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FactSet Research Systems Inc. Reports Operating Results (10-K)
Posted by: gurufocus (IP Logged)
Date: October 31, 2011 03:53PM

FactSet Research Systems Inc. (FDS) filed Annual Report for the period ended 2011-08-31. Factset Research Systems Inc. has a market cap of $4.61 billion; its shares were traded at around $100.68 with a P/E ratio of 28.77 and P/S ratio of 6.35. The dividend yield of Factset Research Systems Inc. stocks is 1.07%. Factset Research Systems Inc. had an annual average earning growth of 17.9% over the past 10 years. GuruFocus rated Factset Research Systems Inc. the business predictability rank of 5-star.

Highlight of Business Operations:

Revenues in fiscal 2011 were $726.5 million, up 13.3% from $641.1 million for the same period a year ago. Increased revenues were from successes across our product suite and in all geographic locations. The fourth quarter of fiscal 2011 was a record quarter for us as ASV grew by $37 million, rising to $779 million at August 31, 2011. During fiscal 2011, our user count increased by 5,300, net new clients rose to 127, and annual subscriptions increased by $93 million organically. Broad-based growth has been the catalyst for accelerating our ASV growth rate to 14% over the past 12 months. Our investment management clients continue to experience strong growth across all geographies and represented 82% of our total revenues in fiscal 2011, consistent with the prior year. For much of fiscal 2011, the global financial markets were in positive territory, thus encouraging many of our clients to invest in people and in their business partnerships. This generally positive business environment, coupled with our strategy of continual product and service enhancements translated into progress in each of our key metrics. The new FactSet application released in September 2009 continues to receive strong reviews from the marketplace. We invested heavily in the product during fiscal 2011, releasing four new versions, each with many new features and improvements in speed and stability. Our client product usage growth rate far exceeded our subscription growth rate, signaling that we delivered more value per dollar of subscription to our clients than in prior years.

International revenues in fiscal 2011 were $228.9 million, an increase from $205.7 million in the prior year period. The impact from foreign currency increased international revenues by $1.4 million year over year. European revenues advanced to $178.7 million due to increases in user and client counts, offering a broader selection of global proprietary content, clients licensing our advanced applications and growth in our real-time news and quotes. Asia Pacific revenues grew to $50.3 million, up from $44.1 million a year ago. The foreign currency impact attributable to the change in the value of the Japanese Yen compared to the U.S. dollar increased revenues by $1.4 million in fiscal 2011. Holding currencies constant, Asia Pacific revenue growth year over year was 10.9%, largely due to our ability to sell additional services to existing clients, the ability to bring on new clients and users over the last 12 months, growth in our global content offering and the expansion of our real-time news and quotes. Revenues from international operations accounted for 31.5% of our consolidated revenues in fiscal 2011, as compared to 32.1% in the year ago quarter.

Operating income from our U.S. segment decreased 1% to $125.0 million in fiscal 2010 compared to $126.2 million in the same period a year ago due to higher compensation expense, a rise in T&E expense and increased occupancy and marketing costs partially offset by $11.4 million of incremental revenues and lower data costs. During fiscal 2010 we entered into a new lease agreement to expand our New York location by 22,000 square feet to support operations resulting in higher occupancy costs in 2010 as well as incremental future minimum rental payments of $6.2 million over the remaining non-cancelable lease term. Marketing costs increased in fiscal 2010 as compared to 2009 within the U.S. as we released the new FactSet in September 2009. European operating income increased 20% to $72.2 million in fiscal 2010 compared to the same period a year ago due to a $5.0 million increase in revenues, favorable currency exchange rates, lower variable fees payable to data vendors, a reduction in data amortization expense associated with the Thomson Reuters transition services agreement and the termination of a BPO relationship in May 2009. Asia Pacific operating income decreased 1% to $24.4 million in fiscal 2010 compared to $24.7 million in fiscal 2009, due to higher occupancy costs from recent office expansions.

Net income advanced $150.2 million, up 4% while diluted earnings per common share rose 5% to $3.13 in fiscal 2010 compared to fiscal 2009. Included in fiscal 2010 were income tax benefits of $0.03 per diluted share from finalizing our U.S. tax return for 2009, adjusting certain reserves to reflect the lapse of statute of limitations and higher levels of non-U.S. taxable income. Excluding the income tax benefits of $0.03 per diluted share in fiscal 2010 and $0.09 per diluted share in fiscal 2009, our diluted earnings per share grew 7% year over year primarily due a 3% increase in revenues, lower data costs and favorable currency rates partially offset by higher compensation expense.

Our non-U.S. dollar denominated revenues expected to be recognized over the next twelve months are estimated to be $16 million while our non-U.S. dollar denominated expenses are $165 million, which translates into a net foreign currency exposure of $149 million per year. Our primary foreign currency exchange exposures are related to our operating expense base in countries outside the U.S., where approximately 67% of our employees are located. Foreign currency movements increased our operating expenses by $1.5 million and decreased operating income by $0.1 million during fiscal 2011. In fiscal 2010, operating expenses were reduced by $3.8 million and operating income increased by $4.7 million from the impact of foreign currency fluctuations.

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