) reported third quarter 2012 earnings per share (EPS) of $1.08,
ahead of the Zacks Consensus Estimate of $1.04. The company's share
price tumbled more than 9% on Tuesday as the company's fourth
quarter revenue forecast did not meet market expectations.
FactSet reported total revenue of $202.3 million in the third
quarter of 2012, up 10.2% from $183.6 million in the year-ago
quarter. The company added 1,100 new users during the quarter, thus
bringing the total user count to 48,400 as FactSet replaced a
competitor at a global sell-side banking firm.
Moreover, FactSet is also benefiting from growing adoption of
its Portfolio Analytics suite. FactSet believes that Portfolio
Analytics has a good market among existing clients and it remains
an attractive selling point for new clients. The company has
witnessed considerable sales growth for its PA 2.0 users and
clients over the last 12 months.
Annual Subscription Value
The company's Annual Subscription Value (ASV) was about $811.0
million, up 9.0% from the year-ago period. Out of the total
subscription value, 80.0% came from the buy-side clients while the
remaining 20.0% came from the sell-side firms, which generally
provides consultancy on the M&A activity and equity
The company witnessed an increase in its data costs as a result
of its growing client base and expanding third-party dataset
offerings, but offset to a greater extent by lower depreciation and
intangible asset amortization. This apart, SG&A expenses as a
percentage of revenues reduced on the back of lower inter-office
travel, more efficient use of existing leased office space and also
as a result of prior-year internal sales conference that were not
repeated in 2012.
FactSet's revenue growth exceeded the growth rate of operating
expenses. This led to a 20 basis points expansion in operating
margin. Operating margin was 33.9% in the quarter versus 33.7% in
the year-ago quarter. Cost of services, as a percentage of revenue,
increased marginally on a year-over-year basis on higher
compensation costs and an uptick in data charges.
Net income during the quarter came in at $48.0 million, up 10.8%
from $43.3 million in the year-ago period. On a fully-diluted
basis, quarterly EPS was $1.05 versus 92 cents in the year-ago
quarter. Adjusted net income (excluding amortization of intangible
assets from acquisitions, but including stock based compensation)
of $1.08 per share was ahead of the year-ago level of 95 cents per
Balance Sheet, Cash Flow & Share Repurchase
FactSet exited the quarter with $228.5 million in cash and cash
equivalents, compared with $184.9 million in the previous quarter.
The company has no long-term debt.
During the third quarter, the company made capital expenditure
of $6.0 million and also spent $27.0 million on share repurchases.
Moreover, on May 8, 2012, the company approved an additional $200.0
million for share repurchases. At the end of the quarter, the
company had $256.0 million remaining for future share
The company expects fourth quarter 2012 revenues between $204
million and $208 million. Operating margin is expected between
33.5% and 34.0%. GAAP diluted EPS is estimated in the range of
$1.06 to $1.08, while non-GAAP diluted EPS is expected in the range
of $1.15 to $1.17.
FactSet reported decent third quarter 2012 results by beating
the Zacks Consensus Estimate on bottom line. The company's revenue
growth was supported by an increase in the number of users, which
in turn improved the business volume. The company's balance sheet
seems strong with sufficient cash balance and no long term
debt burden. But the company provided weak fourth quarter outlook,
which is a reason for concern.
The company continues to launch new applications and new data in
its system, which includes its own or from other sources such as
the new bank loan data from Markit, ace provider of independent
loan market data and loan portfolio management software. This also
includes fixed income in the company's Portfolio Analytics
Although new products and services are offered by the company
regularly, but we believe adding new customers is a challenge. On
the other hand, the recent economic turmoil in the European markets
had a negative impact on the financial services companies, thereby
restricting spending on investment tools. Moreover, FactSet faces
stiff competition from
), which is also coming up with new solutions to increase its
FactSet carries a Zacks #3 Rank, implying a short-term Hold
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