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 services for the investment and corporate communities. For over 40 years, global financial professionals have utilized our content and multi-asset class solutions across each stage of the investment process. Our goal is to provide a seamless user experience spanning idea generation, research, portfolio construction, trade execution, performance measurement, risk management, reporting, and portfolio analysis, in which we serve the front, middle, and back offices to drive productivity and improved performance. Our flexible, open data and technology solutions can be implemented both across the investment portfolio lifecycle or as standalone components serving different workflows in the organization. We are focused on growing our business throughout each of our three segments, the U.S., Europe, and Asia Pacific. We primarily deliver insight and information through the workflow solutions of Research, Analytics and Trading, Content and Technology Solutions and Wealth.

We currently serve financial professionals, which include portfolio managers, investment research professionals, investment bankers, risk and performance analysts, wealth advisors, and corporate clients. We provide both insights on global market trends and intelligence on companies and industries, as well as capabilities to monitor portfolio risk and performance and to execute trades. We combine dedicated client service with open and flexible technology offerings, such as a comprehensive data marketplace, a configurable mobile and desktop platform, digital portals and application programming interface (“APIs”). Our revenue is 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 2019 marked our 41st year of operations and while much has changed in the market and in technology, our focus has always been to provide best-in-class products and exceptional client service.

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

Business Strategy

As a premier financial solutions provider for the global financial community, we provide workflow solutions and leading analytical applications across the investment lifecycle to create an open and scalable platform. We bring the front, middle and back offices together to drive productivity and performance throughout the portfolio lifecycle. Our strategy is focused on growing our business throughout each of our three segments, 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. To execute on our 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 workflow solutions of Research, Analytics and Trading, Wealth, and Content and Technology Solutions.

Research Solutions

Our Research Solutions workflow (“Research”) focuses on company analysis, idea generation, and research management. The tools within Research provide solutions to analyze public and private companies, generate ideas and discover opportunities with our proprietary data. Research also allows users to monitor the global markets, to gain industry and market insights, and to collaborate on and share information across teams. FactSet combines the global coverage, deep history, and transparency with over 1,000 FactSet-sourced and third-party databases integrated in one flexible platform.

Analytics and Trading Solutions

Our Analytics and Trading Solutions workflow (“Analytics and Trading”) addresses processes around portfolio analytics, risk management and performance measurement and attribution. Analytics and Trading also focuses on client reporting, portfolio construction, trade execution and order management. The applications within Analytics and Trading are modularized and deployed to fulfill both targeted and holistic needs in the front and middle offices. Analytics and Trading integrates our clients’ proprietary data along with FactSet and third-party content to bring actionable insights to the portfolio management process. Analytics and Trading tools are accessible through a variety of mediums, including the FactSet workstation and application programming interfaces.

Wealth Solutions

Our Wealth Solutions workflow (“Wealth”) is specific to the wealth management industry and creates offerings that enable wealth professionals across an entire enterprise, including home office, advisory, and client engagement. Wealth empowers wealth managers to demonstrate value to clients and prospects while protecting and growing their assets with FactSet’s combined solution set of portfolio analytics, market monitoring tools, multi-asset class research and customized client facing digital solutions. Our Research Management Solutions products enable our wealth management clients to increase collaboration and communication between Home Office and Advisory functions within the firm and deliver consistent and scalable messaging to the clients of the advisor.

Content and Technology Solutions

Our Content and Technology Solutions workflow (“CTS”) 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 a client’s business.

FactSet Clients

Buy-side

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, analytics, proprietary content, data feeds and portfolio services. Buy-side 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.

The buy-side annual subscription value (“ASV”) growth rate for fiscal 2019 was 4.8%. Buy-side clients accounted for 83.7% of ASV as of August 31, 2019.

Sell-side

FactSet delivers comprehensive solutions to sell-side clients including workstation, proprietary and third-party content, productivity tools for Microsoft® Office, FactSet Web and Mobile, and FactSet Partners for research authoring and publishing. Our focus remains on expanding the depth of content offered and increasing workflow efficiency for investment banking, private equity, corporate and research firms.

The sell-side ASV growth rate for fiscal 2019 was 6.3%. Sell-side clients accounted for 16.3% of ASV as of August 31, 2019.

Client Subscription Growth

During fiscal 2019, we added 432 net new clients, increasing the number of clients by 8.4% over the prior year. In the first quarter of fiscal 2019, we changed our client count definition to include clients from the April 2017 acquisition of FDSG. The prior year client count was not restated to reflect this change. We added 34,925 net new users during fiscal 2019, leading to a healthy progression in the number of users in both our buy-side and sell-side clients.

ASV Growth

ASV at any given point in time represents the forward-looking revenue for the next twelve months from all subscription services currently being supplied to clients and excludes professional service fees, 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, and professional services fees.

As of August 31, 2019, ASV was $1.46 billion, up from $1.39 billion a year ago. As of August 31, 2019, organic ASV was $1.46 billion, up $70.2 million or 5.0% from a year ago. This increase in organic ASV was due to growth across all of our geographic segments with the majority of growth in the U.S., followed by Asia Pacific and Europe. ASV growth from our workflow solutions was primarily driven by Analytics and Trading, CTS and Wealth.

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

Financial Information on Geographic Areas

Operating segments are defined as components of an enterprise that have the following characteristics: (i) it engages in business activities from which it may earn revenues and incur expenses, (ii) its operating results are regularly reviewed by the company’s chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance, and (iii) its 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, consisting of 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 and 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 in which it serves. Our internal financial reporting structure is based on three segments: the U.S., Europe and Asia Pacific. We believe this alignment helps to better manage the business and serve client needs, as each segment requires financial and economic information specific to their respective markets. 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 serves investment professionals, including financial institutions throughout the Americas. The Europe and Asia Pacific segments serve investment professionals located throughout Europe and Asia Pacific, respectively. Financial information, including revenues, operating income and long-lived assets related to our operations in each geographic area are presented in Note 8, Segment Information, and in the Notes to the Company’s Consolidated Financial Statements included in Item 8.

The U.S. segment has offices in 15 locations, within 13 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, UAE (Dubai), England, France, Germany, Italy, Latvia, Luxembourg, the Netherlands, South Africa, Spain, and Switzerland. The Asia Pacific segment has office locations in Australia, Hong Kong, China, India, Japan, the Philippines, and Singapore. Segment revenue reflects 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, office and other direct expenses.

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

The following charts depict revenue related to our reportable segments.

Talent

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 are 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.

As of August 31, 2019, our employee headcount was 9,681, an increase of 1.1% in the last twelve months. Of our total employees, 2,351 are in the U.S., 1,282 in Europe and 6,048 in the Asia Pacific segment. 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 approximately 5,800 people. As of August 31, 2019, approximately 430 FactSet employees within certain French and German subsidiaries were represented by mandatory works councils, an amount consistent with fiscal 2018. No other employees are represented by collective bargaining agreements.

In December 2018, we appointed Daniel Viens as Chief Human Resources Officer. In May 2019, we announced that John W. Wiseman, the Company’s Global Head of Sales and Client Solutions, would step down from his position on June 1, 2019, remaining at the company until August 31, 2019 to assist during the transition. In the same announcement, effective June 1, 2019, we appointed Franck A.R. Gossieaux as the Company's new Global Head of Sales and Client Solutions.

Third-Party Content

We aggregate content from over 1,000 third-party data suppliers, news sources, exchanges, brokers and contributors into our own dedicated single online service, which the client accesses to perform their analysis. We license 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 to assure that, where reasonable, alternative sources are available. We are not dependent on any one third-party data supplier in order to meet the needs of our clients. We have entered into third-party content agreements of 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 more than 10% of FactSet's total data costs during fiscal 2019, with the exception for one vendor, which is a supplier of risk models and portfolio optimizer data to FactSet and represented 11% of FactSet’s data costs in fiscal 2019.

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.

We are embarking on a set of programs that will increasingly move our systems and applications to cloud computing platforms. We continue to operate fully redundant data centers in both Virginia and New Jersey in the U.S. that can handle our entire client capacity. In addition, select workloads are migrating to diverse cloud computing regions utilizing premier, market-leading Cloud providers.

The Competitive Landscape

We are a part of the financial information services industry, providing accurate financial information and workflow 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 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 comprehensive solution with one of the broadest sets of functionalities, through a desktop or mobile user interface or through a standardized or bespoke 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 workflow solutions, 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 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 intend to continue to invest in the development of new products and enhancements that will allow us to respond quickly to market changes and efficiently meet the needs of our clients. We incurred research and product development costs of $214.7 million, $217.1 million and $215.0 million during fiscal years 2019, 2018 and 2017, 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, CT 06851 prior to January 1, 2020, and 45 Glover Avenue Norwalk, CT 06850, thereafter

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	55	Chief Executive Officer	2014
Helen L. Shan	52	Executive Vice President and Chief Financial Officer	2018
Franck A.R. Gossieaux	49	Executive Vice President, Global Head of Sales and Client Solutions	2019
Rachel R. Stern	54	Executive Vice President, General Counsel and Secretary	2009
Gene D. Fernandez	52	Executive Vice President, Chief Technology and Product Officer	2017
Robert J. Robie	41	Executive Vice President, Head of Analytics and Trading	2018
Daniel Viens	62	Senior Vice President, Chief Human Resources Officer	2018

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. Following his move back to the U.S. in 2000, Mr. Snow held various sales leadership roles prior to assuming the role of Senior Vice President, Director of U.S. Investment Management Sales in 2013. Mr. Snow received a Bachelor of Arts in Chemistry from the University of California at Berkeley and a Master of International Management from the Thunderbird School of Global Management. He has earned the right to use the Chartered Financial Analyst designation.

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, a professional services firm. 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. Preceding her tenure as the CFO for Mercer, Ms. Shan also served as the Vice President and Treasurer for Marsh and McLennan Companies, with additional prior experience in the same position with Pitney Bowes Inc. and served as a Managing Director at J.P. Morgan. In September 2018, Ms. Shan joined the Board of Directors of EPAM Systems Inc., a global provider of digital platform engineering and software development services. Ms. Shan holds dual degrees with a Bachelor of Science and a Bachelor of Applied Science from the University of Pennsylvania’s Wharton School of Business and School of Applied Science and Engineering. Ms. Shan also has a Master of Business Administration from Cornell University’s SC Johnson College of Business.

Frank A.R. Gossieaux – Executive Vice President, Global Head of Sales and Client Solutions. Mr. Gossieaux joined FactSet in September 2004. Mr. Gossieaux held multiple senior leadership roles at FactSet in both Europe and North America including Senior Vice President of Americas Sales, Senior Vice President of EMEA Sales, and Senior Vice President of International Investment Management. Mr. Gossieaux received a Bachelor of Science in Economics from the University Pantheon-Assas (Sorbonne-Assas) in Paris.

Rachel R. Stern – Executive Vice President, Strategic Resources and General Counsel__. Ms. Stern joined FactSet in January 2001 as General Counsel. In addition to her role in the Legal Department, Ms. Stern is also responsible for Compliance, Facilities and Real Estate Planning, and the administration of our offices in Hyderabad, Manila and Riga. Ms. Stern is admitted to practice in New York, Washington D.C., and as House Counsel in Connecticut. Ms. Stern received a Bachelor of Arts from Yale University, a Master of Arts from the University of London and a Juris Doctor from the University of Pennsylvania Law School.

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 Bachelor of Science in Computer Science and Economics from Rutgers University.

Robert J. Robie – Executive Vice President, Head of Analytics and Trading Solutions. Mr. Robie joined FactSet in July 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. Although Mr. Robie joined FactSet in 2000, he did work at BTN Partners from 2004 through 2005 in their quantitative portfolio management and performance division, before returning to continue his career with FactSet. Mr. Robie holds a Bachelor of Arts in Economics from Beloit College.

Daniel Viens – Senior Vice President, Chief Human Resources Officer. Mr. Viens joined FactSet in September 1998 as a Vice President, Director of Human Resources and has held several leadership positions of increased responsibility in Human Resources. Prior to joining FactSet, Mr. Viens was a Director of Human Resources for First Data Solutions and Donnelly Marketing (a former company of Dun & Bradstreet), where he developed significant Human Resources acumen. Mr. Viens graduated from Boston University, and holds both a Master's Degree from Eastern Illinois University in Clinical Psychology, and a Master of Business Administration from Columbia University.

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	21
Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Quantitative and Qualitative Disclosures about Market Risk	46
Note 1 to Consolidated Financial Statements entitled Organization and Nature of Business	59
Note 8 to Consolidated Financial Statements entitled Segment Information	72