March 26, 2020
NORWALK, Conn., March 26, 2020 (GLOBE NEWSWIRE) -- FactSet ("FactSet" or the “Company”) (NYSE:FDS) (NASDAQ:FDS), a global provider of integrated financial information, analytical applications, and industry-leading service, today announced results for its second quarter ended February 29, 2020.
Second Quarter Fiscal 2020 Highlights
“We performed well in our second quarter and continued to execute successfully against our three-year investment plan,” said Phil Snow, FactSet CEO. “I am most proud, however, of the way the FactSet community has united to support its members and our clients during this challenging period. While we proceed with caution for the remainder of the year due to the heightened impact and uncertainty surrounding the coronavirus pandemic, our commitment to our team and our clients remains absolute.”
Key Financial Measures*
(Condensed and Unaudited) | Three Months Ended | |||||||
February 29, | February 28, | |||||||
(In thousands, except per share data) | 2020 | 2019 | Change | |||||
GAAP revenues | $ | 369,780 | $ | 354,895 | 4.2 | % | ||
Organic revenues | $ | 370,988 | $ | 356,194 | 4.2 | % | ||
Operating income | $ | 106,257 | $ | 108,688 | (2.2 | )% | ||
Adjusted operating income | $ | 117,922 | $ | 118,243 | (0.3 | )% | ||
Operating margin | 28.7 | % | 30.6 | % | ||||
Adjusted operating margin | 31.8 | % | 33.2 | % | ||||
Net income | $ | 88,686 | $ | 84,702 | 4.7 | % | ||
Adjusted net income | $ | 98,348 | $ | 93,598 | 5.1 | % | ||
Diluted EPS | $ | 2.30 | $ | 2.19 | 5.0 | % | ||
Adjusted diluted EPS | $ | 2.55 | $ | 2.42 | 5.4 | % | ||
* See reconciliation of U.S. GAAP to adjusted key financial measures in the back of this press release
“FactSet ended the half-year on solid footing, and we believe we are well-positioned to navigate the current unprecedented economic and market volatility given the strength of our balance sheet and liquidity,” said Helen Shan, FactSet CFO. “FactSet’s strong team and resilient business model will help us navigate this tumultuous time and bring long-term value to both clients and shareholders.”
Annual Subscription Value (ASV) + Professional Services and Segment Revenue
ASV at any given point in time represents the forward-looking revenues for the next twelve months from all subscription services currently supplied to clients and excludes professional services fees billed in the last 12 months that are not subscription-based. Professional services are revenues derived from project-based consulting and implementation.
ASV plus professional services was $1.50 billion at February 29, 2020. Organic ASV plus professional services was also $1.50 billion at February 29, 2020, up $62.5 million from the prior year at a growth rate of 4.3%. Organic ASV, which excludes the effects of acquisitions, dispositions, and foreign currency movements, plus professional services, increased $25.7 million over the last three months.
Buy-side and sell-side ASV growth rates for the second quarter of fiscal 2020 were 4.5% and 2.9%, respectively. Buy-side clients accounted for 84.1% of organic 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 $925.6 million, increasing 3.9% over the prior year period's $890.5 million. U.S. revenues for the quarter increased to $232.7 million compared with $223.3 million in the second quarter last year. Excluding the effects of acquisitions and dispositions completed in the last 12 months, the U.S. revenue growth rate was 4.2%. ASV from international operations was $554.0 million, increasing 4.5% over the prior year period of $530.2 million. International revenues were $137.1 million compared with $131.6 million from the second quarter of fiscal 2019. Excluding the effects of acquisitions and dispositions completed in the last 12 months and foreign currency impacts, the international revenue growth rate was 4.1%. Segment ASV does not include professional services, which totaled $24.5 million at February 29, 2020.
Operational Highlights – Second Quarter Fiscal 2020
Share Repurchase Program
FactSet repurchased 267,500 shares of its common stock for $74.2 million at an average price of $277.28 during the second quarter under the Company’s existing share repurchase program. Additionally, on March 24, 2020, the Board of Directors of FactSet approved an increase of $220 million to the existing share repurchase program. Including this increase, as of March 26, 2020, $300 million is available for share repurchases.
Annual Business Outlook
FactSet provided its outlook for fiscal 2020 on September 26, 2019. Given the risk factors, uncertainties, and assumptions discussed below, particularly the ongoing uncertainty surrounding the duration, magnitude, and impact of the novel coronavirus pandemic, FactSet’s actual future results may differ materially from these expectations. FactSet currently does not intend to update its forward-looking statements until its next quarterly results announcement other than in publicly available statements.
Fiscal 2020 Expectations
Both GAAP operating margin and GAAP diluted EPS guidance do not include certain effects of any non-recurring benefits or charges that may arise in fiscal 2020. 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, March 26, 2020, at 11:00 a.m. Eastern Time to discuss its second 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: International Participants: Passcode: |
833.231.8259 647.689.4104 6187761 |
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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 the FactSet workstation or web. An audio replay of this conference will also be available until April 2, 2020 via the following telephone numbers: 800.585.8367 in the U.S. and 416.621.4642 internationally using passcode 6187761.
Forward-looking Statements
This news release contains forward-looking statements based on management's current expectations, estimates, forecasts and projections about industries in which FactSet operates and the beliefs and assumptions of management. All statements that address expectations, guidance, outlook or projections about the future, including statements about the Company's strategy for growth, product development, revenues, future financial results, anticipated growth, market position, subscriptions, expected expenditures, trends in FactSet’s business and financial results, are forward-looking statements. Forward-looking statements may be identified by words like "expects," "believes, " "anticipates," "plans," "intends, " "estimates, " "projects," "should," "indicates," "continues," "may" and similar expressions. These statements are not guarantees of future performance and involve a number of risks, uncertainties and assumptions. Many factors, including those discussed more fully elsewhere in this release and in FactSet's filings with the 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 ability to integrate newly acquired companies, clients and businesses; strains on resources as a result of growth, the volatility and stability of global securities markets, including declines in equity or fixed income returns impacting the buying power of investment management clients; the ability to hire and retain qualified personnel; the maintenance of the Company's leading technological position and reputation; failure to maintain or improve FactSet’s competitive position in the marketplace; fraudulent, misappropriation or unauthorized data access, including cyber-security and privacy breaches; failures or disruptions of telecommunications, data centers, network systems, facilities, or the Internet; uncertainty, consolidation and business failures in the global investment banking industry; the continued shift from active to passive investing, the negotiation of contract terms with vendors, data suppliers and landlords; the retention of clients and the attraction of new ones; the absence of U.S. or foreign governmental regulation restricting international business; the unfavorable resolution of tax assessments and legal proceedings; legislative and regulatory changes in the environments in which FactSet and its clients operate; and the potential adverse impact on our business of global public health epidemics, including the current coronavirus pandemic. Forward-looking statements speak only as of the date they are made, and FactSet assumes no duty to and does not undertake to update forward-looking statements. Actual results could differ materially from those anticipated in forward-looking statements and future results could differ materially from historical performance.
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 movements in all periods presented. Adjusted operating income and margin, adjusted net income and adjusted diluted earnings per share exclude both intangible asset amortization and non-recurring items. The Company believes that these adjusted financial measures better reflect the underlying economic performance of FactSet.
The GAAP financial measure, cash flows provided by operating activities, has been adjusted for capital expenditures to report non-GAAP free cash flow. FactSet uses this financial measure both in presenting its results to stockholders and the investment community and in the Company’s internal evaluation and management of the business. Management believes that this financial measure is useful to investors because it permits investors to view the Company’s performance using the same metric that management uses to gauge progress in achieving its goals and is an indication of cash flow that may be available to fund further investments in future growth initiatives.
About FactSet
FactSet (NYSE:FDS | NASDAQ:FDS) delivers superior content, analytics, and flexible technology to help more than 128,000 users see and seize opportunity sooner. We give investment professionals the edge to outperform with informed insights, workflow solutions across the portfolio lifecycle, and industry-leading support from 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.
FactSet
Media & Investor Relations Contact:
Rima Hyder
857.265.7523
rima.hyder@factset.com
Consolidated Statements of Income (Unaudited) |
|||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||
February 29, | February 28, | February 29, | February 28, | ||||||||||||
(In thousands, except per share data) | 2020 | 2019 | 2020 | 2019 | |||||||||||
Revenues | $ | 369,780 | $ | 354,895 | $ | 736,438 | $ | 706,535 | |||||||
Operating expenses | |||||||||||||||
Cost of services | 176,218 | 165,108 | 341,175 | 331,884 | |||||||||||
Selling, general and administrative | 87,305 | 81,099 | 175,820 | 165,424 | |||||||||||
Total operating expenses | 263,523 | 246,207 | 516,995 | 497,308 | |||||||||||
Operating income | 106,257 | 108,688 | 219,443 | 209,227 | |||||||||||
Other expense | |||||||||||||||
Interest expense, net | (2,661 | ) | (4,211 | ) | (5,792 | ) | (8,670 | ) | |||||||
Other expense, net | (487 | ) | (128 | ) | (1,801 | ) | (265 | ) | |||||||
Income before income taxes | 103,109 | 104,349 | 211,850 | 200,292 | |||||||||||
Provision for income taxes | 14,423 | 19,647 | 29,207 | 31,294 | |||||||||||
Net income | $ | 88,686 | $ | 84,702 | $ | 182,643 | $ | 168,998 | |||||||
Diluted earnings per common share | $ | 2.30 | $ | 2.19 | $ | 4.73 | $ | 4.37 | |||||||
Diluted weighted average common shares | 38,576 | 38,619 | 38,582 | 38,714 | |||||||||||
Consolidated Balance Sheets (Unaudited) | ||||||
February 29, | August 31, | |||||
(In thousands) | 2020 | 2019 | ||||
ASSETS | ||||||
Cash and cash equivalents | $ | 343,488 | $ | 359,799 | ||
Investments | 23,885 | 25,813 | ||||
Accounts receivable, net of reserves | 168,139 | 146,309 | ||||
Prepaid taxes | 25,917 | 15,033 | ||||
Prepaid expenses and other current assets | 39,676 | 36,858 | ||||
Total current assets | 601,105 | 583,812 | ||||
Property, equipment, and leasehold improvements, net | 135,016 | 119,384 | ||||
Goodwill | 690,637 | 685,729 | ||||
Intangible assets, net | 128,243 | 133,691 | ||||
Deferred taxes | 7,172 | 7,571 | ||||
Lease right-of-use assets, net | 235,930 | — | ||||
Other assets | 30,469 | 29,943 | ||||
TOTAL ASSETS | $ | 1,828,572 | $ | 1,560,130 | ||
LIABILITIES | ||||||
Accounts payable and accrued expenses | $ | 73,454 | $ | 79,620 | ||
Current lease liabilities | 27,830 | — | ||||
Accrued compensation | 40,810 | 64,202 | ||||
Deferred fees | 59,184 | 47,656 | ||||
Taxes payable | — | — | ||||
Dividends payable | 27,251 | 27,445 | ||||
Total current liabilities | 228,529 | 218,923 | ||||
Long-term debt | 574,264 | 574,174 | ||||
Deferred taxes | 13,562 | 16,391 | ||||
Deferred fees | 9,344 | 10,088 | ||||
Taxes payable | 25,958 | 26,292 | ||||
Lease liabilities | 257,235 | — | ||||
Deferred rent and other non-current liabilities | 2,920 | 42,006 | ||||
TOTAL LIABILITIES | $ | 1,111,812 | $ | 887,874 | ||
STOCKHOLDERS’ EQUITY | ||||||
TOTAL STOCKHOLDERS’ EQUITY | $ | 716,760 | $ | 672,256 | ||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 1,828,572 | $ | 1,560,130 | ||
Consolidated Statements of Cash Flows (Unaudited) | ||||||||
Six Months Ended | ||||||||
February 29, | February 28, | |||||||
(In thousands) | 2020 | 2019 | ||||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
Net income | $ | 182,643 | $ | 168,998 | ||||
Adjustments to reconcile net income to net cash provided by operating activities | ||||||||
Depreciation and amortization | 28,296 | 29,052 | ||||||
Stock-based compensation expense | 18,028 | 16,140 | ||||||
Deferred income taxes | (3,091 | ) | 1,088 | |||||
Loss on sale of assets | 145 | 196 | ||||||
Changes in assets and liabilities, net of effects of acquisitions | ||||||||
Accounts receivable, net of reserves | (21,835 | ) | (19,676 | ) | ||||
Accounts payable and accrued expenses | 10,356 | (5,423 | ) | |||||
Accrued compensation | (23,518 | ) | (26,266 | ) | ||||
Deferred fees | 10,775 | 9,729 | ||||||
Taxes payable, net of prepaid taxes | (12,182 | ) | (17,385 | ) | ||||
Other, net | 5,843 | (10,899 | ) | |||||
Net cash provided by operating activities | 195,460 | 145,554 | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
Purchases of property, equipment and leasehold improvements, net of proceeds from dispositions | (51,899 | ) | (21,482 | ) | ||||
Purchases of Investments | (2,236 | ) | (7,927 | ) | ||||
Proceeds from maturity or sale of investments | 4,199 | 10,041 | ||||||
Net cash used in investing activities | (49,936 | ) | (19,368 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
Repurchases of common stock | (158,595 | ) | (110,739 | ) | ||||
Dividend payments | (54,363 | ) | (48,442 | ) | ||||
Proceeds from employee stock plans | 50,487 | 43,362 | ||||||
Other financing, net | (1,586 | ) | — | |||||
Net cash used in financing activities | (164,057 | ) | (115,819 | ) | ||||
Effect of exchange rate changes on cash and cash equivalents | 2,222 | (655 | ) | |||||
Net (decrease) increase in cash and cash equivalents | (16,311 | ) | 9,712 | |||||
Cash and cash equivalents at beginning of period | 359,799 | 208,623 | ||||||
Cash and cash equivalents at end of period | $ | 343,488 | $ | 218,335 | ||||
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 | |||||||
February 29, | February 28, | |||||||
(In thousands) | 2020 | 2019 | Change | |||||
GAAP revenues | $ | 369,780 | $ | 354,895 | 4.2 | % | ||
Deferred revenue fair value adjustment (a) | 1,188 | 1,299 | ||||||
Currency impact (b) | 20 | — | ||||||
Organic revenues | $ | 370,988 | $ | 356,194 | 4.2 | % | ||
Operating Income, Margin, Net Income and Diluted EPS
(Unaudited) | Three Months Ended | |||||||
February 29, | February 28, | |||||||
(In thousands, except per share data) | 2020 | 2019 | Change | |||||
GAAP Operating income | $ | 106,257 | $ | 108,688 | (2.2 | )% | ||
Intangible asset amortization | 5,143 | 5,839 | ||||||
Deferred revenue fair value adjustment | 1,188 | 1,299 | ||||||
Other non-recurring items (a) | 5,334 | 2,417 | ||||||
Adjusted operating income | $ | 117,922 | $ | 118,243 | (0.3 | )% | ||
Adjusted operating margin (b) | 31.8 | % | 33.2 | % | ||||
GAAP Net income | $ | 88,686 | $ | 84,702 | 4.7 | % | ||
Intangible asset amortization (c) | 4,183 | 4,742 | ||||||
Deferred revenue fair value adjustment (c) | 966 | 1,055 | ||||||
Other non-recurring items (a)(c) | 4,513 | 1,718 | ||||||
Income tax benefits (d) | — | 1,381 | ||||||
Adjusted net income | $ | 98,348 | $ | 93,598 | 5.1 | % | ||
GAAP Diluted earnings per common share | $ | 2.30 | $ | 2.19 | 5.0 | % | ||
Intangible asset amortization | 0.11 | 0.12 | ||||||
Deferred revenue fair value adjustment | 0.03 | 0.03 | ||||||
Other non-recurring items (a) | 0.11 | 0.04 | ||||||
Income tax benefits (d) | — | 0.04 | ||||||
Adjusted diluted earnings per common share | $ | 2.55 | $ | 2.42 | 5.4 | % | ||
Weighted average common shares (Diluted) | 38,576 | 38,619 | ||||||
Business Outlook Operating Margin, Net Income and Diluted EPS
(Unaudited) | ||||||
Annual Fiscal 2020 Guidance | ||||||
(In thousands, except per share data) | Low end of range | High end of range | ||||
GAAP Operating margin | 28.5 | % | 29.5 | % | ||
Intangible asset amortization (a) | 1.6 | % | 1.6 | % | ||
Deferred revenue fair value adjustment (b) | 0.3 | % | 0.3 | % | ||
Other non-recurring items (c) | 1.1 | % | 1.1 | % | ||
Adjusted operating margin | 31.5 | % | 32.5 | % | ||
GAAP Net income | $ | 337,000 | $ | 349,000 | ||
Intangible asset amortization (a) | 19,485 | 19,485 | ||||
Deferred revenue fair value adjustment (b) | 3,900 | 3,900 | ||||
Other non-recurring items (c) | 21,150 | 21,150 | ||||
Adjusted net income | $ | 381,535 | $ | 393,535 | ||
GAAP Diluted earnings per common share | $ | 8.70 | $ | 9.00 | ||
Intangible asset amortization (a) | 0.50 | 0.50 | ||||
Deferred revenue fair value adjustment (b) | 0.10 | 0.10 | ||||
Other non-recurring items (c) | 0.55 | 0.55 | ||||
Adjusted diluted earnings per common share | $ | 9.85 | $ | 10.15 | ||
Free Cash Flow
(Unaudited) | Three Months Ended | |||||||||
February 29, | February 28, | |||||||||
(In thousands) | 2020 | 2019 | Change | |||||||
Net cash provided by operating activities | $ | 99,669 | 99,234 | |||||||
Capital expenditures | (25,119 | ) | (11,957 | ) | ||||||
Free cash flow | $ | 74,550 | $ | 87,277 | (14.6 | )% | ||||
Supplementary Schedules of Historical ASV by Client Type
The following table presents the percentages and growth rates of organic ASV by client type, excluding the impact of currency movements, and may be useful to facilitate historical comparisons. Organic ASV excludes acquisitions and dispositions completed within the last 12 months and the effects of foreign currency movements. The numbers below do not include professional services.
Q2'20 | Q1'20 | Q4'19 | Q3'19 | Q2'19 | Q1'19 | Q4'18 | Q3'18 | |||||||||
% of ASV from buy-side clients | 84.1 | % | 83.9 | % | 83.7 | % | 84.2 | % | 83.9 | % | 83.9 | % | 83.9 | % | 84.4 | % |
% of ASV from sell-side clients | 15.9 | % | 16.1 | % | 16.3 | % | 15.8 | % | 16.1 | % | 16.1 | % | 16.1 | % | 15.6 | % |
ASV Growth rate from buy-side clients | 4.5 | % | 4.0 | % | 4.8 | % | 5.2 | % | 5.3 | % | 5.9 | % | 5.4 | % | 5.3 | % |
ASV Growth rate from sell-side clients | 2.9 | % | 4.0 | % | 6.3 | % | 6.8 | % | 9.2 | % | 8.6 | % | 7.3 | % | 5.0 | % |
Total Organic ASV Growth Rate | 4.2 | % | 4.0 | % | 5.0 | % | 5.4 | % | 5.9 | % | 6.3 | % | 5.7 | % | 5.3 | % |
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) | Q2'20 | Q2'19 | |||||
As reported ASV (a) | $ | 1,479.6 | $ | 1,419.5 | |||
Currency impact (b) | (0.5 | ) | — | ||||
Organic ASV total | $ | 1,479.1 | $ | 1,419.5 | |||
Total Organic ASV Growth Rate | 4.2 | % | |||||
Source: FactSet Research Systems Inc.