FactSet Q3 income rises

Source: FactSet Research Systems

FactSet Research Systems Inc. (NYSE:FDS) (Nasdaq:FDS), a leading provider of integrated financial information and analytical applications to the global investment community, today announced its results for the third quarter of fiscal 2013.

For the quarter ended May 31, 2013 revenues increased to $214.6 million, up 6% over the prior year. Included in this total was $2.9 million of acquired revenues from StreetAccount. Operating income was $71.6 million compared to $68.5 million in the third quarter of fiscal 2012. Net income was $53.4 million versus $48.0 million a year ago. Diluted earnings per share was $1.20 compared to $1.05 in the same period of fiscal 2012.

Adjusted net income increased 6% to $51.1 million, while adjusted diluted EPS grew 10% to $1.15. Adjusted net income and diluted EPS both exclude income tax benefits of $2.3 million or $0.05 per diluted share related to finalizing prior years' tax returns.

 

(Condensed and Unaudited)
 

Three Months Ended
May 31,

(In thousands, except per share data)

2013

2012

Change

Revenues

$214,613

$202,311

6%

Operating income

$71,637

$68,494

5%

Adjusted net income

$51,097

$47,980

6%

Adjusted diluted earnings per share

$1.15

$1.05

10%

Diluted weighted average shares

44,485

45,736

 

"We again delivered double-digit diluted EPS growth and our free cash flow reached an all-time high of $92 million during the third quarter of fiscal 2013. Off-market conditions, especially on the sell-side, continue to interrupt client buying patterns and limited our ASV growth this quarter as expected," said Philip A. Hadley, Chairman and CEO. "We continue to return capital to shareholders as evidenced by a 13% increase in our dividend and a $200 million expansion to our share repurchase program during the quarter."

Annual Subscription Value ("ASV")

ASV advanced $2 million excluding the impact from foreign currency during the quarter and totaled $864 million at May 31, 2013. Of this total, 83% 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 — Third Quarter of Fiscal 2013
• ASV from U.S. operations was $590 million and $274 million was related to international operations.
• U.S. revenues, including $2.9 million from StreetAccount, were $147 million, up 6% from the year ago quarter.
• Non-U.S. revenues rose 6% to $68 million as compared to the same period in fiscal 2012. Excluding the impact from foreign currency, the international growth rate was 7%.
• Operating margin was 33.4%, compared to 33.9% a year ago.
• The effective tax rate for the third quarter was 25.9%, down from 30.4% a year ago. Excluding income tax benefits from finalizing prior years' tax returns, the annual effective tax rate was 29.0%.
• Quarterly free cash flow was a record high $92 million, up 32% over the year ago quarter.
• Accounts receivable decreased $17 million over the last three months, reflecting an improvement in DSO from 36 to 29 days, the lowest DSO on record for FactSet.

Operational Highlights — Third Quarter of Fiscal 2013
• Client count was 2,440 at May 31st, a net increase of 4 clients.
• Annual client retention was greater than 95% of ASV and 92% when expressed as a percentage of clients.
• Users increased by 61 over the past three months and totaled 49,516 professionals at May 31st. New users from buy-side clients were partially offset by declines on the sell-side.
• Employee count was 5,900 at May 31st, up 8% over last year.
• Capital expenditures were $4.2 million.
• The regular quarterly dividend increased 13% from $0.31 to $0.35 per share, beginning with the Company's dividend payment on June 18, 2013 to holders of record of FactSet common stock on May 31st.
• On May 14, 2013, the Board of Directors approved a $200 million expansion to the existing share repurchase program. The Company repurchased 536,383 shares for $49.0 million during the third quarter. Including the recently approved $200 million expansion to the program, at May 31st, $206.5 million remains authorized for future repurchases.
• Common shares outstanding were 44.0 million at May 31, 2013.
• FactSet released a new Instant Messaging platform — FactSet IM, an open collaboration platform purposely designed to enhance the workflow needs of global financial professionals.
• The Wall Street Journal published the results of the first annual "Europe's Best Analysts Survey" in conjunction with FactSet as the data provider on May 22, 2013. FactSet also provided the data for the WSJ's U.S. and Asia "Best Analysts" surveys.

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.

Fourth Quarter Fiscal 2013 Expectations
• Revenues are expected to range between $218 million and $221 million.
• Operating margin is expected to range between 33.0% and 34.0%.
• The annual effective tax rate is expected to range between 28.5% and 29.5%.
• GAAP diluted EPS should range between $1.18 and $1.21, the midpoint of the range represents 11% growth over last year's fourth quarter. 

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