FactSet Research (FDS) reported first quarter 2011 EPS of 88 cents, exceeding the Zacks Consensus Estimate of 84 cents.
Revenue
The company reported revenue of $173.3 million in the first quarter of 2011, up 12.0% from $155.2 million reported in the year-ago quarter. FactSet witnessed some benefits from the increase in demand in its served markets, and also witnessed improvement in annual subscription value.
Revenues from the U.S. were $118.2 million, up 12.0% compared to the year-ago quarter. Non-U.S. revenues also increased 10.0% to $55.1 million.
Annual Subscription Value
Annual Subscription Value (ASV) increased $10.9 million sequentially to $695.0 million in the first quarter. Of this, 82.0% of ASV was from buy-side clients and the remainder from sell-side firms performing M&A advisory work and equity research. ASV from FactSet’s U.S. operations was $474.0 million, while ASV from international operations amounted to $221.0 million.
The company exited the quarter with 43,600 users, an increase of 800 users during the quarter. Client count was 2,123 at quarter-end, a net increase of 13 clients. The annual client retention rate was greater than 95.0% of ASV and 90.0% of clients.
Operating Results
FactSet’s operating margin was 34.3% in the quarter, down 5 basis points year over year. The reduction in the operating margin was due to the fact that operating expenses increased at a higher rate than revenue. The increase in operating expense may be attributed to the increase in selling, general and administrative expenses.
Net income for the quarter came in at $41.0 million, an increase of 15.2% from $36.1 million reported in the year-ago period. On a fully diluted basis, the quarterly EPS of 88 cents was an increase from 74 cents in the year-ago quarter.
Balance Sheet & Cash Flow
FactSet exited the quarter with $202.3 million in cash and short-term investments, compared to $195.0 million in the previous quarter. The company has no long-term debt. During the quarter, the company repurchased 302,666 shares for $26.1 million, while $133.0 million remained authorized for future repurchases.
This apart, the company incurred a net capital expenditure of $8.0 million during the quarter, $5.4 million for computer equipment and the remainder for office space expansion.
Guidance
For the second quarter of fiscal 2010, FactSet expects revenue in the range of $174 million to $179 million. Diluted EPS for the second quarter is expected to be in the 85 to 87 cent range.
For full fiscal year 2011, capital expenditures, net of landlord contributions, is expected to be $22 million to $28 million.
The company is witnessing some benefits from the increasing demand, which also helped raise the client count. This apart, FactSet has a healthy cash balance.
Additionally, with the gradual recovery of the financial markets, spending on investment tools is showing gradual improvement. On the other hand, Factset operates in a highly competitive market which may rationalize the growth prospects of the company in the coming quarters.
As such, we have a Short term Buy rating (Zacks rank #2) on FactSet shares.
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