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FactSet Reports Strong Revenue and EPS Growth in Third Quarter 2018NORWALK, Conn., June 26, 2018 (GLOBE NEWSWIRE) -- 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
“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*
* 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
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
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 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. FactSet
*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.
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)
Operating Income, Margin, Net Income and Diluted EPS (Details may not sum to total due to rounding)
(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
(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
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.
The following table presents the calculation of the above-mentioned ASV growth rates from all clients.
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