- ASV grew to $970 million, up 8.5% organically
- Adjusted EPS rose to $1.32, up 11.9%
- Free cash flow was $66 million, up 25.9% over the prior year
FactSet Research Systems Inc. (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 2015.
For the quarter ended November 30, 2014, revenues advanced to $242.7 million, up 8.8% over the prior year. Included in this total was$2.5 million related to an acquisition completed less than a year ago. Operating income was $80.3 million compared to $74.7 million in the year ago quarter. Net income was $55.9 million versus $52.2 million a year ago. Diluted earnings per share were $1.32 compared to$1.19 in the same period of fiscal 2014.
Adjusted diluted EPS grew 11.9% as prior year EPS was adjusted to exclude income tax benefits of $0.01 per share from the U.S. Federal R&D tax credit.
A reconciliation between GAAP and adjusted financial measures is presented on page 8 of this press release.
|Consolidated Statements of Income|
|(Condensed and Unaudited)|
|Three Months Ended|
|(In thousands, except per share data)||2014||2013||Change|
|Adjusted diluted earnings per share||$1.32||$1.18||11.9%|
|Diluted weighted average shares||42,340||43,773|
"Our first quarter performance was a strong start to the fiscal year," said Philip Hadley, Chairman and CEO. "The underlying growth rate of our business continues to expand and translated into double digit EPS growth for the 18th consecutive quarter. I was pleased that our growth was broad based across our products and derived from each geographic region. We also added 997 net new users, our best first quarter user addition in 7 years. This healthy performance pushed our user growth rate to 9.0% over the last 12 months."
Annual Subscription Value ("ASV")
ASV totaled $970.2 million at November 30, 2014, up 8.5% organically over the prior year. Excluding the impact from foreign currency, ASV increased $9.2 million over the last three months. 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. Buy-side clients account for 82.5% of ASV and the remainder from sell-side firms that perform Mergers & Acquisitions ("M&A") advisory work, capital markets services and equity research. The buy-side and sell-side ASV growth rates accelerated to 8.9% and 6.7%, respectively. Supplementary tables covering buy-side and sell-side ASV growth rates are presented on page 8 of this press release.
Financial Highlights – First Quarter of Fiscal 2015
- ASV from U.S. operations was $654 million and $316 million was related to international operations.
- U.S. revenues were $163.7 million, up 7.0% from the year ago first quarter.
- Non-U.S. revenues rose to $79.0 million. Excluding incremental revenue from the acquisition of Matrix and the impact of foreign currency, the international growth rate was 9.8%.
- Operating margin was 33.1%.
- Quarterly free cash flow was $66.4 million, an increase of 25.9% over prior year.
- The effective tax rate for the first quarter was 30.8%, as compared to 30.5% a year ago.
Operational Highlights – First Quarter of Fiscal 2015
- Annual client retention was greater than 95% of ASV and 93% of clients, up from 92% a year ago.
- Client count rose by 19 and totaled 2,762 at November 30, 2014.
- Users of the FactSet workstation grew 9.0% and totaled 55,593 professionals at November 30, 2014.
- Employee count was 6,887 at November 30, 2014, up 7.6% over last year.
- Capital expenditures were $4.8 million.
- A regular quarterly dividend of $16.2 million or $0.39 per share was paid on December 16, 2014 to common stockholders of record as of November 28, 2014.
- Common shares outstanding were 41.6 million at November 30, 2014.
- FactSet was named as one of the "20 Great Workplaces in Technology" for the first time by Great Place to Work.
- FactSet opened a new office in Toronto, Canada to meet the needs of its growing Canadian client base.
U.S. Federal R&D Tax Credit
The U.S. Federal R&D tax credit expired on December 31, 2013 and was not extended as of November 30, 2014, the end of FactSet's first quarter. Although a bill including the renewal of the R&D tax credit for calendar year 2014 has been approved by the U.S. House of Representatives, it has not been signed into law. Accordingly, FactSet did not recognize any income tax benefits from the Federal R&D tax credit during the just completed first quarter.
The impact of the Federal R&D tax credit to FactSet is estimated to be $8.1 million per year or $0.19 per share. It is important to note that the U.S. Federal R&D tax credit was never made a permanent credit, resulting in 9 expirations and 15 extensions since 1981. Only once in its 33-year history was the tax credit not retroactively re-enacted (from July 1, 1995 through June 30, 1996). However, the timing of FactSet's ability to recognize the Federal R&D tax credit has been volatile due to the number of lapses and retroactive re-enactments. If FactSet had been able to recognize the full value of income tax benefits from the U.S. Federal R&D tax credit, adjusted EPS would have increased by $0.05 and $0.03 in the first quarter of fiscal 2015 and 2014, respectively, and the effective tax rate would have declined to 29% in both periods.
Share Repurchase Program and Authorization
FactSet repurchased 379,854 shares for $48.4 million during the first quarter. On December 15, 2014, the Board of Directors of FactSet approved a $300 million expansion of the existing share repurchase program. Including this expansion, $338.7 million is now available for future share repurchases. In the past 12 months, FactSet has returned $270 million to stockholders in the form of share repurchases, funded entirely by cash generated from operations.
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. FactSet does not intend to update its forward-looking statements until its next quarterly results announcement, other than in publicly available statements.
Second Quarter Fiscal 2015 Expectations:
- Revenues are expected to range between $244 million and $248 million.
- Operating margin is expected to range between 32.8% and 33.8%.
- The annual effective tax rate is expected to range between 31.0% and 32.0% and assumes that the U.S. Federal R&D tax credit will not be re-enacted by the end of the second quarter of fiscal 2015.
- Diluted EPS should range between $1.35 and $1.37. The midpoint of this range represents 12.4% growth over the prior year.