After a difficult first quarter of fiscal 2010, data and analytics vendor FactSet Research Systems seems to be experiencing a return to form with an overall revenue increase of 0.5% for the second quarter on previous year’s figures. Phil Hadley, chairman and CEO of the vendor, indicates that he believes the investment in its business via the launch of a new platform and the decision to go from offering data integration services to offering its own data feeds has paid off for FactSet and is the reason behind its “highest quarterly user growth in two years”.
For the quarter ended 28 February 2010, revenues were US$157.3 million, up 0.5% compared to the prior year. Operating income for the second quarter increased to US$54.5 million, an advance of 5% from US$52.0 million in the same period of fiscal 2009. Net income rose to US$36.1 million as compared to US$34.6 million a year ago. Diluted earnings per share increased to US$0.75, up 6% from US$0.71 in the same period of fiscal 2009.
Peter Walsh, chief operating officer, says: “The second quarter was a solid quarter for FactSet as our clients continued to stabilise. Annual subscription value (ASV) grew by US$14 million during the second quarter to US$635 million.” Of this total, 82% was derived from buy side clients and the remainder was from the sell side firms who perform M&A advisory work and equity research, consistent with the vendor’s previous revenue split. ASV from FactSet’s US operations was US$430.3 million and US$204.3 million related to international operations.
“We believe that even modest growth in the current environment, though hard won, is encouraging,” adds Walsh. The growth can be attributed to the vendor’s price increase for its investment management customers for the quarter and a few other areas such as the new FactSet workstation, which Walsh says has proved popular with new clients and old.
The focus of the vendor’s sales team has been on promoting its new workstations and upgrading existing clients to this new offering. In September last year, FactSet announced the release of its newest financial software platform, which consolidates data and analytics, previously spread across multiple applications, onto one interface. Walsh reckons this new solution goes some way to explaining the user increase of 1,400 in the quarter, although he indicates that investment is still being conducted in a “slow and cautious manner”.
Walsh explains that the vendor’s proprietary content collection has been selling well over the quarter, in particular its FactSet Fundamentals and FactSet Estimates. “FactSet has completed its journey from a pure software company to a software and content company,” he contends.
The vendor has also recently established a reference data related partnership with the London Stock Exchange (LSE), under the terms of which the exchange will deliver FactSet’s reference data via its web-based platform UnaVista, which provides validation, matching and reconciliation solutions.
According to Walsh, the vendor is seeking to bring down some of its costs by moving more of its operations offshore to Hyderabad in India and Manila in the Philippines. The vendor’s presence in these locations has “rapidly expanded” over the last year, he adds.
For the next quarter, revenues are expected to range between US$157 million and US$151 million, according to the vendor. “After a trough, we have seen client and user counts begin to rise, along with metrics that suggest increasing client engagement with new FactSet,” he concludes.