FactSet posts Q2 net income rise

For the quarter ended February 28, 2011 revenues increased to $177.6 million, up 13% compared to the prior year. Operating income for the second quarter rose to $58.1 million from $54.5 million in the same period of fiscal 2010. Net income advanced to $45.3 million as compared to $36.1 million a year ago. Diluted earnings per share increased to $0.95, up 27% from $0.75 in the same period of fiscal 2010. Included in this quarter's results were income tax benefits of $0.10 per diluted share or $4.9 million from the reenactment of the U.S. Federal R&D credit. In addition, a pre-tax charge of $2.5 million or $0.04 per diluted share was recorded in the quarter related to an increase in the estimated number of performance-based stock options that will be eligible to vest in August 2011.

GAAP financial measures including operating income, net income and diluted earnings per share have been adjusted to report non-GAAP financial measures that exclude the $4.9 million of income tax benefits and the $2.5 million incremental charge related to performance-based options. Non-GAAP operating income for the quarter was $60.5 million, up 11%. Non-GAAP net income advanced 16% to $42.0 million and non-GAAP diluted earnings per share increased 19% to $0.89.

"We're pleased with our second quarter results and our record of delivering strong performance. It reflects the consistency of our subscription business model and our continued focus on enhancing long-term shareholder value" says Philip A. Hadley, Chairman and Chief Executive Officer. "We continue to experience ASV, user count and client growth due to momentum across our products and geographies."

Annual Subscription Value ("ASV")

ASV advanced $27.9 million organically during the quarter. ASV was $723 million at February 28, 2011, up 11% organically over the prior year. Of this total, 82% is derived from buy-side clients and the remainder is from the sell-side firms who perform M&A advissory work and equity research. ASV drivers during the quarter were expanded deployment of proprietary data, growth in the number of clients and users, purchases of advanced applications, a reduction in cancelation rates, and a price increase of $9 million for the Company's U.S. investment management clients. 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 2011

* ASV from U.S. operations was $496 million and $227 million related to international operations.
* U.S. revenues, including Market Metrics, were $121.5 million, up 14% from the year ago quarter.
* Non-U.S. revenues rose 11% to $56.1 million as compared to the same period in fiscal 2010.
* Non-GAAP operating margin, which excludes the incremental charge related to performance-based options was 34.1%.
* Free cash flow generated over the last twelve months was $186 million. Quarterly free cash flow was $42.9 million.
* Cash and investments in marketable securities were $203 million at February 28, 2011.
* Accounts receivable increased $2 million over the last 12 months while ASV is up $72 million over the same period.
* Non-GAAP operating income was up 11% compared to the prior year.
* Non-GAAP diluted EPS advanced 19% to $0.89 per diluted share.
* The effective tax rate for the second quarter was 22.3% as compared to 33.9% a year ago. Excluding the $4.9 million of income tax benefits from the reenactment of the R&D credit, the effective tax rate for the second quarter was 30.7%.

Operational Highlights - Second Quarter of Fiscal 2011

* Professionals using FactSet increased to 44,800, up 1,200 users over the past three months.
* Client count was 2,161 at February 28, a net increase of 38 clients during the quarter.
* Annual client retention rate was greater than 95% of ASV and 90% of clients.
* Employee count rose by 309 in the last three months to 4,768, an increase of 39% compared to a year ago.
* FactSet was named one of Fortune's "100 Best Companies to Work For," marking the Company's third appearance on the list in the last four years.
* The Company's global presence expanded with the opening of a Dubai office in December 2010, joining FactSet's network of 24 offices around the world.
* Capital expenditures were $6.1 million, net of landlord contributions for construction of $1.4 million. Approximately $4.9 million or 80% of capital expenditures were for computer equipment and the remainder for office expansions.
* A regular quarterly dividend of $10.6 million or $0.23 per share was paid on March 15, 2011, to common stockholders of record as of February 28, 2011.
* The Company repurchased 506,706 shares for $49.0 million during the second quarter. At February 28, 2011, $84 million remains authorized for future repurchases.
* Common shares outstanding at February 28, 2011 were 46.1 million.

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