FactSet Research Systems Inc. (FDS - Free Report) reported mixed third-quarter fiscal 2020 results, wherein earnings topped the Zacks Consensus Estimate but revenues missed the same.
The company reported adjusted earnings per share of $2.86, which surpassed the Zacks Consensus Estimate by 17.2% and increased 9.2% on a year-over-year basis driven by lower employee-related operating expenses in response to the coronavirus pandemic.
FactSet’s revenues of $374.1 million marginally missed the Zacks Consensus Estimate and increased 2.6% year over year. The uptick was driven by higher sales of analytics, content and technology solutions, and wealth management solutions.
Notably, FactSet’s shares have gained 21.8% year to date, significantly outperforming the 6.8% rally of the industry it belongs to.
Revenues in Detail
Organic revenues increased 2.6% year over year to $375.3 million. Region-wise, U.S. revenues increased to $231 million from $227 million in the year-ago quarter. EMEA revenues were $105.4 million compared with $102.5 million in the year-ago quarter. Asia Pacific revenues were $37.7 million compared with $35.1 million in the year-ago quarter.
FactSet Research Systems Inc. Revenue (TTM)
ASV Plus Professional Services
FactSet’s Annual Subscription Value (“ASV”) plus professional services was $1.5 billion, up 5% organically. Buy-side and sell-side ASV growth rates were 4.8% and 5.6%, respectively. Nearly 84% of organic ASV was generated by buy-side and the rest by sell-side firms performing functions like mergers and acquisitions advisory work,equity research and capital markets services.
ASV generated from the United States was $931.5 million, up 5% from the prior-year quarter’s level. ASV from EMEA and Asia pacific regions were $411.9 million and 150.4 million, up 3.7% and 8.9% year over year, respectively. FactSet added 55 clients in the reported quarter, taking the total number to 5,743. Annual client retention was 89%. At the end of the quarter, total employee count was 10,065, up 7.5% year over year.
Adjusted operating income came in at $133.4 million, up 8.6% from the year-ago quarter’s figure. Adjusted operating margin increased to 35.5% from 34% in the year-ago quarter. Selling, general and administration expenses decreased 2.1% to $81.7 million. Total operating expenses increased 2.1% to $252.4 million.
Balance Sheet and Cash Flow
FactSet exited third-quarter with cash and cash equivalents of $457.7 million compared with $343.5 million in the previous quarter. Long-term debt of $574.3 million was flat with the prior quarter figure. In the quarter, the company generated $151 million of cash from operating activities and capital expenditure was $11 million. Free cash flow was $139.9 million.
Fiscal 2020 Outlook
FactSet updated its fiscal 2020 outlook provided previously on Sep 26, 2019.
The company now anticipates adjusted EPS in the range of $10.4 and $10.6, compared with the previous anticipation of $9.85 to $10.15. The updated range is above the Zacks Consensus Estimate of $10.34.
The company expects revenues between $1.485 billion and $1.49 billion, compared with the previous expectation of $1.49 billion to $1.50 billion. The Zacks Consensus Estimate is pegged at $1.49 billion.
Organic ASV plus professional services for fiscal 2020 is projected to increase in the range of $60-$75 million over fiscal 2019. The prior expectation was an increase of $65-$85 million. Adjusted operating margin is projected in the range of 33%-33.5%, compared with the previous projection of 28.5%-29.5%. The annual effective tax rate is expected between 15.5% and 16.5%.
FactSet currently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Performance of Other Business Services Companies
S&P Global’s (SPGI - Free Report) first-quarter 2020 adjusted earnings per share of $2.73 beat the consensus mark by 15.7% and improved 29.4% year over year on the back of revenue growth, benefits of productivity initiatives and reduced business travel. The stock currently carries a Zacks Rank #2 (Buy).
IQVIA Holdings’ (IQV - Free Report) first-quarter 2020 adjusted earnings per share of $1.50 beat the consensus mark by 1.4% but decreased 1.9% on a year-over-year basis. The reported figure lies within the guided range of $1.46-$1.51. The stock currently carries a Zacks Rank #4 (Sell).
Insperity’s (NSP - Free Report) first-quarter 2020 adjusted earnings of $1.70 per share beat the consensus mark by 5.6% but decreased 14.1% year over year. The reported figure matched the higher end of the guided range of $1.61-$1.70. The stock currently carries a Zacks Rank #4.
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