- Adjusted EPS was $1.22, up 10%
- Quarterly free cash flow growth of 18% to $53 million
- $300 million expansion to the existing share repurchase program
|(Condensed and Unaudited)||GAAP||Expiring U.S. Federal R&D Tax Credit (a)||Adjusted||YoY % Change|
|Net Income||$ 52,178||$ 1,111||$ 53,289||7%|
|Diluted EPS||$ 1.19||$ 0.03||$ 1.22||10%|
|(a) Adjusted net income and diluted EPS both add back income tax benefits as the U.S. Federal R&D tax credit is set to expire on December 31, 2013 and was not extended as of November 30th, the end of FactSet's first quarter of fiscal 2014. If the U.S. Federal R&D tax credit had been re-enacted, then the annual effective tax rate would have been 29.0%. Since the R&D credit's original expiration date of December 31, 1985, the credit has expired 8 times and extended 15 times. The current extension expires on December 31, 2013. Most recently, the credit expired on December 31, 2011 and was not re-enacted until January 1, 2013. Refer to page 10 of this press release for a more complete history of the U.S. Federal R&D tax credit.|
|Consolidated Statements of Income|
|(Condensed and Unaudited)|
|Three Months Ended November 30,|
|(In thousands, except per share data)||2013||2012||Change|
|Adjusted net income||$53,289||$49,769||7%|
|Adjusted diluted earnings per share||$1.22||$1.11||10%|
|Diluted weighted average shares||43,773||44,984|
Annual Subscription Value ("ASV")ASV totaled $890 million at November 30, 2013, up 5% organically over the prior year. Including $5 million from the acquisition of Revere and a $1 million reduction from currency, ASV increased $2 million over the last three months. Approximately 82.2% of ASV 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 – First Quarter of Fiscal 2014
- ASV from U.S. operations was $609 million and $281 million was related to international operations.
- U.S. revenues were $152.9 million, up 6% from the year ago quarter.
- Non-U.S. revenues rose 4% to $70.1 million as compared to the same period in fiscal 2013. Excluding the impact from foreign currency, the international growth rate was 6%.
- Operating margin was 33.5% compared to 33.7% a year ago.
- The effective tax rate for the first quarter was 30.5%, as compared to 30.4% a year ago. If the U.S. Federal R&D tax credit had been re-enacted by November 30th, the annual effective tax rate would have been 29.0%.
- Quarterly free cash flow was $52.7 million, up 18% over the year ago quarter.
- Client count was 2,525 at November 30th, a net increase of 25 clients.
- Annual client retention was greater than 95% of ASV and 92% when expressed as a percentage of clients.
- Users increased by 89 over the past three months and totaled 51,014 professionals at November 30th.
- Employee count was 6,399 at November 30th, an increase of 141 employees during the quarter.
- Capital expenditures were $5.4 million.
- A regular quarterly dividend of $15.1 million or $0.35 per share was paid on December 17, 2013 to common stockholders of record as of November 29, 2013.
- The Company repurchased 530,000 shares for $57.8 million during the first quarter.
- Common shares outstanding were 43.0 million at November 30, 2013.
- On September 9th, FactSet relocated its California office from San Mateo to San Francisco.
- FactSet held its U.S. Symposium in November 2013, with 316 industry professionals from 102 firms in attendance.
- Van Eck's Market Vectors Exchange Traded Funds (ETFs) is now available on the FactSet platform. FactSet users holding Van Eck's Market Vectors ETFs now have greater transparency into fund characteristics and composition, which enhances the accuracy of portfolio performance and risk analysis.
Revere Data AcquisitionOn September 5, 2013, FactSet announced it had acquired the assets of Revere Data, LLC ("Revere") for $15.3 million. Revere classifies companies into a unique industry taxonomy and offers a database of supply chain relationships. At the time of acquisition, Revere had annual subscriptions of $5 million. The acquisition of Revere reduced the Company's first quarter operating margin by 30 basis points and diluted earnings per share by $0.01. For the full year fiscal 2014, Revere is expected to dilute earnings per share by $0.02. Matrix Data Limited Investment On December 10, 2013, FactSet acquired a 60% ownership interest in Matrix Data Limited ("Matrix") for £12 million with the ability to acquire the remaining 40% interest. Headquartered in London, England, Matrix's primary line of business is a provider of intelligence to the UK financial services industry, covering market share of mutual fund distribution. Matrix has developed customer, channel and market benchmarking solutions that help clients optimize product distribution and improve marketing effectiveness to drive revenue growth. The Company employs 85 individuals in England and at the time of acquisition had annual subscriptions of $7 million. Matrix is expected to reduce FactSet's second quarter operating margin by 50 basis points and diluted earnings per share by $0.01. For the full year fiscal 2014, Matrix is not expected to have an impact on diluted earnings per share. Business Outlook The following forward-looking statements reflect FactSet's expectations as of today's date. 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. Second Quarter Fiscal 2014 Expectations
- Revenues are expected to range between $225 million and $228 million.
- Operating margin is expected to range between 32.6% and 33.6%, which includes a 30 basis point reduction from Revere and a 50 basis point reduction from Matrix.
- The annual effective tax rate is expected to range between 30.0% and 31.0% and assumes the U.S. Federal R&D tax credit will not be re-enacted by the end of the second quarter of fiscal 2014.
- GAAP diluted EPS should range between $1.20 and $1.23. The anticipated lapse in the U.S. Federal R&D tax credit during the second quarter of fiscal 2014 reduced each end of the GAAP diluted EPS range by $0.03.
About Adjusted Financial MeasuresFinancial measures in accordance with U.S. generally accepted accounting principles ("GAAP") including net income and diluted earnings per share have been adjusted. These adjusted financial measures add back income tax benefits that were not able to be recognized by FactSet in the current year first quarter because the U.S. Federal R&D tax credit was not re-enacted by November 30, 2013, the end of FactSet's first quarter of fiscal 2014. The loss of income tax benefits from the anticipated lapse in the U.S Federal R&D tax credit reduced GAAP net income by $1.1 million and GAAP diluted earnings per share by $0.03. 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 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 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. About Non-GAAP Free Cash Flow 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 first quarter was $58 million of net cash provided by operations and $5 million of capital expenditures. 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. 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 FactSetFactSet, a leading provider of financial information and analytics, helps the world's best investment professionals outperform. More than 50,000 users stay ahead of global market trends, access extensive company and industry intelligence, and monitor performance with FactSet's desktop analytics, mobile applications, and comprehensive data feeds. The Company has been included in FORTUNE's Top 100 Best Companies to Work For, the United Kingdom's Great Places to Work and France's Best Workplaces. FactSet is listed on the New York Stock Exchange and NASDAQ (NYSE:FDS) (Nasdaq:FDS). Learn more at www.factset.com, and follow us on Twitter: www.twitter.com/factset.
|FactSet Research Systems Inc.|
|Consolidated Statements of Income – Unaudited|
|Three Months Ended|
|(In thousands, except per share data)||2013||2012|
|Cost of services||83,250||73,586|
|Selling, general and administrative||64,985||66,414|
|Total operating expenses||148,235||140,000|
|Income before income taxes||75,081||71,513|
|Provision for income taxes||22,903||21,744|
|Diluted earnings per common share||$1.19||$1.11|
|Diluted weighted average common shares||43,773||44,984|
|FactSet Research Systems Inc.|
|Consolidated Statements of Comprehensive Income – Unaudited|
|Three Months Ended|
|Other comprehensive income, net of tax|
|Net unrealized gain on cash flow hedges*||2,647||1,287|
|Foreign currency translation adjustments||8,148||3,074|
|Other comprehensive income||10,795||4,361|
|* The unrealized gain on cash flow hedges disclosed above was net of tax expense of $1,581 and $771 for the three months ended November 30, 2013 and 2012, respectively.|
|FactSet Research Systems Inc.|
|Consolidated Balance Sheets - Unaudited|
|November 30,||August 31,|
|Cash and cash equivalents||$174,021||$196,627|
|Accounts receivable, net of reserves||76,348||73,290|
|Prepaid expenses and other current assets||12,997||15,652|
|Total current assets||280,969||318,034|
|Property, equipment, and leasehold improvements, net||64,284||65,371|
|Intangible assets, net||40,216||36,223|
|Accounts payable and accrued expenses||$29,711||$29,864|
|Total current liabilities||97,713||118,253|
|Deferred rent and other non-current liabilities||19,415||22,334|
|Additional paid-in capital||343,593||326,869|
|Treasury stock, at cost||(514,979)||(454,917)|
|Accumulated other comprehensive loss||(20,126)||(31,173)|
|TOTAL STOCKHOLDERS' EQUITY||546,622||541,779|
|TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY||$671,158||$690,197|
|FactSet Research Systems Inc.|
|Consolidated Statements of Cash Flows - Unaudited|
|Three Months Ended|
|(In thousands)||November 30,|
|CASH FLOWS FROM OPERATING ACTIVITIES|
|Adjustments to reconcile net income to net cash provided by operating activities|
|Depreciation and amortization||8,763||8,917|
|Stock-based compensation expense||5,116||5,203|
|Deferred income taxes||(679)||1,766|
|Gain on sale of assets||(23)||(2)|
|Tax benefits from share-based payment arrangements||(2,144)||(4,032)|
|Changes in assets and liabilities, net of effects of acquisition|
|Accounts receivable, net of reserves||(2,612)||(4,655)|
|Accounts payable and accrued expenses||(316)||2,851|
|Taxes payable, net of prepaid taxes||19,108||13,709|
|Prepaid expenses and other assets||3,036||2,613|
|Deferred rent and other non-current liabilities||(3,280)||997|
|Other working capital accounts, net||299||(409)|
|Net cash provided by operating activities||58,139||50,636|
|CASH FLOWS FROM INVESTING ACTIVITIES|
|Acquisition of business, net of cash acquired||(15,288)||--|
|Purchases of investments||(7,172)||(7,795)|
|Proceeds from sales of investments||6,871||7,500|
|Purchases of property, equipment and leasehold improvements, net of proceeds from dispositions||(5,438)||(6,097)|
|Net cash used in investing activities||(21,027)||(6,392)|
|CASH FLOWS FROM FINANCING ACTIVITIES|
|Repurchase of common stock||(60,062)||(28,241)|
|Proceeds from employee stock plans||9,484||13,102|
|Tax benefits from share-based payment arrangements||2,144||4,032|
|Net cash used in financing activities||(63,498)||(24,738)|
|Effect of exchange rate changes on cash and cash equivalents||3,780||2,162|
|Net (decrease) increase in cash and cash equivalents||(22,606)||21,668|
|Cash and cash equivalents at beginning of period||196,627||189,044|
|Cash and cash equivalents at end of period||$174,021||$210,712|
|Three Months Ended November 30, 2013|
|(Condensed and Unaudited)||GAAP||YoY % Change||Expiring U.S. Federal R&D Tax Credit (a)||Adjusted||YoY % Change||Stock-Based Compensation||Amortization of Intangible Assets||Non-GAAP|
|Operating Income||$ 74,740||5%||$ 5,116||$ 1,707||$ 81,563|
|Net Income (b)||$ 52,178||5%||$ 1,111||$ 53,289||7%||$ 3,556||$ 1,186||$ 58,031|
|Diluted EPS (b)||$ 1.19||7%||$ 0.03||$ 1.22||10%||$ 0.08||$ 0.03||$ 1.33|
|Weighted Average Shares||43,773||43,773||43,773|
|(a) Adjusted net income and diluted EPS both add back income tax benefits as the U.S. Federal R&D tax credit was not re-enacted as of November 30th, the end of FactSet's first quarter of fiscal 2014. If the U.S. Federal R&D tax credit had been re-enacted, then the annual effective tax rate would have been 29.0%.|
|(b) For the purposes of calculating non-GAAP net income and non-GAAP diluted EPS, stock-based compensation expense and the amortization of intangible assets were taxed at the annual effective tax rate of 30.5%.|
In January 2013, the U.S. Congress re-enacted the U.S. Federal R&D tax credit, which had previously expired on December 31, 2011. The reenactment of the credit was retroactive to January 1, 2012 and extends through the end of the 2013 calendar year. As of November 30, 2013, the R&D tax credit had not been extended, and as a result, FactSet was not been permitted to factor it into its effective tax rate beyond December 31, 2013. The anticipated lapse is expected to reduce GAAP diluted EPS by $0.03 during the second quarter of fiscal 2014 unless it is re-enacted by February 28, 2014.As depicted in the chart below, the timing of when FactSet is able to recognize the U.S. Federal R&D tax credit has been volatile due to the numerous lapses and retroactive re-enactments by legislation over the past 10 years. Refer to the chart below which summarizes the volatility in regards to the timing of when FactSet was able to recognize the R&D tax credit in each fiscal year.
|Fiscal Year||Number of Months of R&D Tax Credit Recorded during the Fiscal Year||Signed into Law||Actionable Item by Legislature|
|2014||4 (FY14)||N/A – credit set to expire on Dec 31, 2013|
|2013||12 (FY13) + 8 (FY12)||January 1, 2013||Retroactive to 1/1/12 and extended through 12/31/13|
|2011||12 (FY11) + 8 (FY10)||December 17, 2010||Retroactive to 1/1/10 and extended through 12/31/11|
|2009||12 (FY09) + 8 (FY08)||October 3, 2008||Retroactive to 1/1/08 and extended through 12/31/09|
|2007||12 (FY07) + 8 (FY06)||December 20, 2006||Retroactive to 1/1/06 and extended through 12/31/07|
|2006||4 (FY06)||October 4, 2004||Extended the credit through 12/31/05|
|2005||12 (FY05) + 2 (FY04)|
|2004||10 (FY04)||December 17, 1999||Extended the credit for 5 years through 6/30/04|
CONTACT: Rachel Stern FactSet Research Systems Inc. 203.810.1000