FactSet Research Systems (NYSE:FDS) (Nasdaq:FDS), a leading provider of integrated global financial information and analytical applications to the investment community, today announced its results for the first quarter of fiscal 2014.
For the quarter ended November 30, 2013, revenues were $223.0 million, up 6% compared to the prior year. Operating income for the first quarter advanced to $74.7 million from $71.1 million last year. Net income rose to $52.2 million as compared to $49.8 million in the year ago quarter. Diluted earnings per share increased to $1.19, up from $1.11 in the same period of fiscal 2013.
Adjusted net income increased 7% to $53.3 million, while adjusted diluted EPS grew 10% to $1.22.
Consolidated Statements of Income
(Condensed and Unaudited)
Three Months Ended November 30,
(In thousands, except per share data) 2013 2012 Change
Revenues $222,975 $211,085 6%
Operating income $74,740 $71,085 5%
Adjusted net income $53,289 $49,769 7%
Adjusted diluted earnings per share $1.22 $1.11 10%
Diluted weighted average shares 43,773 44,984
"Our investment discipline and proven business model continues to generate shareholder value as illustrated by our 10% adjusted EPS growth. Our buy-side client base is experiencing a healthy business cycle, but we are facing a challenging sell-side environment, which reduced organic ASV," says Philip Hadley, Chairman and CEO. "As we continue to generate record levels of quarterly free cash flow, I'm pleased to announce a $300 million expansion to our existing share repurchase program. We also completed the acquisition of Revere Data in September and acquired a 60% ownership interest in Matrix Data Limited in December 2013."
Annual Subscription Value ("ASV")
ASV totaled $890 million at November 30, 2013, up 5% organically over the prior year. Including $5 million from the acquisition of Revere and a $1 million reduction from currency, ASV increased $2 million over the last three months. Approximately 82.2% of ASV 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 — First Quarter of Fiscal 2014
• ASV from U.S. operations was $609 million and $281 million was related to international operations.
• U.S. revenues were $152.9 million, up 6% from the year ago quarter.
• Non-U.S. revenues rose 4% to $70.1 million as compared to the same period in fiscal 2013. Excluding the impact from foreign currency, the international growth rate was 6%.
• Operating margin was 33.5% compared to 33.7% a year ago.
• The effective tax rate for the first quarter was 30.5%, as compared to 30.4% a year ago. If the U.S. Federal R&D tax credit had been re-enacted by November 30th, the annual effective tax rate would have been 29.0%.
• Quarterly free cash flow was $52.7 million, up 18% over the year ago quarter.
Operational Highlights — First Quarter of Fiscal 2014
• Client count was 2,525 at November 30th, a net increase of 25 clients.
• Annual client retention was greater than 95% of ASV and 92% when expressed as a percentage of clients.
• Users increased by 89 over the past three months and totaled 51,014 professionals at November 30th.
• Employee count was 6,399 at November 30th, an increase of 141 employees during the quarter.
• Capital expenditures were $5.4 million.
• A regular quarterly dividend of $15.1 million or $0.35 per share was paid on December 17, 2013 to common stockholders of record as of November 29, 2013.
• The Company repurchased 530,000 shares for $57.8 million during the first quarter.
• Common shares outstanding were 43.0 million at November 30, 2013.
• On September 9th, FactSet relocated its California office from San Mateo to San Francisco.
• FactSet held its U.S. Symposium in November 2013, with 316 industry professionals from 102 firms in attendance.
• Van Eck's Market Vectors Exchange Traded Funds (ETFs) is now available on the FactSet platform. FactSet users holding Van Eck's Market Vectors ETFs now have greater transparency into fund characteristics and composition, which enhances the accuracy of portfolio performance and risk analysis.
Expansion of the Share Repurchase Program
On December 16, 2013, the Board of Directors approved a $300 million expansion to the existing share repurchase program. Including the recently approved $300 million expansion to the program, $305 million remains authorized for future repurchases. Over the last 12 months, FactSet has returned $421 million to shareholders in the form of share repurchases and dividends.
Revere Data Acquisition
On September 5, 2013, FactSet announced it had acquired the assets of Revere Data, LLC ("Revere") for $15.3 million. Revere classifies companies into a unique industry taxonomy and offers a database of supply chain relationships. At the time of acquisition, Revere had annual subscriptions of $5 million. The acquisition of Revere reduced the Company's first quarter operating margin by 30 basis points and diluted earnings per share by $0.01. For the full year fiscal 2014, Revere is expected to dilute earnings per share by $0.02.
Matrix Data Limited Investment
On December 10, 2013, FactSet acquired a 60% ownership interest in Matrix Data Limited ("Matrix") for £12 million with the ability to acquire the remaining 40% interest. Headquartered in London, England, Matrix's primary line of business is a provider of intelligence to the UK financial services industry, covering market share of mutual fund distribution. Matrix has developed customer, channel and market benchmarking solutions that help clients optimize product distribution and improve marketing effectiveness to drive revenue growth. The Company employs 85 individuals in England and at the time of acquisition had annual subscriptions of $7 million. Matrix is expected to reduce FactSet's second quarter operating margin by 50 basis points and diluted earnings per share by $0.01. For the full year fiscal 2014, Matrix is not expected to have an impact on diluted earnings per share.
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.
Second Quarter Fiscal 2014 Expectations
• Revenues are expected to range between $225 million and $228 million.
• Operating margin is expected to range between 32.6% and 33.6%, which includes a 30 basis point reduction from Revere and a 50 basis point reduction from Matrix.
• The annual effective tax rate is expected to range between 30.0% and 31.0% and assumes the U.S. Federal R&D tax credit will not be re-enacted by the end of the second quarter of fiscal 2014.
• GAAP diluted EPS should range between $1.20 and $1.23. The anticipated lapse in the U.S. Federal R&D tax credit during the second quarter of fiscal 2014 reduced each end of the GAAP diluted EPS range by $0.03.