- ASV grew $22 million to $803 million
- Revenues rose 12% to $199 million
- Non-GAAP diluted EPS grew 16% to $1.14
NORWALK, Conn., March 13, 2012 (GLOBE NEWSWIRE) -- FactSet Research Systems Inc. (NYSE:FDS) (Nasdaq:FDS), a leading provider of integrated global financial information and analytical applications for the investment community, today announced its results for the second quarter of fiscal 2012.
GAAP Results
For the quarter ended February 29, 2012 revenues rose to $199.4 million, up 12.2% compared to the prior year. Operating income for the second quarter increased to $67.1 million from $58.1 million in the same period of fiscal 2011. Net income advanced to $46.7 million as compared to $45.3 million a year ago. Diluted earnings per share increased to $1.02, up from $0.95 in the same period of fiscal 2011. The results of the second quarter last year included income tax benefits of $0.10 per diluted share from the reenactment of the U.S. Federal R&D credit. In addition, a charge of $0.04 per diluted share was recorded in the year ago quarter related to an increase in the estimated number of performance-based stock options that became eligible to vest.
Non-GAAP Results
Non-GAAP net income advanced 12.3% to $52.2 million and non-GAAP diluted earnings per share increased 16.3% to $1.14. Quarterly free cash flow was $39.1 million during the second quarter of fiscal 2012 as compared to $42.9 million a year ago.
GAAP financial measures including net income and diluted earnings per share have been adjusted to exclude stock-based compensation expense, amortization of intangible assets and income tax benefits. A reconciliation between GAAP and non-GAAP financial measures is presented on page 7 of this press release.
Consolidated Statements of Income
| (Condensed and Unaudited) | ||||||||||||
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Three Months Ended |
Six Months Ended |
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| (In thousands, except per share data) | Feb 29, 2012 | Feb 28, 2011 | Change | Feb 29, 2012 | Feb 28, 2011 | Change | ||||||
| Revenues | $199,371 | $177,635 | 12.2% | $395,819 | $350,924 | 12.8% | ||||||
| Operating income | 67,117 | 58,093 | 15.5% | 133,870 | 117,522 | 13.9% | ||||||
| Provision for income taxes | 20,867 | 12,971 | 60.9% | 42,353 | 30,924 | 37.0% | ||||||
| Net income | $46,746 | $45,254 | 3.3% | $92,290 | $86,855 | 6.3% | ||||||
| Diluted earnings per share | $1.02 | $0.95 | 7.4% | $2.01 | $1.83 | 9.8% | ||||||
| Diluted weighted average shares | 45,707 | 47,427 | 45,972 | 47,495 | ||||||||
| Non-GAAP net income | $52,180 | $46,465 | 12.3% | |||||||||
| Non-GAAP diluted earnings per share | $1.14 | $0.98 | 16.3% | |||||||||
Philip Hadley, Chairman and CEO said, "We're pleased with our second quarter results as today we announced robust top and bottom-line growth. We grew ASV by $22 million, revenues by 12%, and non-GAAP EPS by 16%. FactSet added 53 net new clients in the quarter, our highest number since 2006 and sequentially we added 400 net new users during the quarter."
Annual Subscription Value ("ASV")
ASV was $803 million at February 29, 2012, up 11% over the prior year. Of this total, 81% is derived from buy-side clients and the remainder is from the sell-side firms who perform M&A advisory work and equity research (please refer to the supplementary schedule on page 8 of this press release for the percentage split of ASV between client type on a historical basis). ASV advanced $21.7 million during the second quarter. Over the past three months, users increased by 400 to 47,300, from additions at buy-side firms. 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 – Second Quarter of Fiscal 2012
- ASV from U.S. operations was $548 million and $255 million was related to international operations.
- U.S. revenues were $136.4 million, up 12.2% from the year ago quarter.
- Non-U.S. revenues also rose 12.2% to $63.0 million as compared to the same period in fiscal 2011.
- Operating margins were 33.7% for the quarter.
- Free cash flow generated over the last twelve months was $209 million, up 12% compared to the same period a year ago. Quarterly free cash flow was $39.1 million.
- Cash and investments were $200 million at February 29, 2012.
- Accounts receivable increased $1 million over the last twelve months while ASV is up $80 million over the same period.
- The effective tax rate was 30.9% as compared to 22.3% a year ago.
- The U.S. Federal R&D tax credit expired on December 31, 2011. The expiration increased the annual effective tax rate by 1.3% and reduced second quarter diluted EPS by $0.02.
Operational Highlights – Second Quarter of Fiscal 2012
- Client count was 2,324 at February 29, a net increase of 53 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 February 29 as compared to 90% a year ago, reflecting a reduction in client turnover.
- Employee count was 5,516 at February 29, an increase of 66 employees during the quarter and up 16% from a year ago.
- Capital expenditures were $4.6 million.
- A regular quarterly dividend of $12.1 million or $0.27 per share will be paid on March 20, 2012, to common stockholders of record as of February 29, 2012.
- The Company repurchased 507,800 shares for $45.1 million during the second quarter. At February 29, 2012, $83 million remains authorized for future repurchases.
- Common shares outstanding were 44.8 million at February 29, 2012.
- We entered into a new license agreement with StreetAccount LLC (SA) to complement our news offering with distilled company news and market summaries.
Business Outlook
The following forward-looking statements reflect FactSet's expectations as of March 13, 2012. 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.
Third Quarter Fiscal 2012 Expectations
- Revenues are expected to range between $200 million and $204 million, which represents year over year growth of 9% and 11% at each end of the range.
- Operating margin is expected to range between 33.5% and 34.0%.
- The effective tax rate is expected to range between 31.0% and 32.0%.
- GAAP diluted EPS should range between $1.03 and $1.05.
- Non-GAAP diluted EPS should range between $1.14 and $1.16, which represents year over year growth of 12% and 14% at each end of the range.·
- Both GAAP diluted EPS and non-GAAP diluted EPS include a $0.02 reduction to reflect the expiration of the U.S. Federal R&D tax credit on December 31, 2011.
Conference Call
The Company will host a conference call today, March 13, 2012, at 11:00 a.m. (EDT) to review the second quarter fiscal 2012 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 net income and diluted earnings per share have been adjusted to report non-GAAP financial measures. These measures exclude stock-based compensation expense, amortization of intangible assets and income tax benefits. 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 7 of this 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 second quarter was $43.7 million of net cash provided by operations and $4.6 million of capital expenditures. 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-six locations worldwide, including Boston, New York, Chicago, San Mateo, London, Amsterdam, Frankfurt, Paris, Milan, Hyderabad, Mumbai, Dubai, Manila, Tokyo, Hong Kong, and Sydney. To learn more about FactSet, visit www.factset.com and follow us on Twitter: www.twitter.com/factset.
| FactSet Research Systems Inc. | ||||
| Consolidated Statements of Income - Unaudited | ||||
| Three Months Ended | Six Months Ended | |||
| (In thousands, except per share data) | Feb 29, 2012 | Feb 28, 2011 | Feb 29, 2012 | Feb 28, 2011 |
| Revenues | $199,371 | $177,635 | $395,819 | $350,924 |
| Operating expenses | ||||
| Cost of services | 67,531 | 60,137 | 134,364 | 116,922 |
| Selling, general and administrative | 64,723 | 59,405 | 127,585 | 116,480 |
| Total operating expenses | 132,254 | 119,542 | 261,949 | 233,402 |
| Operating income | 67,117 | 58,093 | 133,870 | 117,522 |
| Other income | 496 | 132 | 773 | 257 |
| Income before income taxes | 67,613 | 58,225 | 134,643 | 117,779 |
| Provision for income taxes | 20,867 | 12,971 | 42,353 | 30,924 |
| Net income | $46,746 | $45,254 | $92,290 | $86,855 |
| Diluted earnings per common share | $1.02 | $0.95 | $2.01 | $1.83 |
| Diluted weighted average common shares | 45,707 | 47,427 | 45,972 | 47,495 |
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FactSet Research Systems Inc. |
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| Consolidated Statements of Financial Condition - Unaudited | ||
| February 29, | August 31, | |
| 2012 | 2011 | |
| (In thousands) | ||
| ASSETS | ||
| Cash and cash equivalents | $184,998 | $181,685 |
| Investments | 15,185 | -- |
| Accounts receivable, net of reserves | 71,459 | 75,004 |
| Prepaid taxes | 3,549 | -- |
| Deferred taxes | 3,768 | 4,008 |
| Prepaid expenses and other current assets | 13,078 | 12,473 |
| Total current assets | 292,037 | 273,170 |
| Property, equipment, and leasehold improvements, net | 78,595 | 81,620 |
| Goodwill | 225,275 | 228,265 |
| Intangible assets, net | 41,470 | 46,310 |
| Deferred taxes | 19,638 | 20,166 |
| Other assets | 6,809 | 7,909 |
| TOTAL ASSETS | $663,824 | $657,440 |
| LIABILITIES | ||
| Accounts payable and accrued expenses | $24,960 | $24,603 |
| Accrued compensation | 24,699 | 41,536 |
| Deferred fees | 28,950 | 28,252 |
| Taxes payable | -- | 2,867 |
| Dividends payable | 12,085 | 12,165 |
| Total current liabilities | 90,694 | 109,423 |
| Deferred taxes | 2,853 | 3,712 |
| Taxes payable | 5,513 | 7,204 |
| Deferred rent and other non-current liabilities | 20,740 | 21,913 |
| TOTAL LIABILITIES | $119,800 | $142,252 |
| STOCKHOLDERS' EQUITY | ||
| Common stock | $451 | $614 |
| Additional paid-in capital | 101,579 | 432,538 |
| Treasury stock, at cost | (33,242) | (824,382) |
| Retained earnings | 490,815 | 912,078 |
| Accumulated other comprehensive loss | (15,579) | (5,660) |
| TOTAL STOCKHOLDERS' EQUITY | 544,024 | 515,188 |
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $663,824 | $657,440 |
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FactSet Research Systems Inc. |
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| Consolidated Statements of Cash Flows - Unaudited | ||
| Six Months Ended | ||
| (In thousands) | Feb 29, 2012 | Feb 28, 2011 |
| CASH FLOWS FROM OPERATING ACTIVITIES | ||
| Net income | $92,290 | $86,855 |
| Adjustments to reconcile net income to net cash provided by operating activities | ||
| Depreciation and amortization | 16,692 | 18,758 |
| Stock-based compensation expense | 11,925 | 10,377 |
| Deferred income taxes | (91) | (1,275) |
| Gain on sale of assets | (1) | (4) |
| Tax benefits from share-based payment arrangements | (4,973) | (12,919) |
| Changes in assets and liabilities | ||
| Accounts receivable, net of reserves | 3,545 | (10,808) |
| Accounts payable and accrued expenses | 155 | (788) |
| Accrued compensation | (16,298) | (19,853) |
| Deferred fees | 697 | 2,765 |
| Taxes payable, net of prepaid taxes | (3,372) | 2,849 |
| Prepaid expenses and other assets | (456) | (3,052) |
| Deferred rent and other non-current liabilities | (922) | 139 |
| Other working capital accounts, net | (732) | (563) |
| Net cash provided by operating activities | 98,459 | 72,481 |
| CASH FLOWS FROM INVESTING ACTIVITIES | ||
| Purchases of investments | (15,000) | -- |
| Purchases of property, equipment and leasehold improvements, net of proceeds from dispositions | (10,644) | (15,433) |
| Net cash used in investing activities | (25,644) | (15,433) |
| CASH FLOWS FROM FINANCING ACTIVITIES | ||
| Dividend payments | (24,182) | (21,110) |
| Repurchase of common stock | (59,795) | (75,145) |
| Proceeds from employee stock plans | 13,843 | 27,961 |
| Tax benefits from share-based payment arrangements | 4,973 | 12,919 |
| Net cash used in financing activities | (65,161) | (55,375) |
| Effect of exchange rate changes on cash and cash equivalents | (4,341) | 5,691 |
| Net increase in cash and cash equivalents | 3,313 | 7,364 |
| Cash and cash equivalents at beginning of period | 181,685 | 195,741 |
| Cash and cash equivalents at end of period | $184,998 | $203,105 |
Reconciliation of Non-GAAP Financial Measures
| Financial measures in accordance with GAAP including net income and diluted earnings per share have been adjusted in this earnings release to report non-GAAP financial measures. 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. Non-GAAP measures may also facilitate comparisons to FactSet's historical performance. | |||
| (Unaudited) | |||
| Three Months Ended | |||
| (In thousands, except per share data) | Feb 29, 2012 | Feb 28, 2011 | Change |
| GAAP Net income | $46,746 | $45,254 | |
| Stock-based compensation (a) | 6,044 | 6,701 | |
| Amortization of intangible assets from acquisitions | 1,820 | 2,136 | |
| Tax effect of stock-based compensation and amortization of intangible assets (b) | (2,430) | (2,714) | |
| Income tax benefits (c) | -- | (4,912) | |
| Non-GAAP net income | $52,180 | $46,465 | |
| GAAP Diluted earnings per common share | $1.02 | $0.95 | |
| Stock-based compensation (a) | 0.13 | 0.14 | |
| Amortization of intangible assets from acquisitions | 0.04 | 0.05 | |
| Tax effect of stock-based compensation and amortization of intangible assets (b) | (0.05) | (0.06) | |
| Income tax benefits (c) | -- | (0.10) | |
| Non-GAAP diluted earnings per share | $1.14 | $0.98 | 16.3% |
| (a) Included in the second quarter of fiscal 2011 was a pre-tax charge of $2.5 million related to an increase in the estimated number of performance-based stock options that became eligible to vest. This change increased stock-based compensation, net of tax by $1.7 million and reduced diluted earnings per share by $0.04. | |||
| (b) For the purposes of calculating the non-GAAP measures above, stock-based compensation expense and amortization of intangible assets are assumed to be taxed at the effective tax rates excluding income tax benefits. For the three months ended February 29, 2012, the effective tax rate was 30.9%. For the three months ended February 28, 2011, the effective tax rate, excluding income tax benefits of $4.9 million, was 30.7%. | |||
| (c) Income tax benefits were from the reenactment of the U.S. Federal R&D tax credit retroactive to prior years. | |||
Supplementary Schedule of Historical ASV by Client Type
During the second quarter of fiscal 2012, FactSet improved its methodology used in calculating the percentage of ASV derived from buy-side and sell-side clients. The following table presents the updated percentages for each quarter beginning with the fourth quarter of fiscal 2008 and can be useful to facilitate historical comparisons.
| Q2'12 | Q1'12 | Q4'11 | Q3'11 | Q2'11 | Q1'11 | Q4'10 | Q3'10 | Q2'10 | Q1'10 | Q4'09 | Q3'09 | Q2'09 | Q1'09 | Q4'08 | |
| % of ASV from buy-side clients | 81% | 80% | 79% | 80% | 80% | 80% | 80% | 82% | 82% | 82% | 82% | 81% | 80% | 79% | 79% |
| % of ASV from sell-side clients | 19% | 20% | 21% | 20% | 20% | 20% | 20% | 18% | 18% | 18% | 18% | 19% | 20% | 21% | 21% |