Here's our initial take on FactSet Research Systems' (NYSE: FDS) financial report.
Key Metrics
| Metric |
Q3 FY24 |
Q3 FY25 |
Change |
vs. Expectations |
| Revenue |
$552.7 million |
$585.5 million |
6% |
Beat |
| Adjusted diluted earnings per share |
$4.37 |
$4.27 |
(2%) |
Missed |
| Organic annual subscription value |
$2.2 billion |
$2.3 billion |
5% |
n/a |
| GAAP operating margin |
36.6% |
33.2% |
(3.4 pp) |
n/a |
FactSet Weighed Down by Cost Comparisons
Financial data and analysis vendor FactSet grew revenue in the quarter and remains a must-have vendor for its existing client base. But higher costs ate into the bottom line, leading the company to report earnings per share that fell short of Wall Street expectations.
Revenue, including the product of acquisitions, grew by 6% year over year, and organic revenue was up 4.4%. FactSet grew its annual subscription value (ASV) by 6%, including the result of acquisitions, to $2.4 billion, and annual ASV retention was greater than 95%. As a percentage of clients, annual retention was 91%.
Although costs were higher, much of the added expense can be attributed to timing issues and one-time items. GAAP operating margin fell to 33.2% from 36.6%, which the company attributed to the lapping of both a lower bonus accrual and a one-time payroll tax adjustment, as well as added salaries due to recent acquisitions.
FactSet continues to return cash to shareholders. In May, the company announced a 6% increase to its quarterly dividend. It is the 26th consecutive yearly dividend increase. The company also repurchased $80.7 million worth of its shares in the quarter.
Over the last decade, FactSet has reduced its share count by more than 8%. The company said its board approved a new $400 million repurchase authorization beginning on Sept. 1.
Immediate Market Reaction
The report was largely more of the same, and investors reacted accordingly. FactSet shares initially fell about 3% in premarket trading, continuing a trend that has seen the stock fall 12% so far in 2025.
What to Watch
FactSet reaffirmed its full-year guidance, and CEO Phil Snow said the company has "a healthy pipeline and increased momentum." We are in the final three months of the company's fiscal year, so clarity should be strong.
There is also change on the horizon. In early June, FactSet said Snow would be stepping down in September. He will be replaced by Sanoke Viswanathan, a JPMorgan Chase (NYSE: JPM) wealth management executive who was a member of Jamie Dimon's operating committee at the bank.
FactSet has a well-regarded product, but its services are priced at a premium, and the total addressable market, buy-side and sell-side bankers, has not been growing. It will be up to Viswanathan to find the catalyst to get markets excited about FactSet again.
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JPMorgan Chase is an advertising partner of Motley Fool Money. Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends FactSet Research Systems and JPMorgan Chase. The Motley Fool has a disclosure policy.
