FactSet(FDS) - 2022 Q1 - Quarterly Report

Part I Financial Statements Unaudited consolidated financial statements for Q1 FY2022 and Q1 FY2021, covering income, balance sheets, cash flows, and equity changes, with detailed notes Consolidated Statements of Income | (In thousands, except per share data) | Three Months Ended November 30, 2021 | Three Months Ended November 30, 2020 | | :--- | :--- | :--- | | Revenues | $424,725 | $388,206 | | Operating income | $122,661 | $121,031 | | Net income | $107,647 | $101,206 | | Diluted earnings per common share | $2.79 | $2.62 | - Revenues for the three months ended November 30, 2021, increased by 9.4% year-over-year, while net income grew by 6.4%. Diluted EPS rose from $2.62 to $2.79[10] Consolidated Balance Sheets | (In thousands) | November 30, 2021 | August 31, 2021 | | :--- | :--- | :--- | | Total Assets | $2,254,364 | $2,224,940 | | Cash and cash equivalents | $673,900 | $681,865 | | Goodwill | $783,025 | $754,205 | | Total Liabilities | $1,155,469 | $1,208,587 | | Long-term debt | $574,580 | $574,535 | | Total Stockholders' Equity | $1,098,895 | $1,016,353 | - Total assets increased to $2.25 billion as of November 30, 2021, primarily due to a rise in goodwill. Total liabilities decreased, while stockholders' equity grew, reflecting net income and other equity activities[15] Consolidated Statements of Cash Flows | (In thousands) | Three Months Ended November 30, 2021 | Three Months Ended November 30, 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $72,918 | $89,276 | | Net cash used in investing activities | ($58,851) | ($58,322) | | Net cash used by financing activities | ($16,482) | ($56,377) | | Net decrease in cash and cash equivalents | ($7,965) | ($25,468) | - Cash from operations decreased to $72.9 million from $89.3 million in the prior-year period. Investing activities included $50.0 million for an acquisition. Financing activities saw lower cash usage due to reduced share repurchases compared to the prior year[17] Notes to the Consolidated Financial Statements - FactSet is a global financial data and analytics company deriving revenues primarily from subscriptions to its products and services. The company operates through three geographic segments: the Americas, EMEA, and Asia Pacific[23][25][27] - On December 24, 2021, FactSet entered into a definitive agreement to acquire CUSIP Global Services (CGS) from S&P Global Inc. for $1.925 billion in cash. The transaction is expected to close in the first quarter of calendar 2022[139][143] | (in thousands) | Three Months Ended Nov 30, 2021 | Three Months Ended Nov 30, 2020 | | :--- | :--- | :--- | | Americas | $266,913 | $244,337 | | EMEA | $115,003 | $105,777 | | Asia Pacific | $42,809 | $38,092 | | Total Revenues | $424,725 | $388,206 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 FY2022 financial results, covering revenue, EPS, ASV, segment performance, expenses, liquidity, and COVID-19 impact Executive Overview - In Q1 FY2022, revenues grew 9.4% to $424.7 million, driven by 9.1% organic revenue growth. Operating income increased 1.3%, and diluted EPS rose 6.5%[160][163] - Organic Annual Subscription Value (ASV) plus Professional Services reached $1.70 billion, an 8.9% increase year-over-year, with growth across all geographic segments[161][162] - The company's strategy focuses on building the leading open content and analytics platform, growing its digital platform, delivering execution excellence, and driving a growth mindset[155] - The COVID-19 pandemic has not significantly affected financial results for the quarter. The company has implemented a new flexible work standard, allowing for hybrid or fully remote arrangements, and is reassessing its real estate footprint[164][167][168] Annual Subscription Value (ASV) Annual Subscription Value (ASV) Metrics | (in millions) | As of November 30, 2021 | | :--- | :--- | | As reported ASV plus Professional Services | $1,706.3 | | Currency impact | $2.7 | | Acquisition ASV | ($7.9) | | Organic ASV plus Professional Services | $1,701.1 | | Organic ASV plus Professional Services growth rate | 8.9% | - Organic ASV growth was driven by sales to existing clients (including price increases) and new client sales. By geography, the Americas contributed most to the increase, followed by EMEA and Asia Pacific[174][175] - Buy-side clients accounted for approximately 83% of Organic ASV, with a growth rate of 8.5%. Sell-side clients grew at 13.2%[181] Results of Operations Q1 FY2022 vs Q1 FY2021 Performance | (in thousands) | Q1 2022 | Q1 2021 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenues | $424,725 | $388,206 | $36,519 | 9.4% | | Cost of services | $207,149 | $188,088 | $19,061 | 10.1% | | SG&A | $94,915 | $79,087 | $15,828 | 20.0% | | Operating income | $122,661 | $121,031 | $1,630 | 1.3% | | Net income | $107,647 | $101,206 | $6,441 | 6.4% | - Revenue growth of 9.4% was primarily driven by a 9.1% increase in organic revenues. All geographic segments and workflow solutions contributed to the growth[191][192] - Operating margin decreased from 31.2% to 28.9% due to higher computer-related expenses, charges for vacating leased office space, and increased intangible asset amortization[200][208] - The provision for income taxes decreased by $6.7 million, mainly due to $6.9 million in higher windfall tax benefits from employee stock option exercises, which was a primary driver for the 6.4% increase in net income[218][219] Liquidity and Capital Resources - Primary liquidity sources are cash from operations and a $750.0 million revolving credit facility, of which $575.0 million was drawn and $175.0 million was available as of November 30, 2021[229][231] - In Q1 FY2022, the company returned $49.3 million to shareholders through $18.6 million in share repurchases and $30.7 million in dividend payments[235][237][240] - Net cash from operating activities decreased by $16.4 million to $72.9 million, primarily due to the timing of tax payments and higher bonus payouts[250] Free Cash Flow Reconciliation | (in thousands) | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $72,918 | $89,276 | | Capital expenditures | ($8,583) | ($18,333) | | Free cash flow | $64,335 | $70,943 | Quantitative and Qualitative Disclosures About Market Risk Details exposure to foreign currency and interest rate risks, outlining hedging strategies and potential impacts on operating income and interest expense - The company uses foreign currency forward contracts to hedge exposure to the British Pound, Euro, Indian Rupee, and Philippine Peso[269] - A sensitivity analysis shows that if the U.S. dollar were 10% weaker, the fair value of outstanding forward contracts would increase by $15.4 million, which would be substantially offset by changes in the expense base[270] - The company has $575.0 million in variable-rate debt, with $287.5 million of it effectively converted to a fixed rate via an interest rate swap, mitigating interest rate risk on that portion[273] Controls and Procedures Management concluded disclosure controls and procedures were effective as of November 30, 2021, with no material changes to internal control over financial reporting - The Principal Executive Officer and Principal Financial Officer concluded that the company's disclosure controls and procedures are effective as of the end of the reporting period[276] - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[277] Part II Legal Proceedings The company is involved in ordinary course legal proceedings, with no material adverse effect expected; details in Note 12 - Information regarding legal proceedings is incorporated by reference from Note 12, "Commitments and Contingencies," in the Notes to the Consolidated Financial Statements[278] Risk Factors No material changes to risk factors previously disclosed in the FY2021 Annual Report on Form 10-K - No material changes to the risk factors identified in the Annual Report on Form 10-K for the fiscal year ended August 31, 2021, occurred during the three months ended November 30, 2021[279] Unregistered Sales of Equity Securities and Use of Proceeds Details the company's equity security repurchases during Q1 FY2022, including shares bought under the publicly announced program Issuer Purchases of Equity Securities (Q1 FY2022) | Period | Total Shares Purchased | Average Price Paid per Share | Shares Purchased as Part of Program | | :--- | :--- | :--- | :--- | | September 2021 | 7,000 | $396.06 | 7,000 | | October 2021 | 39,386 | $404.71 | 39,200 | | November 2021 | 6,561 | $438.40 | — | | Total | 52,947 | | 46,200 |