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Item 7. Management’s Discussion and Analysis

2021-10-22 compared with 2020-10-29 · 373 added, 375 removed, 219 unchanged (77% of the section changed)

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

This Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the Consolidated Financial Statements and related Notes included in Item 8.

This Management’s Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") should be read in conjunction with the Consolidated Financial Statements and related Notes included in Item 8.

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

For a similar detailed discussion comparing fiscal 2020 and 2019, refer to Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations within the Company's Annual Report on Form 10-K for the year ended August 31, 2019.

Management's Discussion and Analysis of Financial Condition and Results of Operations within our Annual Report on Form 10-K for the year ended August 31, 2020.

This discussion contains forward-looking statements that involve risks and uncertainties.

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Risk Factors of this Annual Report on Form 10-K.

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.

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

• Key Metrics

• Annual Subscription Value ("ASV")

• Client and User Additions

• Employee Headcount

• Results of Operations

• Non-GAAP Financial Measures

• Liquidity and Capital Resources

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• Foreign Currency

• Critical Accounting Policies and Estimates

• Critical Accounting Estimates

• New Accounting Pronouncements

Executive Overview

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 and analysis, trade execution, performance measurement, risk management, and reporting, in which we serve the front, middle, and back offices to drive productivity and improved performance.

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

We are focused on growing our business through three segments:

FactSet Research Systems Inc.

and its wholly-owned subsidiaries (collectively, "we," "our," "us," the "Company" or "FactSet") is a global financial data and analytics company with open and flexible technology and a purpose to drive the investment community to see more, think bigger, and do their best work.

Our strategy is to become the leading open content and financial analytics platform in the industry that delivers differentiated advantage for our clients’ success.

For over 40 years, the FactSet platform has delivered expansive data, sophisticated analytics, and flexible technology that global financial professionals need to power their critical investment workflows.

Over 160,000 asset managers and owners, bankers, wealth managers, corporate firms, including private equity and venture capital firms, and others use our personalized solutions to identify opportunities, explore ideas, and gain a competitive advantage, in areas spanning investment research, portfolio construction and analysis, trade execution, performance measurement, risk management, and reporting across the investment lifecycle.

We provide financial data and market intelligence on securities, companies and industries to enable our clients to research investment ideas, as well as offering them the capabilities to analyze, monitor and manage their portfolios.

We combine dedicated client service with open and flexible technology offerings, such as a configurable desktop and mobile platform, comprehensive data feeds, cloud-based digital solutions, and application programming interfaces ("APIs").

Our revenue is primarily derived from subscriptions to our products and services such as workstations, portfolio analytics, and market data.

We advance our industry by comprehensively understanding our clients’ workflows, solving their most complex challenges, and helping them achieve their goals.

By providing them with the leading open content and analytics platform, an expansive universe of concorded data they can trust, next-generation workflow support designed to help them grow and see their next best action, and the industry’s most committed service specialists, FactSet puts our clients in a position to outperform.

We are focused on growing our business through three reportable segments ("segments"):

the Americas, EMEA and Asia Pacific.

Within each of our segments, we primarily deliver insight and information through our four workflow solutions of Research, Analytics and Trading, CTS and Wealth.

We currently serve a wide range of financial professionals, which include but are not limited to, 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 execute trades.

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

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

Refer to Note 19, Segment Information, in the Notes to the Consolidated Financial Statements included in Part II, Item 8.

of this Annual Report on Form 10-K for further discussion.

Within each of our segments, we primarily deliver insight and information through our three workflow solutions:

Research & Advisory;

Analytics & Trading;

and Content & Technology ("CTS").

Business Strategy

Current technology trends are leading to a greater demand to deliver a fully digital and integrated client experience.

To take advantage of these developments we have focused our innovations and strategic investments in cloud computing, data lakes, APIs and our hosted proprietary data and analytics platform to provide real-time, predictive business intelligence for a seamless client experience.

We continue to expand our broad financial content to provide support for our clients' most sophisticated investment strategies including enhanced data in private markets, industry specific deep sector and ESG.

As a premier financial solutions provider for the global financial community, we provide workflow solutions and leading analytical applications, powered by cognitive capabilities and robust technology, across the investment portfolio lifecycle.

We bring the front, middle and back offices together to drive productivity and performance at every step of the investment process using our open and scalable solutions.

Our strategy is focused on growing our business in each of our three segments:

the Americas, EMEA, and

Asia Pacific.

We believe this geographical strategic alignment helps us better manage our resources.

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

Client needs and market dynamics continue to evolve at an accelerated pace with an increasing demand for differentiated, personalized, and connected data, an ongoing shift to multi-asset class investing, and cost rationalization as the shift from active to passive investing continues.

Clients are seeking new cloud-based solutions that enable self-service and automation, open and flexible systems, and increased efficiencies when integrating and managing data as part of their own broader digital transformations.

FactSet’s strategy focuses on building the leading open content and analytics platform that delivers differentiated advantages for our clients’ success – in keeping with our purpose of enabling the investment community to see more, think bigger and do their best work.

We want to be the trusted partner of choice for clients, to anticipate their needs and provide them with the most innovative solutions to make them more efficient.

This includes transforming the way our clients discover, decide, and act on an opportunity using our digital platform;

purposefully increasing our pace and speed to market by streamlining how we work;

and investing in our future workforce.

To execute on our strategy, we plan on the following:

• Growing our digital platform:

Scaling up our Content Refinery by providing the most comprehensive and connected inventory of industry, proprietary, and third-party data for the financial community, including granular data for key industry verticals, private companies, wealth, and environmental social and governance ("ESG").

Driving next-generation workflow solutions by creating personalized and integrated solutions to streamline workflows which includes solutions for asset managers, asset owners, sell side, wealth and corporate clients.

Our goal is to deliver tangible efficiencies to our clients by connecting data and analytics with a cloud based eco-system, enabling them to manage work more effectively through an integrated investment lifecycle.

• Delivering execution excellence:

Building a more agile and digital first-minded organization that increases the speed of our product creation and go-to-market strategy.

To capitalize on market trends and give our clients innovative tools, we plan to release new products built on a cloud-based digital foundation as well as migrating our existing data and applications to the cloud.

Additionally, we expect to rationalize our existing product portfolio to reinvest in higher return products.

• Driving a growth mindset:

Recruiting, training and empowering a diverse and operationally efficient workforce to drive sustainable growth.

To drive a more performance-based culture, we are investing in talent who can create leading technological solutions, efficiently execute our go-to-market strategy and achieve our growth targets.

At the center of our strategy is the relentless focus on our clients and their FactSet experience.

We want to be a trusted partner and service provider, offering hyper-personalized digital products for clients to research ideas, uncover relevant insights, and leverage cognitive computing to help get the most out of their data and analytics.

Additionally, we continually evaluate business opportunities such as acquisitions and partnerships to help us expand our capabilities and competitive differentiators across the investment portfolio lifecycle.

We are focused on growing our global business in three segments:

the Americas, EMEA and Asia Pacific.

We believe this geographical strategic alignment helps us better manage our resources, target our solutions and interact with our clients.

We further execute on our growth strategy by offering data, products, and analytical applications within our three workflow solutions:

Research & Advisory;

Analytics & Trading;

Fiscal 2021 Year in Review

Revenue for the fiscal year 2021 was $1.6 billion, an increase of 6.5% from the prior year.

This increase was due to growth across all our operating segments, primarily in the Americas, followed by EMEA and Asia Pacific, supported by increased revenue from each of our workflow solutions, mainly in Analytics and Trading, followed by CTS and Wealth.

Revenue also increased due to the benefit from our annual price increase.

The revenue growth of 4.1% was fully attributed to organic revenue growth, which excludes the effects of acquisitions and dispositions completed in the last 12 months, changes in foreign currency rates in all periods presented and the deferred revenue fair value adjustments from purchase accounting (Refer to Results of Operations, Non-GAAP Financial Measures in this MD&A for further discussion on organic revenue).

As of August 31, 2020, organic annual subscription value ("organic ASV") plus professional services totaled $1.56 billion, an increase of 5.3% over the prior year.

Operating income increased by 0.4% and diluted earnings per share ("EPS") increased 6.3% compared to the prior year.

This increase in operating income and EPS was primarily driven by revenue growth of 4.1%, a decrease in non-compensatory employee related expenses and a reduction in bad debt expense.

This increase was partially offset by higher spend in employee compensation, including stock-based compensation, increased computer-related expenses, the impairment of an investment and increased professional fees on a year-over-year basis.

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

Revenue increased across our operating segments, primarily in the Americas, followed by EMEA and Asia Pacific, supported by increased revenue from each of our workflow solutions, mainly in Analytics & Trading, followed by CTS and Wealth.

Revenue also grew due to the benefit from our annual price increase.

The revenue growth of 6.5% was primarily attributed to organic revenue growth, which excludes the effects of acquisitions and dispositions completed in the last 12 months, changes in foreign currency rates in all periods presented and the deferred revenue fair value adjustments from purchase accounting (Refer to Results of Operations, Non-GAAP Financial Measures in this MD&A for further discussion on organic revenue).

Operating income increased 7.8% and diluted earnings per share ("EPS") increased 7.4% compared with the prior year.

This increase in operating income and EPS was primarily driven by revenue growth of 6.5%, a decrease in non-compensatory employee related expenses, an impairment of an investment that occurred in fiscal 2020 and a decrease in professional fees.

This increase was partially offset by higher spend in employee compensation, including stock-based compensation and

increased computer-related expenses.

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

Our clients and users reached new highs of 6,453 and 160,932, respectively, in fiscal 2021.

Over the last 12 months, we returned $382.6 million to stockholders in the form of share repurchases and dividends.

As of August 31, 2020, our employee count was 10,484, up 8.3% in the past 12 months, due primarily to an increase in net new employees of 9.8% in Asia Pacific, 6.4% in EMEA, and 5.4% in the Americas.

As of August 31, 2021, our employee count was 10,892, up 3.9% in the past 12 months, due primarily to an increase in net new employees of 6.6% in Asia Pacific and 0.7% in EMEA, partially offset by a decrease of 1.5% in the Americas.

Of our total employees, as of August 31, 2021, 7,080 were located in Asia Pacific, 2,439 were located in the Americas and 1,373 were located in EMEA.

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

FactSet garnered many awards in 2020, with honors covering every aspect of the Company's business.

Highlights include:

Buy-Side Market Risk Management Product of the Year from the Risk.net Markets Technology Awards;

Best EMS from the Markets Media Markets Choice Awards;

Best Client Reporting Solution from the FTF News Technology Innovation Awards;

Best Technology Provider, Client Portals, from the Wealthmanagement.com Awards;

and various awards including Best Data Provider to the Buy-Side, Best Data Provider to the Sell-Side, and Best Buy-Side Data Analytics Tool organized by Waters Technology.

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

We garnered multiple awards during fiscal 2021, with honors spanning multiple workflows, including research, risk, performance, trading, and wealth management.

Our expanding suite of datasets stood out, most notably in the ESG and alternative categories, for its depth and innovation in delivery mechanisms.

We were recognized by over thirty industry awards and rankings reports, including winning three categories in WatersTechnology’s 2021 Inside Market Data & Inside Reference Data awards:

best alternative data provider, best ESG data provider, and best overall data or service provider for 2021.

Client Service / Customer Success

An important part of our comprehensive value to clients is our Customer Success team, a versatile group of business-people with knowledge of financial markets and FactSet's solutions.

Customer Success Managers work closely with our clients, advising them on how FactSet's solutions can best be leveraged to enhance efficiency across workflows.

Additionally, our information and analytical applications are supported by a team of financial data and modeling experts, who take a consultative approach to fully understand our clients’ challenges and advise them on how FactSet solutions can best be tailored and leveraged to meet each client's unique objectives and strategies.

A client-centric approach is foundational to the Company's ongoing achievements.

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

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

Our client service teams are a critical component of our comprehensive value proposition, and include a versatile group of financial data and modeling experts, with extensive knowledge of financial markets and FactSet solutions.

Our client service teams take a consultative approach to understand our clients’ challenges and objectives to strategically leverage our workflow solutions and deliver support of the highest standard.

Our clients have continuous access to our support desk, trained to respond to both project and technical support questions.

A client-centric approach is foundational to our ongoing achievements, therefore client satisfaction is critical to how we measure our success.

According to our global client satisfaction survey, greater than 94% of respondents were satisfied or very satisfied with our support.

We believe that these strong relationships help ensure continued high rates of retention and account expansion.

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

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

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

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

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

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

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

Nearly all our employees are currently working remotely.

We believe our transition to remote working has been successful and has not significantly affected our financial results for the fiscal year ended August 31, 2020.

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

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

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

In response to the COVID-19 pandemic, we implemented a business continuity plan with a dedicated incident management team to respond quickly and provide ongoing guidance so that we could continue offering our clients uninterrupted products, services and support while also protecting our employees.

We believe these actions have been successful and that the pandemic, and our responses, have not significantly affected the financial results for our 2021 fiscal year.

At the outset of the pandemic, we required the vast majority of our employees at our offices across the globe (including our corporate headquarters) to work remotely and implemented global travel restrictions for our employees.

Since that time, we have begun to re-open many of our offices globally, utilizing a three-phased approach to provide flexibility for employees wishing to work from our offices with a focus on social distancing and safety while acting consistently with applicable local regulations.

We anticipate that the ability to open offices will vary significantly from region to region based on a number of factors, including the availability of COVID-19 vaccines and the spread of COVID-19 variants.

We have worked with local organizations to procure vaccines for our employees and encouraged them to get vaccinated.

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

As of August 31, 2021, there have been minimal interruptions in our ability to provide our products, services and support to our clients.

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

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

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

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

We continue to work closely with our clients to provide consistent access to our products and services and have remained flexible to achieve client priorities.

Based on our success in working in a remote environment during the COVID-19 pandemic, we expect to implement a new work standard under which employees in many of our locations, where permitted by local laws and regulations, and where the role permits, will have the opportunity to choose between different work arrangements.

These include working either in a hybrid arrangement, where an employee can split time between working from the office and working from a pre-approved remote location, or a fully remote arrangement, where an employee can work entirely from a pre-approved remote location.

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

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

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

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

implementation risk due to restrictions on being able to work onsite at our clients' facilities;

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

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

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

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

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

tighter management of headcount spending;

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

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

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

To date, the COVID-19 pandemic has not had a material negative impact on our revenue, earnings or ASV.

We incurred additional expenses at the start of the COVID-19 pandemic, particularly relating to equipment to enable our employees to support our clients while working remotely, which were not material to our fiscal 2021 results.

As we have continued to work in remote and hybrid environments, reductions in discretionary spending, particularly travel and entertainment, have more than offset any related increased expenses.

Given our transition to our new work standard, we anticipate that many of these expense reductions will continue going forward, as we incur less travel and entertainment spending than we did pre-pandemic and seek to reduce our spending on office space that is no longer necessary in our new work environment.

Refer to Item 1A.

Risk Factors of this Annual Report on Form 10-K for further discussion of the potential impact of the COVID-19 pandemic on our business.

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

As of August 31,

(in millions) 2020 2019 Change

$ 1,539.2 $ 1,458.0

Currency impact to ASV (4.7) —

Organic ASV $ 1,534.5 $ 1,458.0 5.2 %

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

Organic ASV Growth

As of August 31, 2020, our organic ASV totaled $1.53 billion, up 5.2% over the prior year comparable period.

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

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

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

The increase in organic ASV was due to growth in all our workflow solutions, driven mainly by an increase in Analytics and Trading, followed by CTS and Wealth.

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

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

As of August 31, 2020, organic ASV plus professional services was $1.56 billion, an increase of 5.3% compared to the prior year period.

The professional service fees were $25.0 million and $22.9 million as of August 31, 2020 and 2019, respectively.

As of August 31, 2020, ASV from the Americas was $956.6 million, an increase of 5.2% from the prior year period.

This increase was primarily due to increased sales from Analytics and Trading and CTS, as well as the benefit from our annual price increase, partially offset by cancellations.

ASV from EMEA was $426.0 million as of August 31, 2020, an increase of 5.7% compared to the prior year period.

The ASV increase in EMEA was primarily driven by Analytics and Trading and CTS and the benefit from our annual price increase, partially offset by cancellations.

Asia Pacific ASV was $156.5 million as of August 31, 2020, an increase of 7.6% compared to the prior year period.

ASV increased in Asia Pacific mainly due to Analytics and Trading and CTS, as well as the benefit from our annual price increase, partially offset by cancellations.

Combined EMEA and Asia Pacific ASV represented 37.8% of total ASV as of August 31, 2020, up from 37.6% in the prior year period.

Buy-side and Sell-side ASV Growth

Buy-side and sell-side ASV growth rates for the last 12 months were 5.4% and 4.6%, respectively.

Buy-side clients account for approximately 84% of organic ASV, and primarily include portfolio managers, analysts, traders, wealth managers, performance teams and risk and compliance teams at a variety of firms, such as traditional asset managers, wealth advisors, corporations, hedge funds, insurance companies, plan sponsors and fund of funds.

The remaining portion of our organic ASV is derived from sell-side clients, primarily including investment bankers, private equity and research analysts.

Client and User Addition s

Annual Subscription Value ("ASV")

As of August 31, 2021, organic annual subscription value ("organic ASV") plus Professional Services totaled $1.7 billion, an increase of 7.2% over August 31, 2020.

Organic ASV increased across all our geographic segments with the majority of the increase related to the Americas, followed by EMEA and Asia Pacific.

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

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

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

– "Professional Services" are revenues derived from project-based consulting and implementation.

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

Organic ASV plus Professional Service

The following table presents the calculation the calculation of Organic ASV plus Professional Services as of August 31, 2021.

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

(in millions) As of August 31, 2021

As reported ASV plus Professional Services (1)

Currency impact (2)

Acquisition ASV (3)

Organic ASV plus Professional Services $ 1,678.5

Organic ASV plus Professional Services growth rate 7.2 %

(1) Includes $24.1 million in Professional Services fees as of August 31, 2021.

(2) The impact from foreign currency movements.

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

As of August 31, 2021, Organic ASV plus Professional Services was $1.7 billion, an increase of 7.2% compared with August 31, 2020.

The increase in year-over-year Organic ASV was largely attributed to existing clients, followed by new client sales and existing client price increases, partially offset by existing client cancellations.

Organic ASV increased across all our geographic segments with the majority of the increase related to the Americas, followed by EMEA and Asia Pacific.

This increase was driven by additional sales in our workflow solutions, primarily in Research, followed by Analytics & Trading and CTS.

Sales increased in Research mainly due to higher demand for our workstations.

Sales increased in Analytics & Trading mainly from our portfolio analytics, portfolio reporting, performance and reporting, front office, and risk and quantitative solutions.

CTS sales increased primarily due to core and premium content sets, specifically related to company financial data and data management solutions.

As of August 31, 2021, ASV from the Americas was $1,039.4 million, an increase from $956.6 million as of August 31, 2020.

Americas organic ASV increased to $1029.2 million as of August 31, 2021, a 7.4% increase compared with August 31, 2020.

As of August 31, 2021, ASV from EMEA was $450.0 million, an increase from $426.0 million as of August 31, 2020.

EMEA organic ASV increased to $451.3 million as of August 31, 2021, a 5.6% increase compared with August 31, 2020.

As of August 31, 2021, Asia Pacific ASV was $174.7 million, an increase from $156.5 million as of August 31, 2020.

Asia Pacific organic ASV increased to $174.6 million as of August 31, 2021, a 12.3% increase compared with August 31, 2020.

The increase in organic ASV across all our geographic segments was largely attributed to increased sales to existing clients, followed by new client sales and existing client price increases, partially offset by existing client cancellations.

The increased organic ASV in the Americas was primarily driven by increased sales for Research, followed by higher sales of Analytics & Trading and CTS.

The EMEA organic ASV increase was mainly driven by higher sales of CTS followed by Analytics & Trading.

The Asia Pacific organic ASV increase was primarily due to increased sales of Research, Analytics & Trading, and CTS.

Buy-side and Sell-side Organic ASV Growth

Buy-side and sell-side Organic ASV growth rates at August 31, 2021, compared with August 31, 2020, were 6.5% and 12.0%, respectively.

Buy-side clients account for approximately 83% of our Organic ASV, consistent with the prior year period, and primarily include asset managers, asset owners, wealth managers, hedge funds and corporate firms.

The remainder of our Organic ASV is derived from sell-side firms and primarily include broker-dealers, banking and advisory, private equity and venture capital firms.

Client and User Additions

As of and for the

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2021 2020 Change

Clients 5,875 5,574 5.4 %

Users 133,051 126,822 4.9 %

Our total client count was 5,875 as of August 31, 2020, representing a net increase of 301 or 5.4% in the last 12 months.

The net increase was primarily driven by an increase in corporate and wealth management clients, partially offset by institutional asset management clients.

6,453 5,875 9.8 %

160,932 141,136 14.0 %

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

(2) In the second quarter of fiscal 2021, we revised our user count methodology to include users across all our products, including workstations, StreetAccount and other workflow solutions.

The prior year user count was adjusted to reflect this change for comparison purposes.

Our client count includes clients with ASV of $10,000 and above.

Our total client count was 6,453 as of August 31, 2021, a net increase of 9.8%, or 578 clients in the last 12 months, mainly due to an increase in corporate and wealth management clients and third-party data providers.

The client count increase was mainly driven by demand for our integrated content and workflow solutions, which are further enhanced by our continued investment in product innovation.

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, 2020, there were 133,051 professionals using FactSet, representing a net increase of 6,229 or 4.9% in the last 12 months, primarily driven by wealth management and corporate professionals.

Annual client retention was greater than 95% of ASV for the period ended August 31, 2020 and August 31, 2019.

When expressed as a percentage of clients, annual retention increased to approximately 90% for the period ended August 31, 2020, compared to approximately 89% for the period ended August 31, 2019.

As of August 31, 2020, our largest individual client accounted for approximately 3% of our total subscriptions, and annual subscriptions from our ten largest clients did not surpass 15% of our total client subscriptions.

Returning Value to Stockholders

On August 14, 2020, our Board of Directors approved a regular quarterly dividend of $0.77 per share.

The cash dividend of $29.1 million was paid on September 17, 2020 to common stockholders of record at the close of business on August 31, 2020.

We repurchased 0.7 million shares of common stock for $199.6 million during fiscal 2020 under our existing share repurchase program.

Over the last 12 months, we returned $310.1 million to stockholders in the form of share repurchases and dividends.

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

As a result of this expansion, $259.0 million is available for future share repurchases as of August 31, 2020.

Capital Expenditures

Capital expenditures as of August 31, 2020 were $77.6 million, compared to $59.4 million a year ago.

Capital expenditures of $43.6 million, or 56% of our total capital expenditures, were related to facilities investments, primarily for the build-out of our new corporate headquarters in Norwalk, Connecticut, as well as new office space in India and the Philippines.

The remainder of our capital expenditures included $17.0 million of investments in technology primarily in Norwalk, Connecticut, as well as in India and the Philippines and $17.0 million in development costs related to internal-use software.

As of August 31, 2021, there were 160,932 professionals using FactSet, representing a net increase of 14.0%, or 19,796 users, in the last 12 months, primarily driven by an increase in wealth advisory professionals from our wealth management clients, as well as an increase in sell-side users from our banking clients.

The increase in users was mainly due to a new wealth management client, improvement in our client retention and increased new hiring at our banking clients.

Annual ASV retention was greater than 95% of ASV for the period ended August 31, 2021 and August 31, 2020.

When expressed as a percentage of clients, annual retention was approximately 91.0% for the period ended August 31, 2021, an improvement from approximately 90% for the period ended August 31, 2020.

Employee Headcount

As of August 31, 2021, our employee headcount was 10,892, up 3.9% in the past 12 months, due primarily to an increase in net new employees of 6.6% in Asia Pacific and 0.7% in EMEA, partially offset by a decrease of 1.5% in the Americas.

employee headcount at August 31, 2021, 7,080 were located in Asia Pacific, 2,439 were located in the Americas and 1,373 were located in EMEA.

Results of Operations

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Diluted weighted average common shares 38,570 38,646

Revenue in fiscal 2020 was $1.49 billion, an increase of 4.1% compared to the prior year.

The increase in revenue was driven primarily by the Americas, followed by EMEA and Asia Pacific.

This increase in segment revenue was supported by increased revenue across all our workflow solutions, most notably by Analytics and Trading, followed by CTS and Wealth, as well as the benefit from our annual price increase and lower cancellations as compared to the prior year.

The revenue growth of 4.1% for fiscal 2020 compared to the prior year period was reflective of organic revenue growth of 4.0% and a 10 basis point increase from deferred revenue fair value adjustments from purchase accounting.

Revenue increased 6.5% to $1.6 billion in fiscal 2021, compared with $1.5 billion from the same period in the prior year.

The increase in revenue was largely attributed to increased sales to existing clients, followed by new client sales and existing client price increases, partially offset by existing client cancellations.

Revenue increased across all our segments, primarily from the Americas, followed by EMEA and Asia Pacific, driven by increased revenue in all our workflow solutions, mainly in Analytics & Trading, CTS, and Research, compared with the prior year.

Organic revenue increased to $1.6 billion for the fiscal year ended 2021, a 6.3% increase over the prior year period.

(Refer to Item 7.

Results of Operations, Non-GAAP Financial Measures in the MD&A of this Annual Report on Form 10-K for further discussion on organic revenue).

Revenue by Operating Segment

(in thousands) Years ended August 31,

$ 929,444 $ 894,554

The revenue growth of 6.5% was composed of organic revenue growth of 6.3%, a 30 basis point increase from foreign currency exchange rate fluctuations, partially offset by a 10 basis point decrease from deferred revenue fair value adjustments from purchase accounting and acquisition-related revenue.

Revenue by Segment

Years ended August 31,

(in thousands) 2021 2020 $ Change % Change

Americas $ 1,008,046 $ 943,649 $ 64,397 6.8 %

% of revenue 63.3 % 63.2 %

EMEA $ 422,203 $ 408,084

$ 427,700 $ 406,498 $ 21,202 5.2 %

% of revenue 26.9 % 27.2 %

Asia Pacific $ 142,464 $ 132,713

$ 155,699 $ 143,964 $ 11,735 8.2 %

% of revenue 9.8 % 9.6 %

Consolidated Revenue $ 1,591,445 $ 1,494,111 $ 97,334 6.5 %

Revenues from our Americas segment increased 3.9% to $929.4 million in fiscal 2020 compared to $894.6 million in fiscal 2019.

This increase was primarily due to increased sales of products and solutions, particularly in Analytics and Trading and CTS, the benefit from our annual price increase for the majority of our Americas segment clients and a reduction in cancellations on a year-over-year basis.

The revenue growth of 3.9% is fully attributed to organic revenue growth.

Revenues from our Americas operations accounted for 62% of our consolidated revenue during fiscal 2020, which is consistent with the prior year period.

EMEA revenues increased 3.5% to $422.2 million in fiscal 2020 compared to $408.1 million in fiscal 2019.

This increase was primarily driven by increased sales of products and solutions, particularly in Analytics and Trading, the benefit from our annual price increase for the majority of our EMEA clients and a reduction in cancellations on a year-over-year basis.

The revenue growth of 3.5% for fiscal 2020 compared to the prior year period was reflective of organic revenue growth of 3.2%, a 10 basis point increase from foreign currency exchange rate fluctuations and a 20 basis point increase from deferred revenue fair value adjustments from purchase accounting.

Asia Pacific revenues increased 7.3% to $142.5 million during fiscal 2020, compared with $132.7 million in fiscal 2019.

This increase was due mainly to increased sales of products and solutions, primarily in Analytics and Trading, the benefit from our annual price increase for the majority of our Asia Pacific clients and a reduction in cancellations on a year-over-year basis.

The revenue growth of 7.3% for fiscal 2020 compared to the prior year period was reflective of organic revenue growth of 7.2% and a 10 basis point increase from foreign currency exchange rate fluctuations.

Americas revenue increased 6.8% to $1,008.0 million in fiscal 2021, compared with $943.6 million from the same period in the prior year.

This revenue growth was mainly due to increased sales in all of our workflow solutions, primarily in Analytics & Trading and CTS.

The revenue growth of 6.8% was due to

organic revenue growth of 6.3% and a 50 basis point increase in acquisition-related revenue and deferred revenue fair value adjustments from purchase accounting.

EMEA revenue increased 5.2% to $427.7 million in fiscal 2021, compared with $406.5 million from the same period in the prior year.

This revenue growth was mainly due to increased sales in all of our workflow solutions, primarily in CTS and Analytics & Trading.

The revenue growth of 5.2% was driven by organic revenue growth of 3.7%, a 110 basis point increase from foreign currency exchange rate fluctuations and a 40 basis point increase from deferred revenue fair value adjustments from purchase accounting.

Asia Pacific revenue increased 8.2% to $155.7 million in fiscal 2021, compared with $144.0 million from the same period in the prior year.

The revenue growth was mainly due to increased sales in all of our workflow solutions, primarily in Analytics & Trading.

The revenue growth of 8.2% was due mainly to organic revenue growth of 8.0% and a 20 basis point increase from foreign currency exchange rate fluctuations.

Revenue by Workflow Solution

The revenue growth of 4.1% across our operating segments for fiscal 2020 compared to the prior year period was primarily driven by Analytics and Trading, followed by CTS and Wealth, as well as the benefit from our annual price increase and a reduction in cancellations on a year-over-year basis.

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

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

Revenue growth from Wealth was driven mainly by to higher sales of our traditional and web-based workstation product.

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

Revenue increased 6.5% for fiscal 2021, compared with the same period in the prior, primarily driven by Analytics & Trading and CTS.

The increase in Analytics & Trading was mainly driven by increased sales in our portfolio reporting, portfolio analytics, risk and quantitative solutions and performance and reporting.

CTS sales increased primarily due to core and premium content sets, specifically related to company financial data and data management solutions.

Operating Expenses

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Cost of Services

Cost of services increased 4.8% to $695.4 million in fiscal 2020 compared to $663.4 in fiscal 2019.

This increase was primarily due to an increase in computer-related expenses and employee compensation costs, including stock-based compensation.

Cost of services increased 13.1% to $786.4 million in fiscal 2021 compared with $695.4 from the same period in the prior year.

Cost of services, expressed as a percentage of revenue, was 49.4% during fiscal 2021, an increase of 290 basis points over the prior year period.

This cost of service increase was primarily due to higher computer-related expenses, partially offset by a reduction in employee compensation costs and data costs, when expressed as a percentage of revenue.

Computer-related expenses increased 150 basis points, primarily driven by increased technology investments, including cloud-based hosting and licensed software arrangements.

Employee compensation costs decreased 60 basis points due mainly to higher capitalization of compensation costs related to development of our internal-use software projects, as well as a shift in headcount distribution from higher to lower cost locations.

This employee compensation expense decrease was partially offset by higher annual base salaries, a net increase in employee headcount of 803 employees, with the majority of the compensation from new employee headcount included in cost of services, and higher vacation accrual expense.

Data costs decreased 40 basis points primarily due to our efforts to control our data cost spend.

This increase was primarily due to an increase in employee compensation costs, including stock-based compensation, and computer-related expenses.

Employee compensation costs increased 150 basis points mainly due to higher annual base salaries and a net increase in employee headcount of 408 employees, with the majority of the compensation from new employee headcount included in cost of services, an increase in year-over-year variable compensation, and an increase in stock based compensation expense.

Computer-related expenses increased by 150 basis points, primarily due to increased technology investments related to our migration to cloud-based hosting services, licensed software arrangements, and a 30 basis point increase in the amortization of intangibles, due to a higher investment in capitalized software that has been placed into service.

This increase was partially offset by increased capitalization of compensation costs related to development of our internal-use software projects, as well as a shift in headcount to lower cost locations.

Selling, General and Administrative

Selling, general and administrative ("SG&A") expenses increased 7.5% to $359.0 million during fiscal 2020 compared to $333.9 million in fiscal 2019.

This increase was primarily due to an impairment on an investment in a company, an increase in employee compensation costs, and professional fees, partially offset by a decrease in non-compensatory employee related expenses and bad debt expense.

SG&A expenses, expressed as a percentage of revenue, were 24.0% in fiscal 2020, an increase of 80 basis points over the prior year period.

This SG&A increase was primarily due to an impairment on an investment in a company, an increase in professional fees and higher employee compensation costs, partially offset by a reduction in non-compensatory employee related expenses and bad debt expense.

The investment impairment recorded to reflect the estimated fair value of an investment in a company resulted in a 110 basis point increase.

Professional fees increased 60 basis points primarily to support our technology plan and business transformation activities.

Employee compensation costs increased 40 basis point primarily driven by higher annual base salaries, a net increase in employee headcount, higher variable compensation accrual and higher vacation accrual expense.

Non-compensatory employee related expenses, inclusive of travel, entertainment and office expenses,

decreased 110 basis points, mainly due to restrictions and impacts related to the COVID-19 pandemic, partially offset by increased technology investments to support remote work arrangements.

Bad debt expense decreased 70 basis points.

Selling, general and administrative ("SG&A") expenses decreased 7.8% to $331.0 million during fiscal 2021, compared with $359.0 million from the same period in the prior year.

SG&A expenses, expressed as a percentage of revenue, were 20.8% in fiscal 2021, a decrease of 320 basis points over the prior year period.

This decrease was primarily due to a decrease in non-

compensatory employee related expenses, an impairment on an investment in a company in fiscal 2020, and a decrease in professional fees, partially offset by increased compensations costs.

Non-compensatory employee-related expenses, inclusive of travel, entertainment and office expenses, decreased 150 basis points, mainly due to restrictions and impacts related to the COVID-19 pandemic, as most employees continued to work from home.

The prior year investment impairmen t res ulted in a 110 basis point decrease in the current year.

Professional fees decreased 50 basis points, primarily due to the completion of certain projects to support our technology plan and business transformation activities and lower tax consulting and accounting fees, compared with the prior year period.

The decrease was partially offset by an increase in employee compensation costs of 70 basis points, primarily driven by higher annual base salaries and a net increase in employee headcount, as well as higher variable compensation expense.

Operating Income and Operating Margin

Operating income increased 0.4% to $439.7 million in fiscal 2020 compared to $438.0 million in fiscal 2019.

Operating income increased primarily due to revenue growth, inclusive of our annual price increase, a reduction in non-compensatory employee related expenses and a decrease in bad debt expense, partially offset by an increase in computer-related expenses, an impairment of an investment in a company, employee compensation costs, including stock-based compensation, and professional fees.

Operating income was positively impacted by movements in foreign currency exchange rates on a year-over-year basis.

Our operating margin decreased in fiscal 2020 to 29.4%, compared to 30.5% for fiscal 2019.

Operating margin decreased primarily due to the impact from an investment impairment, higher computer-related expenses and an increase in professional fees, partially offset by a decrease in non-compensatory employee related expenses, a reduction in bad debt expense and lower data costs, when expressed as a percentage of revenue.

Segment Information

Reportable Segments

Our operating segments are aligned with how we manage the business, the geographic markets we serve, and how our CODM, the Company's Chief Executive Officer, assesses performance.

Our internal financial reporting structure is based on three reportable segments, the Americas, EMEA and Asia Pacific.

Within each of our segments, we primarily deliver insight and information through our four workflow solutions of Research, Analytics and Trading, CTS and Wealth.

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

Expenditures associated with our data centers, third-party data costs and corporate headquarters charges are recorded by the Americas segment and are not allocated to the other segments.

The content collection centers, located in India, the Philippines, and Latvia, benefit all our operating segments, and thus the expenses incurred at these locations are allocated to each segment based on a percentage of revenue.

Refer to Note 18, Segment Information in the Notes to the Company’s Consolidated Financial Statements included in Item 8.

of this Annual Report on Form 10-K for financial information, including revenues, operating income and long-lived assets for each of our segments.

Operating income increased 7.8% to $474.0 million in fiscal 2021 compared with $439.7 million in the prior year.

Operating income increased primarily due to revenue growth, inclusive of our annual price increase, a reduction in non-compensatory employee related expenses, a prior year investment impairment, decreased professional fees and occupancy costs, partially offset by an increase in employee compensation costs, including stock-based compensation, and computer-related expenses.

Operating income was negatively impacted by movements in foreign currency exchange rates on a year-over-year basis.

Our operating margin increased in fiscal 2021 to 29.8%, compared with 29.4% for fiscal 2020.

Operating margin increased primarily due to a decrease in non-compensatory employee related expenses, a prior year investment impairment, decreased professional fees and occupancy costs, partially offset by higher employee compensation costs and computer-related expenses.

Operating Income by Segment

Our internal financial reporting structure is based on three reportable segments, the Americas , EMEA and Asia Pacific.

Refer to Note 19 , Segment Information , for further discussion regarding our segments.

Years ended August 31,

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Americas $ 218,180 $ 182,037 $ 36,143 19.9 %

EMEA 179,831 179,258 $ 573 0.3 %

159,704 165,317 (5,613) (3.4) %

Asia Pacific 96,157 92,306 $ 3,851 4.2 %

Total Operating Income $ 474,041 $ 439,660 $ 34,381 7.8 %

Americas operating income decreased 5.8% to $168.9 million during fiscal 2020 compared to $179.4 million a year ago.

The decrease in Americas operating income was primarily due to an increase in computer-related expenses, an impairment of an investment in a company and higher professional fees, partially offset by revenue growth of 3.9%, inclusive of our annual price increase, a decrease in bad debt expense and a reduction in non-compensatory employee related expenses.

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

An investment impairment was recorded to reflect the estimated fair value of an investment in a company.

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

Non-compensatory employee related expenses, inclusive of travel, entertainment and office expenses, decreased mainly due to restrictions and impacts related to the COVID-19 pandemic, partially offset by increased technology investments to support remote work arrangements.

EMEA operating income increased 0.3% to $179.8 million during fiscal 2020, compared to $179.3 million a year ago.

The increase in EMEA operating income was primarily due to revenue growth of 3.5%, inclusive of our annual price increase, a decrease in bad debt expense and a reduction in non-compensatory employee related expenses, partially offset by an increase in employee compensation costs.

Operating income was positively impacted by movements in foreign currency exchange rates on a year-over-year basis.

Non-compensatory employee related expenses, inclusive of travel, entertainment and office expenses, decreased, mainly due to restrictions and impacts related to the COVID-19 pandemic, partially offset by investment in technology to allow employees to work from home.

Employee compensation increased primarily due to a net increase in employee headcount of 6.4% over the past 12 months, annual base salary increases year-over-year, higher variable compensation accrual and higher vacation accrual expense.

Asia Pacific operating income increased 14.5% to $90.9 million during fiscal 2020, compared to $79.4 million a year ago.

The increase in Asia Pacific operating income was mainly due to revenue growth of 7.3%, inclusive of our annual price increase, and a reduction in non-compensatory employee related expenses, partially offset by an increase in employee compensation costs and occupancy costs.

Americas operating income increased 19.9% to $218.2 million during fiscal 2021, compared with $182.0 million from the prior year.

The increase was primarily due to revenue growth of 6.8%, inclusive of our annual price increase, a reduction in non-compensatory employee related expenses, a prior year investment impairment and lower professional fees, partially offset by an increase in employee compensation expense and computer-related expenses.

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

Professional fees decreased, primarily due to the completion of certain projects to support our technology plan and business transformation activities, as well as lower tax consulting fees, compared with the prior year period.

The expense decreases were partially offset by higher employee compensation expense, mainly due to increased annual base salaries, an increase in year-over-year variable compensation, partially offset by higher capitalization of compensation costs related to development of our internal-use software projects, and increases in computer-related expenses, due to increased technology investments, including costs from cloud-based hosting and licensed software arrangements.

Additionally, amortization of intangible assets increased, primarily due to a higher investment in capitalized software that has been placed into service.

EMEA operating income decreased 3.4% to $159.7 million during fiscal 2021, compared with $165.3 million from the prior year.

The decrease in EMEA operating income was primarily due to an increase in employee compensation costs, bad debt expense, and amortization of intangibles, partially offset by revenue growth of 5.2%, inclusive of our annual price increase and a reduction in non-compensatory employee related expenses.

Operating income was negatively impacted by movements in foreign currency exchange rates on a year-over-year basis.

Employee compensation increased primarily due to a net increase in employee headcount over the past 12 months, increased annual base salaries, higher variable compensation and higher vacation expense.

Employee compensation increased mainly due to a 9.8% increase in our Asia Pacific workforce in the last 12 months and annual base salary increases year-over-year.

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

Asia Pacific operating income increased 4.2% to $96.2 million during fiscal 2021, compared with $92.3 million from the prior year.

The increase in Asia Pacific operating income was mainly due to revenue growth of 8.2%, inclusive of our annual price increase, and a reduction in non-compensatory employee related expenses, partially offset by an increase in employee compensation costs.

Operating income was favorably impacted by movements in foreign currency exchange rates on a year-over-year basis.

Non-compensatory employee related expenses, inclusive of travel, entertainment and office expenses, decreased, mainly due to restrictions and impacts related to the COVID-19 pandemic, partially offset by investments in technology to allow employees to work from home.

Employee compensation increased mainly due to a 6.6% increase in our Asia Pacific workforce in the last 12 months and increased annual base salaries.

Income Taxes, Net Income and Diluted Earnings per Share

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Diluted earnings per common share $ 10.36 $ 9.65 $ 0.71 7.4 %

The fiscal 2020 provision for income taxes was $54.2 million, compared to $69.2 million in fiscal 2019, a decrease of 21.7%.

The decrease was primarily due to a lower effective tax rate in fiscal 2020 compared to the prior year period, driven mainly by higher research and development ("R&D") tax credits and a higher Foreign Derived Intangible Income ("FDII") deduction.

The decrease was also driven by a reduction from finalizing prior year tax returns, which resulted in a benefit of $3.7 million in fiscal 2020 compared to an increase to the provision of $7.7 million in fiscal 2019 .

Additionally, the decrease in the provision was attributed to $1.9 million in higher windfall tax benefits from stock-based compensation for fiscal 2020 compared to fiscal 2019, partially offset by a $3.4 million income tax benefit from the revision of the one-time transition tax permitted by the TCJA recognized during fiscal 2019.

The fiscal 2021 provision for income taxes was $68.0 million, compared with $54.2 million in fiscal 2020, an increase of 25.5%.

The increase was primarily due to net changes in jurisdictional pre-tax book income in fiscal 2021, compared with the prior year.

Additionally, the increase was driven by a $4.4 million lower windfall tax benefit from stock-based compensation for fiscal 2021, compared with fiscal 2020, changes in tax rates in certain jurisdictions, and a lower benefit from finalizing prior year tax returns of $1.2 million.

The increase was partially offset by the impact of the true-up of certain foreign deferred tax balances, and higher research and development tax credits.

Net Income and Diluted Earnings per Share

Net income increased 5.7% to $372.9 million during fiscal 2020 compared to $352.8 million in fiscal 2019.

Diluted earnings per share increased 6.3% to $9.65 in fiscal 2020 compared to $9.08 in fiscal 2019.

Net income and diluted EPS increased primarily due to a lower income tax provision, a reduction in interest expense associated with our outstanding debt and higher operating income, partially offset by foreign currency losses.

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

Diluted EPS also benefited from a 0.2 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.

Net income increased 7.1% to $399.6 million during fiscal 2021 compared with $372.9 million in fiscal 2020.

Diluted earnings per share increased 7.4% to $10.36 in fiscal 2021 compared with $9.65 in fiscal 2020.

Net income and diluted EPS increased primarily due to increased operating income and a reduction in interest expense, partially offset by an increase in the provision for income taxes.

Interest expense decreased as a result of a decrease in LIBOR compared with the prior year, which reduced the interest rate under our 2019 Revolving Credit Facility.

Refer to Note 13, Debt of the Notes to the Consolidated Financial Statements included in Item 8.

of this Annual Report on Form 10-K for more information on LIBOR and the 2019 Revolving Credit Facility.

Non-GAAP Financial Measures

To supplement the financial measures prepared in accordance with generally accepted accounting principles in the United States ("GAAP") , we use non-GAAP financial measures including organic 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 show in the tables below.

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

Moreover, these non-GAAP financial measures have limitations in that they do not reflect all the items associated with the operations of the business as determined 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 that we do, limiting the usefulness of those measures for comparative purposes.

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Adjusted measures may also facilitate comparisons to our historical performance.

The table below provides a reconciliation of revenue to organic revenue.

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

Twelve Months Ended

(In thousands) 2020 2019 Change

(In thousands) 2021 2020 $ Change % Change

Revenue $ 1,591,445 $ 1,494,111 $ 97,334 6.5 %

Deferred revenue fair value adjustment (1)

539 4,192 (3,653) (87.1) %

Adjusted revenue 1,591,984 1,498,303 93,681 6.3 %

Acquired revenue (2)

(4,119) — (4,119)

Currency impact (3)

4,472 — 4,472

Organic revenue $ 1,592,337 $ 1,498,303 $ 94,034 6.3 %

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

The table below provides a 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.

(1) The amortization effect of the purchase accounting adjustment on the fair value of acquired deferred revenue.

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

(3) 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.

Twelve Months Ended

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Operating income $ 474,041 $ 439,660 7.8 %

Intangible asset amortization 22,269 24,920

Deferred revenue fair value adjustment 539 4,192

Intangible asset amortization 23,257 22,269

Impairment of Investment — 16,500

Other items 20,782 8,045

Transformation costs (1)

14,113 16,478

Restructuring / severance 5,028 51

Real estate charges 716 4,253

Adjusted operating income $ 517,694 $ 503,403 2.8 %

Operating margin 29.8 % 29.4 %

Adjusted operating margin (2)

Net income $ 372,938 $ 352,790 5.7 %

Intangible asset amortization (3)

32.5 % 33.6 %

Net income $ 399,590 $ 372,938 7.1 %

Deferred revenue fair value adjustment 456 3,385

Intangible asset amortization 19,672 17,773

Impairment of Investment — 16,500

Other items (6)

Transformation costs (1)

11,938 13,171

Restructuring / severance 4,253 41

Real estate charges 606 3,399

Income tax items (3)

(4,466) (7,085)

Adjusted net income (2)

$ 432,049 $ 420,122 2.8 %

Diluted earnings per common share $ 10.36 $ 9.65 7.4 %

Intangible asset amortization 0.46 0.52

Deferred revenue fair value adjustment 0.01 0.10

Intangible asset amortization 0.51 0.46

Impairment of Investment — 0.42

Other items 0.42 0.15

Transformation costs (1)

Restructuring / severance 0.11 —

Real estate charges 0.02 0.08

Income tax items (3)

(0.12) (0.18)

Adjusted diluted earnings per common share (4)

$ 11.20 $ 10.87 3.0 %

Weighted average common shares (Diluted) 38,570 38,646

(1) Operating income, net income and diluted EPS in fiscal 2020 were adjusted to exclude (i) intangible asset amortization, (ii) deferred revenue fair value adjustments from purchase accounting, (iii) an impairment charge to reflect the estimated fair value of an investment in a company, and (iv) professional fees associated with infrastructure upgrades and our ongoing multi-year investment plan and facilities costs.

(2) 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 year tax returns and other discrete items.

(3) The intangible asset amortization was recorded net of a tax impact of $4.5 million in fiscal 2020 compared with $4.7 million for fiscal 2019.

(4) The deferred revenue fair value adjustment was recorded net of a tax impact of $0.8 million in fiscal 2020 compared with $1.0 million for fiscal 2019.

(5) There was no tax impact during fiscal 2020 resulting from the impairment of an investment in a company.

(6) The other items were recorded net of a tax impact of $4.2 million in fiscal 2020 compared with $1.7 million for fiscal 2019.

(1) Costs primarily related to professional fees associated with the ongoing multi-year investment plan.

(2) Adjusted operating margin is calculated as adjusted operating income divided by adjusted revenue as shown in the organic revenue table above.

(3) Income tax items for the year ended August 31, 2021 reflects tax expenses primarily related to a reduction in the estimated foreign pre-tax book income as well as an increase in estimated U.S.

pre-tax book income.

This was partially offset by a benefit from the finalization of the prior year tax return.

Income tax items for the year ended August 31, 2020 includes income tax expenses primarily due to finalization of the prior year tax return.

(4) For purposes of calculating adjusted net income and adjusted diluted earnings per share, deferred revenue fair value adjustments and intangible asset amortization were taxed at the annual effective tax rates of 17.8% for fiscal 2021 and 17.7% for fiscal 2020.

Liquidity and Capital Resources

Our primary sources of liquidity have been our cash flows generated from our operations, existing cash and cash equivalents and, when needed, our credit capacity under our existing credit facility.

We have primarily used these sources of liquidity to, among other things, service our existing and future debt obligations, fund our working capital requirements for operations and capital expenditures, investments, acquisitions, dividend payments and repurchases of our common stock.

We use these sources of liquidity to, among other things, service our existing and future debt obligations, fund our working capital requirements, capital expenditures, investments, acquisitions, dividend payments and repurchases of our common stock.

Based on past performance and current expectations, we believe our liquidity, along with other financing alternatives, will provide us the necessary capital to fund these transactions and achieve our planned growth for the next 12 months and the foreseeable future.

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Long-Term Debt

2019 Credit Agreement

On March 29, 2019, we entered into a credit agreement with PNC Bank, National Association ("PNC") (the "2019 Credit Agreement"), which provides for a $750.0 million revolving credit facility (the "2019 Revolving Credit Facility").

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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, 2020, which we believe approximates the carrying amount as the terms and interest rate approximate market rates given its floating interest rate basis.

Borrowings under the loan bear interest on the outstanding principal amount at a rate equal to LIBOR plus a spread using a debt leverage pricing grid, which was 0.875% as of August 31, 2021.

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

The variable rate of interest on the 2019 Revolving Credit Facility can expose us to interest rate volatility due to changes in LIBOR.

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

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The interest rate swap agreement matures on March 29, 2024.

During fiscal 2019, we 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.

During fiscal 2020, we recorded interest expense on our outstanding debt, including the amortization of debt issuance costs, net of the effects of the interest rate swap agreement of $12.9 million.

During fiscal 2019, we recorded interest expense on our outstanding debt, including the amortization of debt issuance costs, of $19.8 million.

Including the effects of the interest rate swap agreement, the weighted average interest rate on amounts outstanding under our credit facilities was 2.20% for the twelve months ended August 31, 2020.

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

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

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

There is currently a global transition, known as reference rate reform, away from referencing the LIBOR, and other interbank offered rates, and toward new reference rates.

As a result of the reference rate reform initiative, these interbank offered rates, including LIBOR are expected to be discontinued.

Refer to Note 3, Summary of Significant Accounting Policies of the Notes to the Consolidated Financial Statements included in Item 8.

of this Annual Report on Form 10-K for more information on our evaluation of reference rate reform on our Consolidated Financial Statements.

Including the effects of the interest rate swap agreemen t, the weighted average interest rate on amounts outstanding under our 2019 Revolving Credit Facility was 1.38% and 2.20% for the twelve months ended August 31, 2021 and August 31, 2020, respectively.

Interest on the outstanding balance under the 2019 Revolving Credit Facility is payable quarterly, in arrears, and on the maturity date.

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

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

We were in compliance with all the covenants and requirements within the 2019 Credit Agreement as of August 31, 2021.

The borrowings under 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, as the administrative agent and lender.

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

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

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

There were no prepayment penalties if we 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

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

Refer to Note 12, Debt of the Notes to the Company's Consolidated Financial Statements included in Item 8.

Refer to Note 13, Debt of the Notes to the Consolidated Financial Statements included in Item 8.

of this Annual Report on Form 10-K for more information on these covenants.

Uses of Liquidity

Returning Value to Shareholders

For the year ended August 31, 2021, we returned $382.6 million to stockholders in the form of share repurchases and dividends.

Share Repurchase Program

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

In fiscal 2020, we repurchased 0.7 million shares for $199.6 million under our existing share repurchase program compared to 0.9 million shares for $213.1 million in fiscal 2019.

Under our share repurchase program, we may repurchase shares of our common stock from time to time in the open market and privately negotiated transactions, subject to market conditions.

In fiscal 2021, we repurchased 0.8 million shares for $264.7 million under our existing share repurchase program compared with 0.7 million shares for $199.6 million in fiscal 2020.

A total of $199.9 million remains authorized for future share repurchases as of August 31, 2021.

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

On August 14, 2020, our Board of Directors approved a regular quarterly dividend of $0.77 to be paid on September 17, 2020.

During fiscal 2020, the dividend increased $0.05 per share or 6.9%, which marked the 15th consecutive year we have increased dividends, highlighting our continued commitment to returning value to stockholders.

Capital Expenditures

For the year ended August 31, 2021, capital expenditures were $61.3 million, compared with $77.6 million during the same period a year ago, a decrease of $16.3 million.

Capital expenditures decreased as the cost related to the build-out of our office space in the Philippines during the year ended August 31, 2021 was less than the cost related to the build-out of our new corporate headquarters in Norwalk, Connecticut and office space in India during the prior year period.

This decrease was partially offset by higher expenditures related to the development of capitalized internal-use software during the year ended August 31, 2021 compared with the prior year.

On August 9, 2021, our Board of Directors approved a regular quarterly dividend of $0.82 which was paid on September 16, 2021.

During fiscal 2021, the quarterly dividend increased $0.05 per share or 6.5%, which marked the 22nd consecutive year we have increased dividends, highlighting our continued commitment to returning value to stockholders.

Over the last 12 months, we have paid 117.9 million in cash dividends.

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

During fiscal 2021, we completed acquisitions of businesses, with the most significant cash flows related to the acquisition of Truvalue Labs, Inc.

("TVL") on November 2, 2020.

We acquired all of the outstanding shares of TVL for a purchase price of $41.9 million, subject to working capital and other adjustments.

TVL is a leading provider of ESG information.

TVL applies artificial intelligence driven technology to over 100,000 unstructured text sources in multiple languages, including news, trade journals, and non-governmental organizations and industry reports, to provide daily signals that identify positive and negative ESG behavior.

The acquisition of TVL further enhances our commitment to providing industry leading access to ESG data across our platforms.

Refer to Note 7, Acquisition, in the Notes to the Consolidated Financial Statements included in Item 8.

of this Annual Report on Form 10-K for further discussion of the TVL acquisition.

Contractual Obligations

Purchase obligations represent committed payments due in future periods to our various data vendors and for other goods and services.

These purchase commitments are agreements that are enforceable and legally binding on us, and they 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.

As of August 31, 2021 and 2020, we had total purchase commitments with suppliers of $191.9 million and $226.0 million, respectively.

We also have contractual obligations related to our lease liabilities and outstanding debt.

Refer to Note 12, Leases and Note 13, Debt for information regarding lease commitments and outstanding debt obligations, respectively.

Our purchase obligations consist of two primary arrangements, data content and hosting services.

Data content is an integral component of the value we provide to our clients.

Hosting services support our technology investments related to our migration to cloud-based hosting services, the majority of which rely on third-party hosting providers.

Of the $191.9 million in purchase commitments, $84.0 million relates to hosting services and $78.7 million relates to data content.

Additional commitments relate primarily to third-party software providers.

Summary of Cash Flows

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Years ended August 31,

(in thousands) 2020 2019

(in thousands) 2021 2020 $ Change % Change

Net cash provided by operating activities $ 555,226 $ 505,840 $ 49,386 9.8 %

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Net increase in cash and cash equivalents $ 96,260 $ 225,806 $ (129,546) (57.4) %

Cash and cash equivalents aggregated to $585.6 million at August 31, 2020, compared with $359.8 million at August 31, 2019, an increase of $225.8 million.

This increase was primarily due to $505.8 million of net cash provided by operating activities, $95.5 million in proceeds primarily from the exercise of employee stock options and purchases under the FactSet Research Systems Inc.

Employee Stock Purchase Plan, as Amended and Restated (the "ESPP"), and $11.7 million from the effects of foreign currency translations.

These cash inflows were partially offset by $199.6 million in share repurchases, $110.4 million in dividend payments and $77.6 million of capital expenditures.

Our cash and cash equivalents are held in numerous locations throughout the world, with $303.0 million within the Americas, $222.3 million within EMEA (predominantly within the UK, France, and Germany) and the remaining $60.3 million within Asia Pacific (predominantly within the Philippines and India) as of August 31, 2020.

The Company intends to reinvest substantially all of its accumulated undistributed foreign earnings, except in instances where repatriation would result in

minimal additional tax.

As a result of the TCJA, we believe that the income tax impact if such earnings were repatriated would be minimal.

For fiscal 2020, net cash provided by operating was $505.8 million compared to $427.1 million in fiscal 2019, an increase of $78.7 million.

This increase was primarily driven by higher net income and timing of other operating cash flows, partially offset by the timing of income tax payments.

For fiscal 2020, net cash used in investing activities was $73.6 million compared to $56.1 million in fiscal 2019, an increase in cash used from investing activities of $17.5 million.

This increase was mainly due to higher capital expenditures of $18.3 million, driven primarily by increased development costs related to internal-use software.

For fiscal 2020, net cash used in financing activities was $218.1 million compared to $214.3 million in fiscal 2019, representing a $3.8 million increase in cash used in financing activities.

This increase was due primarily to a $11.5 million decrease in proceeds from the exercise of employee stock options and ESPP purchases and a $10.4 million increase in dividend payments, partially offset by a $20.7 million decrease in share repurchases.

Cash and cash equivalents aggregated to $681.9 million as of August 31, 2021, compared with $585.6 million as of August 31, 2020.

Our cash and cash equivalents increased $96.3 million during the twelve months ended August 31, 2021, primarily due to inflows of $555.2 million from net cash provided by operating activities and $64.2 million in proceeds from the exercise of employee stock options, partially offset by cash outflows of $264.7 million in share repurchases, $117.9 million in dividend payments, $58.1 million for the acquisition of businesses and $61.3 million of capital expenditures.

Our cash and cash equivalents are held in numerous locations throughout the world, with $266.9 million within the Americas, $369.3 million within EMEA (predominantly within the UK, Germany, and France) and the remaining $45.8 million within Asia Pacific (predominantly within the Philippines and India) as of August 31, 2021.

We intend to reinvest substantially all of our accumulated undistributed foreign earnings, except in instances where repatriation would result in minimal additional tax.

As a result of the U.S.

Tax Cuts and Jobs Act ("TCJA"), we believe that the income tax impact if such earnings were repatriated would be minimal.

For fiscal 2021, net cash provided by operating activities was $555.2 million compared with $505.8 million for fiscal 2020, an increase of $49.4 million.

This increase was primarily driven by higher net income and the timing of tax payments in certain jurisdictions, partially offset by certain working capital changes, inclusive of increases in variable compensation accruals.

For fiscal 2021, net cash used in investing activities was $136.0 million, representing a $62.4 million increase from the prior year.

This increase was mainly due to the acquisition of businesses, primarily related to the acquisition of TVL for approximately $41.9 million in cash, net of cash acquired, and a $16.3 million decrease in capital expenditures.

For fiscal 2021, net cash used by financing activities was $322.7 million, representing a $104.6 million increase in cash outflows compared with the prior year.

Financing activities were impacted by a $65.1 million increase in share repurchases, a $31.3 million decrease in proceeds from employee stock plans, and an increase of $7.5 million in dividend payments.

Free Cash Flow

We define free cash flow, a non-GAAP financial measure, as cash provided by operating activities less purchases of property, equipment, leasehold improvements and intangible assets.

We define free cash flow, a non-GAAP financial measure, as cash provided by operating activities less purchases of property, equipment, leasehold improvements and capitalized internal use software.

We present free cash flow solely as a supplemental disclosure to provide useful information to investors about the amount of cash generated by the business after necessary capital expenditures.

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Free cash flow $ 493,901 $ 428,198

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

For fiscal 2020, we generated free cash flow of $428.2 million compared to $367.8 million in fiscal 2019 , an increase of $60.4 million.

This increase reflects an increase of $78.7 million in cash provided by operating activities, partially offset by an increase in capital expenditures of $18.3 million.

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 mentioned here.

With the exception of the new leases entered in the ordinary course of business and purchase commitments associated with our technology investment plan and business transformation activities, there were no other significant changes to our contractual obligations during fiscal 2020.

The following table summarizes our significant contractual obligations as of August 31, 2020 and the corresponding effect that these obligations will have on our liquidity and cash flows in future periods:

Payments due by fiscal year

(in millions) 2021 2022-2023 2024-2025 2026 and thereafter Total

Operating lease obligations (1)

$ 40.8 $ 76.4 $ 68.3 $ 186.7 $ 372.2

Purchase commitments (2)

77.7 84.7 63.6 — 226.0

Long-term debt obligations (3)

— — 575.0 — 575.0

Total contractual obligations by period (4)

$ 118.5 $ 161.1 $ 706.9 $ 186.7 $ 1,173.2

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

Operating lease amounts also include renewal options that are reasonably certain to be exercised and are included in the measurement of the lease liability.

Amounts above do not include future lease payments under leases that have not commenced.

For more information on our operating leases, refer to Note 11, Leases, in the Notes to the Company’s Consolidated Financial Statements included in Item 8.

of this Annual Report on Form 10-K.

(2) 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.

As of August 31, 2020 and 2019, we had total purchase commitments of $226.0 million and $69.9 million, respectively.

(3) Represents the amount due under the 2019 Credit Agreement.

(4) Non-current income taxes payable of $27.7 million and non-current deferred tax liabilities of $19.7 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 a uthorizations 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.

We entered into the 2019 Credit Agreement on March 29, 2019 and borrowed $575.0 million.

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

Refer to Note 12, Debt in the Notes to the Company’s Consolidated Financial Statements included in Item 8.

of this Annual Report on Form 10-K for more information on the 2019 Credit Agreement.

(1) Capital expenditures are included in net cash used in investing activities during each fiscal period reported and include property, equipment, leasehold improvements and internal-use software.

For fiscal 2021, we generated free cash flow of $493.9 million compared with $428.2 million in fiscal 2020, an increase of $65.7 million.

This increase reflects an increase of $49.4 million in cash provided by operating activities and decreases in capital expenditures of $16.3 million.

Off-Balance Sheet Arrangements

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Foreign Currency Exposure

Certain wholly-owned subsidiaries within the EMEA 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 exchange rates for revenue and expenses.

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

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

During fiscal 2020, foreign currency movements

increased operating income by $5.0 million, compared to a $10.1 million increase to operating income in the same period a year earlier.

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

We entered into a series of forward contracts to mitigate our currency exposure ranging from 25% to 75% over their respective hedged periods.

Certain wholly-owned subsidiaries, primarily within the EMEA and Asia Pacific segments, where approximately 78% of our employees are located, are exposed to volatility in currency exchange rates through translation of the foreign subsidiaries' net assets or liabilities from their respective functional currencies into U.S.

dollars, using an end of period exchange rate.

The net translation gains and losses are recorded in accumulated other comprehensive loss as a component of stockholders’ equity.

During fiscal 2021, foreign currency movements decreased operating income by $5.4 million, compared with a $5.0 million increase to operating income in the prior year.

To mitigate the foreign currency exposure, we entered into a series of forward contracts to hedge a portion of our British Pound Sterling, Euro, Indian Rupee, and Philippine Peso exposures ranging from 25% to 75% over their respective hedged periods as of August 31, 2021.

The current foreign currency forward contracts are set to mature at various points between the first quarter of fiscal 2022 through the fourth quarter of fiscal 2022.

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dollars with Euros and British Pound Sterling was €33.8 million and £37.7 million, respectively.

A loss on derivatives of $2.0 million was recorded in operating income during fiscal 2020 , compared to a loss of $1.8 million in fiscal 2019.

Critical Accounting Policies and Estimates

We prepare the Consolidated Financial Statements in conformity with generally accepted accounting principles, which requires us to make certain estimates and apply judgements that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosures.

A loss on foreign currency forward contracts of $5.0 million was recorded into operating income during fiscal 2021, compared with a loss of $1.6 million in fiscal 2020.

Critical Accounting Estimates

We prepare the Consolidated Financial Statements in conformity with GAAP, which requires us to make certain estimates and apply judgements that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosures.

We base our estimates on historical experience and other assumptions that we believe to be reasonable at the time the Consolidated Financial Statements are prepared and, as such, they may ultimately differ materially from actual results.

We describe our significant accounting policies in Note 3, Summary of Significant Accounting Policies in the Notes to the Company’s Consolidated Financial Statements included in Item 8.

We describe our significant accounting policies in Note 3, Summary of Significant Accounting Policies in the Notes to the Consolidated Financial Statements included in Item 8.

of this Annual Report on Form 10-K.

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

The critical accounting policies, estimates, and judgments that we believe to have the most significant impacts to our Consolidated Financial Statements are described below.

Revenue Recognition

The majority of our revenue is derived from client access to our hosted proprietary data and analytics platform, which can include various combinations of products and services available over the contractual term.

The hosted platform is a subscription-based service that consists primarily of providing access to products and services including workstations, analytics, enterprise data, research management, and trade execution.

We have determined that the subscription-based service represents a single performance obligation covering a series of distinct products and services that are substantially the same and that have the same pattern of transfer to the client.

Based on the nature of the services and products offered by us, we apply an input time-based measure of progress as the client is simultaneously receiving and consuming the benefits of the platform.

We record revenue for our contracts using the over-time revenue recognition model as a client is invoiced or performance is satisfied.

A provision for billing adjustments and cancellation of services is estimated and accounted for as a reduction to revenue, with a corresponding reduction to accounts receivable.

Refer to Note 4, Revenue Recognition in the Notes to the Company’s Consolidated Financial Statements included in Item 8.

of this Annual Report on Form 10-K for further details.

Estimated Tax Provision and Tax Contingencies

The critical accounting estimates and judgments that we believe to have the most significant impacts to our Consolidated Financial Statements are described below.

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

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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.

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 FDII deduction.

Our effective tax rates differ from the statutory rate primarily due to the impact of state taxes, foreign operations, research and development ("R&D") and other tax credits, tax audit settlements, incentive-stock options and the foreign derived intangible income ("FDII") deduction.

Our annual effective tax rate was 14.5%, 12.7% and 16.4% in fiscal 2021, 2020 and 2019, respectively.

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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.

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.

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As of August 31, 2021 , we had gross unrecognized tax benefits totaling $14.9 million, including $1.3 million of accrued interest, recorded as Taxes Payable (non-current) within the Consolidated Balance Sheets.

Refer to Note 10, Income Taxes in the Notes to the Company’s Consolidated Financial Statements included in Item 8.

of this Annual Report on Form 10-K for furthe r information

Business Combinations

We account for 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.

Refer to Note 11, Income Taxes in the Notes to the Consolidated Financial Statements included in Item 8.

of this Annual Report on Form 10-K for further information.

Performance-based Equity Awards

Performance-based equity awards 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.

Refer to Note 17, Stock-Based Compensation in the Notes to the Consolidated Financial Statements included in Item 8.

of this Annual Report on Form 10-K for further information.

Goodwill and Intangible Assets

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

We review our goodwill for impairment annually dur ing the fourth quarter of each fiscal year and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of any one of our reporting units below its respective carrying amount.

In performing the goodwill impairment test, we first perform a qualitative assessment, which requires that we consider factors such as macro-economic conditions, industry and market conditions in which FactSet operates, including the competitive environment and significant changes in demand for our services.

We also consider our share price both in absolute terms and in relation to our peers.

If, after assessing the totality of events or circumstances, we determine that it is more likely than not that the fair values of our reporting units are greater than the carrying amounts, then the quantitative goodwill impairment test is not performed.

If the qualitative assessment indicates that the quantitative analysis should be performed, we then evaluate goodwill for impairment by comparing the fair value of each of our reporting units to its carrying value, including the associated goodwill.

To determine the fair values, we use an income approach, along with other relevant market information, derived from a discounted cash flow model to estimate fair value of our reporting units.

We review our goodwill for impairment annually during the fourth quarter of each fiscal year and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of any one of our reporting units below its respective carrying amount.

We may elect 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, we consider such factors as macro-economic conditions, industry and market conditions in which we operate, including the competitive environment and significant changes in demand for our services.

We also consider the 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 we elect not to perform a qualitative analysis, a quantitative analysis is performed to determine whether a goodwill impairment exists.

The quantitative goodwill impairment analysis is used to identify potential impairment by comparing the fair value of a reporting unit with its carrying amount using an income approach, along with other relevant market information, derived from a discounted cash flow model to estimate the fair value of our reporting units.

An impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value, if any, would be recognized.

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We determined, after performing a qualitative review of each reporting unit, that it is more likely than not that the fair value of each reporting unit substantially exceeds their respective carrying amounts.

Accordingly, there was no indication of impairment and the quantitative goodwill impairment test was not performed.

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

Accordingly, there was no indication of impairment and a quantitative goodwill impairment test was not performed.

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

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.

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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.

Our ongoing consideration of 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, 2021 and 2020 was $135.0 million and $121.1 million, respectively.

Refer to Note 8, Goodwill and Note 9, Intangible Assets in the Notes to the Company’s Consolidated Financial Statements included in Item 8.

Refer to Note 9, Goodwill and Note 10, Intangible Assets in the Notes to the Consolidated Financial Statements included in Item 8.

of this Annual Report on Form 10-K for further details.

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.

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

In evaluating long-lived assets for recoverability, we use our best estimate of future cash flows (undiscounted and excluding interest charges).

If the estimated future cash flows are less than the carrying value of the asset, an impairment loss is recognized to the extent that such asset's carrying value exceeds its fair value, based on the most appropriate valuation technique, including discounted cash flows.

In determining indicators for impairment, we take various factors into account, including, but not limited to, a significant decline in our expected future cash flows;

changes in expected useful life;

unanticipated competition;

slower growth rates, ongoing maintenance and improvements of the assets, or changes in the usage or operating performance.

A significant amount of judgment is involved in determining if an indicator of impairment has occurred and in calculating the inputs to the impairment calculation such as estimates related to future cash flows and asset fair values, forecasting asset useful lives and selecting the discount rate that reflects the risk inherent in future cash flows.

If actual results are not consistent with our estimates and assumptions included in our impairment assessment, we may be exposed to losses that could be material.

There have been no long-lived asset impairment charges and no change to our impairment assessment methodology for each of the last three years.

The carrying value of long-lived assets was $131.4 million as of August 31, 2021 and $133.1 million as of August 31, 2020.

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 p ast 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.

Refer to Note 7, Property, Equipment and Leasehold Improvements in the Notes to the Company’s Consolidated Financial Statements included in Item 8.

of this Annual Report on Form 10-K for further information.

Performance-based Equity Awards

Performance-based equity awards, whether in the form of performance-based stock options or performance share units, require management to make assumptions rega rding 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.

Refer to Note 16, Stock-Based Compensation in the Notes to the Company’s Consolidated Financial Statements included in Item 8.

Refer to Note 8, Property, Equipment and Leasehold Improvements in the Notes to the Consolidated Financial Statements included in Item 8.

of this Annual Report on Form 10-K for further information.

Contingencies

We are subject to various legal proceedings, claims and litigation that have arisen in the ordinary course of business, which involve inherent uncertainties including, but not limited to, employment matters, and commercial and intellectual property litigation.

Assessing the probability of loss for such contingencies and determining how to accrue the appropriate liabilities

requires judgment.

If actual results differ from our assessments, our financial position, results of operations, or cash flows would be affected.

Business Combinations

We account for business combinations using the purchase method of accounting.

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.

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

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.

Refer to Note 3, Summary of Significant Accounting Policies in the Notes to the Consolidated Financial Statements included in Item 8.

of this Annual Report on Form 10-K for a full description of recent accounting pronouncements, including the expected dates of adoption, which we include here by reference.

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 7. Management’s Discussion and Analysis