- ASV advanced $22.5 million, up 6% organically
- Adjusted EPS rose 10% to $1.22
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 second quarter of fiscal 2014.
For the quarter ended February 28, 2014, revenues increased to $226.9 million, up 7% over the prior year. Included in this total was $2 million from the acquisition of Matrix. Operating income was $75.1 million compared to $56.2 million in the year ago quarter. Net income was $52.4 million versus $44.5 million a year ago. Diluted earnings per share was $1.22 compared to $1.00 in the same period of fiscal 2013.
Adjusted operating income for the quarter was up 4% over the prior year. Adjusted operating income in the fiscal 2013 period excludes the prior year non-cash pre-tax charge of $15.7 million for vesting performance-based stock options. Adjusted net income advanced 6%. Adjusted net income in the year ago quarter excludes both the after-tax charge of $11.0 million related to performance-based stock options and $6.3 million in income tax benefits from the U.S. Federal R&D credit. Adjusted diluted EPS rose 10%. Prior year adjusted diluted EPS of $1.11 excludes the net effect of a $0.25 decrease for the vesting of performance-based options, partially offset by a $0.14 increase in diluted EPS from the U.S. Federal R&D credit.
A reconciliation between GAAP and adjusted financial measures is presented on page 9 of this press release.
Consolidated Statements of Income
(Condensed and Unaudited)
Three Months Ended
(In thousands, except per share data)
Adjusted operating income
Adjusted net income
Adjusted diluted earnings per share
Diluted weighted average shares
"Our second quarter results reflect an improving buy-side client base, and include acquiring the remaining 40% interest in Matrix," said Philip Hadley, Chairman and CEO. "I'm pleased to see that our net client growth in the past three months was the highest quarterly total since 2006 and buy-side users grew at a level we've not seen since 2004. This is validation that our sizable reinvestment in our products and services is being recognized by the market."
Annual Subscription Value ("ASV")
ASV totaled $920 million at February 28, 2014, up 6% organically over the prior year. Including $7.3 million from the acquisition of Matrix, ASV increased $29.8 million over the last three months. Buy-side clients account for 82.7% of ASV and the remainder from 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 - Second Quarter of Fiscal 2014
- ASV from U.S. operations was $626 million and $294 million was related to international operations.
- U.S. revenues were $154.3 million, up 6% from the year ago quarter.
- Non-U.S. revenues rose to $72.7 million. Excluding incremental revenue from the acquisition of Matrix and the impact of foreign currency, the international growth rate was 6%.
- Operating margin was 33.1% compared to 26.4% a year ago. The acquisition of Matrix reduced the operating margin by 40 basis points.
- The effective tax rate was 30.5%. If the U.S. Federal R&D tax credit had been re-enacted by February 28, 2014, the annual effective tax rate would have been 29.0%.
- Quarterly free cash flow was $38 million.
Operational Highlights - Second Quarter of Fiscal 2014
- Client count rose by 96, including 32 new clients acquired from Matrix and totaled 2,632 at February 28, 2014.
- Annual client retention was greater than 95% of ASV and 92% when expressed as a percentage of clients.
- Users of the FactSet workstation increased by 849 over the past three months and totaled 51,863 professionals at February 28, 2014. The user count does not include Matrix users.
- Employee count was 6,486 at February 28, 2014, an increase of 87 employees during the quarter.
- Capital expenditures were $2.6 million.
- A regular quarterly dividend of $14.8 million or $0.35 per share was paid on March 18, 2014, to common stockholders of record as of February 28, 2014.
- The Company repurchased 800,000 shares for $86.1 million during the second quarter. At February 28, 2014, $219 million remains authorized for future repurchases.
- Common shares outstanding were 42.4 million at February 28, 2014.
- FactSet was named one of Fortune's "100 Best Companies to Work For," marking the Company's sixth appearance on the list in the last seven years.
- FactSet opened a new office in Singapore to meet the needs of its growing international client base.
FactSet acquired Matrix Data Limited ("Matrix") for $32 million during the second quarter of fiscal 2014. 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. At the time of acquisition, Matrix employed 85 individuals in England and had annual subscriptions of $7.3 million. Matrix reduced FactSet's second quarter operating margin by 40 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.
Third Quarter Fiscal 2014 Expectations
- Revenues are expected to range between $229 million and $233 million.
- Operating margin is expected to range between 32.5% and 33.5%, which includes a 70 basis point reduction from the recent acquisitions of Revere and Matrix.
- The annual effective tax rate is expected to range between 30% and 31% and assumes that the U.S. Federal R&D tax credit will not be re-enacted by the end of the third quarter of fiscal 2014.
Diluted EPS should range between $1.24 and $1.26. The lapse in the U.S. Federal R&D tax credit on December 31, 2013 reduced each end of the diluted EPS range by $0.03.