What changed in this filing

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Item 2. Management’s Discussion and Analysis

2020-07-09 compared with 2020-04-09 · 328 added, 275 removed, 273 unchanged (69% of the section changed)

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For over 40 years, global financial professionals have utilized our content and multi-asset class solutions across each stage of the investment process.

Our goal is to provide a seamless user experience spanning idea generation, research, portfolio construction, trade execution, performance measurement, risk management, reporting, and portfolio analysis, in which we serve the front, middle, and back offices to drive productivity and improved performance.

Our flexible, open data and technology solutions can be implemented both across the investment portfolio lifecycle or as standalone components serving different workflows in the organization.

We are focused on growing our business throughout each of our three segments, the Americas, EMEA (formerly known as Europe) , and Asia Pacific.

Our goal is to provide a seamless user experience spanning idea generation, research, portfolio construction and analysis, trade execution, performance measurement, risk management, and reporting, in which we serve the front, middle, and back offices to drive productivity and improved performance.

Our flexible, open data and technology solutions can be implemented both across the investment portfolio lifecycle or as standalone components serving different workflows in an organization.

We are focused on growing our business through three segments:

the Americas, EMEA (formerly known as Europe), and Asia Pacific.

We primarily deliver insight and information through the workflow solutions of Research, Analytics and Trading, Content and Technology Solutions ("CTS") and Wealth.

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We combine dedicated client service with open and flexible technology offerings, such as a configurable desktop and mobile platform, comprehensive data feeds, an open marketplace, digital portals and application programming interfaces (APIs).

Our revenue is primarily derived from subscriptions to products and services such as workstations, analytics, enterprise data, and research management.

Our revenue is primarily derived from subscriptions to products and services such as workstations, portfolio analytics, enterprise data, and research management.

Business Strategy

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To execute on our business strategy of broad-based growth across each geographical segment, we continue to look at ways to create value for our clients by offering data, products and analytical applications within our key workflow solutions of Research, Analytics and Trading, CTS and Wealth.

Fiscal 2020 Second Quarter in Review

Revenue in the second quarter of fiscal 2020 was $369.8 million, an increase of 4.2% from the prior year comparable period, fully attributed to organic revenue growth.

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Fiscal 2020 Third Quarter in Review

Revenue in the third quarter of fiscal 2020 was $374.1 million, an increase of 2.6% from the prior year comparable period, fully attributed to organic revenue growth.

Organic revenue excludes the effects of acquisitions and dispositions completed in the last 12 months, changes in foreign currency rates in all periods presented and the deferred revenue fair value adjustments from purchase accounting.

Revenue increased across our geographic segments primarily driven by revenue growth in our Analytics and Trading, CTS and Wealth workflow solutions, from increased demand for our portfolio analytics solutions, our core and premium data feeds and our traditional and web-based wealth workstations.

As of February 29, 2020, organic annual subscription value ("organic ASV") plus professional services totaled $1.50 billion, an increase of 4.3% over the prior year comparable period.

Although operating income decreased 2.2%, net income and diluted earnings per share ("EPS") increased 4.7% and 5.0%, respectively, compared to the prior year period.

This increase in net income and EPS were primarily driven by revenue growth of 4.2% and a decrease in the income tax provision and interest expense.

The increase in net income and EPS were partially offset by an increase in operating expenses primarily attributed to increases in computer-related expenses, employee compensation and professional fees on a year-over-year basis.

As of February 29, 2020, employee count was 9,892, up 3.8% in the past 12 months, due primarily to an increase in net new employees of 5.7% in Asia Pacific and 4.6% in EMEA , partially offset by a net decrease of 1.3% in the Americas.

Revenue increased across our geographic segments primarily driven by revenue growth in Analytics and Trading, followed by CTS and Wealth.

The revenue growth was driven by increased demand for our risk management, portfolio analytics and reporting solutions, core and premium data feeds, and traditional and web-based wealth workstations.

As of May 31, 2020, organic annual subscription value ("organic ASV") plus professional services totaled $1.52 billion, an increase of 5.0% over the prior year comparable period.

Organic ASV at any given point in time represents the forward-looking revenue for the next 12 months from all subscription services currently being supplied to clients and excludes ASV from acquisitions and dispositions completed within the last 12 months, the effects of foreign currency movements on the current year period and professional services.

Operating income grew 3.8% and diluted earnings per share ("EPS") increased 11.0% compared to the prior year period.

This increase in operating income was primarily driven by revenue growth of 2.6% and a decrease in non-compensatory employee related expenses mainly due to restrictions and impacts related to the COVID-19 pandemic.

This operating income increase was partially offset by an increase in computer-related expenses on a year-over-year basis, primarily driven by increased technology investments including cloud-based hosting and licensed software arrangements.

Additionally, EPS benefited from a reduction in the income tax provision, interest expense and diluted weighted average shares outstanding, compared to the prior year period.

As of May 31, 2020, our employee count was 10,065, up 7.5% in the past 12 months, due primarily to an increase in net new employees of 9.0% in Asia Pacific, 6.7% in EMEA, and 3.9% in the Americas.

Of our total employees, 6,372 were located in Asia Pacific, 2,367 were located in the Americas, and 1,326 were located in EMEA.

COVID-19 Update

In December 2019, a novel strain of coronavirus, now known as COVID-19 (“COVID-19”), was reported in Wuhan, China and has since extensively impacted the global health and economic environment.

In January 2020, the World Health Organization (“WHO”) declared it a Public Health Emergency of International Concern.

On February 28, 2020, the WHO raised its assessment of the COVID-19 threat from high to very high at a global level due to the continued increase in the number of cases and affected countries, and on March 11, 2020, the WHO characterized COVID-19 as a pandemic.

Given the dynamic nature of these circumstances, the full impact of the COVID-19 pandemic on our ongoing business, results of operations and overall financial performance cannot be reasonably estimated at this time.

The COVID-19 pandemic may curtail our clients’ spending and could lead them to delay or defer purchasing decisions or product and service implementations, or may cause them to cancel or reduce their spending with us, which could materially adversely impact our business, results of operations and overall financial performance.

A novel strain of coronavirus, now known as COVID-19 (“COVID-19”), was first reported in December 2019, and it has since extensively impacted the global health and economic environment, with the World Health Organization characterizing COVID-19 as a pandemic on March 11, 2020.

The COVID-19 virus has spread to nearly all regions in the world, creating significant uncertainties and disruption in the global economy.

We are closely monitoring pandemic-related developments, and our highest priority is the health and safety of our employees, clients, vendors and stakeholders.

We have taken, and continue to take, numerous steps to address the COVID-19 pandemic.

We have implemented a business continuity plan with a dedicated incident management team to respond quickly and effectively to changes in our environment to continue offering our clients uninterrupted products, services and support while also protecting our employees.

We will continue to coordinate our COVID-19 response based on guidance from global health organizations, relevant governments and pandemic response best practices.

We have required the vast majority of our employees at our offices across the globe (including our corporate headquarters) to work remotely on a temporary basis and have implemented global travel restrictions for our employees.

Nearly all our employees are currently working remotely.

We believe our transition to remote working has been successful and has not significantly affected our financial results for the three or nine months ended May 31, 2020.

We are planning to re-open many of our offices during fiscal 2021, utilizing a three-phased approach to provide flexibility for employees with a focus on social distancing and safety.

Our offices will not re-open until local authorities permit us to do so and our own criteria and conditions to ensure employee health and safety are satisfied.

There can be no assurances as to when we re-open our offices or that there will be no negative impacts arising from the return to the office environment.

As of May 31, 2020, there has been minimal interruptions in our ability to provide our products, services and support to our clients.

Working remotely has had relatively little impact on the productivity of our employees, including our ability to gather content.

We continue to work closely with our clients to provide consistent access to our products and services and have remained flexible to achieve client priorities as many implement their own contingency plans.

We have increased our support desk resources to manage increased volumes and have extended additional web IDs to our clients in need of immediate remote access to financial data.

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Our revenue, earnings, and ASV are relatively stable and predictable as a result of our subscription-based business model.

To date, we have not seen the COVID-19 pandemic having a material impact on our revenue or ASV, although we anticipate that there may be some level of revenue and ASV weakness going forward due to longer sales cycles and lower incremental client billings.

The COVID-19 pandemic could curtail our clients’ spending and lead them to delay or defer purchasing decisions or product and service implementations or may cause them to cancel or reduce their spending with us.

In determining the possible revenue and ASV impact from the COVID-19 pandemic, we are considering the potential delay in decision making causing longer sales cycles (or conversely delayed cancellations from clients);

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and possible reduced seasonal hiring at investment banks, which are some of our largest clients, over the summer months.

At this time, we anticipate that there may be some level of revenue and ASV weakness due to longer sales cycles and lower client billings.

While our revenue, earnings, and ASV are relatively stable and predictable as a result of our subscription-based business model, we may experience the the effects of the COVID-19 pandemic on our results of operations and overall financial performance beginning in the third quarter fiscal 2020.

Our operations also have been affected by a range of external factors related to the COVID-19 pandemic that are not within our control.

For example, many jurisdictions have imposed a wide range of restrictions on the physical movement of our employees and vendors to limit the spread of COVID-19.

If the COVID-19 pandemic has a substantial impact on our employees or vendors attendance or productivity, our operations, including our ability to gather content, may suffer, and in turn our results of operations and overall financial performance may be harmed.

Furthermore, if our employees incur substantial medical expenses due to COVID-19, our expenses may increase due to our self-funded employee medical insurance model.

We have taken numerous steps, and will continue to take further actions, in our approach to addressing the COVID-19 pandemic.

We have implemented our business continuity plans and our incident management team is in place to respond to changes in our environment quickly and effectively.

As a result of the COVID-19 pandemic, we instructed employees at many of our offices across the globe (including our corporate headquarters) to work from home on a temporary basis and have implemented travel restrictions.

We have also incurred additional expenses in connection with our response to the COVID-19 pandemic, including costs related to enabling our employees to support our clients while working remotely.

These additional expenses were not material to our second quarter fiscal 2020 results.

We also are working closely with our clients to support them as they implement their own contingency plans, helping them access our products and services remotely.

We have increased our support desk resources to manage increased volumes and have extended additional web IDs to clients in need of immediate remote access to financial data.

We believe that implementing cost reduction efforts will help us mitigate the impact that reduced revenues may have on our fiscal 2020 operating income.

We are considering reducing expenses through such methods as reduction of discretionary spending including travel and entertainment;

tighter management of headcount spending, with a focus on our most critical areas and hiring in lower cost locations;

We have incurred, and expect to continue to incur, additional expenses in response to the COVID-19 pandemic, including costs to enable our employees to support our clients while working remotely.

These additional expenses were not material to our third quarter fiscal 2020 results, and reductions in discretionary spending, particularly travel and entertainment, have more than offset these increased expenses.

We believe that implementing additional cost reduction efforts will help us mitigate the impact that any reduced revenues may have on our future operating income.

We may consider reducing expenses further through such methods as reduction of discretionary spending, including travel and entertainment;

tighter management of headcount spending;

and reduction in variable third-party content costs in a manner consistent with client demand.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act was signed into law to address the economic impact of the COVID-19 pandemic.

We continue to monitor any effects that may result from the CARES Act and other similar legislation or actions in geographies in which our business operates.

Refer to “Risk Factors” for further discussion of the impact of the COVID-19 pandemic on our business.

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(in thousands, except client and user counts and per share data)

February 29, 2020 February 28, 2019

May 31, 2020 May 31, 2019

Revenue $ 374.1 $ 364.5 2.6 %

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The table below provides a reconciliation of ASV to organic ASV:

(in millions) February 29, 2020 February 28, 2019

(in millions) May 31, 2020 May 31, 2019

As reported ASV (1)

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(1) ASV at any given point in time represents the forward-looking revenue for the next 12 months from all subscription services currently being supplied to clients and excludes professional service fees, which are not subscription-based.

The professional service fees are $24.5 million and $21.9 million as of February 29, 2020 and February 28, 2019, respectively.

The professional service fees are $24.5 million and $23.1 million as of May 31, 2020 and May 31, 2019, respectively.

(2) Organic ASV excludes ASV from acquisitions and dispositions completed within the last 12 months, the effects of foreign currency movements on the current year period and professional services.

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Organic Annual Subscription Value Growth

Organic ASV at any given point in time represents the forward-looking revenue for the next 12 months from all subscription services currently being supplied to clients, excludes ASV from acquisitions and dispositions completed within the last 12 months, the effects of foreign currency movements on the current year period and professional services.

With proper notice provided to us, our clients can add to, delete portions of, or terminate service, subject to certain contractual limitations.

As of February 29, 2020, our organic ASV totaled $1.48 billion, up 4.2% over the prior year comparable period.

As of February 29, 2020, organic ASV plus professional services was $1.50 billion, an increase of 4.3%, compared to the prior year period.

The increase in year-over-year organic ASV was due to growth across all of our geographic segments from increased sales of products and solutions to new and existing clients, with the majority of the ASV increase related to the Americas, which also benefited from our annual price increase for most clients in this segment, followed by growth in EMEA and Asia Pacific, partially offset by increased cancellations compared to the prior year period.

The increase in ASV from our workflow solutions was primarily driven by Analytics and Trading, CTS and Wealth.

The ASV increase in Analytics and Trading was mainly due to increased sales for our performance and risk products and our portfolio analytics solutions.

The increase in ASV from CTS was primarily driven by increased sales in core and premium data feeds while the ASV increase in Wealth was mainly due to increased traditional and web-based workstation sales.

As of February 29, 2020, organic ASV from the Americas was $925.6 million, an increase of 3.9% from the prior year period.

Organic ASV from EMEA was $ 407.8 million as of February 29, 2020, an increase of 3.8% compared to the prior year period.

Asia Pacific ASV was $145.7 million as of February 29, 2020, an increase of 7.2%, compared to the prior year period.

Combined EMEA and Asia Pacific ASV represented 37.4% of total ASV as of February 29, 2020, consistent with 37.3% in the prior year period.

ASV increased in the Americas as of February 29, 2020, compared to the prior year period, primarily from Analytics and Trading, CTS, and Wealth, along with our annual price increase in the region, partially offset by increased cancellations compared to the prior year period.

As of February 29, 2020, ASV increased in Asia Pacific mainly due to Analytics and Trading, CTS and Research.

The ASV increase in EMEA was primarily driven by Analytics and Trading and CTS, as well as decreased cancellations in the region compared to the prior year period.

Buy-side and sell-side ASV growth rates for the second quarter of fiscal 2020 were 4.5% and 2.9%, respectively, compared to the prior year period.

Buy-side clients account for 84.1% of ASV, which include traditional asset managers, wealth advisors, corporations, hedge funds, insurance companies, plan sponsors and fund of funds.

The remaining portion of ASV is derived from sell-side firms that perform M&A advisory work, capital markets services and equity research.

As of May 31, 2020, our organic ASV totaled $1.49 billion, up 5.0% over the prior year comparable period.

As of May 31, 2020, organic ASV plus professional services was $1.52 billion, an increase of 5.0% compared to the prior year period.

The increase in year-over-year organic ASV was due to growth across all of our geographic segments from increased sales of products and solutions to new and existing clients.

The majority of the ASV increase related to the Americas, followed by growth in Asia Pacific and EMEA, as well as the benefit from our annual price increase, partially offset by cancellations.

The increase in ASV was driven by growth in all our workflow solutions, primarily from an increase in Analytics and Trading and CTS, followed by Wealth and Research.

The ASV increase in Analytics and Trading was mainly due to increased sales for our risk management, portfolio analytics and reporting solutions.

The increase in ASV from CTS was primarily driven by increased sales in premium and core data feeds, while the ASV increase in Wealth was mainly due to increased traditional and web-based workstation sales.

The ASV increase in Research was mainly due to price increases from the existing client base.

As of May 31, 2020, ASV from the Americas was $931.5 million, an increase of 5.0% from the prior year period.

ASV from EMEA was $411.9 million as of May 31, 2020, an increase of 3.7% compared to the prior year period.

Asia Pacific ASV was $150.4 million as of May 31, 2020, an increase of 8.9% compared to the prior year period.

Combined EMEA and Asia Pacific ASV represented 37.6% of total ASV as of May 31, 2020, consistent with the prior year period.

ASV in the Americas as of May 31, 2020, increased compared to the prior year period, primarily from Analytics and Trading, CTS and Wealth, as well as the benefit from our annual price increase, partially offset by cancellations.

As of May 31, 2020, ASV increased in Asia Pacific mainly due to Analytics and Trading, Research, CTS, and the benefit from our annual price increase.

The ASV increase in EMEA was primarily driven by Analytics and Trading, CTS and the benefit from our annual price increase, as well as decreased cancellations in the region compared to the prior year period.

Buy-side and sell-side organic ASV growth rates for the third quarter of fiscal 2020 were 4.8% and 5.6%, respectively, compared to the prior year period.

Buy-side clients account for 84% of organic ASV, which include traditional asset managers, wealth advisors, corporations, hedge funds, insurance companies, plan sponsors and fund of funds.

The remainder of our organic ASV is derived from sell-side firms that perform M&A advisory work, capital markets services and equity research.

Client and User Additions

Our total client count was 5,688 as of February 29, 2020, representing a net increase of 283 or 5.2% in the last 12 months.

Our total client count was 5,743 as of May 31, 2020, representing a net increase of 288 or 5.3% in the last 12 months.

The increase was primarily due to an increase in corporate and wealth management clients.

As of February 29, 2020, there were 128,896 professionals using FactSet, representing a net increase of 6,833 or 5.6% in the last 12 months, driven primarily by traditional and web-based workstation sales.

ASV retention for the periods ending February 29, 2020 and February 28, 2019 exceeded 95%.

Client retention was 89% for the period ended February 29, 2020, compared to retention of 91% in the prior year period.

Client retention was lower primarily due to continued cost pressures among institutional asset managers and hedge funds.

As of February 29, 2020, our largest individual client accounted for less than 3% of total subscriptions and annual subscriptions from our ten largest clients did not surpass 14% of total client subscriptions.

As of May 31, 2020, there were 131,095 professionals using FactSet, representing a net increase of 8,144 or 6.6% in the last 12 months, driven primarily by wealth management, corporate, and banking clients.

ASV retention for the periods ending May 31, 2020 and May 31, 2019 exceeded 95%.

Client retention was 89% for the period ended May 31, 2020, compared to retention of 90% in the prior year period.

Client retention was lower primarily due to continued cost pressures among institutional asset managers and sell-side clients.

As of May 31, 2020, our largest individual client accounted for just above 2.5% of total subscriptions, and annual subscriptions from our ten largest clients did not surpass 15% of total client subscriptions.

Returning Value to Stockholders

On February 18, 2020, our Board of Directors approved a regular quarterly dividend of $0.72 per share.

The cash dividend of $27.1 million was paid on March 19, 2020 to common stockholders of record at the close of business on February 28, 2020.

We repurchased 267,500 shares of common stock for $74.2 million during the second quarter of fiscal 2020 under our existing share repurchase program.

For the six months ended February 29, 2020, we returned $213.0 million to stockholders in the form of share repurchases and dividends.

On May 5, 2020, FactSet’s Board of Directors approved a 7% increase in the regular quarterly dividend from $0.72 to $0.77 per share.

The cash dividend of $29.0 million was paid on June 18, 2020 to common stockholders of record at the close of business on May 29, 2020.

We repurchased 46,636 shares of common stock for $12.4 million during the third quarter of fiscal 2020 under our existing share repurchase program.

For the nine months ended May 31, 2020, we returned $252.4 million to stockholders in the form of share repurchases and dividends.

Over the last 12 months, we returned $341.8 million to stockholders in the form of share repurchases and dividends.

As of February 29, 2020, $80.0 million remains available for future share repurchases under the existing share repurchase program.

On March 24, 2020, our Board of Directors approved a $220.0 million increase to the existing share repurchase program.

Subsequent to this expansion, $300.0 million is available for future share repurchases.

As a result of this expansion, $287.6 million is available for future share repurchases as of May 31, 2020.

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Capital Expenditures

Capital expenditures in the second quarter of fiscal 2020 were $25.1 million, compared to $12.0 million a year ago.

Capital expenditures of $7.1 million, or 28%, were primarily related to investment in technology.

The remainder of our capital expenditures was primarily for the build-out of our new corporate headquarters in Norwalk, Connecticut and office space in India.

Capital expenditures in the third quarter of fiscal 2020 were $11.0 million, compared to $11.4 million in the prior year period.

Capital expenditures of $5.9 million, or 54%, were related to facilities investments, primarily for the build-out of our new corporate headquarters in Norwalk, Connecticut and office space in the Philippines.

The remainder of our capital expenditures, $5.1 million, was primarily related to investment in technology and development costs related to internal-use software.

Results of Operations

For an understanding of the significant factors that influenced our performance for the three and six months ended February 29, 2020 and February 28, 2019, the following discussion should be read in conjunction with the consolidated financial statements and related notes presented in this Quarterly Report on Form 10-Q.

Three Months Ended Six Months Ended

February 29, February 28, Change February 29, February 28, Change

(in thousands, except per share data) 2020 2019 2020 2019

For an understanding of the significant factors that influenced our performance for the three and nine months ended May 31, 2020 and May 31, 2019, the following discussion should be read in conjunction with the consolidated financial statements and related notes presented in this Quarterly Report on Form 10-Q.

Three Months Ended May 31, Nine Months Ended May 31,

(in thousands, except per share data) 2020 2019 Change 2020 2019 Change

Revenue $ 374,083 $ 364,533 2.6 % $ 1,110,521 $ 1,071,068 3.7 %

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Diluted weighted average common shares 38,481 38,993 38,548 38,807

Three months ended February 29, 2020 compared to three months ended February 28, 2019

Revenue for the three months ended February 29, 2020 was $369.8 million, an increase of 4.2%, consistent with the organic revenue increase of 4.2%, compared to the prior year period.

The increase in revenue was due to growth across all our operating segments for the three months ended February 29, 2020 compared to the prior year period, with the majority of the increase in revenue driven by the Americas, which also benefited from our annual price increase for the majority of our clients in the region, partially offset by cancellations.

Six months ended February 29, 2020 compared to six months ended February 28, 2019

Revenue for the six months ended February 29, 2020 was $736.4 million, an increase of 4.2%, comparable with the organic revenue increase of 4.2%, over the same period a year ago.

The increase in revenue was due to growth across all our operating segments for the six months ended February 29, 2020 compared to the prior year period, with the increase in revenue primarily related to the Americas, which also benefited from our annual price increase for the majority of our clients in the region during the second quarter of fiscal 2020, partially offset by cancellations.

Three months ended May 31, 2020 compared to three months ended May 31, 2019

Revenue for the three months ended May 31, 2020 was $374.1 million, an increase of 2.6%, consistent with the organic revenue increase of 2.6% compared to the prior year period.

The increase in revenue was due to growth across all our operating segments for the three months ended May 31, 2020 compared to the prior year period, with the majority of the increase in revenue driven by the Americas, as well as the benefit from our annual price increase, partially offset by cancellations.

Nine months ended May 31, 2020 compared to nine months ended May 31, 2019

Revenue for the nine months ended May 31, 2020 was $1,110.5 million, an increase of 3.7%, comparable with the organic revenue increase of 3.6% over the same period a year ago.

The increase in revenue was due to growth across all our operating segments for the nine months ended May 31, 2020 compared to the prior year period, with the increase in revenue primarily related to the Americas and the benefit from our annual price increase, partially offset by cancellations.

Revenue by Operating Segment

Three Months Ended Six Months Ended

February 29, February 28, Change February 29, February 28, Change

Three Months Ended May 31, Nine Months Ended May 31,

(in thousands)

2020 2019 2020 2019

2020 2019 Change 2020 2019 Change

Americas $ 230,992 $ 226,961 1.8 % $ 695,053 $ 672,479 3.4 %

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28.2 % 28.1 % 27.8 % 27.9 %

International

$ 137,049 $ 131,580 4.2 % $ 272,377 $ 261,017 4.4 %

37.1 % 37.1 % 37.0 % 36.9 %

$ 369,780 $ 354,895 4.2 % $ 736,438 $ 706,535 4.2 %

Three months ended February 29, 2020 compared to three months ended February 28, 2019

Revenue from our Americas segment increased 4.2% to $232.7 million during the three months ended February 29, 2020, compared to $223.3 million from the same period a year ago.

This revenue growth was due mainly to increased sales of products and solutions to clients primarily in Analytics and Trading, CTS and Wealth, along with our annual price increase for the majority of the Americas' clients, partially offset by cancellations.

Organic revenue in the Americas increased 4.2% compared to the same period a year ago.

Revenue from our Americas operations accounted for 62.9% of our consolidated revenue during the second quarter of fiscal 2020 and 2019.

EMEA revenue increased 3.2% to $102.1 million during the three months ended February 29, 2020, compared to $98.9 million from the same period a year ago.

Asia Pacific $ 37,671 $ 35,073 7.4 % $ 107,113 $ 99,392 7.8 %

% of revenue 10.1 % 9.6 % 9.6 % 9.3 %

Consolidated $ 374,083 $ 364,533 2.6 % $ 1,110,521 $ 1,071,068 3.7 %

Three months ended May 31, 2020 compared to three months ended May 31, 2019

Revenue from our Americas segment increased 1.8% to $231.0 million during the three months ended May 31, 2020, compared to $227.0 million from the same period a year ago.

This revenue growth was due mainly to increased sales of products and solutions to clients primarily in Analytics and Trading, followed by CTS and Wealth, along with the benefit from our annual price increase, partially offset by cancellations.

Organic revenue in the Americas also increased 1.8% compared to the same period a year ago.

Revenue from our Americas operations accounted for 61.7% of our consolidated revenue for the three months ended May 31, 2020 compared to 62.3% in the prior year period.

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EMEA revenue increased 2.8% to $105.4 million during the three months ended May 31, 2020, compared to $102.5 million from the same period a year ago.

This revenue growth was mainly due to increased sales of products and solutions to clients primarily in Analytics and Trading and CTS, partially offset by cancellations.

The EMEA organic revenue growth rate was 3.1% for the three months ended February 29, 2020, compared to the same period a year ago.

Asia Pacific revenue increased 7.0% to $34.9 million during the three months ended February 29, 2020, compared to $32.6 million from the same period a year ago.

This revenue growth was due mainly to increased sales of products and solutions to clients primarily in the Analytics and Trading, CTS and Research workflows, partially offset by cancellations.

Asia Pacific organic revenue increased 7.0% for the three months ended February 29, 2020, compared to the same period a year ago.

Six months ended February 29, 2020 compared to six months ended February 28, 2019

Revenue from our Americas segment increased 4.2% to $464.1 million during the six months ended February 29, 2020, compared to $$445.5 million from the same period a year ago.

The EMEA organic revenue growth rate was 3.0% for the three months ended May 31, 2020, compared to the same period a year ago.

Foreign currency exchange rate fluctuations decreased our EMEA revenue growth rate by 20 basis points.

Asia Pacific revenue increased 7.4% to $37.7 million during the three months ended May 31, 2020, compared to $35.1 million from the same period a year ago.

This revenue growth was due mainly to increased sales of products and solutions to clients primarily in Analytics and Trading, CTS and Research, partially offset by cancellations.

Asia Pacific organic revenue increased 7.0% for the three months ended May 31, 2020, compared to the same period a year ago.

Foreign currency exchange rate fluctuations increased our Asia Pacific revenue growth rate by 40 basis points.

Nine months ended May 31, 2020 compared to nine months ended May 31, 2019

Revenue from our Americas segment increased 3.4% to $695.1 million during the nine months ended May 31, 2020, compared to $672.5 million from the same period a year ago.

This revenue growth was due mainly to increased sales of products and solutions to clients primarily in Analytics and Trading, CTS and Wealth, partially offset by cancellations.

Organic revenue in the Americas increased 3.3% compared to the same period a year ago.

Revenue from our Americas operations accounted for 63.0% of our consolidated revenue for the six months ended February 29, 2020, compared to 63.1% in the prior year period.

EMEA revenue increased 3.2% to $202.9 million during the six months ended February 29, 2020, compared to $196.7 million from the same period a year ago.

Revenue from our Americas operations accounted for 62.6% of our consolidated revenue for the nine months ended May 31, 2020, compared to 62.8% in the prior year period.

EMEA revenue increased 3.1% to $308.4 million during the nine months ended May 31, 2020, compared to $299.2 million from the same period a year ago.

This revenue growth was due mainly to increased sales of products and solutions to clients primarily in Analytics and Trading and CTS, partially offset by cancellations.

The EMEA organic revenue growth rate was 3.0% for the six months ended February 29, 2020, compared to the same period a year ago.

Asia Pacific revenue increased 8.0% to $69.4 million during the six months ended February 29, 2020, compared to $64.3 million from the same period a year ago.

This revenue growth was due mainly to increased sales of products and solutions to clients primarily in the Analytics and Trading, CTS and Research workflows, partially offset by cancellations.

Asia Pacific organic revenue increased 8.0% for the six months ended February 29, 2020, compared to the same period a year ago.

The EMEA organic revenue growth rate was 3.0% for the nine months ended May 31, 2020, compared to the same period a year ago.

Foreign currency exchange rate fluctuations decreased our EMEA revenue growth rate by 10 basis points.

Asia Pacific revenue increased 7.8% to $107.1 million during the nine months ended May 31, 2020, compared to $99.4 million from the same period a year ago.

This revenue growth was due mainly to increased sales of products and solutions to clients primarily in Analytics and Trading, CTS and Research, partially offset by cancellations.

Asia Pacific organic revenue increased 7.6% for the nine months ended May 31, 2020, compared to the same period a year ago.

Foreign currency exchange rate fluctuations increased our Asia Pacific revenue growth rate by 20 basis points.

Revenue by Workflow Solution

Three months ended February 29, 2020 compared to three months ended February 28, 2019

The revenue growth of 4.2% across our operating segments for the three months ended February 29, 2020 compared to the same period a year ago was primarily driven by Analytics and Trading, CTS, and Wealth, along with our annual price increase for the majority of our Americas' clients.

Revenue growth from Analytics and Trading was primarily due to increased sales of portfolio analytics solutions and performance and risk products.

Three months ended May 31, 2020 compared to three months ended May 31, 2019

The revenue growth of 2.6% across our operating segments for the three months ended May 31, 2020 compared to the same period a year ago was primarily driven by Analytics and Trading, CTS, and Wealth, along with the benefit from our annual price increase.

Revenue growth from Analytics and Trading was primarily due to increased demand for our risk management, portfolio analytics and reporting solutions.

The growth in CTS was driven mainly by increased sales of core and premium data feeds.

Wealth also experienced growth mainly due to higher sales of our traditional and web-based workstation product.

Offsetting these positive growth factors were increased cancellations compared to the prior year period, resulting from continued industry-wide cost pressures and firm consolidations.

Six months ended February 29, 2020 compared to six months ended February 28, 2019

The revenue growth of 4.2% across our operating segments for the six months ended February 29, 2020 compared to the same period a year ago was primarily driven by Analytics and Trading, CTS and Wealth, along with our annual price increase during the second quarter of fiscal 2020 for the majority of our Americas' clients.

Revenue growth from Analytics and Trading was mainly due to increased sales of portfolio analytics solutions and performance and risk products.

Offsetting these positive growth factors were cancellations resulting from continued industry-wide cost pressures and firm consolidations.

Nine months ended May 31, 2020 compared to nine months ended May 31, 2019

The revenue growth of 3.7% across our operating segments for the nine months ended May 31, 2020 compared to the same period a year ago was primarily driven by Analytics and Trading, CTS, and Wealth, along with the benefit from our annual price increase.

Revenue growth from Analytics and Trading was mainly due to increased sales of risk and portfolio analytics products.

CTS revenue growth was driven mainly by increased sales of core and premium data feeds.

The revenue growth from Wealth was primarily due to higher sales of our traditional and web-based workstation product.

Offsetting these positive growth factors were increased cancellations compared to the prior year period, resulting from continued industry-wide cost pressures and firm consolidations.

Offsetting these positive growth factors were cancellations resulting from continued industry-wide cost pressures and firm consolidations.

Table of Content s

Operating Expenses

Three Months Ended Six Months Ended

February 29, February 28, Change February 29, February 28, Change

(in thousands) 2020 2019 2020 2019

Three Months Ended May 31, Nine Months Ended May 31,

(in thousands) 2020 2019 Change 2020 2019 Change

Cost of services $ 170,703 $ 163,832 4.2 % $ 511,878 $ 495,716 3.3 %

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Cost of Services

Three months ended February 29, 2020 compared to three months ended February 28, 2019

For the three months ended February 29, 2020, cost of services increased 6.7% to $176.2 million compared to $165.1 million in the same period a year ago, primarily due to an increase in computer-related expenses and compensation costs.

Cost of services, when expressed as a percentage of revenue, was 47.7% during the second quarter of fiscal 2020, an increase of 110 basis points compared to the same period a year ago.

Three months ended May 31, 2020 compared to three months ended May 31, 2019

For the three months ended May 31, 2020, cost of services increased 4.2% to $170.7 million compared to $163.8 million in the same period a year ago, primarily due to an increase in computer-related expenses.

Cost of services, when expressed as a percentage of revenue, was 45.6% during the third quarter of fiscal 2020, an increase of 70 basis points compared to the same period a year ago.

This increase was primarily due to an increase in computer-related expenses, partially offset by a reduction in compensation costs, when expressed as a percentage of revenue.

Computer-related expenses, as a percentage of revenue, increased 120 basis points, primarily driven by increased technology investments including cloud-based hosting and licensed software arrangements.

Employee compensation, when expressed as a percentage of revenue, decreased 30 basis points in the second quarter of fiscal 2020, compared to the same period a year ago.

This decrease in employee compensation was primarily driven by revenue growth outpacing the growth of employee compensation, partially offset by higher annual base salaries and a net employee headcount increase, with the majority of the compensation included in cost of services focused in lower cost locations.

Six months ended February 29, 2020 compared to six months ended February 28, 2019

For the six months ended February 29, 2020, cost of services increased 2.8% to $341.2 million compared to $331.9 million in the same period a year ago, primarily due to an increase in computer-related expenses.

Cost of services, when expressed as a percentage of revenue, was 46.3% for the six months ended February 29, 2020, a decrease of 60 basis points compared to the same period a year ago.

This decrease was primarily driven by revenue growth outpacing the growth of employee compensation on a year-over-year basis, as well as a decrease in compensation costs and client communication costs, partially offset by an increase in computer-related expenses and employee compensation, when expressed as a percentage of revenue.

Employee compensation, when expressed as a percentage of revenue, decreased 130 basis points primarily driven by revenue growth outpacing the growth of cost of services, partially offset by a net headcount increase of 363 employees, with the majority of the compensation included in cost of services and focused mainly in lower cost locations.

The employee compensation decrease was also partially offset by higher annual base salaries and related benefits.

Client communication costs decreased 30 basis points, when expressed as a percentage of revenue due to a reduction in client hosting expenses.

Computer-related expenses, as a percentage of revenue, increased 150 basis points primarily driven by increased costs from cloud-based hosting and licensed software arrangements.

Employee compensation expense, when expressed as a percentage of revenue, decreased 50 basis points in the third quarter of fiscal 2020, compared to the same period a year ago.

This decrease in employee compensation expense was primarily driven by higher capitalization of compensation costs related to development of our internal-use software projects, as well as a shift in headcount distribution from higher to lower cost locations.

This employee compensation expense decrease was partially offset by higher annual base salaries, a net increase in employee headcount, with the majority of the compensation from new employee headcount included in cost of services, and a higher vacation accrual expense.

Nine months ended May 31, 2020 compared to nine months ended May 31, 2019

For the nine months ended May 31, 2020, cost of services increased 3.3% to $511.9 million compared to $495.7 million in the same period a year ago, primarily due to an increase in computer-related expenses and stock-based compensation.

Cost of services, when expressed as a percentage of revenue, was 46.1% for the nine months ended May 31, 2020, a decrease of 20 basis points compared to the same period a year ago.

This decrease was primarily driven by a reduction in employee compensation, partially offset by higher computer-related expenses, when expressed as a percentage of revenue.

Employee compensation expense, when expressed as a percentage of revenue, decreased 110 basis points, primarily driven by higher capitalization of compensation costs related to development of our internal-use software projects, as well as a shift in headcount distribution from higher to lower cost locations.

This employee compensation expense decrease was partially offset by higher annual base salaries, a net increase in employee headcount of 699 employees, with the majority of the compensation from new employee headcount included in cost of services, and higher vacation accrual expense.

Computer-related expenses, when expressed as a percentage of revenue, increased 120 basis points, primarily driven by increased technology investments including cloud-based hosting and licensed software arrangements.

Selling, General and Administrative

Three months ended February 29, 2020 compared to three months ended February 28, 2019

For the three months ended February 29, 2020, SG&A expenses increased 7.7% to $87.3 million, compared to $81.1 million for the same period a year ago, primarily due to an increase in professional fees, the timing of certain non-income related tax credits and an increase in compensation costs, partially offset by a reduction in travel expenses and a decrease in bad debt expense.

SG&A expenses, expressed as a percentage of revenue, were 23.6% during the second quarter of fiscal 2020, an increase of 80 basis points over the prior year period.

When expressed as a percentage of revenue, this increase was primarily driven by an increase in professional fees and the timing of certain non-income related tax credits, partially offset by a reduction in travel expenses and bad debt expense.

Professional fees, when expressed as a percentage of revenue, increased 100 basis points to support our three-year content and technology investment plan.

The timing of certain non-income related tax credits resulted in an increase of 40 basis points, when expressed as a percentage of revenue.

Travel expenses decreased 60 basis points, compared to the prior year period, due to an internal focus on cost discipline measures.

Three months ended May 31, 2020 compared to three months ended May 31, 2019

For the three months ended May 31, 2020, SG&A expenses decreased 2.1% to $81.7 million, compared to $83.5 million for the same period a year ago, primarily due to a decrease in non-compensatory employee related expenses, partially offset by an increase in compensation expense.

SG&A expenses, expressed as a percentage of revenue, were 21.9% during the third quarter of fiscal 2020, a decrease of 100 basis points over the prior year period.

When expressed as a percentage of revenue, this decrease was primarily driven by a decrease in non-compensatory employee related expenses and bad debt expense, partially offset by an increase in employee compensation expense including stock-based compensation.

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Non-compensatory employee related expenses, inclusive of travel, entertainment and office expenses, when expressed as a percentage of revenue, decreased 170 basis points mainly due to restrictions and impacts related to the COVID-19 pandemic.

Bad debt decreased 40 basis points, compared to the prior year period, when expressed as a percentage of revenue.

Six months ended February 29, 2020 compared to six months ended February 28, 2019

For the six months ended February 29, 2020, SG&A expenses increased 6.3% to $175.8 million, compared to $165.4 million for the same period a year ago, primarily due to an increase in employee compensation, professional fees and the timing of certain non-income related tax credits, partially offset by a decrease in bad debt expense and travel expenses.

SG&A expenses, expressed as a percentage of revenue, were 23.9% for the six months ended February 29, 2020, an increase of 50 basis points over the prior year period.

When expressed as a percentage of revenue, this increase was primarily driven by growth across the SG&A drivers outpacing the growth of revenue, an increase in professional fees and the timing of certain non-income related tax credits, partially offset by a decrease in bad debt expense and travel expenses.

Professional fees, when expressed as a percentage of revenue, increased 60 basis points to support our three-year content and technology investment plan.

Travel expenses decreased 50 basis points, compared to the prior year period, due to an internal focus on cost discipline measures.

Bad debt decreased 60 basis points, over the prior year period.

Employee compensation expense, including stock-based compensation, increased 80 basis points, when expressed as a percentage of revenue, due to higher annual base salaries, a net increase in employee headcount, higher vacation accrual expense, and incremental employee-based stock grants.

Nine months ended May 31, 2020 compared to nine months ended May 31, 2019

For the nine months ended May 31, 2020, SG&A expenses increased 3.5% to $257.6 million, compared to $248.9 million for the same period a year ago, primarily due to an increase in employee compensation, professional fees, the effects of foreign currency fluctuations, and occupancy costs, partially offset by a decrease in non-compensatory employee related expenses and bad debt expense.

SG&A expenses, expressed as a percentage of revenue, were 23.2% for the nine months ended May 31, 2020, consistent with the prior year period.

An increase in professional fees and employee compensation expense, partially offset by a decrease in non-compensatory employee related expenses and bad debt expense, attributed to the consistent year over year SG&A costs, when expressed as a percentage of revenue.

Professional fees, when expressed as a percentage of revenue, increased 40 basis points in support of our technology plan and business transformation activities.

Employee compensation expense, when expressed as a percentage of revenue, increased 30 basis points, primarily driven by higher annual base salaries, a net increase in employee headcount and higher vacation accrual expense.

Non-compensatory employee related expenses, inclusive of travel, entertainment and office expenses, when expressed as a percentage of revenue, decreased 90 basis points mainly due to restrictions and impacts related to the COVID-19 pandemic.

Bad debt decreased 50 basis points compared to the prior year period when expressed as a percentage of revenue.

Operating Income and Operating Margin

Three months ended February 29, 2020 compared to three months ended February 28, 2019

Operating income decreased 2.2% to $106.3 million for the three months ended February 29, 2020 compared to $108.7 million in the prior year period.

Operating income decreased due to an increase in computer-related expenses, employee compensation, professional fees, and the timing of certain non-income related tax credits, partially offset by an increase in revenue, a decrease in travel expenses and bad debt expense.

Operating margin decreased to 28.7% during the second quarter of fiscal 2020 compared to 30.6% in the prior year period.

The decrease in operating margin on a year-over-year basis was primarily due to increased computer-related expenses, professional fees and the timing of certain non-income related tax credits, when expressed as a percentage of revenue.

These reductions in operating margin were partially offset by revenue growth, and reductions in travel expenses, bad debt expense and employee compensation, when expressed as a percentage of revenue.

Six months ended February 29, 2020 compared to six months ended February 28, 2019

Operating income increased 4.9% to $219.4 million for the six months ended February 29, 2020 compared to $209.2 million in the prior year period.

Operating income increased due to increased revenue and a reduction in bad debt expense and travel expenses, partially offset by an increase in computer-related expenses, compensation expense, and professional fees.

Operating margin increased to 29.8% for the six months ended February 29, 2020 compared to 29.6% in the prior year period.

The increase in operating margin on a year-over-year basis was primarily due to revenue growth and a reduction in employee compensation, bad debt expense, travel expenses, and client communication costs, partially offset by an increase in computer-related expenses and professional fees, when expressed as a percentage of revenue.

Three months ended May 31, 2020 compared to three months ended May 31, 2019

Operating income increased 3.8% to $121.6 million for the three months ended May 31, 2020 compared to $117.2 million in the prior year period.

Operating income increased due to higher revenue and a reduction in non-compensatory employee related expenses, partially offset by an increase in computer-related expenses and employee compensation expense compared to the prior year period.

The impact of foreign currency increased operating income by $1.5 million year over year.

Operating margin increased to 32.5% during the third quarter of fiscal 2020 compared to 32.2% in the prior year period.

The increase in operating margin on a year-over-year basis was primarily due to a decrease in non-compensatory employee related expenses and bad debt expense, partially offset by an increase in computer-related expenses and employee compensation expense including stock-based compensation, when expressed as a percentage of revenue.

Nine months ended May 31, 2020 compared to nine months ended May 31, 2019

Operating income increased 4.5% to $341.1 million for the nine months ended May 31, 2020 compared to $326.5 million in the prior year period.

Operating income increased due to increased revenue and a reduction in non-compensatory employee related expenses and bad debt expense, partially offset by an increase in computer-related expenses, employee compensation expense including stock-based compensation, and professional fees.

The impact of foreign currency increased operating income by $2.7 million year over year.

Operating margin increased to 30.7% for the nine months ended May 31, 2020 compared to 30.5% in the prior year period.

The increase in operating margin on a year-over-year basis was primarily due to revenue growth and a reduction in non-compensatory employee related costs, employee compensation expense and bad debt expense, partially offset by an increase in computer-related expenses and professional fees, when expressed as a percentage of revenue.

Operating Income by Segment

Three Months Ended Six Months Ended

February 29, February 28, Change February 29, February 28, Change

(in thousands) 2020 2019 2020 2019

Three Months Ended May 31, Nine Months Ended May 31,

(in thousands) 2020 2019 Change 2020 2019 Change

Americas $ 54,019 $ 51,012 5.9 % $ 144,952 $ 140,549 3.1 %

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Total Operating Income $ 121,640 $ 117,240 3.8 % $ 341,083 $ 326,467 4.5 %

Our operating segments are aligned with how we manage the business, the geographic markets we serve, and how the chief operating decision maker ("CODM") assesses performance.

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Our operating segments are aligned with how we manage the business, the geographic markets we serve, and how our chief operating decision maker ("CODM") assesses performance.

Our internal financial reporting structure is based on three reportable segments, the Americas, EMEA and Asia Pacific, which we believe helps us better manage the business and view the markets we serve.

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The expenses incurred at these locations are allocated to each segment based on a percentage of revenue.

Three months ended February 29, 2020 compared to three months ended February 28, 2019

Americas operating income decreased 9.6% to $41.3 million during the three months ended February 29, 2020 compared to $45.7 million in the same period a year ago.

The decrease in Americas operating income was primarily due to an increase in computer-related expenses and professional fees, partially offset by revenue growth of 4.2%, which includes our annual price increase for most clients in this segment, and a reduction in bad debt expense.

Computer-related expenses increased year-over-year primarily due to increased technology investments including costs from cloud-based hosting and licensed software arrangements.

Professional fees increased to support our three-year content and technology investment plan.

EMEA operating income decreased 1.4% to $42.7 million during the three months ended February 29, 2020 compared to $43.2 million in the same period a year ago.

The decrease in EMEA operating income was primarily due to an increase in employee compensation partially offset by revenue growth of 3.2%.

Employee compensation increased primarily due to a net headcount increase of 4.6% over the past 12 months, annual base salary increases year-over-year and severance charges.

Asia Pacific operating income increased 12.9% to $22.3 million during the three months ended February 29, 2020, compared to $19.7 million in the same period a year ago.

The increase in the Asia Pacific operating income was mainly due to revenue growth of 7.0%, partially offset by an increase in employee compensation.

The increase in employee compensation was primarily due to a net headcount increase of 5.7% in our Asia Pacific workforce in the last 12 months and annual base salary increases year-over-year.

Six months ended February 29, 2020 compared to six months ended February 28, 2019

Americas operating income increased 1.6% to $90.9 million during the six months ended February 29, 2020 compared to $89.5 million in the same period a year ago.

The increase in Americas operating income was primarily due to revenue growth of 4.2%, which includes our annual price increase for most clients in this region, a decrease in employee compensation and bad debt expense, partially offset by an increase in computer-related expenses and professional fees.

Employee compensation decreased primarily due to a net reduction in headcount of 1.3% over the past 12 months, partially offset by annual base salary increases year-over-year.

Computer-related expenses increased year-over-year primarily due to increased technology investments including costs from cloud-based hosting and licensed software arrangements.

Professional fees increased mainly related to support our three-year content and technology investment plan.

EMEA operating income increased 1.9% to $83.9 million during the six months ended February 29, 2020 compared to $82.3 million in the same period a year ago.

The increase in the EMEA operating income was primarily due to revenue growth of 3.2%, partially offset by an increase in employee compensation expense.

Employee compensation increased primarily due to a net headcount increase of 4.6% over the past 12 months and annual base salary increases year-over-year.

Asia Pacific operating income increased 19.5% to $44.6 million during the six months ended February 29, 2020, compared to $37.4 million in the same period a year ago.

The increase in the Asia Pacific operating income was mainly due to revenue growth of 8.0%, partially offset by an increase in compensation expense.

Employee compensation increased as a result of a 5.7% increase in our Asia Pacific workforce in the last 12 months and annual base salary increases year-over-year.

Three months ended May 31, 2020 compared to three months ended May 31, 2019

Americas operating income increased 5.9% to $54.0 million during the three months ended May 31, 2020 compared to $51.0 million in the same period a year ago.

The increase in Americas operating income was primarily due to revenue growth of 1.8%, inclusive of our annual price increase, a decrease in non-compensatory employee related expenses, and a decrease in employee compensation expense, partially offset by an increase in computer-related expenses.

Non-compensatory employee related expenses, inclusive of travel, entertainment and office expenses, decreased mainly due to restrictions and impacts related to the COVID-19 pandemic.

Employee compensation expense decreased mainly due to higher capitalization of compensation costs related to development of our internal-use software projects.

This decrease in employee compensation expense was partially offset by annual base salary increases year-over-year, a net increase in employee headcount, higher vacation accrual expense and incremental employee-based stock grants.

Computer-related expenses increased primarily due to increased technology investments including costs from cloud-based hosting and licensed software arrangements.

EMEA operating income decreased 2.6% to $43.6 million during the three months ended May 31, 2020 compared to $44.8 million in the same period a year ago.

The decrease in EMEA operating income was primarily due to an increase in employee compensation expense partially offset by revenue growth of 2.8%, inclusive of our annual price increase.

The impact of foreign currency increased operating income by $1.5 million year over year.

Employee compensation expense increased due to higher vacation accrual expense, a net increase in employee headcount and annual base salary increases year-over-year.

Asia Pacific operating income increased 11.9% to $24.0 million during the three months ended May 31, 2020, compared to $21.4 million in the same period a year ago.

The increase in the Asia Pacific operating income was mainly due to revenue growth of 7.4%, inclusive of our annual price increase, and a decrease in non-compensatory employee related expenses, partially offset by an increase in employee compensation expense.

Non-compensatory employee related expenses, inclusive of travel, entertainment and office expenses, decreased mainly due to restrictions and impacts related to the COVID-19 pandemic.

Employee compensation expense increased mainly due to a net increase in employee headcount and annual base salary increases year-over-year.

Nine months ended May 31, 2020 compared to nine months ended May 31, 2019

Americas operating income increased 3.1% to $145.0 million during the nine months ended May 31, 2020 compared to $140.5 million in the same period a year ago.

The increase in Americas operating income was primarily due to revenue growth of 3.4%, inclusive of our annual price increase, and decreases in bad debt expense, non-compensatory employee related costs, and employee compensation expense, partially offset by an increase in computer-related expenses and professional fees.

Non-compensatory employee related expenses, inclusive of travel, entertainment and office expenses, decreased mainly due to restrictions and impacts related to the COVID-19 pandemic.

Employee compensation expense decreased mainly due to higher capitalization of compensation costs related to development of our internal-use software projects.

This decrease in employee compensation expense was partially offset by higher annual base salaries, a net increase in employee headcount of 3.9% over the past 12 months, higher vacation accrual expense and incremental employee-based stock grants.

Computer-related expenses increased primarily due to increased technology investments including costs from cloud-based hosting and licensed software arrangements.

Professional fees increased to support our technology investment plan and business transformation activities.

EMEA operating income increased 0.3% to $127.5 million during the nine months ended May 31, 2020 compared to $127.1 million in the same period a year ago.

The increase in EMEA operating income was primarily due to revenue growth of 3.1%, inclusive of our annual price increase, partially offset by an increase in employee compensation expense.

The impact of foreign currency increased operating income by $4.8 million year over year.

Employee compensation increased primarily due to higher vacation accrual expense, a net increase in employee headcount of 6.7% over the past 12 months and annual base salary increases year-over-year.

Table of Content s

Asia Pacific operating income increased 16.7% to $68.6 million during the nine months ended May 31, 2020, compared to $58.8 million in the same period a year ago.

The increase in Asia Pacific operating income was mainly due to revenue growth of 7.8%, inclusive of our annual price increase, partially offset by an increase in employee compensation expense and occupancy costs.

The impact of foreign currency decreased operating income by $2.3 million year over year.

Employee compensation expense increased as a result of a 9.0% increase in our Asia Pacific workforce in the last 12 months and annual base salary increases year-over-year.

Occupancy costs increased mainly due to facility costs in the Philippines.

Income Taxes, Net Income and Diluted Earnings per Share

Three Months Ended Six Months Ended

February 29, February 28, Change February 29, February 28, Change

(in thousands, except for per share data) 2020 2019 2020 2019

Three Months Ended May 31, Nine Months Ended May 31,

(in thousands, except for per share data) 2020 2019 Change 2020 2019 Change

Provision for income taxes $ 17,924 $ 21,119 (15.1) % $ 47,131 $ 52,413 (10.1) %

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Diluted earnings per common share $ 2.63 $ 2.37 11.0 % $ 7.36 $ 6.73 9.4 %

Three months ended February 29, 2020 compared to three months ended February 28, 2019

For the three months ended February 29, 2020, the provision for income taxes was $14.4 million, a decrease of 26.6% from the same period a year ago.

The provision decreased due primarily to a higher windfall tax benefit from stock-based compensation of $4.7 million for the three months ended February 29, 2020, $2.4 million income tax expense from the settlement with a tax authority recognized during the three months ended February 28, 2019, partially offset by a $1.1 million benefit from the revision of the one-time transition tax on accumulated earnings and profits of foreign subsidiaries permitted by the U.S.

Tax Cuts and Jobs Act ("TCJA") recognized during the three months ended February 28, 2019.

Six months ended February 29, 2020 compared to six months ended February 28, 2019

For the six months ended February 29, 2020, the provision for income taxes was $29.2 million, a decrease of 6.7% from the same period a year ago.

The provision decreased mainly due to higher net tax benefits, partially offset by higher operating income for the six months ended February 29, 2020 compared to the prior year period.

The net increase in tax benefits of $10.6 million for the six months ended February 29, 2020 compared to $6.6 million for the prior year period, was primarily driven by an income tax expense from the settlement with a tax authority during the six months ended February 28, 2019, coupled with benefits recognized during the six months ended February 29, 2020 from finalizing prior years' tax returns, remeasurement of a foreign net deferred tax position due to changes in the jurisdiction's tax rate and higher windfall tax benefits from stock-based compensation.

The reduction in the provision was partially offset by the benefit from the revision of the one-time transition tax on accumulated earnings and profits of foreign subsidiaries permitted by the TCJA recognized during the six months ended February 28, 2019.

Three months ended May 31, 2020 compared to three months ended May 31, 2019

For the three months ended May 31, 2020, the provision for income taxes was $17.9 million, compared to $21.1 million from the same period a year ago.

The provision decreased due mainly to a lower effective tax rate as of May 31, 2020 compared to the same period a year ago, primarily driven by higher research and development ("R&D") tax credits and a higher foreign-derived intangible income ("FDII") deduction, coupled with the effect of applying the lower effective tax rate to the first half of fiscal 2020.

The three months ended May 31, 2019 included a $5.8 million income tax expense from finalizing the prior year’s tax returns with no similar event for the three months ended May 31, 2020.

The decrease to the provision was partially offset by increased income tax expense from higher operating income for the three months ended May 31, 2020 compared to the prior year period and $3.3 million in higher windfall tax benefits from stock-based compensation recognized during the three months ended May 31, 2019 compared to the three months ended May 31, 2020.

Nine months ended May 31, 2020 compared to nine months ended May 31, 2019

For the nine months ended May 31, 2020, the provision for income taxes was $47.1 million, compared to $52.4 million from the same period a year ago.

The provision decreased due mainly to a lower effective tax rate as of May 31, 2020 compared to the same period a year ago, primarily driven by higher R&D tax credits and a higher FDII deduction, coupled with the effect of applying the lower effective tax rate to the first half of fiscal 2020.

The nine months ended May 31, 2019 included a $5.8 million tax expense from finalizing the prior year’s tax returns with no similar event for the nine months ended May 31, 2020.

The decrease to the provision was partially offset by increased income tax expense from higher operating income for the nine months ended May 31, 2020 compared to the prior year period.

The decrease to the provision was also offset by $3.3 million in higher windfall tax benefits from stock-based compensation recognized during the nine months ended May 31, 2019 compared to the nine months ended May 31, 2020 and an income tax benefit from the revision of the one-time transition tax permitted by the U.S.

Tax Cuts and Jobs Act recognized during the nine months ended May 31, 2019.

Net Income and Diluted Earnings per Share

Three months ended February 29, 2020 compared to three months ended February 28, 2019

Net income increased 4.7% to $88.7 million and diluted earnings per share ("EPS") increased 5.0% to $2.30 for the three months ended February 29, 2020, compared to the same period a year ago.

Net income and diluted EPS increased primarily due to revenue growth, a decrease in the income tax provision and interest expense, partially offset by an increase in operating expenses on a year-over-year basis.

Six months ended February 29, 2020 compared to six months ended February 28, 2019

Net income increased 8.1% to 182.6 million and diluted EPS increased 8.2% to $4.73 for the six months ended February 29, 2020, compared to the same period a year ago.

Net income and diluted EPS increased primarily due to revenue growth outpacing the growth of operating expenses, a decrease in the income tax provision and interest expense, on a year-over-year basis.

Three months ended May 31, 2020 compared to three months ended May 31, 2019

Net income increased 9.7% to $101.2 million and diluted earnings per share ("EPS") increased 11.0% to $2.63 for the three months ended May 31, 2020, compared to the same period a year ago.

Net income and diluted EPS increased primarily due to revenue growth outpacing the growth of operating expenses, a decrease in the income tax provision and reduced interest expense on a year-over-year basis.

Interest expense decreased compared to the prior year period primarily due to a reduction in the LIBOR rate.

Diluted EPS also benefited from a 0.5 million share reduction in our diluted weighted average shares outstanding, compared to the same period a year ago, mainly due to share repurchases, partially offset by the impact from stock option exercises.

Nine months ended May 31, 2020 compared to nine months ended May 31, 2019

Net income increased 8.6% to 283.9 million and diluted EPS increased 9.4% to $7.36 for the nine months ended May 31, 2020, compared to the same period a year ago.

Interest expense decreased compared to the prior year period, primarily due to a reduction in the LIBOR rate.

Diluted EPS also benefited from a 0.3 million share reduction in our diluted weighted average shares outstanding, compared to the same period a year ago, mainly due to share repurchases, partially offset by the impact from stock option exercises.

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Non-GAAP Financial Measures

7 unchanged sentences

The table below provides an unaudited reconciliation of revenue to organic revenue.

Three Months Ended

February 29, February 28,

Three Months Ended May 31,

(In thousands) 2020 2019 Change

3 unchanged sentences

Organic revenue $ 375,336 $ 365,807 2.6 %

(1) Deferred revenue fair value adjustments from purchase accounting.

(1) Deferred revenue fair value adjustment from purchase accounting.

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The table below provides an unaudited reconciliation of operating income, operating margin, net income and diluted EPS to adjusted operating income, adjusted operating margin, adjusted net income and adjusted diluted EPS.

Three Months Ended

February 29, February 28,

Three Months Ended May 31,

(In thousands, except per share data) 2020 (1)

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Other items (5)

4,436 (1,333)

Income tax items (734) 5,296

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Weighted average common shares (Diluted) 38,481 38,993

(1) Operating income, net income and diluted EPS in the second quarter of fiscal 2020 were adjusted to exclude (i) intangible asset amortization, (ii) deferred revenue fair value adjustments from purchase accounting, and (iii) other items primarily related to severance, stock-based compensation acceleration, professional fees related to our ongoing three-year content and technology investment plan and facilities costs.

(2) Operating income, net income and diluted EPS in the second quarter of fiscal 2019 were adjusted to exclude (i) intangible asset amortization, (ii) deferred revenue fair value adjustments from purchase accounting, and (iii) severance, stock-based compensation expense and occupancy costs.

Net income and diluted EPS in the second quarter of fiscal 2019 were also primarily adjusted to exclude a settlement with a tax authority partially offset by income tax benefits primarily related to the TCJA.

(3) The intangible asset amortization was recorded net of a tax impact of $1.0 million in the second quarter of fiscal 2020, compared to $1.1 million for the second quarter of fiscal 2019.

(4) The deferred revenue fair value adjustment was recorded net of a tax impact of $0.2 million for both the second quarter of fiscal 2020 and 2019.

(5) The other items were recorded net of a tax impact of $0.8 million for the second quarter of fiscal 2020, compared to$0.5 million for the second quarter of 2019.

(1) Operating income, net income and diluted EPS in the third quarter of fiscal 2020 were adjusted to exclude (i) intangible asset amortization, (ii) deferred revenue fair value adjustments from purchase accounting, and (iii) other items primarily related to professional fees associated with the ongoing content and technology investment plan and facilities costs.

(2) Operating income, net income and diluted EPS in the third quarter of fiscal 2019 were adjusted to exclude (i) intangible asset amortization, (ii) deferred revenue fair value adjustments from purchase accounting, and (iii) other items including non-core transaction related revenue, offset by severance, stock-based compensation acceleration, transformation activities and occupancy costs.

(3) The intangible asset amortization was recorded net of a tax provision of $0.9 million in the third quarter of fiscal 2020, compared to $1.1 million for the third quarter of fiscal 2019.

(4) The deferred revenue fair value adjustment was recorded net of a tax provision of $0.2 million for the third quarters of both fiscal 2020 and 2019.

(5) The other items were recorded net of a tax provision of $1.0 million for the third quarter of fiscal 2020, compared to a $0.3 million tax benefit for the third quarter of 2019.

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

Six Months Ended

February 29, February 28,

Nine Months Ended May 31,

(in thousands) 2020 2019

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Free cash flow $ 283,504 $ 272,418

$ 143,561 $ 124,072

Net cash used in investing activities (1)

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(1) Capital expenditures are included in net cash used in investing activities during each fiscal period reported.

(2) Free cash flow is defined as cash provided by operating activities, less capital expenditures.

Cash and cash equivalents aggregated to $343.5 million as of February 29, 2020, compared to $359.8 million as of August 31, 2019.

Our cash and cash equivalents decreased $16.3 million during the first six months of fiscal 2020, primarily due to $158.6 million in share repurchases, $54.4 million in dividend payments, and $51.9 million of capital expenditures.

These cash outflows were partially offset by cash inflows of $195.5 million of net cash provided by operating activities, and $50.5 million in proceeds from the exercise of employee stock options.

Net cash used in investing activities was $49.9 million in the first six months of fiscal 2020, representing a $30.6 million increase from the same period a year ago.

Cash and cash equivalents aggregated to $457.7 million as of May 31, 2020, compared to $359.8 million as of August 31, 2019.

Our cash and cash equivalents increased $97.9 million during the first nine months of fiscal 2020, primarily due to cash inflows of $346.4 million of net cash provided by operating activities and $65.3 million in proceeds from the exercise of employee stock options, partially offset by cash outflows of $171.0 million in share repurchases, $81.4 million in dividend payments, and $62.9 million of capital expenditures.

Net cash used in investing activities was $61.4 million in the first nine months of fiscal 2020, representing a $31.9 million increase from the same period a year ago.

This increase was due primarily to $30.0 million of higher capital expenditures.

Net cash used by financing activities was $164.1 million in the first six months of fiscal 2020, representing a $48.2 million increase in cash used by financing activities from the same period a year ago.

The increase was primarily due to a $47.9 million increase in share purchases, and a $5.9 million increase in dividend payments, partially offset by a $7.1 million increase in proceeds from employee stock plans.

As of February 29, 2020, our total Cash and cash equivalents worldwide was $343.5 million.

Net cash used by financing activities was $188.7 million in the first nine months of fiscal 2020, representing a $32.7 million increase in cash used by financing activities from the same period a year ago.

The increase was primarily due to a $12.7 million increase in share purchases and a $5.7 million increase in dividend payments, partially offset by a $13.6 million decrease in proceeds from employee stock plans.

As of May 31, 2020, our total Cash and cash equivalents worldwide was $457.7 million.

The total available cash and cash equivalents within the Americas was $235.8 million, within EMEA was $171.1 million (predominantly within the UK, France, and Germany) and the remaining $50.8 million was held in Asia Pacific.

As of February 29, 2020, we have borrowed $575.0 million of the available $750.0 million provided under our 2019 revolving credit facility, resulting in $175.0 million available for additional borrowings.

As of May 31, 2020, we have borrowed $575.0 million of the available $750.0 million provided under our 2019 revolving credit facility which we entered into on March 29, 2019, resulting in $175.0 million available for additional borrowings.

The 2019 Credit Agreement between FactSet, as the borrower, and PNC Bank, National Association ("PNC"), as the administrative agent and lender (the "2019 Credit Agreement") also allows us, subject to certain requirements, to arrange for additional borrowings with an aggregate amount up to $500.0 million.

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In addition, we expect existing foreign cash and cash equivalents and cash flows from operations to continue to be sufficient to fund our foreign operating activities and cash commitments for investing activities, such as capital expenditures, for at least the next 12 months and, thereafter, for the foreseeable future.

Free cash flow generated in the six months ended February 29, 2020 was $143.6 million, an increase of 15.7% compared to a year ago.

We have not observed any significant client loss, deterioration in the collectability of receivables, reduction in liquidity, or decline in subscription renewal rates as a result of the COVID-19 pandemic.

While the COVID-19 pandemic did not have a material impact on our financial results or cash flows for the three and nine months ended May 31, 2020, our future business and cash flows may be adversely affected.

The situation surrounding the COVID-19 pandemic remains fluid, and we are actively managing our response and assessing potential impacts to our financial position, including our balance sheet and liquidity position.

However, the COVID-19 pandemic has caused disruption in the capital markets, and could adversely affect our ability to access these markets on acceptable terms or at all and/or increase our cost of borrowing should we desire to access additional capital.

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Free cash flow generated in the nine months ended May 31, 2020 was $283.5 million, an increase of 4.1% compared to a year ago.

Free cash flow was generated from $346.4 million of net cash provided by operating activities, less $62.9 million in capital expenditures.

Free cash flow increased $19.5 million year-over-year due to a $49.9 million increase in operating cash flows partially offset by higher capital expenditures for the build-out of new and existing office space for some of our locations and increased investments in technology compared to the prior year period.

Free cash flow increased $11.1 million year-over-year due to a $41.1 million increase in operating cash flows primarily due to higher net income, partially offset by the timing of income tax payments.

This increase was partially offset by higher capital expenditures for the build-out of new and existing office space for some of our locations and increased investments in technology compared to the prior year period.

Capital Resources

Capital Expenditures

Capital expenditures were $25.1 million in the second quarter of fiscal 2020, compared to $12.0 million in the prior year period.

Capital expenditures of $7.1 million, or 28%, were primarily related to investment in technology.

The remainder of our capital expenditures were primarily for the build-out of our new corporate headquarters in Norwalk, Connecticut and office space in India.

Capital expenditures were $51.9 million during the first six months of fiscal 2020, compared to $21.5 million in the same period a year ago.

Capital expenditures of $14.8 million, or 29%, were primarily related to investment in technology.

The remainder of our capital expenditures was primarily for the build-out of new corporate headquarters in Norwalk, Connecticut and office space in India .

Capital expenditures in the third quarter of fiscal 2020 were $11.0 million, compared to $11.4 million in the prior year period.

The remainder of our capital expenditures, $5.1 million, was primarily related to investment in technology and development costs related to internal-use software.

Capital expenditures during the first nine months of fiscal 2020 were $62.9 million, compared to $32.9 million in the same period a year ago.

Capital expenditures of $40.7 million, or 65%, were related to facilities investments, primarily for the build-out of our new corporate headquarters in Norwalk, Connecticut and office space in India and the Philippines.

The remainder of our capital expenditures, $22.2 million, was primarily related to investment in technology and development costs related to internal-use software.

Capital Needs

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The 2019 Credit Agreement also allows us, subject to certain requirements, to arrange for additional borrowings with PNC for an aggregate amount up to $500.0 million, provided that any such request for additional borrowings must be in a minimum amount of $25.0 million.

As of February 29, 2020, we have borrowed $575.0 million of the available $750.0 million provided by the 2019 Revolving Credit Facility, resulting in $175.0 million available to be withdrawn.

We are required to pay a commitment fee using a pricing grid currently at 0.10% based on the daily amount by which the available balance in the 2019 Revolving Credit Facility exceeds the borrowed amount.

All outstanding loan amounts are reported as Long-term debt within the Consolidated Balance Sheets at February 29, 2020 and August 31.

As of May 31, 2020, we have borrowed $575.0 million of the available $750.0 million provided by the 2019 Revolving Credit Facility, resulting in $175.0 million available to be withdrawn.

We are required to pay a commitment fee using a pricing grid which was 0.10% as of May 31, 2020.

This fee is based on the daily amount by which the available balance in the 2019 Revolving Credit Facility exceeds the borrowed amount.

All outstanding loan amounts are reported as Long-term debt within the Consolidated Balance Sheets at May 31, 2020 and August 31, 2019.

The principal balance is payable in full on the maturity date.

The fair value of our long-term debt was $575.0 million as of February 29, 2020, which we believe approximates the carrying amount as the terms and interest rate approximate market rates given its floating interest rate basis.

Borrowings under the loan bear interest on the outstanding principal amount at a rate equal to the daily LIBOR rate plus a spread using a debt leverage pricing grid, currently at 0.875%.

For the three months ended February 29, 2020 and February 28, 2019 we recorded interest expense of $3.8 million and $5.1 million, respectively, on our outstanding debt amounts.

For the six months ended February 29, 2020 and February 28, 2019 we recorded interest expense of $8.0 million and $9.9 million, respectively, on our outstanding debt amounts.

The weighted average interest rate on amounts outstanding under our credit facilities was 2.76% and 3.35% for the year to date ended February 29, 2020 and August 31, 2019, respectively.

The fair value of our long-term debt was $575.0 million as of May 31, 2020, which we believe approximates the carrying amount as the terms and interest rate approximate market rates given its floating interest rate basis.

Borrowings under the loan bear interest on the outstanding principal amount at a rate equal to the LIBOR rate plus a spread using a debt leverage pricing grid, which was 0.875% as of May 31, 2020.

The variable rate of interest on our long-term debt can expose us to interest rate volatility due to changes in the LIBOR rate.

To mitigate this exposure, on March 5, 2020, we entered into an interest rate swap agreement with a notional amount of $287.5 million to hedge the variable interest rate obligation on a portion of our outstanding balance under the 2019 Revolving Credit Facility.

Under the terms of the interest rate swap agreement, we will pay interest at a fixed rate of 0.7995% and receive variable interest payments based on the same one-month LIBOR rate utilized to calculate the interest expense from the 2019 Revolving Credit Facility.

The interest rate swap agreement matures on March 28, 2024.

For the three months ended May 31, 2020 and May 31, 2019, we recorded interest expense of $2.9 million and $5.2 million, respectively, on our outstanding debt amounts.

For the nine months ended May 31, 2020 and May 31, 2019, we recorded interest expense of $10.9 million and $15.1 million, respectively, on our outstanding debt amounts.

Including the effects of the interest rate swap agreement, the weighted average interest rate on amounts outstanding under our credit facilities was 2.47% for the nine months ended May 31, 2020.

The weighted average interest rate for the fiscal year ended 2019 was 3.35%.

Interest on the loan outstanding is payable quarterly, in arrears, and on the maturity date.

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As the terms for the interest rate swap agreement align with the 2019 Revolving Credit Facility, we do not expect any hedge ineffectiveness.

We have designated and accounted for this instrument as a cash flow hedge with the unrealized gains or losses on the interest rate swap agreement recorded in AOCL in the Consolidated Balance Sheets.

During fiscal 2019, we incurred approximately $0.9 million in debt issuance costs related to the 2019 Credit Agreement.

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In addition, the 2019 Credit Agreement requires that we maintain a consolidated net leverage ratio, as measured by total net funded debt/EBITDA (as defined in the 2019 Credit Agreement) below a specified level as of the end of each fiscal quarter.

We were in compliance with all the covenants and requirements within the 2019 Credit Agreement as of February 29, 2020.

We were in compliance with all the covenants and requirements within the 2019 Credit Agreement as of May 31, 2020.

Letters of Credit

From time to time, we are required to obtain letters of credit in the ordinary course of business.

Approximately $2.9 million of standby letters of credit have been issued in connection with our leased office spaces as of February 29, 2020.

Approximately $2.9 million of standby letters of credit have been issued in connection with our leased office spaces as of May 31, 2020.

These standby letters of credit utilize the same covenants included in the 2019 Credit Agreement.

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dollars using period-end rates of exchange for assets and liabilities and average exchange rates for revenue and expenses.

Translation gains and losses that arise from translating assets, liabilities, revenue and expenses of foreign operations are recorded in accumulated other comprehensive income (loss) as a component of stockholders’ equity.

Our foreign currency exchange exposure is related to our operating expenses in countries outside the Americas, where approximately 76% of our employees were located as of February 29, 2020.

During the second quarter of fiscal 2020, foreign currency movements increased operating income by $0.2 million, compared to a $4.0 million increase to operating income a year ago.

During the first six months of fiscal 2020, foreign currency movements increased operating income by $1.2 million, compared to a increase in operating income of $5.6 million in the same period a year ago.

As of February 29, 2020, we maintained foreign currency forward contracts to hedge a portion of our British Pound Sterling, Euro, Indian Rupee, and Philippine Peso exposures.

Translation gains and losses that arise from translating assets, liabilities, revenue and expenses of foreign operations are recorded in accumulated other comprehensive loss as a component of stockholders’ equity.

Our foreign currency exchange exposure is related to our operating expenses in countries outside the Americas, where approximately 76% of our employees were located as of May 31, 2020.

During the third quarter of fiscal 2020, foreign currency movements increased operating income by $1.5 million, compared to a $3.0 million increase to operating income a year ago.

During the first nine months of fiscal 2020, foreign currency movements increased operating income by $2.7 million, compared to an increase in operating income of $8.6 million in the same period a year ago.

As of May 31, 2020, we maintained foreign currency forward contracts to hedge a portion of our British Pound Sterling, Euro, Indian Rupee, and Philippine Peso exposures.

We entered into a series of forward contracts to mitigate our currency exposure ranging from 50% to 75% over their respective hedged periods.

The current foreign currency forward contracts are set to mature at various points between the fourth quarter of fiscal 2020 through the first quarter of fiscal 2021.

As of February 29, 2020, the gross notional value of foreign currency forward contracts to purchase Philippine Pesos and Indian Rupees with U.S.

As of May 31, 2020, the gross notional value of foreign currency forward contracts to purchase Philippine Pesos and Indian Rupees with U.S.

dollars was ₱466.8 billion and Rs830.6 billion, respectively.

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dollars with Euros and British Pound Sterling was €11.4 million and £9.5 million, respectively.

A loss on derivatives of $0.3 million was recorded into operating income for the three months ended February 29, 2020, compared to a loss on derivatives of $0.4 million in the same period a year ago.

For the six months ended February 29, 2020, a loss on derivatives of $1.1 million was recorded into operating income, compared to a loss on derivatives of $0.8 million in the prior year period.

A loss on derivatives of $1.0 million was recorded into operating income for the three months ended May 31, 2020, compared to a loss on derivatives of $0.6 million in the same period a year ago.

For the nine months ended May 31, 2020, a loss on derivatives of $2.1 million was recorded into operating income, compared to a loss on derivatives of $1.4 million in the prior year period.

Off-Balance Sheet Arrangements

At February 29, 2020 and August 31, 2019, we had no off-balance sheet financing or other arrangements with unconsolidated entities or financial partnerships (such as entities often referred to as structured finance or special purpose entities) established for purposes of facilitating off-balance sheet financing, other debt arrangements, or other contractually limited purposes.

At May 31, 2020 and August 31, 2019, we had no off-balance sheet financing or other arrangements with unconsolidated entities or financial partnerships (such as entities often referred to as structured finance or special purpose entities) established for purposes of facilitating off-balance sheet financing, other debt arrangements, or other contractually limited purposes.

Share Repurchase Program

Repurchases of shares of our common stock are made from time to time in the open market and privately negotiated transactions, subject to market conditions.

In the second quarter of fiscal 2020, we repurchased 267,500 shares for $74.2 million under our existing share repurchase program compared to 214,945 shares for $44.1 million in the same period a year ago.

During the first six months of fiscal 2020, we repurchased 610,500 shares for $158.6 million compared to 489,945 shares for $104.6 million in the prior year comparable period.

For the six months ended February 29, 2020, we have returned $213.0 million to stockholders in the form of share repurchases and dividends.

In the third quarter of fiscal 2020, we repurchased 46,636 shares for $12.4 million

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under our existing share repurchase program compared to 175,000 shares for $47.6 million in the same period a year ago.

During the first nine months of fiscal 2020, we repurchased 657,136 shares for $171.0 million compared to 664,945 shares for $152.1 million in the prior year comparable period.

For the nine months ended May 31, 2020, we have returned $252.4 million to stockholders in the form of share repurchases and dividends.

Over the last 12 months, we have returned $341.8 million to stockholders in the form of share repurchases and dividends.

As of February 29, 2020, $80.0 million was available for future share repurchases under the existing share repurchase program.

On March 24, 2020, our Board of Directors approved a $220.0 million increase to the existing share repurchase program.

Subsequent to this expansion, $300.0 million is available for future share repurchases.

As a result of this expansion, $287.6 million is available for future share repurchases as of May 31, 2020.

Contractual Obligations

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As of August 31, 2019, we had total purchase commitments of $69.9 million.

There were no material changes in our purchase commitments during the six months ended February 29, 2020.

There were no material changes in our purchase commitments during the nine months ended May 31, 2020.

As disclosed earlier in the Capital Resources section of this MD&A, we entered into the 2019 Credit Agreement on March 29, 2019 and borrowed $575.0 million.

The loan balance of $575.0 million remains outstanding as of February 29, 2020.

Refer to the Capital Resources section of the MD&A for a discussion on our Long-term debt borrowings.

There were no other significant changes to our contractual obligations during the first six months of fiscal 2020.

On February 18, 2020, our Board of Directors approved a regular quarterly dividend of $0.72 per share.

The cash dividend of $27.1 million was paid on March 19, 2020, to common stockholders of record at the close of business on February 28, 2020.

The loan balance of $575.0 million remains outstanding as of May 31, 2020.

Refer to the Capital Resources section of the MD&A for a discussion of our Long-term debt borrowings.

There were no other significant changes to our contractual obligations during the first nine months of fiscal 2020.

On May 5, 2020, our Board of Directors approved a regular quarterly dividend of $0.77 per share.

The $0.05 per share or 7% increase in the amount of our quarterly dividend marked the 15th consecutive year we have increased dividends, highlighting our continued commitment to returning value to shareholders.

The cash dividend of $29.0 million was paid on June 18, 2020, to common stockholders of record at the close of business on May 29, 2020.

Future cash dividends will depend on our earnings, capital requirements, financial condition and other factors considered relevant by us and is subject to final determination by our Board of Directors.

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We describe our significant accounting policies in Note 3, Summary of Significant Accounting Policies, of the notes to our consolidated financial statements included in Item 8 of our Annual Report on Form 10-K for the fiscal year ended August 31, 2019.

The accounting policies used in preparing our consolidated financial statements for the first six months of fiscal 2020 are applied consistently with those described in our Annual Report on Form 10-K for the fiscal year ended August 31, 2019, with the exception of the accounting guidance adopted in the first quarter of fiscal 2020 related to leases accounting.

The accounting policies used in preparing our consolidated financial statements for the first nine months of fiscal 2020 are applied consistently with those described in our Annual Report on Form 10-K for the fiscal year ended August 31, 2019, with the exception of the accounting guidance adopted in the first quarter of fiscal 2020 related to accounting for leases.

Refer to Note 15, Leases, of the Notes to the Consolidated Financial Statements in this Quarterly Report on Form 10-Q for further details on the adoption of the new lease standard.

We discuss our critical accounting estimates in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended August 31, 2019.

There were no significant changes in our accounting policies or critical accounting estimates during the first six months of fiscal 2020.

There were no significant changes in our accounting policies or critical accounting estimates during the first nine months of fiscal 2020.

New Accounting Pronouncements

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In the ordinary course of business, we are exposed to financial risks involving the volatility of equity markets as well as foreign currency and interest rate fluctuations.

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Shift from Active to Passive Investment Management

Approximately 84.1% of our ASV is derived from our investment management clients.

Approximately 84% of our organic ASV is derived from our investment management clients.

The prosperity of these clients is tied to equity assets under management.

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Moreover, a shift from active investment management to passive investment management can result in lower demand for our services.

Our investment banking clients that provide M&A advisory work, capital markets services and equity research, account for approximately 15.9% of our ASV.

Our investment banking clients that provide M&A advisory work, capital markets services and equity research, account for approximately 16% of our organic ASV.

A significant portion of this revenue relates to services deployed by large, bulge-bracket banks.

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The UK will still follow all the EU's rules and regulations, will remain in the single market and the customs union, and will continue to permit the free movement of people.

A political declaration also came into force on January 31, 2020, which sets out the overall understanding on the framework for the future UK-EU relationship and provides the basis for UK-EU negotiations.

The UK and the EU are currently negotiating a UK-EU free trade deal and the terms of their future relationship.

The deadline for these negotiations is the expiry of the

transition period.

On March 2, 2020 formal UK-EU negotiations on the future relationship commenced.

On March 18, 2020, the European Commission published a draft legal agreement for the future EU-UK partnership, covering all areas of the negotiations, including trade and economic cooperation, law enforcement and participation in European Union programs.

The UK and the EU are currently in the process of negotiating a UK-EU free trade deal and the terms of their future relationship.

Although March negotiations were affected by the COVID-19 pandemic, the EU and the UK resumed the Brexit discussions on April 15, 2020.

The deadline for these negotiations is the expiry of the transition period and the UK has consistently made it clear that it will not ask to extend the transition period.

At this time, we cannot predict the impact that the future UK-EU arrangements will have on our business, as it will depend on the longer-term outcome of tariff, trade, regulatory and other negotiations.

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We also continue to review the application of key MiFID II requirements and plan to work with our clients to navigate through them.

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Forward-Looking Factors

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the unfavorable resolution of tax assessments and legal proceedings;

t he impact of the coronavirus pandemic on our operating results;

t he impact of the COVID-19 pandemic on our operating results and our employees' health and safety;

and legislative and regulatory changes in the environments in which we and our clients operate.

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Business Outlook

We provided forward-looking statement for fiscal 2020 on September 26, 2019.

We provided an annual outlook for certain key metrics for fiscal 2020 on September 26, 2019 and most recently updated it on June 25, 2020.

Given the number of risk factors, uncertainties and assumptions discussed in Part 1 Item 1A, Risk Factors, of our Annual Report on Form 10-K for the fiscal year ended August 31, 2019, and particularly the ongoing uncertainty surrounding the duration, magnitude, and impact of the novel coronavirus pandemic, actual results may differ materially from these expectations.

We currently do not intend to update our forward-looking statements until our next quarterly results announcement, other than in publicly available statements.

We currently do not intend to update our forward-looking statements.

Fiscal 2020 Expectations:

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The change in the range reflects the current anticipated business impacts resulting from the coronavirus pandemic.

– GAAP revenue is expected to be in the range of $1.49 billion and $1.50 billion.

– GAAP operating margin is expected to be in the range of 28.5% and 29.5%.

– Adjusted operating margin is expected to be in the range of 31.5% and 32.5%.

– Annual effective tax rate is expected to be in the range of 17.0% and 17.5%.

– GAAP diluted EPS is expected to be in the range of $8.70 and $9.00.

Adjusted diluted EPS is expected to be in the range of $9.85 and $10.15.

– GAAP revenue is now expected to be in the range of $1.485 billion and $1.490 billion.

– GAAP operating margin is now expected to be in the range of 30.0% and 30.5%.

– Adjusted operating margin is now expected to be in the range of 33.0% and 33.5%.

– Annual effective tax rate is now expected to be in the range of 15.5% and 16.5%.

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– GAAP diluted EPS is now expected to be in the range of $9.60 and $9.80.

Adjusted diluted EPS is now expected to be in the range of $10.40 and $10.60.

Both GAAP operating margin and GAAP diluted EPS guidance do not include certain effects of any non-recurring benefits or charges that may arise in fiscal 2020.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis