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FactSet Research (FDS) Tops on Q1 Earnings, Misses Revenues
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FactSet Research Systems Inc. (FDS - Free Report) reported mixed results for fiscal first-quarter 2018. While earnings came ahead of the Zacks Consensus Estimate, revenues missed the same. However, on a year-over-year basis, it registered growth on both the counts.
The company reported adjusted earnings per share of $2.04, which surpassed the Zacks Consensus Estimate of $1.98. The figure exceeded the guided range of $1.93 to $1.99 per share. Moreover, adjusted earnings improved 16.6% on a year-over-year basis.
Quarter Details
FactSet’s revenues of $329.1 million increased 14.3% from the year-ago quarter and came ahead of the guided range of $321 million-$328 million. Organic revenues increased 5.8% year over year to $304.3 million during the quarter. Successful integration of newly acquired businesses along with expansion in workflow-based solutions backed the company’s top-line performance. However, the figure missed the Zacks Consensus Estimate of $331 million.
In the reported quarter, FactSet’s revenues from the United States increased to $208.8 million while international revenues grew to $120.4 million. Excluding the impact of foreign currency, acquisitions and disposition, U.S. revenues and international revenues rose 4.8% and 7.7%, respectively, on a year-over-year basis.
FactSet Research Systems Inc. Price, Consensus and EPS Surprise
The company’s Annual Subscription Value (ASV) increased to $1.32 billion as of Nov 30, 2017, up 12.8% from the year-ago quarter figure of $1.17 billion. Of this, nearly 84.2% was generated by buy-side clients while the rest came from sell-side firms performing functions like mergers & acquisition, advisory work and equity research. Organically, it had increased 5.1% on a year-over-year basis.
FactSet added 65 clients in the reported quarter, taking the tally to 4,809. The company retained 90% of its clients. The percentage of client retention was more than 95% of ASV.
Coming to the operational metrics, FactSet reported a 21% rise in total operating expenses. As a percentage of revenues, operating expenses increased approximately 400 basis points (bps) to 73%.
FactSet’s adjusted operating income increased 10.6% from the year-ago quarter to $105.1 million. However, operating margin decreased 130 bps year over year to 31.7%, owing to increased operating expenses as a percentage of revenues.
Adjusted net income during the quarter was $80.9 million compared with $70.1 million in the year-ago quarter.
FactSet exited the quarter with $221.9 million in cash and cash equivalents, compared with $194.7 million from the previous quarter. Long-term debt at the end of the quarter amounted to $574.7 million.
Cash flow from operations during the quarter was $61.1 million. The company generated free cash flow of $55.2 million.
FactSet repurchased $30.9 million worth of its common stock under its existing share repurchase authorization during the first quarter. The company has still $213.2 million remaining under the share repurchase authorization as of Nov 30, 2017.
Guidance
Starting this quarter, the company has decided not to provide quarterly guidance. Instead, it will issue a fiscal guidance. The company initiated guidance for fiscal 2018. GAAP revenues are expected to be between $1.34 billion and $1.36 billion (mid-point $1.35 billion). The Zacks Consensus Estimate is currently pegged at $1.36 billion.
Organic ASV for fiscal 2018 is projected to increase by $65 million to $85 million, representing year-over-year growth of 4.9% to 6.5%. The anticipated range for adjusted operating margin is 31% and 32.5%.
Adjusted earnings are expected to be within $8.25 and $8.45 (mid-point $8.35). The midpoint represents 14% year-over-year growth. The Zacks Consensus Estimate is pegged at $8.18 per share.
Bottom Line
Shares of Factset have gained 25.3% year to date, underperforming the industry’s 30.7% rally. Investors seem concern about lower-than-expected revenues and unimpressive top-line guidance for fiscal 2018. Furthermore, declining client retention ratio remains a major concern.
The company’s client retention ratio in the first quarter came in at 90%, tanking 300 basis points (bps) from the year-ago quarter and 100 bps from the fourth quarter of fiscal 2017. It should be noted that a strong client retention ratio signifies more stable revenues.
Although the company continues to add clients every quarter, it has failed to retain old clients. This will negatively impact its near-term top-line growth.
Long-term expected EPS growth rate for Intel, NetApp and IPG is projected to be 8.42%, 11.34% and 12%, respectively.
Zacks Editor-in-Chief Goes "All In" on This Stock
Full disclosure, Kevin Matras now has more of his own money in one particular stock than in any other. He believes in its short-term profit potential and also in its prospects to more than double by 2019. Today he reveals and explains his surprising move in a new Special Report.
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FactSet Research (FDS) Tops on Q1 Earnings, Misses Revenues
FactSet Research Systems Inc. (FDS - Free Report) reported mixed results for fiscal first-quarter 2018. While earnings came ahead of the Zacks Consensus Estimate, revenues missed the same. However, on a year-over-year basis, it registered growth on both the counts.
The company reported adjusted earnings per share of $2.04, which surpassed the Zacks Consensus Estimate of $1.98. The figure exceeded the guided range of $1.93 to $1.99 per share. Moreover, adjusted earnings improved 16.6% on a year-over-year basis.
Quarter Details
FactSet’s revenues of $329.1 million increased 14.3% from the year-ago quarter and came ahead of the guided range of $321 million-$328 million. Organic revenues increased 5.8% year over year to $304.3 million during the quarter. Successful integration of newly acquired businesses along with expansion in workflow-based solutions backed the company’s top-line performance. However, the figure missed the Zacks Consensus Estimate of $331 million.
In the reported quarter, FactSet’s revenues from the United States increased to $208.8 million while international revenues grew to $120.4 million. Excluding the impact of foreign currency, acquisitions and disposition, U.S. revenues and international revenues rose 4.8% and 7.7%, respectively, on a year-over-year basis.
FactSet Research Systems Inc. Price, Consensus and EPS Surprise
FactSet Research Systems Inc. Price, Consensus and EPS Surprise | FactSet Research Systems Inc. Quote
The company’s Annual Subscription Value (ASV) increased to $1.32 billion as of Nov 30, 2017, up 12.8% from the year-ago quarter figure of $1.17 billion. Of this, nearly 84.2% was generated by buy-side clients while the rest came from sell-side firms performing functions like mergers & acquisition, advisory work and equity research. Organically, it had increased 5.1% on a year-over-year basis.
FactSet added 65 clients in the reported quarter, taking the tally to 4,809. The company retained 90% of its clients. The percentage of client retention was more than 95% of ASV.
Coming to the operational metrics, FactSet reported a 21% rise in total operating expenses. As a percentage of revenues, operating expenses increased approximately 400 basis points (bps) to 73%.
FactSet’s adjusted operating income increased 10.6% from the year-ago quarter to $105.1 million. However, operating margin decreased 130 bps year over year to 31.7%, owing to increased operating expenses as a percentage of revenues.
Adjusted net income during the quarter was $80.9 million compared with $70.1 million in the year-ago quarter.
FactSet exited the quarter with $221.9 million in cash and cash equivalents, compared with $194.7 million from the previous quarter. Long-term debt at the end of the quarter amounted to $574.7 million.
Cash flow from operations during the quarter was $61.1 million. The company generated free cash flow of $55.2 million.
FactSet repurchased $30.9 million worth of its common stock under its existing share repurchase authorization during the first quarter. The company has still $213.2 million remaining under the share repurchase authorization as of Nov 30, 2017.
Guidance
Starting this quarter, the company has decided not to provide quarterly guidance. Instead, it will issue a fiscal guidance. The company initiated guidance for fiscal 2018. GAAP revenues are expected to be between $1.34 billion and $1.36 billion (mid-point $1.35 billion). The Zacks Consensus Estimate is currently pegged at $1.36 billion.
Organic ASV for fiscal 2018 is projected to increase by $65 million to $85 million, representing year-over-year growth of 4.9% to 6.5%. The anticipated range for adjusted operating margin is 31% and 32.5%.
Adjusted earnings are expected to be within $8.25 and $8.45 (mid-point $8.35). The midpoint represents 14% year-over-year growth. The Zacks Consensus Estimate is pegged at $8.18 per share.
Bottom Line
Shares of Factset have gained 25.3% year to date, underperforming the industry’s 30.7% rally. Investors seem concern about lower-than-expected revenues and unimpressive top-line guidance for fiscal 2018. Furthermore, declining client retention ratio remains a major concern.
The company’s client retention ratio in the first quarter came in at 90%, tanking 300 basis points (bps) from the year-ago quarter and 100 bps from the fourth quarter of fiscal 2017. It should be noted that a strong client retention ratio signifies more stable revenues.
Although the company continues to add clients every quarter, it has failed to retain old clients. This will negatively impact its near-term top-line growth.
Zacks Rank and Stocks to Consider
Factset has a Zacks Rank #4 (Sell).
Some of the better-ranked stocks in the broader technology sector are Intel Corporation (INTC - Free Report) , NetApp, Inc. (NTAP - Free Report) and IPG Photonics Corporation (IPGP - Free Report) , all sporting a Zacks Rank #1 (Strong Buy). You can see see the complete list of today’s Zacks #1 Rank stocks here.
Long-term expected EPS growth rate for Intel, NetApp and IPG is projected to be 8.42%, 11.34% and 12%, respectively.
Zacks Editor-in-Chief Goes "All In" on This Stock
Full disclosure, Kevin Matras now has more of his own money in one particular stock than in any other. He believes in its short-term profit potential and also in its prospects to more than double by 2019. Today he reveals and explains his surprising move in a new Special Report.
Download it free >>