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Item 5. Market for Registrant’s Common Equity

2020-10-29 compared with 2019-10-30 · 61 added, 850 removed, 34 unchanged (96% of the section changed)

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information, Holders and Dividends

Market Information –

Our common stock is listed on the New York Stock Exchange (“NYSE”) and the NASDAQ Stock Market under the symbol FDS.

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

(a) Market Information, Holders and Dividends

Market Information – Our common stock is listed on the NYSE and NASDAQ under the symbol FDS.

The following table sets forth, for each fiscal period indicated, the high and low sales prices per share of our common stock as reported on the NYSE:

Holders of Record –

As of October 24, 2019, we had approximately 199,571 holders of record of our common stock.

First Second Third Fourth

High $ 289.98 $ 310.25 $ 307.97 $ 363.64

Low $ 233.09 $ 275.12 $ 195.22 $ 279.01

High $ 237.29 $ 237.95 $ 284.32 $ 305.38

Low $ 210.11 $ 188.31 $ 228.43 $ 266.06

Holders of Record – As of October 22, 2020, we had approximately 2,604 holders of record of our common stock.

However, because many of our shares of common stock are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of stockholders represented by these record holders.

The closing price of our common stock on October 24, 2019, was $253.22 per share as reported on the NYSE.

The closing price of our common stock on October 22, 2020, was $327.97 per share as reported on the NYSE.

Dividends - During fiscal years 2020 and 2019, our Board of Directors declared the following dividends on our common stock:

Dividends per

Total $ Amount

Year Ended Dividends per

Common Stock Record Date Total $ Amount

(in thousands)

First Quarter

November 30, 2018

December 18, 2018

Second Quarter

February 28, 2019

March 19, 2019

Third Quarter

June 18, 2019

Fourth Quarter

August 30, 2019

September 19, 2019

First Quarter

November 30, 2017

December 19, 2017

Second Quarter

February 28, 2018

March 20, 2018

Third Quarter

June 19, 2018

Fourth Quarter

August 31, 2018

September 18, 2018

All the above cash dividends were paid from existing cash resources on a quarterly basis.

First Quarter $ 0.72 November 29, 2019 $ 27,291 December 19, 2019

Second Quarter $ 0.72 February 28, 2020 $ 27,251 March 19, 2020

Third Quarter $ 0.77 May 29, 2020 $ 29,189 June 18, 2020

Fourth Quarter $ 0.77 August 31, 2020 $ 29,283 September 17, 2020

First Quarter $ 0.64 November 30, 2018 $ 24,372 December 18, 2018

Second Quarter $ 0.64 February 28, 2019 $ 24,385 March 19, 2019

Third Quarter $ 0.72 May 31, 2019 $ 27,506 June 18, 2019

Fourth Quarter $ 0.72 August 30, 2019 $ 27,445 September 19, 2019

Future dividend payments 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.

Recent Sales of Unregistered Securities

(b) Recent Sales of Unregistered Securities

There were no sales of unregistered equity securities during fiscal 2020.

Issuer Purchases of Equity Securities

The following table provides a month-to-month summary of the share repurchase activity under the current stock repurchase program during the three months ended August 31, 2019:

The following table provides a month-to-month summary of the share repurchase activity under our current share repurchase program during the three months ended August 31, 2020:

(in thousands, except per share data)

Period Total number

purchased (1)

price paid per

Total number of shares

purchased as part of

publicly announced

plans or programs

Maximum number

(or approximate dollar

value) that may yet be

purchased under

or programs (2)

Includes 217,500 shares purchased under the existing stock repurchase program, as well as 3,792 shares repurchased from employees to cover their cost of taxes upon vesting of restricted stock.

share Total number of shares purchased as part of

publicly announced plans or programs Maximum number of shares

(or approximate dollar value) that may yet be

purchased under the plans or programs (2)

June 2020 2,940 $ 328.47 — $ 287,616

July 2020 47,428 $ 344.03 46,480 $ 271,616

August 2020 37,295 $ 355.76 35,468 $ 258,995

87,663 81,948

(1) Includes 81,948 shares purchased under the existing share repurchase program, as well as 5,715 shares repurchased from employees to cover their cost of taxes due upon the vesting or exercise of stock-based awards.

(2) Repurchases may be made from time to time in the open market and privately negotiated transactions, subject to market conditions.

There is no defined number of shares to be repurchased over a specified timeframe through the life of the share repurchase program.

It is expected that share repurchases will be paid using existing and future cash generated by operations.

The amount included in the Maximum number of shares that may yet be purchased under the plans or programs column for June 2019, includes a $210.0 million expansion of the existing share repurchase program as approved by the Board of Directors of FactSet on June 24, 2019.

Securities Authorized for Issuance under Equity Compensation Plans –

see Part III of this Report on Form 10-K

No minimum number of shares to be repurchased has been fixed.

There is no timeframe to complete the share repurchase program and it is expected that share repurchases will be paid using existing and future cash generated by operations.

Securities Authorized for Issuance under Equity Compensation Plans – refer to Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters of this Annual Report on Form 10-K.

Stock Performance Graph

The annual changes for the five-year period shown in the graph below assume $100 had been invested in our common stock, the Standard & Poor’s 500 Index, the NYSE Composite Index and the Dow Jones U.S.

Financial Services Index on August 31, 2014.

The total cumulative dollar returns shown on the graph represent the value that such investments would have had on August 31, 2019.

The annual changes for the five-year period shown in the graph below assume $100 had been invested in our common stock, the Standard & Poor’s 500 Index, the NYSE Composite Index, the Dow Jones U.S.

Financial Services Index, and the S&P 500 Financial Exchange and Data Index on August 31, 2015, or the origination date of each respective index.

We are adding the S&P 500 Financial Exchange and Data Index as a comparison peer group this year, in lieu of the NYSE Composite Index, as we believe it is reflective of the stock performance of other companies that provide services similar to ours and will provide a more meaningful comparison of our stock performance to investors.

The NYSE Composite Index is shown below for comparison purposes in the transitional year.

The total cumulative dollar returns shown on the graph represent the value that such investments would have had on August 31, 2020.

Stockholder returns over the indicated period are based on historical data and should not be considered indicative of future stockholder returns.

2015 2016 2017 2018 2019 2020

FactSet Research Systems Inc.

$ 100 $ 113 $ 100 $ 145 $ 172 $ 222

S&P 500 Index $ 100 $ 110 $ 125 $ 147 $ 148 $ 177

2 unchanged sentences

Financial Services Index $ 100 $ 101 $ 127 $ 154 $ 148 $ 143

S&P 500 Financial Exchanges and Data $ 100 $ 119 $ 155 $ 191 $ 222

The information contained in the above graph shall not be deemed to be soliciting material or filed or incorporated by reference in future filings with the SEC, or subject to the liabilities of Section 18 of the Securities Exchange Act of 1934, except to the extent that FactSet specifically incorporates it by reference into a document filed under the Securities Act of 1933 or the Securities Exchange Act of 1934.

1 unchanged sentence

The following selected financial data has been derived from our Consolidated Financial Statements.

This financial data should be read in conjunction with Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations and Item 8, Financial Statements and Supplementary Data, of this Report on Form 10-K.

This financial data should be read in conjunction with Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations and Item 8.

Financial Statements and Supplementary Dat a, of this Annual Report on Form 10-K.

Consolidated Statements of Income Data

1 unchanged sentence

(in thousands, except per share data) 2020 2019 2018 2017 2016

Revenue $ 1,494,111 $ 1,435,351 $ 1,350,145 $ 1,221,179 $ 1,127,092

Operating income $ 439,660 $ 438,035 $ 366,204 $ 352,135 $ 349,676

 (1)  

 (4)  

 (7)  

 (10)  

 (13)  

Provision for income taxes $ 54,196 $ 69,175 $ 84,753 $ 86,053 $ 122,178

 (2)  

 (5)  

 (8)  

 (11)  

 (14)  

Net income $ 372,938 $ 352,790 $ 267,085 $ 258,259 $ 338,815

Diluted earnings per common share $ 9.65 $ 9.08 $ 6.78 $ 6.51 $ 8.19

 (3)  

 (6)  

 (9)  

 (12)  

 (15)  

Weighted average common shares (diluted)

Diluted weighted average common shares 38,646 38,873 39,377 39,642 41,365

Cash dividends declared per common share $ 2.98 $ 2.72 $ 2.40 $ 2.12 $ 1.88

5 unchanged sentences

Goodwill and intangible assets, net $ 830,798 $ 810,177 $ 850,768 $ 881,103 $ 546,076

Total assets $ 2,083,388 $ 1,560,130 $ 1,419,447 $ 1,413,315 $ 1,019,161

Non-current liabilities $ 910,720 $ 668,951 $ 672,413 $ 652,485 $ 343,570

Total stockholders’

Operating income in fiscal 2019 included pre-tax charges of $8.0 million, primarily related to $4.3 million in severance costs, $8.7 million related to other corporate actions including stock-based compensation acceleration, professional fees related to infrastructure upgrade activities and a one-time adjustment related to data costs and occupancy costs, partially offset by $5.0 million in non-core transaction related revenue.

Net income in fiscal 2019 included $6.3 million (after-tax) expenses, primarily related to $3.5 million (after-tax) in severance costs, $6.8 million (after-tax) related to other corporate actions including stock-based compensation acceleration, professional fees related to infrastructure upgrade activities and a one-time adjustment related to data costs and occupancy costs, partially offset by $4.0 million (after-tax) in non-core transaction related revenue.

Diluted earnings per share (“EPS”) in fiscal 2019 was reduced by $0.15 per share, primarily related to $0.09 in severance costs, $0.16 related to other corporate actions including stock-based compensation acceleration, professional fees related to infrastructure upgrade activities and a one-time adjustment related to data costs and occupancy costs, partially offset by $0.10 in non-core transaction related revenue.

Operating income in fiscal 2018 included pre-tax charges of $17.4 million from restructuring actions, $4.7 million related to other corporate actions including stock-based compensation acceleration and $4.9 million in legal matters.

Net income in fiscal 2018 included $13.8 million (after-tax) expense related to restructuring actions, $3.8 million (after-tax) expense related to other corporate actions including stock-based compensation acceleration, $3.4 million (after-tax) expense related to legal matters and $21.3 million of tax charges primarily related to the one-time deemed repatriation tax on foreign earnings.

Diluted earnings per share (“EPS”) in fiscal 2018 included a $0.35 decrease in diluted EPS from restructuring actions, a $0.10 detriment due to other corporate actions including stock-based compensation, a $0.09 decrease from legal matters and a $0.53 decrease from tax charges primarily related to the one-time deemed repatriation tax on foreign earnings.

Operating income in fiscal 2017 included pre-tax charges of $5.6 million related to modifications of certain share-based compensation grants, $5.0 million related to restructuring actions and $7.4 million in acquisition-related expenses.

Net income in fiscal 2017 included $4.2 million (after-tax) related to modifications of certain share-based compensation grants, $3.7 million (after-tax) related to restructuring actions and $5.5 million (after-tax) of acquisition-related expenses.

Fiscal 2017 net income also included a loss of $0.9 million (after-tax) from a final working capital adjustment related to the sale of FactSet’s Market Metrics business in the fourth quarter of fiscal 2016.

These charges were offset by income tax benefits of $1.9 million related primarily to finalizing prior year tax returns and other discrete items.

Diluted EPS in fiscal 2017 included a $0.11 decrease in diluted EPS from the modifications of certain share-based compensation grants, a $0.09 decrease from the restructuring actions, a $0.13 decrease from acquisition-related expenses and $0.02 decrease from the working capital adjustment, partially offset by a $0.05 increase in diluted EPS from the income tax benefits.

Operating income in fiscal 2016 included pre-tax charges of $4.6 million related primarily to legal matters, $2.8 million from restructuring actions and $1.8 million related to a change in the vesting of performance-based equity options.

Net income in fiscal 2016 included $3.3 million (after-tax) related primarily to legal matters, $2.0 million (after-tax) from restructuring actions, $1.2 million (after-tax) related to a change in the vesting of performance-based equity instruments, partially offset by $10.5 million of income tax benefits primarily from the permanent reenactment of the U.S.

Federal R&D tax credit (“R&D Tax Credit”), finalizing the fiscal 2015 tax returns and other discrete items and a gain of $81.7 million (after-tax) related to the sale of FactSet’s Market Metrics business in July 2016.

Diluted EPS in fiscal 2016 included the net effect of a $2.01 increase in diluted EPS from the gain on sale and a $0.25 increase in diluted EPS from the income tax benefits, partially offset by a $0.08 decrease related primarily to legal matters, a $0.05 decrease from the restructuring actions and a $0.03 decrease from a change in the vesting of performance-based equity instruments.

Operating income in fiscal 2015 included pre-tax charges of $3.0 million related to the vesting of performance-based equity instruments and $3.2 million related primarily to changes in the senior leadership responsible for the Company’s sales force.

Net income in fiscal 2015 included $2.1 million (after-tax) of incremental expenses related to the vesting of performance-based equity instruments, $2.2 million (after-tax) related to the changes in the senior leadership responsible for the Company’s sales force and income tax benefits of $8.8 million primarily from the reenactment of the R&D Tax Credit in December 2014, and finalizing the fiscal 2014 tax returns and other discrete items.

Diluted EPS in fiscal 2015 included the net effect of a $0.21 increase in diluted EPS from the income tax benefits, partially offset by a $0.05 decrease from the vesting of performance-based equity instruments and a $0.05 decrease from the changes in the senior leadership responsible for the Company’s sales force.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is designed to provide a reader of our financial statements with a narrative from the perspective of our management on our financial condition, results of operations, liquidity and certain other factors that may affect our future results.

Our MD&A is presented in the following sections:

Executive Overview

Results of Operations

Capital Resources

Foreign Currency

Off-Balance Sheet Arrangements

Share Repurchase Program

Contractual Obligations

Significant Accounting Policies and Critical Accounting Estimates

New Accounting Pronouncements

Market Trends

Forward-Looking Factors

Business Developments

The MD&A should be read in conjunction with the Consolidated Financial Statements and related Notes included in Item 8, Financial Statements and Supplementary Data, of this Report on Form 10-K.

Executive Overview

FactSet Research Systems Inc.

(the “Company”

or “FactSet”) is a global provider of integrated financial information, analytical applications and industry-leading services for the investment and corporate communities.

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

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

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

We are focused on growing our business throughout each of our three segments, the U.S., Europe, and Asia Pacific.

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

We currently serve financial professionals, which include portfolio managers, investment research professionals, investment bankers, risk and performance analysts, wealth advisors, and corporate clients.

We provide both insights on global market trends and intelligence on companies and industries, as well as capabilities to monitor portfolio risk and performance and to execute trades.

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

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

Fiscal 2019 Year in Review

Revenue for the fiscal year 2019 was $1.44 billion, an increase of 6.3% from the prior year comparable period, of which, 6.2% of the increase can be attributed to organic revenue growth.

Revenue growth can be attributed primarily to Analytics and Trading, CTS and Wealth due mainly to increased demand for our portfolio analytics solutions, core and premium data feeds and our wealth workstations.

As of August 31, 2019, organic annual subscription value (“organic ASV”) plus professional services totaled $1.48 billion, an increase of 5.1% over the prior year.

Operating income grew 19.6% and diluted earnings per share ("EPS") increased 33.9% compared to the prior year period. In addition, clients and users reached new highs of 5,574 and 126,822, respectively, in fiscal 2019.

Over the last 12 months, we returned $320.4 million to stockholders in the form of share repurchases and dividends.

We won multiple awards, which included Best Data Provider to the Sell-Side, Best Performance Measurement and Attribution System Provider, and Best Client Reporting System at the Waters Technology Awards, Best Alternative Data Initiative and Best Data Analytics Provider at the Inside Market Data Awards.

We expanded our data offering within CTS, on the Open:FactSet Marketplace, which now includes over 100 content and solution sets, including new data feeds from Mastercard and IHS Markit.

Additionally, we launched a Global Robotics and Automation Index licensed to Sumitomo Mitsui Trust Asset Management Co., Ltd., marking our entry in the Japanese index mutual fund market.

In December 2018, we appointed Daniel Viens as Chief Human Resources Officer and in June 2019, we appointed Franck Gossieaux as Executive Vice President, Global Head of Sales and Client Solutions.

Client Service / Consultants

As part of the comprehensive value of FactSet’s solutions, consultants are versatile business people with knowledge of the financial markets and FactSet products.

Consultants work closely with clients advising how FactSet solutions can be best leveraged to enhance their efficiency across workflows.

A client-centric approach is a key foundation of our success at the Company.

Additionally, our information and analytical applications are supported by a team of financial data and modeling experts.

Client satisfaction is critical to how we measure the success of our service.

According to our global client satisfaction survey, greater than 93% of respondents were satisfied or very satisfied with FactSet’s support.

We believe that these strong relationships help enable high rates of retention and expansion of client business.

The following is a review of our key metrics:

As of and for the

Year Ended August 31,

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

Operating Income

In the first quarter of  

fiscal  

2019, we changed our client count definition to include clients from the April 2017 acquisition of FactSet Digital Solutions Group ("FDSG").

The prior year client count was not restated to reflect this change.

The table below provides an unaudited reconciliation of ASV to organic ASV:

As of August 31,

(in millions)

As reported ASV (1)

Currency impact to ASV

Organic ASV (2)

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 $22.9 million and $21.6 million as of August 31, 2019 and 2018, respectively.

Organic ASV excludes ASV from acquisitions and dispositions completed within the last 12 months, the effects of foreign currency, and professional services.

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, and professional services.

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

As of August 31, 2019, our organic ASV totaled $1.46 billion, up 5.0% organically over the prior year.

As of August 31, 2019, organic ASV plus professional services was $1.48 billion, an increase of 5.1%, compared to the prior year period.

The increase in year over year organic ASV was due to growth across all of our geographic segments with the majority of growth in the U.S., followed by Asia Pacific and Europe.

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

The increase includes sales of products and solutions to new and existing clients, an annual price increase for both the majority of the U.S.

and international clients, partially offset by cancellations due primarily to industry-wide cost pressures, firm consolidations and closures.

ASV growth in Analytics and Trading was primarily due to increased sales for our portfolio analytics solutions.

ASV growth in CTS was primarily driven by increased sales in core and premium data feeds while ASV growth in Wealth was mainly due to increased workstation sales.

As of August 31, 2019, ASV from the U.S.

segment was $909.7 million, an increase of 4.7% from the prior year comparable period.

This increase was primarily from Analytics and Trading, CTS and Wealth, due to the increased demand for our portfolio analytics solutions, core and premium data feeds and wealth workstations.

ASV from the international operations was $548.3 million as of August 31, 2019, an increase of 4.6% over August 31, 2018.

International ASV represents 37.6% of total ASV as of August 31, 2019, remaining consistent with the prior year period.

The ASV increase from our international operations was due to continued growth in Analytics and Trading in both Asia Pacific and Europe as well as CTS growth in Europe.

The Analytics and Trading growth was driven by our portfolio analytics solutions, while the CTS growth was due to core and premium data feeds.

Buy-side and sell-side ASV growth rates for the last 12 months were 4.8% and 6.3% respectively.

Buy-side clients account for 83.7% 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.

Client and User Additions

Our total client count was 5,574 as of August 31, 2019, representing a net increase of 432 clients in the last twelve months.

In the first quarter of fiscal 2019, we changed our client count definition to include clients from the April 2017 acquisition of FDSG.

The prior year client count was not restated to reflect this change. The net increase was primarily driven by an increase in wealth management and corporate clients.

As part of our long-term growth strategy, we continue to focus on expanding and cultivating relationships with our existing client base through sales of workstations, applications, services and content.

As of August 31, 2019, there were 126,822 professionals using FactSet, representing a net increase of 34,925 or 38.0% in the last 12 months primarily driven by Wealth and Research workstation sales.

Annual client retention as of August 31, 2019 was 89%, when expressed as a percentage of clients.

Our successful client retention demonstrates that a majority of our clients maintain their subscriptions to FactSet year over year, highlighting the strength of our business strategy.

As of August 31, 2019, our largest individual client accounted for approximately 3% of total subscriptions, and annual subscriptions from our ten largest clients did not surpass 15% of total client subscriptions.

Returning Value to Stockholders

On August 9, 2019, our Board of Directors approved a regular quarterly dividend of $0.72 per share.

The cash dividend of $27.3 million was paid on September 19, 2019 to common stockholders of record at the close of business on August 30, 2019.

We repurchased 0.9 million shares for $213.1 million during fiscal 2019 under our existing share repurchase program.

Over the last 12 months, we have generated $427.1 million in cash from operations and have returned $320.4 million to stockholders in the form of share repurchases and cash dividends.

On June 24, 2019, the Board of Directors of FactSet approved a $210.0 million expansion of the existing share repurchase program.

Subsequent to this expansion, $238.6 million was available for future repurchases as of August 31, 2019.

Capital Expenditures

Capital expenditures were $59.4 million during fiscal 2019, compared to $33.5 million a year ago.

Capital expenditures of $28.0 million, or 47%, were primarily related to corporate infrastructure investments, additional server equipment for our data centers located in New Jersey and Virginia, as well as computers and peripherals for new office space primarily in India.

The remainder of our capital expenditures was primarily for the build-out of office space, with $22.3 million related to the new corporate headquarters in Norwalk, Connecticut and $6.6 million related to new office space in India.

Results of Operations

For an understanding of the significant factors that influenced our performance during the past three fiscal years, the following discussion should be read in conjunction with the Consolidated Financial Statements and the Notes to Consolidated Financial Statements presented in this Report on Form 10-K.

Years ended August 31,

(in thousands, except per share data)

Cost of services

Selling, general and administrative

Operating income

Diluted earnings per common share

Diluted weighted average common shares

Fiscal 2019 compared to Fiscal 2018

Revenue in fiscal 2019 were $1.44 billion, increasing 6.3% compared to fiscal 2018.

Our organic revenue growth rate for fiscal 2019 was 6.2% compared to the prior year period.

Organic revenue excludes the effects of acquisitions and dispositions completed in the last 12 months, foreign currency in all periods presented and deferred revenue fair value adjustments from purchase accounting. The increase in revenue was due to revenue growth across all geographic segments and workflow solutions, including client additions and product expansion within our existing client base.

The growth in the workflow solutions was primarily driven by Analytics and Trading, CTS and Wealth.

The increase includes sales of products and solutions to new and existing clients, an annual price increase, partially offset by cancellations.

Revenue growth in Analytics and Trading was primarily due to increased demand for our portfolio analytics solutions.

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

Wealth also experienced revenue growth due to higher sales of our workstation product.

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

Fiscal 2018 compared to Fiscal 2017

Revenue in fiscal 2018 were $1.35 billion, increasing 10.6% compared to fiscal 2017.

Our organic revenue growth rate for fiscal 2018 was 5.6% compared to fiscal 2017, with cancellations remaining relatively flat during fiscal 2018.

Organic revenue excludes the effects of acquisitions and dispositions completed in the last 12 months and foreign currency in all periods.

The increase in revenue was throughout our geographical segments and workflow solutions.

segment revenues was up 7.4% compared to the fiscal 2017, primarily driven by additional clients, expansion from within our existing client base and an annual price increase, while holding client cancellations steady.

Our international operations also grew as demonstrated by our 17.3% growth in Europe and a 13.1% increase in Asia Pacific.

In addition to revenue growth amongst the geographic segments, achievements were also made across each workflow solution which include Research, Analytics and Trading, CTS, and Wealth.

The Research workflow growth was driven by additional users due to banking new hires.

The growth in the Analytics and Trading workflow was primarily attributed to increased sales in the portfolio analytics, reporting, and risk platforms, coupled with the enhancement of our multi-asset class risk model offerings, which strengthened our position in the analytics market.

The CTS workflow growth was driven by increased demand for our proprietary content data feeds while new business sales drove the Wealth workflow growth.

Revenue by Geographic Segment

Years ended August 31,

(in thousands)  

Europe Revenues

Asia Pacific Revenues

International Revenue

Consolidated Revenue

Fiscal 2019 compared to Fiscal 2018

Revenues from our U.S.

segment increased 6.3% to $894.6 million in fiscal 2019 compared to $841.9 million in fiscal 2018.

This increase was primarily due to increased sales of products and solutions to new and existing clients primarily in Analytics and Trading, CTS and Wealth, an annual price increase for the majority of our U.S.

segment clients, partially offset by cancellations.

Excluding the effects of acquisitions and dispositions, organic revenues in the U.S.

was up 6.2% compared to fiscal 2018.

Revenues from our U.S.

operations accounted for 62.3% of our consolidated revenue during fiscal 2019, consistent with the prior year period.

Revenue from our international operations increased 6.4% in fiscal 2019 compared to fiscal 2018.

European revenues increased 5.3% to $408.1 million in fiscal 2019 compared to $387.6 million in fiscal 2018.

This increase was primarily driven by increased sales of products and solutions to new and existing clients primarily in Analytics and Trading and CTS, which includes our annual price increase for the majority of our European clients, partially offset by increased cancellations in Research.

European organic revenues grew 5.0% in fiscal 2019 compared to fiscal 2018.

Foreign currency exchange rate fluctuations decreased our European growth rate by 30 basis points.

Asia Pacific revenues increased 10.0% during fiscal 2019, compared with fiscal 2018.

This increase was due mainly to increased sales of products and solutions to new and existing clients primarily in Analytics and Trading, which includes our annual price increase for the majority of our Asia Pacific clients, partially offset by cancellations.

Asia Pacific organic revenues grew 10.0% during fiscal 2019 compared to fiscal 2018, with foreign currency exchange rate fluctuations having a minimal impact.

Fiscal 2018 compared to Fiscal 2017

Revenues from our U.S.

segment increased 7.4% to $841.9 million in fiscal 2018 compared to $784.1 million in fiscal 2017, due to organic ASV growth across our workflow solutions and strong performance executing new business sales.

Cancellations remained relatively flat for fiscal 2018 showing signs of stability.

Excluding the effects of acquisitions and dispositions, organic revenues in the U.S.

were up 5.1% compared to fiscal 2017.

Revenues from our U.S.

operations accounted for 62.4% of our consolidated revenue during fiscal 2018, a decrease from 64.2% in fiscal 2017.

Revenue from our international operations increased 16.3% in fiscal 2018 compared to fiscal 2017, due to growth across our workflow solutions, partially offset by higher cancellations compared to the prior year.

European revenues increased 17.3% to $387.6 million in fiscal 2018 compared to $330.3 in fiscal 2017.

Excluding the effects of acquisitions and dispositions completed in the last 12 months and foreign currency, European organic revenues grew 9.4% in fiscal 2018 compared to fiscal 2017.

Foreign currency exchange rate fluctuations increased our European growth rate by 150 basis points.

Asia Pacific revenues increased 13.1% during fiscal 2018, compared with fiscal 2017.

Excluding the effects of acquisitions and dispositions completed in the last 12 months and foreign currency, Asia Pacific organic revenues grew 12.9% during fiscal 2018 compared to fiscal 2017, with foreign currency exchange rate fluctuations having a minimal impact.

Operating Expenses

Years ended August 31,

(in thousands)  

Cost of services

Selling, general and administrative (“SG&A”)

Total operating expenses

Operating income

Operating Margin

Cost of Services

Fiscal 2019 compared to Fiscal 2018

Cost of services increased 0.6% to $663.4 million in fiscal 2019 compared to $659.3 in fiscal 2018.

This increase was primarily due to an increase in data costs and computer-related expenses, partially offset by a reduction in compensation costs and contractor fees.

Cost of services, expressed as a percentage of revenue, was 46.2% during fiscal 2019, a decrease of 260 basis points over the prior year period.

This decrease was primarily due to revenue growth outpacing the growth of cost of services on a year over year basis, as well as a decrease in compensation costs, partially offset by an increase in computer-related expenses, when expressed as a percentage of revenue.

Employee compensation, when expressed as a percentage of revenue decreased 300 basis points in fiscal 2019, compared to the prior fiscal year.

This decrease in employee compensation was primarily driven by a foreign currency benefit from a stronger U.S.

dollar, a shift in headcount distribution from our higher to lower cost locations, the timing of new employee hiring, and a restructuring charge impacting the prior year period, partially offset by higher employee benefit costs.

Computer-related expenses increased 40 basis points, when expressed as a percentage of revenue for fiscal 2019, compared to the prior year period, primarily driven by increased costs from cloud-based hosting and licensed software arrangements.

Fiscal 2018 compared to Fiscal 2017

Cost of services increased 16.4% to $659.3 million in fiscal 2018 compared to $566.6 million in fiscal 2017.

Cost of services, expressed as a percentage of revenue, was 48.8% during fiscal 2018, an increase of 240 basis points over fiscal 2017.

This increase was primarily due to higher employee compensation costs driven by increased employee headcount and restructuring actions, incremental data costs from recent acquisitions and additional users as well as amortization of intangible assets associated with our recent acquisitions.

This increase was partially offset by a reduction in stock-based compensation expenses from accelerated vesting in fiscal 2017.

Employee compensation, including stock-based compensation, when expressed as a percentage of revenue increased 100 basis points in fiscal 2018, compared to fiscal 2017.

The increase is primarily due to the hiring of 497 net new employees over the last 12 months, with the majority of their compensation recorded in cost of services due to their involvement with content collection, engineering and product development.

Employee compensation expense further increased due to headcount expansion from fiscal 2017 acquisitions that were included for a full year in fiscal 2018, while fiscal 2017 only included a partial year amount.

In addition, during fiscal 2018 we incurred $17.4 million of restructuring charges primarily related to severance of which $8.5 million was recorded within cost of services.

Data costs, when expressed as a percentage of revenue, increased 60 basis points due primarily from our recent acquisitions and higher variable data costs associated with additional users.

Amortization of acquired intangible assets, when expressed as a percentage of revenue, increased 20 basis points in fiscal 2018 compared to the same period a year ago, primarily due to recent acquisitions, which added $93.2 million of intangible assets to be amortized over a weighted-average life of 11.5 years.

These intangible assets were amortized for the full fiscal 2018, while, fiscal 2017 did not include a similar amount of acquisition amortization due to the dates of each acquisition.

Selling, General and Administrative

Fiscal 2019 compared to Fiscal 2018

SG&A expenses increased 2.8% to $333.9 million during fiscal 2019 compared to $324.6 million in fiscal 2018.

This increase was primarily due to an increase in bad debt expense and compensation costs, partially offset by a reduction in travel expenses.

SG&A expenses, expressed as a percentage of revenue, were 23.3% in fiscal 2019, a decrease of 70 basis points over the prior year period.

This year over year decrease was primarily due to revenue growth outpacing the growth of SG&A related expenses, lower employee compensation and a reduction in travel costs, partially offset by an increase in bad debt expense, when expressed as a percentage of revenue.

Employee compensation, when expressed as a percentage of revenue, decreased 50 basis points in fiscal 2019, compared to fiscal 2018.

This decrease is primarily driven by a foreign currency benefit from a stronger U.S dollar, a shift in headcount distribution from our higher to lower cost locations, the timing of new employee hiring, and a restructuring charge impacting the prior year period, partially offset by higher employee benefit costs.

Travel expenses decreased 30 basis points, as a percentage of revenue, due to an internal focus on cost discipline measures.

Bad debt expense increased 60 basis points, as a percentage of revenue.

Fiscal 2018 compared to Fiscal 2017

SG&A expenses increased 7.3% to $324.6 million during fiscal 2018 compared to $302.5 million in fiscal 2017.

SG&A expenses, expressed as a percentage of revenue, were 24.0% in fiscal 2018, a decrease of 70 basis points over fiscal 2017.

This decrease was primarily due to revenue growth outpacing the growth of SG&A related expenses on a year over year basis, foreign currency exchange gains on hedging activities of our Indian Rupee and lower overall employee compensation including stock-based compensation expense.

This decrease was partially offset primarily by higher legal costs, restructuring actions and new employee additions.

Employee compensation, including stock-based compensation, when expressed as a percentage of revenue decreased 50 basis points compared to fiscal 2017.

The decrease is primarily related to a higher percentage of our employees working in a cost of services capacity compared to an SG&A role.

Compensation for our employees within the content collection, consulting, product development, software and systems engineering groups is recorded within cost of services while employees within our sales and various other support and administrative departments are reflected in SG&A.

In fiscal 2018, the majority of our hiring had been in departments within cost of services, thus driving a higher percentage of our employee compensation in this area.

Partially offsetting these decreases were higher legal expenses primarily from the settlement of a legal matter in the fourth quarter of fiscal 2018, a full year of employee compensation from acquisitions and $8.9 million of severance charges.

Operating Income and Operating Margin

Fiscal 2019 compared to Fiscal 2018

Operating income increased 19.6% to $438.0 million in fiscal 2019 compared to $366.2 million in fiscal 2018.

Operating income increased due to revenue growth, favorable foreign exchange rates which reduced the overall operating expense impact and mainly resulted in a reduction in compensation expense, as well as, decreased costs from restructuring actions, decreased travel expenses and contractor fees, partially offset by an increase in data costs, computer-related expenses and bad debt expense. Our operating margin increased in fiscal 2019 to 30.5%, compared to 27.1% for fiscal 2018.

Operating margin increased due to incremental revenue that outpaced the growth of our operating expenses year over year, favorable foreign exchange rates, which reduced the overall operating expense impact and mainly resulted in a reduction in compensation expense, as well as, lower costs from restructuring actions, a reduction in travel expenses, partially offset by higher bad debt expense and computer-related expenses, when expressed as a percentage of revenue.

Fiscal 2018 compared to Fiscal 2017

Operating income increased 4.0% to $366.2 million in fiscal 2018 compared to $352.1 million in fiscal 2017.

Our operating margin decreased in fiscal 2018 to 27.1%, compared to 28.8% for fiscal 2017.

Operating income increased due to incremental revenue that outpaced the growth of SG&A expenses year over year partially offset by higher cost of services.

The reduction in operating margin year over year was due to an increase in employee compensation costs, including restructuring actions, data costs from acquisitions and additional users, amortization of intangible assets associated with acquisitions, and incremental legal fees partially offset by foreign currency exchange gains on hedging activities and lower stock-based compensation.

Operating Income by Segment

Years ended August 31,

(in thousands)

Our operating segments are aligned with how we manage the business, the demographic markets we serve, and how the CODMG assesses performance.

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

Sales, consulting, data collection, product development and software engineering are the primary functional groups within each segment.

Each segment records compensation expense, including stock-based compensation, amortization of intangible assets, depreciation of furniture and fixtures, amortization of leasehold improvements, communication costs, professional fees, rent expense, travel, office and other direct expenses.

Expenditures associated with our data centers, third-party data costs and corporate headquarter charges are recorded by the U.S.

segment and are not allocated to the other segments.

The centers of excellence, located in India and the Philippines, primarily focus on content collection that benefit all our segments.

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

Fiscal 2019 compared to Fiscal 2018

operating income increased 21.1% to $179.4 million during fiscal 2019, compared to $148.1 million a year ago.

The increase in U.S.

operating income was primarily due to revenue growth of 6.3% and a reduction in compensation expense, partially offset by increased computer-related expenses, data costs, bad debt expense and occupancy expense.

Compensation expense decreased due to a net reduction in headcount of 4.9% over the past 12 months, the timing of new employee hiring, and a restructuring charge impacting the prior year period, partially offset by higher employee benefit costs.

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

Data costs increased due to increased acquisition costs of fixed cost content and additional spend on variable cost content to drive revenue growth.

Occupancy costs increased primarily related to leasing the new corporate headquarters space in Norwalk, Connecticut.

European operating income increased 20.3% to $179.3 million during fiscal 2019, compared to $149.0 million a year ago.

The increase in European operating income was primarily due to revenue growth of 5.3% and an overall reduction in operating expenses driven mainly by a decrease in employee compensation expense and occupancy expense, partially offset by an increase in bad debt expense.

Employee compensation decreased primarily due to a foreign currency benefit from a stronger U.S.

dollar, a restructuring charge impacting the prior year period, partially offset by a net headcount increase of 2.9% over the past 12 months.

Occupancy costs decreased due to a one-time adjustment recognized in fiscal 2019.

The impact of foreign currency increased European operating income by $6.6 million year over year.

Asia Pacific operating income increased 14.9% to $79.4 million during fiscal 2019, compared to $69.1 million a year ago.

The increase in Asia Pacific operating income was due to revenue growth of 10.0% and benefits from a stronger U.S.

dollar, partially offset by increases in compensation expense and occupancy costs.

Employee compensation was higher, year over year, due to a 3.3% increase in our Asia Pacific workforce, partially offset by a foreign currency benefit from a stronger U.S.

Occupancy costs increased due primarily to the expansion of office space in India and the Philippines.

The impact of foreign currency increased Asia Pacific operating income by $3.2 million year over year.

Fiscal 2018 compared to Fiscal 2017

operating income increased 8.0% to $148.1 million during fiscal 2018 compared to $137.1 million in fiscal 2017.

The increase in U.S.

operating income was primarily due to revenue growth of 7.4%, partially offset by increased expenses related to employee compensation, computer equipment and data costs.

Employee compensation increased primarily due to annual base salary increases, restructuring actions, and higher employee benefit costs including medical expenditures.

Computer related expenses, which include depreciation, maintenance, software and other fees, increased year over year due to expenses associated with upgrades to existing computer systems in Norwalk, additional server equipment in our data centers located in New Jersey and Virginia, as well as laptop computers and peripherals for new and existing employees.

Data costs increased due to higher third-party data costs from our recent acquisitions and additional users.

European operating income decreased 3.1% to $149.0 million during fiscal 2018 compared to $153.7 million in fiscal 2017.

The impact of foreign currency decreased European operating income by $4.9 million year over year.

Additionally, the decrease in European operating income was due to a full year impact of fiscal 2017 acquisitions, that contributed to higher employee compensation, amortization of intangible assets, and data costs, partially offset by revenue growth of 17.3%.

Asia Pacific operating income increased 12.7% to $69.1 million during fiscal 2018 compared to $61.4 million in fiscal 2017.

The increase in Asia Pacific operating income was due to revenue growth of 13.1% and benefits from a stronger U.S.

dollar, partially offset by increases in employee compensation and occupancy costs.

Employee compensation was higher year over year as result of a 9.2% increase in our Asia Pacific workforce.

Occupancy costs increased due primarily to an increase in rent expense for additional office space in our Philippines location.

The impact of foreign currency increased Asia Pacific operating income by $3.6 million year over year.

Income Taxes, Net Income and Diluted Earnings per Share

Years ended August 31,

(in thousands)

Provision for income taxes

Diluted earnings per common share

Fiscal 2019 compared to Fiscal 2018

The fiscal 2019 provision for income taxes was $69.2 million, a decrease of 18.4% from the same period a year ago.

The decrease was primarily attributable to the enactment of the TCJA.

The TCJA imposed a one-time transition tax expense, which resulted in a $23.2 million impact to the income tax provision for fiscal 2018, without a comparable impact in fiscal 2019.

This transition tax impact was revised during fiscal 2019, resulting in a net benefit of $3.4 million upon finalizing the accounting for the tax effects of the TCJA.

The TCJA also lowered the statutory U.S corporate income tax rate from 35% to 21%, effective January 1, 2018, which was fully applicable for fiscal 2019 compared to the lower tax rate being phased in for the prior year comparable period.

The reduction in the U.S.

corporate income tax rate required a remeasurement of our net U.S.

deferred tax position, which resulted in a non-recurring tax charge of $2.2 million during fiscal 2018.

The decrease in the income tax provision year over year was partially offset by a $3.3 million income tax expense from finalizing prior years’

tax returns and other discrete items for fiscal 2019.

Our effective tax rate was 16.4% for the full fiscal 2019 year compared to 24.1% a year ago was mainly due the reduction in the federal statutory rate from the enactment of the TCJA that was fully applicable for fiscal year 2019 compared to being phased in for the prior year comparable period.

The decrease in the effective tax rate for fiscal 2019 was also due to the one-time transition tax from the TCJA that was recorded in the prior year period.

These benefits were partially offset by higher foreign income taxed at rates lower than U.S.

Fiscal 2018 compared to Fiscal 2017

The fiscal 2018 provision for income taxes was $84.8 million, a decrease of 1.5% from fiscal 2017.

The decrease was primarily attributable to the impacts associated with the U.S.

tax reform under the TCJA.

On December 22, 2017, the U.S.

government enacted comprehensive tax legislation through the TCJA.

The TCJA, among other things, lowered the statutory U.S.

corporate income tax rate from 35% to 21%, effective January 1, 2018.

Due to our August 31 fiscal year-end, the lower tax rate was phased in, resulting in a blended U.S.

statutory federal rate of 25.7% for fiscal 2018.

The TCJA also implemented a modified territorial tax system and imposed a mandatory one-time transition tax on accumulated earnings and profits (“E&P”) of foreign subsidiaries that were previously deferred from U.S.

income taxes.

Our effective tax rate was 24.1% for the full fiscal 2018 year compared to 25.0% in fiscal 2017, due to higher foreign income taxed at rates lower than U.S.

rates, incremental income tax benefits from R&D tax credits and increased excess tax benefits from stock option exercises.

These benefits were partially offset by the one-time transition tax of $23.2 million and a $2.3 million tax expense associated with the remeasurement of our net U.S.

deferred tax position, both of which related to the TCJA.

We had approximately $250 million in undistributed foreign E&P generated prior to December 31, 2017, which resulted in the provisional amount for the one-time transition tax expense of $23.2 million, payable over an eight-year period.

Net Income and Diluted Earnings per Share

Fiscal 2019 compared to Fiscal 2018

Net income increased 32.1% to $352.8 million while diluted earnings per share increased 33.9% to $9.08 during fiscal 2019 compared to fiscal 2018.

Net income and diluted EPS increased primarily due to higher operating income, a reduction in the income tax provision primarily due to the TCJA reform, partially offset by an increase in interest expense associated with our outstanding debt.

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 options issued.

Fiscal 2018 compared to Fiscal 2017

Net income increased 3.4% to $267.1 million, while diluted earnings per share increased 4.1% to $6.78 during fiscal 2018 compared to fiscal 2017.

Net income and diluted EPS grew primarily from higher revenue from strong performances across our segments and workflow solutions, gains earned from our foreign currency hedges, and a decrease in our effective tax rate due to the TCJA.

These benefits were partially offset by an increase in employee compensation expenses, data costs, amortization of intangible assets from acquisitions, occupancy costs, and interest expense associated with our outstanding debt.

Diluted EPS also benefited from a 0.3 million reduction in our weighted average shares outstanding due to share repurchases partially offset by stock option exercises during fiscal 2018.

Non-GAAP Financial Measures

To supplement the financial measures prepared in accordance with GAAP, we use non-GAAP financial measures including organic revenue, adjusted operating margin, adjusted net income and adjusted diluted earnings per share.

The reconciliations of these non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP are shown in tables below.

These non-GAAP financial measures should not be considered in isolation from, or as a substitute for or superior to, financial measures reported in accordance with GAAP.

Moreover, these non-GAAP financial measures have limitations in that they do not reflect all the items associated with the operations of the business as determined in accordance with GAAP.

Other companies may calculate similarly titled non-GAAP financial measures differently than we do, limiting the usefulness of those measures for comparative purposes.

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

Adjusted measures may also facilitate comparisons to our historical performance.

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

Twelve Months Ended

(In thousands)

Deferred revenue fair value adjustment (1)

Currency impact (2)

Organic revenue

Deferred revenue fair value adjustments from purchase accounting.

The impact from foreign currency movements over the past 12 months.

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, respectively.

Twelve Months Ended

(In thousands, except per share data)

Operating income

Intangible asset amortization

Deferred revenue fair value adjustment

Adjusted operating income

Adjusted operating margin

Intangible asset amortization(3)

Deferred revenue fair value adjustment(4)

Other items(5)

Income tax items

Adjusted net income

Diluted earnings per common share

Intangible asset amortization

Deferred revenue fair value adjustment

Income tax items

Adjusted diluted earnings per common share(6)

Weighted average common shares (diluted)

Operating income, net income and diluted EPS in fiscal 2019 were adjusted to exclude (i) intangible asset amortization (ii) deferred revenue fair value adjustments from purchase accounting, and (iii) other items including severance, stock-based compensation acceleration, professional fees for infrastructure upgrade activities, a one-time adjustment related to data costs and occupancy costs, partially offset by non-core transaction related revenue.

Net income and diluted EPS in fiscal 2019 were also adjusted to exclude amounts primarily related to finalizing prior years' tax returns and other discrete items.

Operating income, net income and diluted EPS in fiscal 2018 were adjusted to exclude (i) intangible asset amortization (ii) deferred revenue fair value adjustments from purchase accounting, and (iii) other items including restructuring, legal matters and other corporate actions.

Net income and diluted EPS in fiscal 2018 were also adjusted to exclude a one-time deemed repatriation tax on foreign earnings.

The intangible asset amortization was recorded net of a tax impact of $4.7 million in fiscal 2019 compared with $4.9 million for fiscal 2018.

The deferred revenue fair value adjustment was recorded net of a tax impact of $1.0 million in fiscal 2019 compared with $1.6 million for fiscal 2018.

The other items were recorded net of a tax impact of $1.7 million in fiscal 2019 compared with $5.3 million for fiscal 2018.

Details may not sum to total due to rounding

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

Years ended August 31,

(in thousands)

Net cash provided by operating activities

Capital expenditures (1)

Free cash flow (2)

Net cash used in investing activities

Net cash used in financing activities

Cash and cash equivalents at end of year

Included in net cash used in investing activities during each fiscal year reported.

Free cash flow is defined as cash provided by operating activities, which includes the cash cost for taxes and changes in working capital, less capital expenditures.

Fiscal 2019 compared to Fiscal 2018

Cash and cash equivalents aggregated to $359.8 million, or 23.1% of total assets at August 31, 2019, compared with $208.6 million, or 14.7% of total assets at August 31, 2018.

Our cash and cash equivalents increased $151.2 million during fiscal 2019, primarily due to $575.0 million in proceeds from debt, $427.1 million of net cash provided by operating activities, $107.1 million in proceeds from the exercise of employee stock options and $3.3 million in net proceeds from investments.

These cash inflows were partially offset by $575.0 million related to the repayment of debt, $220.4 million in share repurchases (which included $213.1 million under the existing share repurchase program and $7.3 million in shares repurchased from employees to cover their cost of taxes upon vesting of restricted stock), $100.1 million in dividend payments, $59.4 million of capital expenditures, and $5.6 million from the effects of foreign currency translations.

Net cash used in investing activities was $56.1 million in fiscal 2019, representing a $7.6 million increase in cash used from investing activities, compared to fiscal 2018.

This increase was primarily due to $25.9 million of higher capital expenditures, offset by a $15.0 million decrease in acquisition activity, and a $3.3 million increase in net proceeds from investments (net of purchases).

During fiscal 2019, net cash used in financing activities was $214.3 million, representing a $105.8 million decrease from fiscal 2018.

This decrease was due primarily to $575.0 million of borrowings under our 2019 Credit Agreement, an $83.6 million decrease in share repurchases and a $35.4 million increase in proceeds from employee stock plans.

This decrease was partially offset by the $575.0 million retirement of the 2017 Credit Agreement and a $10.6 million increase in dividend payments.

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

We expect that for at least the next 12 months, our operating expenses will continue to constitute a significant use of our cash.

As of August 31, 2019, our total cash and cash equivalents worldwide was $359.8 million, with $132.6 million included in the U.S.

segment, the majority of which is held in bank accounts located within the U.S., $183.5 million in the Europe segment, predominantly within bank accounts in the UK, France, and Germany, and the remaining $43.7 million held in the Asia Pacific segment.

As of August 31, 2019, we also had $574.2 million in outstanding borrowings (net of $0.8 million of unamortized debt issuance costs).

We believe our liquidity (including cash on hand, cash from operating activities and other cash flows that we expect to generate) within each geographic segment will be sufficient to meet our short-term and long-term operating requirements, including working capital needs, capital expenditures, dividend payments, stock repurchases, growth objectives and other financing activities.

In addition, we expect existing foreign cash, 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 fiscal 2019 was $367.8 million, an increase of 4.4% compared to $352.1 million in fiscal 2018.

Free cash flow is the result of $427.1 million of net cash provided by operating activities, partially offset by $59.4 million in capital expenditures.

The year over year increase to free cash flow was primarily driven by higher net income and an increase in client collections due to a reduction in our days sales outstanding ("DSO") to 37 days as of August 31, 2019, compared to 41 days for the prior year period, partially offset by higher capital requirements from the build-out of new office space and the timing of supplier and tax payments.

Fiscal 2018 compared to Fiscal 2017

Cash and cash equivalents aggregated to $208.6 million, or 14.7% of our total assets at August 31, 2018, compared with $194.7 million, or 13.8% of our total assets at August 31, 2017.

Our cash and cash equivalents increased $13.9 million during fiscal 2018 due to net cash provided by operating activities of $385.7 million and $71.6 million in proceeds from the exercise of employee stock options.

These cash inflows were partially offset by $89.4 million in dividend payments, $33.5 million of capital expenditures, $15.0 million related to a business investment, $3.2 million from the effects of foreign currency translations and $303.9 million in share repurchases, which included $302.4 million under the existing share repurchase program and $1.5 million in shares repurchased from employees to cover their cost of taxes upon vesting of restricted stock.

Net cash used in investing activities was $48.5 million in fiscal 2018, representing a $298.8 million decrease from fiscal 2017.

This reduction was primarily due to decreased acquisition activity with $15.0 million invested in fiscal 2018 compared to $303.1 million largely related to the BI-SAM Technologies (“BISAM”) and Vermilion Holdings Limited (“Vermilion”) acquisitions in fiscal 2017.

Additionally, cash used in investing activities decreased year over year due to lower capital expenditures of $3.3 million and a decrease in the purchase of investments (net of proceeds) of $7.4 million year over year

During fiscal 2018, net cash used in financing activities was $320.0 million, representing a $311.9 million increase from fiscal 2017.

This increase was due to $275.0 million in proceeds (net of repayment) from the issuance of long-term debt in fiscal 2017 that did not occur in fiscal 2018.

In addition, the decrease was due to higher dividend payments of $8.5 million, an increase in share repurchases of $43.0 million, and a change in the presentation of tax benefits from share-based payment arrangements due to the adoption of the accounting standard update, which required us to disclose benefits from stock option exercises as an operating cash inflow instead of a financing activity.

This presentation change was adopted prospectively beginning with fiscal 2018.

These cash outflows were partially offset by an increase in proceeds from employee stock plans of $21.6 million.

Free cash flow generated in fiscal 2018 was $352.1 million, an increase of 24.1% compared to $283.7 million in fiscal 2017.

Free cash flow was attributable to $267.1 million of net income, $87.0 million of non-cash items, $31.6 million of working capital changes, less $33.5 million in capital expenditures.

The year over year free cash flow growth was driven by positive working capital changes totaling $47.6 million and lower capital expenditures of $3.3 million.

Working capital improved year over year due to timing of supplier payments and payroll, stabilization of our days sales outstanding (“DSO”) at 41 days and the adoption of an accounting standard update for share-based payments, which required the presentation of benefits from stock options exercised to be reported as an operating activity, when in prior periods it was reported as a financing activity.

Capital Resources

Capital Expenditures

Capital expenditures were $59.4 million during fiscal 2019, compared to $33.5 million a year ago.

Capital expenditures were $33.5 million during fiscal 2018, down from $36.9 million in fiscal 2017.

Capital expenditures of $24.2 million, or 72% of our capital expenditures during fiscal 2018 related to upgrades to existing computer systems in Norwalk, additional server equipment in our data centers located in New Jersey and Virginia, as well as laptop computers and peripherals for new and existing employees.

The remainder of our capital expenditures was primarily for the build out of office space including $2.2 million at our India location, $2.8 million at our Hong Kong location and $1.5 million at our Netherlands location.

Capital Needs

Long-Term Debt

2019 Credit Agreement

On March 29, 2019, the Company entered into the 2019 Credit Agreement ("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 provides for a $750.0 million revolving credit facility ("the 2019 Revolving Credit Facility").

FactSet may request borrowings under the 2019 Revolving Credit Facility until its maturity date of March 29, 2024.

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

FactSet 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.

FactSet is 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 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 August 31, 2019, which the Company believe approximates carrying amount as the terms and interest rates 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%.

During fiscal years 2019, 2018 and 2017, FactSet recorded interest expense of $19.8 million, $15.9 million and $8.4 million, respectively, on its outstanding debt amounts.

The weighted average interest rate on amounts outstanding under our credit facilities was 3.35% and 2.69% as of August 31, 2019 and 2018, respectively.

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

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

These costs were capitalized as loan origination fees and are amortized into interest expense ratably over the term of the 2019 Credit Agreement.

The 2019 Credit Agreement contains covenants and requirements restricting certain FactSet activities, which are usual and customary for this type of loan.

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

The Company was in compliance with all the covenants and requirements within the 2019 Credit Agreement as of August 31, 2019.

The borrowings from the 2019 Credit Agreement were used to retire all outstanding debt under the previous 2017 Credit Agreement between FactSet, as the borrower, and PNC as the lender on March 29, 2019.

The total principal amount of the debt outstanding at the time of retirement was $575.0 million and there were no prepayment penalties.

2017 Credit Agreement

On March 17, 2017, the Company entered into a Credit Agreement (the "2017 Credit Agreement") between FactSet, as the borrower, and PNC Bank, National Association ("PNC"), as the administrative agent and lender.

The 2017 Credit Agreement provided for a $575.0 million revolving credit facility (the "2017 Revolving Credit Facility").

The 2017 Credit Agreement also allowed FactSet, subject to certain requirements, to arrange for additional borrowings with PNC for an aggregate amount of up to $225.0 million, provided that any such request for additional borrowings was in a minimum amount of $25.0 million.

FactSet could have requested borrowings under the 2017 Revolving Credit Facility until its maturity or retirement date.

Borrowings under the loan were subject to interest on the outstanding principal amount at a rate equal to the daily LIBOR rate plus 1.00%.

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

There were no prepayment penalties if the Company elected to prepay the outstanding loan amounts prior to the scheduled maturity date.

The principal balance was repaid in full on March 29, 2019.

Letters of Credit

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

Approximately $2.8 million of standby letters of credit have been issued in connection with our leased office spaces as of August 31, 2019.

These standby letters of credit contain covenants that, among other things, require us to maintain minimum levels of consolidated net worth and certain leverage and fixed charge ratios.

As of August 31, 2019 and 2018, we were in compliance with all covenants contained in the standby letters of credit.

Foreign Currency

Foreign Currency Exposure

Certain wholly-owned subsidiaries within the Europe and Asia Pacific segments operate under a functional currency different from the U.S.

The financial statements of these foreign subsidiaries are translated into U.S.

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

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

Our foreign currency exchange exposure is related to our operating expense base in countries outside the U.S., where 76% of our employees were located as of August 31, 2019.

During fiscal 2019, foreign currency movements increased operating income by $10.1 million, compared to a decrease in operating income by $1.3 million for fiscal 2018.

Foreign Currency Hedges

As of August 31, 2019, we maintained the following foreign currency forward contracts to hedge our exposures:

Philippine Peso –

foreign currency forward contracts to hedge approximately 75% of our Philippine Peso exposure through the fourth quarter of fiscal 2020.

Indian Rupee –

foreign currency forward contracts to hedge approximately 50% of our Indian Rupee exposure through the end of the third quarter of fiscal 2020, and 25% of our Indian Rupee exposure through the fourth quarter of fiscal 2020.

Euro –

foreign currency forward contracts to hedge approximately 75% of our Euro exposure through the first quarter of fiscal 2020, 50% of our Euro exposure from the second quarter through the third quarter of fiscal 2020, and 25% of our Euro exposure through the fourth quarter of fiscal 2020.

British Pound Sterling –

foreign currency forward contracts to hedge approximately 75% of our British Pound sterling exposure through the first quarter of fiscal 2020, 50% of our British Pound Sterling exposure from the second quarter through the third quarter of fiscal 2020, and 25% of our British Pound sterling exposure through the fourth quarter of fiscal 2020.

As of August 31, 2019, the gross notional value of foreign currency forward contracts to purchase Philippine Pesos and Indian Rupees with U.S.

dollars was ₱1.4 billion and Rs.1.4 billion, respectively.

The gross notional value of foreign currency forward contracts to purchase U.S.

dollars with Euros and British Pound Sterling was €35.7 million and £20.5 million, respectively.

There were no other outstanding foreign currency contracts as of August 31, 2019.

A loss on derivatives of $1.8 million was recorded in operating income during fiscal 2019, compared to a gain of $3.1 million in fiscal 2018.

Off-Balance Sheet Arrangements

At August 31, 2019 and 2018, 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 or other debt arrangements or for other contractually limited purposes.

Share Repurchase Program

Repurchases will be made from time to time in the open market and privately negotiated transactions, subject to market conditions.

In fiscal 2019, we repurchased 0.9 million shares for $213.1 million compared to 1.5 million shares for $302.4 million in fiscal 2018 under the existing share repurchase program.

Over the last 12 months, we have returned $320.4 million to stockholders in the form of share repurchases and dividends.

On June 24, 2019, the Board of Directors of FactSet approved a $210.0 million expansion of the existing share repurchase program.

Subsequent to this expansion, $238.6 million is available for future repurchases as of August 31, 2019.

Contractual Obligations

Fluctuations in our operating results, the degree of success of our accounts receivable collection efforts, the timing of tax and other payments, as well as, necessary capital expenditures to support growth of our operations will impact our liquidity and cash flows in future periods.

The effect of our contractual obligations on our liquidity and capital resources in future periods should be considered in conjunction with the factors disclosed below.

As of August 31, 2019 and 2018, we had total purchase commitments with suppliers of $83.3 million and $79.0 million, respectively.

There were no material changes in the Company’s purchase commitments with suppliers during fiscal 2019.

The following table summarizes our significant contractual obligations as of August 31, 2019 and the corresponding effect that these obligations will have on our liquidity and cash flows in future periods:

Payments due by period

(in millions)

2025 and thereafter

Operating lease obligations (1)

Purchase commitments (2)

Long-term debt obligations (3)

Total contractual obligations by period(4)

Operating lease amounts include future minimum lease payments under all our non-cancelable operating leases with an initial term in excess of one year.

For more information on our operating leases, see Note 19, Commitments and Contingencies, in the Notes to the Company’s Consolidated Financial Statements included in Item 8 of this Report on Form 10-K.

Purchase commitments represent payments due in future periods in respect of obligations to our various data vendors as well as commitments to purchase goods and services such as telecommunication services, computer software and maintenance support and consulting services.

Represents the amount due under the Company’s 2019 Credit Agreement.

Non-current income taxes payable of $26.3 million and non-current deferred tax liabilities of $16.4 million have been excluded in the table above due to uncertainty regarding the timing of future payments.

Purchase orders do not necessarily reflect a binding commitment but are merely indicative of authorizations and intention to conclude purchases in the future.

For the purpose of this tabular disclosure, purchase obligations for goods and services are defined as agreements that are enforceable and legally binding on us and that specify all significant terms, including:

fixed or minimum quantities to be purchased;

fixed, minimum or variable price provisions;

and the approximate timing of the transaction.

It is expected that all the contractual obligations noted in the table will be funded from existing cash and cash flows from operations.

Expected timing pertaining to the contractual obligations included in the table above has been estimated based on information currently available.

The amounts paid, and the timing of those payments may differ based on when the goods and services provided by our vendors to whom we are contractually obligated are received, as well, as due to changes to agreed-upon amounts for any of our obligations.

On February 14, 2018, we entered into a new lease to relocate our corporate headquarters to 45 Glover Avenue in Norwalk, Connecticut.

The new location will comprise approximately 173,000 square feet of office space.

We took possession of the newly leased property on January 1, 2019 for fit-out purposes.

We will continue to occupy our existing headquarters space until the new headquarters property is ready for occupancy, currently estimated to be in the second quarter of fiscal 2020.

Including new lease agreements executed during fiscal 2019, our worldwide leased office space increased to approximately 1,860,000 square feet at August 31, 2019, up 110,000 square feet, or 6.3% from August 31, 2018.

This increase was primarily related to additional office space in India.

Future minimum requirements for our operating leases in place as of August 31, 2019 totaled $400.0 million, a decrease from $407.8 million as of August 31, 2018.

This decrease is primarily due the passage of a year on remaining rental agreement terms, reducing the overall future minimum lease obligation, partially offset by added office space in India.

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.

In conjunction with the 2019 Credit Agreement, FactSet retired its loan outstanding under the 2017 Credit Agreement amount of $575.0 million.

With the exception of the new leases entered in the ordinary course of business, there were no other significant changes to our contractual obligations during fiscal 2019.

On August 9, 2019, our Board of Directors approved a regular quarterly dividend of $0.72 to be paid on September 19, 2019.

The $0.08 per share or 12.5% increase marked our 14 th consecutive year we have increased dividends, highlighting our continued commitment to returning value to shareholders.

Over the last 12 months, we have returned $320.4 million to stockholders in the form of share repurchases and cash dividends.

Future cash dividends will depend on our earnings, capital requirements, financial condition and other relevant factors.

Dividends must be authorized by our Board of Directors.

During fiscal years 2019 and 2018, our Board of Directors declared the following dividends on our common stock:

Dividends per

Total $ Amount

(in thousands)

First Quarter

November 30, 2018

December 18, 2018

Second Quarter

February 28, 2019

March 19, 2019

Third Quarter

June 18, 2019

Fourth Quarter

August 30, 2019

September 19, 2019

First Quarter

November 30, 2017

December 19, 2017

Second Quarter

February 28, 2018

March 20, 2018

Third Quarter

June 19, 2018

Fourth Quarter

August 31, 2018

September 18, 2018

Significant Accounting Policies

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 below.

Critical Accounting Estimates

We consider an accounting estimate to be critical if:

(i) the accounting estimate requires us to make assumptions about matters that were highly uncertain at the time the accounting estimate was made, and (ii) changes in the estimate that are reasonably likely to occur from period to period, or use of different estimates that we reasonably could have used in the current period, would have a material impact on our financial condition or results of operations.

Management has discussed the development and selection of these critical accounting estimates with the Audit Committee of our Board of Directors.

In addition, there are other items within our consolidated financial statements that require estimation but are not deemed critical as defined above.

Changes in estimates used in these and other items could have a material impact on our financial statements.

Business Combinations

The Company accounts for its business combinations 

using the purchase method of accounting.

The acquisition purchase price is allocated to the underlying identified, tangible and intangible assets and liabilities assumed, based on their respective estimated fair values on the acquisition date.

The excess of the purchase consideration over the fair values of the identified assets and liabilities is recorded as goodwill and assigned to one or more reporting units.

The amounts and useful lives assigned to acquisition-related tangible and intangible assets impact the amount and timing of future amortization expense.

Determining the fair value of assets acquired and liabilities assumed and the expected useful life, requires management’s judgment and often involves the use of significant estimates and assumptions, including assumptions with respect to future cash inflows and outflows, discount rates, asset lives and market multiples, among other items.

Acquisition-related expenses and restructuring costs are recognized separately from the business combination and are expensed as incurred.

Performance-based Equity Awards

Performance-based equity awards, whether in the form of stock options or restricted stock, require management to make assumptions regarding the likelihood of achieving performance targets.

The number of performance-based awards that vest will be predicated on achieving performance levels during the measurement period subsequent to the date of grant.

Dependent on the financial performance levels attained, a percentage of the performance-based awards will vest to the grantees.

However, there is no current guarantee that such awards will vest in whole or in part.

June 2017 Performance-based Option Grant Review

In connection with the acquisition of BISAM, FactSet granted 206,417 performance-based stock options in June 2017.

These performance-based options were scheduled to vest 40% on the second anniversary date of the grant and 20% on each subsequent anniversary date, if certain BISAM revenue and operating income targets were achieved by March 31, 2019.

In the third quarter of fiscal 2019, it was determined that the performance criteria were not achieved by March 31, 2019, and, as such, the options were forfeited, and no stock-based compensation expense was recorded for this performance-based option grant for fiscal 2019.

Accrued Compensation

We make significant estimates in determining our accrued compensation.

We conduct a final review of Company, departmental and individual performance each year end to determine the amount of discretionary employee compensation.

We also review compensation throughout the year to determine how overall performance tracks against management’s expectations.

Management takes these and other factors, including historical performance, into account in reviewing accrued compensation estimates on a quarterly basis and adjusts accrual rates as appropriate.

As of August 31, 2019, and 2018, the amount of the variable employee compensation recorded within accrued compensation was $49.4 million and $43.6 million, respectively.

Goodwill and Intangible Assets

Goodwill is not amortized as it is estimated to have an indefinite life.

At least annually, we are required to test goodwill at the reporting unit level for potential impairment, and, if impaired, write down to fair value based on the present value of discounted cash flows.

Our reporting units evaluated for potential impairment were the U.S., Europe and Asia Pacific, which is aligned with how the chief operating decision making group (“CODMG”), composed of the CEO and executive management, manages the business and the demographic markets we serve.

The three reporting units are consistent with the operating segments reported as there is no discrete financial information available for the subsidiaries or business units within each operating segment.

The impairment test requires management to make judgments in connection with these reporting units, including assigning assets, liabilities, goodwill and other indefinite-lived intangible assets to reporting units and determining the fair value of each reporting unit.

Our impairment analysis contains uncertainties as it requires management to make assumptions and apply judgment to estimate industry and economic factors including market conditions, legal and technological factors and the profitability of our business strategies.

It is our policy to conduct impairment testing based on our current business strategies taking into consideration present industry and economic conditions, as well as future expectations.

In fiscal 2019, we elected to perform a qualitative analysis for the reporting units to determine whether it is more likely than not the fair value of the reporting unit is greater than its carrying value.

In performing a qualitative assessment, FactSet considers such factors as macro-economic conditions, industry and market conditions in which FactSet operates including the competitive environment and significant changes in demand for the Company’s services.

The Company also considers its share price both in absolute terms and in relation to peer companies.

If the qualitative analysis indicates that it is more likely than not the fair value of a reporting unit is less than its carrying amount or if FactSet elects not to perform a qualitative analysis, a quantitative analysis is performed to determine whether a goodwill impairment exists.

Future events could cause us to conclude that indicators of impairment do exist, and that goodwill associated with our previous acquisitions is impaired, which could result in an impairment loss in our Consolidated Statements of Income and a write-down of the related asset.

We performed our annual goodwill impairment test during the fourth quarter of fiscal 2019, consistent with the timing of previous years.

It was determined that there was no impairment, as it was not more likely than not the fair value of any reporting unit was less than its carrying value, using the qualitative screen.

The carrying value of goodwill as of August 31, 2019 and 2018, was $685.7 million and $701.8 million, respectively.

Our identifiable intangible assets consist of acquired content databases, client relationships, software technology, non-compete agreements and trade names resulting from acquisitions, which have been fully integrated into our operations.

We amortize intangible assets over their estimated useful lives, which are evaluated quarterly to determine whether events and circumstances warrant a revision to the remaining period of amortization.

The weighted average useful life of our identifiable intangible assets at August 31, 2019 was 12.6 years.

If the estimate of the remaining useful life is changed, the remaining carrying amount of the intangible asset is amortized prospectively over that revised remaining useful life.

There were no material adjustments to the useful lives of intangible assets subject to amortization during any of the periods presented.

These intangible assets had no assigned residual values as of August 31, 2019 and 2018.

Intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable.

Determination of recoverability is based on an estimate of undiscounted future cash flows resulting from the use of the asset and its eventual disposition.

Measurement of any impairment loss for intangible assets that management expects to hold, and use is based on the amount the carrying value exceeds the fair value of the asset, which may be based on estimated future cash flows (discounted).

No indicators of impairment of intangible assets has been identified during any of the periods presented.

Our ongoing consideration of the recoverability could result in impairment charges in the future, which could adversely affect our results of operations.

The carrying value of intangible assets as of August 31, 2019 and 2018, was $120.6 million and $148.9 million, respectively.

Long-lived Assets

Long-lived assets, comprised of property, equipment and leasehold improvements are evaluated for impairment whenever events or changes in circumstances indicate the carrying value may not be recoverable.

Factors that may cause an impairment review include significant changes in technology that make current computer-related assets that we use in our operations obsolete or less useful, and significant changes in the way we use these assets in our operations.

When evaluating long-lived assets for potential impairment, if impairment indicators are present, we first compare the carrying value of the asset to the asset’s estimated future cash flows (undiscounted and excluding interest charges).

If the estimated future cash flows are less than the carrying value of the asset, we calculate an impairment loss.

The impairment loss calculation compares the carrying value of the asset to the asset’s estimated fair value, which may be based on estimated future cash flows (discounted).

We recognize an impairment loss if the amount of the asset’s carrying value exceeds the asset’s estimated fair value.

If we recognize an impairment loss, the adjusted carrying amount of the asset becomes its new cost basis.

The new cost basis will be depreciated (amortized) over the remaining useful life of that asset.

Using the impairment evaluation methodology described here, there have been no long-lived asset impairment charges for each of the last three years.

The carrying value of long-lived assets was $132.5 million as of August 31, 2019 and $100.5 million as of August 31, 2018.

Our impairment loss calculations contain uncertainties because they require management to make assumptions and to apply judgment to estimate future cash flows and asset fair values, including forecasting useful lives of the assets and selecting the discount rate that reflects the risk inherent in future cash flows.

We have not made any material changes in our impairment loss assessment methodology during the past three fiscal years.

We do not believe there is a reasonable likelihood that there will be a material change in the estimates or assumptions we use to calculate long-lived asset impairment losses.

However, if actual results are not consistent with our estimates and assumptions used in estimating future cash flows and asset fair values, we may be exposed to losses that could be material.

Estimated Tax Provision and Tax Contingencies

We are subject to income taxes in the U.S.

and numerous foreign jurisdictions.

Our tax provision is an estimate based on our understanding of laws in Federal, state and foreign tax jurisdictions.

These laws can be complicated and are difficult to apply to any business.

The tax laws also require us to allocate our taxable income to many jurisdictions based on subjective allocation methodologies and information collection processes.

Our effective tax rates differ from the statutory rate primarily due to the impact of state taxes, foreign operations, R&D and other tax credits, tax audit settlements, incentive-stock options and the Foreign Derived Intangible Income Deduction.

Our annual effective tax rate was 16.4%, 24.1% and 25.0% in fiscal 2019, 2018 and 2017, respectively.

Our provision for income taxes is subject to volatility and could be adversely impacted by numerous factors such as changes in tax laws, regulations, or accounting principles, including accounting for uncertain tax positions or interpretations of them.

Significant judgment is required to determine recognition and measurement.

Further, as a result of certain ongoing employment and capital investment actions and commitments, our income in certain countries is subject to reduced tax rates and in some cases is wholly exempt from tax.

Our failure to meet these commitments could adversely affect our provision for income taxes.

In addition, we are subject to the continuous examination of our income tax returns by the Internal Revenue Service and other tax authorities.

We regularly assess the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our provision for income taxes.

There can be no assurance that the outcomes from these continuous examinations will not have an adverse impact on our operating results and financial condition.

To account for unrecognized tax benefits, we first determine whether it is more-likely-than-not (defined as a likelihood of more than fifty percent) that a tax position will be sustained based on its technical merits as of the reporting date.

A tax position that meets this more-likely-than-not threshold is then measured and recognized at the largest amount of benefit that is greater than fifty percent likely to be realized upon effective settlement with a taxing authority.

The determination of liabilities related to unrecognized tax benefits, including associated interest and penalties, requires significant estimates.

There can be no assurance that we will accurately predict the outcomes of these audits, however, we have no reason to believe that such audits will result in the payment of additional taxes and/or penalties that would have a material adverse effect on the Company’s results of operations or financial position, beyond current estimates. For this reason and due to ongoing audits by multiple tax authorities, we regularly engage in discussions and negotiations with tax authorities regarding tax matters in various jurisdictions.

We adjust these reserves in light of changing facts and circumstances, such as the closing of a tax audit or the refinement of an estimate.

To the extent that the final outcome of these matters is different than the amounts recorded, such differences will affect the provision for income taxes in the period in which such determination is made.

The Company does not currently anticipate that the total amounts of unrecognized tax benefits will significantly change within the next 12 months.

We classify the liability for unrecognized tax benefits as Taxes Payable (non-current) and to the extent that we anticipate payment of cash within one year, the benefit will be classified as Taxes Payable (current).

Additionally, we accrue interest on all tax exposures for which reserves have been established consistent with jurisdictional tax laws.

This interest is classified as income tax expense in the financial statements.

As of August 31, 2019, we had gross unrecognized tax benefits totaling $10.9 million, including $1.1 million of accrued interest, recorded as Taxes Payable (non-current) within the Consolidated Balance Sheets.

New Accounting Pronouncements

See Note 3, Summary of Significant Accounting Policies , in the Notes to the Company’s Consolidated Financial Statements included in Item 8 for a full description of recent accounting pronouncements, including the expected dates of adoption, which we include here by reference.

Market Trends

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.

Shift from Active to Passive Investment Management

Approximately 83.7% of our ASV is derived from our investment management clients.

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

An equity market decline not only depresses assets under management but also could cause a significant increase in redemption requests to move money out of equities and into other asset classes.

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 16.3% of our ASV.

A significant portion of these revenues relate to services deployed by large, bulge-bracket banks.

Credit continues to impact many of the large banking clients due to the amount of leverage deployed in past operations.

Our clients could also encounter similar issues.

A lack of confidence in the global banking system could cause declines in M&A funded by debt.

Additional uncertainty, consolidation and business failures in the global investment banking sector could adversely affect our financial results and future growth.

Our revenue may decline if banks, including those involved in merger activity, significantly reduce headcount in the areas of corporate M&A, capital markets and equity research to compensate for the challenges faced by other departments.

On June 23, 2016, voters in the United Kingdom approved an advisory referendum to withdraw from the European Union ("Brexit").

On March 29, 2017, the United Kingdom invoked Article 50 of the Lisbon Treaty, formally starting negotiations with the European Union.

United Kingdom and European Union leaders then backed an extension until October 31, 2019, to provide more time to complete negotiations on formal withdrawal and transitional arrangements.

On October 17, 2019 a new Brexit deal was agreed between the European Union and the UK Government.

On October 22, 2019 the UK Parliament approved the new Brexit deal but rejected the timing of its implementation.

Following the vote in the UK Parliament, European Council President Donald Tusk confirmed that he would recommend that the European Union leaders agree to a third extension to the Article 50 period until January 31, 2020, to give the United Kingdom more time to scrutinize the new Brexit deal, and to avoid a no-deal Brexit.

The political and economic instability created by the Brexit vote has caused, and may continue to cause, significant volatility in global financial markets.

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

Although it is unknown what the result of those negotiations will be, it is possible that new terms may adversely affect our operations and financial results.

While we evaluate our own risks and uncertainty related to Brexit, we will continue to partner with our clients to help them navigate the fluctuating international markets.

Markets in Financial Instruments Directive (“MiFID”)

MiFID II built upon many of the initiatives introduced through MiFID and is intended to help improve the functioning of the European Union single market by achieving a greater consistency of regulatory standards.

MiFID originally became effective in 2007 and was enhanced through adoption of MiFID II, which became effective in January 2018.

We continue to monitor the impact in the European Union of MiFID II on the investment process and trade lifecycle, as well as any impact of MiFID II on non-European Union countries.

We also continue to review the application of key MiFID II requirements in the event of a no-deal Brexit in light of a recent publication by the European Securities and Markets Authority.

We plan to work with our clients to navigate the MiFID II requirements.

Forward-Looking Factors

Forward-Looking Statements

In addition to current and historical information, this Report on Form 10-K, including Management’s Discussion and Analysis of Financial Condition and Results of Operations, contains forward-looking statements based on management’s current expectations, estimates, forecasts and projections about industries in which we operate and the beliefs and assumptions of management.

All statements that address expectations, guidance, outlook or projections about the future, including statements about our strategy for growth, product development, revenue, future financial results, anticipated growth, market position, subscriptions, expected expenditures, trends in our business and financial results, are forward-looking statements.

Forward-looking statements may be identified by words like “expects,”

“believes,”

“anticipates,”

“plans,”

“intends,”

“estimates,”

“projects,”

“should,”

“indicates,”

“continues,”

“may”

and similar expressions.

These statements are not guarantees of future performance and involve a number of risks, uncertainties and assumptions.

Many factors, including those discussed more fully elsewhere in this Report on Form 10-K or in any of our other filings with the Securities and Exchange Commission, could cause results to differ materially from those stated.

These factors include, but are not limited to:

the ability to integrate newly acquired companies, clients and businesses;

strains on resources as a result of growth, the volatility and  stability of global securities markets, including declines in equity or fixed income returns impacting the buying power of investment management clients;

the ability to hire and retain qualified personnel;

the maintenance of our leading technological position and reputation;

failure to maintain or improve our competitive position in the marketplace;

fraudulent, misappropriation or unauthorized data access, including cyber-security and privacy breaches;

failures or disruptions of telecommunications, data centers, network systems, facilities, or the Internet;

uncertainty, consolidation and business failures in the global investment banking industry;

the continued shift from active to passive investing, the negotiation of contract terms with vendors, data suppliers and landlords;

the retention of clients and the attraction of new ones;

the absence of U.S.

or foreign governmental regulation restricting international business;

the unfavorable resolution of tax assessments and legal proceedings;

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

Forward-looking statements speak only as of the date they are made, and we assume no duty to and do not undertake to update forward-looking statements.

Actual results could differ materially from those anticipated in forward-looking statements and future results could differ materially from historical performance.

We intend that all forward-looking statements we make will be subject to safe harbor protection of the federal securities laws as found in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.

These statements involve certain known and unknown risks and uncertainties that could cause our actual results to differ materially from those expressed or implied in our forward-looking statements. Such risks and uncertainties include, among others, those listed in Part 1 Item 1A, Risk Factors , of this Report on Form 10-K.

We do not intend, and undertake no obligation, to update any of our forward-looking statements after the date of this Report on Form 10-K to reflect actual results or future events or circumstances.

Business Outlook

The following forward-looking statements reflect our expectations as of September 26, 2019.

Given the number of risk factors, uncertainties and assumptions discussed in this MD&A above and Part 1 Item 1A, Risk Factors, of this Report on Form 10-K, actual results may differ materially.

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

Fiscal 2020 Expectations

Organic ASV plus professional services is expected to increase in the range of $65 million and $85 million over fiscal 2019.

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%.

FactSet’s 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.

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.

Business Developments

Departure of  

Global Head of Sales and Client Solutions  

and Appointment of Global Head of Sales and Client Solutions

On April 15, 2019, we entered into a separation of employment and general release agreement (the "Separation Agreement") with John W.

Wiseman, the Executive Vice President, Global Head of Sales and Client Solutions.

Pursuant to the Separation Agreement, Mr.

Wiseman participated in an orderly transition of duties to his successor, Franck A.R.

Gossieaux, appointed June 1, 2019.

Wiseman remained an employee of FactSet until his effective termination date of August 31, 2019.

Effective June 1, 2019, we appointed Franck A.R.

Gossieaux as the Executive Vice President, Global Head of Sales and Client Solutions.

Gossieaux succeeded John W.

Wiseman and reports directly to Philip Snow, the Chief Executive Officer.

Appointment of Chief Human Resources Officer

Effective December 1, 2018, we appointed Daniel Viens as the Chief Human Resources Officer.

Viens reports directly to Philip Snow, the Chief Executive Officer.

Total stockholders’ equity $ 896,375 $ 672,256 $ 525,900 $ 559,691 $ 517,381

The items described below (pre-tax) represent a significant impact to the presentation and comparability of our selected financial data.

• During fiscal 2020, the Company recorded a $16.5 million impairment charge to reflect the estimated fair value of an investment in a company, expenses of $14.8 million related to professional fees associated with infrastructure upgrades and our ongoing multi-year investment plan, and $4.3 million of facilities costs.

The facilities costs related to duplicate rent associated with the build-out of the new Norwalk, Connecticut headquarters while we still occupied our then-current Norwalk, Connecticut headquarters.

• During fiscal 2019, the Company recorded $5.0 million in non-core transaction related revenue.

The Company also recorded expenses of $4.3 million in severance costs and $8.7 million related to other corporate actions including stock-based compensation acceleration, professional fees related to infrastructure upgrade activities, and a one-time adjustment related to data costs and occupancy costs.

• During fiscal 2018, the Company recorded expenses of $17.4 million in restructuring actions, $4.7 million related to other corporate actions, including stock-based compensation acceleration, and $4.9 million in legal matters.

• During fiscal 2017, the Company recorded expenses of $5.6 million related to modifications of certain share-based compensation grants, $5.0 million related to restructuring actions and $7.4 million in acquisition-related expenses.

• During fiscal 2016, the Company recorded expenses of $4.6 million related primarily to legal matters, $2.8 million from restructuring actions and $1.8 million related to a change in the vesting of performance-based equity options.

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-K

Item 5. Market for Registrant’s Common Equity