$ |
1,290.2 |
Total Organic ASV Growth Rate |
|
5.3 |
% |
|
- Beginning with the fiscal third quarter of 2017, FactSet
excluded professional services fees billed within the last 12
months, which are not subscription based. ASV excludes $20.1
million and $16.4 million, respectively, in professional services
fees as of May 31, 2018 and 2017.
- The impact from foreign currency movements was excluded above
to calculate total organic ASV.
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