Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Management’s Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") should be read in conjunction with the Consolidated Financial Statements and related Notes included in this Quarterly Report on Form 10-Q, our Annual Report on Form 10-K for the fiscal year ended August 31, 2022, our Current Reports on Form 8-K and our other filings with the Securities and Exchange Commission. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed below. Factors that could cause such differences include, but are not limited to, those identified below and those discussed in Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended August 31, 2022.

Our MD&A is designed to provide a reader of our financial statements with a narrative from the perspective of our management on our financial condition, results of operations, liquidity and certain other factors that may affect our future results. Our MD&A is presented in the following sections:

• Executive Overview

• Annual Subscription Value ("ASV")

• Client and User Additions

• Employee Headcount

• Results of Operations

• Non-GAAP Financial Measures

• Liquidity and Capital Resources

• Off-Balance Sheet Arrangements

• Foreign Currency Exposure

• Critical Accounting Estimates

• New Accounting Pronouncements

Executive Overview

FactSet Research Systems Inc. and its wholly-owned subsidiaries (collectively, "we," "our," "us," the "Company" or "FactSet") is a global financial digital platform and enterprise solutions provider with open and flexible solutions that drive the investment community to see more, think bigger and do its best work. Our strategy is to build the leading open content and analytics platform that delivers a differentiated advantage for our clients’ success.

Fiscal 2023 marks the 45th year our platform has delivered expansive data, sophisticated analytics, and flexible technology used by global financial professionals to power their critical investment workflows. As of February 28, 2023, we had more than 7,700 clients comprised of approximately 186,000 investment professionals, including asset managers, bankers, wealth managers, asset owners, channel partners, hedge funds, corporate users, private equity and venture capital professionals. Our on- and off-platform solutions span the investment lifecycle including investment research, portfolio construction and analysis, trade execution, performance measurement, risk management and reporting. Our revenues are primarily derived from subscriptions to our multi-asset class data and solutions powered by our connected content, referred to as our "content refinery." Our products and services include workstations, portfolio analytics and enterprise solutions.

We provide financial data and market intelligence on securities, companies, industries and people to enable our clients to research investment ideas, as well as to analyze, monitor and manage their portfolios. We combine dedicated client service with open and flexible technology offerings, including a configurable desktop and mobile platform, comprehensive data feeds, cloud-based digital solutions and application programming interfaces ("APIs"). Our CUSIP Global Services ("CGS") business supports security master files relied on by the investment industry for critical front, middle and back office functions.

We drive our business based on our detailed understanding of our clients’ workflows, which helps us to solve their most complex challenges. We provide them with an open digital platform, connected and reliable data, next-generation workflow solutions and highly committed service specialists.

We operate our business through three segments: the Americas, EMEA and Asia Pacific. Refer to Note 16, Segment Information, in the Notes of this Quarterly Report on Form 10-Q for further discussion. For each of our segments, we execute our strategy through our three workflow solutions: Research & Advisory; Analytics & Trading; and Content & Technology Solutions ("CTS").

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Business Strategy

As the needs of our clients evolve, they seek personalized and connected data, tools for multi-asset class investing and increased efficiencies. Clients are also seeking cloud-based solutions, open and flexible systems and increased efficiencies to support their digital transformations.

Our strategy is to build the leading open content and analytics platform to deliver differentiated advantages for our clients’ success. To execute this strategy, we plan on:

• Growing our digital platform**: We are scaling up our content refinery to offer a comprehensive and connected inventory of industry, proprietary and third-party data for the financial community. This data includes granular data for key industry verticals, private companies, wealth management, real-time data and sustainable finance. We are driving personalized workflow solutions for financial professionals, including asset managers, bankers, wealth managers, asset owners, channel partners, hedge funds, corporate users and private equity and venture capital professionals. Our goal is to offer an open ecosystem of cloud-based data and analytics, providing solutions and content that is accessible and flexible through many delivery methods, enabling our clients to more efficiently manage their workflows.

• Delivering execution excellence**: We strive to be innovative and collaborative across our organization to remain responsive, flexible and agile. Our open ecosystem provides a digital foundation that powers client personalization and efficiency, firm-type product development and core process automation. We employ technology to accelerate content collection for industry, proprietary and third-party data. Additionally, our sales force is improving price realization by focusing on productivity, efficiency and improved client outcomes. We are also optimizing our operations and managing our expenses to improve returns on our investments in people and product. Finally, we are committed to promoting a modern work environment that preserves the benefit of flexibility while retaining talent, fostering creativity, innovation, and collaboration, and enabling mentorship.

• Driving a growth mindset**: To drive sustainable growth, we are recruiting, training and empowering a diverse and operationally efficient workforce. As a performance-based culture, we are investing in talent that can create leading technological solutions and efficiently execute our strategy. We use partnerships and acquisitions to accelerate our growth in strategic areas.

Our strategy centers on a relentless focus on our clients and their FactSet experience. We aim to be a trusted partner and service provider, offering personalized digital products powered by cognitive computing to research ideas and uncover relevant insights. Additionally, we continually evaluate business opportunities such as partnerships and acquisitions to increase our capabilities and competitive differentiation.

We are focused on growing our global business through three segments: the Americas, EMEA and Asia Pacific. We believe this geographic strategic alignment helps us better manage our resources, target our solutions and interact with our clients. We further execute on our growth strategy by offering data, products and analytical applications within our three workflow solutions: Research & Advisory; Analytics & Trading; and CTS.

Fiscal 2023 Second Quarter in Review

Revenues in the second quarter of fiscal 2023 were $515.1 million, an increase of 19.5% from the prior year comparable period. Revenues increased across all our segments, primarily in the Americas and, to a lesser extent, EMEA and Asia Pacific. The increased revenues were supported by higher sales in each of our workflow solutions, mainly in CTS (driven by the acquisition of CGS), followed by Research & Advisory and Analytics & Trading, when compared with the prior year. Organic revenues contributed to 8.9% of our growth during the second quarter of fiscal 2023, compared with the prior year period. Refer to Part I, Item 2. Non-GAAP Financial Measures in the MD&A of this Quarterly Report on Form 10-Q for a reconciliation between revenues and organic revenues.

As of February 28, 2023, organic annual subscription value ("Organic ASV") plus Professional Services totaled $1.9 billion, an increase of 9.1% over February 28, 2022. Organic ASV increased across all our segments, with the majority of the increase related to the Americas and, to a lesser extent, EMEA and Asia Pacific, supported by increases in our workflow solutions, mainly from Research & Advisory and Analytics & Trading, and, to a lesser extent, CTS. Refer to Part I, Item 2 Annual Subscription Value in the MD&A of this Quarterly Report on Form 10-Q for the definitions of Organic ASV and Organic ASV plus Professional Services.

Operating margin increased to 32.9% during the three months ended February 28, 2023, compared with 28.6% in the prior year period. This increase was mainly due to growth in revenues and a decrease in employee compensation costs, as well as asset

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impairment charges recorded in the prior year period, when expressed as a percentage of revenues. The margin improvement was further driven by a decrease in occupancy costs and professional fees, partially offset by higher amortization of intangible assets and royalty fees, when expressed as a percentage of revenues.

Diluted earnings per share ("EPS") increased 19.0% for the three months ended February 28, 2023, compared with the prior year period.

CUSIP Global Services Acquisition

On December 24, 2021, we entered into a definitive agreement to acquire CGS for $1.932 billion in cash, inclusive of working capital adjustments. The acquisition was completed on March 1, 2022. We believe that the CGS acquisition will significantly expand our critical role in the global capital markets. Revenues from CGS are recognized based on geographic business activities in accordance with how our operating segments are currently aligned. CGS functions as part of CTS.

The purchase price for the CGS acquisition was financed from the net proceeds of the issuance of the Senior Notes and borrowings under the 2022 Credit Facilities. Refer to Note 6, Acquisitions and Note 11, Debt in the Notes of this Quarterly Report on Form 10-Q for more information on our acquisition of CGS, and our defined terms of Senior Notes and the 2022 Credit Facilities, respectively.

COVID-19 Update

In response to the COVID-19 pandemic, we implemented a business continuity plan to respond quickly and provide ongoing guidance so that we could continue offering our clients uninterrupted products, services and support while also protecting our employees. We believe these actions have been successful and that the pandemic, and our responses, have not significantly affected our financial results for the three and six months ended February 28, 2023.

Refer to Part I, Item 1. Business, Human Capital Management, How We Work and Item 1A. Risk Factors, Operational Risks of our Annual Report on Form 10-K for the fiscal year ended August 31, 2022 for further discussion of the potential impact of the COVID-19 pandemic on our business.

Ukraine/Russia Conflict

As the military conflict between Russia and Ukraine is ongoing, we continue to monitor the potential impact on our business, our people and our clients. We have taken all necessary steps to ensure compliance with all applicable regulatory restrictions on international trade and financial transactions. In Russia, we have discontinued all commercial operations and delivery of products and services to clients; have terminated all contracts with vendors; and have suspended all new business, trials and prospecting activities. Total revenues associated with clients in Russia were not material to our consolidated financial results, and termination of Russian vendors has not had a material impact on our business or client relationships. We have no offices in Russia or Ukraine, and none of our employees or contractors has been directly impacted by the conflict. We continue to monitor the regional and global ramifications of the events in the area, including the threatened disruptions to global energy markets, and are reviewing our business continuity plans to ensure that we are prepared in the event any of our offices are impacted. Our cybersecurity teams are ready to respond in the event of any attempted systems compromise.

Annual Subscription Value ("ASV")

We believe ASV reflects our ability to grow recurring revenues and generate positive cash flow, and is a key indicator of the successful execution of our business strategy.

–"ASV" at any point in time represents our forward-looking revenues for the next 12 months from all subscription services currently being supplied to clients, excluding revenues from Professional Services.

–"Organic ASV" at any point in time equals our ASV excluding ASV from acquisitions and dispositions completed within the last 12 months and the effects of foreign currency movements.

–"Professional Services" are revenues derived from project-based consulting and implementation, annualized over the past 12 months.

–"Organic ASV plus Professional Services" at any point in time equals the sum of Organic ASV and Professional Services.

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Organic ASV plus Professional Services

The following table presents the calculation of Organic ASV plus Professional Services as of February 28, 2023. With proper notice provided as contractually required, our clients can add to, delete portions of, or terminate service, subject to certain limitations.

(dollar amounts in millions)			As of February 28, 2023
As reported ASV plus Professional Services*(1)*			$	2,074.0
Currency impact*(2)*			(1.0)
Acquisition ASV*(3)*			(171.3)
Organic ASV plus Professional Services			$	1,901.7
Organic ASV plus Professional Services growth rate			9.1		%

*(1)*Includes $23.2 million in Professional Services.

*(2)*The impact from foreign currency movements.

*(3)*Acquired ASV from acquisitions completed within the last 12 months.

As of February 28, 2023, Organic ASV plus Professional Services was $1.9 billion, an increase of 9.1% compared with February 28, 2022. Organic ASV increased due mainly to increased sales to existing clients and, to a lesser extent, price increases to existing clients and new client sales, partially offset by existing client cancellations.

Organic ASV increased across all our segments, with the majority of the increase related to the Americas, followed by EMEA and Asia Pacific. This increase was driven by additional sales in our workflow solutions, primarily in Research & Advisory and Analytics & Trading, and, to a lesser extent, CTS. Sales increased in Research & Advisory mainly due to higher demand for our workstations. Sales increased in Analytics & Trading mainly from our portfolio analytics solutions, performance and reporting products and portfolio and benchmark services. CTS sales increased mainly from our data management solutions, company data and real time data solutions.

Segment ASV

As of February 28, 2023, ASV from the Americas represented 64% of total ASV and was $1,315.3 million, an increase from $1,085.6 million as of February 28, 2022. Americas Organic ASV increased to $1,188.6 million as of February 28, 2023, a 9.3% increase from the prior year period. The Organic ASV increase in the Americas was primarily driven by increased sales of Research & Advisory and Analytics & Trading.

As of February 28, 2023, ASV from EMEA represented 26% of total ASV and was $528.5 million, an increase from $459.9 million as of February 28, 2022. EMEA Organic ASV increased to $494.3 million as of February 28, 2023, a 8.1% increase from the prior year period. The EMEA Organic ASV increase was mainly driven by higher sales of Analytics & Trading, CTS and Research & Advisory.

As of February 28, 2023, ASV from Asia Pacific represented 10% of total ASV and was $207.1 million, an increase from $180.5 million as of February 28, 2022. Asia Pacific Organic ASV increased to $195.6 million as of February 28, 2023, a 10.8% increase from the prior year period. The Asia Pacific Organic ASV increase was primarily due to increased sales of Research & Advisory and Analytics & Trading.

Buy-side and Sell-side Organic ASV Growth

The buy-side and sell-side Organic ASV growth rates at February 28, 2023, compared with February 28, 2022, were 8.1% and 15.8%, respectively. Buy-side clients account for approximately 83% of our Organic ASV, consistent with the prior year period, and primarily include asset managers, wealth managers, asset owners, channel partners, hedge funds, and corporate firms. The remainder of our Organic ASV is derived from sell-side firms and primarily include broker-dealers, banking and advisory, private equity and venture capital firms.

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Client and User Additions

The table below presents our total clients and users:

			As of February 28, 2023			As of February 28, 2022			Change
Clients*(1)*			7,730			7,172			7.8		%
Users			186,463			171,341			8.8		%

*(1)*The client count includes clients with ASV of $10,000 and above.

Our total client count was 7,730 as of February 28, 2023, a net increase of 7.8% or 558 clients in the last 12 months, mainly due to an increase in corporate clients, wealth management clients and channel partners. We believe this increase was primarily due to our expanded suite of client-centric workflow solutions, our content refinery and continued execution excellence by our sales and client facing teams.

As of February 28, 2023, there were 186,463 professionals using FactSet, representing a net increase of 8.8% or 15,122 users in the last 12 months, primarily driven by an increase from wealth management firms.

Annual ASV retention was greater than 95% of ASV and 92% when expressed as a percentage of clients for the period ended February 28, 2023, with both percentages consistent with the prior year period.

Employee Headcount

As of February 28, 2023, our employee headcount was 11,896, an increase of 10.3% compared with 10,784 employees as of February 28, 2022. This growth in headcount was primarily due to an increase of 10.4% in Asia Pacific, 12.1% in the Americas and 6.8% in EMEA. At February 28, 2023, 7,891 employees were located in Asia Pacific, 2,540 in the Americas, and 1,465 in EMEA.

Results of Operations

For an understanding of the significant factors that influenced our performance for the three and six months ended February 28, 2023 and February 28, 2022, the following discussion should be read in conjunction with the Consolidated Financial Statements and related Notes presented in this Quarterly Report on Form 10-Q.

The following table summarizes the results of operations for the periods described:

			Three Months Ended												Six Months Ended
			February 28,									% Change			February 28,									% Change
(dollar amounts in thousands, except per share data)			2023			2022			2023			2022
Revenues			$	515,085		$	431,119					19.5		%	$	1,019,900		$	855,844					19.2		%
Cost of services			240,806			199,413						20.8		%	$	467,848		$	406,544					15.1		%
Selling, general and administrative			104,582			98,066						6.6		%	$	210,178		$	189,304					11.0		%
Asset impairments			447			10,292						(95.7)		%	$	729		$	13,987					(94.8)		%
Operating income			$	169,250		$	123,348					37.2		%	$	341,145		$	246,009					38.7		%
Net income			$	131,593		$	109,938					19.7		%	$	268,391		$	217,585					23.3		%
Diluted weighted average common shares			38,981			38,761									38,947			38,628
Diluted earnings per common share			$	3.38		$	2.84					19.0		%	$	6.89		$	5.63					22.4		%

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Revenues

Three months ended February 28, 2023 compared with three months ended February 28, 2022

Revenues for the three months ended February 28, 2023 were $515.1 million, an increase of 19.5%. The increase in revenues was primarily driven by increased sales to existing clients and, to a lesser extent, price increases to existing clients and new client sales, partially offset by existing client cancellations. Revenues increased across all our segments, primarily from the Americas and, to a lesser extent, by EMEA and Asia Pacific. The increased revenues were supported by higher sales in each of our workflow solutions, mainly in CTS (driven by the acquisition of CGS), followed by Research & Advisory and Analytics & Trading. Organic revenues increased to $469.5 million for the three months ended February 28, 2023, an 8.9% increase over the prior year period. Refer to Part I, Item 2. Non-GAAP Financial Measures in the MD&A of this Quarterly Report on Form 10-Q for further discussion on organic revenues.

The growth in revenues of 19.5% was reflective of organic revenues growth of 8.9% and an 11.0% increase primarily due to the impact of acquisition-related revenues, partially offset by a 0.4% decrease from foreign currency exchange rate fluctuations.

Six months ended February 28, 2023 compared with six months ended February 28, 2022

Revenues for the six months ended February 28, 2023 was $1,019.9 million, an increase of 19.2%. The increase in revenues was mainly due to increased sales to existing clients, inclusive of price increases, followed by new client sales, partially offset by existing client cancellations. Revenues increased across all our geographic segments, primarily from the Americas, followed by EMEA and Asia Pacific. The increased revenues were supported by higher sales in each of our workflow solutions, primarily in CTS (driven by the acquisition of CGS), followed by Research & Advisory and Analytics & Trading. Organic revenues increased to $929.4 million for the six months ended February 28, 2023, an 8.6% increase over the prior year period.

The growth in revenues of 19.2% was reflective of organic revenue growth of 8.6% and an 11.2% increase primarily related to acquisition-related revenue, partially offset by a 0.6% decrease from foreign currency exchange rate fluctuations.

Revenues by Segment

The following table summarizes our revenues by segment for the periods described:

			Three Months Ended									Six Months Ended
			February 28,						% Change			February 28,						% Change
(dollar amounts in thousands)			2023			2022			2023			2022
Americas			$	331,121		$	273,659		21.0		%	$	654,488		$	540,572		21.1		%
% of revenues			64.3		%	63.5		%				64.2		%	63.2		%
EMEA			$	132,508		$	114,591		15.6		%	$	263,246		$	229,594		14.7		%
% of revenues			25.7		%	26.6		%				25.8		%	26.8		%
Asia Pacific			$	51,456		$	42,869		20.0		%	$	102,166		$	85,678		19.2		%
% of revenues			10.0		%	9.9		%				10.0		%	10.0		%
Consolidated			$	515,085		$	431,119		19.5		%	$	1,019,900		$	855,844		19.2		%

Three months ended February 28, 2023 compared with three months ended February 28, 2022

Americas

Americas revenues increased 21.0% to $331.1 million during the three months ended February 28, 2023, compared with $273.7 million from the same period a year ago. The increased revenues were driven by higher sales in all of our workflow solutions, primarily in CTS. The growth in revenues of 21.0% was reflective of an 8.2% increase in organic revenues and a 12.8% increase from acquisition-related revenues.

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EMEA

EMEA revenues increased 15.6% to $132.5 million during the three months ended February 28, 2023, compared with $114.6 million from the same period a year ago. The increased revenues were driven by higher sales in all of our workflow solutions, primarily in CTS. The growth in revenues of 15.6% was reflective of an 8.2% increase in organic revenues and an 8.1% increase from acquisition-related revenues, partially offset by a 0.7% decrease driven by the effects of foreign currency exchange rate fluctuations.

Asia Pacific

Asia Pacific revenues increased 20.0% to $51.5 million during the three months ended February 28, 2023, compared with $42.9 million from the same period a year ago. The increased revenues were driven by higher sales in all of our workflow solutions, primarily in CTS, followed by Research & Advisory and Analytics & Trading. The growth in revenues of 20.0% was reflective of a 15.3% increase in organic revenues and a 7.1% increase from acquisition-related revenues, partially offset by a 2.4% decrease driven by the effects of foreign currency exchange rate fluctuations.

Six months ended February 28, 2023 compared with six months ended February 28, 2022

Americas

Revenues from the Americas increased 21.1% to $654.5 million during the six months ended February 28, 2023, compared with $540.6 million from the same period a year ago. The increased revenues were driven by higher sales in all of our workflow solutions, primarily in CTS. The growth in revenues of 21.1% was reflective of an 8.0% increase in organic revenue growth and a 13.1% increase primarily due to the impact of acquisition-related revenue.

EMEA

Revenues from EMEA increased 14.7% to $263.2 million during the six months ended February 28, 2023, compared with $229.6 million from the same period a year ago. The increased revenues were driven by higher sales in all of our workflow solutions, primarily in CTS. The growth in revenues of 14.7% was reflective of a 7.7% increase in organic revenue and an 8.2% increase primarily due to the impact of acquisition-related revenue, partially offset by a 1.2% decrease due to the effects of foreign currency exchange rate fluctuations.

Asia Pacific

Revenues from Asia Pacific increased 19.2% to $102.2 million during the six months ended February 28, 2023, compared with $85.7 million from the same period a year ago. The increased revenues were driven by higher sales in all of our workflow solutions, primarily in CTS. The growth in revenues of 19.2% was reflective of a 15.1% increase in organic revenues and a 7.1% increase from acquisition-related revenue, partially offset by a 3.0% decrease due to the effects of foreign currency exchange rate fluctuations.

Revenues by Workflow Solution

Three months ended February 28, 2023 compared with three months ended February 28, 2022

The growth in revenues of 19.5% for the three months ended February 28, 2023, compared with the same period a year ago, was due to higher revenues from each of our segments supported by increased revenues from our workflow solutions, primarily from CTS and, to a lesser extent, Research & Advisory and Analytics & Trading. The increase in CTS revenues was mainly driven by CGS related data licensing and issuance revenues. The increase in Research & Advisory revenues was driven mainly by higher demand for our workstations. The increase in revenues from Analytics & Trading was primarily due to increased demand for our performance and portfolio reporting products, portfolio analytics solutions and portfolio and benchmark services.

Six months ended February 28, 2023 compared with six months ended February 28, 2022

The growth in revenues of 19.2% for the six months ended February 28, 2023, compared with the same period a year ago, was due to higher revenues from each of our segments supported by increased revenues from our workflow solutions, primarily from CTS and, to a lesser extent, Research & Advisory and Analytics & Trading. The increase in CTS revenues was driven mainly by CGS related data licensing and issuance revenues. The increase in Research & Advisory revenues was driven mainly by higher demand for our workstations. The increase in revenues from Analytics & Trading was primarily due to increased

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demand for our performance and portfolio reporting products, portfolio analytics solutions and portfolio and benchmark services.

Operating Expenses

Principal Operating Costs and Expenses

Cost of services is mainly comprised of employee compensation costs and also includes expenses related to data costs, computer-related expenses, amortization of identifiable intangible assets, royalty fees, client-related communication costs and computer depreciation.

Selling, general and administrative ("SG&A") consists primarily of employee compensation costs and also includes expenses related to occupancy costs, professional fees, depreciation of furniture and fixtures, amortization of leasehold improvements, travel and entertainment expenses, marketing costs, non-compensatory employee expenses, internal communication costs and bad debt expense.

Employee compensation costs are a major component of both our cost of services and SG&A. These expenses primarily include costs related to salaries, incentive compensation and sales commissions, stock-based compensation, benefits, employment taxes, and any applicable restructuring costs.

We assign employee compensation costs between costs of services and SG&A based on the roles and activities associated with each employee. We categorize employees within the content collection, consulting, product development, software and systems engineering groups as cost of services personnel. Employees included in our sales department and those that serve in various other support departments, including marketing, finance, legal, human resources and administrative services, are classified as SG&A.

Asset impairments consist primarily of expenses recognized when the carrying amount of an asset exceeds its fair value.

The following table summarizes the components of our total operating expenses and operating margin for the periods presented:

			Three Months Ended									Six Months Ended
			February 28,									February 28,						% Change
(dollar amounts in thousands)			2023			2022			% Change			2023			2022
Cost of services			$	240,806		$	199,413		20.8		%	$	467,848		$	406,544		15.1		%
SG&A			104,582			98,066			6.6		%	210,178			189,304			11.0		%
Asset impairments			447			10,292			(95.7)		%	729			13,987			(94.8)		%
Total operating expenses			$	345,835		$	307,771		12.4		%	$	678,755		$	609,835		11.3		%
Operating income			$	169,250		$	123,348		37.2		%	$	341,145		$	246,009		38.7		%
Operating margin			32.9		%	28.6		%				33.4		%	28.7		%

Cost of Services

Three months ended February 28, 2023 compared with three months ended February 28, 2022

Cost of services increased 20.8% to $240.8 million for the three months ended February 28, 2023, compared with $199.4 million for the same period a year ago, primarily due to an increase in amortization of intangible assets, employee compensation costs, royalty fees related to our CGS acquisition and computer-related expenses.

Cost of services, when expressed as a percentage of revenues, was 46.8% for the three months ended February 28, 2023, an increase of 50 basis points over the prior year period. This increase was primarily due to higher amortization of intangible assets, royalty fees and computer-related expenses, partially offset by lower employee compensation and data costs.

• Amortization of intangible assets increased 210 basis points mainly due to increased amortization related to acquired intangible assets, primarily from the CGS acquisition.

• Royalty fees increased cost of services by 170 basis points due to contracts acquired in connection with the acquisition of CGS.

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• Computer-related expenses increased 80 basis points due to increased spend from our migration to cloud-based hosting services, CGS integration activities, amortization of capitalized internal use software and an increase in licensed software arrangements.

• Employee compensation costs decreased 340 basis points primarily due to growth of our revenues outpacing the increase in employee compensation costs. This decrease was also driven by higher capitalization of compensation costs related to the development of our internal-use software, partially offset by higher annual base salaries and variable compensation expense. The increase in annual base salaries was mainly due to annual merit increases and a net headcount increase in cost of services of 884, with hiring focused mainly in lower cost locations.

• Data costs decreased by 70 basis points due to revenue growth outpacing the increased cost of content.

Six months ended February 28, 2023 compared with six months ended February 28, 2022

For the six months ended February 28, 2023, cost of services increased 15.1% to $467.8 million compared with $406.5 million in the same period a year ago, primarily due to an increase in amortization of intangible assets, royalty fees related to our CGS acquisition, computer-related expenses and employee compensation costs.

Cost of services, when expressed as a percentage of revenues, was 45.9% for the six months ended February 28, 2023, a decrease of 160 basis points compared with the same period a year ago. This decrease was primarily due to lower employee compensation and data costs, partially offset by higher amortization of intangible assets, royalty fees and computer-related expenses.

• Employee compensation costs decreased 450 basis points primarily due to growth of our revenues outpacing the increase in employee compensation costs. This decrease was also driven by higher capitalization of compensation costs related to the development of our internal-use software and a one-time restructuring charge to drive organizational realignment incurred during the first quarter of fiscal 2022, partially offset by higher annual base salaries and variable compensation expense. The increase in annual base salaries was primarily driven by annual merit increases and a net headcount increase in cost of services of 884, with hiring focused mainly in lower cost locations.

*•*Data costs decreased 110 basis points mainly due to the release of certain accruals during the six months ended February 28, 2023 which related to the successful resolution of exchange audits that were set-up during the prior year period, partially offset by increased data prices and usage-based fees.

• Amortization of intangible assets increased 200 basis points, mainly due to increased amortization related to acquired intangible assets, primarily from the CGS acquisition.

• Royalty fees increased cost of services 170 basis points due to contracts acquired in connection with the acquisition of CGS.

• Computer-related expenses increased 40 basis points due to increased spend from our migration to cloud-based hosting services and an increase in licensed software arrangements.

Selling, General and Administrative

Three months ended February 28, 2023 compared with three months ended February 28, 2022

SG&A expenses increased 6.6% to $104.6 million for the three months ended February 28, 2023, compared with $98.1 million from the same period a year ago, with the majority of the increase related to higher employee compensation expense and, to a lesser extent, an increase in travel and entertainment expenses, partially offset by a decrease in professional fees.

SG&A expenses, when expressed as a percentage of revenues, were 20.3% for the three months ended February 28, 2023, a decrease of 240 basis points over the prior year period. This decrease was primarily due to lower occupancy costs and professional fees, partially offset by higher travel and entertainment expenses.

• Occupancy costs decreased by 110 basis points mainly driven by impairment charges recognized during fiscal 2022 related to vacating leased office space, which reduced occupancy costs recorded over their respective remaining lease terms.

• Professional fees decreased by 110 basis points primarily driven by costs related to the acquisition of CGS incurred during the prior year period.

• Travel and entertainment expenses increased by 70 basis points as we resumed essential business travel and incurred non-compensatory employee-related costs related to return to office activities during the current year.

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Six months ended February 28, 2023 compared with six months ended February 28, 2022

For the six months ended February 28, 2023, SG&A expenses increased 11.0% to $210.2 million, compared with $189.3 million for the same period a year ago, primarily due to higher employee compensation costs and an increase in travel and entertainment expenses.

SG&A expenses, when expressed as a percentage of revenues, were 20.6% for the six months ended February 28, 2023, a decrease of 150 basis points over the prior year period. This decrease was primarily due to lower occupancy costs, professional fees, and employee compensation costs, partially offset by an increase in travel and entertainment expenses.

• Occupancy costs decreased by 100 basis points mainly driven by impairment charges recognized during fiscal 2022 related to vacating leased office space, which reduced occupancy costs recorded over their respective remaining lease terms.

• Professional fees decreased 80 basis points, primarily driven by costs related to the acquisition of CGS incurred during the prior year period.

• Employee compensation costs decreased 30 basis points, primarily due to growth of our revenues outpacing the increase in employee compensation costs, partially offset by higher annual base salaries and stock-based compensation expense. The increase in annual base salaries was primarily driven by a net headcount increase in SG&A of 228 and annual merit increases.

• Travel and entertainment expenses increased by 70 basis points as we resumed essential business travel and incurred non-compensatory employee-related costs related to return to office activities during the current year.

Asset Impairments

Asset impairments incurred during the three and six months ended February 28, 2022 were $10.3 million and $14.0 million, respectively, with no similar level of impairment recorded during the three and six ended February 28, 2023. The asset impairments recognized during the three and six months ended February 28, 2022 included a respective $9.7 million and $13.4 million charge related to our lease right-of-use ("ROU") assets and property, equipment and leasehold improvements associated with vacating certain leased office space to resize our real estate footprint for the hybrid work environment. We fully impaired our lease ROU assets for locations we vacated with no intention to sublease. For locations we intend to sublease, we recognized an impairment when the estimated fair value of the lease ROU asset was less than its carrying value. Substantially all the property, equipment and leasehold improvements associated with the vacated lease office space was fully impaired as there are no expected future cash flows for these items.

Operating Income and Operating Margin

Three months ended February 28, 2023 compared with three months ended February 28, 2022

Operating income increased 37.2% to $169.3 million for the three months ended February 28, 2023, compared with $123.3 million in the prior year period. This increase was primarily due to growth in revenues and, to a lesser extent, asset impairment charges incurred during the prior year period. These increases to operating income were partially offset by higher employee compensation costs, amortization of intangible assets, royalty fees and computer-related expenses. Foreign currency exchange rate fluctuations, net of hedge activity, increased operating income by $7.7 million for the three months ended February 28, 2023, compared with a decrease of $1.2 million during the three months ended February 28, 2022.

Operating margin increased to 32.9% during the three months ended February 28, 2023, compared with 28.6% in the prior year period. This increase was mainly due to growth in revenues and a decrease in employee compensation costs, as well as asset impairment charges recorded in the three months ended February 28, 2022, when expressed as a percentage of revenues. The margin improvement was further driven by a decrease in occupancy costs and professional fees, partially offset by higher amortization of intangible assets and royalty fees, when expressed as a percentage of revenues.

Six months ended February 28, 2023 compared with six months ended February 28, 2022

Operating income increased 38.7% to $341.1 million for the six months ended February 28, 2023, compared with $246.0 million in the prior year period. Operating income increased primarily due to growth in revenues and, to a lesser extent, asset impairment charges recognized in the prior year period. These increases in operating income were partially offset by higher employee compensation costs, amortization of intangible assets, royalty fees and computer-related expenses. Foreign currency exchange rate fluctuations, net of hedge activity, increased operating income by $16.3 million, compared with a decrease of $5.4 million during the six months ended February 28, 2022.

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Operating margin increased to 33.4% for the six months ended February 28, 2023, compared with 28.7% in the prior year period. This increase was primarily due to growth in revenues and a decrease in employee compensation costs, as well as asset impairment charges recognized in the prior year period, when expressed as a percentage of revenues. The margin improvement was further driven by a decrease in data costs and occupancy costs, partially offset by higher amortization of intangible assets and royalty fees, when expressed as a percentage of revenues.

Operating Income by Segment

Our internal financial reporting structure is based on three segments: the Americas; EMEA; and Asia Pacific. Refer to Note 16, Segment Information in the Notes of this Quarterly Report on Form 10-Q for further discussion regarding our segments. The following table summarizes our operating income by segment for the periods described:

			Three Months Ended															Six Months Ended
			February 28,												% Change			February 28,									% Change
(dollar amounts in thousands)			2023						2022						2023			2022
Americas			$	61,181					$	48,903					25.1		%	$	128,712		$	104,401					23.3		%
EMEA			68,941						45,944						50.1		%	136,263			86,598						57.4		%
Asia Pacific			39,128						28,501						37.3		%	76,170			55,010						38.5		%
Total Operating Income			$	169,250					$	123,348					37.2		%	$	341,145		$	246,009					38.7		%

Three months ended February 28, 2023 compared with three months ended February 28, 2022

Americas

Americas operating income increased 25.1% to $61.2 million during the three months ended February 28, 2023, compared with $48.9 million in the same period a year ago. This increase was primarily due to growth in revenues of 21.0% and asset impairment charges recorded in the prior year period, partially offset by higher amortization of intangible assets, employee compensation costs, royalty fees and computer-related expenses.

• The impairment charges recorded in the prior year period were mainly related to our lease ROU assets and property, equipment and leasehold improvements ("PPE") associated with vacating certain leased office space.

• Amortization of intangible assets primarily increased due to amortization related to acquired intangible assets, mainly from the CGS acquisition.

• Employee compensation costs increased primarily due to an increase in annual base salary and, to a lesser extent, an increase in variable compensation costs, partially offset by higher capitalization of compensation costs related to the development of our internal-use software. The increase in annual base salary was primarily driven by annual merit increases and a net headcount increase of 275.

• Royalty fees increased due to contracts acquired in connection with the acquisition of CGS.

• Computer-related expenses increased primarily due to increased spend from our migration to cloud-based hosting services to support our transition to a hybrid cloud strategy, CGS integration activities and expenses related to licensed software arrangements.

EMEA

EMEA operating income increased 50.1% to $68.9 million during the three months ended February 28, 2023, compared with $45.9 million recognized during the same period a year ago. This increase was primarily due to growth in revenues of 15.6%, lower amortization of intangible assets and a reduction in bad debt expense, partially offset by an increase in employee compensation costs. Amortization of intangible assets decreased as certain acquired intangible assets were fully amortized during the third quarter of fiscal 2022. Employee compensation costs increased primarily due to an increase in annual base salary driven by annual merit increases and a net headcount increase of 93.

Asia Pacific

Asia Pacific operating income increased 37.3% to $39.1 million during the three months ended February 28, 2023, compared with $28.5 million from the prior year. This increase was mainly due to growth in revenues of 20.0%, partially offset by higher employee compensation costs and travel expenses. Employee compensation expense increased mainly due to higher annual base salaries driven by annual merit increases and a net increase in employee headcount of 744. Travel expenses increased as we incurred non-compensatory employee-related costs related to return to office activities during the current year.

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Six months ended February 28, 2023 compared with six months ended February 28, 2022

Americas

Americas operating income increased 23.3% to $128.7 million during the six months ended February 28, 2023, compared with $104.4 million in the same period a year ago. This increase was primarily due to growth in revenues of 21.1% and asset impairment charges recorded in the prior year period, partially offset by an increase in amortization of intangible assets, employee compensation costs, royalty fees and computer-related expenses.

• The impairment charges recorded in the prior year period were mainly related to our lease ROU assets and PPE associated with vacating certain leased office space.

• Amortization of intangible assets primarily increased due to amortization related to acquired intangible assets, mainly from the CGS acquisition.

• Employee compensation costs increased primarily due to an increase in annual base salary, and, to a lesser extent, an increase in variable compensation expense, partially offset by an increase in capitalized compensation costs related to development of internal-use software projects and a current period benefit due to a one-time restructuring charge recorded in the prior year period to drive organizational realignment. The increase in annual base salary was driven by annual merit increases and a net increase in employee headcount of 275.

• Royalty fees increased due to contracts acquired in connection with the acquisition of CGS.

• Computer-related expenses increased primarily due to increased spend from our migration to cloud-based hosting services to support our transition to a hybrid cloud strategy, as well as expenses related to licensed software arrangements.

EMEA

EMEA operating income increased 57.4% to $136.3 million during the six months ended February 28, 2023, compared with $86.6 million in the same period a year ago. This increase was primarily due to growth in revenues of 14.7%, a decrease in data costs and amortization of intangible assets, partially offset by an increase in employee compensation costs.

*•*Data costs decreased due to the release of certain accruals during the six months ended February 28, 2023 which related to the successful resolution of exchange audits that were set-up during the prior year period.

• Amortization of intangible assets decreased as certain acquired intangible assets were fully amortized during the third quarter of fiscal 2022.

• Employee compensation costs increased primarily due to an increase in variable compensation, partially offset by a one-time restructuring charge recorded during the prior year period to drive organization realignment.

Asia Pacific

Asia Pacific operating income increased 38.5% to $76.2 million during the six months ended February 28, 2023, compared with $55.0 million in the same period a year ago. This increase was mainly due to growth in revenues of 19.2%, partially offset by an increase in employee compensation costs and travel expenses. Employee compensation expense increased primarily due to higher annual base salary driven by annual merit increases and a net headcount increase of 744. Travel expenses increased as we incurred non-compensatory employee-related costs related to return to office activities during the current year.

Income Taxes

The provision for income taxes and the effective tax rate is as follows:

			Three Months Ended												Six Months Ended
			February 28,												February 28,
(dollar amounts in thousands)			2023			2022						% Change			2023			2022						% Change
Income before income taxes			$	156,762		$	121,956					28.5		%	$	314,647		$	241,886					30.1		%
Provision for income taxes			$	25,169		$	12,018					109.4		%	$	46,256		$	24,301					90.3		%
Effective tax rate			16.1		%	9.9		%				62.9		%	14.7		%	10.0		%				46.3		%

We are subject to taxation in the United States and various foreign jurisdictions in which we conduct our business.

Our provision for income taxes for interim periods is calculated by applying an estimate of our annual effective tax rate to our quarter and year-to-date results, adjusted for discrete items recorded in the period. The computation of the annual estimated

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effective tax rate at each interim period requires certain estimates and assumptions including, but not limited to, the expected pretax income (or loss) for the year, projections of the proportion of income (or loss) earned and taxed in foreign jurisdictions, permanent and temporary differences and the likelihood of recovering deferred tax assets, then adjusted for any discrete items. On a quarterly basis, we update the estimate of our annual effective tax rate as new events occur, assumptions change, or additional information is obtained.

For the three months ended February 28, 2023, the effective tax rate was 16.1% compared to 9.9% for the same period a year ago. For the six months ended February 28, 2023, the effective tax rate was 14.7% compared to 10.0% for the same period a year ago. For all periods presented, our effective tax rate was lower than the applicable U.S. corporate income tax rate mainly due to research and development ("R&D") tax credits, a foreign derived intangible income ("FDII") deduction and a tax benefit from the exercise of stock options.

Our effective tax rate during the three and six months ended February 28, 2023 was higher than the rate during the respective prior year periods, due mainly to a decrease in the impact of tax attributes on the effective tax rate as a result of an increase in income, a lower tax benefit from the exercise of stock options and an increase in the U.K.'s enacted tax rates.

Net Income and Diluted Earnings per Share

			Three Months Ended												Six Months Ended
			February 28,												February 28,
(dollar amounts in thousands, except per share data)			2023			2022						% Change			2023			2022						% Change
Net income			$	131,593		$	109,938					19.7		%	$	268,391		$	217,585					23.3		%
Diluted weighted average common shares			38,981			38,761						0.6		%	38,947			38,628						0.8		%
Diluted earnings per common share			$	3.38		$	2.84					19.0		%	$	6.89		$	5.63					22.4		%

Three months ended February 28, 2023 compared with three months ended February 28, 2022

Net income increased 19.7% to $131.6 million and EPS increased 19.0% to $3.38 for the three months ended February 28, 2023, compared with the same period a year ago. Net income and diluted EPS increased primarily due to higher operating income, partially offset by an increase in the provision for income taxes and an increase in interest expense as a result of higher outstanding debt, compared with the prior year period.

Six months ended February 28, 2023 compared with six months ended February 28, 2022

Net income increased 23.3% to $268.4 million and diluted EPS increased 22.4% to $6.89 for the six months ended February 28, 2023, compared with the same period a year ago. Net income and diluted EPS increased primarily due to higher operating income, partially offset by an increase in interest expense as a result of higher outstanding debt and an increase in the provision for income taxes, compared with the prior year period.

Non-GAAP Financial Measures

To supplement the financial measures prepared in accordance with generally accepted accounting principles in the United States ("GAAP"), we use non-GAAP financial measures including organic revenues, adjusted operating income, adjusted operating margin, adjusted net income, EBITDA, adjusted EBITDA and adjusted diluted earnings per share. The reconciliations from our financial measures calculated and presented in accordance with GAAP to these non-GAAP financial measures are shown in the tables below. These non-GAAP financial measures should not be considered in isolation from, as a substitute for or superior to, financial measures reported in accordance with GAAP. Moreover, these non-GAAP financial measures have limitations in that they do not reflect all the items associated with the operations of our business as determined in accordance with GAAP. Other companies may calculate similarly titled non-GAAP financial measures differently than we do, limiting the usefulness of those measures for comparative purposes.

Despite the limitations of these non-GAAP financial measures, we believe these adjusted financial measures, and the information they provide, are useful in viewing our performance using the same tools that management uses to gauge progress in achieving our goals. Adjusted measures may also facilitate comparisons to our historical performance.

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Adjusted revenues exclude the impact of the fair value of deferred revenues acquired in a business combination. Organic revenues further excludes revenues related to acquisitions and dispositions completed in the last 12 months and foreign currency movements in all periods presented.

The table below provides an unaudited reconciliation of revenues to adjusted revenues and organic revenues.

			Three Months Ended												Six Months Ended
			February 28,									% Change			February 28,						% Change
(dollar amounts in thousands)			2023			2022						2023			2022
Revenues			$	515,085		$	431,119					19.5		%	$	1,019,900		$	855,844		19.2		%
Deferred revenues fair value adjustment(1)			—			(62)									—			24
Adjusted revenues			$	515,085		$	431,057					19.5		%	$	1,019,900		$	855,868		19.2		%
Acquired revenues(2)			(47,370)			—									(95,825)			—
Currency impact(3)			1,832			—									5,332			—
Organic revenues			$	469,547		$	431,057					8.9		%	$	929,407		$	855,868		8.6		%

(1) Reflects the amortization effect of the purchase accounting adjustment related to the fair value of acquired deferred revenues for acquisitions prior to fiscal 2022. Acquisitions thereafter do not include this adjustment in accordance with our adoption of ASU No. 2021-08, Business Combinations: Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (Topic 805).

(2) Revenues from acquisitions completed within the last 12 months.

(3) The impact from foreign currency movements year over year.

The table below provides an unaudited reconciliation of operating income, operating margin, net income and diluted EPS to adjusted operating income, adjusted operating margin, adjusted net income, EBITDA, adjusted EBITDA and adjusted diluted earnings per share. Adjusted operating income and margin, adjusted net income, and adjusted diluted earnings per share exclude intangible asset amortization, the impact of the fair value of deferred revenues acquired in a business combination and non-recurring items. EBITDA excludes interest expense, provision for income taxes and depreciation and amortization expense, while Adjusted EBITDA further excludes non-recurring non-cash expenses.

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			Three Months Ended									Six Months Ended
			February 28,									February 28,
(dollar amounts in thousands, except per share data)			2023			2022			% Change			2023			2022			% Change
Operating income			$	169,250		$	123,348		37.2		%	$	341,145		$	246,009		38.7		%
Deferred revenues fair value adjustment			—			(62)						—			24
Intangible asset amortization			17,709			6,291						35,717			12,343
Business acquisition / integration costs*(1)*			3,329			5,048						6,828			5,048
Restructuring / severance			433			200						433			9,228
Real estate charges*(2)*			—			9,734						—			13,429
Transformation costs (3)			—			580						—			1,768
Adjusted operating income			$	190,721		$	145,139		31.4		%	$	384,123		$	287,849		33.4		%
Operating margin			32.9		%	28.6		%				33.4		%	28.7		%
Adjusted operating margin*(4)*			37.0		%	33.7		%				37.7		%	33.6		%
Net income			$	131,593		$	109,938		19.7		%	$	268,391		$	217,585		23.3		%
Deferred revenues fair value adjustment			—			(55)						—			22
Intangible asset amortization			14,717			5,543						30,294			10,962
Business acquisition / integration costs*(1)*			2,766			4,448						5,792			4,448
Restructuring / severance			360			177						360			8,261
Real estate charges*(2)*			—			8,578						—			11,887
Transformation costs*(3)*			—			512						—			1,576
Income tax items			(1,322)			(2,466)						(1,552)			(2,725)
Adjusted net income*(5)*			$	148,114		$	126,675		16.9		%	$	303,285		$	252,016		20.3		%
Net income			$	131,593		$	109,938					$	268,391		$	217,585		23.3		%
Interest expense			16,737			1,962						33,274			3,934
Income taxes			25,169			12,018						46,256			24,301
Depreciation and amortization expense			26,211			13,395						52,208			32,827
EBITDA			$	199,710		$	137,313		45.4		%	$	400,129		$	278,647		43.6		%
Real estate charges*(2)*			—			9,734						—			13,429
Adjusted EBITDA			$	199,710		$	147,047		35.8		%	$	400,129		$	292,076		37.0		%
Diluted earnings per common share			$	3.38		$	2.84		19.0		%	$	6.89		$	5.63		22.4		%
Deferred revenues fair value adjustment			—			0.00						—			0.00
Intangible asset amortization			0.37			0.14						0.78			0.28
Business acquisition / integration costs*(1)*			0.07			0.11						0.15			0.12
Restructuring / severance			0.01			0.01						0.01			0.21
Real estate charges*(2)*			—			0.22						—			0.31
Transformation costs*(3)*			—			0.01						—			0.04
Income tax items			(0.03)			(0.06)						(0.04)			(0.07)
Adjusted diluted earnings per common share*(5)*			$	3.80		$	3.27		16.2		%	$	7.79		$	6.52		19.5		%
Weighted average common shares (Diluted)			38,981			38,761						38,947			38,628

*(1)*Related to integration costs of the CGS acquisition.

*(2)*Related to impairment charges of our lease ROU assets and property, equipment and leasehold improvements associated with vacating certain leased office space.

*(3)*Primarily related to professional fees associated with our ongoing multi-year investment plan.

*(4)*Adjusted operating margin is calculated as Adjusted operating income divided by Adjusted revenues as shown in the revenues reconciliation table above.

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*(5)*For purposes of calculating Adjusted net income and Adjusted diluted earnings per share, all adjustments were taxed at the quarterly effective tax rates of 16.9% for fiscal 2023 and 11.9% for fiscal 2022.

Liquidity and Capital Resources

Our cash flows provided by operating activities, existing cash and cash equivalents, supplemented with our long-term debt borrowings, have been sufficient to fund our operations while allowing us to invest in activities that support the long-term growth of our operations. Generally, some or all of the remaining available cash flow has been used to, among other things, service our existing and future debt obligations, satisfy our working capital requirements and fund our capital expenditures, acquisitions, dividend payments and repurchases of our common stock. Based on past performance and current expectations, we believe our sources of liquidity, including the available capacity under our existing revolving credit facility and other financing alternatives, will provide us the necessary capital to fund these transactions and achieve our planned growth for the next 12 months and the foreseeable future. We are exposed to credit risk for cash and cash equivalents held in financial institutions in the event of a default, to the extent that such amounts are in excess of applicable insurance limits; however, we do not believe our concentration of cash and cash equivalents presents a significant credit risk as the counterparties to the instruments consist of multiple high-quality, credit-worthy financial institutions.

Sources of Liquidity

Long-Term Debt & Swap Agreements

2022 Credit Agreement

On March 1, 2022, we entered into a credit agreement (the "2022 Credit Agreement") and borrowed an aggregate principal amount of $1.0 billion under its senior unsecured term loan credit facility (the "2022 Term Facility") and $250.0 million of the available $500.0 million under its senior unsecured revolving credit facility (the "2022 Revolving Facility" and, together with the 2022 Term Facility, the "2022 Credit Facilities"). The 2022 Term Facility matures on March 1, 2025, and the 2022 Revolving Facility matures on March 1, 2027. The 2022 Revolving Facility allows for the availability of up to $100.0 million in the form of letters of credit and up to $50.0 million in the form of swingline loans. We may seek additional commitments under the 2022 Revolving Facility from lenders or other financial institutions up to an aggregate principal amount of $750.0 million.

We pay a commitment fee on the daily unused amount of the 2022 Revolving Facility using a pricing grid based on our senior unsecured non-credit enhanced long-term debt rating and our total leverage ratio. The commitment fee remained consistent at 0.125% from the borrowing date through February 28, 2023. During fiscal 2022, we incurred approximately $9.5 million in debt issuance costs related to the 2022 Credit Facilities.

We used these borrowings, along with the net proceeds from the issuance of the Senior Notes (as defined below) and cash on hand, to finance the consideration for the CGS acquisition, to repay borrowings under the 2019 Credit Agreement (as defined below) and to pay related transaction fees, costs and expenses.

We may voluntarily prepay loans under the 2022 Credit Facilities at any time without premium or penalty. During the three and six months ended February 28, 2023, we repaid $125.0 million and $250.0 million, respectively, under the 2022 Term Facility, inclusive of voluntary prepayments of $112.5 million and $225.0 million, respectively. Since loan inception on March 1, 2022, we have repaid $500.0 million under the 2022 Term Facility, inclusive of voluntary prepayments of $462.5 million.

As of February 28, 2023, the outstanding borrowings under the 2022 Credit Facilities bore interest at a rate equal to the applicable one-month Term Secured Overnight Financing Rate ("SOFR") rate plus a 1.1% spread (comprised of a 1.0% interest rate margin based on a debt leverage pricing grid plus a 0.1% credit spread adjustment). The spread remained consistent from the borrowing date through February 28, 2023. Interest on the 2022 Credit Facilities is currently payable on the last business day of each month, in arrears.

The 2022 Credit Agreement contains usual and customary event of default provisions for facilities of this type, which are subject to usual and customary grace periods and materiality thresholds. If an event of default occurs under the 2022 Credit Agreement, the lenders may, among other things, terminate their commitments and declare all outstanding borrowings immediately due and payable.

The 2022 Credit Agreement contains usual and customary affirmative and negative covenants for facilities of this type, including a financial covenant requiring maintenance of a total leverage ratio of no greater than 4.00 to 1.00 as of February 28, 2023. We were in compliance with all covenants and requirements of the 2022 Credit Agreement as of February 28, 2023.

Refer to Note 11, Debt in the Notes of this Quarterly Report on Form 10-Q for further discussion of the 2022 Credit Agreement.

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2022 Swap Agreement

On March 1, 2022, we entered into an interest rate swap agreement (the "2022 Swap Agreement") to hedge a portion of our outstanding floating SOFR rate debt with a fixed interest rate of 1.162%. Effective December 30, 2022, we apportioned the then-outstanding notional amount of the 2022 Swap Agreement between two counterparties. Refer to Note 5, Derivative Instruments, in the Notes of this Quarterly Report on Form 10-Q for more information on the 2022 Swap Agreement.

Senior Notes

On March 1, 2022 we completed a public offering of $500.0 million aggregate principal amount of 2.900% Senior Notes due March 1, 2027 (the “2027 Notes”) and $500.0 million aggregate principal amount of 3.450% Senior Notes due March 1, 2032 (the “2032 Notes” and, together with the 2027 Notes, the “Senior Notes”). The Senior Notes were issued pursuant to an indenture, dated as of March 1, 2022, by and between us and U.S. Bank Trust Company, National Association, as trustee (the "Trustee"), as supplemented by the supplemental indenture, dated as of March 1, 2022, between us and the Trustee (the "Supplemental Indenture").

Interest on the Senior Notes is payable semiannually in arrears on March 1 and September 1 of each year, with the first payment made on September 1, 2022. The Senior Notes were issued at an aggregate discount of $2.8 million during fiscal 2022 and we incurred approximately $9.1 million in debt issuance costs.

We may redeem the Senior Notes, in whole or in part, at any time at specified redemption prices, plus any accrued and unpaid interest. Upon the occurrence of a change of control triggering event (as defined in the Supplemental Indenture), we must offer to repurchase the Senior Notes at 101% of their principal amount, plus any accrued and unpaid interest.

2019 Credit Agreement

On March 29, 2019, we entered into a credit agreement with PNC Bank, National Association (the "2019 Credit Agreement"), and borrowed $575.0 million of the available $750.0 million provided by the revolving credit facility thereunder (the "2019 Revolving Credit Facility"). Borrowings under the 2019 Revolving Credit Facility bore interest on the outstanding principal amount at a rate equal to the daily LIBOR plus a spread using a debt leverage pricing grid. Interest on the amounts outstanding under the 2019 Revolving Credit Facility was payable quarterly, in arrears, and on the maturity date.

As of March 1, 2022, we repaid in full and terminated the 2019 Credit Agreement. Refer to Note 11, Debt in the Notes of this Quarterly Report on Form 10-Q for more information on the termination.

Uses of Liquidity

Returning Value to Shareholders

During the six months ended February 28, 2023 we returned $67.5 million to shareholders in the form of dividends and during the six months ended February 28, 2022, we returned $80.1 million in the form of share repurchases and dividends. Over the last 12 months, we returned $132.0 million to stockholders in the form of dividends, with no shares repurchased over this timeframe due to the suspension of our share repurchase program. Refer to the Share Repurchase Program below for more information.

Dividends

In the third quarter of fiscal 2022, our Board of Directors approved an 8.5% increase in the regular quarterly dividend from $0.82 to $0.89 per share. Fiscal 2022 marked 23 consecutive fiscal years of dividend increases, highlighting our continued commitment to returning value to stockholders. During the six months ended February 28, 2023 and February 28, 2022, we paid dividends of $67.5 million and $61.4 million, respectively. Future dividends will depend on our earnings, capital requirements, financial condition and other factors considered relevant by us and are subject to final determination by our Board of Directors.

Share Repurchase Program

As of February 28, 2023, $181.3 million remained authorized for future share repurchases under our share repurchase program. There is no defined number of shares to be repurchased over a specified timeframe through the life of the program. We may repurchase shares of our common stock under the program from time-to-time in the open market and privately negotiated transactions, subject to market conditions.

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We did not repurchase any shares of our common stock during the three months ended February 28, 2023 and February 28, 2022. We also did not repurchase any shares during the six months ended February 28, 2023 compared with 46,200 shares repurchased for $18.6 million during the same period in the prior fiscal year. Beginning in the second quarter of fiscal 2022, we suspended our share repurchase program until at least the second half of fiscal 2023, with the exception of potential minor repurchases to offset dilution from grants of equity awards or repurchases to satisfy withholding tax obligations due upon the vesting of stock-based awards. The suspension of our share repurchase program allowed us to prioritize the repayment of debt under the 2022 Credit Facilities. We anticipate resuming the existing share repurchase program for the third and fourth quarters of fiscal 2023. Refer to Note 11, Debt in the Notes of this Quarterly Report on Form 10-Q for more information on the 2022 Credit Facilities.

Capital Expenditures

For the six months ended February 28, 2023, capital expenditures increased by 72.4% to $35.4 million, compared with $20.5 million during the same period a year ago. This increase was primarily due to higher expenditures related to the development of capitalized internal-use software.

Acquisitions

CUSIP Global Services

On March 1, 2022, we completed the acquisition of CGS for a cash purchase price of $1.932 billion, inclusive of working capital adjustments. CGS manages a database of 60 different data elements uniquely identifying more than 50 million global financial instruments. It is the foundation for security master files relied on by critical front, middle and back-office functions. CGS, operating on behalf of the ABA, is the provider of CUSIP and CINS identifiers globally and also acts as the official numbering agency for ISIN identifiers in the United States and as a substitute number agency for more than 35 other countries. We believe that the CGS acquisition will significantly expand our critical role in the global capital markets.

Cobalt Software, Inc.

On October 12, 2021, we acquired all of the outstanding shares of Cobalt Software, Inc. ("Cobalt") for a purchase price of $50.0 million, net of cash acquired, and inclusive of working capital adjustments. Cobalt is a leading portfolio monitoring solutions provider for the private capital industry. This acquisition advances our strategy to scale our data and workflow solutions through targeted investments as part of our multi-year investment plan and expands our private markets offering.

Refer to Note 6, Acquisitions, in the Notes of this Quarterly Report on Form 10-Q for further discussion of the CGS and Cobalt acquisitions.

Contractual Obligations

Purchase obligations represent our legally-binding agreements to purchase fixed or minimum quantities at determinable prices. Our total purchase obligations as of August 31, 2022 primarily related to hosting services and acquisition of data, and, to a lesser extent, third-party software providers. Hosting services support our technology investments related to our transition to a hybrid cloud strategy, the majority of which rely on third-party hosting providers. Data is an integral component of the value we provide to our clients and our commitments to third-party software providers mainly include internal-use software licenses.

As of August 31, 2022, we had total purchase obligations with suppliers of $373.9 million. During the second quarter of fiscal 2023, we amended a contract with a data supplier that resulted in an incremental commitment to purchase data of approximately $26 million.

We also have contractual obligations related to our lease liabilities and outstanding debt. Refer to Note 10, Leases and Note 11, Debt in the Notes of this Quarterly Report on Form 10-Q for information regarding lease commitments and outstanding debt obligations, respectively.

Summary of Cash Flows

As of February 28, 2023, Cash and cash equivalents were $445.3 million, compared with $773.0 million as of February 28, 2022. Our cash and cash equivalents are held in numerous locations throughout the world, with $196.4 million in the Americas, $155.3 million in EMEA (predominantly in the U.K.) and the remaining $93.6 million in Asia Pacific (predominantly in India and the Philippines) as of February 28, 2023. We permanently reinvest all foreign unremitted earnings, except in jurisdictions where earnings can be repatriated substantially free of tax.

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The table below, for the periods indicated, provides selected cash flow information:

			Six Months Ended
			February 28,
(dollar amounts in thousands)			2023			2022						% Change
Net cash provided by operating activities			$	271,314		$	194,952					39.2		%
Net cash provided by (used in) investing activities			(46,305)			(70,814)						(34.6)		%
Net cash provided by (used in) financing activities			(285,654)			(26,417)						981.3		%
Effect of exchange rate changes on cash and cash equivalents			2,698			(6,574)						(141.0)		%
Net increase (decrease) in cash and cash equivalents			$	(57,947)		$	91,147					(163.6)		%

Operating

For the six months ended February 28, 2023, net cash provided by operating activities was $271.3 million, which included net income of $268.4 million, non-cash charges of $93.6 million and a net cash outflow of $90.6 million to support our working capital requirements. The non-cash charges were primarily driven by $52.2 million of depreciation and amortization, $27.5 million of stock-based compensation expense and $19.6 million from amortization of lease ROU assets. The change in our working capital was primarily driven by higher accounts receivable due to increased sales, an increase in days sales outstanding and a cash outflow of $51.7 million related to our variable compensation payment.

For the six months ended February 28, 2022, net cash provided by operating activities was $195.0 million, which consisted of net income of $217.6 million, non-cash charges of $91.7 million and a net cash outflow of $114.3 million to support our working capital requirements. The non-cash charges were primarily driven by $32.8 million of depreciation and amortization, $25.9 million of stock-based compensation expense and $22.2 million from amortization of lease ROU assets. The change in our working capital was primarily driven by higher accounts receivable due to an increase in sales and a cash outflow of $34.7 million related to our variable compensation payment.

Investing

For the six months ended February 28, 2023, net cash used in investing activities was $46.3 million. The cash used in investing activities was primarily due to an increase in capital expenditures of $35.4 million mainly due to capitalization of compensation costs related to development of our internal-use software projects.

For the six months ended February 28, 2022, net cash used in investing activities was $70.8 million. The cash used in investing activities was primarily due to the purchase of Cobalt for $50.0 million.

Financing

For the six months ended February 28, 2023, net cash used in financing activities was $285.7 million, consisting mainly of $250.0 million related to the partial repayment of the 2022 Term Facility and $67.5 million of dividend payments, partially offset by $43.6 million of proceeds from employee stock plans.

For the six months ended February 28, 2022, net cash used in financing activities was $26.4 million, consisting mainly of $61.4 million of dividend payments and $18.6 million of repurchases of common stock, partially offset by $56.9 million of proceeds from employee stock plans.

Free Cash Flow

We define free cash flow, a non-GAAP financial measure, as cash provided by operating activities less purchases of property, equipment, leasehold improvements and capitalized internal-use software. We believe free cash flow is a liquidity measure that provides useful information to management and investors about the amount of cash generated by the business that, after capital expenditures, can be used for strategic opportunities, including returning value to shareholders, investing in our business, making strategic acquisitions and strengthening the balance sheet. Free cash flow should be considered in addition to, rather than as a substitute for, consolidated net income as a measure of our performance and net cash provided by operating activities as a measure of our liquidity.

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The following table reconciles our net cash provided by operating activities to free cash flow:

			Six Months Ended
			February 28,
(dollar amounts in thousands)			2023			2022			Change
Net cash provided by operating activities			$	271,314		$	194,952		$	76,362
Less: purchases of property, equipment, leasehold improvements and capitalized internal-use software			(35,416)			(20,546)			(14,870)
Free cash flow			$	235,898		$	174,406		$	61,492

We generated free cash flow of $235.9 million during the six months ended February 28, 2023, an increase of $61.5 million compared with the same period a year ago. This change reflects a $76.4 million increase in cash provided by operating activities, mainly due to higher net income and lower working capital requirements, partially offset by a $14.9 million increase in purchases of property, equipment, leasehold improvements and capitalized internal-use software, primarily driven by higher capitalized costs related to internal-use software.

Off-Balance Sheet Arrangements

As of February 28, 2023 and August 31, 2022, we had no off-balance sheet financing or other arrangements with unconsolidated entities or financial partnerships (such as entities often referred to as structured finance or special purpose entities) established for purposes of facilitating off-balance sheet financing, other debt arrangements, or other contractually limited purposes.

Foreign Currency Exposure

As we operate globally, we are exposed to the risk that our financial condition, results of operations and cash flows could be impacted by changes in foreign currency exchange rates. To mitigate this foreign currency exposure, we entered into a series of forward contracts to hedge a portion of our foreign currency risk related to the British Pound Sterling, Indian Rupee, Euro and Philippine Peso. As of February 28, 2023, these forward contracts hedge a portion of our foreign currency transaction exposure ranging from 25% to 75%, over their respective hedged periods, which are set to mature at various points between the third quarter of fiscal 2023 through the second quarter of fiscal 2024.

The following table summarizes the gross notional value of foreign currency forward contracts to purchase the British Pound Sterling, Euro, Indian Rupee and Philippine Peso with U.S. dollars:

			February 28, 2023						August 31, 2022
(in thousands)			Local Currency			USD			Local Currency			USD
British Pound Sterling			£	46,000		$	55,491		£	44,200		$	55,567
Euro			€	37,500		39,877			€	37,500		40,679
Indian Rupee			Rs	2,987,143		36,200			Rs	2,667,928		33,600
Philippine Peso			₱	1,767,455		31,600			₱	1,462,060		27,000
Total						$	163,168					$	156,846

Refer to Part I, Item 3. Quantitative and Qualitative Disclosures About Market Risk in the MD&A of this Quarterly Report on Form 10-Q for the reclassification of the foreign currency forward contracts gain (loss) from AOCL into income and the impact of foreign currency exchange rate fluctuations, net of hedge activity, to operating income.

Critical Accounting Estimates

We prepare the Consolidated Financial Statements in conformity with GAAP, which requires us to make certain estimates and apply judgements that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosures. We base our estimates on historical experience and other assumptions that we believe to be reasonable at the time the Consolidated Financial Statements are prepared and, as such, they may ultimately differ materially from actual results.

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We describe our significant accounting policies in Note 2, Significant Accounting Policies in the Notes included in Item 8 of our Annual Report on Form 10-K for the fiscal year ended August 31, 2022. These accounting policies were consistently applied in preparing our Consolidated Financial Statements for the six months ended February 28, 2023.

We disclosed our critical accounting estimates in Part II, Item 7 Critical Accounting Estimates in the MD&A of our Annual Report on Form 10-K for the fiscal year ended August 31, 2022. There were no significant changes in our critical accounting estimates during the six months ended February 28, 2023.

New Accounting Pronouncements

See Note 2, Summary of Significant Accounting Policies, in the Notes of this Quarterly Report on Form 10-Q for a full description of recent accounting pronouncements, including the expected dates of adoption, which we include herein by reference.