Form 10-Q for FactSet Research Systems Inc. for the Quarter Ended February 28, 2025

Overview of FactSet’s Financial Performance

FactSet, a leading provider of financial data and analytics, has reported its financial results for the second quarter of fiscal year 2025. The company’s revenues grew by 4.5% compared to the same period last year, reaching $570.7 million. This growth was driven by a 4.0% increase in organic revenues and a 0.7% increase from acquisitions, partially offset by a 0.2% decrease due to foreign currency fluctuations.

Revenues increased across all of FactSet’s geographic segments, with the Americas seeing the largest growth at 4.8%. EMEA revenues grew by 3.0% and Asia Pacific saw a 6.4% increase. The rise in revenues was primarily driven by higher sales of FactSet’s workstation products and its CGS (Corporate Group Services) offerings.

Profit Trends

FactSet’s operating income increased by 2.0% to $185.5 million in the second quarter, compared to $181.9 million in the same period last year. However, the company’s operating margin decreased from 33.3% to 32.5% due to higher professional fees and computer-related expenses, partially offset by revenue growth and lower employee compensation costs.

Diluted earnings per share (EPS) increased by 3.0% to $3.76, up from $3.65 in the prior year period. This was mainly driven by the higher operating income.

Strengths and Weaknesses

One of FactSet’s key strengths is its ability to grow its recurring revenue base. The company’s Organic Annual Subscription Value (Organic ASV), which represents its forward-looking revenues for the next 12 months from all subscription services, grew by 4.1% to $2,276.2 million. This increase was seen across all geographic segments, with the majority of the growth coming from the Americas.

FactSet’s client and user counts also increased, by 7.8% and 6.1% respectively, over the prior year period. The company’s annual ASV retention rate remained strong at over 95%, indicating high customer loyalty.

However, FactSet’s operating margin declined due to higher expenses, particularly in the areas of professional fees and computer-related costs. The company will need to carefully manage these costs to maintain its profitability.

Another potential weakness is the material weakness identified in FactSet’s internal control over financial reporting related to information technology general controls. While the company has developed a remediation plan, addressing this issue will be an area of focus going forward.

Outlook and Future Prospects

Looking ahead, FactSet remains focused on executing its strategic priorities, which include expanding its data offerings, deepening integration with client workflows, and innovating with artificial intelligence (AI).

The company’s investments in these areas are expected to drive future growth. For example, FactSet’s growing data ecosystem and enhanced data delivery capabilities should position it as a leading enterprise data provider. Its efforts to embed deeper into client workflows, particularly in the buy-side front office, could also unlock new revenue opportunities.

FactSet’s AI roadmap, which includes solutions for portfolio performance commentary, earnings call analysis, and natural language data queries, is another area of focus. The company believes its approach to leveraging AI will differentiate it from competitors and contribute to its growth.

Overall, FactSet’s solid financial performance, strong recurring revenue base, and strategic initiatives suggest the company is well-positioned to navigate the evolving financial services landscape. However, managing costs and addressing the identified internal control weakness will be important for the company to maintain its competitive edge and continue delivering value to shareholders.

Table 1: Key Financial Metrics

Table 2: Segment Performance

Table 3: Operating Expenses