filings.toolsItem 1. FINANCIAL STATEMENTS
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Item 1. FINANCIAL STATEMENTS
FactSet Research Systems Inc.
Consolidated Statements of Income – Unaudited
| Three Months Ended | Six Months Ended | |||||||||||||
| February 28, | February 29, | February 28, | February 29, | |||||||||||
| (in thousands, except per share data) | 2025 | 2024 | 2025 | 2024 | ||||||||||
| Revenues | $ | 570,660 | $ | 545,945 | $ | 1,139,327 | $ | 1,088,161 | ||||||
| Operating expenses | ||||||||||||||
| Cost of services | 269,604 | 255,142 | 528,383 | 506,763 | ||||||||||
| Selling, general and administrative | 115,564 | 108,861 | 234,117 | 210,416 | ||||||||||
| Total operating expenses | 385,168 | 364,003 | 762,500 | 717,179 | ||||||||||
| Operating income | 185,492 | 181,942 | 376,827 | 370,982 | ||||||||||
| Other income (expense), net | ||||||||||||||
| Interest income | 273 | 2,847 | 2,974 | 5,859 | ||||||||||
| Interest expense | (13,916) | (16,599) | (28,316) | (33,337) | ||||||||||
| Other income (expense), net | 471 | 455 | 574 | 337 | ||||||||||
| Total other income (expense), net | (13,172) | (13,297) | (24,768) | (27,141) | ||||||||||
| Income before income taxes | 172,320 | 168,645 | 352,059 | 343,841 | ||||||||||
| Provision for income taxes | 27,460 | 27,705 | 57,177 | 54,346 | ||||||||||
| Net income | $ | 144,860 | $ | 140,940 | $ | 294,882 | $ | 289,495 | ||||||
| Basic earnings per common share | $ | 3.81 | $ | 3.70 | $ | 7.76 | $ | 7.61 | ||||||
| Diluted earnings per common share | $ | 3.76 | $ | 3.65 | $ | 7.66 | $ | 7.49 | ||||||
| Basic weighted average common shares | 38,015 | 38,103 | 38,010 | 38,059 | ||||||||||
| Diluted weighted average common shares | 38,510 | 38,650 | 38,513 | 38,646 | ||||||||||
The accompanying notes are an integral part of these Consolidated Financial Statements.
FactSet Research Systems Inc.
Consolidated Statements of Comprehensive Income – Unaudited
| Three Months Ended | Six Months Ended | |||||||||||||
| February 28, | February 29, | February 28, | February 29, | |||||||||||
| (in thousands) | 2025 | 2024 | 2025 | 2024 | ||||||||||
| Net income | $ | 144,860 | $ | 140,940 | $ | 294,882 | $ | 289,495 | ||||||
| Other comprehensive income (loss), net of tax | ||||||||||||||
| Net unrealized gain (loss) on cash flow hedges(1) | (406) | (1,186) | (3,595) | (2,840) | ||||||||||
| Foreign currency translation adjustment gains (losses) | (11,926) | (2,956) | (29,545) | (1,048) | ||||||||||
| Other comprehensive income (loss) | (12,332) | (4,142) | (33,140) | (3,888) | ||||||||||
| Comprehensive income | $ | 132,528 | $ | 136,798 | $ | 261,742 | $ | 285,607 |
(1) Presented net of a tax benefit of $154 thousand and $419 thousand for the three months ended February 28, 2025 and February 29, 2024, respectively. Presented net of a tax benefit of $1,259 thousand and $1,007 thousand for the six months ended February 28, 2025 and February 29, 2024, respectively.
The accompanying notes are an integral part of these Consolidated Financial Statements.
FactSet Research Systems Inc.
Consolidated Balance Sheets – Unaudited
| (in thousands, except share data) | February 28, 2025 | August 31, 2024 | ||||||
| ASSETS | ||||||||
| Cash and cash equivalents | $ | 278,548 | $ | 422,979 | ||||
| Investments | 8,471 | 69,619 | ||||||
| Accounts receivable, net of reserves of $14,998 at February 28, 2025 and $14,581 at August 31, 2024 | 277,636 | 228,054 | ||||||
| Prepaid taxes | 75,931 | 55,103 | ||||||
| Prepaid expenses and other current assets | 67,055 | 60,093 | ||||||
| Total current assets | 707,641 | 835,848 | ||||||
| Property, equipment and leasehold improvements, net | 79,739 | 82,513 | ||||||
| Goodwill | 1,245,315 | 1,011,129 | ||||||
| Intangible assets, net | 1,935,488 | 1,844,141 | ||||||
| Deferred taxes | 53,546 | 61,337 | ||||||
| Lease right-of-use assets, net | 118,129 | 130,494 | ||||||
| Other assets | 101,584 | 89,578 | ||||||
| TOTAL ASSETS | $ | 4,241,442 | $ | 4,055,040 | ||||
| LIABILITIES | ||||||||
| Accounts payable and accrued expenses | $ | 131,103 | $ | 178,250 | ||||
| Current debt | — | 124,842 | ||||||
| Current lease liabilities | 32,560 | 31,073 | ||||||
| Accrued compensation | 70,846 | 93,279 | ||||||
| Deferred revenues | 177,325 | 159,761 | ||||||
| Current taxes payable | 30,483 | 40,391 | ||||||
| Dividends payable | 39,511 | 39,470 | ||||||
| Total current liabilities | 481,828 | 667,066 | ||||||
| Long-term debt | 1,472,162 | 1,241,131 | ||||||
| Deferred taxes | 14,772 | 8,452 | ||||||
| Deferred revenues, non-current | 446 | 1,344 | ||||||
| Taxes payable | 46,313 | 40,452 | ||||||
| Long-term lease liabilities | 158,419 | 177,521 | ||||||
| Other liabilities | 10,585 | 6,614 | ||||||
| TOTAL LIABILITIES | $ | 2,184,525 | $ | 2,142,580 | ||||
| Commitments and contingencies (see Note 12) | ||||||||
| STOCKHOLDERS’ EQUITY | ||||||||
| Preferred stock, $0.01 par value, 10,000,000 shares authorized, none issued | $ | — | $ | — | ||||
| Common stock, $0.01 par value; 150,000,000 shares authorized; 42,910,088 and 42,598,915 shares issued; 37,991,384 and 37,952,270 shares outstanding at February 28, 2025 and August 31, 2024, respectively | 429 | 426 | ||||||
| Additional paid-in capital | 1,569,319 | 1,478,839 | ||||||
| Treasury stock, at cost: 4,918,704 and 4,646,645 shares at February 28, 2025 and August 31, 2024, respectively | (1,504,381) | (1,375,696) | ||||||
| Retained earnings | 2,104,303 | 1,888,504 | ||||||
| Accumulated other comprehensive loss | (112,753) | (79,613) | ||||||
| TOTAL STOCKHOLDERS’ EQUITY | $ | 2,056,917 | $ | 1,912,460 | ||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 4,241,442 | $ | 4,055,040 |
The accompanying notes are an integral part of these Consolidated Financial Statements.
FactSet Research Systems Inc.
Consolidated Statements of Cash Flows – Unaudited
| Six Months Ended | ||||||||
| February 28, | February 29, | |||||||
| (in thousands) | 2025 | 2024 | ||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net income | $ | 294,882 | $ | 289,495 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities | ||||||||
| Depreciation and amortization | 74,127 | 58,650 | ||||||
| Amortization of lease right-of-use assets | 15,177 | 15,263 | ||||||
| Stock-based compensation expense | 30,139 | 30,962 | ||||||
| Deferred income taxes | 8,763 | 5,632 | ||||||
| Other, net | 3,268 | 7,034 | ||||||
| Changes in assets and liabilities, net of effects of acquisitions | ||||||||
| Accounts receivable | (46,225) | (39,468) | ||||||
| Prepaid expenses and other assets | (3,889) | (14,690) | ||||||
| Accounts payable and accrued expenses | (61,915) | 10,377 | ||||||
| Accrued compensation | (21,470) | (40,456) | ||||||
| Deferred revenues | 11,934 | 22,133 | ||||||
| Taxes payable, net of prepaid taxes | (24,810) | (26,150) | ||||||
| Lease liabilities, net | (19,654) | (19,840) | ||||||
| Net cash provided by operating activities | 260,327 | 298,942 | ||||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Purchases of property, equipment, leasehold improvements and capitalized internal-use software | (49,610) | (38,383) | ||||||
| Acquisition of businesses, net of cash and cash equivalents acquired | (342,461) | — | ||||||
| Purchases of investments | (4,208) | (44,936) | ||||||
| Proceeds from maturity or sale of investments | 58,155 | — | ||||||
| Net cash provided by (used in) investing activities | (338,124) | (83,319) | ||||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Proceeds from debt | 305,000 | — | ||||||
| Repayments of debt | (200,000) | (125,000) | ||||||
| Dividend payments | (78,817) | (74,141) | ||||||
| Proceeds from employee stock plans | 60,344 | 66,544 | ||||||
| Repurchases of common stock | (113,142) | (112,165) | ||||||
| Other financing activities | (18,927) | (14,465) | ||||||
| Net cash provided by (used in) financing activities | (45,542) | (259,227) | ||||||
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | (8,048) | (132) | ||||||
| Net increase (decrease) in cash, cash equivalents and restricted cash | (131,387) | (43,736) | ||||||
| Cash and cash equivalents at beginning of period | 422,979 | 425,444 | ||||||
| Cash, cash equivalents and restricted cash at end of period | $ | 291,592 | $ | 381,708 | ||||
| Reconciliation of total cash, cash equivalents and restricted cash: | ||||||||
| Cash and cash equivalents | $ | 278,548 | $ | 381,708 | ||||
| Restricted cash included in Prepaid expenses and other current assets | 6,522 | — | ||||||
| Restricted cash included in Other assets | 6,522 | — | ||||||
| Total cash, cash equivalents and restricted cash | $ | 291,592 | $ | 381,708 |
The accompanying notes are an integral part of these Consolidated Financial Statements.
FactSet Research Systems Inc.
Consolidated Statements of Changes in Stockholders’ Equity**- Unaudited**
For the Three Months Ended February 28, 2025
| (in thousands, except share data) | Common Stock | Additional Paid-in Capital | Treasury Stock | Retained Earnings | Accumulated Other Comprehensive Loss | Total Stockholders’ Equity | ||||||||||||||||||||
| Shares | Par Value | Shares | Amount | |||||||||||||||||||||||
| Balance as of November 30, 2024 | 42,830,024 | $ | 428 | $ | 1,531,278 | 4,780,213 | $ | (1,438,678) | $ | 1,998,954 | $ | (100,421) | $ | 1,991,561 | ||||||||||||
| Net income | 144,860 | 144,860 | ||||||||||||||||||||||||
| Other comprehensive income (loss) | (12,332) | (12,332) | ||||||||||||||||||||||||
| Common stock issued for employee stock plans | 73,939 | 1 | 21,494 | — | — | 21,495 | ||||||||||||||||||||
| Vesting of restricted stock | 6,125 | — | — | 1,777 | (843) | (843) | ||||||||||||||||||||
| Excise tax on share repurchases | (508) | (508) | ||||||||||||||||||||||||
| Repurchases of common stock | 136,714 | (64,352) | (64,352) | |||||||||||||||||||||||
| Stock-based compensation expense | 16,547 | 16,547 | ||||||||||||||||||||||||
| Dividends declared | (39,511) | (39,511) | ||||||||||||||||||||||||
| Balance as of February 28, 2025 | 42,910,088 | $ | 429 | $ | 1,569,319 | 4,918,704 | $ | (1,504,381) | $ | 2,104,303 | $ | (112,753) | $ | 2,056,917 | ||||||||||||
| For the Six Months Ended February 28, 2025 | ||||||||||||||||||||||||||
| (in thousands, except share data) | Common Stock | Additional Paid-in Capital | Treasury Stock | Retained Earnings | Accumulated Other Comprehensive Loss | Total Stockholders’ Equity | ||||||||||||||||||||
| Shares | Par Value | Shares | Amount | |||||||||||||||||||||||
| Balance as of August 31, 2024 | 42,598,915 | $ | 426 | $ | 1,478,839 | 4,646,645 | $ | (1,375,696) | $ | 1,888,504 | $ | (79,613) | $ | 1,912,460 | ||||||||||||
| Net income | 294,882 | 294,882 | ||||||||||||||||||||||||
| Other comprehensive income (loss) | (33,140) | (33,140) | ||||||||||||||||||||||||
| Common stock issued for employee stock plans | 235,036 | 2 | 60,342 | 370 | (170) | 60,174 | ||||||||||||||||||||
| Vesting of restricted stock | 76,137 | 1 | (1) | 30,500 | (14,058) | (14,058) | ||||||||||||||||||||
| Excise tax on share repurchases | (1,315) | (1,315) | ||||||||||||||||||||||||
| Repurchases of common stock | 241,189 | (113,142) | (113,142) | |||||||||||||||||||||||
| Stock-based compensation expense | 30,139 | 30,139 | ||||||||||||||||||||||||
| Dividends declared | (79,083) | (79,083) | ||||||||||||||||||||||||
| Balance as of February 28, 2025 | 42,910,088 | $ | 429 | $ | 1,569,319 | 4,918,704 | $ | (1,504,381) | $ | 2,104,303 | $ | (112,753) | $ | 2,056,917 |
FactSet Research Systems Inc.
Consolidated Statements of Changes in Stockholders’ Equity**- Unaudited**
For the Three Months Ended February 29, 2024
| (in thousands, except share data) | Common Stock | Additional Paid-in Capital | Treasury Stock | Retained Earnings | Accumulated Other Comprehensive Loss | Total Stockholders’ Equity | ||||||||||||||||||||
| Shares | Par Value | Shares | Amount | |||||||||||||||||||||||
| Balance as of November 30, 2023 | 42,297,330 | $ | 423 | $ | 1,366,343 | 4,237,590 | $ | (1,195,491) | $ | 1,616,352 | $ | (86,887) | $ | 1,700,740 | ||||||||||||
| Net income | 140,940 | 140,940 | ||||||||||||||||||||||||
| Other comprehensive income (loss) | (4,142) | (4,142) | ||||||||||||||||||||||||
| Common stock issued for employee stock plans | 172,244 | 2 | 38,138 | 197 | (88) | 38,052 | ||||||||||||||||||||
| Vesting of restricted stock | 6,152 | — | — | 1,802 | (873) | (873) | ||||||||||||||||||||
| Repurchases of common stock | 113,050 | (52,255) | (52,255) | |||||||||||||||||||||||
| Stock-based compensation expense | 16,652 | 16,652 | ||||||||||||||||||||||||
| Dividends declared | (37,360) | (37,360) | ||||||||||||||||||||||||
| Balance as of February 29, 2024 | 42,475,726 | $ | 425 | $ | 1,421,133 | 4,352,639 | $ | (1,248,707) | $ | 1,719,932 | $ | (91,029) | $ | 1,801,754 | ||||||||||||
| For the Six Months Ended February 29, 2024 | ||||||||||||||||||||||||||
| (in thousands, except share data) | Common Stock | Additional Paid-in Capital | Treasury Stock | Retained Earnings | Accumulated Other Comprehensive Loss | Total Stockholders’ Equity | ||||||||||||||||||||
| Shares | Par Value | Shares | Amount | |||||||||||||||||||||||
| Balance as of August 31, 2023 | 42,096,628 | $ | 421 | $ | 1,323,631 | 4,071,256 | $ | (1,122,077) | $ | 1,505,096 | $ | (87,141) | $ | 1,619,930 | ||||||||||||
| Net income | 289,495 | 289,495 | ||||||||||||||||||||||||
| Other comprehensive income (loss) | (3,888) | (3,888) | ||||||||||||||||||||||||
| Common stock issued for employee stock plans | 297,348 | 3 | 66,541 | 343 | (153) | 66,391 | ||||||||||||||||||||
| Vesting of restricted stock | 81,750 | 1 | (1) | 32,040 | (14,312) | (14,312) | ||||||||||||||||||||
| Repurchases of common stock | 249,000 | (112,165) | (112,165) | |||||||||||||||||||||||
| Stock-based compensation expense | 30,962 | 30,962 | ||||||||||||||||||||||||
| Dividends declared | (74,659) | (74,659) | ||||||||||||||||||||||||
| Balance as of February 29, 2024 | 42,475,726 | $ | 425 | $ | 1,421,133 | 4,352,639 | $ | (1,248,707) | $ | 1,719,932 | $ | (91,029) | $ | 1,801,754 | ||||||||||||
The accompanying notes are an integral part of these Consolidated Financial Statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FactSet Research Systems Inc.
February 28, 2025
(Unaudited)
1. DESCRIPTION OF BUSINESS
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 deliver financial intelligence to investment professionals worldwide.
Our platform delivers expansive data, sophisticated analytics and flexible technology used by global financial professionals to power their critical investment workflows. As of February 28, 2025, we had more than 8,600 clients comprised of over 219,000 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 data and technology platform. Our products and services include workstations, portfolio analytics and enterprise data solutions. We also offer managed services that operate as an extension of our clients' internal teams to support data, performance, risk and reporting workflows.
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 and analyze, monitor and manage their portfolios. Our solutions span the investment lifecycle 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"). The CUSIP Global Services ("CGS") business supports security master files relied on by the investment industry for critical front, middle and back-office functions. All of our platforms 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. Within each segment, we offer data, products and analytical applications by firm type: Institutional Buyside, Dealmakers, Wealth, and Partnerships and CGS. Refer to Note 16, Segment Information for further discussion on our segments.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
We conduct business globally and manage our business on a geographic basis. The accompanying unaudited Consolidated Financial Statements and Notes to the Consolidated Financial Statements included in this Quarterly Report on Form 10-Q are prepared in accordance with generally accepted accounting principles in the United States ("GAAP") for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all information and footnotes required by GAAP for annual financial statements. As such, the information in this Quarterly Report on Form 10-Q should be read in conjunction with the audited Consolidated Financial Statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended August 31, 2024. The accompanying unaudited Consolidated Financial Statements include our accounts and those of our wholly-owned subsidiaries; all intercompany activity and balances have been eliminated.
In the opinion of management, the accompanying unaudited Consolidated Financial Statements include all normal recurring adjustments, transactions or events discretely impacting the interim periods considered necessary to present fairly our results of operations, financial position, cash flows and equity.
Reclassifications
Asset impairments were included within Selling, general and administrative ("SG&A") in the Consolidated Statements of Income during the three and six months ended February 28, 2025, and were included within Other, net in the Consolidated Statements of Cash Flows for the six months ended February 28, 2025. We conformed the comparative prior period figures to the current period presentation.
During the six months ended February 28, 2025, Prepaid expenses and other assets, previously included within Other, net, were presented as a separate component of Cash Flows from Operating Activities in the Consolidated Statements of Cash Flows. We conformed the comparative figures for the six months ended February 29, 2024, to the current period presentation.
Use of Estimates
The preparation of our Consolidated Financial Statements and related disclosures in conformity with GAAP required management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates may include income taxes, stock-based compensation, goodwill and intangible assets, business combinations, property, equipment and leasehold improvements ("PPE"), contingencies and impairment assessments. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of our assets and liabilities. Actual results could differ materially from those estimates.
Concentrations of Credit Risk
Credit risk arises from the potential nonperformance by counterparties to fulfill their financial obligations. Our financial instruments that potentially subject us to concentrations of credit risk consist primarily of our cash, cash equivalents, restricted cash, accounts receivable, investments in mutual funds and derivative instruments. The maximum credit exposure of our cash, cash equivalents, restricted cash, accounts receivable and investments in mutual funds is their carrying values as of the balance sheet date. The maximum credit exposure related to our derivative instruments is based upon their respective gross fair values as of the balance sheet date.
Cash, Cash Equivalents, Restricted Cash and Investments
We are exposed to credit risk on our cash, cash equivalents, restricted cash and investments in mutual funds in the event of default by the financial and governmental institutions with which we transact. We invest in a manner that aligns with our restrictive cash investment practices, preserves capital and provides liquidity, while minimizing our exposure to credit risk. We limit our exposure to credit loss by investing with multiple financial and governmental institutions that we believe are high-quality and credit-worthy. We have not experienced any credit losses relating to our cash, cash equivalents, restricted cash and investments in mutual funds.
Accounts Receivable
Our accounts receivable credit risk is dependent upon the financial stability of our individual clients. As of February 28, 2025 and August 31, 2024, our accounts receivable reserve was $15.0 million and $14.6 million, respectively. We do not require collateral from our clients; however, no single client represented more than 3.5% of our total revenues for the six months ended February 28, 2025 and February 29, 2024. Due to our large and geographically dispersed client base, our concentration of credit risk related to our accounts receivable is generally limited.
Derivative Instruments
Our use of derivative instruments exposes us to credit risk to the extent counterparties may be unable to meet the terms of their agreements. To mitigate credit risk, we limit counterparties to financial institutions we believe are credit-worthy and use several institutions to reduce concentration risk. We do not expect any losses as a result of default by our counterparties.
Concentrations of Data Providers
We integrate data from various third-party sources into our hosted proprietary data and analytics platform. As certain data sources have a limited number of suppliers, we make every effort to assure that, where reasonable, alternative sources are available. We are not dependent on any individual third-party data supplier to meet the needs of our clients, with only two data suppliers each representing more than 10% of our total data costs for the six months ended February 28, 2025 and February 29, 2024.
Concentrations of Cloud Providers
Our clients rely on us for the delivery of time-sensitive, up-to-date data and applications. Our business is dependent on our ability to process substantial volumes of data and transactions rapidly and efficiently. We currently use multiple providers of cloud services; however, one supplier provided the majority of our cloud computing support for the six months ended February 28, 2025 and February 29, 2024. We maintain back-up facilities and other redundancies at our data centers, take security measures and have emergency procedures to minimize the risk that an event will disrupt our operations.
Recently Adopted Accounting Pronouncements
We did not adopt any new standards or updates issued by the Financial Accounting Standards Board ("FASB") during the six months ended February 28, 2025 that had a material impact on our Consolidated Financial Statements.
Accounting Pronouncements Not Yet Adopted
Income Statement - Disaggregation of Income Statement Expenses
In November 2024, the FASB issued Accounting Standards Update ("ASU") 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40) - Disaggregation of Income Statement Expenses. This ASU requires disaggregation of certain income statement expense captions into specified categories to be disclosed within the footnotes to the financial statements. This ASU does not change the expense captions on the income statement. The amendments in this ASU are to be applied prospectively, although retrospective application is permitted, and are effective for our annual financial statements starting in fiscal 2028 and interim periods starting in fiscal 2029. Early adoption is permitted. This ASU is not expected to have a material impact on our Consolidated Financial Statements. We are currently assessing the impact of the new requirements on our disclosures.
U.S. Securities and Exchange Commission ("SEC") Disclosures - The Enhancement and Standardization of Climate-Related Disclosures for Investors
In March 2024, the SEC adopted a final rule under SEC Release Nos. 33-11275 and 34-99678, The Enhancement and Standardization of Climate-Related Disclosures for Investors, which would require disclosure of certain climate-related information in various filings with the SEC. In April 2024, the SEC stayed implementation of the final rule pending completion of judicial review. In March 2025, the SEC stated that it has ended its defense of the rule. We are currently monitoring the legal challenges and assessing the potential impact of the rule on our disclosures.
Codification Improvements - Amendments to Remove References to the Concepts Statements
In March 2024, the FASB issued ASU 2024-02, Codification Improvements - Amendments to Remove References to the Concepts Statements. This ASU amends the FASB Accounting Standards Codification ("the Codification") to remove references to various FASB Concepts Statements and impacts a variety of topics in the Codification. The amendments apply to all reporting entities within the scope of the affected accounting guidance, but in most instances the references removed are extraneous and not required to understand or apply the guidance. The amendments in this ASU are to be applied prospectively, although retrospective application is permitted, and are effective for our interim and annual financial statements starting in fiscal 2026. Early adoption is permitted. This ASU is not expected to have a material impact on our Consolidated Financial Statements or related disclosures.
Income Taxes - Improvements to Income Tax Disclosures
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740) - Improvements to Income Tax Disclosures. This ASU enhances annual income tax disclosures primarily related to our effective tax rate reconciliation and income taxes paid. The amendments in this ASU are to be applied prospectively, although retrospective application is permitted, and are effective for our annual financial statements starting in fiscal 2026. Early adoption is permitted. This ASU is not expected to have a material impact on our Consolidated Financial Statements. We are currently assessing the impact of the new requirements on our disclosures.
Segment Reporting - Improvements to Reportable Segment Disclosures
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280) - Improvements to Reportable Segment Disclosures. This ASU enhances segment disclosures primarily related to significant segment expenses for both interim and annual periods. The amendments in this ASU are to be applied retrospectively and are effective for our annual financial statements starting in fiscal 2025 and interim periods starting in fiscal 2026. Early adoption is permitted. This ASU is not expected to have a material impact on our Consolidated Financial Statements. We are currently assessing the impact of the new requirements on our disclosures.
Disclosure Improvements - Codification Amendment in Response to the SEC's Disclosure Update and Simplification Initiative
In October 2023, the FASB issued ASU 2023-06, Disclosure Improvements - Codification Amendment in Response to the SEC’s Disclosure Update and Simplification Initiative. The ASU incorporates several disclosure and presentation requirements currently residing in the SEC Regulations S-X and S-K. The amendments will be applied prospectively and are effective when the SEC removes the related requirements from Regulations S-X or S-K. Any amendments the SEC does not remove by June 30, 2027 will not be effective. As we are currently subject to these SEC requirements, this ASU is not expected to have a material impact on our Consolidated Financial Statements or related disclosures.
No other new accounting pronouncements issued or effective during the six months ended February 28, 2025 have had, or are expected to have, a material impact on our Consolidated Financial Statements.
3. REVENUE RECOGNITION
We derive most of our revenues by delivering client access to our multi-asset class solutions powered by our platform of connected data and technology that is available over the contractual term (referred to as the "Hosted Platform"). The Hosted Platform is a subscription-based service that provides client access to various combinations of products and services including workstations, portfolio analytics and enterprise solutions. We also derive revenues through the CGS platform, a subscription-based service that provides access to a database of universally recognized security identifiers and related descriptive data for issuers and their financial instruments (referred to as the "Identifier Platform").
The majority of each of our contracts with clients, whether for Hosted Platform or Identifier Platform services, represents a single performance obligation covering a series of distinct products and services that are substantially the same and that have the same pattern of transfer to the client. The primary nature of the promise to the client is to provide daily access to each of these data and analytics platforms over the associated contractual term. These platforms provide integrated financial information, analytical applications and industry-leading service for the investment community. Based on the nature of the products and services offered by these platforms, we apply an output time-based measure of progress as the client is simultaneously receiving and consuming the benefits of the respective platform. We recognize revenue for the majority of these platforms in accordance with the 'as invoiced' practical expedient, because the consideration that we have the right to invoice corresponds directly with the value of our performance to date. There are no significant judgments that would impact the timing of revenue recognition.
Due to our election of the practical expedient, we do not consider payment terms as a financing component within a client contract when, at contract inception, the period between the transfer of the promised services to the client and the payment timing for those services will be one year or less.
The majority of client contracts have a duration of one year, or the amount we are entitled to receive corresponds directly with the value of our performance obligations completed to date. Therefore, we do not disclose the value of the remaining unsatisfied performance obligations.
Disaggregated Revenues
We disaggregate revenues from our client contracts by segment based on the geographic region where the sale originated. Our business segmentation by geography is aligned with the operational and economic characteristics of our business. Refer to Note 16, Segment Information, for further information.
The following table presents revenues disaggregated by segment:
| Three Months Ended | Six Months Ended | |||||||||||||
| February 28, | February 29, | February 28, | February 29, | |||||||||||
| (in thousands) | 2025 | 2024 | 2025 | 2024 | ||||||||||
| Americas | $ | 369,661 | $ | 352,618 | $ | 736,903 | $ | 700,985 | ||||||
| EMEA | 143,387 | 139,176 | 287,112 | 278,737 | ||||||||||
| Asia Pacific | 57,612 | 54,151 | 115,312 | 108,439 | ||||||||||
| Total Revenues | $ | 570,660 | $ | 545,945 | $ | 1,139,327 | $ | 1,088,161 |
4. FAIR VALUE MEASURES
Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability (i.e., the "exit price") in an orderly transaction between market participants at the measurement date. In determining fair value, the use of various valuation methodologies, including market, income and cost approaches are permissible. When pricing an asset or liability, the inputs to these valuation methodologies consider market comparable information, taking into account the principal or most advantageous market in which we would transact.
Fair Value Hierarchy
The accounting guidance for fair value measurements establishes a three-level fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The hierarchy ranks the reliability of the inputs, based upon the lowest level of input that is significant to the fair value measurement, used to determine fair value. Our assessment of the significance of a particular input to the fair value measurement requires judgment and may affect its placement within the fair value hierarchy. We have categorized our assets and liabilities within the fair value hierarchy as follows:
Level 1 – applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.
Level 2 – applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.
Level 3 – applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.
The assumptions used in determining fair value represent our best estimates, but these estimates involve inherent uncertainties and the application of our judgment. As a result, if factors change, our fair value estimates could be materially different in the future and may adversely affect our business and financial results.
(a) Assets and Liabilities Measured at Fair Value on a Recurring Basis
The following tables show, by level within the fair value hierarchy, our assets and liabilities that are measured at fair value on a recurring basis as of February 28, 2025 and August 31, 2024. We did not have any transfers between levels of fair value measurements during the six months ended February 28, 2025 and the fiscal year ended August 31, 2024.
| Fair Value Measurements as of February 28, 2025 | ||||||||||||||
| (in thousands) | Level 1 | Level 2 | Level 3 | Total | ||||||||||
| Assets | ||||||||||||||
| Money market funds(1) | $ | 49,022 | $ | — | $ | — | $ | 49,022 | ||||||
| Mutual funds(2) | — | 8,471 | — | 8,471 | ||||||||||
| Derivative instruments(3) | — | 4 | — | 4 | ||||||||||
| Total assets measured at fair value | $ | 49,022 | $ | 8,475 | $ | — | $ | 57,497 | ||||||
| Liabilities | ||||||||||||||
| Derivative instruments(3) | $ | — | $ | 2,489 | $ | — | $ | 2,489 | ||||||
| Contingent liabilities(4) | — | — | 26,158 | 26,158 | ||||||||||
| Total liabilities measured at fair value | $ | — | $ | 2,489 | $ | 26,158 | $ | 28,647 |
| Fair Value Measurements as of August 31, 2024 | ||||||||||||||
| (in thousands) | Level 1 | Level 2 | Level 3 | Total | ||||||||||
| Assets | ||||||||||||||
| Money market funds(1) | $ | 129,635 | $ | — | $ | — | $ | 129,635 | ||||||
| Mutual funds(2) | — | 69,619 | — | 69,619 | ||||||||||
| Derivative instruments(3) | — | 2,619 | — | 2,619 | ||||||||||
| Total assets measured at fair value | $ | 129,635 | $ | 72,238 | $ | — | $ | 201,873 | ||||||
| Liabilities | ||||||||||||||
| Derivative instruments(3) | $ | — | $ | 250 | $ | — | $ | 250 | ||||||
| Contingent liability(4) | — | — | 4,193 | 4,193 | ||||||||||
| Total liabilities measured at fair value | $ | — | $ | 250 | $ | 4,193 | $ | 4,443 |
(1) Our money market funds are readily convertible into cash. The net asset value of each fund on the last day of the reporting period is used to determine its fair value. Our money market funds are included in Cash and cash equivalents within the Consolidated Balance Sheets.
(2) Our mutual funds' fair value is based on the fair value of the underlying investments held by the mutual funds, allocated to each share of the mutual fund using a net asset value approach. The fair value of each underlying investment is based on observable inputs. Our mutual funds are included in Investments within the Consolidated Balance Sheets.
(3) Our derivative instruments as of February 28, 2025 included our foreign exchange forward contracts and, as of August 31, 2024, included our foreign exchange forward contracts and our 2024 Swap Agreement. We utilized the income approach to measure fair value for our foreign exchange forward contracts. The income approach uses pricing models that rely on market observable inputs such as spot, forward and interest rates, as well as credit default swap spreads. To estimate fair value for our interest rate swap agreement, we utilized a present value of future cash flows, leveraging a model-derived valuation that uses observable inputs such as interest rate yield curves. Refer to Note 5, Derivative Instruments for the definition of the 2024 Swap Agreement and for more information on our derivative instruments and their classification within the Consolidated Balance Sheets.
(4) Our contingent liabilities resulted from the acquisitions of Liquid Holdings LLC ("LiquidityBook") and Platform Group Limited ("Irwin") during fiscal 2025 and the acquisition of another business during fiscal 2023. These liabilities reflect the present value of potential future payments that are contingent upon the achievement of certain specified milestones. The acquisition date fair value of the contingent liabilities for fiscal 2025 and 2023 was $21.6 million and $7.9 million, respectively, and was valued using a scenario-based method. This method incorporates unobservable inputs and assumptions made by management, including the probability of achieving specified milestones, expected time until payment and the discount rate. The fair value of the contingent liabilities is reduced by milestone achievement and remeasured each reporting period until the contingencies are resolved, with any changes in fair value recorded in SG&A within the Consolidated Statements of Income. Aside from milestone achievement, the remaining changes in the fair value of the contingent liabilities from their respective acquisition dates through February 28, 2025 were driven by the passage of time, with no
changes made to key assumptions used in our fair value estimates. Refer to Note 6, Acquisitions for more information on the LiquidityBook and Irwin transactions and their respective contingent liabilities.
(b) Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis
Assets that are measured at fair value on a non-recurring basis primarily include our PPE, lease right-of-use ("ROU") assets, goodwill and intangible assets. These assets are assessed for impairment whenever events or circumstances indicate their carrying value may not be fully recoverable, and at least annually for goodwill. The fair values of these non-financial assets are determined based on valuation techniques using the best information available, and may include quoted market prices, market comparable information and discounted cash flow projections.
(c) Assets and Liabilities Measured at Fair Value for Disclosure Purposes Only
We elected not to carry our debt, which includes our Current debt and Long-term debt, at fair value on the Consolidated Balance Sheets. The carrying value of our debt is net of related unamortized discounts and debt issuance costs.
Our debt is comprised of our Senior Notes and 2022 Credit Facilities. Our Senior Notes are publicly traded; therefore, the fair value of our Senior Notes is estimated based on quoted prices in active markets as of the reporting date, which are considered Level 1 inputs. The fair value of our 2022 Credit Facilities is estimated based on quoted market prices for similar instruments, adjusted for unobservable inputs to ensure comparability to our investment rating, maturity terms and principal outstanding, which are considered Level 3 inputs. Refer to Note 11, Debt for definitions of, and more information on, our Senior Notes and 2022 Credit Facilities.
The following table summarizes information on our outstanding debt as of February 28, 2025 and August 31, 2024:
| February 28, 2025 | August 31, 2024 | ||||||||||||||||
| (in thousands) | Fair Value Hierarchy | Principal Amount | Estimated Fair Value | Principal Amount | Estimated Fair Value | ||||||||||||
| 2027 Notes | Level 1 | $ | 500,000 | $ | 483,965 | $ | 500,000 | $ | 479,760 | ||||||||
| 2032 Notes | Level 1 | 500,000 | 449,430 | 500,000 | 449,380 | ||||||||||||
| 2022 Revolving Facility | Level 3 | 480,000 | 480,644 | 250,000 | 246,578 | ||||||||||||
| 2022 Term Facility | Level 3 | — | — | 125,000 | 125,242 | ||||||||||||
| Total principal amount | $ | 1,480,000 | $ | 1,414,039 | $ | 1,375,000 | $ | 1,300,960 | |||||||||
| Total unamortized discounts and debt issuance costs | (7,838) | (9,027) | |||||||||||||||
| Total net carrying value of debt | $ | 1,472,162 | $ | 1,365,973 | |||||||||||||
5. DERIVATIVE INSTRUMENTS
Cash Flow Hedges
In designing our hedging approach, we consider several factors, including offsetting exposures, the significance of exposures, the forecasting of risk and the potential effectiveness of the hedge to reduce the volatility of our earnings and cash flows. Factors considered in the decision to hedge an underlying market exposure include the materiality of the risk, the volatility of the market, the duration of the hedge, the degree to which the underlying exposure is committed, and the availability, effectiveness and cost of derivative instruments.
We utilize derivative instruments to manage risk and not for speculative or trading purposes. We limit counterparties to financial institutions we believe are credit-worthy. Refer to Note 2, Summary of Significant Accounting Policies - Concentrations of Credit Risk, for further discussion on counterparty credit risk.
We leverage foreign currency forward contracts and interest rate swap agreements to mitigate certain operational exposures from the impact of changes in foreign currency exchange rates and to manage our floating interest rate exposure, respectively. Our foreign currency forward contracts and interest rate swap agreements are designated as cash flow hedges at inception.
For highly effective cash flows hedges, the change in the derivative's fair value is recorded in Accumulated other comprehensive loss ("AOCL"), net of tax, in the Consolidated Balance Sheets. Our cash flow hedges were highly effective with no amount of ineffectiveness recorded in the Consolidated Statements of Income during the three and six months ended February 28, 2025 and February 29, 2024.
Realized gains or losses from the settlement of our foreign currency forward contracts and interest rate swap agreements are subsequently reclassified into SG&A and Interest expense, respectively, in the Consolidated Statements of Income. There was no discontinuance of our cash flow hedges during the six months ended February 28, 2025 and February 29, 2024. As such, no corresponding gains or losses were reclassified into earnings prior to settlement during those respective periods.
Foreign Currency Forward Contracts
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. During the six months ended February 28, 2025 and February 29, 2024, we maintained a series of foreign currency forward contracts to hedge a portion of our projected operating expenses in our primary currency exposures, namely the British Pound Sterling, Euro, Indian Rupee and Philippine Peso. As of February 28, 2025, the hedge maturity periods of our outstanding foreign currency forward contracts range from the third quarter of fiscal 2025 through the second quarter of fiscal 2026.
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 February 28, 2025 and August 31, 2024:
| February 28, 2025 | August 31, 2024 | |||||||||||||
| (in thousands) | Local Currency Amount | Notional Contract Amount (USD) | Local Currency Amount | Notional Contract Amount (USD) | ||||||||||
| British Pound Sterling | £ | 43,800 | $ | 55,323 | £ | 41,200 | $ | 52,372 | ||||||
| Indian Rupee | Rs | 4,325,590 | 50,100 | Rs | 4,651,351 | 55,200 | ||||||||
| Euro | € | 33,600 | 36,398 | € | 43,800 | 48,183 | ||||||||
| Philippine Peso | ₱ | 1,957,088 | 33,600 | ₱ | 1,850,674 | 32,400 | ||||||||
| Total | $ | 175,421 | $ | 188,155 |
Refer to Part I, Item 3. Quantitative and Qualitative Disclosures About Market Risk of this Quarterly Report on Form 10-Q for further discussion on our exposure to foreign exchange rate fluctuations.
Interest Rate Swap Agreements
2024 Swap Agreement
On March 1, 2024, we entered into an interest rate swap agreement ("2024 Swap Agreement") with a notional amount of $200.0 million to hedge a portion of our outstanding floating Secured Overnight Financing Rate ("SOFR") debt with a fixed interest rate of 5.145%. The notional amount of the 2024 Swap Agreement declined by $50.0 million on a quarterly basis beginning May 31, 2024. The 2024 Swap Agreement matured on February 28, 2025.
2022 Swap Agreement
On March 1, 2022, we entered into an interest rate swap agreement ("2022 Swap Agreement") with a notional amount of $800.0 million to hedge a portion of our outstanding floating SOFR debt with a fixed interest rate of 1.162%. The notional amount of the 2022 Swap Agreement declined by $100.0 million on a quarterly basis beginning May 31, 2022. The 2022 Swap Agreement matured on February 28, 2024.
Refer to Note 11, Debt, for further discussion of our outstanding floating rate debt and refer to Part I, Item 3. Quantitative and Qualitative Disclosures About Market Risk, in this Quarterly Report on Form 10-Q for further discussion of our exposure to interest rate risk on our outstanding floating rate debt.
Gross Notional Value and Fair Value of Derivative Instruments
The following is a summary of the gross notional values of our derivative instruments:
| (in thousands) | Gross Notional Value | |||||||
| February 28, 2025 | August 31, 2024 | |||||||
| Foreign currency forward contracts | $ | 175,421 | $ | 188,155 | ||||
| Interest rate swap agreement | — | 100,000 | ||||||
| Total cash flow hedges | $ | 175,421 | $ | 288,155 |
The following is a summary of the fair values of our derivative instruments:
| Fair Value of Derivative Instruments | |||||||||||||||||||||||
| (in thousands) | Derivative Assets | Derivative Liabilities | |||||||||||||||||||||
| Derivatives designated as hedging instruments | Balance Sheet Classification | February 28, 2025 | August 31, 2024 | Balance Sheet Classification | February 28, 2025 | August 31, 2024 | |||||||||||||||||
| Foreign currency forward contracts | Prepaid expenses and other current assets | $ | 4 | $ | 2,619 | Accounts payable and accrued expenses | $ | 2,489 | $ | 127 | |||||||||||||
| Interest rate swap agreement | Prepaid expenses and other current assets | — | — | Accounts payable and accrued expenses | — | 123 | |||||||||||||||||
| Total cash flow hedges | $ | 4 | $ | 2,619 | $ | 2,489 | $ | 250 |
Derivative Recognition
The following table provides the pre-tax effect of cash flow hedge accounting on our AOCL for the three months ended February 28, 2025 and February 29, 2024:
| Gain (Loss) Recognized in AOCL on Derivatives | Gain (Loss) Reclassified from AOCL into Income | ||||||||||||||||
| (in thousands) | February 28, | February 29, | Location of Gain (Loss) Reclassified from AOCL into Income | February 28, | February 29, | ||||||||||||
| Derivatives in Cash Flow Hedging Relationships | 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Foreign currency forward contracts | $ | (2,233) | $ | (623) | SG&A | $ | (1,590) | $ | (47) | ||||||||
| Interest rate swap agreement | (9) | 17 | Interest expense | (92) | 1,046 | ||||||||||||
| Total cash flow hedges | $ | (2,242) | $ | (606) | $ | (1,682) | $ | 999 |
| The following table provides the pre-tax effect of cash flow hedge accounting on our AOCL for the six months ended February 28, 2025 and February 29, 2024: | |||||||||||||||||
| Gain (Loss) Recognized in AOCL on Derivatives | Location of Gain (Loss) Reclassified from AOCL into Income | Gain (Loss) Reclassified from AOCL into Income | |||||||||||||||
| (in thousands) | February 28, | February 29, | February 28, | February 29, | |||||||||||||
| Derivatives in Cash Flow Hedging Relationships | 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Foreign currency forward contracts | $ | (6,368) | $ | (406) | SG&A | $ | (1,391) | $ | 318 | ||||||||
| Interest rate swap agreement | (23) | 27 | Interest expense | (146) | 3,150 | ||||||||||||
| Total cash flow hedges | $ | (6,391) | $ | (379) | $ | (1,537) | $ | 3,468 | |||||||||
As of February 28, 2025, we estimate that net pre-tax derivative losses of $2.5 million included in AOCL will be reclassified into earnings within the next 12 months.
Offsetting of Derivative Instruments
We enter into master netting arrangements designed to permit net settlement of derivative transactions among the respective counterparties, settled on the same date and in the same currency. As of February 28, 2025 and August 31, 2024, there were no material amounts recorded net in the Consolidated Balance Sheets.
6. ACQUISITIONS
Liquid Holdings, LLC ("LiquidityBook")
On February 7, 2025, we completed the acquisition of LiquidityBook for a purchase price of $243.8 million, net of cash acquired, and inclusive of preliminary working capital adjustments. The purchase price includes contingent consideration of $11.9 million which reflects the acquisition date fair value of potential future payments that are contingent upon the achievement of certain specified milestones. Refer to Note 4, Fair Value Measures, for information regarding the contingent consideration.
LiquidityBook provides cloud-native trading solutions to hedge fund, asset and wealth management, outsourced trading, and sell-side middle office clients. LiquidityBook operates a proprietary FIX network that enables streamlined connectivity to over 200 brokers and order routing to more than 1,600 destinations across 80 markets globally. This acquisition adds technology-forward order management and investment book of record capabilities and enhances FactSet’s ability to serve the integrated workflow needs of clients across the portfolio life cycle.
The LiquidityBook purchase price was in excess of the fair value of net assets acquired, resulting in the recognition of goodwill. The preliminary purchase price allocation is subject to change pending a final valuation of the assets and liabilities acquired and the finalization of working capital adjustments. We expect to finalize the allocation of the purchase price for LiquidityBook as soon as possible, but in any event, no later than one year from the acquisition date.
The acquisition date fair values of major classes of assets acquired and liabilities assumed are as follows:
| Acquisition Date Fair Value | Acquisition Date Useful Life | Amortization Method | |||||||||
| (in thousands) | (in years) | ||||||||||
| Current assets | $ | 3,629 | |||||||||
| Amortizable intangible assets | |||||||||||
| Software technology | 68,000 | 12 years | Straight-line | ||||||||
| Client relationships | 9,200 | 17 years | Straight-line | ||||||||
| Trade names | 3,500 | 10 years | Straight-line | ||||||||
| Goodwill | 162,376 | ||||||||||
| Other assets | 551 | ||||||||||
| Current liabilities | |||||||||||
| Deferred revenues | (803) | ||||||||||
| Other current liabilities | (2,414) | ||||||||||
| Other liabilities | (207) | ||||||||||
| Total purchase price | $ | 243,832 |
Goodwill totaling $162.4 million represents the excess of the LiquidityBook purchase price over the fair value of net assets acquired and considers future economic benefits that we expect to achieve as a result of the acquisition. The goodwill is included in the Americas segment, subject to final allocation, and is deductible for income tax purposes.
The results of LiquidityBook's operations have been included in our Consolidated Financial Statements, within the Americas, EMEA and Asia Pacific segments, beginning with the closing of the acquisition on February 7, 2025. Pro forma information has not been presented because the effect of the LiquidityBook acquisition is not material to our Consolidated Financial Statements.
Platform Group Limited ("Irwin")
On November 5, 2024, we completed the acquisition of Irwin for a purchase price of $120.2 million, net of cash acquired, and inclusive of preliminary working capital adjustments. The purchase price includes contingent consideration of $9.6 million which reflects the acquisition date fair value of potential future payments that are contingent upon the achievement of certain specified milestones. Refer to Note 4, Fair Value Measures, for information regarding the contingent consideration.
Irwin is a leading investor relations and capital markets platform for public companies and their advisors. This acquisition builds on a recent successful partnership between FactSet and Irwin, and expands our ability to address the holistic workflow needs of investor relations professionals with an integrated, modern solution.
The Irwin purchase price was in excess of the fair value of net assets acquired, resulting in the recognition of goodwill. The preliminary purchase price allocation is subject to change pending a final valuation of the assets and liabilities acquired and the finalization of working capital adjustments. We expect to finalize the allocation of the purchase price for Irwin as soon as possible, but in any event, no later than one year from the acquisition date.
The acquisition date fair values of major classes of assets acquired and liabilities assumed are as follows:
| Acquisition Date Fair Value | Acquisition Date Useful Life | Amortization Method | |||||||||
| (in thousands) | (in years) | ||||||||||
| Current assets | $ | 2,393 | |||||||||
| Amortizable intangible assets | |||||||||||
| Software technology | 36,100 | 12 years | Straight-line | ||||||||
| Client relationships | 1,700 | 11 years | Straight-line | ||||||||
| Trade names | 1,400 | 10 years | Straight-line | ||||||||
| Goodwill | 90,337 | ||||||||||
| Current liabilities | |||||||||||
| Deferred revenues | (4,218) | ||||||||||
| Other current liabilities | (524) | ||||||||||
| Other liabilities | (7,002) | ||||||||||
| Total purchase price | $ | 120,186 |
Goodwill totaling $90.3 million represents the excess of the Irwin purchase price over the fair value of net assets acquired and considers future economic benefits that we expect to achieve as a result of the acquisition. The goodwill is included in the Americas segment, subject to final allocation, and is not deductible for income tax purposes.
The results of Irwin's operations have been included in our Consolidated Financial Statements, within the Americas, EMEA and Asia Pacific segments, beginning with the closing of the acquisition on November 5, 2024. Pro forma information has not been presented because the effect of the Irwin acquisition is not material to our Consolidated Financial Statements.
7. GOODWILL
Changes in the carrying value of goodwill by segment for the six months ended February 28, 2025 are as follows:
| (in thousands) | Americas | EMEA | Asia Pacific | Total | ||||||||||
| Balance at August 31, 2024 | $ | 704,454 | $ | 304,442 | $ | 2,233 | $ | 1,011,129 | ||||||
| Acquisitions | 252,713 | — | — | 252,713 | ||||||||||
| Foreign currency translations | (3,457) | (15,004) | (66) | (18,527) | ||||||||||
| Balance at February 28, 2025 | $ | 953,710 | $ | 289,438 | $ | 2,167 | $ | 1,245,315 |
Goodwill is not amortized as it is estimated to have an indefinite life. Goodwill impairment is tested at the reporting unit level, which is consistent with our reportable segments. We test goodwill annually during the fourth quarter of each fiscal year or more frequently if events and circumstances occur indicating that it is more likely than not that the fair value of any one of our reporting units is less than its respective carrying value. If the carrying value of the reporting unit exceeds the fair value, then the goodwill is considered impaired and written down to the reporting unit’s fair value.
We tested our goodwill for impairment during the fourth quarter of fiscal 2024 utilizing a qualitative analysis. We concluded there was no impairment as it was more likely than not that the fair value of each of our reporting units was not less than its respective carrying value. No events or circumstances were identified during the six months ended February 28, 2025 that would indicate it is more likely than not that goodwill has been impaired.
8. INTANGIBLE ASSETS
We amortize intangible assets on a straight-line basis over their estimated useful lives. The following table presents the estimated useful life, gross carrying amounts and accumulated amortization related to our identifiable intangible assets as of February 28, 2025 and August 31, 2024:
| February 28, 2025 | August 31, 2024 | ||||||||||||||||||||||
| (in thousands, except useful lives) | Estimated Useful Life (years) | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | ||||||||||||||||
| ABA business process | 36 | $ | 1,583,000 | $ | 131,917 | $ | 1,451,083 | $ | 1,583,000 | $ | 109,930 | $ | 1,473,070 | ||||||||||
| Client relationships | 11 to 26 | 274,296 | 85,098 | 189,198 | 266,419 | 80,904 | 185,515 | ||||||||||||||||
| Software technology | 3 to 12 | 244,862 | 120,165 | 124,697 | 143,685 | 117,189 | 26,496 | ||||||||||||||||
| Developed technology | 3 to 5 | 217,750 | 95,817 | 121,933 | 181,492 | 68,286 | 113,206 | ||||||||||||||||
| Data content | 7 to 20 | 83,284 | 39,650 | 43,634 | 84,374 | 38,725 | 45,649 | ||||||||||||||||
| Trade names | 10 | 4,848 | 74 | 4,774 | — | — | — | ||||||||||||||||
| Non-compete agreements | 4 | 290 | 121 | 169 | 290 | 85 | 205 | ||||||||||||||||
| Total | $ | 2,408,330 | $ | 472,842 | $ | 1,935,488 | $ | 2,259,260 | $ | 415,119 | $ | 1,844,141 |
The weighted average useful life of our intangible assets as of February 28, 2025 was 30.6 years. Intangible assets are tested for impairment qualitatively on a quarterly basis or whenever events or changes in circumstances indicate that the carrying amount of an asset group is not recoverable. If indicators of impairment are present, our intangible assets are tested for impairment by comparing the carrying value to undiscounted cash flows and, if impaired, written down to fair value based on discounted cash flows. We did not identify a material impairment nor a material change to the estimated remaining useful lives of our intangible assets during the six months ended February 28, 2025 and February 29, 2024. Our intangible assets have no assigned residual values.
The following table presents the amortization expense for our intangible assets which is included in Cost of services in our Consolidated Statements of Income:
| Three Months Ended | Six Months Ended | |||||||||||||
| February 28, | February 29, | February 28, | February 29, | |||||||||||
| (in thousands) | 2025 | 2024 | 2025 | 2024 | ||||||||||
| Amortization expense | $ | 32,589 | $ | 26,688 | $ | 62,461 | $ | 48,853 |
As of February 28, 2025, estimated intangible asset amortization expense for each of the next five years and thereafter is as follows:
| (in thousands) | Estimated Amortization Expense | ||||
| Fiscal Years Ended August 31, | |||||
| 2025 (remaining six months) | $ | 67,171 | |||
| 2026 | 129,171 | ||||
| 2027 | 103,563 | ||||
| 2028 | 78,014 | ||||
| 2029 | 70,983 | ||||
| Thereafter | 1,486,586 | ||||
| Total | $ | 1,935,488 |
9. INCOME TAXES
We are subject to taxation in the United States and various foreign jurisdictions in which we conduct our business. Income tax expense is based on taxable income determined in accordance with current enacted laws and tax rates. Deferred income taxes are recorded for the temporary differences between the financial statement carrying amounts and the tax basis of our assets and liabilities using currently enacted tax rates.
Provision for Income Taxes and Effective Tax Rate
The provision for income taxes and the effective tax rate are as follows:
| Three Months Ended | Six Months Ended | |||||||||||||
| February 28, | February 29, | February 28, | February 29, | |||||||||||
| (in thousands) | 2025 | 2024 | 2025 | 2024 | ||||||||||
| Income before income taxes | $ | 172,320 | $ | 168,645 | $ | 352,059 | $ | 343,841 | ||||||
| Provision for income taxes | $ | 27,460 | $ | 27,705 | $ | 57,177 | $ | 54,346 | ||||||
| Effective tax rate | 15.9 | % | 16.4 | % | 16.2 | % | 15.8 | % |
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 February 28, 2025 was 15.9%, compared with 16.4% for the three months ended February 29, 2024. This decrease was primarily due to lower U.S. tax on foreign earnings, partially offset by certain discrete items, mainly lower excess tax benefits related to stock-based compensation.
Our effective tax rate for the six months ended February 28, 2025 was 16.2%, compared with 15.8% for the six months ended February 29, 2024. This increase was primarily due to lower excess tax benefits related to stock-based compensation, partially offset by lower U.S. tax on foreign earnings.
For the periods presented, our effective tax rates were lower than the applicable U.S. corporate income tax rate. This was primarily attributable to excess tax benefits from stock-based compensation, foreign tax credits, research and development ("R&D") tax credits and a foreign derived intangible income ("FDII") deduction, partially offset by our state income taxes.
Base Erosion and Profit Shifting Pillar Two
The Organization for Economic Co-operation and Development released Base Erosion and Profit Shifting Pillar Two rules (“Pillar Two”) to introduce a global minimum corporate tax of 15% for companies with global revenues and profits above certain thresholds. Certain aspects of Pillar Two are effective for tax years beginning on or after January 1, 2024. Although the U.S. has not yet enacted legislation to adopt Pillar Two, certain countries in which we operate have already adopted, or are in the process of adopting, legislation to implement Pillar Two. After considering the applicable tax law changes associated with Pillar Two legislation, we determined there was no material impact to our provision for income taxes for the six months ended February 28, 2025.
10. LEASES
Our operating lease arrangements relate to our office space and data centers. We review new arrangements at inception to evaluate whether we obtain substantially all the economic benefits of and have the right to control the use of an asset. Our lease ROU assets and lease liabilities are recognized based on the present value of future minimum lease payments at lease commencement or modification date (which includes fixed lease payments and certain qualifying index-based variable payments) over the reasonably certain lease term, leveraging an estimated incremental borrowing rate ("IBR"). Certain adjustments to calculate our lease ROU assets may be required due to prepayments, lease incentives received and initial direct costs incurred. We account for lease and non-lease components as a single lease component, which we recognize over the expected lease term on a straight-line expense basis in occupancy costs (a component of SG&A expense) in our Consolidated Statements of Income.
As of February 28, 2025, we recognized $118.1 million of Lease ROU assets, net and $191.0 million of combined Current lease liabilities and Long-term lease liabilities in the Consolidated Balance Sheets. Our leases have remaining lease terms ranging from less than one year to just under 11 years. Our lease agreements may include options to extend or terminate the lease which are included in the measurement of our lease term when it is reasonably certain that we will exercise the option.
The following table presents our future minimum lease payments and a reconciliation to the combined Current lease liabilities and Long-term lease liabilities in the Consolidated Balance Sheets as of February 28, 2025:
| (in thousands) | Minimum Lease Payments | ||||
| Fiscal Years ended August 31, | |||||
| 2025 (remaining six months) | $ | 20,335 | |||
| 2026 | 39,195 | ||||
| 2027 | 37,668 | ||||
| 2028 | 33,418 | ||||
| 2029 | 27,747 | ||||
| Thereafter | 61,608 | ||||
| Total minimum lease payments | $ | 219,971 | |||
| Less: Imputed interest | 28,992 | ||||
| Total lease liabilities | $ | 190,979 |
The following table includes components of our occupancy costs:
| Three Months Ended | Six Months Ended | |||||||||||||
| February 28, | February 29, | February 28, | February 29, | |||||||||||
| (in thousands) | 2025 | 2024 | 2025 | 2024 | ||||||||||
| Operating lease costs(1) | $ | 7,606 | $ | 7,645 | $ | 15,178 | $ | 15,263 | ||||||
| Variable lease costs(2) | $ | 4,777 | $ | 4,817 | $ | 9,665 | $ | 9,306 |
(1) Operating lease costs include costs associated with fixed lease payments and index-based variable payments that qualified for lease accounting under ASC 842, Leases and complied with the practical expedients and exceptions we elected.
(2) Variable lease costs include costs that are not fixed and are not dependent on an index or rate. These costs were not included in the measurement of lease liabilities and primarily include variable non-lease costs, such as utilities, real estate taxes, insurance and maintenance, as well as lease costs for those leases that qualified for the short-term lease exception.
The following table summarizes our weighted average remaining lease term and weighted average discount rate related to our operating leases recorded on the Consolidated Balance Sheets:
| As of February 28, 2025 | As of August 31, 2024 | |||||||
| Weighted average remaining lease term (in years) | 6.5 | 6.9 | ||||||
| Weighted average discount rate (IBR) | 4.7 | % | 4.6 | % |
The following table summarizes supplemental cash flow information related to our operating leases:
| Six Months Ended | ||||||||
| February 28, | February 29, | |||||||
| (in thousands) | 2025 | 2024 | ||||||
| Cash paid for amounts included in the measurement of lease liabilities | $ | 19,645 | $ | 19,811 | ||||
| Lease ROU assets obtained in exchange for lease liabilities(1) | $ | 4,213 | $ | 2,313 | ||||
| Reductions to ROU assets resulting from reductions to lease liabilities(2) | $ | (5,529) | $ | (23) |
(1)Primarily includes new lease arrangements entered into during the respective period and contract modifications that extend our lease terms and/or provide additional rights.
(2)Primarily relates to lease term reassessments based on contractual options to early terminate, resulting in a reduction to the lease liability and the corresponding lease ROU asset.
11. DEBT
We elected not to carry our debt at fair value. The carrying value of our debt is net of related unamortized discounts and debt issuance costs. Our debt obligations as of February 28, 2025 and August 31, 2024 consisted of the following:
| (in thousands) | Issuance Date | Contractual Maturity Date | February 28, 2025 | August 31, 2024 | ||||||||||
| Current debt | ||||||||||||||
| 2022 Term Facility | 3/1/2022 | 3/1/2025 | $ | — | $ | 125,000 | ||||||||
| Total unamortized debt issuance costs on Current debt | — | (158) | ||||||||||||
| Total Current debt | $ | — | $ | 124,842 | ||||||||||
| Long-term debt | ||||||||||||||
| 2022 Revolving Facility | 3/1/2022 | 3/1/2027 | $ | 480,000 | $ | 250,000 | ||||||||
| 2027 Notes | 3/1/2022 | 3/1/2027 | 500,000 | 500,000 | ||||||||||
| 2032 Notes | 3/1/2022 | 3/1/2032 | 500,000 | 500,000 | ||||||||||
| Total unamortized discounts and debt issuance costs | (7,838) | (8,869) | ||||||||||||
| Total Long-term debt | $ | 1,472,162 | $ | 1,241,131 | ||||||||||
| Total debt | $ | 1,472,162 | $ | 1,365,973 |
As of February 28, 2025, annual maturities on our debt obligations, based on contractual maturity dates, were as follows:
| (in thousands) | Maturities | ||||
| Fiscal Years ended August 31, | |||||
| 2025 (remaining six months) | $ | — | |||
| 2026 | — | ||||
| 2027 | 980,000 | ||||
| 2028 | — | ||||
| 2029 | — | ||||
| Thereafter | 500,000 | ||||
| Total | $ | 1,480,000 |
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"). The 2022 Revolving Facility, together with the 2022 Term Facility, are referred to as the "2022 Credit Facilities".
The 2022 Term Facility matured 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. The 2022 Revolving Facility allowed for additional commitments of up to $750.0 million from lenders or other financial institutions. On January 31, 2025, we entered into a joinder agreement to our 2022 Credit Agreement that added an incremental revolving loan lender and increased the available commitments under the 2022 Revolving Facility by $100.0 million. The joinder agreement increased the total 2022 Revolving Facility commitments to $600.0 million and reduced the additional commitments we can seek to $650.0 million. All other terms of the 2022 Credit Agreement remained unchanged.
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, 2025, we repaid $62.5 million and $125.0 million, respectively, under the 2022 Term Facility. As of February 28, 2025, the 2022 Term Facility has been fully repaid.
During the six months ended February 28, 2025, we borrowed $305.0 million and repaid $75.0 million for total net borrowings of $230.0 million under the 2022 Revolving Facility. As of February 28, 2025, the outstanding borrowings under the 2022 Revolving Facility were $480.0 million.
From the borrowing date through November 30, 2023, the outstanding borrowings under the 2022 Credit Facilities bore interest at a rate equal to the applicable one-month Term SOFR 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). From December 1, 2023 through February 28, 2025, the spread decreased to 0.975% (comprised of a 0.875% interest rate margin based on a debt leverage pricing grid plus a 0.1% credit spread adjustment). Interest on the 2022 Credit Facilities is payable on the last business day of each month, in arrears.
Additionally, 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. From the borrowing date through November 30, 2023, the commitment fee was 0.125%, which subsequently decreased to 0.1% through February 28, 2025.
We incurred approximately $9.5 million in debt issuance costs during fiscal 2022 related to the 2022 Credit Facilities. Debt issuance costs are presented in the Consolidated Balance Sheets as a direct deduction from the carrying amount of the debt liability. Debt issuance costs are amortized to Interest expense in the Consolidated Statements of Income on a straight-line basis over the contractual term of the debt, which approximates the effective interest method.
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 3.50 to 1.00 as of February 28, 2025. We were in compliance with all covenants and requirements of the 2022 Credit Agreement as of February 28, 2025.
Interest Rate Swap Agreements
2024 Swap Agreement
On March 1, 2024, we entered into the 2024 Swap Agreement to hedge a portion of our outstanding floating SOFR debt with a fixed interest rate of 5.145%. The 2024 Swap Agreement matured on February 28, 2025.
2022 Swap Agreement
On March 1, 2022, we entered into the 2022 Swap Agreement to hedge a portion of our outstanding floating SOFR debt with a fixed interest rate of 1.162%. The 2022 Swap Agreement matured on February 28, 2024.
Refer to Note 5, Derivative Instruments for further discussion of the 2024 Swap Agreement and 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").
The Senior Notes were issued at an aggregate discount of $2.8 million and we incurred approximately $9.1 million in debt issuance costs during fiscal 2022. Debt discounts and debt issuance costs are presented in the Consolidated Balance Sheets as a net direct deduction from the carrying amount of the debt liability. The debt discounts and debt issuance costs are amortized to Interest expense in the Consolidated Statements of Income over the contractual term of the debt, leveraging the effective interest method.
Interest on the Senior Notes is payable semiannually in arrears on March 1 and September 1 of each year.
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.
Interest Expense
The following table presents the interest expense on our outstanding debt which is a component of Interest expense in our Consolidated Statements of Income:
| Three Months Ended | Six Months Ended | |||||||||||||
| February 28, | February 29, | February 28, | February 29, | |||||||||||
| (in thousands) | 2025 | 2024 | 2025 | 2024 | ||||||||||
| Interest expense on outstanding debt(1) | $ | 13,899 | $ | 16,589 | $ | 28,266 | $ | 33,318 |
(1) Interest expense on our outstanding debt includes the related amortization of debt issuance costs and debt discounts. Interest expense is net of the effects of our interest rate swap agreements.
12. COMMITMENTS AND CONTINGENCIES
Commitments represent obligations, such as those for future purchases of goods or services that are not yet recorded on the balance sheet as liabilities. We record liabilities for commitments when incurred (i.e., when the goods or services are received).
Except for income tax contingencies, we accrue for contingencies when we believe that a loss is probable and the amount can be reasonably estimated. Judgment is required to determine both the probability and the estimated amount of loss. If the reasonable estimate of a probable loss is a range, we record an accrual for the most probable estimate of the loss or the minimum amount when no amount within the range is a better estimate than any other amount. We review these accruals on a quarterly basis and adjust, as necessary, to reflect the impact of negotiations, settlements, rulings, advice of legal counsel and other current information. Contingent gains are recognized only when realized.
Income tax contingencies related to uncertain tax positions are accounted for in accordance with applicable accounting guidance. Refer to Note 2, Summary of Significant Accounting Policies - Income Taxes 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, 2024 for further details.
Purchase Commitments with Suppliers and Vendors
Purchase obligations represent our legally-binding agreements to purchase fixed or minimum quantities at determinable prices. As of August 31, 2024, we had total purchase obligations with suppliers and vendors of $382.6 million. Our total purchase obligations as of August 31, 2024 primarily related to hosting services, acquisition of data and, to a lesser extent, third-party software providers. For the six months ended February 28, 2025, we had no new material purchase obligations.
We also have contractual obligations related to our lease liabilities and outstanding debt. Refer to Note 10, Leases and Note 11, Debt, for information regarding lease commitments and outstanding debt obligations, respectively.
Letters of Credit
From time to time, we are required to obtain letters of credit in the ordinary course of business. We had $0.4 million of standby letters of credit outstanding as of February 28, 2025 and August 31, 2024. No liabilities related to these arrangements are reflected in the Consolidated Balance Sheets.
Our 2022 Revolving Facility allows for the availability of up to $100.0 million in the form of letters of credit. We have not obtained any letters of credit under the 2022 Revolving Facility since its inception. Refer to Note 11, Debt, for information regarding the 2022 Revolving Facility.
Contingencies
Legal Matters
In the normal course of our business, we are, or may be, engaged in various legal proceedings, claims, litigation and regulatory proceedings. In view of the uncertainty inherent in litigation and regulatory matters, we cannot predict the eventual outcome of such matters or the timing of their resolution, or in most cases reasonably estimate what the eventual judgments, damages, fines, penalties or impact of activity (if any) restrictions may be. While we cannot predict the outcome of these matters, based on information available at February 28, 2025, our management believes that the ultimate outcome of these unresolved matters against us, individually or in the aggregate, will not have a material adverse effect on our consolidated financial position, our results of operations or our cash flows.
Income Taxes
As a multinational company operating in many states and countries, we are routinely audited by various taxing authorities and have reserved for potential adjustments to our provision for income taxes that may result from examinations by, or any negotiated settlements with, these tax authorities. We believe that the final outcome of these examinations or settlements will not have a material effect on our consolidated financial position, results of operations or our cash flows. If events occur which indicate payment of these amounts is unnecessary, the reversal of the liabilities would result in the recognition of tax benefits in the period we determine the liabilities are no longer necessary. If our estimates of the federal, state and foreign income tax liabilities are less than the ultimate assessment, additional expense would result.
Sales Tax Matters
During August 2019 through February 2024, we received various assessment and audit notices from the Commonwealth of Massachusetts Department of Revenue (the "Commonwealth") with respect to sales taxes, interest and underpayment penalties relating to the tax periods from January 1, 2006 through December 31, 2023 ("Sales Taxes"). We entered into an agreement with the Commonwealth on November 26, 2024 which fully resolved all matters relating to the Sales Taxes.
During the first quarter of fiscal 2025 and the fourth quarter of fiscal 2024, we took charges of approximately $2.4 million and $54.0 million, respectively, related to this dispute and made corresponding payments of $56.4 million to the Commonwealth during the first quarter of fiscal 2025. In addition to reserves taken in prior fiscal years, this brought our total charge and cash payments with respect to this matter to approximately $66.2 million.
Indemnifications
As permitted or required under Delaware law and to the maximum extent allowable under that law, we have certain obligations to indemnify each of our current and former officers and directors for certain events or occurrences while the officer or director is, or was, serving at our request in such capacity. These indemnification obligations are valid as long as the director or officer acted in good faith and in a manner the person reasonably believed to be in, or not opposed to, the best interests of FactSet, and with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. It is not possible to determine the maximum potential amount for claims made under the indemnification obligations due to the unique set of facts and circumstances likely to be involved in each particular claim and indemnification provision; however, we have purchased a director and officer insurance policy that mitigates our exposure and may enable us to recover a portion of any future amounts paid. We do not believe, based on historical experience and information currently available, that it is probable that any material amounts will be required to be paid under such indemnification obligations.
13. STOCKHOLDERS' EQUITY
The following table presents the shares of common stock repurchased under our share repurchase program and acquired from holders of our stock-based awards upon vesting to satisfy tax withholding requirements:
Share Repurchases
| Three Months Ended | Six Months Ended | |||||||||||||
| February 28, | February 29, | February 28, | February 29, | |||||||||||
| (in thousands, except share data) | 2025 | 2024 | 2025 | 2024 | ||||||||||
| Repurchases of common stock under the share repurchase program | 136,714 | 113,050 | 241,189 | 249,000 | ||||||||||
| Total cost of common stock repurchased under the share repurchase program(1) | $ | 64,352 | $ | 52,255 | $ | 113,142 | $ | 112,165 | ||||||
| Repurchases of common stock to satisfy tax withholding requirements due upon vesting of stock-based awards | 1,777 | 1,999 | 30,870 | 32,383 | ||||||||||
| Total cost of repurchases of common stock to satisfy withholding requirements due upon vesting of stock-based awards | $ | 843 | $ | 961 | $ | 14,228 | $ | 14,465 |
(1) For the three and six months ended February 28, 2025, amount excludes a 1% excise tax of $0.5 million and $1.3 million, respectively, on corporate stock repurchases required under the Inflation Reduction Act of 2022.
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. There is no defined number of shares to be repurchased over a specified timeframe through the life of our share repurchase program. On September 17, 2024, our Board of Directors authorized up to $300 million for share repurchases during fiscal 2025. As of February 28, 2025, $186.9 million remained authorized under our share repurchase program. 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.
In addition to our share repurchase program, we also acquire shares of our common stock from holders of our stock-based awards to satisfy withholding tax requirements due at vesting. Shares acquired from these holders do not reduce the amount authorized for repurchase under the share repurchase program.
Equity-based Awards
Refer to Note 15, Stock-Based Compensation for more information on equity awards issued during the six months ended February 28, 2025 and February 29, 2024.
Dividends
Our Board of Directors approved the following dividends:
| Year Ended | Dividends per Share of Common Stock | Record Date | Total Amount (in thousands) | Payment Date | ||||||||||
| Fiscal 2025 | ||||||||||||||
| First Quarter | $ | 1.04 | November 29, 2024 | $ | 39,572 | December 19, 2024 | ||||||||
| Second Quarter | $ | 1.04 | February 28, 2025 | $ | 39,511 | March 20, 2025 | ||||||||
| Fiscal 2024 | ||||||||||||||
| First Quarter | $ | 0.98 | November 30, 2023 | $ | 37,299 | December 21, 2023 | ||||||||
| Second Quarter | $ | 0.98 | February 29, 2024 | $ | 37,360 | March 21, 2024 | ||||||||
Future cash dividend payments are subject to final determination by our Board of Directors and will depend on our earnings, capital requirements, financial condition and other relevant factors.
Accumulated Other Comprehensive Loss
The components of AOCL as of February 28, 2025 and August 31, 2024 were as follows:
| (in thousands) | February 28, 2025 | August 31, 2024 | ||||||
| Accumulated unrealized gains (losses) on cash flow hedges, net of tax | $ | (1,752) | $ | 1,843 | ||||
| Accumulated foreign currency translation adjustments | (111,001) | (81,456) | ||||||
| Total AOCL | $ | (112,753) | $ | (79,613) |
14. EARNINGS PER SHARE
Basic earnings per common share ("Basic EPS") is computed by dividing net income by the number of weighted average common shares outstanding during the period. Diluted earnings per common share ("Diluted EPS") is calculated by using the treasury stock method which assumes the issuance of common stock for all potentially dilutive stock-based awards.
The following is a reconciliation of our Basic and Diluted EPS computations:
| Three Months Ended | Six Months Ended | |||||||||||||
| February 28, | February 29, | February 28, | February 29, | |||||||||||
| (in thousands, except per share data) | 2025 | 2024 | 2025 | 2024 | ||||||||||
| Numerator | ||||||||||||||
| Net income used for calculating Basic EPS and Diluted EPS | $ | 144,860 | $ | 140,940 | $ | 294,882 | $ | 289,495 | ||||||
| Denominator | ||||||||||||||
| Weighted average common shares used in the calculation of Basic EPS | 38,015 | 38,103 | 38,010 | 38,059 | ||||||||||
| Common stock equivalents associated with stock-based compensation plans | 495 | 547 | 503 | 587 | ||||||||||
| Shares used in the calculation of Diluted EPS | 38,510 | 38,650 | 38,513 | 38,646 | ||||||||||
| Basic EPS | $ | 3.81 | $ | 3.70 | $ | 7.76 | $ | 7.61 | ||||||
| Diluted EPS | $ | 3.76 | $ | 3.65 | $ | 7.66 | $ | 7.49 |
The following table presents the potential common shares that were excluded from Diluted EPS as they relate to stock-based awards that were antidilutive or subject to performance conditions which have not been satisfied by the end of the reporting period:
| Three Months Ended | Six Months Ended | |||||||||||||
| February 28, | February 29, | February 28, | February 29, | |||||||||||
| (in thousands) | 2025 | 2024 | 2025 | 2024 | ||||||||||
| Stock options | 670 | — | 695 | — | ||||||||||
| Restricted stock units and Performance share units | 93 | 95 | 96 | 95 |
15. STOCK-BASED COMPENSATION
Our stock-based compensation expense consists of:
-
Stock options, restricted stock units ("RSUs") and performance share units ("PSUs") issued to eligible employees under the FactSet Research Systems Inc. Stock Option and Award Plan, as Amended and Restated (the "LTIP").
-
Stock options and RSUs issued to non-employee members of the Board of Directors ("non-employee directors") under the FactSet Research Systems Inc. Non-Employee Directors’ Stock Option and Award Plan, as Amended and Restated (the "Director Plan").
-
Common stock purchased by eligible employees under the FactSet Research Systems Inc. Employee Stock Purchase Plan, as Amended and Restated (the "ESPP").
We measure and recognize stock-based compensation expense for all stock-based awards and purchases of common stock under the ESPP based on their estimated grant date fair value.
We utilize a lattice-binomial option-pricing model ("binomial model") to estimate the grant date fair value for our employee stock options and the Black-Scholes model to estimate the grant date fair value for non-employee director stock options and common stock purchased by eligible employees under our ESPP.
Both the binomial model and Black-Scholes model involve certain estimates and assumptions such as:
-
Risk-free interest rate** - based on the U.S. Treasury yield curve in effect at the time of grant with maturities equal to the expected terms of the stock-based awards granted.
-
Expected life** - the weighted average period the stock-based awards are expected to remain outstanding.
-
Expected volatility** - based on a blend of historical volatility of the stock-based award's useful life and the weighted average implied volatility for call option contracts traded in the 90 days preceding the stock-based award's valuation date.
-
Dividend yield** - the expectation of dividend payouts based on our history.
The binomial model also incorporates market conditions, vesting restrictions and exercise patterns.
For RSUs and PSUs (collectively, "Restricted Stock Awards"), the grant date fair value is measured by reducing the grant date price of our common stock by the present value of expected future dividend payments on the underlying stock during the requisite service period, discounted at the appropriate risk-free interest rate. The number of PSUs granted assumes target-level achievement of the specified performance levels within the payout range. The ultimate number of common shares that may be earned pursuant to our PSU awards depends on the level of our achievement of stated financial performance objectives.
Stock-based compensation expense for stock option and RSU awards is recognized over the requisite service period using the straight-line method. For stock options and RSU grants, the amount of stock-based compensation expense recognized on any date is at least equal to the vested portion of the award on that date.
Our PSUs require us to make assumptions regarding the probability of achieving specified performance levels established at the time of grant. We recognize stock-based compensation expense for PSUs using the straight-line method over the requisite service period. The probability of achieving the specified performance levels is reviewed on a quarterly basis to ensure the amount of stock-based compensation expense appropriately reflects the expected achievement.
For our ESPP, stock-based compensation expense is recognized on a straight-line basis over the offering period.
Our stock-based awards are generally subject to continued employment for employees, or continued service for non-employee directors, through the applicable vesting date. Compensation expense for stock-based awards is recorded net of estimated forfeitures, which are based on historical forfeiture rates and are revised if actual forfeitures differ from those estimates.
Stock-based Compensation Expense
The following table presents the stock-based compensation for the periods presented:
| Three Months Ended | Six Months Ended | |||||||||||||
| February 28, | February 29, | February 28, | February 29, | |||||||||||
| (in thousands) | 2025 | 2024 | 2025 | 2024 | ||||||||||
| Stock-based compensation expense | $ | 16,547 | $ | 16,652 | $ | 30,139 | $ | 30,962 |
There were no stock-based compensation costs capitalized in any periods presented. As of February 28, 2025, $149.2 million of total unrecognized compensation expense related to non-vested stock-based awards is expected to be recognized over the remaining weighted average vesting period of 3.2 years.
Employee Stock Option Awards
Our annual employee stock option grant, made during the first quarter of each fiscal year, makes up the majority of our employee stock options granted under the LTIP in each fiscal year.
The following table presents the employee stock options granted under the LTIP for the six months ended February 28, 2025 and February 29, 2024:
| Six Months Ended | ||||||||||||||
| February 28, | February 29, | |||||||||||||
| 2025 | 2024 | |||||||||||||
| Stock options granted(1) | 203,114 | 243,125 | ||||||||||||
| Weighted average exercise price | $ | 459.17 | $ | 436.63 | ||||||||||
| Weighted average grant date fair value | $ | 133.21 | $ | 132.60 |
(1) Includes the annual employee grant on November 1, 2024 and November 1, 2023 of 200,693 and 242,371 stock options, respectively. These annual employee grants vest 20% annually on the anniversary date of the grant, are fully vested after five years, and expire ten years from the date of grant.
As part of the November 1, 2024 annual employee grant, the estimated grant date fair value, using the binomial model, leveraged the following assumptions:
| November 1, 2024 Annual Employee Grant Details | |||||
| Stock options granted | 200,693 | ||||
| Risk-free interest rate | 4.31% - 4.87% | ||||
| Expected life (years) | 6.62 | ||||
| Expected volatility | 24.49 | % | |||
| Dividend yield | 0.95% | ||||
| Estimated fair value | $133.10 | ||||
| Exercise price | $458.80 | ||||
Employee Restricted Stock Awards
Our annual employee Restricted Stock Awards grant, made during the first quarter of each fiscal year, makes up the majority of our employee Restricted Stock Awards granted under the LTIP in each fiscal year. These awards entitle the holders to shares of common stock as the Restricted Stock Awards vest. For unvested Restricted Stock Awards, holders are not entitled to dividends declared on the underlying shares.
The following table presents the employee Restricted Stock Awards granted under the LTIP for the six months ended February 28, 2025 and February 29, 2024:
| Six Months Ended | ||||||||||||||
| February 28, 2025 | February 29, 2024 | |||||||||||||
| Shares | Weighted Average Grant Date Fair Value Per Award | Shares | Weighted Average Grant Date Fair Value Per Award | |||||||||||
| RSUs granted(1) | 80,416 | $ | 447.55 | 64,827 | $ | 425.09 | ||||||||
| PSUs granted(2) | 34,479 | $ | 446.59 | 37,008 | $ | 424.63 | ||||||||
| Performance adjustment - PSUs(3) | 7,364 | $ | 424.01 | 14,472 | $ | 306.33 | ||||||||
| Total Restricted Stock Awards | 122,259 | 116,307 |
(1) Includes the annual employee grant on November 1, 2024 and November 1, 2023 of 76,448 and 64,187 RSUs, respectively. The majority of the RSUs granted vest 20% annually on the anniversary date of the grant and are fully vested after five years.
(2) Includes the annual employee grant on November 1, 2024 and November 1, 2023 of 33,756 and 36,860 PSUs, respectively. The majority of the PSUs granted cliff vest on the third anniversary of the grant date, subject to the achievement of certain performance metrics. The ultimate number of common shares that may be earned pursuant to our PSU awards depends on the level of our achievement of stated financial performance objectives. The achievement range was 0% to 200% for both the November 1, 2024 and November 1, 2023 annual grants.
(3) Additional PSUs were granted during the first quarter of fiscal 2025 and fiscal 2024 based on performance above the specified target level of achievement for PSUs granted on November 1, 2021 and November 9, 2020, respectively.
Stock-based Awards Available for Grant
As of February 28, 2025, we had 3.3 million employee stock-based awards available for grant under the LTIP and 0.2 million non-employee director stock-based awards available for grant under the Director Plan. In accordance with the LTIP and Director Plan, each Restricted Stock Award granted or canceled/forfeited is equivalent to 2.5 shares deducted from or added back to, respectively, the aggregate number of stock-based awards available for grant.
16. SEGMENT INFORMATION
Operating segments are defined as components of an enterprise that have the following characteristics: (i) they engage in business activities from which they may earn revenue and incur expense, (ii) their operating results are regularly reviewed by the chief operating decision maker ("CODM") for resource allocation decisions and performance assessment, and (iii) their discrete financial information is available. Our Chief Executive Officer functions as our CODM.
We have three operating segments: Americas, EMEA and Asia Pacific. This is how our CODM manages our business and the geographic markets in which we operate. These operating segments are consistent with our reportable segments.
The Americas segment primarily sells to clients throughout North, Central, and South America. The EMEA segment primarily sells to clients in Europe, the Middle East, and Africa. The Asia Pacific segment primarily sells to clients in Asia and Australasia. Segment revenues reflect sales to our clients based on the geographic region where the sale originated.
Each segment records expenses related to its individual operations with the exception of expenditures associated with our data centers, third-party data costs and corporate headquarters charges, which are recorded by the Americas segment and are not allocated to the other segments. The expenses incurred at our content collection centers, located in India, the Philippines and Latvia, are allocated to each segment based on their respective percentage of revenues as this reflects the benefits provided by each segment.
Intercompany revenue and expense amounts have been eliminated within each segment in order to report on the basis that management uses internally for evaluating segment performance.
The following table reflects the results of operations of our segments:
| (in thousands) | Americas | EMEA | Asia Pacific | Total | ||||||||||
| For the three months ended February 28, 2025 | ||||||||||||||
| Revenues | $ | 369,661 | $ | 143,387 | $ | 57,612 | $ | 570,660 | ||||||
| Operating income | $ | 73,127 | $ | 70,568 | $ | 41,797 | $ | 185,492 | ||||||
| Capital expenditures(1) | $ | 22,074 | $ | 117 | $ | 1,545 | $ | 23,736 | ||||||
| Americas | EMEA | Asia Pacific | Total | |||||||||||
| For the three months ended February 29, 2024 | ||||||||||||||
| Revenues | $ | 352,618 | $ | 139,176 | $ | 54,151 | $ | 545,945 | ||||||
| Operating income | $ | 81,711 | $ | 62,839 | $ | 37,392 | $ | 181,942 | ||||||
| Capital expenditures(1) | $ | 20,015 | $ | 295 | $ | 1,607 | $ | 21,917 | ||||||
| Americas | EMEA | Asia Pacific | Total | |||||||||||
| For the six months ended February 28, 2025 | ||||||||||||||
| Revenues | $ | 736,903 | $ | 287,112 | $ | 115,312 | $ | 1,139,327 | ||||||
| Operating income | $ | 154,925 | $ | 139,606 | $ | 82,296 | $ | 376,827 | ||||||
| Capital expenditures(1) | $ | 47,028 | $ | 492 | $ | 2,090 | $ | 49,610 | ||||||
| Americas | EMEA | Asia Pacific | Total | |||||||||||
| For the six months ended February 29, 2024 | ||||||||||||||
| Revenues | $ | 700,985 | $ | 278,737 | $ | 108,439 | $ | 1,088,161 | ||||||
| Operating income | $ | 162,559 | $ | 131,704 | $ | 76,719 | $ | 370,982 | ||||||
| Capital expenditures(1) | $ | 34,793 | $ | 1,256 | $ | 2,334 | $ | 38,383 |
(1) Capital expenditures include purchases of PPE and capitalized internal-use software.
Segment Total Assets
The following table reflects the total assets for our segments as of February 28, 2025 and August 31, 2024:
| (in thousands) | February 28, 2025 | August 31, 2024 | ||||||
| Segment Assets | ||||||||
| Americas | $ | 3,554,455 | $ | 3,178,800 | ||||
| EMEA | 537,717 | 600,206 | ||||||
| Asia Pacific | 149,270 | 276,034 | ||||||
| Total assets | $ | 4,241,442 | $ | 4,055,040 |
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