FactSet Research Systems Inc.
) reported third-quarter 2013 earnings per share of $1.17,
beating the Zacks Consensus Estimate.
FactSet reported total revenue of $214.6 million in the third
quarter of 2013, up 6.0% from $202.3 million reported in the
year-ago quarter. Within this 6.0%, 5.0% is organic in nature,
while 1.0% is the growth rate that the company had on account of
the contribution from StreetAccount.
Four new clients were added to the company's existing
portfolio of clients, reaching a total of 2,440. This figure,
however, includes neither the companies on trial nor the ones
that pay less than $24,000 a year.
Apart from this, 61 users were added to the company's user
count this quarter after which the figure increased more than
49,500. Buy-Side clients added to the company's user base, while
some sell-side clients continued to reduce their exposure to
FactSet. Moreover, the company continues to make gains on the
buy-side, which constituted around 83% of the total revenue
The U.S. revenues for the company were $147.0 million, which
included a contribution of approximately $2.9 million from
StreetAccount, up 6.0% from the year-ago quarter. Moreover, the
Non-U.S. revenues were $68.0 million, up 6.0% compared with the
Annual Subscription Value
The company's Annual Subscription Value (ASV) increased by
$2.0 million and reached a total figure of $864.0 million on May
31, 2013. Included in this total figure, is 83% derived from
buy-side clients, while rest of it comes from the sell-side firms
who perform Mergers & Acquisition advisory work and equity
FactSet's revenue growth rate was slower than that of
operating expenses. This led to a 30 basis points (bps) decline
in operating margin which dropped to 33.4% compared with 33.8% in
the year-ago quarter.
The increase in operating expense resulted from higher
compensation expense, from the engineering, consulting and
content disciplines as well as higher StreetAccount revenues.
Higher depreciation in the computer hardware price resulted from
reinvesting in the company's state-of-the-art computer
infrastructure also contributed to the increase in the
Net income during the quarter came in at $53.4 million, down
11.3% from $48.0 million in the year-ago period. Quarterly
earnings per share were $1.20 versus $1.05 in the year-ago
quarter. Adjusted net income (excluding amortization of
intangible assets from acquisitions, but including stock-based
compensation) of $1.17 per share was below the year-ago quarter's
$1.05 per share.
Balance Sheet, Cash Flow
FactSet exited the quarter with $257.5 million in cash and
cash equivalents, compared with $166.1 million in the previous
quarter. The company has no long-term debt. Free cash flow
increased $92 million, the largest quarterly free cash flow in
FactSet's history, up 32% over the same period last year.
For the fourth quarter of fiscal 2013, the company expects
revenues in the range of $218.0 million to $221.0 million. Apart
from this, the operating margin is expected to range between
33.0% and 34.0%. While the GAAP earnings per share should range
between $1.18 and $1.21.
FactSet reported modest third-quarter 2013 results since
revenues grew on a year-over-year basis and earnings per share
and exceeded the Zacks Consensus Estimate. The company also
reported a decent operating performance, with operating income
growing above the year-ago quarter. Moreover, the ASV increased
compared to the year-ago quarter.
FactSet continues to launch new products and applications
across its segments with special emphasis on financial services
to gain more customers.
The company is offering new products and services on a regular
basis. However, adding new customers is still a challenge due to
the sluggish European market.
We expect competition to intensify further in the future. Some
competitors such as Bloomberg L.P., Dow Jones & Company Inc.,
) and Thomson Reuters are also coming up with substitute products
at competitive prices.
FactSet carries a Zacks Rank #3 (Hold).
Investors can consider other stocks in the technology space
Western Digital Corp.
) both carrying a Zacks Rank #2 (Buy).
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