When Wall Street is healthy, FactSet Research Systems (NYSE:FDS) tends to be healthy. The provider of financial research and institutional support has benefited tremendously from the eight-year bull market in stocks, and strategic acquisitions have helped give it greater exposure to key growth areas like wealth management and portfolio analytics.
Coming into Tuesday's fiscal fourth-quarter financial report, FactSet shareholders wanted to see the company finish the year on a strong note, with solid gains coming both from its core business and from expansion initiatives. FactSet's results were impressive, and the company hopes to enter fiscal 2018 on an upbeat note. Let's look more closely at FactSet Research Systems and what its latest results say about its future.
FactSet keeps gaining ground
FactSet's fiscal fourth-quarter results continued the positive momentum that the financial services provider had built up throughout most of the year. Revenue climbed 14% to $326.7 million, which slightly surpassed expectations among those following the stock. Adjusted net income was up a more modest 9% to $74.7 million, but a decline in its share count helped bolster per-share growth, and adjusted earnings of $1.90 per share beat the consensus forecast among investors by $0.01.
As FactSet has done in recent quarters, growth came on multiple fronts. Annual subscription value jumped (ASV) 15% to $1.32 billion, and even though acquisitions inflated that number somewhat, organic growth of roughly 6% in both ASV and overall revenue showed that FactSet isn't relying entirely on the merger arena to produce gains in key metrics. The buy-side part of the business fared slightly better than the sell-side, outpacing respective segment ASV growth rates by a percentage point.
FactSet also saw ongoing success from its efforts to broaden its geographical scope. The company saw ASV from international operations rise by nearly a quarter compared to the year-ago period, much of which came from recent acquisitions. However, FactSet's core domestic business also remained sound, with an increase of more than 9%, of which more than half represented organic growth.
Operationally, FactSet stayed consistent, with 95% retention on annual subscription value despite another 1-percentage-point drop in client count retention rates to 91%. The company now boasts almost 4,750 clients, up 115 from three months ago, and user counts grew by more than 2,800 to top 88,800. Employee head counts climbed to nearly 9,075, with 700 new workers brought on during the past 12 months.
CEO Phil Snow was succinct in his views on the quarter. "We expanded our product portfolio," Snow said, "with exciting new acquisitions in key growth areas such as analytics and wealth." The CEO also pointed to the balance between organic growth and integrating newly acquired businesses as a favorable dynamic going forward.
Can FactSet keep climbing?
FactSet is optimistic about its ability to reap further rewards in fiscal 2018. "We grew revenue and adjusted earnings to record levels again this quarter," said CFO Maurizio Nicolelli, and FactSet sees its having "secured key wins with global clients" as a key driver of future gains.
FactSet's guidance for the fiscal first quarter of 2018 was upbeat. The company expects revenue of between $327 million and $333 million, which is above the current consensus forecast among those following FactSet. Adjusted earnings expectations of $1.93 to $1.99 per share compared favorably to the $1.94 per share estimate from investors, as FactSet anticipates sustaining its 12% growth rate in earnings.
FactSet investors were happy with the results, and the stock climbed 4% in morning trading following the pre-market announcement. As long as its clients remain financially healthy and willing to take on new services, FactSet Research Systems will have a golden opportunity to cash in and expand its business while times are good.