FactSet Research Systems (FDS)

First quarter 2009 Earnings Announcement

FactSet Research Systems Inc. will announce results for the first quarter of fiscal 2009, ending November 30, 2008 on December 16th. For the first quarter of 2009, FactSet expects revenue in the $154.0 million to $157.0 million range. The high and low end of the range has been decreased to account for potential future reductions in services to Lehman Brothers, Merrill Lynch, AIG, and Washington Mutual. The company expects the related exposure to be approximately 1.5% of ASV or $10.0 million. Operating margins, excluding FactSet Fundamentals, are expected to be in the 31.5% to 33.0% range. This decrease of 90 basis points from the previous quarter guidance reflects the increased workstations sold to summer interns in the fourth quarter of 2008. Other income is expected to be between $0.6 million to $1.0 million. Effective tax rate is expected in the 33.8% to 34.6% range, and assumes that the U.S. Federal R&D tax credit will not be reenacted. EPS dilution from FactSet Fundamentals is expected to remain at $0.04 per share. The primary expense drivers in the first quarter are the cost of the TSA from Thomson and the new employee growth to support the collection operation. Free cash flow for the first quarter includes variable employee compensation related to fiscal year 2007. The cash outlay is expected to be approximately $33.0 million in the first quarter of fiscal 2009.

For the full fiscal year 2009, FactSet expects capital expenditures, net of landlord contributions, in the $32.0 million to $38.0 million range. Factset entered into a Transition Services Agreement with Thomson, where the latter will provide services for 18 months from the closing date, including daily updates to FactSet's fundamental database. FactSet anticipates that this transaction will be dilutive to its EPS' until the conclusion of the 18 month transition period. The quarterly costs of transition services on a pre-tax basis are expected to be approximately $1.6 million or $6.5 million for the full fiscal year 2009. These costs will be eliminated at the end of 18 months of the transition period. FactSet expects the transaction to be accretive to its fiscal 2010 EPS.

Fourth Quarter 2008 Earnings

On September 23, 2008, FactSet Research Systems Inc. announced results for the fourth quarter of fiscal 2008, ended August 31, 2008. Revenue for the quarter increased 18.7% to $153.7 million from $129.5 million in the year-ago quarter. This was in line with consensus estimates of $153.6 million and at the higher end of the company's guided range of $150.0 million to $154.0 million. On a fully diluted basis, EPS for the quarter was $0.67, an increase of 11.7% from $0.60 in the year-ago quarter, which included a tax benefit of $1.1 million or $0.02 per share.

Net income for the quarter increased 9.3% year-over-year to $33.6 million. Included in the fourth quarter of 2008 was a pre-tax charge of $1.1 million related to the acquisition of a copy of the Thomson Fundamentals database and related assets. This acquisition reduced diluted EPS by $0.01. As such, adjusted net income was $34.3 million or $0.68 per share. The growth in net income for the quarter was impacted by a decline in other income by 64.6% as a result of lower U.S. interest rates. Gross margin was 67.0%, a decrease of 80 basis points year-over-year. Operating margin was 32.7% in the quarter, a decrease of 20 basis points year-over-year. Excluding the impact of Thomson acquisition, operating margin was 33.4% during the quarter. The effective tax rate for the quarter was 34.2%. During the quarter, higher compensation was partially offset by lower computer depreciation and maintenance and amortization of intangibles. The increase in compensation was driven by new employees. The decrease in computer maintenance is a result of replacing all mainframes in both data centers in fiscal 2008 and the decrease in amortization was due to full amortization of certain assets from previous acquisitions.

Annual subscription value (ASV) for the quarter, indicating forward 12 months revenue, amounted to $615.0 million. Excluding $2.0 million from the acquisition of Thomson fundamentals and foreign exchange currency, ASV increased $25.5 million. ASV from FactSet's domestic operations was $420.0 million, and international ASV totaled $195.0 million. On an organic basis, ASV increased by $92.6 million, or 18% year-over-year. Including foreign exchange currency ASV increased 19% year-over-year. The increase in the ASV was derived from strong performance from both the U.S. and non-U.S. investment management businesses. The number of users rose to 40,120, up 520 from the third quarter of fiscal 2008. Client count was 2,085, a net increase of 41 clients during the quarter. Demand for portfolio analytics continued to increase with 637 clients, an increase of 18% year-over-year and representing approximately 5,730 users who subscribe to the portfolio analysis workstation service, an increase of 22% year-over-year. Non-subscription revenues during the quarter were $2.7 million, which includes $1.4 million from workstations sold to summer interns. Marquee users were up 45% year-over-year. Client retention rate remained above 95% during the quarter. Geographically, revenues from the U.S. were $106.0 million, up 16% from the year-ago period. International revenues increased 25% to $48.0 million in the quarter.

FactSet generated $39.7 million cash from operating activities, a decrease of $18.9 million from the previous quarter. The company incurred capital expenditures of $9.6 million and generated $39.5 million in free cash flow, excluding the acquisition of Thomson Fundamentals. FDS exited the quarter with $143.0 million in cash and short-term investments, down $48.8 million from the previous quarter and has no long-term debt. The company repurchased 189,700 shares for $12.1 million during the quarter and currently has $105.0 million authorized for future repurchases. In August 2008, the company granted 1.7 million employee stock options.

Dividend

On November 17, 2008, FactSet announced that its Board of Directors has approved a regular quarterly dividend of $0.18 per share, payable on December 16, 2008 to holders of record of FactSet's common stock as on November 28, 2008.

Partnership

On October 20, 2008, FactSet announced a partnership with FirstRain, the leading provider of search-driven research for investment professionals. Under the partnership, the partners announced the availability of FirstRain within the FactSet real-time market data platform, FactSet Marquee. The partnership improves the research process by making it easy to incorporate findings from non-traditional sources such as blogs, industry publications, and local news as well as new unique web analytics such as Management Turnover trends, as part of idea generation and portfolio monitoring. All users of FactSet Marquee will gain access to web results from FirstRain, and clients of both firms will be able to utilize the full FirstRain platform from within their existing FactSet workflow.

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