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, 2023, 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 Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K for the fiscal year ended August 31, 2023.

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 technologies that drive the investment community to see more, think bigger and do its best work.

Our platform delivers expansive data, sophisticated analytics, and flexible technology used by global financial professionals to power their critical investment workflows. As of November 30, 2023, we had nearly 8,000 clients comprised of more than 207,000 investment professionals, including institutional asset managers, bankers, wealth managers, asset owners, partners, hedge funds, corporate users, and private equity and venture capital professionals. 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 drive our business based on our detailed understanding of our clients' workflows, which helps us to solve their most complex challenges. 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. Our on- and off-platform solutions span the investment life cycle of investment research, portfolio construction and analysis, trade execution, performance measurement, risk management and reporting. We provide 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. Our platform and solutions are supported by our dedicated client service team.

We operate our business through three reportable segments ("segments"): the Americas, EMEA and Asia Pacific. During fiscal 2024, we revised our internal organization within each segment to offer data, products and analytical applications by firm type:

• "Institutional Buyside" focuses on asset managers, asset owners, and hedge fund companies,

• "Dealmakers" focuses on banking and sell-side research, corporate, and private equity and venture capital workflows,

• "Wealth" focuses on wealth management workflows, and

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• "Partnerships and CGS": "Partnerships" delivers solutions to content providers, financial exchanges, and rating agencies. "CGS" is the exclusive issuer of Committee on Uniform Security Identification Procedures ("CUSIP") and CUSIP International Number System ("CINS") identifiers.

As our chief operating decision maker ("CODM") continues to review our business and operating results based on our three segments, the Americas, EMEA and Asia Pacific, the realignment of our internal organization by firm types will not impact our segments for fiscal 2024. Refer to Note 15, Segment Information, in the Notes to the Consolidated Financial Statements included in Part I, Item 1. of this Quarterly Report on Form 10-Q for more information on our segments and CODM.

Business Strategy

Our strategy is to build the leading open content and analytics platform and powerful enterprise solutions that deliver a differentiated advantage for our clients’ success. By offering personalized digital products, we strive to be a trusted partner and service provider, delivering relevant insights and research ideas tailored to our clients' specific business models.

We are focused on growing our global business through three strategically aligned geographic segments: the Americas, EMEA and Asia Pacific. This approach allows us to better manage resources, target solutions and interact with clients effectively. To execute our strategy, we have outlined the following key initiatives:

• Expanding our Digital Platform**: We are scaling up our content refinery to provide a comprehensive inventory of industry, proprietary and third-party data. This includes granular data for key industry verticals, real-time data, fund data and sustainable finance. Through an open ecosystem of cloud-based data and analytics, we aim to offer flexible solutions and content accessible through various delivery methods. In addition, we are working to expand our use of artificial intelligence to drive efficiencies for our clients, with anticipated initiatives including automation of tasks and integration of natural language queries. We believe that our breadth of high-quality, connected content will be a critical raw material for large language models.

• Ensuring Execution Excellence**: Innovation and collaboration are at the core of our approach. We employ technology to accelerate content collection, data connectivity and the development of summaries and themes. Our sales force is committed to enhancing price realization, productivity, efficiency and improved client outcomes. We are also optimizing operations and managing expenses to improve returns on our investments.

• Fostering a Growth Mindset**: We prioritize recruiting, training and empowering a diverse and efficient workforce. We are driving sustainable growth by investing in talent that can create leading technological solutions and efficiently execute our strategy. Additionally, strategic partnerships and acquisitions help to accelerate our expansion in key areas.

Fiscal 2024 First Quarter in Review

Revenues in the first quarter of fiscal 2024 were $542.2 million, an increase of 7.4% from the comparable prior year period. Revenues increased in all our segments, primarily in the Americas and, to a lesser extent, EMEA and Asia Pacific. The increased revenues were driven by higher demand for our workstations, middle office solutions, data feeds and our CGS subscriptions. The increased revenues reflected 7.2% growth in organic revenues during the first quarter of fiscal 2024 compared with the prior year period. Refer to Part I, Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations, Non-GAAP Financial Measures, of this Quarterly Report on Form 10-Q for a definition of organic revenues and a reconciliation between revenues and organic revenues.

As of November 30, 2023, organic annual subscription value ("Organic ASV") plus Professional Services totaled $2,185.0 million, an increase of 7.1% over the prior year. Organic ASV increased in all our segments, with the majority of the increase related to the Americas and, to a lesser extent, EMEA and Asia Pacific. This increase was primarily driven by higher demand for our workstations and, to a lesser extent, our middle office solutions and data feeds. Refer to Part I, Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations, Annual Subscription Value, of this Quarterly Report on Form 10-Q for the definitions of Organic ASV and Organic ASV plus Professional Services.

Operating margin increased to 34.9% during the three months ended November 30, 2023, compared with 34.1% in the prior year period. This increase was mainly due to growth in revenues and, when expressed as a percentage of revenues, a benefit from the net settlement of our derivative instruments and a decrease in professional fees, partially offset by higher computer-related expenses and royalty fees. Diluted earnings per common share ("Diluted EPS") for the three months ended November 30, 2023 was $3.84, an increase of 9.1%, compared with the prior year period.

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Annual Subscription Value ("ASV")

We believe ASV reflects our ability to grow recurring revenues and generate positive cash flows and serves as 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.

Prior year ASV has been revised to include certain CGS revenues not previously reflected as ASV to better align with our legacy business.

Organic ASV plus Professional Services

The following table presents the calculation of Organic ASV plus Professional Services as of November 30, 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 November 30, 2023
As reported ASV plus Professional Services(1)			$	2,184.6
Currency impact(2)			0.4
Organic ASV plus Professional Services			$	2,185.0
Organic ASV plus Professional Services annual growth rate			7.1		%

(1)Includes $22.2 million in Professional Services as of November 30, 2023.

(2)The impact from foreign currency movements.

As of November 30, 2023, Organic ASV plus Professional Services was $2,185.0 million, an increase of 7.1% compared with November 30, 2022. This increase in Organic ASV was primarily driven by higher sales to existing clients and, to a lesser extent, price increases to existing clients and sales to new clients, partially offset by existing client cancellations.

Organic ASV increased in all our segments, with the majority of the increase related to the Americas, and, to a lesser extent, EMEA and Asia Pacific. This increase was primarily driven by higher demand for our workstations and, to a lesser extent, our middle office solutions and data feeds.

Segment ASV

As of November 30, 2023, ASV from the Americas represented 64% of total ASV and was $1,395.0 million, an increase from $1,293.1 million as of November 30, 2022. Americas Organic ASV was $1,395.1 million as of November 30, 2023, a 7.9% increase from the prior year period. The Organic ASV increase in the Americas was primarily driven by higher demand for our workstations and, to a lesser extent, our middle office solutions, data feeds and CGS subscriptions.

As of November 30, 2023, ASV from EMEA represented 26% of total ASV and was $552.4 million, an increase from $522.0 million as of November 30, 2022. EMEA Organic ASV was $552.2 million as of November 30, 2023, a 5.4% increase from the prior year period. The EMEA Organic ASV increase was primarily driven by an increase in our data feeds, middle office solutions and, to a lesser extent, higher demand for our workstations.

As of November 30, 2023, ASV from Asia Pacific represented 10% of total ASV and was $215.0 million, an increase from $201.0 million as of November 30, 2022. Asia Pacific Organic ASV was $215.5 million as of November 30, 2023, an 8.0% increase from the prior year period. The Asia Pacific Organic ASV increase was primarily driven by higher demand for our workstations, data feeds and middle office solutions.

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Buy-side and Sell-side Organic ASV Growth

The buy-side and sell-side Organic ASV annual growth rates as of November 30, 2023 were 7.2% and 7.6%, respectively. Buy-side clients account for approximately 82% of our Organic ASV, compared to 83% in the prior year, and primarily include institutional asset managers, wealth managers, asset owners, 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, and private equity and venture capital firms.

Client and User Additions

The table below presents our total clients and users:

			As of November 30, 2023			As of November 30, 2022			Change
Clients(1)			7,945			7,631			4.1		%
Users			207,083			180,959			14.4		%

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

Our total client count was 7,945 as of November 30, 2023, a net increase of 4.1% or 314 clients in the last 12 months, mainly due to an increase in corporate clients and, to a lesser extent, wealth management clients and partners.

As of November 30, 2023, there were 207,083 professionals using FactSet, representing a net increase of 14.4% or 26,124 users in the last 12 months, primarily driven by an increase in wealth users, and, to a lesser extent, sell-side users from our banking clients.

Annual ASV retention was greater than 95% of ASV for the three months ended November 30, 2023 and November 30, 2022. When expressed as a percentage of clients, annual retention was approximately 90% for the three months ended November 30, 2023, compared with approximately 92% for the three months ended November 30, 2022.

Employee Headcount

As of November 30, 2023, our employee headcount was 12,515, an increase of 7.6% compared with 11,627 employees as of November 30, 2022. This growth in headcount was primarily due to our continued investment in our centers of excellence ("COEs"), particularly through expanding our talent pool in our India and Philippines locations. Our COEs account for approximately 68% of our employees.

Our net headcount growth by segment as of November 30, 2023 compared to November 30, 2022 was 11.7% in Asia Pacific and 0.2% in the Americas, partially offset by a decrease of 1.0% in EMEA. As of November 30, 2023, we had 8,595 employees located in Asia Pacific, 2,500 in the Americas and 1,420 in EMEA.

Results of Operations

For an understanding of the significant factors that influenced our performance for the three months ended November 30, 2023 and November 30, 2022, the following discussion should be read in conjunction with the Consolidated Financial Statements and related Notes presented in Part I, Item 1. in this Quarterly Report on Form 10-Q.

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

			Three Months Ended
			November 30,									% Change
(dollar amounts in thousands, except share and per share data)			2023			2022
Revenues			$	542,216		$	504,815					7.4		%
Cost of services			251,621			227,042						10.8		%
Selling, general and administrative			100,711			105,596						(4.6)		%
Asset impairments			844			282						199.3		%
Operating income			$	189,040		$	171,895					10.0		%
Net income			$	148,555		$	136,798					8.6		%
Diluted weighted average common shares			38,643			38,914
Diluted EPS			$	3.84		$	3.52					9.1		%

Revenues

Three months ended November 30, 2023 compared with three months ended November 30, 2022

Revenues for the three months ended November 30, 2023 were $542.2 million, an increase of 7.4%. The increase in revenues was primarily driven by increased sales to existing clients and, to a lesser extent, price increases to existing clients and sales to new clients, partially offset by existing client cancellations. Revenues increased in all our segments, primarily from the Americas and, to a lesser extent, EMEA and Asia Pacific. The increased revenues was driven by higher demand for our workstations, middle office solutions, data feeds and our CGS subscriptions. Organic revenues increased to $541.4 million for the three months ended November 30, 2023, a 7.2% increase over the prior year period.

The growth in revenues of 7.4% was reflective of a 7.2% increase in organic revenues and a 0.2% increase due to the effects of foreign currency exchange rate fluctuations.

Revenues by Segment

The following table summarizes our revenues by segment:

			Three Months Ended
			November 30,						% Change
(dollar amounts in thousands)			2023			2022
Americas			$	348,367		$	323,367		7.7		%
% of revenues			64.3		%	64.1		%
EMEA			$	139,561		$	130,738		6.7		%
% of revenues			25.7		%	25.9		%
Asia Pacific			$	54,288		$	50,710		7.1		%
% of revenues			10.0		%	10.0		%
Consolidated			$	542,216		$	504,815		7.4		%

Three months ended November 30, 2023 compared with three months ended November 30, 2022

Americas

Americas revenues increased 7.7% to $348.3 million during the three months ended November 30, 2023, compared with $323.4 million from the same period a year ago. The increased revenues were primarily driven by higher demand for our workstations and, to a lesser extent, our middle office solutions, data feeds and our CGS subscriptions. The growth in revenues of 7.7% was reflective of organic growth.

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EMEA

EMEA revenues increased 6.7% to $139.6 million during the three months ended November 30, 2023, compared with $130.7 million from the same period a year ago. The increased revenues were primarily driven by higher sales in our middle office solutions and data feeds. The growth in revenues of 6.7% was reflective of a 6.1% increase in organic revenues and a 0.6% increase due to the effects of foreign currency exchange rate fluctuations.

Asia Pacific

Asia Pacific revenues increased 7.1% to $54.3 million during the three months ended November 30, 2023, compared with $50.7 million from the same period a year ago. The increased revenues were primarily driven by higher demand for our workstations. The growth in revenues of 7.1% was reflective of a 7.5% increase in organic revenues, partially offset by a decrease of 0.4% due to the effects of foreign currency exchange rate fluctuations.

Operating Expenses

Principal Operating 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, other employee-related 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 Cost 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 value of an asset exceeds its fair value.

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

			Three Months Ended
			November 30,
(dollar amounts in thousands)			2023			2022			% Change
Cost of services			$	251,621		$	227,042		10.8		%
SG&A			100,711			105,596			(4.6)		%
Asset impairments			844			282			199.3		%
Total operating expenses			$	353,176		$	332,920		6.1		%
Operating income			$	189,040		$	171,895		10.0		%
Operating margin			34.9		%	34.1		%

Cost of Services

Three months ended November 30, 2023 compared with three months ended November 30, 2022

Cost of services increased 10.8% to $251.6 million for the three months ended November 30, 2023, compared with $227.0 million for the same period a year ago, primarily due to an increase in employee compensation costs and computer-related expenses.

Cost of services, when expressed as a percentage of revenues, was 46.4% for the three months ended November 30, 2023, an increase of 140 basis points over the prior year. This increase was primarily due to higher computer-related expenses, employee compensation costs and royalty fees. When expressed as a percentage of revenues:

• Computer-related expenses increased 80 basis points primarily due to higher spending related to cloud-based hosting services and licensed software arrangements.

• Employee compensation costs increased by 50 basis points primarily due to higher annual base salaries, net of capitalization of compensation costs related to the development of our internal-use software, and variable compensation. The increase in annual base salaries was primarily driven by annual merit increases and a net headcount increase in Cost of services of 869 employees, primarily located in our COEs.

• Royalty fees increased by 30 basis points primarily driven by an increase in both CGS sales and the applicable royalty rate.

Selling, General and Administrative

Three months ended November 30, 2023 compared with three months ended November 30, 2022

SG&A expenses decreased 4.6% to $100.7 million for the three months ended November 30, 2023, compared with $105.6 million from the same period a year ago, primarily driven by the net settlement of our derivative instruments and a decrease in professional fees.

SG&A expenses, when expressed as a percentage of revenues, were 18.6% for the three months ended November 30, 2023, a decrease of 230 basis points over the prior year period. This decrease was primarily driven by the net settlement of our derivative instruments, lower employee compensation costs and professional fees. When expressed as a percentage of revenues:

• The net settlement of derivative instruments for the three months ended November 30, 2023 compared with the three months ended November 30, 2022 resulted in a decrease in SG&A of 110 basis points.

• Employee compensation costs decreased by 70 basis points primarily due to growth of our revenues outpacing the increase in employee compensation costs. This decrease was also driven by the release of certain restructuring and related payroll tax accruals, partially offset by higher variable compensation and annual base salaries. The increase in annual base salaries was primarily driven by annual merit increases, partially offset by a shift of employees to lower cost locations.

• Professional fees decreased by 40 basis points primarily due to transition costs related to the CGS acquisition incurred during the prior year period.

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Operating Income and Operating Margin

Three months ended November 30, 2023 compared with three months ended November 30, 2022

Operating income increased 10.0% to $189.0 million for the three months ended November 30, 2023, compared with $171.9 million in the prior period. This increase was primarily driven by growth in revenues, partially offset by higher employee compensation costs and computer-related expenses. Foreign currency exchange rate fluctuations, net of hedge activity, increased operating income by $1.9 million for the three months ended November 30, 2023 compared with the three months ended November 30, 2022.

Operating margin increased to 34.9% during the three months ended November 30, 2023, compared with 34.1% in the prior year period. This increase was mainly due to growth in revenues and, when expressed as a percentage of revenues, a benefit from the net settlement of our derivative instruments and a decrease in professional fees, partially offset by higher computer-related expenses and royalty fees.

Operating Income by Segment

We operate our business through three segments: the Americas; EMEA; and Asia Pacific. Refer to Note 15, Segment Information in the Notes to the Consolidated Financial Statements included in Part I, Item 1. of this Quarterly Report on Form 10-Q for further discussion regarding our segments. The following table summarizes our operating income by segment:

			Three Months Ended
			November 30,												% Change
(dollar amounts in thousands)			2023						2022
Americas			$	80,848					$	67,531					19.7		%
EMEA			68,865						67,322						2.3		%
Asia Pacific			39,327						37,042						6.2		%
Total Operating Income			$	189,040					$	171,895					10.0		%

Three months ended November 30, 2023 compared with three months ended November 30, 2022

Americas

Americas operating income increased 19.7% to $80.8 million during the three months ended November 30, 2023, compared with $67.5 million in the same period a year ago. This increase was primarily due to growth in revenues of 7.7%, partially offset by higher computer-related expenses and, to a lesser extent, an increase in royalty fees.

• Computer-related expenses increased primarily due to higher spending related to cloud-based hosting services and licensed software arrangements.

• Royalty fees increased primarily due to an increase in both CGS sales and the applicable royalty rate.

EMEA

EMEA operating income increased 2.3% to $68.9 million during the three months ended November 30, 2023, compared with $67.3 million in the same period a year ago. This increase was primarily due to growth in revenues of 6.7%, partially offset by an increase in employee compensation costs and data costs. Employee compensation costs increased primarily due to higher annual base salaries from annual merit increases, partially offset by a net headcount decrease of 14 employees. Data costs increased compared to the three months ended November 30, 2022 as the prior year period included the release of certain accruals related to the successful resolution of exchange audits that reduced data costs.

Asia Pacific

Asia Pacific operating income increased 6.2% to $39.3 million during the three months ended November 30, 2023, compared with $37.0 million from the prior year. This increase was mainly due to growth in revenues of 7.1%, partially offset by higher employee compensation costs. Employee compensation costs increased primarily due to higher annual base salaries, variable compensation and post-employment benefits. The increase in annual base salaries was mainly driven by annual merit increases and a net headcount increase of 897 employees.

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Income Taxes

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

			Three Months Ended
			November 30,
(dollar amounts in thousands)			2023			2022						% Change
Income before income taxes			$	175,196		$	157,885					11.0		%
Provision for income taxes			$	26,641		$	21,087					26.3		%
Effective tax rate			15.2		%	13.4		%				13.9		%

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 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.

Our effective tax rate for the three months ended November 30, 2023 was lower than the applicable U.S. corporate income tax rate mainly due to a net tax benefit from the employee exercise of stock options, research and development ("R&D") tax credits and utilization of foreign tax credits, partially offset by our net state taxes. For the three months ended November 30, 2022, our effective tax rate was lower than the applicable U.S. corporate income tax rate mainly due to R&D tax credits, a foreign derived intangible income ("FDII") deduction and a net tax benefit from the employee exercise of stock options.

Our effective tax rate for the three months ended November 30, 2023 was higher than for the three months ended November 30, 2022 due mainly to a reduction in the benefit from employee exercise of stock options, as well as a higher overall foreign tax rate, partially offset by increased utilization of foreign tax credits.

Net Income and Diluted EPS

			Three Months Ended
			November 30,
(dollar amounts in thousands, except share and per share data)			2023			2022						% Change
Net income			$	148,555		$	136,798					8.6		%
Diluted weighted average common shares			38,643			38,914						(0.7)		%
Diluted EPS			$	3.84		$	3.52					9.1		%

Three months ended November 30, 2023 compared with three months ended November 30, 2022

Net income increased 8.6% to $148.6 million and Diluted EPS increased 9.1% to $3.84 for the three months ended November 30, 2023 compared with the same period a year ago. The increase in Net income and Diluted EPS, when compared to the prior year period, was primarily due to higher operating income, partially offset by an increase in the provision for income taxes.

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 and adjusted Diluted EPS. 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

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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.

Organic revenues excludes the current year impact of revenues from acquisitions and dispositions completed within the past 12 months ("Acquisition revenues" and "Disposition revenues", respectively) and the current year impact from changes in foreign currency. For year to date comparisons, organic revenues excludes current year revenues that were incurred prior to the first anniversary date of an acquisition. The table below provides an unaudited reconciliation of revenues to organic revenues:

			Three Months Ended
			November 30,									% Change
(dollar amounts in thousands)			2023			2022
Revenues			$	542,216		$	504,815					7.4		%
Acquisition revenues			(174)			—
Currency impact			(649)			—
Organic revenues			$	541,393		$	504,815					7.2		%

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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 and adjusted Diluted EPS. Adjusted operating income and margin, adjusted net income, and adjusted Diluted EPS exclude the impact of acquisition-related intangible asset amortization and non-recurring items. EBITDA excludes interest expense, provision for income taxes and depreciation and amortization.

			Three Months Ended
			November 30,
(dollar amounts in thousands, except per share data)			2023			2022			% Change
Operating income			$	189,040		$	171,895		10.0%
Intangible asset amortization			17,344			18,008
Restructuring / severance			(2,419)			—
Business acquisition / integration costs(1)			—			3,499
Adjusted operating income			$	203,965		$	193,402		5.5%
Operating margin			34.9%			34.1%
Adjusted operating margin(2)			37.6%			38.3%
Net income			$	148,555		$	136,798		8.6		%
Intangible asset amortization			12,368			15,577
Restructuring / severance			(1,725)			—
Business acquisition / integration costs(1)			—			3,026
Income tax items			(71)			(230)
Adjusted net income(3)			$	159,127		$	155,171		2.5		%
Net income			$	148,555		$	136,798		8.6		%
Interest expense			16,738			16,537
Income taxes			26,641			21,087
Depreciation and amortization expense			27,068			25,997
EBITDA			$	219,002		$	200,419		9.3		%
Diluted EPS			$	3.84		$	3.52		9.1		%
Intangible asset amortization			0.32			0.40
Restructuring / severance			(0.04)			—
Business acquisition / integration costs(1)			—			0.08
Income tax items			0.00			(0.01)
Adjusted Diluted EPS(3)			$	4.12		$	3.99		3.3		%
Weighted average common shares (Diluted)			38,643			38,914

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

(2)Adjusted operating margin is calculated as Adjusted operating income divided by Revenues.

(3)For purposes of calculating Adjusted net income and Adjusted Diluted EPS, the three months ended November 30, 2023 and November 30, 2022 were taxed at an adjusted tax rate of 28.7% and 13.5%, respectively.

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 our remaining available cash flows have been used to, among other things, service our existing and future debt obligations, satisfy our working capital requirements and fund various activities, including our capital expenditures, acquisitions, investments, 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

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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 and Swap Agreement

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 November 30, 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 prior outstanding borrowings 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 months ended November 30, 2023, we repaid $62.5 million under the 2022 Term Facility, inclusive of voluntary prepayments of $50.0 million. Since loan inception on March 1, 2022, we have repaid $687.5 million under the 2022 Term Facility, inclusive of voluntary prepayments of $612.5 million.

As of November 30, 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 November 30, 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 3.75 to 1.00 as of November 30, 2023. We were in compliance with all covenants and requirements of the 2022 Credit Agreement as of November 30, 2023.

Refer to Note 10, Debt in the Notes to the Consolidated Financial Statements included in Part I, Item 1. of this Quarterly Report on Form 10-Q, for further discussion of the 2022 Credit Agreement.

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 to the Consolidated Financial Statements included in Part I, Item 1. 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

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(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. 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.

Uses of Liquidity

Returning Value to Stockholders

We returned $97.0 million to our stockholders in the form of share repurchases and dividends during the three months ended November 30, 2023 and $33.7 million in the form of dividends during the three months ended November 30, 2022. Over the last 12 months, we returned $378.6 million to our stockholders in the form of share repurchases and dividends.

Dividends

During the three months ended November 30, 2023 and November 30, 2022, we paid dividends of $37.1 million and $33.7 million, respectively. Fiscal 2023 marked the 24th consecutive fiscal year we have increased dividends, highlighting our continued commitment to returning value to our stockholders. Future dividends will depend on our earnings, capital requirements, financial condition and other factors we consider to be relevant and are subject to final determination by our Board of Directors.

Share Repurchase Program

We may repurchase shares of our common stock under our share repurchase program from time-to-time in the open market or via privately negotiated transactions, subject to market conditions. For the three months ended November 30, 2023, we repurchased 135,950 shares for $59.9 million. We suspended our share repurchase program beginning in the second quarter of fiscal 2022 through the second quarter of fiscal 2023, to prioritize the repayment of debt under the 2022 Credit Facilities. As such, we did not repurchase any shares of our common stock under the share repurchase program during the three months ended November 30, 2022.

There is no defined number of shares to be repurchased over a specified timeframe through the life of our share repurchase program. As of November 30, 2023, $240.1 million remained authorized under our share repurchase program for future share repurchases. Refer to Part II, Item 2. Unregistered Sales of Equity Securities and Use of Proceeds, of this Quarterly Report on Form 10-Q for further discussion on our share repurchase program.

Capital Expenditures

For the three months ended November 30, 2023, capital expenditures decreased by 8.3% to $16.5 million, compared with $18.0 million during the same period a year ago. This decrease was primarily due to lower expenditures for computer equipment, partially offset by an increase in costs related to the development of capitalized internal-use software and investments in network-related equipment.

Contractual Obligations

Purchase obligations represent our legally-binding agreements to purchase fixed or minimum quantities at determinable prices. As of August 31, 2023, we had total purchase obligations with suppliers of $362.2 million. Our total purchase obligations as of August 31, 2023 primarily related to hosting services, acquisition of data and, to a lesser extent, third-party software providers. Hosting services support our hybrid cloud strategy, which relies in large part on third-party hosting providers. Data is an integral component of the value we provide to our clients. Our commitments to third-party software providers mainly include internal-use software licenses.

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We also have contractual obligations related to our lease liabilities and outstanding debt. Refer to Note 9, Leases and Note 10, Debt in the Notes to the Consolidated Financial Statements included in Part I, Item 1. of this Quarterly Report on Form 10-Q for information regarding lease commitments and outstanding debt obligations, respectively.

For the three months ended November 30, 2023, there were no material changes to our contractual obligations.

Summary of Cash Flows

As of November 30, 2023, Cash and cash equivalents were $411.9 million, compared with $425.4 million as of August 31, 2023. Our cash and cash equivalents are held in numerous locations throughout the world, with $164.7 million in EMEA (predominantly in the UK), $136.8 million in the Americas and the remaining $110.4 million in Asia Pacific (predominantly in India and the Philippines) as of November 30, 2023. We permanently reinvest all foreign unremitted earnings, except in jurisdictions where earnings can be repatriated substantially free of tax.

The table below provides selected cash flow information:

			Three Months Ended
			November 30,
(dollar amounts in thousands)			2023			2022						% Change
Net cash provided by operating activities			$	155,144		$	106,636					45.5		%
Net cash provided by (used in) investing activities			(25,219)			(27,852)						(9.5)		%
Net cash provided by (used in) financing activities			(144,564)			(146,232)						(1.1)		%
Effect of exchange rate changes on cash and cash equivalents			1,050			1,317						(20.3)		%
Net increase (decrease) in cash and cash equivalents			$	(13,589)		$	(66,131)					(79.5)		%

Operating

For the three months ended November 30, 2023, net cash provided by operating activities was $155.1 million, which included net income of $148.6 million, non-cash charges of $56.5 million and net cash outflow of $50.0 million to support our working capital requirements. The non-cash charges were primarily driven by $27.1 million of depreciation and amortization and $14.3 million of stock-based compensation expense. The change in our working capital was primarily driven by a cash outflow related to our annual variable compensation payment, partially offset by the timing of payments related to accrued expenses.

For the three months ended November 30, 2022, net cash provided by operating activities was $106.6 million, which included net income of $136.8 million, non-cash charges of $47.4 million and net cash outflow of $77.6 million to support our working capital requirements. The non-cash charges were primarily driven by $26.0 million of depreciation and amortization and $12.2 million of stock-based compensation expense. The change in our working capital was primarily driven by a cash outflow related to our annual variable compensation payment.

Investing

For the three months ended November 30, 2023, net cash used in investing activities was $25.2 million. The cash used in investing activities was primarily related to capital expenditures of $16.5 million mainly due to capitalization of compensation costs related to the development of our internal-use software and investments in network-related equipment.

For the three months ended November 30, 2022, net cash used in investing activities was $27.9 million. The cash used in investing activities was primarily related to capital expenditures of $18.0 million mainly due to capitalization of compensation costs related to development of our internal-use software projects.

Financing

For the three months ended November 30, 2023, net cash used in financing activities was $144.6 million, consisting mainly of $62.5 million related to the partial repayment of the 2022 Term Facility, $59.9 million of share repurchases and $37.1 million of dividend payments, partially offset by $28.4 million of proceeds from employee stock plans.

For the three months ended November 30, 2022, net cash used in financing activities was $146.2 million, consisting mainly of $125.0 million related to the partial repayment of the 2022 Term Facility and $33.7 million of dividend payments, partially offset by $23.4 million of proceeds from employee stock plans.

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Free Cash Flow

We define free cash flow, a non-GAAP financial measure, as cash provided by operating activities less purchases of property, equipment and leasehold improvements ("PPE") 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 stockholders, 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.

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

			Three Months Ended
			November 30,
(dollar amounts in thousands)			2023			2022			Change
Net cash provided by operating activities			$	155,144		$	106,636		$	48,508
Less: purchases of property, equipment, leasehold improvements and capitalized internal-use software			(16,466)			(17,960)			1,494
Free cash flow			$	138,678		$	88,676		$	50,002

We generated free cash flow of $138.7 million during the three months ended November 30, 2023, an increase of $50.0 million compared with the same period a year ago. This change reflects a $48.5 million increase in cash provided by operating activities, mainly due to lower working capital requirements and higher net income. The increase in free cash flow also reflects a $1.5 million reduction in purchases of PPE and capitalization of internal-use software primarily driven by lower expenditures for computer equipment, partially offset by an increase in costs related to the development of capitalized internal-use software and investments in network-related equipment.

Off-Balance Sheet Arrangements

As of November 30, 2023 and August 31, 2023, we had no off-balance sheet financing other than letters of credit incurred in the ordinary course of business. Refer to Note 10, Debt and Note 11, Commitments and Contingencies in the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for more information on our letters of credit.

As of November 30, 2023 and August 31, 2023, we also had no 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. As of November 30, 2023, we maintained a series of foreign currency forward contracts to hedge a portion of our primary currency exposures, namely the British Pound Sterling, Indian Rupee, Euro and Philippine Peso. We entered into these contracts to hedge between 25% to 75% of the currency exposure related to our projected operating income in these primary currencies over their respective hedge periods. The hedge period maturities range from the second quarter of fiscal 2024 through the first quarter of fiscal 2025.

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The following table summarizes the gross notional value of our foreign currency forward contracts to purchase the respective local currency with U.S. dollars as of:

			November 30, 2023						August 31, 2023
(in thousands)			Local Currency Amount			Notional Contract Amount (USD)			Local Currency Amount			Notional Contract Amount (USD)
British Pound Sterling			£	44,100		$	55,208		£	45,000		$	56,098
Indian Rupee			Rs	4,162,086		49,800			Rs	3,363,150		40,300
Euro			€	42,600		46,730			€	39,000		42,646
Philippine Peso			₱	1,878,107		33,600			₱	1,888,541		33,600
Total						$	185,338					$	172,644

Refer to Part I, Item 3. Quantitative and Qualitative Disclosures About Market Risk of this Quarterly Report on Form 10-Q for more information on our foreign currency exposures.

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.

We describe our significant accounting policies in Note 2, Summary of Significant Accounting Policies in the Notes to the Consolidated Financial Statements included in Part II, Item 8. of our Annual Report on Form 10-K for the fiscal year ended August 31, 2023. These accounting policies were consistently applied in preparing our Consolidated Financial Statements for the three months ended November 30, 2023.

We disclosed our critical accounting estimates in Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations, Critical Accounting Estimates, of our Annual Report on Form 10-K for the fiscal year ended August 31, 2023. There were no significant changes in our critical accounting estimates during the three months ended November 30, 2023.

New Accounting Pronouncements

Refer to Note 2, Summary of Significant Accounting Policies, in the Notes to the Consolidated Financial Statements included in Part I, Item 1. of this Quarterly Report on Form 10-Q for a full description of recent accounting pronouncements, including their expected dates of adoption, which we include herein by reference.