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FactSet (FDS) Q2 Earnings Surpass Estimates, Revenues Miss

FactSet Research Systems, Inc. FDS reported mixed second-quarter fiscal 2024 results, wherein earnings beat the Zacks Consensus Estimate, but revenues missed the same.

FDS’ earnings per share (excluding 57 cents from non-recurring items) of $4.2 beat the consensus mark by 10.2% and increased 11.1% from the year-ago fiscal quarter. Revenues of $545.9 million missed the Zacks Consensus Estimate by a slight margin but increased 6% from the year-ago fiscal quarter.

Revenues in Detail

Organic revenues increased 6% year over year to $546.1 million. Region-wise, organic revenue growth from the Americas, EMEA and the Asia Pacific was 6.5%, 4.8% and 6.4%, respectively.

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Revenues generated from the Americas segment were $352.6 million, up 6.5% from the year-ago fiscal quarter, beating our estimated $349.8 million. Revenues from the EMEA were $139.2 million, reflecting an increase of 4.8% from the year-ago fiscal quarter. The figure missed our estimated $141 million. Revenues from the Asia Pacific were $54.1 million, which highlighted growth of 6.4% from the second quarter of fiscal 2023 but missed our expected $54.7 million.

ASV Plus Professional Services

FactSet’s Annual Subscription Value (“ASV”) plus professional services were $2.2 billion. Organic ASV plus professional services were $2.2 billion, up 5.4% from the year-ago fiscal quarter. Buy-side and sell-side organic ASV growth rates were 5.6% and 5.5%, 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 $1.4 billion, up 5.9% from the year-ago fiscal quarter. Organic ASV from the EMEA and the Asia Pacific was $557.5 million and $216.3 million, up 5% and 4.8% year over year, respectively.

FactSet added 75 clients in the reported quarter, driven by an increase in corporate and wealth clients, thus taking the total to more than 8,000. The annual client retention rate was 90%.

Operating Results

The adjusted operating income was $209.3 million, which increased 7.5% from the year-ago fiscal quarter and beat our estimated $199.5 million. The adjusted operating margin of 38.3% increased by 130 basis points from the year-ago fiscal quarter. Adjusted EBITDA was $218.1 million, up 9.2% from the year-ago figure, and beat our estimate of $212 million.

Balance Sheet and Cash Flow

FactSet exited the quarter with a cash and cash equivalent balance of $381.7 million compared with $411.9 million in the previous quarter. The long-term debt was $1.5 billion compared with $1.6 billion in the preceding quarter.

FDS generated $143.8 million in cash from operating activities, while capital expenditure was $22 million. The free cash flow utilized was 16.8 million.

2024 Guidance

Revenues are expected in the range of $2.2 billion-$2.21 billion. The Zacks Consensus Estimate is pegged at $2.21 billion. FactSet's annual effective tax rate is expected to be 16.5-17.5%.

FactSet expects adjusted earnings per share in the range of $15.60-$16. The consensus estimate for earnings is pegged at $15.8 per share, which met the midpoint of the guided range. The adjusted operating margin is expected in the range of 36.3%-36.7%.

Earnings Snapshot of Peers

S&P Global Inc. SPGI reported mixed fourth-quarter results.

SPGI's adjusted EPS of $3.1 missed the Zacks Consensus Estimate by 0.6% but rose 23.2% from the year-ago quarter. Revenues of $3.2 billion beat the consensus estimate by 0.5% and increased 7.3% year over year. The uptick was aided by strong performances in all divisions.

Republic Services, Inc. RSG reported impressive fourth-quarter 2023 results.

RSG’s EPS, excluding 2 cents from non-recurring items, of $1.41 beat the Zacks Consensus Estimate by 10.2% and increased 24.8% year over year. Revenues of $3.8 billion surpassed the consensus mark by 2.9% and increased 8.6% year over year.

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