This is a summary of the second quarter fiscal 2009 earnings call conducted by FactSet Research Systems, Inc. (FDS) on March 17, 2009.
Management:
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CFO, Executive VP, Treasurer: Peter G. Walsh
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Chairman of the Board, CEO: Philip A. Hadley
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Executive VP, Director, US Investment Management Services: Michael D. Frankenfield
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President, COO, Director: Michael F. DiChristina
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Head of non-U.S. Operations: Scott Beyer
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Senior VP, Director - Investment Banking and Brokerage Services: Kieran M. Kennedy
Key Investor Issues:
- For the quarter the company posted net income of $34.6 million, or 71 cents a share, compared with $29.5 million, or 59 cents a share, a year ago.
- Revenue growth was 12% from a year ago.
- Operating margins rose to 33.2%.
- ASV grew $4 million organically.
Second Quarter Highlights:
During the last 12 months free cash flow rose 24% to $143 million.
Free cash flow generated during the second quarter were $29 million, up 23% over the year-ago quarter. Free cash flows generated in the first half of 2009 exceeded last year’s total by 88%.
Drivers of free cash flow during Q2 were record levels of net income and higher non-cash expenses partially offset by a decline in working capital. The decrease in working capital was caused by a $10 million in accounts receivable and the timing of U.S. Federal estimated tax payments.
This year annual invoices aggregated to $11 million. Accordingly, this annual invoice process increased accounts receivable and deferred revenues. It is normal for the company’s receivables to rise during Q2. The increase this year was 14% which is comparable to the 12% and 14% sequential increases during Q2 in 2008 and 2007 respectively. Moreover, 88% of the AR increase relates to invoices sent in January and February 2009 so the quality of the receivables on an age basis remains high.
DSO’s at quarter end were an impressive 48 days.
Free cash flow in Q2 was distorted due to estimated tax payments. FactSet remits two estimated tax payments through the first half of the fiscal year during the second quarter. This additional payment reduces Q2 free cash flow. Estimated tax payments during Q2 were $29 million. Of that total $14 million related to Q1.
The ending cash and marketable securities balance was $132 million, up $8 million from November 30.
During Q2 the company invested $17 million to repurchase common stock and paid a quarterly dividend of $8 million. Including the $100 million increase to the share repurchase announced today there is $145 million remaining in repurchase authorization.
Capital expenditures during the quarter were $6.4 million. Expenditures for office space was $4.9 million and the remainder was for computer equipment.
Revenues were $156.5 million, up 12% versus a year ago.
- Operating income advanced 20% to $52 million.
- Net income rose 17% to $35 million.
- EPS was $0.71 per share, up 20%.
ASV increased $4 million organically during the quarter.
The ASV change in the quarter included $7 million related to the annual price increase for U.S. Investment Management clients. The company defines annual subscription value or ASV as a forward-looking revenue for the next 12 months from all subscription services currently being supplied to the clients.
ASV was $624 million at February 28. ASV advanced $49 million over the last 12 months, a growth rate of 9%.
FactSet’s Investment Management business represents 80% of the total ASV. The remainder relates to services used by M&A investment bankers and sell side equity research professionals. The number of clients declined during the quarter by 12 to 2,067. This was comparable to a net loss of six clients in Q1. Users were 38,700 at February 28, a decrease of 1,500 during the last three months.
At quarter end there were 5,773 users of Portfolio Analytics Workstation from 652 clients.
