FactSet Exceeds Earnings Expectations

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FactSet Research (FDS - Analyst Report) reported revenue for the quarter of $155.5 million. This exceeded the Zacks Consensus Estimate of $154.0 million. On a fully diluted basis, EPS for the quarter was 74 cents, inline with the Zacks Consensus Estimate of 73 cents. Revenue for the quarter increased 1.0% to $155.5 million from $153.7 million in the year-ago quarter.

Geographically, revenues from the U.S. were $106.0 million, flat compared to the year-ago quarter. Non-U.S. revenues increased 3.0% to $49.6 million.

Annual Subscription Value (ASV) increased $4.0 million sequentially to $619.0 million in the fourth quarter. Of this, 82.0% of ASV was from buy-side clients and the remainder from sell-side firms performing M&A advisory work and equity research. ASV from FactSet's U.S. operations was $419.0 million, while international operations supporting ASV amounted to $200.0 million.

The company exited the quarter with 37,300 users, an increase of 200 users during the quarter. Client count was 2,045 at quarter-end, a net increase of 12 clients. Annual client retention rate was greater than 95.0% of ASV and 87.0% of clients. Portfolio Analytics (PA) 2.0 was deployed by 647 clients and 5,640 users at quarter-end. Clients using PA increased by 40 sequentially during the quarter, while the number of PA clients remained flat.

Operating margin was 34.9% in the quarter, an increase of 220 basis points year-over-year. This increase in operating margin can be attributed to the decline in operating expense and successful cost saving. Operating loss from FactSet Fundamentals decreased 58.0% to $0.7 million compared to $1.6 million in the last quarter.

Net income for the quarter came in at $36.3 million, an increase of 8.0% from $33.6 million reported in the year-ago period. The growth in net income for the quarter was partially offset by other income, which declined 85.0% to $95,000. On a fully diluted basis, the quarterly EPS of 74 cents marked an increase of 10.0% from 67 cents in the year-ago quarter. Included in the results is a 1-cent dilution in EPS from investment in FactSet Fundamentals. Adjusting for the dilution from FactSet Fundamentals, EPS on a pro forma basis was 75 cents.

FactSet exited the quarter with $216.3 million in cash and short-term investments, compared to $191.0 million in the previous quarter. The company has no long-term debt. During the quarter, the company repurchased 594,600 shares of common stock and $102.0 remains authorized for repurchase. This apart, the company incurred a capital expenditure of $5.1 million during the quarter.

For the first quarter of fiscal 2010, FactSet expects revenue in the range of $152.0 million to $157.0 million. Diluted EPS for the first quarter is expected to be in the 73 to 75 cents range. For full fiscal year 2010, FactSet expects capital expenditures, net of landlord contributions, to be between $20.0 million to $26.0 million.