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FactSet (FDS) Q4 Earnings Miss Estimates, Revenues Surpass

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FactSet Research Systems, Inc. (FDS - Free Report) reported mixed fourth-quarter fiscal 2023 (ended Aug 31) results, wherein earnings missed, while revenues beat the Zacks Consensus Estimate.

Non-GAAP earnings per share (EPS) (excluding $1.25 from non-recurring items) of $2.93 missed the consensus mark by 16.1% and decreased 6.4% from the year-ago quarter’s reported figure. However, revenues of $535.8 million surpassed the Zacks Consensus Estimate by a slight margin and increased 7.3% from the year-ago quarter’s reported figure. The increase was primarily due to higher sales of Analytics & Trading and Content & Technology solutions.

Revenues in Detail

Organic revenues increased 7.2% year over year to $535.2 million. Region-wise, organic revenue growth from the Americas, the EMEA and the Asia Pacific was 6%, 9.1% and 9.9%, respectively.

Revenues generated from the Americas segment were $343.3 million, 6.1% higher than the year-ago reported figure but missed our estimate of $347.6 million. Revenues from the EMEA came in at $138.6 million, reflecting an increase of 9.7%, and surpassed our estimate by 5.2%. Revenues from the Asia Pacific were $53.9 million, higher than our expected $53.5 million.

ASV Plus Professional Services

FactSet’s Annual Subscription Value (“ASV”) plus professional services were $2.17 billion. Organic ASV plus professional services were $2.1 billion, up 7.2% from the prior-year quarter. Buy-side and sell-side organic ASV growth rates were 6.9% and 9.3%, respectively. Nearly 82% of organic ASV was generated by the buy-side and the rest by sell-side firms.

Organic ASV generated from the United States was $1.38 billion, up 7% from the prior-year quarter. Organic ASV from the EMEA and the Asia Pacific was $558.8 million and $216.7 million, up 7.7% and 8.1% year over year, respectively.

FactSet added 151 clients in the reported quarter, driven by an increase in corporate and wealth clients, taking the total to 7,921. The annual client retention rate was 91%. At the end of the said quarter, the total employee count was 12,237, up 9.2% from the figure registered in the last 12 months, driven primarily by an increase in content, product and technology organizations.

Operating Results

The adjusted operating income was $180.1 million, up 14.4% from the year-ago quarter’s reported figure and surpassed our estimate by 14.1%. The adjusted operating margin increased to 33.6% from 31.5% in the year-ago quarter compared with our estimated 29.5%. Adjusted EBITDA came in at $172.2 million, 8.6% higher than the year-ago figure and beat our estimated $160.8 million.

Balance Sheet and Cash Flow

FactSet exited the quarter with a cash and cash equivalent balance of $425.44 million compared with $486.63 million in the previous quarter. The long-term debt was $1.61 billion compared with the prior quarter’s figure of $1.67 billion. In the reported quarter, FDS generated $175.9 million of cash from operating activities, while capital expenditure was $19.6 million. Free cash flow was $156.3 million.

Guidance for Fiscal 2024

The company reiterated GAAP revenues, which are expected in the band of $2.21-$2.23 billion. The Zacks Consensus Estimate is pegged at $2.23 billion. FactSet's annual effective tax rate is expected at 17-18%.

FactSet expects adjusted EPS in the range of $15.65-$16.15. The Zacks Consensus Estimate for earnings is pegged higher at $16.49. The adjusted operating margin is expected in the range of 36.3%-36.7%.

FactSet currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Earnings Snapshot

Gartner (IT - Free Report)  reported better-than-expected second-quarter 2023 results. Adjusted EPS (excluding 37 cents from non-recurring items) of $2.85 beat the Zacks Consensus Estimate by 14.9% and matched the year-ago reported figure. Revenues of $1.5 billion beat the consensus estimate by 1% and improved 9.2% year over year on a reported basis and 10% on a foreign-currency-neutral basis. The total contract value was $4.6 billion, up 8.9% year over year on a foreign currency-neutral basis.

Automatic Data (ADP - Free Report) reported better-than-expected fourth-quarter fiscal 2023 results. Adjusted EPS of $1.89 (excluding 1 cent from non-recurring items) beat the Zacks Consensus Estimate by 3.3% and grew 26% from the year-ago fiscal quarter’s figure. Total revenues of $4.47 billion beat the consensus estimate by 1.8% and improved 8.5% from the year-ago fiscal quarter’s reading on a reported basis and 9% on an organic constant-currency basis.

TransUnion (TRU - Free Report) reported impressive second-quarter 2023 results, wherein earnings and revenues beat the Zacks Consensus Estimate. Quarterly adjusted earnings of 86 cents per share (adjusting 58 cents from non-recurring items) surpassed the consensus mark by 3.6% but decreased 12.2% year over year.

Total revenues of $968 million beat the consensus mark by 1% and increased 2.1% year over year on a reported basis. Revenues were up 3% on a constant-currency basis, mainly driven by strength in international markets.

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