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Item 1A. Risk Factors

2022-07-01 compared with 2022-04-04 · 31 added, 14 removed, 97 unchanged (32% of the section changed)

There were no material changes during the six months ended February 28, 2022 to the risk factors identified in our Annual Report on Form 10-K for the fiscal year ended August 31, 2021, except for the addition of certain language in the sections "Operational Risks - Operations outside the United States involve additional requirements and burdens that we may not be able to control or manage successfully" and "Legal & Regulatory Risks - Legislative and regulatory changes in the environments in which we and our clients operate" as set out below.

In addition, included below are risk factors related to the CGS acquisition, the offering of senior notes and the entrance into a new credit facility, which took place on March 1, 2022.

Refer to Note 17, Subsequent Events for more information on these transactions.

There have been no material changes to the risk factors identified in our Annual Report on Form 10-K for the fiscal year ended August 31, 2021, except for the addition of certain language in the sections "Operational Risks - Operations outside the United States involve additional requirements and burdens that we may not be able to control or manage successfully" and "Legal & Regulatory Risks - Legislative and regulatory changes in the environments in which we and our clients operate" as set out below.

In addition, included below are risk factors related to the CGS acquisition, the offering of Senior Notes and the entrance into the 2022 Credit Facilities, which took place on March 1, 2022.

Refer to Note 7, Acquisitions and Note 12, Debt , for more information on these transactions.

Operational Risks

Operations outside the United States involve additional requirements and burdens that we may not be able to control or manage successfully.

In fiscal 2021, approximately 40% of our revenue related to operations located outside the U.S.

In fiscal 2021, approximately 40% of our revenues related to operations located outside the U.S.

In addition, a significant number of our employees, approximately 78%, are located in offices outside the U.S.

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revenues accounting for an increased portion of our total revenue in the future.

involve risks that differ from or are in addition to those faced by our U.S.

operations involve risks that differ from or are in addition to those faced by our U.S.

These risks include difficulties in developing products, services and technology tailored to the needs of non-U.S.

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or foreign tax laws.

If we are not able to adapt efficiently or manage the business effectively in markets outside the U.S., our business prospects and operating results could be materially and adversely affected.

If we are not able to adapt

efficiently or manage the business effectively in markets outside the U.S., our business prospects and operating results could be materially and adversely affected.

Legal & Regulatory Risks

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However, MiFID II may also present us with new business opportunities for new service offerings.

In March 2022, the UK government announced proposed reforms to financial regulation in the UK, which would represent a divergence from the existing UK MiFID regime.

Regulatory reform may impact some of our UK-regulated clients and may require them to devote more resource towards realigning their compliance measures, and in some cases ensuring compliance with both the UK and EU regimes.

In May 2022, the UK government announced the new Financial Services and Markets Bill, set to be unveiled later in 2022, which which would reform financial service regulation in the UK and represent a divergence from the existing UK MiFID regime.

Regulatory reform may impact some of our UK-regulated clients and may require them to devote more resources towards realigning their compliance measures, and in some cases ensuring compliance with both the UK and EU regimes.

We continue to monitor the impact of UK regulatory change on our clients.

1 unchanged sentence

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

On January 31, 2020, the United Kingdom formally left the European Union when the UK-EU Withdrawal Agreement became effective.

Under the Withdrawal Agreement, a transition period began that ran until December 31, 2020.

On January 1, 2021, the UK left the EU Single Market and Customs Union, as well as all EU policies and international agreements.

As a result, the free movement of persons, goods, services and capital between the UK and the EU ended, and the EU and the UK formed two separate markets.

On December 24, 2020, the EU reached a trade agreement with the UK (the "Trade Agreement").

The Trade Agreement offers UK and EU companies preferential access to each other's markets, ensuring imported goods will be free of tariffs and quotas;

however, economic relations between the UK and EU will now be on more restricted terms than existed previously.

The Trade Agreement does not incorporate the full scope of the services sector, and businesses such as banking and finance face uncertainty.

In March 2021, the UK and EU had agreed on a framework for voluntary regulatory cooperation and dialogue on financial services issues between the two countries in a Memorandum of Understanding (the "MOU"), which is expected to be signed after formal steps are completed, although this has not yet occurred.

Earlier this year, the European Affairs Committee in the UK launched an inquiry to address the impact of Brexit in the UK financial services sector.

This report was expected by May 2022, but has not yet been issued.

At this time, we cannot predict the impact that the Trade Agreement, the MOU or any future agreements on services, particularly financial services, will have on our business and our clients.

It is possible that new terms may adversely affect our operations and financial results.

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

This uncertainty may have an impact on our clients’ expansion or spending plans, which may in turn negatively impact our revenue or growth.

Risks Relating to the CGS Transaction

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Additionally, management may face challenges in incorporating certain elements and functions of the CGS Business with the FactSet business, and this process may result in additional and unforeseen expenses.

The CGS Transaction may also disrupt the CGS Business’s and FactSet’s ongoing business or cause inconsistencies in standards, controls, procedures and policies that adversely affect our relationships with third party partners, employees, suppliers, customers and others with whom the CGS Business and FactSet have business or other dealings or limit our ability to achieve the anticipated benefits of the CGS Transaction.

The CGS Transaction may also

disrupt the CGS Business’s and FactSet’s ongoing business or cause inconsistencies in standards, controls, procedures and policies that adversely affect our relationships with third party partners, employees, suppliers, customers and others with whom the CGS Business and FactSet have business or other dealings or limit our ability to achieve the anticipated benefits of the CGS Transaction.

It is possible that our experience in operating the CGS Business will require us to adjust our expectations regarding the impact of the CGS Transaction on our operating results.

If we are not able to successfully add the CGS Business to the existing FactSet business in an efficient, effective and timely manner, anticipated benefits, including the opportunities for growth we expect from the CGS Transaction, may not be realized fully, if at all, or may take longer to realize than expected, and our cash flow and financial condition may be negatively affected.

We will incur significant transaction costs in connection with the CGS Transaction.

We have incurred and may incur additional significant transaction costs in connection with the CGS Transaction.

We have incurred a number of non-recurring costs associated with the CGS Transaction.

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Our indebtedness may impair our financial condition and prevent us from fulfilling our obligations under the Senior Notes and our other debt instruments.

As of March 1, 2022, giving effect to the issuance of the senior notes and the incurrence of borrowings under the 2022 Credit Facilities and the repayment of the 2019 Revolving Facility, the total outstanding debt of FactSet was $2.25 billion, none of which is secured.

As of May 31, 2022, giving effect to the issuance of the Senior Notes and the incurrence of borrowings under the 2022 Credit Facilities and the repayment of the 2019 Revolving Facility, the total outstanding principal amount of debt of FactSet was $2.13 billion, none of which is secured.

Under the 2022 Revolving Facility, we have $250.0 million of unused commitments and an option to increase the size of the facility by an additional $750.0 million.

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An increase in the alternate base rate, Term SOFR, Daily Simple SOFR, SONIA or EURIBOR would increase our interest payment obligations under the 2022 Credit Facilities and could have a negative effect on our cash flow and financial condition.

To mitigate this exposure, on March 1, 2022, we entered into an interest rate swap agreement with a notional amount of $800.0 million to hedge the variable interest rate obligation on a portion of our outstanding balance under the 2022 Credit Agreement.

However, as the interest rate swap agreement covers only a portion of our outstanding balance under the 2022 Credit Agreement, a substantial portion of our outstanding balance under the 2022 Credit Agreement continues to be exposed to interest rate volatility.

An increase in the applicable rates would increase our interest payment obligations under the 2022 Credit Agreement and could have a negative effect on our cash flow and financial condition.

However, as the interest rate swap agreement covers only a portion of our outstanding balance under the 2022 Credit Facilities , a substantial portion of our outstanding balance under the 2022 Credit Facilities continues to be exposed to interest rate volatility.

An increase in the applicable rates would increase our interest payment obligations under the 2022 Credit Facilities and could have a negative effect on our cash flow and financial condition.

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

What changed 10-Q

Item 1A. Risk Factors