UNITED STATES

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Form 10-K

For☒   Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the fiscal yearended August 31, 20162018

For the transition period from  to            

Commission File Number: 1-11869

FACTSET RESEARCHRESEARCH SYSTEMS INC.

(Exact name of Registrant as specified in its charter)

601 Merritt 7, Norwalk, Connecticut 06851

(Address of principal executive office, including zip code)

Registrant’s telephone number, including area code:(203) 810-1000

Securities registered pursuant to Section 12(b) of the Act:Common Stock, par value $0.01 per share

Name of each exchange on which registered:New York Stock Exchange and TheThe NASDAQ Stock Market LLC

Securities registered pursuant to Section 12(g) of the Act:None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  

Yes ☒    No ☐

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  

Yes ☐    No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒    No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes ☒    No ☐

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or emerging growth company. See definitionthe definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “smaller reporting“emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

   ☐  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).      Yes ☐    No ☒

The aggregate market value of the registrant’s common stock held by non-affiliates of the registrant based upon the closing price of a share of the registrant’s common stock on February 29, 2016,28, 2018, the last business day of the registrant’s most recently completed second fiscal quarter, as reported by the New York Stock Exchange on that date, was $6,049,252,249.$7,767,417,390.

The number of shares outstanding of the registrant’s common stock, as of October 25, 2016,24, 2018, was 39,935,323.38,037,295.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s definitive Proxy Statement dated October 31, 2016,30, 2018, for the 20162018 Annual Meeting of Stockholders to be held on December 20, 2016,18, 2018, are incorporated by reference into Part III of this Annual Report on Form 10-K where indicated.

FACTSET RESEARCH SYSTEMS INC.

FORM 10-K

For The Fiscal Year Ended August 31, 20162018

PART I

Part I

ItemITEM 1. BusinessBUSINESS

Business Overview

FactSet providesResearch Systems Inc. (the “Company” or “FactSet”) is a global provider of integrated financial information, and big data analytical applications and industry-leading service for the global investment community. The Company deliversOur mission is to solve our clients’ greatest challenges through the power of collaboration. We deliver insight and information to investment professionals through itsour analytics, service, content, and technology. By integrating comprehensive datasets and analytics across asset classes with client data, FactSet supports the workflow of both buy-side and sell-side clients. These professionals include portfolio managers, wealth managers, research and performance analysts, risk managers, sell-side equityinvestment research professionals, investment bankers, risk and fixed income professionals.performance analysts, and wealth advisors. From streaming real-time data to historical information, including quotes, estimates, news and commentary, FactSet offers uniquewe offer proprietary and third-party content through desktop, wirelessweb, mobile and off-platform solutions. The Company’s wideOur broad application suite offers tools and resources including company and industry analyses, full screening tools, portfolio analysis, risk profiles, alpha-testing, portfolio optimization and research management solutions. Recent additions to FactSet’s offering include a complete services solution focused on verifying, cleaning and loading portfolio data across asset classes, and an execution management system through its acquisition of Portware. The Company’sOur revenues are primarily derived from subscriptions to products and services such as workstations, analytics, enterprise data, research management, and trade execution.

Corporate History

FactSet Research Systems Inc. (the “Company” or “FactSet”) was founded in 1978 and has been publicly held since 1996. The Company isWe are dual listed on the New York Stock Exchange (“NYSE”) and the NASDAQ Stock Market (“NASDAQ”) under the symbol “FDS.” Fiscal 20162018 marked the Company’s 38thour 40th year of operation its 36th consecutive year of revenue growth and its 20th consecutive year of earnings growth as a public company.

In fiscal 2016, FactSet earned recognition aswhile much has changed in our market and technologies, our focus has always been to provide the “Best Overall Provider” of market data, researchbest in class products and analytics from Inside Market Data (“IMD”). It was named “Best Data Analytics Provider” in the annual rankings announced by Waters Technology. FactSet was also honored with the “Best Research and Analytics Tool” award at the annual Systems in the City Awards presented in London by Goodacre UK.exceptional client service.

The awards addedfollowing timeline depicts the Company’s history since our founding in 1978:

Business Strategy

We provide our clients with the global standard for delivery, integration and consumption of our financial data by the global investment community. We maintain flexible, open data and software solutions to bring the front, middle, and back office together to drive productivity and performance throughout the portfolio lifecycle. Our strategy is focused on growing our business throughout each of our three segments which include the U.S., Europe, and Asia Pacific. We believe this geographical strategy alignment helps us better manage our resources and concentrate on markets that demand our products. The U.S. segment services investment professionals, including financial institutions throughout the Americas. The European and Asia Pacific segments service investment professionals located throughout Europe and the Asia Pacific segment, respectively. To execute on our business strategy of broad-based growth across each geographical segment, we continue to look at ways to create value for our clients by offering data, products and analytical applications within our key workflows of Research, Analytics, Wealth, and Content and Technology Solutions.

Research Solutions

Our Research Solutions (“Research”) workflow offers a long listpowerful data solution that combines global coverage, deep history, and transparency with thousands of achievements for FactSetFactSet-sourced and third-party databases integrated in fiscal 2016,one flexible platform. Our Research workflow has a strong focus on growing the number of users and client types including “Bestinvestment banking, sell-side research, buy-side research, private equity, capital markets, investor relations, and media. This workflow offering is comprised of Core Applications, including Universal Screening, Company & Security Analytics, Industry and Markets, Filings, Ownership, Research, Provider”News and “Best Analytics Provider” by IMD in May 2016 and earning a spot for the eighth time as one of Fortune’s “100 Best Companies to Work For”our Research Management Solutions (“RMS”).

In October 2015,Analytics Solutions

Our Analytics Solutions (“Analytics”) workflow addresses processes around risk, performance and reporting. Our Analytics workflow provides investment professionals with in-depth insight, powerful analytics, and comprehensive datasets integrated seamlessly into their portfolios. The Analytics workflow is driven by FactSet completed its acquisitionPortfolio Analysis (“PA”) and FactSet’s Multi-Asset Class (“MAC”) risk models. PA is a multi-asset class interactive global solution that includes a flexible, multi-tile interface of Portware, LLC (“Portware”), an award-winning,reports and charts to enable a user to make smarter decisions. MAC risk models analyze risk factors across different asset types and classes. We have enhanced our Analytics workflow offering by leveraging client-requested functionality such as fixed income optimization and the Duration Times Spread attribution model.

Additionally, included in the Analytics workflow is our portfolio management and trading solutions which focus on workflows that are specific for the front office serving traders and portfolio managers. This offering includes a multi-asset execution management system (“EMS”). platform, as well as compliance and order management functionality. These products are aimed at large asset managers, hedge funds and mid-market customers to provide a combination of automated and intelligent trading workflows.

Wealth Solutions

Our Wealth Solutions (“Wealth”) workflow creates solutions that are specific to the wealth management industry and helps with investment portfolio management, advisory services, financial planning and other financial services. Our Wealth workflow offerings include providing end-to-end solutions, focusing on non-equity content and single security analytics, portfolio and risk analytics, and digital strategy.

Content and Technology Solutions

Our Content and Technology Solutions (“CTS”) workflow is focused on delivering value to our clients in the way they want to consume it. Our goal is to reduce the number of customizations by standardizing and bundling our proprietary data into data feeds. Whether a client needs market, company, or alternative data, our data delivery services provide normalized data through APIs and a direct delivery of local copies of standard data feeds. Our symbology links and aggregates a variety of content sources to ensure consistency, transparency, and data integrity across your business.

The additionCTS workflow also includes direct access to insight and information outside of Portware enables the workstation through cloud-based application program interfaces and white label solutions. More specifically, our recent launch of Open:FactSet data marketplace provides access to support client workflows25 specialty datasets from FactSet and other data providers in additional segmentsflexible delivery formats.

FactSet Clients

Buy-side

We focus on the buy-side workflow across all firm and user types. These clients include portfolio managers, analysts, traders, wealth managers, performance teams and risk and compliance teams at a variety of firms, such as traditional asset managers, wealth advisors, corporations, hedge funds, insurance companies, plan sponsors and fund of funds.

As buy-side clients continue to shift towards multi-asset class investment strategies, we are positioned to be a partner in the space, given our ability to provide enterprise-wide solutions across their entire workflow. We provide solutions across asset classes and at nearly every stage of the investment process. Together, FactSetprocess by utilizing our workstations, powerful analytics, proprietary content, data feeds and Portware expect to provide the investment community with state-of-the-art analytic and execution applications across more of the portfolio lifecycle, from analyst to portfolio manager to trader.services.

FactSet also announced in July 2016The buy-side annual subscription value (“ASV”) growth rate for fiscal 2018 was 5.4%. Buy-side clients accounted for 83.9% of ASV as of August 31, 2018.

Sell-side

We are a market leader on the salesell-side and we are continuing to expand beyond investment banking into various other parts of its marketbanking institutions. Our clients represent banking & advisory, broker-dealers, consulting, independent research, businessinstitutional asset management, private equity, and venture capital firms. We believe that future growth may be derived from the breadth of solutions we provide to the sell-side across our geographic segments and workflow solutions.

Though historically we have focused on advisor-sold investmentsselling workstations to banks, over the last few years our emphasis has shifted to focus on selling more differentiated product offerings outside the workstation. We are also expanding our banking user base to commercial banking, equity and insurance, consistingfixed income research teams, quantitative analysis groups, compliance and regulatory divisions and sales and trading teams.

The sell-side ASV growth rate for fiscal 2018 was 7.3%. Sell-side clients accounted for 16.1% of Market Metrics and Matrix-Data Limited (collectively “Market Metrics”). The divestmentASV as of this business is consistent with the Company’s long-term strategic direction and commitment to delivering value to shareholders.August 31, 2018.

Client Subscription Growth

Annual subscription value (“ASV”)ASV at any given point in time represents the forward-looking revenues for the next twelve months from all subscription services currently being supplied to clients. Atclients and excludes professional services fees billed in the last twelve months, which are not subscription-based. Organic ASV excludes ASV from acquisitions and dispositions completed within the last 12 months and the effects of foreign currency

As of August 31, 2016,2018, ASV was $1.15$1.39 billion, up 8.8%$74.4 million or 5.7% organically from a year ago. TheThis increase in ASV during fiscal 2016 was primarily driven by thegrowth amongst our geographic segments and achievements across each of our workflow solutions which include Research, Analytics, Content & Technology Solutions (“CTS”), Research Management Solutions (“RMS”)CTS, and Portware businesses.Wealth.

During fiscal 2016, FactSet2018, we added 116 net398 new clients, increasing the number of clients by 3.9%8.4% over the prior year. This net number reflects a reduction of 41 clients due to the sale of the Market Metrics business. The number of new client additions is an important metric for FactSet as new clients typically come on with modest deployments and often experience substantial growth in subsequent years. In terms of users, 3,450 netWe added 3,051 new users were added during fiscal 2016. FactSet saw2018, leading to a healthy progression in the number of users atin both itsour buy-side and sell-side clients.

The following charts providechart provides a snapshot view of FactSet’s historic ASV growth over the past 10 fiscal years. growth:

Financial Information on Geographic Areas

Operating segments are defined as (i) components of an enterprise that engage in business activities from which they may earn revenues and incur expenses, whose(ii) with operating results that are regularly reviewed by the enterprise’s chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance, and (iii) for which discrete financial information is available. Financial information atExecutive management, along with the CEO, constitute our chief operating segment level is reviewed jointly by the Chiefdecision making group (“CODMG”). Executive Officer (“CEO”) and senior management. Senior management consists of certain executives who directly report to the CEO, comprisingincluding the Chief Financial Officer, Chief OperatingTechnology and Product Officer, Global Head of Sales and Client Solutions, General Counsel, Chief Human Resources Officer and three senior directors in chargeHead of product strategy. Senior management, along withAnalytics & Trading. The CODMG reviews financial information at the CEO, constitute FactSet’s chief operating decision making groupsegment level and is responsible for making decisions about resources allocated amongst the operating segments based on actual results.

FactSet’s operationsOur operating segments are organized into three reportable segmentsaligned with how the Company, including its CODMG, manages the business and the demographic markets we serve. Our internal financial reporting structure is based on geographic business activities:three segments: the U.S., Europe and Asia Pacific. ThisWe believe this alignment reflects the Company’s approach to managinghelps us better manage the business and transacting in the variousfocus on markets in which FactSet serves by providing integrated global financial and economic information. Sales, consulting, data collection, product development and software engineering are thethat demand our products. Our primary functional groups within the U.S., Europe, and Asia Pacific segments thatinclude sales, consulting, data collection, product development and software engineering, which provide global financial and economic information to investment managers, investment banks and other financial services professionals.

The U.S. segment services financeinvestment professionals, including financial institutions throughout the Americas, while theAmericas. The European and Asia Pacific segments service investment professionals located throughout Europe and the Asia Pacific region,segment, respectively. Financial information, including revenues, operating income and long-lived assets related to the Company’sour operations in each geographic area are presented in Note 7,Segment Information, and in the Notes to the Company’s Consolidated Financial Statements included in Item 8.

The U.S. segment has offices in fourteen states throughout the U.S., including our corporate headquarters in Norwalk, Connecticut as well as two additional offices located in Brazil and Canada. The European segment is headquarteredmaintains office locations in London,Bulgaria, Dubai, England, and maintains offices inFinland, France, Germany, Italy, Ireland, Latvia, Luxembourg, the Netherlands, Spain, South Africa, SwedenSpain, and Dubai.Switzerland. The Asia Pacific segment is headquartered in Tokyo, Japan withhas office locations in Australia, Hong Kong, SingaporeChina, India, Japan, and Mumbai, India.Singapore. Segment revenues reflect direct sales to clients based in their respective geographic locations. There are no intersegment or intercompany sales of the FactSet services. Each segment records compensation expense, including stock-based compensation, amortization of intangible assets, depreciation of furniture and fixtures, amortization of leasehold improvements, communication costs, professional fees, rent expense, travel, marketing, office and other direct expenses.

Expenditures associated with the Company’sour data centers, third party data costs and corporate headquarters charges are recorded by the U.S. segment and are not allocated to the other segments. The centers of excellence, which focus primarily on content collection centersand are located in India and the Philippines, benefit all of the Company’s operating segments and thus the expenses incurred at these locations are allocated to each segment based on a percentage of revenues.

The following charts depict revenues related to each of the Company’sour reportable segments.

Business Strategy

Workstations

FactSet’s most widely known product is its flagship FactSet workstation, deployed on thousands of desks around the globe. In fiscal 2016, user growth was 5.5%, and there are now more than 65,000 global FactSet users. In the workstation, FactSet has focused on optimizing speed and responsiveness and on building out unique content sets. Such unique content includes its StreetAccount news content, Revere Geographic Revenue data, and the addition of real time fixed income pricing through a third party partnership. With increased regulatory scrutiny and regulations, FactSet RMS has also driven growth. As one of the largest providers of RMS in the industry, FactSet is used by firms of all asset classes, from the startup hedge fund to the largest institutional asset managers, and from small endowments to the largest pensions and sovereign wealth funds. FactSet RMS helps clients institutionalize and optimize their research workflow providing a solution that boosts cross-firm collaboration, helps create transparency to ensure compliance, and promotes business continuity.

Analytics

Investment professionals want to focus on producing results. They need in-depth insight, powerful analytics, and comprehensive datasets integrated seamlessly with their portfolios. FactSet helps to solve this need by integrating petabytes of data each day (from clients, FactSet’s own unique content and hundreds of third-party providers), as well as by offering multi-asset class analytics, performance, and risk. FactSet Portfolio Analysis is a multi-asset class, global solution that helps investment professionals spend more time discovering alpha and less time managing their portfolios. Portfolio Analysis is an interactive tool that helps portfolio managers make smarter decisions with a flexible, multi-tile interface of reports and charts. FactSet’s Multi-Asset Class (MAC) model helps users understand risk factors across different asset types and classes. Additionally, the Company has enhanced its offering with client-requested functionality such as a linear MAC model, fixed income optimization, and the DTS (Duration Times Spread) attribution model.

Content and Technology Solutions (CTS)

FactSet is focused on delivering value to its clients in the way they want to consume it. This delivery includes offering powerful analytics and comprehensive datasets through desktop, mobile and web interfaces, as well as giving clients direct access to insight and information outside of the Workstation through cloud-based application program interfaces (“APIs”), data feeds and white label solutions. The CTS suite includes a growing number of standardized data feeds that complement and mirror the data in the FactSet workstation. These capabilities and data solutions are powering a growing number of workflows for the middle and front office.

Portware

Since FactSet’s acquisition of Portware in October 2015, the multi-asset EMS has continued to provide a leading trading platform technology. In addition to being named the "Best FX trading platform technology" by Wall Street Letter, the FactSet-Portware acquisition was named the "Best M&A Deal" at Markets Media's Markets Choice Awards. Both of these awards reinforce the strategic benefit of combining Portware’s innovative execution management expertise with FactSet’s integrated financial information and analytical applications. Portware embeds in the middle of the buy-side trader workflow and integrates tightly with other key components to automate simpler trades, freeing traders to focus on more complex trades. Since the acquisition, Portware client volume increased as did new client and broker connections.

Client Service and Support

At its core, FactSet is client centric and always has been. FactSet partners with clients to help them work intelligently and more efficiently. As client needs have changed, FactSet has evolved its business to meet those needs, and this shift has helped to fuel growth even in a challenging market.

FactSet prioritizes customer service and the client experience. Clients have wide access to a team of consultants and product specialists. They are able to leverage a wide range of combined industry knowledge and FactSet product experience to maximize the value of FactSet. Client feedback is regularly incorporated into the product through constant enhancements and technology innovations. This client-focused dedication helped FactSet's achieve a client retention rate of more than 95% of ASV, and 94% when expressed as a percentage of clients, consistent with the prior year.

FactSet Clients

Buy Side

FactSet is focused on understanding the buy-side workflow across all firm types and user types. This segment includes portfolio managers, analysts, traders, wealth managers, performance teams and risk and compliance teams at a variety of firms, such as traditional asset managers, wealth advisors, hedge funds, insurance companies, plan sponsors and fund of funds.

As buy-side clients shift towards multi-asset class investment strategies, FactSet is well positioned to be a partner in the space, given its ability to provide solutions across their entire workflow. Through its workstation, powerful analytics, unique content like FactSet’s Geographic Revenue data, data feeds and portfolio services, FactSet is able to provide solutions across asset classes and at nearly every stage of the investment process.

The buy-side ASV growth rate for fiscal 2016 was 9.0%. Buy-side clients accounted for 82.6% of ASV as of August 31, 2016.

Sell Side

FactSet is a market leader within banking and is continuing to expand beyond investment banking into various other parts of banking institutions. The Company anticipates that future growth may come from the breadth of solutions FactSet provides to the sell side—across analytics, content and technology.

FactSet has historically focused on selling workstations to banks. Over the last few years, its emphasis has shifted to focus on selling more differentiated product offerings outside the workstation including StreetAccount, RMS, Portfolio Analytics and Alpha Testing. FactSet is also expanding its banking user base outside investment banking to commercial banking, research, quant groups, compliance and regulatory divisions and sales and trading teams.

The sell-side ASV growth rate for fiscal 2016 was 7.6%. Sell-side clients accounted for 17.4% of ASV as of August 31, 2016.

Talent

Over the last 38 years, FactSet hasSince our founding, we have built a collaborative culture that recognizes and rewards innovation and offers employees a variety of opportunities and experiences. FactSet’sOur employees are critical to itsour success and the reason it continueswe continue to execute at a high level. ItsWe believe our continued focus on engaging and enabling employees to do their best work is central to FactSet’s ability to deliver the best insightmaking employee engagement a top priority will help us provide high quality insights and information to clients around the globe.globally.

FactSet is proudIn order to optimize productivity, we have received the following accoladesinvested in fiscal 2016:

As of August 31, 2016, employee headcount was 8,375 up 13.8% from a year ago. Excluding the acquired Portware workforceexpanding our footprint and employees of the divested Market Metrics business, headcount increased 13.4% from a year ago. Of FactSet’s total employees, 2,407 were locatedtalent pool in the U.S., 849 in Europe and 5,119 in Asia Pacific. Approximately 55% of the Company’s employees were involved with content collection, 24% worked in product development, software and systems engineering, another 18% conducted sales and consulting servicesIndia and the remaining 3% provided administrative support.

FactSet believes that its current relations with employees are good. Company management keeps employees informedPhilippines, where we now have a combined workforce of decisions and encourages and implements employee suggestions whenever practicable.over 5,500 people.

As of August 31, 2016,2018, our employee headcount was 9,571, an increase of 5.5% in the last twelve months. Of our total employees, 2,471 are in the U.S., 1,246 in Europe and 5,854 in the Asia Pacific segment.

In fiscal 2018, approximately 155430 FactSet employees within certain French and German subsidiaries were represented by a mandatory works council.councils, an amount consistent with fiscal 2017. No other employees are represented by a collective bargaining agreement.agreements.

Third PartyIn May 2018, we announced that Maurizio Nicolelli, the Company’s Chief Financial Officer, would depart FactSet as of December 31, 2018. In July 2018, we announced that Helen L. Shan would join FactSet as the new Chief Financial Officer beginning in September 2018. Additionally, in July 2018, we announced that Edward Baker-Greene, the Company’s Chief Human Resources Officer would depart FactSet as of November 30, 2018.

Third-Party Content

FactSet aggregates third partyWe aggregate content from more than 220thousands of third-party data suppliers, 115 news sources, exchanges, brokers and 85 exchangescontributors into itsour own dedicated online service, which clients access to perform their analyses. FactSet carriesWe carry content from premier providers such as Thomson Reuters, S&P Global Inc., Axioma, Inc., Interactive Data Corporation, LLC, Dow Jones & Company Inc., Northfield Information Services, Inc., Barclays, Intex Solutions, Inc., Bureau van Dijk, ProQuote Limited, MSCI Inc., SIX Financial Information USA Inc., Morningstar, Inc., Russell Investments, Bank of America Merrill Lynch, NYSE Euronext Inc., London Stock Exchange, Tokyo Stock Exchange, NASDAQ OMX, Australian Securities Exchangemajor global exchanges and Toyo Keizai Inc.. Content fees billed to the Company may be on a fixed or royalty (per client) basis.

FactSet seeksdata providers. We seek to maintain contractual relationships with a minimum of two content providers for each major type of financial data, though certain data sets on which FactSet relieswe rely have a limited number of suppliers. The Company makesWe make every effort, when reasonable, to locate alternative sources, to ensure that FactSet iswe are not dependent on any one thirdthird- party data supplier. The Company hasWe have entered into third partythird-party content agreements withat varying lengths, which in some cases can be terminated on one year’s notice, at predefined dates, and in other cases on shorter notice. No single vendor or data supplier represented 10% or more than 10% of FactSet'sour total fixed data expenses in any fiscal year.year presented.

Data Centers

FactSet’sOur business is dependent on itsour ability to process substantial volumes of data and transactions rapidly and efficiently on itsour networks and systems. The Company’sOur global technology infrastructure supports itsour operations and is designed to facilitate the reliable and efficient processing and delivery of data and analytics to itsour clients. FactSet’sOur data centers contain multiple layers of redundancy to enhance system performance, including maintaining, processing and storing data at multiple data centers. User connections are load balanced between data centers. In the event of a site failure, equipment problem or localized disaster, the remaining center hascenters have the capacity to handle the additional load. FactSet continuesWe continue to be focused on maintaining a global technological infrastructure that allows the Companyus to support itsour growing business.

FactSetSeveral years ago, we launched its multi-phase project, Project NextGen several years ago to evolve away from large mainframe computers to a more distributed environment powered by a vast array of smaller, faster and more cost-effective machines. The Company operatesWe operate fully redundant data centers in both Virginia and New Jersey. These data centersJersey in the U.S. that can handle FactSet’sour entire client capacity. In addition, FactSet maintainswe maintain a vast private wide area network that provides a high-speed direct link between the client’s local network and the data content and powerful applications found on the Company’sour mainframe machines.

The Competitive Landscape

FactSet isWe are a part of the financial information services industry, which providesproviding accurate financial information and software solutions to the global investment community. According to industry reports, global spend on market data and analysis grew 1.2% to $26.6 billion in 2016 compared to the prior year. This extremely competitive market is comprised of both large, well-capitalized companies and smaller, niche firms including market data suppliers, news and information providers and many of the content providers that supply the Companyus with financial information included in the FactSet workstation. TheOur largest competitors to FactSet are Bloomberg L.P. (“Bloomberg”), Refinitiv (formerly part of Thomson Reuters Inc. (“Thomson”)Reuters), and S&P Global Market Intelligence (“S&P Capital IQ”). Industry reports state that Bloomberg’s market share grew slightly to 33.3%, up from 32.0% a year ago while Thomson’s was approximately 24.3%, down from 25.9% in the prior year. S&P Capital IQ’s was approximately 4.8%, comparable to that of FactSet.Intelligence. Other competitors and competitive products include online database suppliers and integrators and their applications, such as MSCI Inc., Morningstar Inc., BlackRock Solutions and RIMES Technologies Corporation and Wilshire Associates Inc.Corporation. Many of these firms offer products or services which are similar to those sold by the Company. FactSet’swe sell. Our development of itsour own robust sets of proprietary content combined with itsour news and quotes offering have resulted in more direct competition with the largest financial data providers.

Despite competing products and services, FactSet enjoyswe enjoy high barriers to entry and believesbelieve it would be difficult for another vendor to quickly replicate quickly the extensive databases the Companywe currently offers.offer. Through itsour in-depth analytics and superior client service, FactSet believes itwe believe we can offer clients a more complete solution with one of the broadest sets of functionalities, through a desktop user interface or data feed. In addition, FactSet'sour applications, including itsour client support and service offerings, are entrenched in the workflow of many financial professionals given the downloading functions and portfolio analysis/screening capabilities they offer. The Company isoffered. We are entrusted with significant amounts of our clients' own proprietary data, including portfolio holdings. As a result, the Company'sour products have become central to our clients’ investment analysis and decision-making for clients.decision-making.

Intellectual Property

FactSet hasWe have registered trademarks and copyrights for many of itsour products and services and will continue to evaluate the registration of additional trademarks and copyrights as appropriate. FactSet entersWe enter into confidentiality agreements with itsour employees, clients, data suppliers and vendors. The Company seeksWe seek to protect itsour software, documentation and other written materials under trade secret, copyright and patent laws. While FactSet doeswe do not believe it iswe are dependent on any one of itsour intellectual property rights, the Company doeswe do rely on the combination of intellectual property rights and other measures to protect itsour proprietary rights. Despite these efforts, existing intellectual property laws may afford only limited protection.

Research and Product Development Costs

A key aspect of the Company’sour growth strategy is to enhance itsour existing products and applications by making them faster and the data within themwith more reliable. FactSet strivesreliable data. We strive to rapidly to adopt rapidly new technology that can improve itsour products and services. At FactSet we do not have a separate research and product development department, but rather our Product Development and Engineering departments work closely with our strategists, product managers, sales and other client-facing specialists to identify areas of improvement to provide increased value to our clients. Research and product development costs relate to the salary and benefits for the Company’sour product development, software engineering and technical support staff and, as such, thesestaff. These costs are expensed whenas incurred within our cost of services as employee compensation. The Company expectsWe expect to allocateappropriate a similar percentage of itsour workforce and associated expenses in future years in order to continue to develop new products and enhancements, respond quickly to market changes and meet the needs of itsour clients efficiently. In fiscal 2018, we incurred $217.1 million of research and product development costs, which was comparable to our spend on similar development during fiscal years 2017 and 2016, respectively.

Government Regulation

The CompanyFactSet is subject to reporting requirements, disclosure obligations and other recordkeeping requirements of the Securities and Exchange Commission (“SEC”) and the various local authorities that regulate each location in which FactSet operates.we operate. The Company’s wholly owned subsidiaries, FactSet Data Systems, Inc. and P.A.N. Securities, Inc., are each membersLP, is a member of the Financial Industry Regulatory Authority, Inc. and is a registered broker-dealersbroker-dealer under Section 15 of the Securities and Exchange Act of 1934. FactSet Data Systems, Inc. and P.A.N. Securities, Inc.,LP, as a registered broker-dealers, arebroker-dealer, is subject to Rule 15c3-1 under the Securities and Exchange Act of 1934, which requires that the Company maintain minimum net capital requirements. The Company claims exemption under Rule 15c3-3(k)(2)(i).

Corporate Contact Information

FactSet was founded as a Delaware corporation in 1978, and its principal executive offices areoffice is in Norwalk, Connecticut.

Mailing address of the Company’s headquarters: 601 Merritt 7, Norwalk, Connecticut 06851 USA

Telephone number: +1 (203) 810-1000

Website address: www.factset.com

Available Information

Through the Investor Relations section of the Company’sFactSet’s website (http:(https://investor.factset.com), FactSet makeswe make available the following filings as soon as practicable after they are electronically filed with, or furnished to, the SEC: the Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, Proxy Statements for the annual stockholder meetings, Reports on Forms 3, 4 orand 5, and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended. All such filings are available free of charge.

FactSet broadcastsAdditionally, we broadcast live itsour quarterly earnings calls via itsthe investor relations section of our website. Additionally, the Company providesWe also provide notifications of news or announcements regarding itsour financial performance, including SEC filings, investor events, press and earnings releases, and blogs as part of itsour investor relations website. The contents of this website issection are not intended to be incorporated by reference into this reportReport on Form 10-K or in any other report or document the Company files and any reference to this section of our website is intended to be inactive textual references only.

In addition, the Company’s Code of Ethical Conduct for Financial Managers andFactSet Code of Business Conduct and Ethics areis posted in the Investor Relations section of the Company’s website and thewebsite. The same information is available in print to any stockholder who submits a written request to the Company’s Investor Relations department at its corporate headquarters.department. Any amendments to or waivers of such code that are required to be publicly disclosed by the applicable exchange rules or the SEC will be posted on the Company’sour website. The Corporate Governance Guidelines and the charters of each of the committees of the Company’s Board of Directors, including the Audit Committee, Compensation and Talent Committee, and Nominating and Corporate Governance Committee are available on the Investor Relations section of the Company’s website and theour website. The same information is available in print, free of charge, to any stockholder who submits a written request to the Company’sour Investor Relations department at its corporate headquarters.department.

Executive Officers of the Registrant

The following table shows the Company’sFactSet’s current executive officers as of August 31, 2016:officers:

F. Philip Snow–Chief Executive Officer. Mr. Snow was named Chief Executive Officer effective July 1, 2015. Prior to that, Mr. Snow held the title of President. He began his career at FactSet in 1996 as a Consultant, before moving to the Asia Pacific region to hold positions in the Tokyo and Sydney offices. After moving back to the U.S. in 2000, Mr. Snow held various sales leadership roles before assuming the role of Senior Vice President, Director of U.S. Investment Management Sales in 2013. Mr. Snow received a B.A. in Chemistry from the University of California at Berkeley and a MastersMaster of International Management from the Thunderbird School of Global Management. He holds the Chartered Financial Analyst designation and is a member of the CFA Institute.

Mark J. HaleHelen L. Shan – Executive Vice President and Chief Operating OfficerFinancial Officer. . Mr. Hale joined the Company in 1995 as a software engineer. During his 20-year tenure at FactSet, Mr. Hale has held several positions of increasing responsibility including Head of Software Engineering, and most recently, Senior Vice President, Director of Content Operations. Mr. Hale received a B.S. in Electrical and Computer Engineering from Carnegie Mellon University.

Scott G. Miller – Executive Vice President, Global Director of Sales. Mr. MillerMs. Shan joined FactSet in January 2015. Previously, Mr. MillerSeptember 2018 from Marsh and McLennan Companies, where she was employed by Bloomberg L.P., where he had executive responsibilityCFO for enterprise accounts. Mr. MillerMercer, one of the world’s leading professional services firms. During her time at Mercer, Ms. Shan was a founding executive and Global Chief Operating Officer of Bloomberg’s Enterprise Solutions Group, responsible for theglobal financial reporting and performance, operational finance, investments, and corporate strategy, and executionleading a team of that group’s major initiatives and day-to-day management. Mr. Miller spent 10 yearsfinance professionals supporting clients in sales leadership roles within Bloomberg’s Financial Products Group, including Head of Sales, Americas; Regional Sales Manager, Americas; Regional Sales Manager, EMEA; and National Sales Manager, EMEA. From 1995over 130 countries. Prior to 1998, Mr. Miller worked in fixed income sales at Bank of Montreal in London. He started his career in 1992 at Nesbitt Thomson in Montreal, Canada and isMercer, Ms. Shan was a graduate of St. Francis Xavier University.

Maurizio Nicolelli – Senior Vice President, Chief Financial Officer. Mr. Nicolelli joined the Company in 1996 as the Senior Accountant and held the position of Chief Accountant from 1999 to 2001. From 2002 to 2009, he served as Vice President and Comptroller of the Company. From October 2009 to 2013, he occupied the position of Senior Vice President, Principal Financial OfficerTreasurer for both Marsh and McLennan Companies and Pitney Bowes Inc. and was named Chief Financial Officer in fiscal 2014. Prior to joining FactSet, he was employedalso a Managing Director at PricewaterhouseCoopers LLP. He holdsJ.P. Morgan. In September 2018, Ms. Shan joined the Board of Directors of EPAM Systems Inc., a leading global provider of digital platform engineering and software development services. Ms. Shan earned B.S. in Politicaldegrees from the University of Pennsylvania’s Wharton School and School of Engineering and Applied Science, and a Master of Business Administration from Syracuse University and an M.B.A. in Accounting from St. John's University. Mr. Nicolelli is a CPA licensed in the stateCornell University’s SC Johnson College of New York.Business.

Edward Baker-Greene – Senior Vice President, Chief Human Resources Officer. Mr. Baker-Greene joined FactSet in June 2015 from Voya Financial, formerly ING, U.S., where he was Head of Human Resources for Retirement Solutions, Operations, and Information Technology. Previously, Mr. Baker-Greene worked at Fidelity Investments for 13 years. At Fidelity, he was a part of the Personal and Workplace Investing division, where he held roles in business and human resources capacities, including Senior Vice President/Managing Director, Relationship Management. Mr. Baker-Greene began his professional career as a lawyer focusing on employment law, recruiting, talent management, and human capital management. Mr. Baker-Greene received a B.A. from Tufts University and a J.D. from the University of Virginia School of Law.

On July 5, 2018, the Company entered into a separation of employment and general release agreement with Edward Baker-Greene, pursuant to which Mr. Baker-Greene will remain in his current position as Chief Human Resources Officer until his successor is appointed and will remain an employee of FactSet until his separation date of November 30, 2018.

Gene D. Fernandez– Executive Vice President, Chief Technology and Product Officer.Mr. Fernandez joined FactSet in November 2017 from J.P. Morgan, where he served as the Chief Technology Officer, New Product Development. In this role, he developed the strategy and built the engineering function responsible for new product innovation. During a decade at J.P. Morgan, Mr. Fernandez held various other roles, including Chief Technology Officer for Client Technology and Research and Banking Information Technology. Prior to J.P. Morgan, he worked at Credit Suisse and Merrill Lynch. Mr. Fernandez received a B.S. in Computer Science and Economics from Rutgers University.

Robert J. Robie – Executive Vice President, Head of Analytics and Trading Analytics Solutions. Mr. Robie joined FactSet in 2000 as a Product Sales Specialist. During his tenure at FactSet, Mr. Robie has held several positions of increasing responsibility, including Senior Director of Analytics and Director of Global Fixed Income and Analytics where he led sales and support efforts for FactSet’s fixed income product offering. Between 2004 and 2005, Mr. Robie worked at BTN Partners, where he worked in their quantitative portfolio management and performance division as an analyst. Mr. Robie holds a B.A. in Economics from Beloit College.

Rachel R. Stern– Senior Executive Vice President, Strategic Resources and General Counsel and Secretary. Ms. Stern joined FactSet in 2001 as General Counsel. In addition to the Legal Department at FactSet, she is responsible for Investor Relations; Facilities and Real Estate Planning; and Third-Party Content and Strategic Partnerships.Partnerships; and the administration of our offices in Hyderabad and Manila. Ms. Stern is admitted to practice in New York, and Washington D.C., and as House Counsel in Connecticut. Ms. Stern received a B.A. from Yale University, an M.A. from the University of London and a J.D. from the University of Pennsylvania Law School.

John W. Wiseman – Executive Vice President, Global Head of Sales and Client Solutions. Mr. Wiseman joined FactSet in 2004 as a Vice President in the sales department. During his tenure at FactSet, Mr. Wiseman has held several positions of responsibility including Senior Vice President, Global Head of Strategic Partnerships & Alliances. Prior to his experience with FactSet, Mr. Wiseman was a Senior Managing Director at Bear Stearns & Co. Inc. Mr. Wiseman received a B.A. in Political Science and Management Science from Duke University and a Master of Business Administration from the University of Edinburgh.

Additional Information

Additional information with respect to the Company’sFactSet’s business is included in the following pages and is incorporated herein by reference:

ITEM 1A. RISK FACTORS

Set forth belowThe following risks could materially and elsewhere in this reportadversely affect our business, financial condition, cash flows, results of operations and in other documents FactSet files with the SECtrading price of our common stock could decline. These risk factors do not identify all risks that we face; our operations could also be affected by factors that are not presently known to us or that we currently consider to be immaterial to our operations. Due to risks and uncertainties, that could cause actualknown and unknown, our past financial results may not be a reliable indicator of future performance, and historical trends should not be used to differ materially from those expressed by the forward-looking statements containedanticipate results or trends in this report.future periods. Investors should carefully consider the risks described below before making an investment decision. In assessing these risks, investors should also refer to the other information contained or incorporated by referenceset forth in this Annual Report on Form 10-K, filed with the SEC,including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements including the Company’s consolidated financial statements and related notes thereto. FactSet’s operating results are subject to quarterly and annual fluctuations as a result of numerous factors. As a consequence, operating results for a particular future period are difficult to predict, and, therefore, prior results are not necessarily indicative of future performance.notes. Investors should carefully consider all risks, including those disclosed, before making an investment decision.

Risk factors which could cause future financial performanceLoss, corruption and misappropriation of data and information relating to differ materially from the expectations as expressed in any of FactSet’s forward-looking statements made by or on the Company’s behalf include, without limitation:

FactSet must ensure the protectionclients and privacy of client dataothers

Many of FactSet’sour products, as well as itsour internal systems and processes, involve the storage and transmission of our own, as well as supplier and customer proprietary information and sensitive or confidential data, including client portfolios. FactSet reliesportfolios and strategies. Breaches of this confidentiality, should they occur, could result in the loss of clients and termination of arrangements with suppliers for the use of their data. We rely on a complex network of internal controls to protect the privacy of client data. If FactSet failswe fail to maintain the adequacy of itsour internal controls, including any failure to implement required new or improved controls, unauthorized access or if FactSet experiences difficulties in their implementation, misappropriation of client or supplier data by an employee or an external third partythird-party could occur, whichoccur. Additionally, the maintenance and enhancement of our systems may not be completely effective in preventing loss, unauthorized access or misappropriation. Data misappropriation, unauthorized access or data loss could instill a lack of confidence in our products and systems and damage the Company’sour brand, reputation and ultimately its business. Breaches of Company security measures could expose FactSet, itsus, our clients or the individuals affected to a risk of loss or misuse of this information, potentially resulting in litigation and liability for the Company,us, as well as the loss of existing or potential clients. Many jurisdictions in which we operate have laws and regulations relating to data privacy and protection of personal information, including the European Union General Data Protection Regulation (“GDPR”) which became effective May 25, 2018. GDPR requires companies to satisfy new requirements regarding the handling of personal and sensitive data, including our use, protection and certain abilities of persons whose data is stored to correct or delete such data about themselves. Failure to comply with GDPR requirements could result in penalties of up to 4% of worldwide revenues. The law in this area continues to develop and the changing nature of privacy laws in the European Union and elsewhere could impact our processing of personal and sensitive information related to our content operations, employees, clients, and damagesuppliers, and may expose us to the Company’s brand and reputation.claims of violations.

FactSet must continue to introduce new productsSuccessful cyber-attacks and enhancements to maintain its technological positionthe failure of cyber-security systems and procedures

The market for FactSetIn providing our software-enabled services to clients, we rely on information technology infrastructure that is characterized by rapid technological change, changes in client demandsprimarily managed internally, along with some reliance placed on third-party service providers. We and evolving industry standardsthese third-party service providers are subject to the risks of system failures and security breaches, including cyber-attacks, such as phishing scams, viruses and denials of service attacks, as well as employee errors or malfeasance. Our protective systems and procedures and those of third parties to which can render existing products obsolete and unmarketable. As a result, the Company’s future success will continue to depend upon its ability to develop new products and enhancements that address the future needs of its target markets and to respond to their changing standards and practices. FactSetwe are connected, such as cloud computing providers, may not be successful in developing, introducing, marketingeffective against these threats. We could suffer significant damage to our brand and licensingreputation if a cyber-attack or other security incident were to allow unauthorized access to, or modification of, clients’ or suppliers’ data, other external data, internal data or information technology systems; if the Company’s new products and enhancements on a timely and cost effective basis, and they may not adequately meet the requirements of the marketplaceservices provided to clients were disrupted; or achieve market acceptance. In addition, clients may delay purchases in anticipation of newif products or enhancements.services were perceived as having security vulnerabilities. The costs we would incur to address and resolve these security incidents would increase our expenses. These types of security incidents could also lead to lawsuits, regulatory investigations and claims, loss of business and increased legal liability. We also make acquisitions periodically. While significant effort is placed on addressing information technology security issues with respect to the acquired companies, we may inherit such risks when these acquisitions are integrated into our infrastructure.

FactSet must hireA prolonged or recurring outage at our data centers and retain key qualified personnelother business continuity disruptions at facilities could result in reduced service and the loss of clients

The Company’sOur clients rely on us for the delivery of time-sensitive, up-to-date data and applications. Our business is baseddependent on successfully attracting and retaining talented employees. Competition for talent, including engineering personnel, in the industry in which the Company competes is strong. If the Company is less successful in its recruiting efforts, or if it is unable to retain key employees, itsour ability to developprocess substantial volumes of data and deliver successful productstransactions rapidly and efficiently on our computer-based networks and systems. Our computer operations, as well as our other business centers, and those of our suppliers and clients are vulnerable to interruption by fire, natural disaster, power loss, telecommunications failures, terrorist attacks, acts of war, civil unrest, Internet failures, computer viruses and security breaches, and other events beyond our reasonable control. We maintain back-up facilities and certain other redundancies for each of our major data centers to minimize the risk that any such event will disrupt those operations. However, a loss of our services involving our significant facilities may be adversely affected. FactSet needs technical resourcesmaterially disrupt our business and may induce our clients to seek alternative data suppliers. Any such, as product development engineers to develop new products and enhance existing products. The Company relies upon sales personnel to sell its products and services and maintain healthy business relationships. FactSet’s failure to attract and retain talented employeeslosses or damages we incur could have a material adverse effect on the Company’sour business.

A decline in equity and/ Although we seek to minimize these risks through security measures, controls, back-up data centers and emergency planning, there can be no assurance that such efforts will be successful or fixed income returns may impact the buying power of investment management clients

Approximately 82.6% of the Company’s annual subscription value is derived from its investment management clients. The prosperity of these clients is tied to equity assets under management. An equity market decline not only depresses assets under management but could cause a significant increase in redemption requests. Moreover, extended declines in the equity markets may reduce new fund or client creation, resulting in lower demand for services from investment managers.

Uncertainty, consolidation and business failures in the global investment banking industry may cause FactSet to lose clients and users

FactSet’s sell-side clients that perform M&A advisory work, capital markets services and equity research, account for approximately 17.4% of its revenues. A significant portion of these revenues relate to services deployed by the largest banks. While improvements have been observed in the current fiscal year, the global investment banking industry continues to experience uncertainty and consolidation, which directly impacts the number of prospective clients and users within the sector. A lack of available credit would impact many of the large banking clients due to the amount of leverage deployed in past operations. A lack of confidence in the global banking system could cause declines in merger and acquisitions funded by debt. Uncertainty, consolidation and business failures in the global investment banking sector could adversely affect the Company’s financial results and future growth.effective.

A dramatic shift from active to passive investing could negatively impact user count growth

The predominant investment strategy today is active investing, which attempts to outperform the market. The goal of active management is to beat a particular benchmark. The majority of mutual funds are actively managed. Analyzing market trends, the economy and the company-specific factor, active managers are constantly searching out information and gathering insights to help them make their investment decisions. Passive management, or indexing, is an investment management approach based on investing in exactly the same securities, and in the same proportions, as an index such Dow Jones Industrial Average or the S&P 500. It is called passive because portfolio managers don't make decisions about which securities to buy and sell; the managers merely follow the same methodology of constructing a portfolio as the index uses. The main advantage of active management is the possibility that the managers will be able to outperform the index due to their superior skills. They can make informed investment decisions based on their experiences, insights, knowledge and ability to identify opportunities that can translate into superior performance. The main advantage of passive investing is that it closely matches the performance of the index. Passive investing requires little decision-making by the manager. The manager tries to duplicate the chosen index, tracking it as efficiently as possible. This results in lower operating costs that are passed on to the investor in the form of lower fees. Approximately 82.6% of the Company’s annual subscription value is derived from its investment management clients. The prosperity of these clients is tied to equity assets under management. In the past decade, passively managed index funds have seen greater investor interest, and this trend has become more dramatic in recent years. A continued lessening of investor interest in actively managed equity funds could decrease demand for FactSet’s products and services.

Competition in FactSet’sour industry may cause price reductions or loss of market share

FactSet continuesWe continue to experience intense competition across all markets for itsour products with competitors ranging in size from smaller, highly specialized, single-product businesses to multi-billion dollarmulti-billion-dollar companies. While the Company believeswe believe the breadth and depth of itsour suite of products and applications offer benefits to itsour clients that are a competitive advantage, itsour competitors may offer price incentives to attract new business. Future competitive pricing pressures may result in decreased sales volumes and price reductions, resulting in lower revenues. Weak economic conditions may also result in clients seeking to utilize lower-cost information that is available from alternative sources. The impact of cost-cutting pressures across the industries FactSet serveswe serve could lower demand for its services. In recent years, FactSet has seen clients intensify their focus on containing or reducing costs as a result of the more challenging market conditions.our products. Clients within the financial services industry that strive to reduce their operating costs may seek to reduce their spending on financial market data and related services.services, such as ours. If our clients elect to reduce their spending with FactSet, the Company’s results of operations could be materially adversely affected. Clients may use other strategies to reduce their overall spending on financial market data services by consolidatingconsolidate their spending with fewer vendors,suppliers, by selecting vendorssuppliers with lower-cost offerings or by self-sourcing their needs for financial market data. If clients elect to consolidate their spending on financial market data, services with other vendors and not FactSet, the Company’s results of operationsour business could be adverselynegatively affected.

The continued shift from active to passive investing could negatively impact user count growth and revenues

The predominant investment strategy today is still active investing, which attempts to outperform the market. The main advantage of active management is the expectation that the investment managers will be able to outperform market indices. They make informed investment decisions based on their experiences, insights, knowledge and ability to identify opportunities that can translate into superior performance. The main advantage of passive investing is that it closely matches the performance of market indices. Passive investing requires little decision-making by investment managers and low operating costs which result in lower fees for the investor. While the majority of assets under management are still actively managed, outflows to passively managed index funds have increased in recent years. A continued shift to passive investing could reduce demand for the services of active investment managers and consequently, the demand of our clients for our services.

A decline in equity and/or fixed income returns may impact the buying power of investment management clients

Approximately 83.9% of our ASV is derived from our investment management clients. The profitability and management fees of these clients are tied to assets under management. An equity market decline not only depresses the value of assets under management but could cause a significant increase in redemption requests from our clients’ customers, further reducing their assets under management. Reduced client profits and management fees may cause our clients to cut costs. Moreover, extended declines in the equity and fixed income markets may reduce new fund or client creation. Each of these developments may result in lower demand for our services and workstations from investment managers that could affect our business.

Failure to develop and market new products and enhancements that maintain reputation

FactSet enjoys a positive reputationour technological and competitive position and failure to anticipate and respond to changes in the marketplace. FactSet’s ability to attract and retain customers is affected by external perceptions of its brand and reputation. Reputational damage from negative perceptions or publicity could affect FactSet’s ability to attract and retain clients and employees and its ability to price itsmarketplace for our products at their full value. Although the Company monitors developments for areas of potential risk to its reputation and brand, negative perceptions or publicity could have a material adverse effect on FactSet’s business and financial results.

Increased accessibility to free or relatively inexpensive information sources may reduce demand for FactSet

Each year, an increasing amount of free or relatively inexpensive information becomes available, particularly through the Internet, and this trend may continue. The availability of free or relatively inexpensive information may reduce demand for FactSet’s products. While the Company believes its service offering is distinguished by such factors as customization, timeliness, accuracy, ease-of-use, completeness and other added value factors, if users choose to obtain the information they need from public or other sources, FactSet’s business, financial condition, and results of operations could be adversely affected.

FactSet’s international operations involve special risks

In 2016, approximately 33% of FactSet’s revenue related to operations located outside of the U.S. In addition, a significant number of its employees, 71%, are located in offices outside of the U.S. The Company expects to continue its international growth, with international revenue accounting for an increased portion of total revenue in the future. The Company’s international operations involve risks that differ from or are in addition to those faced by its U.S. operations. These risks include difficulties in developing products, services and technology tailored to the needs of clients around the world, including in emerging markets; different employment laws and rules and related social and cultural factors; different regulatory and compliance requirements, including in the areas of privacy and data protection, anti-bribery and anti-corruption, trade sanctions, marketing and sales and other barriers to conducting business; cultural and language differences; diverse or less stable political, operating and economic environments and market fluctuations; civil disturbances or other catastrophic events that reduce business activity; limited recognition of FactSet’s brand; differing accounting principles and standards; restrictions on or adverse tax consequences from entity management efforts; and unexpected changes in U.S. or foreign tax laws. If the Company is not able to efficiently adapt to or effectively manage the business in markets outside of the U.S., its business prospects and operating results could be materially and adversely affected. In particular, political tension has been increasing in Manila, the Philippines, due to comments and the behavior over the last few months of Rodrigo Duterte, President of the Philippines. Increasing civil unrest in Manila may make it difficult or impossible for FactSet to continue its operations there. Although FactSet has tested business continuity plans in place for its operations there, an extended period of civil unrest that halts or significantly impedes operations could have a material adverse effect on the Company.

Exposure to fluctuations in currency exchange rates that could negatively impact financial results and cash flows

The Company faces exposuremarket for our products is characterized by rapid technological change, including methods and speed of delivery, changes in client demands, development of new investment instruments and evolving industry standards, which can render our existing products less competitive, obsolete or unmarketable. As a result, our future success will continue to adverse movements in foreign currency exchange rates as 71%depend upon our ability to identify and develop new products and enhancements that address the future needs of FactSet’s employeesour target markets and 48% of its leased office space were located outside the U.S at August 31, 2016. These exposures may change over timeto respond to their changing standards and they could have a material adverse impact on the Company’s financial results and cash flows. The Company’s primary exposures relate to expenses denominated in British Pound Sterling, Euro, Indian Rupee, Japanese Yen and Philippine Peso. This exposure has increased over the past 12 months primarily as the Company’s international employee base has risen 17% since August 31, 2015. FactSet’s non-U.S. dollar denominated revenues expected to be recognized over the next 12 months are estimated to be $20.0 million, while its non-U.S. dollar denominated expenses are estimated to be $213.3 million, resulting in a net foreign currency exposure of $193.3 million. Although FactSet believes that its foreign exchange hedging policies are reasonable and prudent under the circumstances, the Company’s attempt to hedge against these riskspractices. We may not be successful whichin developing, introducing, marketing, licensing and implementing new products and enhancements on a timely and cost-effective basis or without impacting the stability and efficiency of existing products and customer systems. Further, any new products and enhancements may not adequately meet the requirements of the marketplace or achieve market acceptance. Our failure or inability to anticipate and respond to changes in the marketplace, including competitor and supplier developments, may also adversely affect our business, operations and growth.

Uncertainty, consolidation and business failures in the global investment banking industry may cause us to lose clients and users

Our investment banking clients that perform Mergers and Acquisitions (“M&A”) advisory work, capital markets services and equity research, account for approximately 16.1% of our ASV. A significant portion of these revenues relate to services deployed by the largest banks. Consolidation or contraction in this industry directly impacts the number of prospective clients and users within the sector. Thus, economic uncertainty for our global investment banking clients, consolidation and business failures in this sector could cause an adverse impact on itsadversely affect our financial results of operations.and future growth.

Volatility in the financial markets may delay the spending pattern of clients and reduce future ASV growth

Sales cycles for FactSet may fluctuate and be extended in times where the financial markets are volatile. The decision on the part of large institutional clients to purchase the FactSet serviceour services often requires management-level sponsorship whichand typically depends upon the size of the client, with larger clients having more complex and time-consuming purchasing processes. The process is also influenced by market volatility. These characteristics often leads FactSetlead us to engage in relatively lengthy sales efforts. Purchases (and incremental ASV) may therefore be delayed as uncertainties in the financial markets may cause clients to remain cautious about capital and data content expenditures, particularly in uncertain economic environments.

Additional cost due to tax assessments resulting from ongoing and future audits by tax authorities as well as changes in tax laws

In the ordinary course of business, we are subject to tax examinations by various governmental tax authorities. The cycle associated withglobal and diverse nature of our business means that there could be additional examinations by governmental tax authorities and the purchaseresolution of ongoing and other probable audits which could impose a future risk to the Company’s service offerings typically dependsresults of our business. In the third quarter of fiscal 2018, we received a letter from the Massachusetts Department of Revenue relating to prior tax periods. The letter requested additional information in order to determine if we should have collected sales and use taxes on our sales to Massachusetts-based clients. Based upon a preliminary review of their request, it is possible that the sizeState may assess sales and use taxes, underpayment penalties and interest, on previously recorded sales transactions. We have not recorded a liability as of August 31, 2018. While we believe that we will ultimately prevail, if we are required to pay an assessment, the client.amount could have a material impact on our consolidated financial position, cash flows and results of operations.

Changes in tax laws or the terms of tax treaties, in a jurisdiction where we are subject to tax could increase our taxes payable. On December 22, 2017, the Tax Cuts and Jobs Act, (the "Act") was signed into law. The Act enacts broad changes to the existing U.S. Internal Revenue code, including reducing the federal corporate income tax rate from 35% to 21%, amongst many other complex provisions. The ultimate impact of such tax reform may differ from our current estimate due to changes in interpretations and assumptions made by us as well as the issuance of further regulations or guidance.

Failure to Identify, Integrate,identify, integrate, or Realize Anticipated Benefitsrealize anticipated benefits of Acquisitionsacquisitions and strains on resources as a result of growth

FactSet may be unable to successfully identify acquisitions or may experience integration or other risks resulting from its acquisitions, leading to an adverse effect on its financial results. As the Company continues to pursue selective acquisitions to support its business and growth strategy, it seeks to be a disciplined acquirer. There can be no assurance that itwe will be able to identify suitable candidates for successful acquisition at acceptable prices. In addition, the Company’sAdditionally, there may be integration risks or other risks resulting from acquired businesses. As we continue to pursue selective acquisitions to support our business strategy, we seek to be a disciplined acquirer. Our ability to achieve the expected returns and synergies from past and future acquisitions and alliances depends in part upon itsour ability to effectively integrate the offerings, technology, sales, administrative functions and personnel of these businesses effectively into FactSet’sour core business. The CompanyWe cannot assure itsguarantee that our acquired businesses will perform at the levels anticipated. In addition, past and future acquisitions may subject the Companyus to unanticipated risks or liabilities or disrupt operations.

A prolongedGrowth, such as the addition of new clients and acquisitions, puts demands on our resources, including our internal systems and infrastructure. These may require improvements or recurring outage at FactSet’s data centersreplacement to meet the additional demands of a larger organization. Further, the addition of new clients and the implementation of such improvements would require additional management time and resources. These needs may result in increased costs that could negatively impact results of operations. Failure to implement needed improvements, such as improved scalability, could result in reduced servicea deterioration in the performance of our internal systems and negatively impact the lossperformance of clientsour business.

FactSet’s clients rely on the Company for the delivery of time-sensitive, up-to-date data. FactSet’s business is dependent on its abilityFailure to process substantial volumes of data and transactions rapidly and efficiently on its computer-based networks and systems. The Company’s computer operations and those of its suppliers and clients are vulnerable to interruption by fire, natural disaster, power loss, telecommunications failures, terrorist attacks, acts of war, internet failures, computer viruses and other events beyond the Company’s reasonable control. FactSet maintains back-up facilities for each of its major data centers to minimize the risk that any such event will disrupt operations. However, a loss of the Company’s services may induce its clients to seek alternative data suppliers. Any such lossesenter into or damages incurred by FactSet could have a material adverse effect on its business. Although the Company seeks to minimize these risks through security measures, controls and back-up data centers, there can be no assurance that such efforts will be successful or effective.

The negotiation of contract terms supportingrenew contracts supplying new and existing data sets or products on competitive terms

FactSet aggregates third partyWe collect and aggregate third-party content from more than 220thousands of data suppliers, 115 news sources, exchanges, brokers and 85 exchanges.contributors into our own dedicated online service, which clients access to perform their analyses. Clients have access to the data and content found within the FactSetour databases. These databases are important to the Company’sour operations as they provide clients with key information. FactSet hasWe have entered into third partythird-party content agreements with varying lengths, which in some cases can be terminated on one year’s notice at predefined dates, and in other cases on shorter notice. FactSet seeksSome of our content provider agreements are with competitors, who may attempt to make renewals difficult or expensive. We seek to maintain favorable contractual relationships with itsour data suppliers. The Company makes every effort,suppliers, including those that are also competitors. We also make efforts, when reasonable, to locate alternative sources to ensure FactSet iswe are not dependent on any one third partythird-party data supplier. FactSet believes it isWe believe we are not dependent on any one third partysignificant third-party data supplier. TheOur failure of FactSet to be able to maintain these relationships or the failure of itsour suppliers to deliver accurate data andor in a timely manner could adversely affect our business.

Inability to hire and retain key qualified personnel

Our business is based on successfully attracting, motivating and retaining talented employees. Competition for talent, especially engineering personnel, is strong. We need technical resources such as engineers to help develop new products and enhance existing services. We rely upon sales personnel to sell our products and services and maintain healthy business relationships. If we are unsuccessful in our recruiting efforts, or if we are unable to retain key employees, our ability to develop and deliver successful products and services may be adversely affected and could have a material, adverse effect on our business.

Increased accessibility to free or relatively inexpensive information sources may reduce demand for our products

Each year, an increasing amount of free or relatively inexpensive information becomes available, particularly through the Company’s business.Internet, and this trend may continue. The availability of free or relatively inexpensive information may reduce demand for our products. While we believe our service offering is distinguished by such factors as customization, timeliness, accuracy, ease-of-use, completeness and other value-added factors, if users choose to obtain the information they need from public or other sources, then our business and results of operations could be adversely affected.

Third parties may claim FactSet infringeswe infringe upon their intellectual property rights or may infringe upon our intellectual property rights

FactSetWe may receive notice from others claiming that the Company haswe have infringed upon their intellectual property rights. Responding to these claims may require the Companyus to enter into royalty and licensing agreements on less favorable terms, incur litigation costs, enter into settlements, stop selling or redesign affected products, pay damages orand satisfy indemnification commitments with the Company’sour clients or vendorssuppliers under contractual provisions of various license arrangements. Additionally, third parties may copy, infringe or otherwise profit from unauthorized use of our intellectually property rights requiring us to litigate to protect our rights. Certain countries may not offer adequate protection of proprietary rights. If FactSet iswe are required to enter into such agreementsdefend ourselves or assert our rights or take such actions itsmentioned, our operating margins may decline as a result. FactSet has madeWe have incurred, and expectsexpect to continue incurringto incur, expenditures to acquire the use of technology and intellectual property rights as part of itsour strategy to manage this risk.

ChangesOperations outside the U.S. involve additional requirements and burdens that we may not be able to control or manage successfully

In fiscal 2018, approximately 38% of our revenues related to operations located outside the U.S. In addition, a significant number of our employees, approximately 74%, are located in securitiesoffices outside the U.S. We expect our growth to continue outside the U.S., with non-U.S. revenues accounting for an increased portion of total revenues in the future. Our non-U.S. operations involve risks that differ from or are in addition to those faced by our U.S. operations. These risks include: difficulties in developing products, services and technology tailored to the needs of non-U.S. clients, including in emerging markets; different employment laws and regulationsrules; rising labor costs in low-wage countries; difficulties in staffing and managing personnel that are located outside the U.S.; different regulatory, legal and compliance requirements, including in the areas of privacy and data protection, anti-bribery and anti-corruption, trade sanctions and currency controls, marketing and sales and other barriers to conducting business; social and cultural differences, such as languages; diverse or less stable political, operating and economic environments and market fluctuations; civil disturbances or other catastrophic events that reduce business activity; limited recognition of our brand and intellectual property protection; differing accounting principles and standards; restrictions on or adverse tax consequences from entity management efforts; and changes in U.S. or foreign tax laws. If we are not able to adapt efficiently to or manage the business effectively in markets outside the U.S., our business prospects and operating results could be materially and adversely affected.

Exposure to fluctuations in currency exchange rates and the failure of hedging arrangements

Due to the global nature of our operations, we conduct business outside the U.S. in several currencies including the British Pound Sterling, Euro, Indian Rupee, Japanese Yen, and Philippine Peso. To the extent that our international activities increase in the future, our exposure to fluctuations in currency exchange rates may increase expenses oras well. To manage this exposure, we utilize derivative instruments (such as foreign currency forward contracts). By their nature, all derivative instruments involve elements of market and credit risk. The market risk associated with these instruments resulting from currency exchange movements is expected to offset the market risk of the underlying transactions, assets and liabilities being hedged. Credit risk is managed through the continuous monitoring of exposure to the counterparties associated with these instruments. Our primary objective in holding derivatives is to reduce the volatility of earnings with changes in foreign currency. Although we believe that our foreign exchange hedging policies are reasonable and prudent under the circumstances, our attempt to hedge against these risks may harm demandnot be successful, which could cause an adverse impact on our results of operations.

Legislative and regulatory changes in the environments in which we and our clients operate

Many of FactSet’sour clients operate within a highly regulated environment. In light of the recent conditions in theenvironment and must comply with governmental legislation and regulations. The U.S. financial markets and economy, the U.S. Congress and Federal regulators have increased their focus on the regulation of the financial services industry. The information provided by,Increased regulation of our clients may increase their expenses, causing them to seek to limit or resident in, the service FactSet provides to itsreduce their costs from outside services such as ours. Additionally, if our clients could be deemed relevant to a regulatory investigation or other governmental or private legal proceeding involving its clients, which could result in requests for information from FactSet that could be expensive and time consuming. In addition, clients subjectare subjected to investigations or legal proceedings they may be adversely impacted, possibly leading to their liquidation, bankruptcy, receivership, reductionsreduction in assets under management, or diminished operations, thatwhich would adversely affect our revenues. In the Company’s revenues.European Union, the new version of the Markets in Financial Instruments Directive, also known as “MiFID II” became effective in January 2018. We believe that compliance with MiFID II requirements is time-consuming and costly for the investment managers who are subject to it and will cause clients to adapt their pricing models and business practices significantly. These increased costs may impact our clients’ spending and may cause some investment managers to lose business or withdraw from the market, which may adversely affect demand for our services. However, MiFID II may also present us with new business opportunities for new service offerings. In addition to the MiFID II requirements, we further believe the proposed withdrawal of the U.K. from the European Union (also known as Brexit) on terms still being negotiated, has created economic uncertainty among our client base. This uncertainty may have an impact on our clients’ expansion or spending plans, which may in turn negatively impact our revenues or growth.

As a business, we are also subject to numerous laws and regulations in the U.S. and in the other countries in which we operate. These laws, rules, and regulations, and their interpretations, may change in the future, and compliance with these changes may increase our costs or cause us to make changes in or otherwise limit our business practices. In addition, the global nature and scope of our business operations make it more difficult to monitor areas that may be subject to regulatory and compliance risk. If we fail to comply with any applicable law, rule, or regulation, we could be subject to claims and fines and suffer reputational damage.

Adverse resolution of litigation or governmental investigations may harm FactSet’s operating results

FactSet isWe are party to lawsuits in the normal course of business. Litigation and governmental investigations can be expensive, lengthy and disruptive to normal business operations. Moreover, the results of complex legal proceedings are difficult to predict. Unfavorable resolution of lawsuits could have a material adverse effect on the Company’sour business, operating results or financial condition. For additional information regarding legal matters, see Item 3,Legal Proceedings,, contained in Part I of this report.Report on Form 10-K.

Failure to maintain reputation

We enjoy a positive reputation in the marketplace. Our ability to attract and retain clients and employees is affected by external perceptions of our brand and reputation. Reputational damage from negative perceptions or publicity could affect our ability to attract and retain clients and employees and our ability to maintain our pricing for our products. Although we monitor developments for areas of potential risk to our reputation and brand, negative perceptions or publicity could have a material adverse effect on our business and financial results.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

AtAs of August 31, 2016, the Company2018, we leased approximately 202,000 square feet of office space at itsour headquarters in Norwalk, Connecticut. On February 14, 2018, we entered into a new lease agreement to relocate our corporate headquarters to 45 Glover Avenue in Norwalk, Connecticut. The new location will comprise approximately 173,000 square feet of office space. We expect to take possession of the newly leased property on or around January 1, 2019, for fit-out purposes. We will continue to occupy our existing headquarters space until the new headquarters is ready for occupancy, currently estimated to be in the second quarter of fiscal 2020.

Including new lease agreements executed during fiscal 2016, the2018, our Company’s worldwide leased office space increased to approximately 1,072,0001,750,000 square feet atas of August 31, 2016,2018, up 163,000607,000 square feet, or 18%53.1%, from August 31, 2015,2017 and includes properties at the following locations:

The leases expire on various dates through 2031. Additionally, the Company has

We have data content collection centersoffices located in Hyderabad, India and Manila, the Philippines, which benefit all of the Company’sour operating segments. Additionally, we have data centers that support our technological infrastructure located in Manchester, New Hampshire, Piscataway, New Jersey and Reston, Virginia. The Company believesother locations listed in the table above are leased office space. The leases expire on various dates through 2031. We believe the amount of leased office space as of August 31, 20162018 is adequate for itsour current needs and that additional space is available for lease to meet any future needs.

ITEM 3. LEGAL PROCEEDINGS

From time to time, FactSetthe Company is subject to legal proceedings, claims and litigation arising in the ordinary course of business, including intellectual property litigation. Based on currently available information, FactSet’sthe Company’s management does not believe that the ultimate outcome of these unresolved matters against the Company,FactSet, individually or in the aggregate, is likely to have a material adverse effect on the Company's consolidated financial position, its annual results of operations or its annual cash flows. However, these matters are subject to inherent uncertainties and management’s view of these matters may change in the future.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

Part II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information - FactSet– Our common stock is listed on the New York Stock Exchange (“NYSE”) and the NASDAQ Stock Market under the symbol FDS. The following table sets forth, for each fiscal period indicated, the high and low sales prices per share of the Company’sour common stock as reported on the NYSE:

Holders of Record– As of October 25, 2016, there were24, 2018, we had approximately 142,883177,777 holders of record of FactSetour common stock. However, because many of FactSet’sour shares of common stock are held by brokers and other institutions on behalf of stockholders, FactSet iswe are unable to estimate the total number of stockholders represented by these record holders. The closing price of FactSet’sour common stock on October 25, 2016,24, 2018, was $153.04$215.30 per share as reported on the NYSE.

Dividends - InDuring fiscal 2016, the Company’syears 2018 and 2017, our Board of Directors declared the following dividends: dividends on our common stock:

All of the above cash dividends were paid from existing cash resources.resources on a quarterly basis. Future dividend payments will depend on the Company’sour earnings, capital requirements, financial condition and other factors considered relevant by FactSet,us, and is subject to final determination by the Company’sour Board of Directors.

There were no sales of unregistered equity securities induring fiscal 2016.2018.

The following table provides a month-to-month summary of the share repurchase activity under the current stock repurchase program during the three months ended August 31, 20162018 (in thousands, except per share data):

Securities Authorized for Issuance underunder Equity Compensation Plans–Information regarding securities authorized for issuance under equity compensation plans is incorporated by reference from the Company’s Proxy Statement filedsee Part III of this Report on October 31, 2016, for its 2016 Annual Meeting of Stockholders.Form 10-K

Stock Performance GraphPerformance Graph

The annual changes for the five-year period shown in the graph below are based on the assumption that $100 had been invested in FactSetour common stock, the Standard & Poor’s 500 Index, the NYSE Composite Index and the Dow Jones U.S. Financial Services Index on August 31, 2011, and that all quarterly dividends were reinvested at the average of the closing stock prices at the beginning and end of the quarter.2013. The total cumulative dollar returns shown on the graph represent the value that such investments would have had on August 31, 2016.2018. Stockholder returns over the indicated period are based on historical data and should not be considered indicative of future stockholder returns.

The information contained in the above graph shall not beenbe deemed to be soliciting material or filed or incorporated by reference in future filings with the SEC, or subject to the liabilities of Section 18 of the Securities Exchange Act of 1934, except to the extent that FactSet specificallyincorporates it by reference into a document filedfiled under the Securities Act of 1933 or the Securities Exchange Act of 1934.

ITEM 6. SELECTED FINANCIAL DATA

The following selected financial data has been derived from FactSet’sour consolidated financial statements. This financial data should be read in conjunction with Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations and Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K.

Consolidated Statements of Income Data

Consolidated Balance Sheet Data

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is designed to provide a reader of our financial statements with a narrative from the perspective of our management on our financial condition, results of operations, liquidity and certain other factors that may affect our future results. Our MD&A is presented in the following sections:

The MD&A should be read in conjunction with the Consolidated Financial Statements and related Notes included in Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K.

Executive Overview

FactSet isWe are a leadingglobal provider of integrated financial information, and big data analytical applications toand industry-leading service for the global investment community. We deliver insight and information to investment professionals through our analytics, service, content, and technology. By integrating comprehensive datasets and analytics across asset classes with client data, we support the workflow of both buy-side and sell-side clients. These professionals include portfolio managers, wealth managers, research and performance analysts, risk managers, sell-side equityinvestment research professionals, investment bankers, risk and fixed income professionals.performance analysts, and wealth advisors. From streaming real-time data to historical information, including quotes, estimates, news and commentary, FactSet offers uniquewe offer proprietary and third-party content through desktop, wireless,web, mobile and off-platform solutions. Our widebroad application suite offers tools and resources including company and industry analyses, full screening tools, portfolio analysis, risk profiles, alpha-testing, portfolio optimization and research management solutions. Recent additionsWith recent acquisitions, we have continued to expand our offering include a complete services solution focused on verifying, cleaningsolutions across the investment lifecycle from idea generation to performance and loading portfolio data across asset classes, and an execution management system through our acquisition of Portware.client reporting. Our revenues are derived from subscriptions to products and services such as workstations, analytics, enterprise data, and content, research management, and trade execution. Investment management (buy-side) clients account for 82.6% of our annual subscription value and the remainder is derived from investment banking firms (sell-side) that perform mergers and acquisitions (“M&A”) advisory work, capital markets services and equity research.

20162018 Year in Review

Fiscal 2016 results continued2018 revenue growth can be attributed to achievements in the delivery, integration and consumption of our positive topline growth. Revenue was up 12.0% whilefinancial data and analytical applications by the global investment community. As of August 31, 2018, annual subscription value (“ASV”) increased 8.8% organically. This fiscal year marked our 38^th year of operation, our 36^thconsecutive year of revenue growth and our 20^th consecutive year of earnings growth as a public company. The pressures our clients have experienced in the past 12 months have not abated and we have dedicated ourselves to helping them navigate an uncertain environment. As of August 31, 2016, ASV totaled $1.15$1.39 billion, an increase of $92.0 million5.8% over the prior year.year and 5.7% organically. Revenues increased 10.6% year over year, of which, 5.6% of the increase can be attributed to organic revenue growth. In addition, clients and users reached new highs of 3,0925,142 and 65,655,91,897, respectively, in fiscal 2016.2018. We returned $431.0$393.4 million to stockholders in the form of share repurchases and dividends an increaseduring the fiscal year.

We continued to diversity our suite of 33.5% oversolutions through the prior year. This included $120.0 million relatingintegration of our acquisitions and new product investments. We enhanced our Multi-Asset Class (“MAC”) risk models, leading to an accelerated share repurchase agreementseveral global client wins and strengthening our position in the analytics market. We expanded our Content and Technology Solutions (“ASR Agreement”CTS”) which we entered intoworkflow and launched Open:FactSet Marketplace, a new platform to address the demand for integrating both financial and alternative data. We recently added Data Exploration, a platform for financial professionals to evaluate quickly alternative and financial datasets and build investment applications in July 2016.a fully hosted environment.

In 2016, we sought to strengthen and expand our core business model. Our strategic acquisition of Portware in October 2015 has provided a new stream of revenue and growth. Portware revenues have grown in double-digits sinceFactSet released its first annual Corporate Social Responsibility Report (“CSR”), highlighting the acquisition and Portware is now break-even on an earnings per share basis. Additionally, we sold our Market Metrics business in July 2016 and recognized an after-tax gain of $81.7 million in the fourth quarter of fiscal 2016. The sale allowed us to sharpen our focus on our long-term growth drivers and our mission to deliver world-class insight and information through our analytics, service, content and technology.

Our investment in product, coupled with the acquisition of Portware, now allows us to address an increasingly greater percentage of our clients’ enterprise workflow. Our robust Portfolio Analytics solutions have been the cornerstone of our growth in the middle office. With a growing interest in passive investment instruments, such as exchange-traded funds (“ETFs”), our effort to build out our ETF content and analytics product suite has made significant strides in fiscal 2016. We now have 29 ETFs in the marketplace based upon FactSet content and over 40 benchmarks. The first FactSet branded ETF, the SPDR FactSet Innovative Technology ETF, launched in January 2016.

As a testamentCompany’s commitments to our broadening suite of premium productsclients, employees, stockholders, and communities. The report covered the strength offiscal year ending August 31, 2017, highlighting our businessrecent achievements and service model FactSet was awarded “Best Overall Provider,” "Best Research Provider" and "Best Analytics Provider" by Inside Market Data in May 2016,. We were also named the “Best Data Analytics Provider” by Waters Technology in July 2016. Other recognition included “Best Research and Analytics Tool” awardsetting a trajectory for our wealth management tools at the annual Systems in the City Awards. Portware also earned “Best Buy-side EMS” for the third time and was included on Global Finance’s first annual list of forex leaders, "The Innovators 2015 – Foreign Exchange."future CSR goals.

Client Service / Consultants

A client-centric approach has always been a key foundation of our success at FactSet. We support our powerful information and analytical applications with a team of financial data and modeling experts. Client satisfaction is a key metric by which we measure the success of our service. According to our fiscal 2016 global client satisfaction survey, 96%greater than 95% of respondents were satisfied or very satisfied with FactSet’s support, consistent with the prior year.support. The depth of our knowledge, the data behind the models and the complex mathematics behindsubstantiating the answers each create an opportunity for us to forge close working relationships with our user community.

Our reward for investingindustry-leading customer care is largely due to the talent of our employee population. As of August 31, 2018, employee headcount was 9,571, up 5.5% from a year ago. This increase in a consulting group comprised of several hundred individuals isheadcount was primarily in client-focused positions with dedication to client loyalty, as evidenced by an annualsupporting our recent global client retention rate of greater than 95% of ASV as of August 31, 2016.2018. Our consulting teams have been trained to listen to our clients’ needs and transfer this knowledge directly to the product development teams, helping us transform suggestions into new or enhanced product offerings. In fiscal 2016, FactSet employees made over 45,000 client consulting visits, over 182,000 consulting calls and handled over 282,000 client questions. In addition, our new support desk in Manila, the Philippines handled over 5,000 client emails.

Educating our clients is also an important component of our service. Not only do we teach our users the nuances of our software and content offerings, but also FactSet personnel are often thought-leaders in a particular area of financial modeling in our rapidly evolving industry. As a result, clients look to FactSet as a trusted partner to stay on the cutting edgeforefront of financial modeling and analysis. During fiscal 2016, over 1,600 clients attended live or online FactSet training sessions and we saw a 7% increase in online learning registration.

Our industry-leading customer care is largely due to the talent of our employee population. As of August 31, 2016, employee headcount was 8,375, up 13.8% from a year ago. Excluding the acquired Portware workforce and employees of the divested Market Metrics business, headcount increased 13.4% from a year ago. The increases were primarily in positions that differentiate us in the market – software engineering, client service and content. In order to optimize costs, we have invested in expanding our footprint and talent pool in India and the Philippines, where we now have a combined workforce of over 4,800. Additionally, in fiscal 2016, we opened offices in Melbourne, Australia and Los Angeles, California.

Of our total employees, 2,407 were located in the U.S., 849 in Europe and 5,119 in Asia Pacific. Approximately 55% of our employees were involved with content collection, 24% worked in product development, software and systems engineering, another 18% conducted sales and consulting services and the remaining 3% provided administrative support. We are proud to have received the following accolades during fiscal 2016:

Key Metrics

The following is a review of our key metrics:

Annual Subscription Value Growth

Annual subscription valueASV at any given point in time represents the forward-looking revenues for the next twelve months from all subscription services currently being supplied to clients.clients, and excludes professional services fees billed in the last twelve months, which are not subscription-based. With proper notice to us, our clients are able tocan add to, delete portions of, or terminate service at any time, subject to certain contractual limitations. As of August 31, 2018, our ASV totaled $1.15$1.39 billion, at August 31, 2016, up 8.8%5.7% organically over the prior year. Organic ASV excludes ASV from acquisitions and dispositions completed within the pastlast 12 months and the effects of foreign currency. The increase in ASV was driven by growth in our geographic segments and achievements across each of our workflow solutions which include Research, Analytics, CTS, and Wealth. Additionally, we have leveraged relationships with existing clients to increase year over year sales through cross-selling and upselling of our diversified product suite.

Buy-side and sell-side ASV growth rates for the last 12 months were 5.4% and 7.3% respectively. Buy-side clients account for 83.9% of ASV, while the remainder is derived from sell-side firms that perform mergers and acquisitions advisory work, capital markets services and equity research.

As of August 31, 2018, ASV from our U.S. operations was $754.4$868.7 million, for the fourth quarteran increase of 2016, up 8.3% organically from a year ago. International ASV totaled $395.5 million, up 10.7%5.3% organically from a year ago. ASV from our international operations represented 34.4%was $524.4 million, an increase of our Company-wide total, its highest level6.3% organically from a year ago. The growth in FactSet history. Our European organic ASV achieved a growth rate of 8.7% over the last 12 months while Asia Pacific organic ASV grew by 17.0%. We have seen notable wins in both the sovereign wealthU.S. operations and investment management spaceinternational operations was driven primarily by higher sales across all workflow solutions and growth globally, withnew business additions across the addition of new clients in all three segments.

Overall, ASV growth for our buy-side business was 9.0%, down 40 basis points from the prior year period while our sell-side business experienced 7.6% growth, down 180 basis points from the prior year period. The decreaseoperations, primarily in the buy and sell-side growth rates can be attributed to an increase in market-related cancellations.U.S segment.

Client and User Additions

As of August 31, 2016, there were 65,655 professionals using FactSet, an increase of 3,450 users in fiscal 2016. During fiscal 2016, we added 116 net new clients, increasing the number of clients by 3.9% over the prior year. Our total client count was 3,0925,142 as of August 31, 2016. This2018, representing a net number reflects a reductionincrease of 41398 clients duein the last twelve months. In the second quarter of fiscal 2017, we changed our client count definition to capture clients with ASV greater than $10,000 versus the saleprevious metric of clients with ASV greater than $24,000. The prior year client count was restated to reflect this change for comparison purposes. Client count has increased by 398 or 8.4% in the last twelve months primarily from wealth managers, corporate firms and institutional asset managers. These firm types contributed to over 60% of the Market Metrics business.net user additions during the fiscal 2018 year. We continue to focus on expanding and cultivating relationships with our current client base as it is essential to our long-term growth strategy and encourages incremental sales growthassists in our upsell of workstations, applications and content at our existing clients.

As of August 31, 2018, there were 91,897 professionals using FactSet. In the second quarter of fiscal 2017, FactSet changed its user count definition to include users from workstations previously not captured due to certain product bundling and users of the StreetAccount web product. The prior year user count was restated to reflect this change for comparison purposes. User count increased by 3,051 users in the past twelve months primarily driven by an increase in workstation sales.

Annual client retention as of August 31, 2016,2018, was greater than 95% of ASV and 94%91% when expressed as a percentage of clients, consistent with the prior year, and despite market-related cancellations which impacted our ASV growth rates.clients. Our successful client retention success, demonstratingdemonstrates that a majority of our clients maintain their subscriptions to FactSet year over year, highlightshighlighting the strength of our business model.strategy. As of August 31, 2016,2018, our largest individual client accounted for approximately 2% of total subscriptions, and annual subscriptions from our ten largest clients did not surpass 15% of total client subscriptions, consistent with August 31, 2015.subscriptions.

Returning Value to Stockholders

On May 6, 2016,August 10, 2018, our Board of Directors approved a 13.6% increase in the regular quarterly dividend beginning withof $0.64 per share. The cash dividend of $24.4 million was paid on September 18, 2018 to common stockholders of record at the dividend payment in June 2016 which was $0.50 per share, or $2.00 per share per annum. In fiscal 2016, weclose of business on August 31, 2018. We repurchased 1.5 million shares for $232.3$302.4 million during fiscal 2018 under theour existing share repurchase program compared to 1.7 million shares for $252.8 million under the existing share repurchase program during fiscal 2015.program.

Additionally, in July 2016, we entered into an ASR Agreement to repurchase $120.0 million of our common stock. We received 595,607 shares of common stock on July 5, 2016 which was approximately 80% of the total number of shares of common stock expected to be repurchased under the ASR Agreement. The final settlement of the ASR Agreement occurred in the first quarter of fiscal 2017, with FactSet receiving an additional 102,916 shares of its common stock. In conjunction with the ASR Agreement, in May 2016,On March 26, 2018, our Board of Directors, approved a $165.0$300.0 million expansion of the existing share repurchase program. Including thethis expansion, $197.0$241.7 million remainedis available for future share repurchases as of August 31, 2016. Combining our dividends and share repurchases, we returned $431.0 million to stockholders during fiscal 2016.2018.

Capital Expenditures

Capital expenditures were $47.7$33.5 million during fiscal 2016, up from $25.72018, compared to $36.9 million a year ago. Approximately $27.7Capital expenditures of $24.2 million or 58%,72% of our capital expenditures during fiscal 2018 related to the build outupgrades of office space including $15.1 million atexisting computer systems in Norwalk, additional server equipment for our data centers located in New York location, $3.9 million at our Chicago locationJersey and $1.4 million at our corporate headquarters in Norwalk.Virginia, as well as laptop computers and peripherals for new and existing employees. The remainder of our capital expenditures was primarily for purchasesthe build out of more servers foroffice space including $2.8 million at our existing data centers, additional laptop computersHong Kong location, $2.2 million at our India locations, and peripherals for new employees, upgrades to existing computer systems and improvements to$1.5 million at our telecommunication equipment.Netherlands location.

Results of Operations

For an understanding of the significant factors that influenced our performance during the past three fiscal years, the following discussion should be read in conjunction with the Consolidated Financial Statements and the Notes to Consolidated Financial Statements presented in this Annual Report on Form 10-K.

Revenues

Fiscal 20162018 compared to Fiscal 20152017

Revenues in fiscal 20162018 were $1,127.1 million, up 12.0%$1.35 billion, increasing 10.6% compared to fiscal 2015.2017. Our organic revenue growth driversrate for fiscal 2018 was 5.6% compared to the prior year period, with cancellations remaining relatively flat during fiscal 20162018. Organic revenues exclude the effects of acquisitions and dispositions completed in the last 12 months and foreign currency in all periods. The increase in revenues was throughout our geographical segments and workflow solutions. The U.S. segment revenue was up 7.4% compared to the prior year period, primarily driven by additional clients, expansion from within our existing client base and an annual price increase, while holding client cancellations steady. Our international operations also grew as demonstrated by our 17.3% growth in Europe and a 13.1% increase in Asia Pacific. In addition to revenue growth amongst the geographic segments, achievements were robust demand for ouralso made across each workflow solution which include Research, Analytics, CTS, and Wealth. The Research workflow growth was driven by additional users due to banking new hires. The growth in the Analytics workflow was primarily attributed to increased sales in the portfolio analytics, (“PA”) suite of products, including an expansionreporting, and risk platforms, coupled with the enhancement of our multi-asset class value addedrisk model offerings, which strengthened our position in the analytics market. The CTS workflow growth was driven by increased demand for our proprietary content data feeds while new business sales drove the Wealth workflow growth.

Fiscal 2017 compared to Fiscal 2016

Revenues in fiscal 2017 were $1.22 billion, up 8.3% compared to fiscal 2016. Our organic revenue growth rate for fiscal 2017 increased 6.9% compared to fiscal 2016. The increase in revenues was primarily driven by organic ASV growth, continued momentum for our multi-asset class analytic solutions, workstations, data feeds products acceleratedand the additions to our product offerings from our fiscal 2017 acquisitions. Offsetting these positive factors, we experienced cancellations due to firm consolidations and failures.

Revenues by Geographic Segment

Fiscal 2018 compared to Fiscal 2017

Revenue from our U.S. segment increased 7.4% to $841.9 million in fiscal 2018 compared to $784.1 million in fiscal 2017, due to organic ASV growth across our workflow solutions and strong performance executing new business sales. Cancellations remained relatively flat for fiscal 2018 showing signs of stability. Excluding the effects of acquisitions and dispositions, organic revenue in the U.S. was up 5.1% compared to fiscal 2017. Revenue from our U.S. operations accounted for 62.4% of our consolidated revenues during fiscal 2018, a decrease from 64.2% in fiscal 2017.

Revenue from our international operations increased 16.3% in fiscal 2018 compared to fiscal 2017, due to growth across our workflow solutions, partially offset by higher cancellations compared to the prior year.

European revenue increased 17.3% to $387.6 million in fiscal 2018 compared to $330.3 in fiscal 2017. Excluding the effects of acquisitions and dispositions completed in the last 12 months and foreign currency, European organic revenue grew 9.4% in fiscal 2018 compared to fiscal 2017. Foreign currency exchange rate fluctuations increased our European growth rate by 150 basis points.

Asia Pacific revenue increased 13.1% during fiscal 2018, compared with fiscal 2017. Excluding the effects of acquisitions and dispositions completed in the last 12 months and foreign currency, Asia Pacific organic revenue grew 12.9% during fiscal 2018 compared to fiscal 2017, with foreign currency exchange rate fluctuations remaining flat compared to prior year.

Fiscal 2017 compared to Fiscal 2016

Revenue from our U.S. segment increased 3.8% to $784.1 million in fiscal 2017 compared to $755.5 million in fiscal 2016. Our U.S. revenue growth reflected the performance from both our Analytics and CTS workflows, as well as revenue from acquisitions completed in fiscal 2017. Excluding the effects of acquisitions and dispositions completed in the last 12 months, organic revenue in the U.S. increased 6.2% compared to fiscal 2016. Revenue from our U.S. operations accounted for 64.2% of our consolidated revenues during fiscal 2017, a decrease from 67.0% in fiscal 2016 due to the acquisitions completed in fiscal 2017 which primarily increased international revenue.

European revenue increased 19.0% in fiscal 2017 compared to fiscal 2016 due to solid growth in both our Content & Technology Solutions (“CTS”), advancementCTS and Analytics workflows as well as, client price increases, and acquisitions completed in Workstation Solutions and significant progress in the Portware business,2017, partially offset by the impact of foreign currency.

Robust Demand for Analytics

We saw increased demand for total portfolio risk analytics resulting in increased traction for our fixed income and multi-asset class, performance and risk offerings. In fiscal 2016, we expanded our robust offering of analytics, models, stress testing and client reporting. Our Portfolio Services offering supports our clients in integrating, cleansing and building strong analytics on top of their data. This managed service is an example of how we have broadened our sources of revenue, while responding to client needs. Clients continue to find value in our ability to serve as a single solution for their analytics, risk and publishing needs, over a variety of asset classes, which enables them to analyze securities and portfolios based on a variety of asset classes.

Accelerated Growth in Content & Technology Solutions

Our CTS suite of products, which provides solutions for our clients outside our terminal business, was a significant growth driver during fiscal 2016. There is an increased awareness of our CTS capabilities and data solutions to power workflows for the front and middle office. Clients are developing internal solutions to provide more customization and to help them target their customers and users more directly. Firms are coming to FactSet to integrate unique content and analytics into their client portals, customer relationship management, performance systems, quant and regulatory workflows. We license in feed form, including Fundamentals, Estimates, Transcripts and Ownership, among other offerings. The CTS suite includes a growing number of standardized data feeds that complement and mirror the data in the FactSet workstation.

Advancement in Workstation Solutions

Our Workstation Solutions, including Research Management Solutions (“RMS”), StreetAccount, Wealth Management and Sales & Trading, continued to be positive revenue growth drivers during fiscal 2016. RMS, which is comprised of our Internal Research Notes (“IRN”) and Code Red products, provides a centralized database for collecting both internal and external research, as well as fast and efficient ways to store and retrieve notes and documents over a shared drive. Growth in our RMS suite was driven by the ongoing regulatory demand for transparency across an increasing number of workflows. Code Red, which we acquired in February 2015, has been a strong local solution supplement to our hosted IRN solution. In adding Code Red’s product offering to FactSet's existing RMS, we have been able to offer an RMS for all our clients' workflows.

Significant progress in Portware

Portware, acquired in October 2015, has maintained its strong track record of growth. We acquired Portware to expand our presence strategically in large global asset managers by becoming part of their trading ecosystem. Since the acquisition, Portware client volume has increased as have new client and broker connections. The integration of the Portware group into our organization has progressed smoothly. We continue to execute on the healthy pipeline of business from the close of the acquisition and have taken advantage of cross-selling the Portware solution to FactSet’s client base.

Impact of Foreign Currency

Slightly offsetting the revenue drivers disclosed above, foreign currency movements decreased revenues by $0.1 million, or less than 10 basis points, during fiscal 2016 compared to the year ago quarter. Excluding revenues from acquisitions and dispositions completed within the last twelve months and the effects of foreign currency, our organic revenue growth rate for the quarter was 8.8%.

Fiscal 2015 compared to Fiscal 2014

Revenues in fiscal 2015 were $1,006.8 million, up 9.4% compared to fiscal 2014. Our revenue growth drivers during fiscal 2015 were increases in ASV, clients and users, accelerated demand for our fixed income portfolio products, portfolio analytics suite of products, sales of equity attribution and multi-asset class risk models, additional purchases of our Portfolio Services solutions, expansion of our proprietary content, and continued growth of our RMS offering.

Revenues by Geographic Region

Fiscal 2016 compared to Fiscal 2015

Revenues from our U.S. segment increased 11.3% to $755.5 million in fiscal 2016 compared to $678.8 million a year ago. Our fiscal 2016 U.S. revenue growth rate of 11.3% reflects increases in the number of users and clients of FactSet within the U.S., predominantly at buy-side hedge fund and middle-market clients. Additionally, we recognized $21.9 million of incremental revenue from the acquisition of Portware. Revenues from our U.S. operations accounted for 67.0% of our consolidated revenues during fiscal 2016, down from 67.4% a year ago, as our international ASV growth rate surpassed our U.S. ASV growth rate by 200 basis points.

European revenues advanced 10.4% year over year which was attributable to increases in client and user counts, increased sales of PA subscriptions and incremental Portware revenues of $7.3 million, partially offset by the negative effects of foreign currency.translation. Foreign currency exchange rate fluctuations reduced our European growth rate by 3040 basis points. Excluding the effects of acquisitions and dispositions completed in the last 12 months and foreign currency, European revenue grew 8.3% compared to fiscal 2016.

The Asia Pacific revenue growth rate of 22.8%13.6% was primarily due to an increase in the number of workstations, advancement inincreased subscriptions to our multi-asset class riskcontent, analytic solutions and analytics, as well positive growth in our fee business. Portware contributed $4.1 million in sales since its acquisition in fiscal 2016.core workstation product offerings. Additionally, foreign currency exchange rate fluctuations increased our Asia Pacific growth rate by 9046 basis points.

Fiscal 2015 compared to Fiscal 2014

Revenues from our U.S. segment increased 8.7% to $678.8 million in fiscal 2015 compared to $624.6 million in fiscal 2014. Our fiscal 2015 U.S. revenue growth rate Excluding the effects of 8.7% reflected increasesacquisitions and dispositions completed in the number of userslast 12 months and clients of FactSet within the U.S., a rise in sales of our PA suite of products, continued demand for our proprietary content, $5.2 million of incremental revenue from the acquisition of Code Red and a strong performance by our U.S. investment management sales team. Our U.S. buy-side sales team saw sustained demand for our fixed income portfolio products, multi-asset class risk and stress testing, attribution and publishing products. Revenues from our U.S. operations accounted for 67.4% of our consolidated revenues during fiscal 2015, down from 67.9% in fiscal 2014, as our international ASV growth rate surpassed our U.S. ASV growth rate by 150 basis points.

European revenues advanced 10.6% year over year which was attributable to increases in client and user counts, continued growth in ASV from European sell-side clients and robust sales of PA subscriptions, partially offset by the negative effects of foreign currency. Foreign currency, exchange rate fluctuations reduced our European growth rate by 40 basis points.

The Asia Pacific revenue growth rate of 12.0% was primarily due to net new user and client growth, increased PA subscriptions and our proficiency in selling additional services to existing clients, partially offset by negative foreign currency impact attributable to the change in the value of the Japanese Yengrew 12.7% compared to the U.S. dollar. Foreign currency exchange rate fluctuations reduced our Asia Pacific growth rate by 350 basis points.fiscal 2016.

Operating Expenses

Cost of Services

Fiscal 20162018 compared to Fiscal 20152017

Cost of services increased 20.2%16.4% to $487.4$659.3 million as compared to the same period a year ago. Expressedprior fiscal year. Cost of services, expressed as a percentage of revenues, cost of services was 43.2% in48.8% during fiscal 2016,2018, an increase of 290240 basis points from aover the prior year ago. Theperiod. This increase was primarily driven bydue to higher employee compensation includingcosts driven by increased employee headcount and restructuring actions, incremental data costs from recent acquisitions and additional users as well as amortization of intangible assets associated with our recent acquisitions. This increase was partially offset by a reduction in stock-based compensation amortization of intangibles and computer-related expenses.expenses from accelerated vesting in the prior year.

Employee compensation, including stock-based compensation, when expressed as a percentage of revenues increased 230100 basis points in fiscal 20162018, compared to fiscal 2015. This2017. The increase wasis primarily due to the hiring of 497 net new employees hired in the past year. Overover the last 12 months, we have added 604 net new employees involvedwith the majority of their compensation recorded in cost of services due to their involvement with content collection, and 266 net new engineering and product development employees, asdevelopment. Employee compensation expense further increased due to headcount expansion from prior year acquisitions that were included for a full year in fiscal 2018, while fiscal 2017 only included a partial year amount. In addition, during fiscal 2018 we continueincurred $17.4 million of restructuring charges primarily related to focus on servicing our existing client base, expanding our content and improving our applications. The increase in employee headcount includes 123 employees added from the Portware acquisition inseverance of which $8.5 million was recorded within cost of sales related roles.services. Data costs, when expressed as a percentage of revenues, increased 60 basis points due primarily from our recent acquisitions and higher variable data costs associated with additional users. Amortization of acquired intangible assets, when expressed as a percentage of revenues, increased 5020 basis points in fiscal 20162018 compared to fiscal 2015the same period a year ago, primarily due to the addition of $75.5recent acquisitions, which added $93.2 million of intangible assets relatedto be amortized over a weighted-average life of 11.5 years. These intangible assets were amortized for the full fiscal 2018, while, fiscal 2017 did not include a similar amount of acquisition amortization due to the acquisitiondates of Portware. Computer-related expenses, which include depreciation, maintenance, software and other fees,each acquisition.

Fiscal 2017 compared to Fiscal 2016

Cost of services increased 40 basis points when16.2% to $566.6 million in fiscal 2017, compared to fiscal 2016. Cost of services, expressed as a percentage of revenues, as we require additional computer hardware and peripherals for new employees, upgrades to existing computer systems and the development of new internal systems to support our growing infrastructure.

Fiscal 2015 compared to Fiscal 2014

Cost of services increased 14.6% to $405.3 millionwas 46.4% in fiscal 2015 as2017, an increase of 320 basis points compared to fiscal 2014. Expressed as a percentage of revenues, cost of services was 40.3% in fiscal 2015, an increase of 190 basis points from fiscal 2014.2016. The increase was primarily driven by higher employee compensation, including stock-based compensation, partially offset by lower computer depreciation.related expenses, amortization of intangibles and acquisition-related costs.

Employee compensation, including stock-based compensation, when expressed as a percentage of revenues, increased 210200 basis points duringin fiscal 20152017 compared to fiscal 2016. In fiscal 2017, 699 new employees were added, which included head count expansion from acquisitions of 498 new employees (primarily in the European segment), as well as base salary changes and incremental hires in our centers of excellence located in India and the Philippines. The increase was also due to new classesemployees hired, of consultants, engineers and product developers hired in fiscal 2015, new additions at our proprietary content collection locations, the addition of 32 employees from the Code Red acquisition, an increase in variable compensation and annual base salary increases. In fiscal 2015, we added 344 net new employeeswhich a significant number were involved with content collection, 252 net new engineering and product developmentdevelopment. As of August 31, 2017, approximately 70% of our employees performed operational roles. Employee compensation also increased due to a charge of $5.9 million related to restructuring actions and 124 net new consultants. In addition, of the total incremental $6.2 million expense recordeda change in fiscal 2015 from the vesting of performance-based equity instrumentsstock options.

Computer-related expenses, which include depreciation, maintenance, software and changesother fees increased 30 basis points, when expressed as a percentage of revenues in the senior leadership responsible for the Company’s salesforce, $2.4 millionfiscal 2017 compared to fiscal 2016. The increase was reported within cost of services. Expensesdue to added computer-related expenses, depreciation associated with the operationadditional laptop computers and peripherals for new and existing employees, upgrades to existing computer systems, and improvements to our telecommunication equipment. Amortization of the Code Red businessintangible assets increased 30 basis points, when expressed as a percentage of revenues, in fiscal 2017 compared to fiscal 2016 primarily due to our fiscal 2017 acquisitions, which added approximately $93.2 million of intangible assets to be amortized over a weighted-average life of 11.5 years. Additionally, acquisition-related costs increased cost of servicessales by $3.5approximately 40 basis points when expressed as a percentage of revenues year over year.

Selling, General and Administrative 

Fiscal 2018 compared to Fiscal 2017

SG&A expenses increased 7.3% to $324.6 million during fiscal 2015 due2018 compared to compensation paid to the acquired workforce, including stock-based compensation from equity based awards granted, amortization$302.5 million in fiscal 2017. SG&A expenses, expressed as a percentage of acquired intangible assets and computer-related expenses.

Partially offsetting the growthrevenues, were 24.0% in costfiscal 2018, a decrease of services during fiscal 2015 was a reduction in computer depreciation expense, which decreased 2070 basis points in fiscal 2015 compared fiscal 2014.over the prior year period. This decrease was primarily due to revenue growth outpacing the continued usegrowth of fully depreciated equipment and our transition to more efficient and cost-effective servers in our data centers.

Selling, General and Administrative

Fiscal 2016 compared to Fiscal 2015

SG&A related expenses increased 7.6% to $290.0 million during fiscal 2016 compared to $269.5 million in fiscal 2015. Expressed ason a percentageyear over year basis, foreign currency exchange gains on hedging activities of revenues, SG&A expenses decreased 110 basis points to 25.7% in fiscal 2016 primarily due toour Indian Rupee and lower overall employee compensation and lower occupancy costs, which include depreciation of furniture and fixtures,including stock-based compensation expense. This decrease was partially offset primarily by expenses related to non-recurringhigher legal matterscosts, restructuring actions and higher marketing costs.new employee additions.

Employee compensation, including stock-based compensation, when expressed as a percentage of revenues decreased 15050 basis points from a year ago duecompared to fiscal 2017. The decrease is primarily related to a higher percentage of our employee baseemployees working in a cost of services capacity compared to an SG&A role. OfCompensation for our totalemployees within the content collection, consulting, product development, software and systems engineering groups is recorded within cost of services while employees within our sales and various other support and administrative departments are reflected in SG&A. In fiscal 2018, the majority of our hiring has been in departments within cost of services, thus driving a higher percentage of our employee headcount increasecompensation in this area. Partially offsetting these decreases were higher legal expenses primarily from the settlement of a legal matter in the last 12 months, only 14% were in SG&A related roles, including 43 employees from the Portware acquisition. Additionally, approximately 142 employees in SG&A related roles left the Company as partfourth quarter of the salefiscal 2018, a full year of the Market Metrics business in July 2016. As such, employee compensation classified as SG&A expense declinedfrom recent acquisitions and $8.9 million of severance charges.

Fiscal 2017 compared to the growthFiscal 2016

SG&A expenses increased 4.3% to $302.5 million during fiscal 2017 compared to $290.0 million in cost of services. Occupancy costs, whenfiscal 2016. SG&A expenses, expressed as a percentage of revenues, decreased 20was 24.8% in fiscal 2017, a decrease of 90 basis points primarilycompared to fiscal 2016 due to lower employee compensation expense partially offset by higher professional fees and occupancy costs, including rent expense and depreciation of furniture and leasehold improvements becoming fully depreciated. The Company incurred approximatelyfixtures. Additionally, fiscal 2016 included a charge of $3.3 million in non-recurring expenses in fiscal 2016 related primarily to legal matters. Marketing expenses increased $1.2 million year over year driven by incremental branding and advertising costs.

Fiscal 2015 compared to Fiscal 2014

SG&A expenses increased 1.9% to $269.5 million during fiscal 2015 as compared to $264.4 million in fiscal 2014. Expressed as a percentage of revenues, SG&A expenses decreased 190 basis points to 26.8% in fiscal 2015 due to lower employee compensation and lower occupancy costs.

Employee compensation, including stock-based compensation, when expressed as a percentage of revenues, decreased 130160 basis points in fiscal 2017 compared to fiscal 2016 due to a higher percentage ofcontinued shift in our employee base working in afrom SG&A to cost of services capacity versus SG&A. Of our totalservice related roles. This decrease in employee headcount increasecompensation was offset by a charge of $4.4 million related to restructuring actions and a change in the vesting of performance-based stock options. Professional fees, expressed as a percentage of revenues, increased 30 basis points from costs associated with acquisitions in fiscal 2015, 84% was within our software engineering, content collection and product development teams, which are all included within cost of services. As such, SG&A employee compensation declined compared to the growth in cost of services.2017. Occupancy costs, when expressed as a percentage of revenues, decreased 60increased 30 basis points primarily due to furniture and leasehold improvements becoming fully depreciated, lower rent expense from the strengtheningincrease in the worldwide-leased office space of the U.S. dollar71,000 square feet, which included expanded offices in Germany, Switzerland, Bulgaria, India and the timing of acquiring new real estate space. However, certain occupancy costs, such as rent, are temporary and are being driven by the timing of acquiring new space to support our growing employee population.

Netherlands.

Operating Income and Operating Margin

Fiscal 20162018 compared to Fiscal 20152017

Operating income increased 5.4%4.0% to $349.7$366.2 million in fiscal year 20162018 compared to $352.1 million in fiscal 2017. Our operating margin decreased in fiscal 2018 to 27.1%, compared to 28.8% for fiscal 2017. Operating income increased due to incremental revenue that outpaced the prior year.growth of SG&A expenses year over year partially offset by higher cost of services. The reduction in operating margin year over year was due to an increase in employee compensation costs, including restructuring actions, data costs from acquisitions and additional users, amortization of intangible assets associated with our recent acquisitions, and incremental legal fees partially offset by foreign currency exchange gains on hedging activities and lower stock-based compensation.

Fiscal 2017 compared to Fiscal 2016

Operating income increased 0.7% to $352.1 million in fiscal 2017 compared to fiscal 2016. Our operating margin for fiscal 20162017 was 31.0%28.8%, down from 33.0% a year ago. The lower operating margin was primarily due to Portware’s operations, which reduced our operating margin by 120 basis points31.0% in fiscal 2016. Additionally, higherExpenses related to employee compensation, including stock-based compensation, reducedprofessional fees, computer related costs, amortization of intangibles and acquisition-related costs all increased in fiscal 2017, which resulted in our total operating margin collectively by 90 basis points. In fiscal 2016, weexpenses increasing to 11.8% year over year. We also incurred non-recurringrecognized charges of approximately $4.6$18.0 million related primarily to legal matters. Offsetting these drivers was organic revenue growth of 9.9% and lower occupancy costs.

Fiscal 2015 compared to Fiscal 2014

Operating income increased 9.8% to $331.9 millionrestructuring actions, a change in fiscal 2015 compared to fiscal 2014. Our operating margin for fiscal 2015 was 33.0%, up from 32.8% in fiscal 2014. Operating margin in fiscal 2015 was negatively impacted by a $3.2 million pre-tax charge related to changes in the senior leadership of our sales teams and a $3.0 million pre-tax charge primarily related to the vesting of performance-based equity instruments. Operating incomestock options and other acquisition-related costs, compared to $7.0 million in fiscal 2014 included $3.0 million2016. The higher expenses were offset partially by a year over year increase in revenues of pre-tax charges related to vesting of performance-based equity instruments and the settlement of a legal claim. Excluding these charges,8.3%, driven partially by our fiscal 2015 adjusted operating margin was 33.6% compared to the fiscal 2014 adjusted operating margin of 33.2%. Revenue growth of 9.4% and net foreign currency benefits totaling of $11.2 million aided our current year operating margin expansion.recent acquisitions.

Operating Income by Segment

Our operating segments are aligned with how we manage the business, and the demographic markets in which we serve.serve, and how the CODMG assesses performance. Our internal financial reporting structure is based on three reportable segments, the U.S., Europe and Asia Pacific. This structurePacific, which we believe helps us better manage the business and view the markets we serve. Sales, consulting, data collection, product development and software engineering are the primary functional groups within each segment. Each segment records compensation expense, including stock-based compensation, amortization of intangible assets, depreciation of furniture and fixtures, amortization of leasehold improvements, communication costs, professional fees, rent expense, travel, marketing, office and other direct expenses. Expenditures associated with our data centers, third partythird-party data costs and corporate headquartersheadquarter charges are recorded by the U.S. segment and are not allocated to the other segments. The content collection centers of excellence, located in India and the Philippines, primarily focus on content collection that benefit all of our segments, so thesegments. The expenses incurred at these locations are allocated to each segment based on a percentage of revenues.

Fiscal 2016 2018compared to Fiscal 20152017

U.S. operating income decreased 4.5%increased 8.0% to $165.3$148.1 million during fiscal 20162018 compared to $173.0 million a year ago. The decrease in U.S. operating income is attributed to employee compensation growth, non-recurring charges of $4.4 million and $8.3 million of incremental amortization expense from Portware, partially offset by revenue growth of 11.3%. Employee compensation increased primarily due to a 7.6% increase in the U.S. employee headcount year over year. The non-recurring charges were related primarily to legal matters.

European operating income increased 13.0% to $131.4 million during fiscal 2016 compared to $116.3$137.1 million a year ago. The increase in U.S. operating income was primarily due to revenue growth of 7.4%, partially offset by increased expenses related to employee compensation, computer equipment and data costs. Employee compensation increased primarily due to annual base salary increases, restructuring actions, and higher employee benefit costs including medical expenditures. Computer related expenses, which include depreciation, maintenance, software and other fees, increased year over year due to expenses associated with upgrades to existing computer systems in Norwalk, additional server equipment in our data centers located in New Jersey and Virginia, as well as laptop computers and peripherals for new and existing employees. Data costs increased due to higher third-party data costs from our recent acquisitions and additional users.

European operating income decreased 3.1% to $149.0 million during fiscal 2018 compared to $153.7 million a year ago. The impact of foreign currency decreased European operating income by $4.9 million year over year. Additionally, the decrease in European operating income was due to a full year impact of fiscal 2017 acquisitions, contributing to higher employee compensation, amortization of intangible assets, and data costs, partially offset by revenue growth of 10.4% and benefits from a stronger U.S. dollar. The impact of foreign currency increased European operating income by $5.1 million year over year.17.3%.

Asia Pacific operating income increased 24.4%12.7% to $53.0$69.1 million during fiscal 20162018 compared to $42.6$61.4 million a year ago. The increase in Asia Pacific operating income was due to revenue growth of 22.8%13.1% and benefits from a stronger U.S. dollar, partially offset by increases in employee compensation.compensation and occupancy costs. Employee compensation was higher year over year as result of a 9.2% increase in our Asia Pacific workforce. Occupancy costs increased due primarily to an increase in rent expense for additional office space in our Philippines location. The impact of foreign currency increased Asia Pacific operating income by $6.5$3.6 million year over year.

Fiscal 2017 compared to Fiscal 2016

U.S. operating income decreased 17.0% to $137.1 million during fiscal 2017 compared to $165.3 million in fiscal 2016. The decrease in U.S. operating income was primarily due to increases in expenses related to employee compensation, and occupancy costs, partially offset by revenue growth of 3.8%. Employee compensation increased primarily due to a 3.6% increase in U.S. employee headcount year over year and a change in the vesting of performance-based stock options. Occupancy costs including rent expense and depreciation of furniture and fixtures increased due primarily to an increase in rent expense at our New York location.

European operating income increased 16.9% to $153.7 million during fiscal 2017 compared to $131.4 million in fiscal 2016. The increase in European operating income was due to revenue growth of 19.0% and benefits from a stronger U.S. dollar, offset by higher employee compensation, occupancy costs, and amortization of intangibles. European revenue grew due to acquisitions completed in 2017, which had a significant sales presence in European markets. The impact of foreign currency increased European operating income by $6.2 million year over year. Employee compensation was higher in fiscal 2017 compared to fiscal 2016 due to an increase of 473 net new employees in our European offices. These employees were primarily from acquisitions completed in 2017. Occupancy costs including rent expense and depreciation of furniture and fixtures increased due primarily to an increase in rent expense in Germany associated with the 2017 acquisitions. Amortization of intangibles increased due to a 19.3% increasethe addition of $93.2 million of intangibles, the majority of which resided in the Asia Pacific employee headcount year over year.

Fiscal 2015 compared to Fiscal 2014our European segment.

OperatingAsia Pacific operating income from our U.S. business advanced 4.8%increased 15.7% to $173.0$61.4 million during fiscal 20152017 compared to $165.0$53.0 million in fiscal 2014.2016. The increase in Asia Pacific operating income was primarily attributable to $54.1 million of incremental revenues and a decrease in computer depreciation, partially offset by a rise in employee compensation expense. U.S. revenue growth was driven by increases in the number of users and clients of FactSet within the U.S., a rise in sales of our PA suite of products, continued demand for our proprietary content, $5.2 million of incremental revenue from the acquisition of Code Red and a strong performance by our U.S. investment management sales team. Excluding the acquired Code Red workforce, U.S. employee headcount increased 7.0% over fiscal 2014, leading to higher employee compensation costs during fiscal 2015. Computer-related expenses decreased due to the transition to more efficient and cost-effective servers in our data centers in addition to the continued use of fully depreciated servers.