Item 1. BUSINESS

Business Overview

FactSet Research Systems Inc. (the “Company” or “FactSet”) is a global provider of integrated financial information, analytical applications and industry-leading service for the investment community. Our mission is to solve our clients’ greatest challenges through the power of collaboration. We deliver insight and information to investment professionals through our analytics, service, content, and technology. These professionals include portfolio managers, investment research professionals, investment bankers, risk and performance analysts, and wealth advisors. From streaming real-time data to historical information, including quotes, estimates, news and commentary, we offer proprietary and third-party content through desktop, web, mobile and off-platform solutions. Our broad application suite offers tools and resources including company and industry analyses, full screening tools, portfolio analysis, risk profiles, alpha-testing, portfolio optimization and research management solutions. Our revenues are primarily derived from subscriptions to products and services such as workstations, analytics, enterprise data, research management, and trade execution.

Corporate History

FactSet was founded in 1978 and has been publicly held since 1996. We are dual listed on the New York Stock Exchange (“NYSE”) and the NASDAQ Stock Market (“NASDAQ”) under the symbol “FDS.” Fiscal 2018 marked our 40th year of operation and while much has changed in our market and technologies, our focus has always been to provide the best in class products and exceptional client service.

The following timeline depicts the Company’s history since our founding in 1978:

Business Strategy

We provide our clients with the global standard for delivery, integration and consumption of our financial data by the global investment community. We maintain flexible, open data and software solutions to bring the front, middle, and back office together to drive productivity and performance throughout the portfolio lifecycle. Our strategy is focused on growing our business throughout each of our three segments which include the U.S., Europe, and Asia Pacific. We believe this geographical strategy alignment helps us better manage our resources and concentrate on markets that demand our products. The U.S. segment services investment professionals, including financial institutions throughout the Americas. The European and Asia Pacific segments service investment professionals located throughout Europe and the Asia Pacific segment, respectively. To execute on our business strategy of broad-based growth across each geographical segment, we continue to look at ways to create value for our clients by offering data, products and analytical applications within our key workflows of Research, Analytics, Wealth, and Content and Technology Solutions.

Research Solutions

Our Research Solutions (“Research”) workflow offers a powerful data solution that combines global coverage, deep history, and transparency with thousands of FactSet-sourced and third-party databases integrated in one flexible platform. Our Research workflow has a strong focus on growing the number of users and client types including investment banking, sell-side research, buy-side research, private equity, capital markets, investor relations, and media. This workflow offering is comprised of Core Applications, including Universal Screening, Company & Security Analytics, Industry and Markets, Filings, Ownership, Research, News and our Research Management Solutions (“RMS”).

Analytics Solutions

Our Analytics Solutions (“Analytics”) workflow addresses processes around risk, performance and reporting. Our Analytics workflow provides investment professionals with in-depth insight, powerful analytics, and comprehensive datasets integrated seamlessly into their portfolios. The Analytics workflow is driven by FactSet Portfolio Analysis (“PA”) and FactSet’s Multi-Asset Class (“MAC”) risk models. PA is a multi-asset class interactive global solution that includes a flexible, multi-tile interface of reports and charts to enable a user to make smarter decisions. MAC risk models analyze risk factors across different asset types and classes. We have enhanced our Analytics workflow offering by leveraging client-requested functionality such as fixed income optimization and the Duration Times Spread attribution model.

Additionally, included in the Analytics workflow is our portfolio management and trading solutions which focus on workflows that are specific for the front office serving traders and portfolio managers. This offering includes a multi-asset execution management system (“EMS”) platform, as well as compliance and order management functionality. These products are aimed at large asset managers, hedge funds and mid-market customers to provide a combination of automated and intelligent trading workflows.

Wealth Solutions

Our Wealth Solutions (“Wealth”) workflow creates solutions that are specific to the wealth management industry and helps with investment portfolio management, advisory services, financial planning and other financial services. Our Wealth workflow offerings include providing end-to-end solutions, focusing on non-equity content and single security analytics, portfolio and risk analytics, and digital strategy.

Content and Technology Solutions

Our Content and Technology Solutions (“CTS”) workflow is focused on delivering value to our clients in the way they want to consume it. Our goal is to reduce the number of customizations by standardizing and bundling our proprietary data into data feeds. Whether a client needs market, company, or alternative data, our data delivery services provide normalized data through APIs and a direct delivery of local copies of standard data feeds. Our symbology links and aggregates a variety of content sources to ensure consistency, transparency, and data integrity across your business.

The CTS workflow also includes direct access to insight and information outside of the workstation through cloud-based application program interfaces and white label solutions. More specifically, our recent launch of Open:FactSet data marketplace provides access to 25 specialty datasets from FactSet and other data providers in flexible delivery formats.

FactSet Clients

Buy-side

We focus on the buy-side workflow across all firm and user types. These clients include portfolio managers, analysts, traders, wealth managers, performance teams and risk and compliance teams at a variety of firms, such as traditional asset managers, wealth advisors, corporations, hedge funds, insurance companies, plan sponsors and fund of funds.

As buy-side clients continue to shift towards multi-asset class investment strategies, we are positioned to be a partner in the space, given our ability to provide enterprise-wide solutions across their entire workflow. We provide solutions across asset classes and at nearly every stage of the investment process by utilizing our workstations, powerful analytics, proprietary content, data feeds and portfolio services.

The buy-side annual subscription value (“ASV”) growth rate for fiscal 2018 was 5.4%. Buy-side clients accounted for 83.9% of ASV as of August 31, 2018.

Sell-side

We are a market leader on the sell-side and we are continuing to expand beyond investment banking into various other parts of banking institutions. Our clients represent banking & advisory, broker-dealers, consulting, independent research, institutional asset management, private equity, and venture capital firms. We believe that future growth may be derived from the breadth of solutions we provide to the sell-side across our geographic segments and workflow solutions.

Though historically we have focused on selling workstations to banks, over the last few years our emphasis has shifted to focus on selling more differentiated product offerings outside the workstation. We are also expanding our banking user base to commercial banking, equity and fixed income research teams, quantitative analysis groups, compliance and regulatory divisions and sales and trading teams.

The sell-side ASV growth rate for fiscal 2018 was 7.3%. Sell-side clients accounted for 16.1% of ASV as of August 31, 2018.

Client Subscription Growth

ASV at any given point in time represents the forward-looking revenues for the next twelve months from all subscription services currently being supplied to clients and excludes professional services fees billed in the last twelve months, which are not subscription-based. Organic ASV excludes ASV from acquisitions and dispositions completed within the last 12 months and the effects of foreign currency

As of August 31, 2018, ASV was $1.39 billion, up $74.4 million or 5.7% organically from a year ago. This increase in ASV was driven by growth amongst our geographic segments and achievements across each of our workflow solutions which include Research, Analytics, CTS, and Wealth.

During fiscal 2018, we added 398 new clients, increasing the number of clients by 8.4% over the prior year. We added 3,051 new users during fiscal 2018, leading to a healthy progression in the number of users in both our buy-side and sell-side clients.

The following chart provides a snapshot of FactSet’s historic ASV growth:

Financial Information on Geographic Areas

Operating segments are defined as (i) components of an enterprise that engage in business activities from which they may earn revenues and incur expenses, (ii) with operating results that are regularly reviewed by the enterprise’s chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance, and (iii) for which discrete financial information is available. Executive management, along with the CEO, constitute our chief operating decision making group (“CODMG”). Executive management consists of certain executives who directly report to the CEO, including the Chief Financial Officer, Chief Technology and Product Officer, Global Head of Sales and Client Solutions, General Counsel, Chief Human Resources Officer and Head of Analytics & Trading. The CODMG reviews financial information at the operating segment level and is responsible for making decisions about resources allocated amongst the operating segments based on actual results.

Our operating segments are aligned with how the Company, including its CODMG, manages the business and the demographic markets we serve. Our internal financial reporting structure is based on three segments: the U.S., Europe and Asia Pacific. We believe this alignment helps us better manage the business and focus on markets that demand our products. Our primary functional groups within the U.S., Europe, and Asia Pacific segments include sales, consulting, data collection, product development and software engineering, which provide global financial and economic information to investment managers, investment banks and other financial services professionals.

The U.S. segment services investment professionals, including financial institutions throughout the Americas. The European and Asia Pacific segments service investment professionals located throughout Europe and the Asia Pacific segment, respectively. Financial information, including revenues, operating income and long-lived assets related to our operations in each geographic area are presented in Note 7, Segment Information, and in the Notes to the Company’s Consolidated Financial Statements included in Item 8.

The U.S. segment has offices in fourteen states throughout the U.S., including our corporate headquarters in Norwalk, Connecticut as well as two additional offices located in Brazil and Canada. The European segment maintains office locations in Bulgaria, Dubai, England, Finland, France, Germany, Italy, Latvia, Luxembourg, the Netherlands, South Africa, Spain, and Switzerland. The Asia Pacific segment has office locations in Australia, China, India, Japan, and Singapore. Segment revenues reflect direct sales to clients based in their respective geographic locations. Each segment records compensation expense, including stock-based compensation, amortization of intangible assets, depreciation of furniture and fixtures, amortization of leasehold improvements, communication costs, professional fees, rent expense, travel, marketing, office and other direct expenses.

Expenditures associated with our data centers, data costs and corporate charges are recorded by the U.S. segment and are not allocated to the other segments. The centers of excellence, which focus primarily on content collection and are located in India and the Philippines, benefit all operating segments and thus the expenses incurred at these locations are allocated to each segment based on a percentage of revenues.

The following charts depict revenues related to our reportable segments.

Talent

Since our founding, we have built a collaborative culture that recognizes and rewards innovation and offers employees a variety of opportunities and experiences. Our employees are critical to our success and the reason we continue to execute at a high level. We believe our continued focus on making employee engagement a top priority will help us provide high quality insights and information to clients globally.

In order to optimize productivity, we have invested in expanding our footprint and talent pool in India and the Philippines, where we now have a combined workforce of over 5,500 people.

As of August 31, 2018, our employee headcount was 9,571, an increase of 5.5% in the last twelve months. Of our total employees, 2,471 are in the U.S., 1,246 in Europe and 5,854 in the Asia Pacific segment.

In fiscal 2018, approximately 430 FactSet employees within certain French and German subsidiaries were represented by mandatory works councils, an amount consistent with fiscal 2017. No other employees are represented by collective bargaining agreements.

In May 2018, we announced that Maurizio Nicolelli, the Company’s Chief Financial Officer, would depart FactSet as of December 31, 2018. In July 2018, we announced that Helen L. Shan would join FactSet as the new Chief Financial Officer beginning in September 2018. Additionally, in July 2018, we announced that Edward Baker-Greene, the Company’s Chief Human Resources Officer would depart FactSet as of November 30, 2018.

Third-Party Content

We aggregate content from thousands of third-party data suppliers, news sources, exchanges, brokers and contributors into our own dedicated online service, which clients access to perform their analyses. We carry content from premier providers of major global exchanges and data providers. We seek to maintain contractual relationships with a minimum of two content providers for each major type of financial data, though certain data sets on which we rely have a limited number of suppliers. We make every effort, when reasonable, to locate alternative sources, to ensure that we are not dependent on any one third- party data supplier. We have entered into third-party content agreements at varying lengths, which in some cases can be terminated on one year’s notice, at predefined dates, and in other cases on shorter notice. No single vendor or data supplier represented 10% or more of our total data expenses in any fiscal year presented.

Data Centers

Our business is dependent on our ability to process substantial volumes of data and transactions rapidly and efficiently on our networks and systems. Our global technology infrastructure supports our operations and is designed to facilitate the reliable and efficient processing and delivery of data and analytics to our clients. Our data centers contain multiple layers of redundancy to enhance system performance, including maintaining, processing and storing data at multiple data centers. User connections are load balanced between data centers. In the event of a site failure, equipment problem or localized disaster, the remaining centers have the capacity to handle the additional load. We continue to be focused on maintaining a global technological infrastructure that allows us to support our growing business.

Several years ago, we launched Project NextGen to evolve away from large mainframe computers to a more distributed environment powered by a vast array of smaller, faster and more cost-effective machines. We operate fully redundant data centers in both Virginia and New Jersey in the U.S. that can handle our entire client capacity. In addition, we maintain a vast private wide area network that provides a high-speed direct link between the client’s local network and the data content and powerful applications found on our mainframe machines.

The Competitive Landscape

We are a part of the financial information services industry, providing accurate financial information and software solutions to the global investment community. This extremely competitive market is comprised of both large, well-capitalized companies and smaller, niche firms including market data suppliers, news and information providers and many of the content providers that supply us with financial information included in the FactSet workstation. Our largest competitors are Bloomberg L.P., Refinitiv (formerly part of Thomson Reuters), and S&P Global Market Intelligence. Other competitors and competitive products include online database suppliers and integrators and their applications, such as MSCI Inc., Morningstar Inc., BlackRock Solutions and RIMES Technologies Corporation. Many of these firms offer products or services which are similar to those we sell. Our development of our own robust sets of proprietary content combined with our news and quotes offering have resulted in more direct competition with the largest financial data providers.

Despite competing products and services, we enjoy high barriers to entry and believe it would be difficult for another vendor to quickly replicate the extensive databases we currently offer. Through our in-depth analytics and client service, we believe we can offer clients a more complete solution with one of the broadest sets of functionalities, through a desktop user interface or data feed. In addition, our applications, including our client support and service offerings, are entrenched in the workflow of many financial professionals given the downloading functions and portfolio analysis/screening capabilities offered. We are entrusted with significant amounts of our clients' own proprietary data, including portfolio holdings. As a result, our products have become central to our clients’ investment analysis and decision-making.

Intellectual Property

We have registered trademarks and copyrights for many of our products and services and will continue to evaluate the registration of additional trademarks and copyrights as appropriate. We enter into confidentiality agreements with our employees, clients, data suppliers and vendors. We seek to protect our software, documentation and other written materials under trade secret, copyright and patent laws. While we do not believe we are dependent on any one of our intellectual property rights, we do rely on the combination of intellectual property rights and other measures to protect our proprietary rights. Despite these efforts, existing intellectual property laws may afford only limited protection.

Research and Product Development Costs

A key aspect of our growth strategy is to enhance our existing products and applications by making them faster with more reliable data. We strive to rapidly to adopt new technology that can improve our products and services. At FactSet we do not have a separate research and product development department, but rather our Product Development and Engineering departments work closely with our strategists, product managers, sales and other client-facing specialists to identify areas of improvement to provide increased value to our clients. Research and product development costs relate to the salary and benefits for our product development, software engineering and technical support staff. These costs are expensed as incurred within our cost of services as employee compensation. We expect to appropriate a similar percentage of our workforce and associated expenses in future years to continue to develop new products and enhancements, respond quickly to market changes and meet the needs of our clients efficiently. In fiscal 2018, we incurred $217.1 million of research and product development costs, which was comparable to our spend on similar development during fiscal years 2017 and 2016, respectively.

Government Regulation

FactSet is subject to reporting requirements, disclosure obligations and other recordkeeping requirements of the Securities and Exchange Commission (“SEC”) and the various local authorities that regulate each location in which we operate. The Company’s P.A.N. Securities, LP, is a member of the Financial Industry Regulatory Authority, Inc. and is a registered broker-dealer under Section 15 of the Securities Exchange Act of 1934. P.A.N. Securities, LP, as a registered broker-dealer, is subject to Rule 15c3-1 under the Securities Exchange Act of 1934, which requires that the Company maintain minimum net capital requirements. The Company claims exemption under Rule 15c3-3(k)(2)(i).

Corporate Contact Information

FactSet was founded as a Delaware corporation in 1978, and its principal executive office is in Norwalk, Connecticut.

Mailing address of the Company’s headquarters: 601 Merritt 7, Norwalk, Connecticut 06851 USA

Telephone number: +1 (203) 810-1000

Website address: www.factset.com

Available Information

Through the Investor Relations section of FactSet’s website (https://investor.factset.com), we make available the following filings as soon as practicable after they are electronically filed with, or furnished to, the SEC: the Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, Proxy Statements for the annual stockholder meetings, Reports on Forms 3, 4 and 5, and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended. All such filings are available free of charge.

Additionally, we broadcast live our quarterly earnings calls via the investor relations section of our website. We also provide notifications of news or announcements regarding our financial performance, including SEC filings, investor events, press and earnings releases, and blogs as part of our investor relations website. The contents of this website section are not intended to be incorporated by reference into this Report on Form 10-K or in any other report or document the Company files and any reference to this section of our website is intended to be inactive textual references only.

In addition, the FactSet Code of Business Conduct and Ethics is posted in the Investor Relations section of the Company’s website. The same information is available in print to any stockholder who submits a written request to the Company’s Investor Relations department. Any amendments to or waivers of such code that are required to be publicly disclosed by the applicable exchange rules or the SEC will be posted on our website. The Corporate Governance Guidelines and the charters of each of the committees of the Company’s Board of Directors, including the Audit Committee, Compensation and Talent Committee, and Nominating and Corporate Governance Committee are available on the Investor Relations section of our website. The same information is available in print, free of charge, to any stockholder who submits a written request to our Investor Relations department.

Executive Officers of the Registrant

The following table shows FactSet’s current executive officers:

Name of Officer	Age	Office Held with the Company	Officer Since
F. Philip Snow	54	Chief Executive Officer	2014
Helen L. Shan	50	Executive Vice President and Chief Financial Officer	2018
Edward Baker-Greene	55	Senior Vice President, Chief Human Resources Officer	2015
Gene D. Fernandez	51	Executive Vice President, Chief Technology and Product Officer	2017
Robert J. Robie	39	Executive Vice President, Head of Analytics and Trading Analytics Solutions	2018
Rachel R. Stern	53	Executive Vice President, General Counsel and Secretary	2009
John W. Wiseman	50	Executive Vice President, Global Head of Sales and Client Solutions	2017

F. Philip Snow – Chief Executive Officer. Mr. Snow was named Chief Executive Officer effective July 1, 2015. Prior to that, Mr. Snow held the title of President. He began his career at FactSet in 1996 as a Consultant, before moving to Asia to hold positions in the Tokyo and Sydney offices. After moving back to the U.S. in 2000, Mr. Snow held various sales leadership roles before assuming the role of Senior Vice President, Director of U.S. Investment Management Sales in 2013. Mr. Snow received a B.A. in Chemistry from the University of California at Berkeley and a Master of International Management from the Thunderbird School of Global Management. He holds the Chartered Financial Analyst designation and is a member of the CFA Institute.

Helen L. Shan – Executive Vice President and Chief Financial Officer. Ms. Shan joined FactSet in September 2018 from Marsh and McLennan Companies, where she was CFO for Mercer, one of the world’s leading professional services firms. During her time at Mercer, Ms. Shan was responsible for global financial reporting and performance, operational finance, investments, and corporate strategy, leading a team of finance professionals supporting clients in over 130 countries. Prior to Mercer, Ms. Shan was a Vice President and Treasurer for both Marsh and McLennan Companies and Pitney Bowes Inc. and was also a Managing Director at J.P. Morgan. In September 2018, Ms. Shan joined the Board of Directors of EPAM Systems Inc., a leading global provider of digital platform engineering and software development services. Ms. Shan earned B.S. degrees from the University of Pennsylvania’s Wharton School and School of Engineering and Applied Science, and a Master of Business Administration from Cornell University’s SC Johnson College of Business.

Edward Baker-Greene – Senior Vice President, Chief Human Resources Officer. Mr. Baker-Greene joined FactSet in June 2015 from Voya Financial, formerly ING, U.S., where he was Head of Human Resources for Retirement Solutions, Operations, and Information Technology. Previously, Mr. Baker-Greene worked at Fidelity Investments for 13 years. At Fidelity, he was a part of the Personal and Workplace Investing division, where he held roles in business and human resources capacities, including Senior Vice President/Managing Director, Relationship Management. Mr. Baker-Greene began his professional career as a lawyer focusing on employment law, recruiting, talent management, and human capital management. Mr. Baker-Greene received a B.A. from Tufts University and a J.D. from the University of Virginia School of Law.

On July 5, 2018, the Company entered into a separation of employment and general release agreement with Edward Baker-Greene, pursuant to which Mr. Baker-Greene will remain in his current position as Chief Human Resources Officer until his successor is appointed and will remain an employee of FactSet until his separation date of November 30, 2018.

Gene D. Fernandez – Executive Vice President, Chief Technology and Product Officer. Mr. Fernandez joined FactSet in November 2017 from J.P. Morgan, where he served as the Chief Technology Officer, New Product Development. In this role, he developed the strategy and built the engineering function responsible for new product innovation. During a decade at J.P. Morgan, Mr. Fernandez held various other roles, including Chief Technology Officer for Client Technology and Research and Banking Information Technology. Prior to J.P. Morgan, he worked at Credit Suisse and Merrill Lynch. Mr. Fernandez received a B.S. in Computer Science and Economics from Rutgers University.

Robert J. Robie – Executive Vice President, Head of Analytics and Trading Analytics Solutions. Mr. Robie joined FactSet in 2000 as a Product Sales Specialist. During his tenure at FactSet, Mr. Robie has held several positions of increasing responsibility, including Senior Director of Analytics and Director of Global Fixed Income and Analytics where he led sales and support efforts for FactSet’s fixed income product offering. Between 2004 and 2005, Mr. Robie worked at BTN Partners, where he worked in their quantitative portfolio management and performance division as an analyst. Mr. Robie holds a B.A. in Economics from Beloit College.

Rachel R. Stern – Executive Vice President, General Counsel and Secretary__. Ms. Stern joined FactSet in 2001 as General Counsel. In addition to the Legal Department at FactSet, she is responsible for Facilities and Real Estate Planning; Third-Party Content and Strategic Partnerships; and the administration of our offices in Hyderabad and Manila. Ms. Stern is admitted to practice in New York, and Washington D.C., and as House Counsel in Connecticut. Ms. Stern received a B.A. from Yale University, an M.A. from the University of London and a J.D. from the University of Pennsylvania Law School.

John W. Wiseman – Executive Vice President, Global Head of Sales and Client Solutions. Mr. Wiseman joined FactSet in 2004 as a Vice President in the sales department. During his tenure at FactSet, Mr. Wiseman has held several positions of responsibility including Senior Vice President, Global Head of Strategic Partnerships & Alliances. Prior to his experience with FactSet, Mr. Wiseman was a Senior Managing Director at Bear Stearns & Co. Inc. Mr. Wiseman received a B.A. in Political Science and Management Science from Duke University and a Master of Business Administration from the University of Edinburgh.

Additional Information

Additional information with respect to FactSet’s business is included in the following pages and is incorporated herein by reference:

		Page(s)
Five-Year Summary of Selected Financial Data		22
Management’s Discussion and Analysis of Financial Condition and Results of Operations		24-44
Quantitative and Qualitative Disclosures about Market Risk		45
Note 1 to Consolidated Financial Statements entitled Organization and Nature of Business		56
Note 7 to Consolidated Financial Statements entitled Segment Information		67