FactSet Research Systems Accelerates Revenue Growth to 14% during the Fourth Quarter of Fiscal 2011

For the quarter ended August 31, 2011 revenues increased to $191.9 million, up 14% compared to the prior year. Operating income for the fourth quarter rose to $59.0 million from $57.4 million in the same period of fiscal 2010. Net income advanced to $40.9 million as compared to $39.3 million a year ago. Diluted earnings per share increased to $0.88, up from $0.83 in the same period of fiscal 2010. A pre-tax charge of $5.4 million or $0.08 per diluted share was recorded in the just completed fourth quarter related to an increase in the number of performance-based stock options that will vest.
 
GAAP financial measures including operating income, operating margin, net income and diluted earnings per share have been adjusted to report non-GAAP financial measures that exclude a pre-tax stock-based compensation charge of $5.4 million and prior year income tax benefits of $0.01 per diluted share. Non-GAAP operating income for the fourth quarter was up 12% to $64.4 million. Non-GAAP net income advanced 16% to $44.6 million and non-GAAP diluted earnings per share increased 17% to $0.96. A reconciliation between GAAP and non-GAAP financial measures is presented on page 8 of the complete press release.

“Our positive fourth quarter results continue to demonstrate the success FactSet is having in the marketplace,” said Philip A. Hadley, Chairman and Chief Executive Officer. “In the fourth quarter, ASV grew $37 million, a quarterly record. In the past 12 months, our annual revenue growth rate improved 600 basis points to 14%, illustrative of our growing market share.”
 
Annual Subscription Value (“ASV”)

ASV advanced $37 million during the quarter. ASV was $779 million at August 31, 2011, up 14% organically over the prior year. Of this total, 82% is derived from buy-side clients and the remainder is from the sell-side firms who perform M&A advisory work and equity research. ASV at any given point in time represents the forward-looking revenues for the next 12 months from all services currently being supplied to clients.

Financial Highlights – Fourth Quarter of Fiscal 2011

• ASV from U.S. operations was $533 million and $246 million was related to international operations.
• U.S. revenues were $132 million, up 15% from the year ago quarter.  
• Non-U.S. revenues rose 12% to $60 million as compared to the same period in fiscal 2010.
• Non-GAAP operating margin was 33.6%.
• Non-GAAP operating income was up 12% compared to the prior year, while non-GAAP diluted EPS advanced 17%.
• Quarterly free cash flow was $64 million, up from $63 million in the year ago quarter.
• Cash and investments in marketable securities were $182 million at August 31, 2011.
• The effective tax rate for the fourth quarter was 30.9% as compared to 31.7% a year ago. 

Operational Highlights – Fourth Quarter of Fiscal 2011

• Professionals using FactSet increased 5% to 48,100, up 2,500 users over the past three months.
• Client count was 2,237 at August 31, a net increase of 50 clients during the quarter.
• Annual client retention was greater than 95% of ASV, consistent with last year. On a client basis, the annual retention rate improved to 92% of clients at August 31 as compared to 90% a year ago, reflecting a reduction in client turnover.
• Employee count was 5,251 at August 31, an increase of 446 employees during the quarter.
• Capital expenditures were $6.5 million with approximately $3.9 million for computer equipment and the remainder for office expansions.
• A regular quarterly dividend of $12.2 million or $0.27 per share was paid on September 20, 2011, to common stockholders of record as of August 31, 2011.
• The Company repurchased 890,000 shares for $84 million during the fourth quarter. At August 31, 2011, $142 million remains authorized for future repurchases.
• Common shares outstanding were 45.1 million at August 31, 2011. 

Fiscal 2011 Highlights

• Revenues increased 13% to $727 million.
• Diluted earnings per share rose 15% to $3.61.
• Free cash flow generated over the last twelve months was $178 million.
• Accounts receivable increased $15 million over the last 12 months while ASV is up $93 million over the same period.
• Users of FactSet advanced 12% or 5,300 professionals since August 31, 2010.
• Added a net increase of 127 clients over the last twelve months.
• Employee count rose 28% to 5,251, up 1,135 employees from a year ago.
• Capital expenditures were $28 million, net of landlord contributions for construction of $1.4 million. Approximately 68% of capital expenditures were for computer equipment and the remainder for office expansions.
• FactSet increased its quarterly dividend 17% from $0.23 to $0.27 per share in May 2011.
• FactSet was named one of Fortune’s “100 Best Companies to Work For,” marking the Company’s third appearance on the list in the last four years.
• FactSet Europe was named one of the “UK’s 50 Best Workplaces” for the third year in a row.

Business Outlook

The following forward-looking statements reflect FactSet’s expectations as of September 20, 2011. Given the number of risk factors, uncertainties and assumptions discussed below, actual results may differ materially. The Company does not intend to update its forward-looking statements until its next quarterly results announcement, other than in publicly available statements.
 
First Quarter Fiscal 2012 Expectations

• Revenues are expected to range between $195 million and $198 million.
• EPS should range between $0.98 and $1.00.

Full Year Fiscal 2012

• The 2012 guidance for capital expenditures, net of landlord contributions, is $22 million to $30 million.
• The projected annual effective tax rate is 31.0%. This rate assumes the U.S. Federal R&D tax credit is reenacted for calendar year 2012 as the tax credit is set to expire on January 1, 2012. If the R&D tax credit expires, the annual effective tax rate would rise to 31.5%.

Conference Call

The Company will host a conference call today, September 20, 2011, at 11:00 a.m. (EDT) to review the fourth quarter fiscal 2011 earnings release. To listen, please visit the investor relations section of the Company’s website at www.factset.com.
 
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 "expected," "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; 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 successful resolution of ongoing audits by tax authorities; 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 generally accepted accounting principles (“GAAP”) including operating income, operating margin, net income and diluted earnings per share have been adjusted to report non-GAAP financial measures. These measures exclude a pre-tax charge of $5.4 million related to an increase in the number of performance-based stock options that will vest. The stock-based compensation charge reduced GAAP operating income by $5.4 million, GAAP diluted earnings per share by $0.08 and GAAP operating margin by 290 basis points. Non-GAAP operating income for the quarter was $64.4 million, up 12%. Non-GAAP net income advanced 16% to $44.6 million and non-GAAP diluted earnings per share increased 17% to $0.96.
 
FactSet uses these non-GAAP financial measures, both in presenting its results to stockholders and the investment community, and in its internal evaluation and management of the businesses. The Company believes that these financial measures and the information they provide are useful to investors because it permits 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 non-GAAP 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. For more information on these non-GAAP financial measures, please see page 8 of the complete release. 
 
About Non-GAAP Free Cash Flow

The presentation of free cash flow is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. 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.Included in the just completed fourth quarter was $70.1 million of net cash provided by operations and $6.5 million of capital expenditures. Over the last twelve months, net cash provided by operations was $207 million and capital expenditures were $29 million. Non-GAAP free cash flow is not intended as an alternative measure of cash flows provided by operating activities, as determined in accordance with GAAP. 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 businesses. 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 Research Systems Inc. combines integrated financial information, analytical applications, and client service to enhance the workflow and productivity of the global investment community. The Company, headquartered in Norwalk, Connecticut, was formed in 1978 and now conducts operations along with its affiliates from more than twenty-four locations worldwide, including Boston, New York, Chicago, San Mateo, London, Amsterdam, Frankfurt, Paris, Milan, Dubai, Tokyo, Hong Kong, Mumbai and Sydney.

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