FACTSET RESEARCH SYSTEMS INC.
(Exact name of registrant as specified in its charter)
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| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
2020
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| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
FACTSET RESEARCH SYSTEMS INC.(Exact name of registrant as specified in its charter)
Delaware | 13-3362547 | ||||
(State or other jurisdiction of
incorporation) | (I.R.S. Employer
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45 Glover Avenue, Norwalk, Connecticut | 06850 | ||||
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Registrant’s
| Title of each class | Trading Symbols(s) | Name of each exchange on which registered | ||||||
| Common Stock, $0.01 Par Value | FDS | New York Stock Exchange LLC | ||||||
| The Nasdaq Stock Market | ||||||||
2020
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Consolidated Statements of Income for the threemonths ended November 30, |
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Consolidated Statements of Comprehensive Income for thethree months ended November 30, |
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Consolidated Balance Sheets at November 30, |
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Consolidated Statements of Cash Flows for the three months ended November 30, |
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Consolidated Statements of Changes in Stockholders’ Equity for the three months ended November 30, 2020 | ||||||||
Consolidated Statements of Changes in Stockholders’ Equity for the three months ended November 30, 2019 | ||||||||
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| Three Months Ended November 30, | |||||||
| (In thousands, except per share data) | 2017 | 2016 | ||||||
Revenues | $ | 329,141 | $ | 288,063 | ||||
Operating expenses | ||||||||
Cost of services | 161,524 | 127,250 | ||||||
Selling, general and administrative | 78,519 | 70,494 | ||||||
Total operating expenses | 240,043 | 197,744 | ||||||
Operating income | 89,098 | 90,319 | ||||||
Other expense | (2,919 | ) | (499 | ) | ||||
Income before income taxes | 86,179 | 89,820 | ||||||
Provision for income taxes | 15,800 | 23,237 | ||||||
Net income | $ | 70,379 | $ | 66,583 | ||||
Basic earnings per common share | $ | 1.80 | $ | 1.67 | ||||
Diluted earnings per common share | $ | 1.77 | $ | 1.66 | ||||
Basic weighted average common shares | 39,085 | 39,827 | ||||||
Diluted weighted average common shares | 39,680 | 40,100 | ||||||
| Three Months Ended November 30, | |||||||||||||||||||||||
| (In thousands, except per share data) | 2020 | 2019 | |||||||||||||||||||||
| Revenue | $ | 388,206 | $ | 366,658 | |||||||||||||||||||
| Operating expenses | |||||||||||||||||||||||
| Cost of services | 188,088 | 164,957 | |||||||||||||||||||||
| Selling, general and administrative | 79,087 | 88,515 | |||||||||||||||||||||
| Total operating expenses | 267,175 | 253,472 | |||||||||||||||||||||
| Operating income | 121,031 | 113,186 | |||||||||||||||||||||
| Other expenses | |||||||||||||||||||||||
| Interest expense, net | (1,029) | (3,131) | |||||||||||||||||||||
| Other income (expense), net | 230 | (1,314) | |||||||||||||||||||||
| Income before income taxes | 120,232 | 108,741 | |||||||||||||||||||||
| Provision for income taxes | 19,026 | 14,784 | |||||||||||||||||||||
| Net income | $ | 101,206 | $ | 93,957 | |||||||||||||||||||
| Basic earnings per common share | $ | 2.66 | $ | 2.47 | |||||||||||||||||||
| Diluted earnings per common share | $ | 2.62 | $ | 2.43 | |||||||||||||||||||
| Basic weighted average common shares | 38,007 | 37,978 | |||||||||||||||||||||
| Diluted weighted average common shares | 38,697 | 38,587 | |||||||||||||||||||||
| Three Months Ended November 30, | |||||||
| (In thousands) | 2017 | 2016 | ||||||
Net income | $ | 70,379 | $ | 66,583 | ||||
Other comprehensive income (loss), net of tax | ||||||||
Net unrealized (loss) gain on cash flow hedges* | (476 | ) | 447 | |||||
Foreign currency translation adjustments | 8,466 | (11,497 | ) | |||||
Other comprehensive income (loss) | 7,990 | (11,050 | ) | |||||
Comprehensive income | $ | 78,369 | $ | 55,533 | ||||
| Three Months Ended November 30, | |||||||||||||||||||||||
| (In thousands) | 2020 | 2019 | |||||||||||||||||||||
| Net income | $ | 101,206 | $ | 93,957 | |||||||||||||||||||
| Other comprehensive income, net of tax: | |||||||||||||||||||||||
| Net unrealized (loss) gain on cash flow hedges* | (116) | 2,051 | |||||||||||||||||||||
| Foreign currency translation adjustments | 333 | 7,787 | |||||||||||||||||||||
| Other comprehensive gain | 217 | 9,838 | |||||||||||||||||||||
| Comprehensive income | $ | 101,423 | $ | 103,795 | |||||||||||||||||||
$714 thousand.
| (In thousands, except share data) | November 30, 2020 | August 31, 2020 | |||||||||
| ASSETS | |||||||||||
| Cash and cash equivalents | $ | 560,137 | $ | 585,605 | |||||||
| Investments | 18,166 | 19,572 | |||||||||
| Accounts receivable, net of reserves of $7,252 at November 30, 2020 and $7,987 at August 31, 2020 | 156,218 | 155,011 | |||||||||
| Prepaid taxes | 25,908 | 38,067 | |||||||||
| Prepaid expenses and other current assets | 43,660 | 43,675 | |||||||||
| Total current assets | 804,089 | 841,930 | |||||||||
| Property, equipment and leasehold improvements, net | 135,121 | 133,102 | |||||||||
| Goodwill | 738,575 | 709,703 | |||||||||
| Intangible assets, net | 134,896 | 121,095 | |||||||||
| Lease right-of-use assets, net | 257,591 | 248,929 | |||||||||
| Other assets | 29,154 | 28,629 | |||||||||
| TOTAL ASSETS | $ | 2,099,426 | $ | 2,083,388 | |||||||
| LIABILITIES | |||||||||||
| Accounts payable and accrued expenses | $ | 84,738 | $ | 82,094 | |||||||
| Current lease liabilities | 30,954 | 29,056 | |||||||||
| Accrued compensation | 36,486 | 81,873 | |||||||||
| Deferred fees | 46,439 | 53,987 | |||||||||
| Dividends payable | 29,266 | 29,283 | |||||||||
| Total current liabilities | 227,883 | 276,293 | |||||||||
| Long-term debt | 575,511 | 574,354 | |||||||||
| Deferred taxes | 18,444 | 19,713 | |||||||||
| Deferred fees | 9,147 | 9,319 | |||||||||
| Taxes payable | 28,795 | 27,739 | |||||||||
| Long-term lease liabilities | 279,723 | 272,269 | |||||||||
| Other non-current liabilities | 7,350 | 7,326 | |||||||||
| TOTAL LIABILITIES | $ | 1,146,853 | $ | 1,187,013 | |||||||
| Commitments and Contingencies | |||||||||||
| 0STOCKHOLDERS’ EQUITY | |||||||||||
| Preferred stock, $0.01 par value, 10,000,000 shares authorized, NaN issued | $ | 0 | $ | 0 | |||||||
| Common stock, $0.01 par value, 150,000,000 shares authorized, 40,884,113 and 40,767,708 shares issued, 38,008,129 and 38,030,252 shares outstanding at November 30, 2020 and August 31, 2020, respectively | 409 | 408 | |||||||||
| Additional paid-in capital | 968,375 | 939,067 | |||||||||
| Treasury stock, at cost: 2,875,984 and 2,737,456 shares at November 30, 2020 and August 31, 2020, respectively | (682,224) | (636,956) | |||||||||
| Retained earnings | 705,089 | 633,149 | |||||||||
| Accumulated other comprehensive loss | (39,076) | (39,293) | |||||||||
| TOTAL STOCKHOLDERS’ EQUITY | $ | 952,573 | $ | 896,375 | |||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 2,099,426 | $ | 2,083,388 | |||||||
FactSet
November 30, 2017 | August 31, 2017 | |||||||
(In thousands, except share data) | (Unaudited) | |||||||
ASSETS | ||||||||
Cash and cash equivalents | $ | 221,933 | $ | 194,731 | ||||
Investments | 31,677 | 32,444 | ||||||
Accounts receivable, net of reserves of $2,920 at November 30, 2017 and $2,738 at August 31, 2017 | 144,848 | 148,331 | ||||||
Prepaid taxes | — | 7,076 | ||||||
Deferred taxes | — | 2,668 | ||||||
Prepaid expenses and other current assets | 28,554 | 24,126 | ||||||
Total current assets | 427,012 | 409,376 | ||||||
Property, equipment and leasehold improvements, net | 98,731 | 100,454 | ||||||
Goodwill | 712,476 | 707,560 | ||||||
Intangible assets, net | 168,874 | 173,543 | ||||||
Deferred taxes | 6,975 | 7,412 | ||||||
Other assets | 16,534 | 14,970 | ||||||
TOTAL ASSETS | $ | 1,430,602 | $ | 1,413,315 | ||||
LIABILITIES | ||||||||
Accounts payable and accrued expenses | $ | 67,669 | $ | 59,214 | ||||
Accrued compensation | 20,658 | 61,083 | ||||||
Deferred fees | 43,423 | 47,495 | ||||||
Deferred taxes | — | 2,382 | ||||||
Taxes payable | 7,948 | 9,112 | ||||||
Dividends payable | 21,902 | 21,853 | ||||||
Total current liabilities | 161,600 | 201,139 | ||||||
Long-term debt | 574,666 | 575,000 | ||||||
Deferred taxes | 25,028 | 24,892 | ||||||
Deferred fees | 4,713 | 3,921 | ||||||
Taxes payable | 9,465 | 11,484 | ||||||
Deferred rent and other non-current liabilities | 36,913 | 37,188 | ||||||
TOTAL LIABILITIES | $ | 812,385 | $ | 853,624 | ||||
Commitments and contingencies (See Note 17) | ||||||||
STOCKHOLDERS’ EQUITY | ||||||||
Preferred stock, $.01 par value, 10,000,000 shares authorized, none issued | $ | — | $ | — | ||||
Common stock, $.01 par value, 150,000,000 shares authorized, 52,101,426 and 51,845,132 shares issued; 39,110,080 and 39,023,032 shares outstanding at November 30, 2017 and August 31, 2017, respectively | 521 | 518 | ||||||
Additional paid-in capital | 775,509 | 741,748 | ||||||
Treasury stock, at cost: 12,991,346 and 12,822,100 shares at November 30, 2017 and August 31, 2017, respectively | (1,638,384 | ) | (1,606,678 | ) | ||||
Retained earnings | 1,507,301 | 1,458,823 | ||||||
Accumulated other comprehensive loss | (26,730 | ) | (34,720 | ) | ||||
TOTAL STOCKHOLDERS’ EQUITY | $ | 618,217 | $ | 559,691 | ||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 1,430,602 | $ | 1,413,315 | ||||
STATEMENTS OF CASH FLOWS
–Unaudited| Three Months Ended November 30, | |||||||||||
| (in thousands) | 2020 | 2019 | |||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | |||||||||||
| Net income | $ | 101,206 | $ | 93,957 | |||||||
| Adjustments to reconcile net income to net cash provided by operating activities | |||||||||||
| Depreciation and amortization | 15,290 | 14,390 | |||||||||
| Amortization of lease right-of-use assets | 10,697 | 10,700 | |||||||||
| Stock-based compensation expense | 11,317 | 9,814 | |||||||||
| Deferred income taxes | 437 | (6,624) | |||||||||
| Changes in assets and liabilities, net of effects of acquisitions | |||||||||||
| Accounts receivable, net of reserves | (342) | 875 | |||||||||
| Accounts payable and accrued expenses | 2,240 | 13,165 | |||||||||
| Accrued compensation | (45,858) | (45,780) | |||||||||
| Deferred fees | (9,724) | (6,483) | |||||||||
| Taxes payable, net of prepaid taxes | 13,302 | 16,616 | |||||||||
| Lease liabilities, net | (10,007) | (3,761) | |||||||||
| Other, net | 718 | (1,078) | |||||||||
| Net cash provided by operating activities | 89,276 | 95,791 | |||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES | |||||||||||
| Acquisition of business, net of cash and cash equivalents acquired | (41,916) | 0 | |||||||||
| Purchases of property, equipment, leasehold improvements and internal-use software | (18,333) | (26,780) | |||||||||
| Purchases of investments | (250) | (2,620) | |||||||||
| Proceeds from maturity or sale of investments | 2,177 | 2,257 | |||||||||
| Net cash used in investing activities | (58,322) | (27,143) | |||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES | |||||||||||
| Repurchases of common stock | (43,144) | (84,423) | |||||||||
| Dividend payments | (29,103) | (27,259) | |||||||||
| Proceeds from employee stock plans | 17,993 | 16,727 | |||||||||
| Other financing activities | (2,123) | 0 | |||||||||
| Net cash used by financing activities | (56,377) | (94,955) | |||||||||
| Effect of exchange rate changes on cash and cash equivalents | (45) | 2,725 | |||||||||
| Net decrease in cash and cash equivalents | (25,468) | (23,582) | |||||||||
| Cash and cash equivalents at beginning of period | 585,605 | 359,799 | |||||||||
| Cash and cash equivalents at end of period | $ | 560,137 | $ | 336,217 | |||||||
Three months Ended
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(in thousands) | November 30, 2017 | November 30, 2016 | ||||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
Net income | $ | 70,379 | $ | 66,583 | ||||
Adjustments to reconcile net income to net cash provided by operating activities | ||||||||
Depreciation and amortization | 14,286 | 10,016 | ||||||
Stock-based compensation expense | 7,481 | 6,385 | ||||||
Deferred income taxes | 875 | 4,907 | ||||||
Loss on sale of assets | 17 | — | ||||||
Tax benefits from share-based payment arrangements | — | (5,511 | ) | |||||
Changes in assets and liabilities, net of effects of acquisitions | ||||||||
Accounts receivable, net of reserves | 3,511 | (9,985 | ) | |||||
Accounts payable and accrued expenses | 8,604 | 2,043 | ||||||
Accrued compensation | (40,384 | ) | (34,261 | ) | ||||
Deferred fees | (3,531 | ) | (3,118 | ) | ||||
Taxes payable, net of prepaid taxes | 7,401 | 13,786 | ||||||
Prepaid expenses and other assets | (6,716 | ) | (2,805 | ) | ||||
Deferred rent and other non-current liabilities | (845 | ) | 3,225 | |||||
Other working capital accounts, net | 65 | (152 | ) | |||||
Net cash provided by operating activities | 61,143 | 51,113 | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
Acquisition of businesses, net of cash acquired | — | (71,689 | ) | |||||
Purchases of investments | (6,942 | ) | (16,700 | ) | ||||
Proceeds from sales of investments | 7,409 | 19,501 | ||||||
Purchases of property, equipment and leasehold improvements, net of proceeds from dispositions | (5,912 | ) | (12,537 | ) | ||||
Net cash used in investing activities | (5,445 | ) | (81,425 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
Dividend payments | (21,682 | ) | (19,867 | ) | ||||
Repurchases of common stock | (31,706 | ) | (84,860 | ) | ||||
Proceeds from debt | — | 65,000 | ||||||
Purchase of business | 442 | — | ||||||
Proceeds from employee stock plans | 22,132 | 16,685 | ||||||
Tax benefits from share-based payment arrangements | — | 5,511 | ||||||
Net cash used by financing activities | (30,814 | ) | (17,531 | ) | ||||
Effect of exchange rate changes on cash and cash equivalents | 2,318 | (7,276 | ) | |||||
Net increase (decrease) in cash and cash equivalents | 27,202 | (55,119 | ) | |||||
Cash and cash equivalents at beginning of period | 194,731 | 228,407 | ||||||
Cash and cash equivalents at end of period | $ | 221,933 | $ | 173,288 | ||||
| (in thousands, except share data) | Common Stock | Additional Paid-in Capital | Treasury Stock | Retained Earnings | Accumulated Other Comprehensive Loss | Total Stockholders’ Equity | |||||||||||||||||||||||||||||||||||||||||
| Shares | Par Value | Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||
| Balance as of August 31, 2020 | 40,767,708 | $ | 408 | $ | 939,067 | 2,737,456 | $ | (636,956) | $ | 633,149 | $ | (39,293) | $ | 896,375 | |||||||||||||||||||||||||||||||||
| Net income | 101,206 | 101,206 | |||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss | 217 | 217 | |||||||||||||||||||||||||||||||||||||||||||||
| Common stock issued for employee stock plans | 98,459 | 1 | 17,991 | 17,992 | |||||||||||||||||||||||||||||||||||||||||||
| Vesting of restricted stock | 17,946 | — | 6,728 | (2,124) | (2,124) | ||||||||||||||||||||||||||||||||||||||||||
| Repurchases of common stock | 131,800 | (43,144) | (43,144) | ||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | 11,317 | 11,317 | |||||||||||||||||||||||||||||||||||||||||||||
| Dividends declared | (29,266) | (29,266) | |||||||||||||||||||||||||||||||||||||||||||||
| Balance as of November 30, 2020 | 40,884,113 | $ | 409 | $ | 968,375 | 2,875,984 | $ | (682,224) | $ | 705,089 | $ | (39,076) | $ | 952,573 | |||||||||||||||||||||||||||||||||
| (in thousands, except share data) | Common Stock | Additional Paid-in Capital | Treasury Stock Shares Amount | Retained Earnings | Accumulated Other Comprehensive Loss | Total Stockholders’ Equity | |||||||||||||||||||||||||||||||||||||||||
| Shares | Par Value | Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||
| Balance as of August 31, 2019 | 40,104,192 | $ | 401 | $ | 806,973 | 1,986,352 | $ | (433,799) | $ | 373,225 | $ | (74,544) | $ | 672,256 | |||||||||||||||||||||||||||||||||
| Net income | 93,957 | 93,957 | |||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income | 9,838 | 9,838 | |||||||||||||||||||||||||||||||||||||||||||||
| Common stock issued for employee stock plans | 119,740 | 1 | 19,181 | 19,182 | |||||||||||||||||||||||||||||||||||||||||||
| Vesting of restricted stock | 15,376 | — | 5,778 | (1,456) | (1,456) | ||||||||||||||||||||||||||||||||||||||||||
| Repurchases of common stock | 343,000 | (84,423) | (84,423) | ||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | 9,814 | 9,814 | |||||||||||||||||||||||||||||||||||||||||||||
| Dividends declared | (27,290) | (27,290) | |||||||||||||||||||||||||||||||||||||||||||||
| Balance as of November 30, 2019 | 40,239,308 | $ | 402 | $ | 835,968 | 2,335,130 | $ | (519,678) | $ | 439,892 | $ | (64,706) | $ | 691,878 | |||||||||||||||||||||||||||||||||
2020
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| Note 1 | Description of Business | |||||||
| Note 2 | Basis of Presentation | |||||||
| Note 3 | Recent Accounting Pronouncements | |||||||
| Note 4 | Revenue Recognition | |||||||
| Note 5 | Fair Value Measures | |||||||
| Note 6 | Derivative Instruments | |||||||
| Note 7 | Acquisition | |||||||
| Note 8 | Goodwill | |||||||
| Note 9 | Income Taxes | |||||||
| Note 10 | Leases | |||||||
| Note 11 | Debt | |||||||
| Note 12 | Commitments and Contingencies | |||||||
| Note 13 | Stockholders' Equity | |||||||
| Note 14 | Earnings Per Share | |||||||
| Note 15 | Stock-Based Compensation | |||||||
| Note 16 | Segment Information | |||||||
management.
The unaudited condensed consolidated financial statements of FactSet and the accompanying notesCompany's Consolidated Financial Statements included in this Quarterly Report on Form 10-Q are prepared in accordance with generally accepted accounting principles in the United States ("GAAP"). for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all
2020.
3. RECENT ACCOUNTING PRONOUNCEMENTS
As
Consolidated Financial Statements.
Balance Sheet Classification of Deferred Taxes
During the first quarter of fiscal 2018, FactSet adopted the accounting standard update issued by the FASB in November 2015 to simplify the presentation of deferred taxes on the balance sheet. This accounting standard update requires an entity to present all deferred tax assets and deferred tax liabilities as non-current on the balance sheet. Under the previous guidance, entities were required to separately present deferred taxes as current or non-current. Netting deferred tax assets and deferred tax liabilities by tax jurisdiction will still be required under the new guidance. This accounting standard update is a change to the balance sheet presentation only. The changes have been applied prospectively as permitted by the standard and prior periods have not been restated.
Share-Based Payments
During the first quarter of fiscal 2018, FactSet adopted the accounting standard update issued by the FASB in March 2016, which simplifies several aspects of the accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures and statutory tax withholding requirements, as well as classification in the statement of cash flows. This accounting standard update will increase the volatility within the Company’s provision for income taxes as all excess tax benefits or deficiencies related to share-based payments, that were previously reported within equity, are now recognized in the consolidated statement of income. In addition, this standard changes the classification of excess tax benefits presented in the Company's consolidated statements of cash flows from a financing activity to an operating activity, which has be applied on a prospective basis as permitted by the standard and prior periods have not been restated. Share-based payment expense will continue to reflect estimated forfeitures of share-based payment awards. The adoption of this standard resulted in the recognition of $4.1 million of excess tax benefits to FactSet’s provision for income taxes during the first quarter of fiscal 2018. The recognition of these benefits contributed $0.09 to diluted earnings per share for the three months ended November 30, 2017. The remaining provisions of this standard did not have a material impact on the Company’s consolidated financial statements.
Recent Accounting Standards or Updates Not Yet Effective
Revenue Recognition
In May 2014 and July 2015, the FASB issued accounting standard updates, which provide clarified principles for recognizing revenue arising from contracts with clients and supersede most current revenue recognition guidance, including industry-specific guidance. The core principle of the revenue model is that an entity recognizes revenue to depict the transfer of promised goods or services to clients in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. These accounting standard updates will be effective for FactSet beginning in the first quarter of fiscal 2019, with early adoption in fiscal 2018 permitted and allow for either full retrospective or modified retrospective adoption. The Company plans to adopt the standard on September 1, 2018 and is currently evaluating the impact of these accounting standard updates on its consolidated financial statements and the method of adoption.
Recognition and Measurement of Financial Assets and Financial Liabilities
In January 2016, the FASB issued an accounting standard update to amend its current guidance on the classification and measurement of certain financial instruments. The accounting standard update significantly revises an entity’s accounting related to the presentation of certain fair value changes for financial liabilities measured at fair value. This guidance also amends certain disclosure requirements associated with the fair value of financial instruments. This guidance will be effective for FactSet beginning in the first quarter of fiscal 2019. The Company is currently evaluating the impact of this accounting standard update on its consolidated financial statements.
Leases
In February 2016, the FASB issued an accounting standard update related to accounting for leases. The guidance introduces a lessee model that requires most leases to be reported on the balance sheet. The accounting standard update aligns many of the underlying principles of the new lessor model with those in the FASB’s new revenue recognition standard. The guidance also eliminates the requirement in current U.S. GAAP for an entity to use bright-line tests in determining lease classification. This accounting standard update will be effective for FactSet beginning in the first quarter of fiscal 2020, with early adoption in fiscal 2019 permitted. The Company is currently evaluating the impact of this accounting standard update on its consolidated financial statements.
Share-Based Payments
In May 2017, the FASB issued an accounting standard update, which amends the scope of modification accounting for share-based payment arrangements. The guidance focuses on changes to the terms or conditions of share-based payment awards that would require the application of modification accounting and specifies that an entity would not apply modification accounting if the fair value, vesting conditions and classification of the awards are the same immediately before and after the modification. This accounting standard update will be effective for FactSet beginning in the first quarter of fiscal 2019, with early adoption permitted. The Company is currently evaluating the impact of this accounting standard update on its consolidated financial statements.
Cash Flow Simplification
In August 2016, the FASB issued an accounting standard update, which simplifies how certain transactions are classified in the statement of cash flows. This includes revised guidance on the cash flow classification of debt prepayments and debt extinguishment costs, contingent consideration payments made after a business combination and distributions received from equity method investments. The guidance is intended to reduce diversity in practice across all industries. This accounting standard update will be effective for FactSet beginning in the first quarter of fiscal 2019. The Company is currently evaluating the impact of this accounting standard update on its consolidated financial statements.
Income Taxes on Intra-Entity Transfers of Assets
In October 2016, the FASB issued an accounting standard update, which removes the prohibition against the immediate recognition of the current and deferred income tax effects of intra-entity transfers of assets other than inventory. The guidance is intended to reduce diversity in practice related to the tax consequences of certain types of intra-entity asset transfers, particularly those involving intellectual property. This accounting standard update will be effective for FactSet beginning in the first quarter of fiscal 2019. The Company is currently evaluating the impact of this accounting standard update on its consolidated financial statements.
Goodwill Impairment Test
Hedge Accounting Simplification
In August 2017,December 2019, the FASB issued an accounting standard updateASU 2019-12, Income Taxes (Topic 740); Simplifying the Accounting for Income Taxes, to reduce the complexity of and simplify the application of hedging accounting. The guidance refines and expands hedgevarious aspects related to accounting for both financialincome taxes, eliminating certain exceptions to the general principles in accounting for income taxes related to intraperiod tax allocation, simplifying when companies recognize deferred taxes in an interim period, and nonfinancial risk components, eliminates the need to separately measure and report hedge ineffectiveness, and aligns the recognition and presentationclarifying certain aspects of the effects of the hedging instrument and the hedged item in the financial statements. Thiscurrent guidance to promote consistent application. The guidance will be effective for FactSet beginningthe Company in the first quarter of fiscal 2020,2022, with early adoption permitted. Most amendments are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis. The Company is currently evaluating the potential impact of this accounting standard updateadopting the guidance on its consolidated financial statements.
Consolidated Financial Statements.
4. information, analytical applications and industry-leading service for the investment community. Based on the nature of the services and products offered by FactSet, the Company applies an input time-based measure of progress as the client is simultaneously receiving and consuming the benefits of the platform. The Company records revenue for its contracts using the over-time revenue recognition model as a client is invoiced or performance is satisfied. FactSet does not consider payment terms as a performance obligation for clients with contractual terms that are one year or less and the Company has elected the practical expedient.
| Three Months Ended November 30, | |||||||||||||||||||||||
| (in thousands) | 2020 | 2019 | |||||||||||||||||||||
| Americas | $ | 244,337 | $ | 231,330 | |||||||||||||||||||
| EMEA | 105,777 | 100,830 | |||||||||||||||||||||
| Asia Pacific | 38,092 | 34,498 | |||||||||||||||||||||
| Total Revenue | $ | 388,206 | $ | 366,658 | |||||||||||||||||||
(a)2020.
Fair Value Measurements at November 30, 2017 | ||||||||||||||||
(in thousands) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Assets | ||||||||||||||||
Corporate money market funds (1) | $ | 47,741 | $ | — | $ | — | $ | 47,741 | ||||||||
Mutual funds (2) | — | 20,475 | — | 20,475 | ||||||||||||
Certificates of deposit (3) | — | 11,202 | — | 11,202 | ||||||||||||
Derivative instruments (4) | — | 5,375 | — | 5,375 | ||||||||||||
Total assets measured at fair value | $ | 47,741 | $ | 37,052 | $ | — | $ | 84,793 | ||||||||
Liabilities | ||||||||||||||||
Derivative instruments (4) | $ | — | $ | — | $ | — | $ | — | ||||||||
Total liabilities measured at fair value | $ | — | $ | — | $ | — | $ | — | ||||||||
Fair Value Measurements at August 31, 2017 | ||||||||||||||||
(in thousands) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Assets | ||||||||||||||||
Corporate money market funds (1) | $ | 26,677 | $ | — | $ | — | $ | 26,677 | ||||||||
Mutual Funds (2) | — | 18,364 | — | 18,364 | ||||||||||||
Certificates of deposit (3) | — | 14,080 | — | 14,080 | ||||||||||||
Derivative instruments (4) | — | 6,142 | — | 6,142 | ||||||||||||
Total assets measured at fair value | $ | 26,677 | $ | 38,586 | $ | — | $ | 65,263 | ||||||||
Liabilities | ||||||||||||||||
Derivative instruments (4) | $ | — | $ | — | $ | — | $ | — | ||||||||
Total liabilities measured at fair value | $ | — | $ | — | $ | — | $ | — | ||||||||
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2020. The Company did not have any transfers between Level 1 and Level 2levels of fair value measurements during the periods presented.
(b)
| Fair Value Measurements at November 30, 2020 | |||||||||||||||||||||||
| (in thousands) | Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||
| Assets | |||||||||||||||||||||||
Corporate money market funds (1) | $ | 201,803 | $ | 0 | $ | 0 | $ | 201,803 | |||||||||||||||
Mutual funds (2) | 0 | 18,166 | 0 | 18,166 | |||||||||||||||||||
Certificates of deposit (3) | 0 | 0 | 0 | 0 | |||||||||||||||||||
Derivative instruments (4) | 0 | 3,027 | 0 | 3,027 | |||||||||||||||||||
| Total assets measured at fair value | $ | 201,803 | $ | 21,193 | $ | 0 | $ | 222,996 | |||||||||||||||
| Liabilities | |||||||||||||||||||||||
Derivative instruments (4) | $ | 0 | $ | 5,311 | $ | 0 | $ | 5,311 | |||||||||||||||
| Total liabilities measured at fair value | $ | 0 | $ | 5,311 | $ | 0 | $ | 5,311 | |||||||||||||||
| Fair Value Measurements at August 31, 2020 | |||||||||||||||||||||||
| (in thousands) | Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||
| Assets | |||||||||||||||||||||||
Corporate money market funds (1) | $ | 276,852 | $ | 0 | $ | 0 | $ | 276,852 | |||||||||||||||
Mutual funds (2) | 0 | 17,257 | 0 | 17,257 | |||||||||||||||||||
Certificates of deposit (3) | 0 | 2,315 | 0 | 2,315 | |||||||||||||||||||
Derivative instruments (4) | 0 | 3,644 | 0 | 3,644 | |||||||||||||||||||
| Total assets measured at fair value | $ | 276,852 | $ | 23,216 | $ | 0 | $ | 300,068 | |||||||||||||||
| Liabilities | |||||||||||||||||||||||
Derivative instruments (4) | $ | 0 | $ | 5,773 | $ | 0 | $ | 5,773 | |||||||||||||||
| Total liabilities measured at fair value | $ | 0 | $ | 5,773 | $ | 0 | $ | 5,773 | |||||||||||||||
Certain assets, including goodwill and intangible assets,
5.
The following is a summary2021 through the first quarter of all hedging positions and corresponding fair values:
(in thousands) | Gross Notional Value | Fair Value (Liability) Asset | ||||||||||||||
Currency Hedged (in U.S. dollars) | November 30, 2017 | August 31, 2017 | November 30, 2017 | August 31, 2017 | ||||||||||||
Indian Rupee | 43,860 | 51,000 | 5,375 | 6,142 | ||||||||||||
Total | $ | 43,860 | $ | 51,000 | $ | 5,375 | $ | 6,142 | ||||||||
fiscal 2022.
Counterparty₱1.3 billion and Rs2.4 billion, respectively. The gross notional value of foreign currency forward contracts to purchase U.S. dollars with Euros and British Pound Sterling was €36.3 million and £37.6 million, respectively.
Facility (as defined below in Note 11,
Debt).Asthe gross notional values of the derivative instruments:
(in thousands, in U.S. dollars) | Gross Notional Value | ||||||||||
| November 30, 2020 | August 31, 2020 | ||||||||||
| Foreign currency forward contracts | $ | 150,298 | $ | 129,649 | |||||||
| Interest rate swap agreement | 287,500 | 287,500 | |||||||||
| Total cash flow hedges | $ | 437,798 | $ | 417,149 | |||||||
(in thousands) Designation of Derivatives | Balance Sheet Location | November 30, 2017 | August 31, 2017 | ||||||
Derivatives designated as hedging instruments | Assets: Foreign Currency Forward Contracts | ||||||||
Prepaid expenses and other current assets | $ | 3,943 | $ | 3,796 | |||||
Other assets | $ | 1,432 | $ | 2,346 | |||||
Liabilities: Foreign Currency Forward Contracts | |||||||||
Accounts payable and accrued expenses | $ | — | $ | — | |||||
| Fair Value of Derivative Instruments | ||||||||||||||||||||
| Derivatives designated as hedging instruments | Derivative Assets | Derivative Liabilities | ||||||||||||||||||
| Balance Sheet Classification | November 30, 2020 | August 31, 2020 | Balance Sheet Classification | November 30, 2020 | August 31, 2020 | |||||||||||||||
| Foreign currency forward contracts | Prepaid expenses and other current assets | $ | 3,027 | $ | 3,644 | Accounts payable and accrued expenses | $ | 45 | $ | 93 | ||||||||||
| Interest rate swap agreement | Prepaid expenses and other current assets | 0 | 0 | Accounts payable and accrued expenses | 1,447 | 1,861 | ||||||||||||||
| Other Assets | 0 | 0 | Other non-current liabilities | 3,819 | 3,819 | |||||||||||||||
| Total cash flow hedges | $ | 3,027 | $ | 3,644 | $ | 5,311 | $ | 5,773 | ||||||||||||
(in thousands) | Loss Recognized in AOCL on Derivatives | Location of Loss | Gain (Loss) Reclassified | ||||||||||||||
Derivatives in Cash Flow Hedging Relationships | 2017 | 2016 | 2017 | 2016 | |||||||||||||
Foreign currency forward contracts | $ | (1 | ) | $ | (649 | ) | SG&A | $ | 763 | $ | (1,357 | ) | |||||
No2019, respectively:
| (in thousands) | Gain (Loss) Recognized in AOCL on Derivatives | Location of Gain (Loss) Reclassified from AOCL into Income | Gain (Loss) Reclassified from AOCL into Income | ||||||||||||||
| November 30, | November 30, | ||||||||||||||||
| Derivatives in Cash Flow Hedging Relationships | 2020 | 2019 | 2020 | 2019 | |||||||||||||
| Foreign currency forward contracts | $ | 248 | $ | 2,030 | SG&A | $ | 817 | $ | (734) | ||||||||
| Interest rate swap agreement | (56) | 0 | Interest expense, net | (470) | 0 | ||||||||||||
| Total cash flow hedges | $ | 192 | $ | 2,030 | $ | 347 | $ | (734) | |||||||||
FactSet’s
6. OTHER COMPREHENSIVE INCOME (LOSS) AND ACCUMULATED OTHER COMPREHENSIVE LOSS
The components of other comprehensive income and amounts reclassified out of AOCL into earnings during the three months ended
November 30, 2017 | November 30, 2016 | |||||||||||||||
(in thousands) | Pre-tax | Net of tax | Pre-tax | Net of tax | ||||||||||||
Foreign currency translation adjustments | $ | 8,466 | $ | 8,466 | $ | (11,497 | ) | $ | (11,497 | ) | ||||||
Realized (gain) loss on cash flow hedges reclassified to earnings (1) | (763 | ) | (476 | ) | 1,357 | 857 | ||||||||||
Unrealized (loss) gain on cash flow hedges recognized in AOCL | (1 | ) | — | (649 | ) | (410 | ) | |||||||||
Other comprehensive income (loss) | $ | 7,702 | $ | 7,990 | $ | (10,789 | ) | $ | (11,050 | ) | ||||||
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The components of AOCL are as follows:
(in thousands) | November 30, 2017 | August 31, 2017 | ||||||
Accumulated unrealized gains on cash flow hedges, net of tax | $ | 3,326 | $ | 3,802 | ||||
Accumulated foreign currency translation adjustments | (30,056 | ) | (38,522 | ) | ||||
Total accumulated other comprehensive loss | $ | (26,730 | ) | $ | (34,720 | ) | ||
7. SEGMENT INFORMATION
Operating segments are defined as components of an enterprise that engage in business activities from which they may earn revenues and incur expenses, whose operating results 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 for which discrete financial information is available. Financial information at the operating segment level is reviewed jointly by the Chief Executive Officer (“CEO”) and senior management. Senior management consists of certain executives who directly report to the CEO, consisting of the Chief Financial Officer, Chief Operating Officer, Chief Technology and Product Officer, Global Head of Sales and Client Solutions, General Counsel and Chief Human Resources Officer. Senior management, along with the CEO, constitute FactSet’s chief operating decision making group (“CODMG”) and is responsible for making decisions about resources allocated amongst the operating segments based on actual results.
FactSet’s operating segments are aligned with how the Company, including its CODMG, manages the business and the demographic markets in which2, 2020, FactSet serves. The Company’s internal financial reporting structure is based on three segments; the U.S., Europe and Asia Pacific. FactSet believes this alignment helps it better manage the business and view the markets the Company serves, which are centered on providing integrated global financial and economic information. Sales, consulting, data collection, product development and software engineering are the primary functional groups within the U.S., Europe and Asia Pacific segments that provide global financial and economic information to investment managers, investment banks and other financial services professionals.
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 region, respectively. The European segment maintains office locations in England, Bulgaria, Dubai, France, Germany, Italy, Latvia, the Netherlands, Spain, and Switzerland. The Asia Pacific segment has office locations in Australia, Hong Kong, India, Japan, the Philippines, Singapore and South Africa. Segment revenues reflect direct sales to clients based in their respective geographic locations. 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, office and other direct expenses.
Expenditures associated with the Company’s data centers, third party data costs and corporate charges are recorded by the U.S. segment and are not allocated to the other segments. The content collection centers located in India and the Philippines benefitacquired all of the Company’s operating segments and thus the expenses incurred at these locations are allocated to each segment based on a percentageoutstanding shares of revenues. Of the total $712.5 million of goodwill reported by the Company at November 30, 2017, 54% was recorded in the U.S. segment, 45% in the European segment and the remaining 1% in the Asia Pacific segment.
The following reflects the results of operations of the segments consistent with the Company’s management system. These results are used by management, both in evaluating the performance of, and in allocating resources to, each of the segments.
(in thousands)
For the three months ended November 30, 2017 | U.S. | Europe | Asia Pacific | Total | ||||||||||||
Revenues from clients | $ | 208,768 | $ | 91,727 | $ | 28,646 | $ | 329,141 | ||||||||
Segment operating profit | 40,771 | 32,970 | 15,357 | 89,098 | ||||||||||||
Total assets | 719,491 | 603,848 | 107,263 | 1,430,602 | ||||||||||||
Capital expenditures | 3,545 | 1,524 | 843 | 5,912 | ||||||||||||
For the three months ended November 30, 2016 | U.S. | Europe | Asia Pacific | Total | ||||||||||||
Revenues from clients | $ | 190,627 | $ | 71,863 | $ | 25,573 | $ | 288,063 | ||||||||
Segment operating profit | 40,005 | 36,584 | 13,730 | 90,319 | ||||||||||||
Total assets | 698,328 | 262,523 | 85,314 | 1,046,165 | ||||||||||||
Capital expenditures | 11,125 | 491 | 921 | 12,537 | ||||||||||||
8. BUSINESS COMBINATIONS
BISAM
On March 17, 2017, FactSet acquired BI-SAM Technologies (“BISAM”)TVL for a total purchase price of $217.6 million. BISAM is a global provider of portfolio performance and attribution, multi-asset risk, GIPS composites management and reporting. BISAM’s product offerings include B-One, BISAM’s cross-asset solution, which will serve as a complement to both FactSet’s portfolio analytics suite and client reporting solutions, and Cognity, which enhances FactSet’s risk analysis for derivatives and quantitative portfolio construction. These factors contributed to a purchase price
Allocationallocation of the purchase price tofor TVL as soon as possible, but in any event, no later than one year from the acquisition date.
(in thousands) | ||||
Tangible assets acquired | $ | 27,583 | ||
Amortizable intangible assets | ||||
Software technology | 18,261 | |||
Client relationships | 37,597 | |||
Trade name | 741 | |||
Goodwill | 173,898 | |||
Total assets acquired | $ | 258,080 | ||
Liabilities assumed | (40,443 | ) | ||
Net assets acquired | $ | 217,637 | ||
| Estimated Acquisition Date Fair Value | Estimated Acquisition Date Useful Life | Amortization Method | |||||||||||||||
| (in thousands) | (in years) | ||||||||||||||||
| Current assets | $ | 811 | |||||||||||||||
| Amortizable intangible assets | |||||||||||||||||
| Software technology | 10,700 | 13 years | Straight-line | ||||||||||||||
| Client relationships | 900 | 12 years | Straight-line | ||||||||||||||
| Trade names | 2,800 | 15 years | Straight-line | ||||||||||||||
| Goodwill | 29,342 | ||||||||||||||||
| Other non-current assets | 5,299 | ||||||||||||||||
| Current liabilities | (3,184) | ||||||||||||||||
| Other non-current liabilities | (4,753) | ||||||||||||||||
| Total purchase price | $ | 41,915 | |||||||||||||||
Intangible assets of $56.6 million have been allocated to amortizable intangible assets consisting of client relationships, amortized over 16 years using an accelerated amortization method; software technology, amortized over five years using a straight-line amortization method; and a trade name, amortized over four years using a straight-line amortization method.
Goodwill totaling $173.9$29.3 million represents the excess of the TVL purchase price over the fair value of net assets acquired and is included in the net tangible and intangible assets acquired.Americas segment. Goodwill generated from the BISAMTVL acquisition is included in the US and European segments and is not deductible for income tax purposes. The results of operations of BISAMTVL have been included in the Company’s Consolidated Financial Statements, of Incomewithin the Americas segment, since the completion of the acquisition on March 17, 2017.November 2, 2020. Pro forma information has not been presented because the effect of the BISAMTVL acquisition is not material to the Company’s consolidated financial results.
Vermilion
On November 8, 2016, FactSet acquired Vermilion Holdings Limited (“Vermilion”) for a total purchase price of $67.9 million. Vermilion is a global provider of client reporting and communications software and services to the financial services industry. Client reporting is a growing area of the market as regulatory requirements rise; and with the acquisition of Vermilion and its Vermilion Reporting Suite (“VRS”), FactSet now offers a workflow around all elements of the client reporting process, which it expects will expand as investors grow increasingly sophisticated. This factor contributed to a purchase price in excess of fair value of Vermilion’s net tangible and intangible assets, leading to the recognition of goodwill. At the time of acquisition, Vermilion employed 59 individuals in its London, Boston and Singapore offices. Total transaction costs related to the acquisition were $0.7 million and recorded within SG&A expenses in the Consolidated Statements of Income.
Allocation of the purchase price to the assets acquired and liabilities assumed was finalized during the third quarter of fiscal 2017. There were no significant adjustments between the preliminary and final allocation. The total purchase price was allocated to Vermilion’s net tangible and intangible assets based upon their estimated fair value as of the date of acquisition. Based upon the purchase price and the valuation, the allocation is as follows:
(in thousands) | ||||
Tangible assets acquired | $ | 7,916 | ||
Amortizable intangible assets | ||||
Software technology | 10,916 | |||
Client relationships | 5,954 | |||
Non-compete agreements | 806 | |||
Trade name | 571 | |||
Goodwill | 51,157 | |||
Total assets acquired | $ | 77,320 | ||
Liabilities assumed | (9,434 | ) | ||
Net assets acquired | $ | 67,886 | ||
Intangible assets of $18.2 million have been allocated to amortizable intangible assets consisting of client relationships, amortized over 15 years using an accelerated amortization method; software technology, amortized over six years using a straight-line amortization method; non-compete agreements, amortized over three years using a straight-line amortization method; and a trade name, amortized over four years using a straight-line amortization method.
Goodwill totaling $51.2 million represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired. Goodwill generated from the Vermilion acquisition is included in the European segment and is not deductible for income tax purposes. The results of operations of Vermilion have been included in the Company’s Consolidated Statements of Income since the completion of the acquisition on November 8, 2016. Pro forma information has not been presented because the effect of the Vermilion acquisition is not material to the Company’s consolidated financial results.
(in thousands) U.S. Europe Asia Pacific Total Balance at August 31, 2017 Foreign currency translations Other adjustments Balance at November 30, 2017 Goodwill is not amortized as it is estimated to have an indefinite life. At least annually, the Company is required to test goodwill at the reporting unit level for potential impairment, and, if impaired, write down to fair value based on the present value of discounted cash flows. The At November 30, 2017 (in thousands) Gross Carrying Amount Accumulated Amortization Net Carrying Amount Data content Client relationships Software technology Non-compete agreements Trade names Total At August 31, 2017 (in thousands) Gross Carrying Amount Accumulated Amortization Net Carrying Amount Data content Client relationships Software technology Non-compete agreements Trade names Total Fiscal Year (in thousands) Estimated Amortization Expense 2018 (remaining nine months) 2019 2020 2021 2022 Thereafter Total Three Months ended November 30, (in thousands) 2017 2016 Balance at September 1 Common stock issued for employee stock plans Repurchase of common stock from employees(1) ) ) Repurchase of common stock under the share repurchase program ) ) Repurchase of common stock under accelerated share repurchase agreement )(2) Balance at November 30, 2017 and 2016, respectively (in thousands, except per share data) Net Income (Numerator) Weighted Average Common Shares (Denominator) Per Share Amount For the three months ended November 30, 2017 Basic EPS Income available to common stockholders Diluted EPS Dilutive effect of stock options and restricted stock Income available to common stockholders plus assumed conversions For the three months ended November 30, 2016 Basic EPS Income available to common stockholders Diluted EPS Dilutive effect of stock options and restricted stock Income available to common stockholders plus assumed conversions Declaration Date Dividends Per Type Record Date Total $ Amount Payment Date November 8, 2017 Regular (cash) November 30, 2017 December 19, 2017 August 10, 2017 Regular (cash) August 31, 2017 September 19, 2017 May 5, 2017 Regular (cash) May 31, 2017 June 20, 2017 February 6, 2017 Regular (cash) February 28, 2017 March 21, 2017 November 10, 2016 Regular (cash) November 30, 2016 December 20, 2016 August 5, 2016 Regular (cash) August 31, 2016 September 20, 2016 (in thousands, except per share data) Number Outstanding Weighted Average Exercise Price Per Share Balance at August 31, 2017 Granted – nonperformance-based Exercised ) Forfeited ) Balance at November 30, 2017 Vesting Percentage (in thousands) Cumulative Catch-up Adjustment* Remaining Expense to be Recognized 40% (current expectation) Vesting Percentage (in thousands) Cumulative Catch-up Adjustment* Remaining Expense to be Recognized 0% (current expectation) Vesting Percentage (in thousands) Cumulative Catch-up Adjustment* Remaining Expense to be Recognized 0% (current expectation) (in thousands, except per award data) Number Outstanding Weighted Average Grant Date Fair Value Per Award Balance at August 31, 2017 Granted Forfeited Vested(1) Balance at November 30, 2017 (in thousands) Share-based Awards Available for Grant under the Employee Option Plan Share-based Awards Available for Grant under the Non-Employee Directors Plan Balance at August 31, 2017 Granted – nonperformance-based options Granted – performance-based options Granted – restricted stock awards(1) Share-based awards canceled/forfeited(2) Balance at November 30, 2017 Three months ended November 30, 2017 2016 Term structure of risk-free interest rate Expected life (years) Term structure of volatility Dividend yield Weighted average estimated fair value Weighted average exercise price Fair value as a percentage of exercise price Three months ended November 30, 2017 2016 Risk-free interest rate Expected life (months) Expected volatility Dividend yield Weighted average estimated fair value Three months ended November 30, (in thousands) 2017 2016 Income before income taxes Total provision for income taxes Effective tax rate (in thousands) November 30, 2017 August 31, 2017 Deferred tax assets: Receivable reserve Depreciation on property, equipment and leasehold improvements Deferred rent Stock-based compensation Purchased intangible assets, including acquired technology Other Total deferred tax assets (in thousands) November 30, 2017 August 31, 2017 Deferred tax liabilities: Stock-based compensation Depreciation on property, equipment and leasehold improvements Purchased intangible assets, including acquired technology Other Total deferred tax liabilities The following table summarizes the (in thousands) Unrecognized income tax benefits at August 31, 2017 Additions based on tax positions related to the current year Additions for tax positions of prior years Reductions from settlements with taxing authorities Unrecognized income tax benefits at November 30, 2017 (in thousands) November 30, 2017 August 31, 2017 2017 Revolving Credit Facility Total Outstanding Debt Years ended August 31, (in thousands) Minimum Lease Payments 2018 (remaining nine months) 2019 2020 2021 2022 Thereafter Total and Vendors Credit Legal Matters 2020. three months ended November 30, 2020. Three months ended November 30, (in thousands, except per share data) 2017 2016 Change Revenues Cost of services Selling, general and administrative ("SG&A") Operating income Net income Diluted earnings per common share Diluted weighted average common shares Three months ended November 30, (in thousands) 2017 2016 Change U.S. % of revenues Europe Asia Pacific International % of revenues Consolidated Three months ended November 30, (in thousands) 2017 2016 Change Cost of services SG&A Total operating expenses Operating Income Operating Margin Workflow Solution Administrative Three months ended November 30, (in thousands) 2017 2016 Change U.S. Europe Asia Pacific Consolidated Information revenue. Refer to Note 16, Asia Pacific operating income increased employee headcount of 542 employees and annual base salary increases year-over-year. Three months ended November 30, (in thousands) 2017 2016 Change Provision for income taxes Net income Diluted earnings per share 2020 driven mainly by research and development ("R&D") tax credits and a foreign derived intangible income ("FDII") deduction. Our effective tax rate for the three months ended November 30, 2020 is further reduced by windfall tax benefits from stock-based compensation. (In thousands, except per share data) 2017 2016 Change GAAP net income Intangible asset amortization Deferred revenue fair value adjustment ─ Other non-recurring items Income tax benefits ─ Adjusted net income GAAP diluted earnings per common share Intangible asset amortization Deferred revenue fair value adjustment ─ Other non-recurring items Income tax benefits ─ Adjusted diluted earnings per common share Weighted average common shares (diluted) Three months ended November 30, (in thousands) 2017 2016 Net cash provided by operating activities Capital expenditures (1) Free cash flow (2) Net cash used in investing activities Net cash used in financing activities Cash and cash equivalents at end of period Liquidity 2020. Estimates 2020, with the exception of the accounting guidance adopted in the first quarter of fiscal 2021 related to the adoption of ASU 2016-03, 2021. A sensitivity analysis was performed based on the estimated fair value of all foreign currency forward contracts outstanding at November 30, Refer to Part II, Item 1A, policies. this report. 10-K for the fiscal year ended August 31, 2020, except for the "Brexit" section in the "Legal & Regulatory Risks" risk factor, as set out below. Period Total number Average Total number of Maximum number of shares September 2017 October 2017 November 2017 Total Certification of the Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 XBRL Instance Document 101.SCH XBRL Taxonomy Extension Schema 101.CAL XBRL Taxonomy Extension Calculation Linkbase 101.DEF XBRL Taxonomy Extension Definition Linkbase Document 101.LAB XBRL Taxonomy Extension Label Linkbase 101.PRE XBRL Taxonomy Extension Presentation Linkbase /s/ GREGORY T. MOSKOFF (Principal Accounting Officer)9.Financial Statements.8. GOODWILLChanges in the carrying amount of goodwill by segment for the three months ended November 30, 20172020 are as follows: $ 386,835 $ 317,759 $ 2,966 $ 707,560 — 5,390 (49 ) 5,341 (107 ) (318 ) — (425 ) $ 386,728 $ 322,831 $ 2,917 $ 712,476 (in thousands)Americas EMEA Asia Pacific Total Balance at August 31, 2020 $ 386,195 $ 320,427 $ 3,081 $ 709,703 Acquisitions 29,342 0 0 29,342 Foreign currency translations 0 (519) 49 (470) Balance at November 30, 2020 $ 415,537 $ 319,908 $ 3,130 $ 738,575 Company’sCompany’s reporting units evaluated for potential impairment were the U.S., EuropeAmericas, EMEA and Asia Pacific, which reflect the level of internal reporting the Company uses to manage its business and operations. The three3 reporting units are consistent with the reported operating segments reported as there is no discrete financial information available for the subsidiaries within each operating segment. The Company performed its annual goodwill impairment test during the fourth quarter of fiscal 2017,2020, consistent with the timing of previous years, at which timeutilizing a qualitative analysis, and concluded it was determined that there was no impairment, withmore likely than not the fair value of each reporting unit was greater than its respective carrying value and no impairment charge was required.17Table of the Company’s reporting units significantly exceeding carrying value.10. INTANGIBLE ASSETSFactSet’s identifiable intangible assets consist of acquired content databases, client relationships, software technology, non-compete agreements and trade names resulting from previous acquisitions, which have been fully integrated into the Company’s operations. The weighted average useful life of FactSet’s acquired identifiable intangible assets at November 30, 2017 was 11.5 years. The Company amortizes intangible assets over their estimated useful lives, which are evaluated quarterly to determine whether events and circumstances warrant a revision to the remaining period of amortization. There have been no changes to the estimate of the remaining useful lives during the first three months of fiscal 2018. Amortizable intangible assets are tested for impairment, if indicators of impairment are present, based on undiscounted cash flows, and, if impaired, written down to fair value based on discounted cash flows. No impairment of intangible assets has been identified during any of the periods presented. The intangible assets have no assigned residual values.The gross carrying amounts and accumulated amortization totals related to the Company’s identifiable intangible assets are as follows: $ 35,039 $ 19,890 $ 15,149 100,375 24,341 76,034 106,610 34,362 72,248 4,875 1,750 3,125 4,113 1,795 2,318 $ 251,012 $ 82,138 $ 168,874 $ 34,116 $ 18,899 $ 15,217 99,779 22,339 77,440 105,963 30,889 75,074 4,833 1,518 3,315 4,080 1,583 2,497 $ 248,771 $ 75,228 $ 173,543 Amortization expense recorded for intangible assets was $6.2 million and $3.8 million for the three months ended November 30, 2017 and 2016, respectively. As of November 30, 2017, estimated intangible asset amortization expense for each of the next five years and thereafter is as follows: $ 18,533 23,838 23,120 21,589 19,259 62,535 $ 168,874 11. COMMON STOCK AND EARNINGS PER SHAREOn November 8, 2017, FactSet’s Board of Directors approved a regular quarterly dividend of $0.56 per share, or $2.24 per share per annum. The cash dividend of $21.9 million was paid on December 19, 2017 to common stockholders of record at the close of business on November 30, 2017.Shares of common stock outstanding were as follows: 39,023 40,038 256 310 (4 (36 (165 (505 — (103 39,110 39,704 (1)For the three months ended November 30, 2017 and 2016, the Company repurchased 4,220 and 34,639 shares, or $0.8million and $5.3million, of common stock, respectively, in settlement of employee tax withholding obligations due upon the vesting of restricted stock.(2)On July 1, 2016, FactSet entered into an accelerated share repurchase agreement (the “ASR Agreement”) to purchase FactSet common stock. 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.A reconciliation of the weighted average shares outstanding used in the basic and diluted earnings per share (“EPS”) computations is as follows: $ 70,379 39,085 $ 1.80 595 $ 70,379 39,680 $ 1.77 $ 66,583 39,827 $ 1.67 273 $ 66,583 40,100 $ 1.66 Dilutive potential common shares consist of stock options and unvested restricted stock awards. The number of stock options excluded from the calculation of diluted earnings per share for the three months ended November 30, 2017 and November 30, 2016 was 552,389 and 621,503, respectively, because their inclusion would have been anti-dilutive.For the three months ended November 30, 2017, the number of performance-based stock option grants excluded from the calculation of diluted EPS was 332,338. For the three months ended November 30, 2016, the number of performance-based stock option grants excluded from the calculation of diluted earnings per share was 756,994. Performance-based stock options are omitted from the calculation of diluted EPS until the performance criteria are probable of being achieved.12. STOCKHOLDERS’ EQUITYPreferred StockAt November 30, 2017 and August 31, 2017, there were 10,000,000 shares of preferred stock ($0.01 par value per share) authorized, of which no shares were issued and outstanding. FactSet’s Board of Directors may from time to time authorize the issuance of one or more series of preferred stock and, in connection with the creation of such series, determine the characteristics of each such series including, without limitation, the preference and relative, participating, optional or other special rights, and the qualifications, limitations or restrictions of the series. Common StockAt November 30, 2017 and August 31, 2017, there were 150,000,000 shares of common stock ($.01 par value per share) authorized, of which 52,101,426 and 51,845,132 shares were issued, respectively. The authorized shares of common stock are issuable for any proper corporate purpose, including future stock splits, stock dividends, acquisitions, raising equity capital or to adopt additional employee benefit plans.Treasury StockAt November 30, 2017 and August 31, 2017, there were 12,991,346 and 12,822,100 shares of treasury stock (at cost) outstanding, respectively. As a result, 39,110,080 and 39,023,032 shares of FactSet common stock were outstanding at November 30, 2017 and August 31, 2017, respectively.Share Repurchase ProgramRepurchases will be made from time to time in the open market and privately negotiated transactions, subject to market conditions. During the first three months of fiscal 2018, the Company repurchased 164,920 shares for $30.9 million compared to 505,000 shares for $79.3 million in the prior year comparable period. As of November 30, 2017, $213.2 million remains authorized for future share repurchases. No minimum number of shares to be repurchased has been fixed. There is no timeframe to complete the repurchase program and it is expected that share repurchases will be paid using existing and future cash generated by operations.Restricted Stock VestingRestricted stock awards entitle the holder to shares of common stock as the awards vest over time. During the first three months of fiscal 2018, 11,278 of previously granted restricted stock awards vested and were included in common stock outstanding as of November 30, 2017 (less 4,220 shares repurchased from employees to cover their cost of taxes upon vesting of the restricted stock). During the same period a year ago, 94,877 of previously granted restricted stock awards vested and were included in common stock outstanding as of November 30, 2016 (less 34,639 shares repurchased from employees to cover their cost of taxes upon vesting of the restricted stock).DividendsThe Company’s Board of Directors declared the following historical dividends:
Share of
Common Stock
(in thousands) $ 0.56 $ 21,902 $ 0.56 $ 21,853 $ 0.56 $ 21,951 $ 0.50 $ 19,709 $ 0.50 $ 19,852 $ 0.50 $ 20,019 All of the above cash dividends were paid from existing cash resources. Future dividend payments will depend on the Company’s earnings, capital requirements, financial condition and other factors considered relevant by the Company and is subject to final determination by the Company’s Board of Directors.13. EMPLOYEE STOCK OPTION AND RETIREMENT PLANSStock Option AwardsThe FactSet Research Systems Inc. 2004 Stock Option and Award Plan, as Amended and Restated (the “Option Plan”) provides for the grant of share-based awards, including stock options and restricted stock awards to employees of FactSet. The expiration date of the Option Plan is December 14, 2020. Stock options granted under the Option Plan expire not more than ten years from the date of grant and the majority vest ratably over a period of five years. Options become vested and exercisable provided the employee continues employment with the Company through the applicable vesting date and remain exercisable until expiration or cancellation. Options are not transferable or assignable other than by will or the laws of descent and distribution. During the grantee’s lifetime, the options may be exercised only by the grantee.Stock Option ActivityDuring the first three months of fiscal 2018, FactSet granted 553,942 stock options at a weighted average exercise price of $189.98 to existing employees of the Company. As of November 30, 2017, a total of 3,669,181 stock options were outstanding at a weighted average exercise price of $149.09. Unamortized stock-based compensation of $75.1 million is expected to be recognized as stock-based compensation expense over the remaining weighted average vesting period of 3.8 years.A summary of stock option activity is as follows: 3,366 $ 139.29 554 $ 189.98 (226 $ 104.90 (25 $ 133.89 3,669 $ 149.09 The total number of in-the-money options exercisable as of November 30, 2017 was 1.3 million with a weighted average exercise price of $121.40. The aggregate intrinsic value of in-the-money stock options exercisable at November 30, 2017 and August 31, 2017 was $102.3 million and $49.7 million, respectively. Aggregate intrinsic value represents the difference between the Company’s closing stock prices of $199.88 and $157.18 on November 30, 2017 and August 31, 2017, respectively, and the exercise price multiplied by the number of options exercisable as of that date. The total pre-tax intrinsic value of stock options exercised during the three months ended November 30, 2017 and 2016 was $18.0 million and $16.4 million, respectively.Performance-based Stock OptionsPerformance-based stock options require management to make assumptions regarding the likelihood of achieving Company performance targets. The number of performance-based options that vest will be predicated on the Company achieving performance levels during the measurement period subsequent to the date of grant. Dependent on the financial performance levels attained by FactSet, a percentage of the performance-based stock options will vest to the grantees of those stock options. However, there is no current guarantee that such options will vest in whole or in part.February 2015 Performance-based Option Grant ReviewIn connection with the acquisition of Code Red, FactSet granted 137,522 performance-based stock options during the second quarter of fiscal 2015. Of the total amount granted, 68,761 performance-based options were eligible to vest if certain Code Red ASV and operating margin targets were achieved over a two-year measurement period ending February 28, 2017. At the conclusion of the measurement period, 70% of the options were deemed eligible to vest, with the remaining options being forfeited. The option holders must remain employed by FactSet through February 28, 2019 in order for the options to vest. As of November 30, 2017, total unamortized stock-based compensation of $0.6 million will be recognized as expense over the remaining vesting period of 1.2 years.The remaining 68,761 options granted in February 2015 are eligible to cliff vest based on a four-year measurement period ending February 28, 2019. As of November 30, 2017, total unamortized stock-based compensation of $0.4 million will be recognized as expense over the remaining vesting period of 1.2 years. A change, up or down, in the actual financial performance levels achieved by Code Red in future fiscal years could result in the following changes to the current estimate of the vesting percentage and related expense: 0% $ (844 ) — 10% $ (633 ) $ 89 $ — $ 356 70% $ 633 $ 623 100% $ 1,266 $ 891 * Amounts represent the cumulative catch-up adjustment to be recorded if there was a change in the vesting percentage as of November 30, 2017.January 2017 Performance-based Option Grant ReviewIn connection with the acquisition of Vermilion, FactSet granted 61,744 performance-based stock options in January 2017. These performance-based options will vest 40% on the second anniversary date of the grant and 20% on each subsequent anniversary date if certain Vermilion revenue and operating income targets are achieved by November 30, 2017. The option holders must also remain employed by FactSet for the options to be eligible to vest. As of November 30, 2017, FactSet does not believe these growth targets are probable of being achieved, and as such, no stock-based compensation expense is expected to be recognized in connection with these performance-based options. A change in the actual financial performance levels achieved by Vermilion in future fiscal years could result in the following changes to the current estimate of the vesting percentage and related expense: $ — $ — 100% $ 473 $ 2,232 * Amounts represent the cumulative catch-up adjustment to be recorded if there was a change in the vesting percentage as of November 30, 2017. June 2017 Performance-based Option Grant ReviewIn connection with the acquisition of BISAM, FactSet granted 206,417 performance-based stock options in June 2017. These performance-based options will vest 40% on the second anniversary date of the grant and 20% on each subsequent anniversary date if certain BISAM revenue and operating income targets are achieved by March 31, 2019. The option holders must also remain employed by FactSet for the options to be eligible to vest. As of November 30, 2017, FactSet does not believe these growth targets are probable of being achieved, and as such, no stock-based compensation expense is expected to be recognized in connection with these performance-based options. A change in the actual financial performance levels achieved by BISAM in future fiscal years could result in the following changes to the current estimate of the vesting percentage and related expense: $ — $ — 80% $ 592 $ 6,515 90% $ 666 $ 7,329 100% $ 740 $ 8,144 * Amounts represent the cumulative catch-up adjustment to be recorded if there was a change in the vesting percentage as of November 30, 2017. Restricted Stock and Stock Unit AwardsThe Company’s Option Plan permits the issuance of restricted stock and restricted stock units. Restricted stock awards are subject to continued employment over a specified period.Restricted Stock and Stock Unit Awards ActivityDuring the first three months of fiscal 2018, FactSet granted 961 restricted stock awards to employees of the Company at a weighted average grant date fair value of $182.17. These restricted stock awards vest over a weighted average period of 5.0 years from grant date.As of November 30, 2017, a total of 161,527 shares of restricted stock and restricted stock units were unvested and outstanding, which results in unamortized stock-based compensation of $17.5 million to be recognized as stock-based compensation expense over the remaining weighted average vesting period of 3.3 years.A summary of restricted stock award activity is as follows: 182 $ 138.62 1 $ 182.17 (10 ) $ 114.37 (11 ) $ 157.37 162 $ 139.12 (1)Of the11,278 restricted stock awards that vested during the first quarter of fiscal 2018, 9,765 related to the second tranche (20%) of awards granted on October 16, 2015.These awards vest 20% per year on the anniversary date of the award. The remaining 1,513 awards vested related to other grants.Share-based Awards Available for GrantA summary of share-based awards available for grant is as follows: 897 42 (554 ) — — — (2 ) — 51 — 392 42 (1)Each restricted stock award granted is equivalent to 2.5 shares granted under the Company’s Option Plan.(2)Under the Company’s Option Plan, for each restricted stock award canceled/forfeited, an equivalent of 2.5 shares is added back to the available share-based awards balance.Employee Stock Purchase PlanShares of FactSet common stock may be purchased by eligible employees under the Amended and Restated FactSet Research Systems Inc. 2008 Employee Stock Purchase Plan (the “ESPP”) in three-month intervals at a purchase price equal to at least 85% of the lesser of the fair market value of the Company’s common stock on either the first day or the last day of each three-month offering period. Employee purchases may not exceed 10% of their gross compensation or a $25,000 contribution limit during an offering period.During the three months ended November 30, 2017, employees purchased 19,589 shares at a weighted average price of $134.39 as compared to 16,496 shares at a weighted average price of $136.14 for the three months ended November 30, 2016. At November 30, 2017, 313,583 shares were reserved for future issuance under the ESPP.401(k) PlanThe Company established it 401(k) Plan in fiscal 1993. The 401(k) Plan is a defined contribution plan covering all full-time, U.S. employees of the Company and is subject to the provisions of the Employee Retirement Income Security Act of 1974 and the Internal Revenue Code of 1986 (“IRC”). Each year, participants may contribute up to 60% of their eligible annual compensation, subject to annual limitations established by the IRC. The Company matches up to 4% of employees’ earnings, capped at the Internal Revenue Service annual maximum. Company matching contributions are subject to a five year graduated vesting schedule. All full-time, U.S. employees are eligible for the matching contribution by the Company. The Company contributed $2.8 million and $1.9 million in matching contributions to employee 401(k) accounts during the three months ended November 30, 2017 and 2016, respectively.14. STOCK-BASED COMPENSATIONThe Company recognized total stock-based compensation expense of $7.5 million and $6.4 million during the three months ended November 30, 2017 and 2016, respectively. As of November 30, 2017, $92.5 million of total unrecognized compensation expense related to non-vested equity awards is expected to be recognized over a weighted average period of 3.6 years. There was no stock-based compensation capitalized as of November 30, 2017 or August 31, 2017, respectively.Employee Stock Option Fair Value DeterminationsThe Company utilizes the lattice-binomial option-pricing model (“binomial model”) to estimate the fair value of new employee stock option grants. The Company’s determination of fair value of stock option awards on the date of grant using the binomial model is affected by the Company’s stock price as well as assumptions regarding a number of variables. These variables include, but are not limited to the Company’s expected stock price volatility over the term of the awards, interest rates, option forfeitures and employee stock option exercise behaviors.Q1 2018 553,942 nonperformance-based employee stock options were granted at a weighted average exercise price of $189.98 and a weighted average estimated fair value of $48.27 per share.Q1 2017 671,263 nonperformance-based employee stock options and 22,460 performance-based employee stock options were granted at a weighted average exercise price of $152.51 and a weighted average estimated fair value of $39.60 per share.The weighted average estimated fair value of employee stock options granted was determined using the binomial model with the following weighted average assumptions: 1.28% - 2.41% 0.07% - 2.09% 7.4 7.4 19% - 29% 21% - 30% 1.32% 1.18% $48.27 $39.60 $189.98 $152.51 25.4% 26.0% The risk-free interest rate assumption for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. Expected volatility is based on a combination of historical volatility of the Company’s stock and implied volatilities of publicly traded options to buy FactSet common stock with contractual terms closest to the expected life of options granted to employees. The approach to utilize a mix of historical and implied volatility was based upon the availability of actively traded options on the Company’s stock and the Company’s assessment that a combination of implied volatility and historical volatility is best representative of future stock price trends. The Company uses historical data to estimate option exercises and employee termination within the valuation model. The dividend yield assumption is based on the Company’s history and expectation of dividend payouts. The expected life of employee stock options represents the weighted average period the stock options are expected to remain outstanding and is a derived output of the binomial model. The binomial model estimates employees exercise behavior based on the option’s remaining vested life and the extent to which the option is in-the-money. The binomial model estimates the probability of exercise as a function of these two variables based on the entire history of exercises and cancellations of all past option grants made by the Company.Non-Employee Director Stock Option Fair Value DeterminationsThe 2008 Non-Employee Directors’ Stock Option Plan (the “Directors’ Plan”) provides for the grant of share-based awards, including stock options, to non-employee directors of FactSet. An initial 250,000 shares of FactSet common stock were reserved for issuance under the Directors’ Plan, of which 42,185 remain available for future grant as of November 30, 2017. The expiration date of the Directors’ Plan is December 1, 2018.The Company utilizes the Black-Scholes model to estimate the fair value of non-employee Director stock option grants. The Company’s determination of fair value of share-based payment awards on the date of grant is affected by the Company’s stock price as well as assumptions regarding a number of variables. These variables include, but are not limited to the Company’s expected stock price volatility over the term of the awards, interest rates, option forfeitures and employee stock option exercise behaviors.Fiscal 2018There were no stock options granted to the Company’s non-employee Directors during the first quarter of fiscal 2018.Fiscal 2017There were no stock options granted to the Company’s non-employee Directors during the first quarter of fiscal 2017. However, on January 13, 2017, FactSet granted 23,846 stock options to the Company’s non-employee Directors, including one-time new Director grants of 2,104 stock options each for Malcolm Frank and Sheila B. Jordan, who were elected to FactSet’s Board of Directors on December 20, 2016. All of the options granted on January 13, 2017 have a weighted average estimated fair value of $35.65 per share, using the Black-Scholes option-pricing model with the following weighted average assumptions:Risk-free interest rate1.95%Expected life (years)5.4Expected volatility22.7%Dividend yield1.24%Restricted Stock Fair Value DeterminationsRestricted stock granted to employees entitles the holder to shares of common stock as the award vests over time, but not to dividends declared on the underlying shares while the restricted stock is unvested. The grant date fair value of restricted stock awards is measured by reducing the grant date price of FactSet’s share by the present value of the dividends expected to be paid on the underlying stock during the requisite service period, discounted at the appropriate risk-free interest rate. Restricted stock awards are amortized to expense over the vesting period. During the first three months of fiscal 2018, there were 961 restricted stock awards granted with a weighted average grant date fair value of $182.17. During the first three months of fiscal 2017, FactSet granted 5,084 restricted stock awards at a weighted average grant date fair value of $151.63.Employee Stock Purchase Plan Fair Value DeterminationsDuring the three months ended November 30, 2017, employees purchased 19,589 shares at a weighted average price of $134.39 as compared to 16,496 shares at a weighted average price of $136.14 a year ago. Stock-based compensation expense recorded for each of the three months ended November 30, 2017 and 2016, relating to the ESPP was $0.5 million, respectively.The weighted average estimated fair value for the ESPP was calculated using the Black-Scholes model with the following assumptions: 1.11 % 0.35 % 3 3 7.97 % 10.3 % 1.42 % 1.11 % $ 25.79 $ 30.32 Accuracy of Fair Value EstimatesThe Company is responsible for determining the assumptions used in estimating the fair value of its share-based payment awards. The Company’s determination of fair value of share-based payment awards on the date of grant using an option-pricing model is affected by the Company’s stock price as well as assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to the Company’s expected stock price volatility over the term of the awards, interest rates, option forfeiture rates and actual and projected employee stock option exercise behaviors. Option-pricing models were developed for use in estimating the value of traded options that have no vesting or hedging restrictions and are fully transferable.15.9. INCOME TAXESIncome tax expense is based on taxable income determined in accordance with current enacted laws and tax rates. Deferred income taxes are recorded for the temporary differences between the financial statement and the tax bases of assets and liabilities using currently enacted tax rates.Provision for Income TaxesThe provision for income taxestaxes is as follows: $ 86,179 $ 89,820 $ 15,800 $ 23,237 18.3 % 25.9 % FactSet’sThree Months Ended November 30, (in thousands) 2020 2019 Income before income taxes $ 120,232 $ 108,741 Provision for income taxes $ 19,026 $ 14,784 Effective tax rate 15.8 % 13.6 % FactSet’s effective tax rate is based on recurring factors and nonrecurring events, including the taxation of foreign income. The Company’s effective tax rate will vary based on, among other things, changes in levels of foreign income, as well as discrete and other nonrecurring events that may not be predictable. FactSet’s effective tax rate is lower than the applicable U.S. corporate income tax rate for the three months ended November 30, 2020 driven mainly by research and development ("R&D") tax credits and a foreign derived intangible income ("FDII") deduction. The effective tax rate for the three months ended November 30, 2020 is further reduced by windfall tax benefits from stock-based compensation.For the three months ended November 30, 2020, the provision for income taxes was lower than$19.0 million, compared to $14.8 million from the U.S. federal rate of 35.0% in both periods presented above primarilysame period a year ago. The provision increased due to foreignhigher operating income taxed at lower statutory tax rates thanand a reduction in the U.S., R&D tax benefits, foreign tax credits, the recognition of $4.1 million of excess tax benefits associated with the new shared-based payment accounting standard update and $1.5 million of income tax benefits from settlements withfor the three months ended November 30, 2020, compared to the same period a year ago. The income tax authorities. Thesebenefit for the three months ended November 30, 2020 was $3.0 million related to windfall tax benefits were partially offset by additional state and local income taxes.Deferred Tax Assets and LiabilitiesThe significant componentsfrom stock-based compensation compared to $5.9 million for the three months ended November 30, 2019 related to the remeasurement of a foreign net deferred tax position due to changes in the jurisdiction's tax rate, finalizing prior years' tax returns, and windfall tax benefits from stock-based compensation.10. LEASESFactSet primarily leases real estate for office space under various operating lease agreements. FactSet reviews new arrangements at inception to evaluate whether the Company obtains substantially all the economic benefits of and has the right to control the use of an asset. If FactSet determines that an arrangement qualifies as a lease, a lease liability and a corresponding lease right-of-use ("ROU") asset are recognized on the lease commencement date. As of November 30, 2020, the Company’s leases have remaining terms of less than one year to just over 15 years.In determining the amount of lease payments used in measuring each lease ROU asset and lease liability, FactSet elected the package of practical expedients permitted under the transition guidance, which permits the Company not to reassess under the new standard the prior conclusions about lease identification, lease classification, and initial direct costs. FactSet did not elect the use-of-hindsight practical expedient in determining the lease term and in assessing impairment. FactSet elected the practical expedient not to separate lease components from non-lease components but, rather, to combine them into one single lease component, which FactSet recognizes over the expected lease term on a straight-line expense basis in occupancy costs (a component of SG&A expense). The Company has also elected to apply the short-term lease exception to not recognize lease ROU assets that are recordedand lease liabilities for leases with a term of 12 months or less. FactSet will recognize these lease payments on a straight-line basis over the lease term in Occupancy costs (a component of SG&A expense).The adoption of the lease standard primarily related to the Company’s real estate operating leases. As of November 30, 2020, the Company recognized $257.6 million of Lease right-of-use assets, net(initially measured as the lease liabilities, adjusted for deferred rent and lease incentives) and combined Current and Long-term lease liabilities of $310.7 million in the Consolidated Balance SheetsSheet. The lease ROU assets and lease liabilities recognized did not include any renewal or termination options that were not yet reasonably certain to be exercised.Lease liabilities are measured as the present value of the future minimum lease payments, which includes fixed lease payments and certain qualifying index-based variable payments, over the lease term. The present value is calculated using FactSet’s incremental borrowing rate ("IBR") within the geography where the leased asset is located as there is no rate implicit in the18Company’s operating lease arrangements. As FactSet does not have any outstanding public debt, the Company estimates the IBR based on FactSet’s estimated credit rating and available market information. The IBR is determined at lease commencement, or as of September 1, 2019 for operating leases in existence upon adoption of ASC 842. The IBR is subsequently reassessed upon any modification to the lease arrangement.The following table reconciles FactSet’s future undiscounted cash flows related to the Company’s operating leases and the reconciliation to the Current and Long-term lease liabilities as of November 30, 2020:(in thousands)Minimum Lease
PaymentsFiscal Years Ended August 31, 2021 (remaining nine months) $ 32,134 2022 41,942 2023 38,317 2024 36,510 2025 35,815 Thereafter 198,108 Total $ 382,826 Less: Imputed interest 72,149 Present value $ 310,677 The components of lease cost related to the operating leases were as follows: $ 913 $ 811 3,235 2,220 11,452 11,615 19,447 20,117 (33,376 ) (32,742 ) 5,304 8,059 $ 6,975 $ 10,080 The significant components of deferred tax liabilitiesThree Months Ended November 30, (in millions)2020 2019 Operating lease cost1$ 10.7 $ 10.6 Variable lease cost2$ 3.4 $ 5.0 1.Operating lease costs include fixed lease payments and qualifying index-based variable payments that are recordedqualified for lease accounting under ASC 842, Leases and complied with the practical expedients and exceptions elected by FactSet.2.Variable lease costs were not included in the Consolidated Balance Sheets were as follows: $ (840 ) $ (815 ) 531 168 25,569 26,231 (232 ) 1,690 $ 25,028 $ 27,274 No U.S. income taxes have been provided on undistributed foreign earnings and profits as of November 30, 2017, as FactSet plans to permanently reinvest these amounts and use the earnings to fund non-U.S. operations and working capital needs as well as facilities overseas. This includes, but is not limited to, capital expenditures and acquisitions intended to further FactSet’s global growth strategy. At each reporting period, FactSet assesses its position with regard to the undistributed foreign earnings of its subsidiaries. To the extent that earnings can no longer be indefinitely reinvested, the Company will accrue the tax impact, if any, attributable to those earnings, including the impact of foreign tax credits, at such time. If such earnings are repatriated, additional tax expense may result, although the flexibility inherent in the U.S. Internal Revenue Code may permit the ultimate distribution to be tax-free depending on the naturemeasurement of the distribution. Therefore, the Company does not believe it is practicablelease liabilities and are primarily related to estimate, with reasonable accuracy, the hypothetical amount of the unrecognized deferred tax liability on its undistributed foreign earnings given the many factorsvariable non-lease costs and assumptions necessary to estimate the amount of the federal income taxleases that may be payable in the future on the undistributed earnings.Unrecognized Tax PositionsApplicable accounting guidance prescribes a comprehensive modelqualified for the financial statement recognition, measurement, classificationshort-term lease exception. These variable non-lease costs included costs that were not fixed at the lease commencement date and disclosure of uncertain tax positions that a company has takenare not dependent on an index or expectsrate. These cost relate to take on a tax return. A company can recognize the financial effect of an income tax position only if it is more likely than not (greater than 50%) that the tax position will prevail upon tax examination, based solely on the technical merits of the tax position. Otherwise, no benefit or expense can be recognized in the consolidated financial statements. The tax benefits recognized are measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. Additionally, companies are required to accrue interest on all tax exposures for which reserves have been established consistent with jurisdictional tax laws.As of November 30, 2017, the Company had gross unrecognized tax benefits totaling $9.5 million, including $1.4 million of accrued interest, recorded as Non-currentutilities, real estate taxes, payable within the Consolidated Balance Sheet. Unrecognized tax benefits represent tax positions taken on tax returns but not yet recognized in the consolidated financial statements. When applicable, the Company adjusts the previously recorded tax expense to reflect examination results when the position is ultimately settled. The Company regularly engages in discussionsinsurance and negotiations with tax authorities regarding tax matters in various jurisdictions. It is reasonably possible that certain federal, foreign, and state tax matters may be concluded in the next 12 months. However, FactSet has no reason to believe that such audits will result in the payment of additional taxes and/or penalties that would have a material adverse effect on the Company’s results of operations or financial position, beyond current estimates. Any changes in accounting estimates resulting from new developments with respect to uncertain tax positions will be recorded as appropriate. The Company does not currently anticipate that the total amounts of unrecognized tax benefits will significantly change within the next 12 months.changes inCompany's lease term and discount rate assumptions related to the balanceoperating leases recorded on the Consolidated Balance Sheets:November 30, 2020 August 31, 2020 Weighted average remaining lease term (in years)10.0 10.1 Weighted average discount rate (IBR)4.3 % 4.2 % The following table summarizes supplemental cash flow information related to the Company's operating leases:Three Months Ended November 30, (in thousands)2020 2019 Cash paid for amounts included in the measurement of lease liabilities $ 9.7 $ 10.5 Lease ROU assets obtained in exchange for lease liabilities $ 1.1 $ 2.1 19Table of gross unrecognized tax benefits during the first three months of fiscal 2018: $ 11,484 448 134 (2,601 ) $ 9,465 In the normal course of business, the Company’s tax filings are subject to audit by federal, state and foreign tax authorities. At11.DEBTFactSet’s debt obligations at November 30, 2017, the Company remained subject to examination in the following major tax jurisdictions:Major Tax JurisdictionsOpen Tax YearsU.S.Federal2014 through 2018State (various)2014 through 2018EuropeFrance2014 through 2018United Kingdom2016 through 2018Germany2017 through 201816. LONG-TERM DEBTFactSet’s debt obligations2020 and August 31, 2020 consisted of the following: $ 574,666 $ 575,000 $ 574,666 $ 575,000 (in thousands) November 30, 2020 August 31, 2020 2019 Revolving Credit Facility $ 575,000 $ 575,000 2019 Revolving Credit Facility loan origination fees (600) (646) Other Long-term debt11,111 0 Long-term debt $ 575,511 $ 574,354 1This debt was acquired as part of the TVL acquisition, refer to Note 7, Acquisition, for more information on the acquisition.On March 17, 2017,29, 2019, the Company entered into a Credit Agreement (the “2017 Credit Agreement”)credit agreement between FactSet, as the borrower, and PNC Bank, National Association (“PNC” ("PNC"), as the administrative agent and lender.lender (the "2019 Credit Agreement"). The 20172019 Credit Agreement provides for a $575.0$750.0 million revolving credit facility (the “2017"2019 Revolving Credit Facility”Facility"). FactSet may request borrowings under the 20172019 Revolving Credit Facility until its maturity date of March 17, 2020.29, 2024. The 20172019 Credit Agreement also allows FactSet, subject to certain requirements, to arrange for additional borrowings with PNC for an aggregate amount of up to $225.0$500.0 million, provided that any such request for additional borrowings must be in a minimum amount of $25.0 million.FactSet borrowed $575.0 million of the available $750.0 million provided by the 2019 Revolving Credit Facility, resulting in $175.0 million available to be withdrawn. FactSet is required to pay a commitment fee using a pricing grid currently at 0.10% based on the daily amount by which the available balance in the 2019 Revolving Credit Facility exceeds the borrowed amount. All outstanding loan amounts are reported as Long-term debt within the Consolidated Balance Sheets at November 30, 2020. The principal balance is payable in full on the maturity date.The fair value of the Company's long-term debt under the 2019 Revolving Credit Facility was $575.0 million as of November 30, 2020, which the Company believes approximates the carrying amount as the terms and interest rates approximate market rates given its floating interest rate basis. Borrowings under the loan2019 Revolving Credit Facility bear interest on the outstanding principal amount at a rate equal to the daily LIBOR plus a spread using a debt leverage pricing grid, currently at 0.875%. For the three months ended November 30, 2020 and 2019, FactSet recorded interest expense on its outstanding debt, including the amortization of debt issuance costs of $2.1 million and $4.2 million, respectively, net of the effects of the interest rate plus 1.00%.swap agreement. Including the effects of the interest rate swap agreement, the year-to-date weighted average interest rate on amounts outstanding under the Company's 2019 Revolving Credit Facility was 1.40% and 2.20% as of November 30, 2020 and August 31, 2020, respectively. Refer to Note 6, Derivative Instruments for further discussion on the interest rate swap agreement. Interest on the loan outstanding under the 2019 Revolving Credit Facility is payable quarterly, in arrears, and on the maturity date. There are no prepayment penalties if the Company elects to prepay the outstanding loan amounts priorDuring fiscal 2019, FactSet incurred approximately $0.9 million in debt issuance costs related to the scheduled maturity date. The principal balance is payable in full on the maturity date.In conjunction with FactSet’s entrance into the 20172019 Credit Agreement, the Company borrowed $575.0 million in the form of a LIBOR rate loan under the 2017 Revolving Credit Facility. Proceeds from the 2017 Revolving Credit FacilityAgreement. These costs were also used to fund FactSet’s acquisition of BISAM.All outstanding loan amounts are reportedcapitalized asLong-term debt within the Consolidated Balance Sheet, and net of related amortized loan origination fees at November 30, 2017. The loan origination feesand are amortized into interest expense ratably over the term of the loan using the effective interest method. During the three months ended November 30, 2017 and 2016, the Company paid approximately $3.4 million and $1.1 million in interest on its outstanding debt amounts, respectively. As of November 30, 2017, no commitment fee was owed by FactSet since it borrowed the full amount under the 20172019 Credit Agreement.The 20172019 Credit Agreement containedcontains covenants and requirements restricting certain FactSet activities, which are usual and customary for this type of loan. In addition, the 20172019 Credit Agreement requiredrequires that FactSet maintain a consolidated net leverage ratio, as measured by total net funded debt/EBITDA below a specified level as of the end of each fiscal quarter. The Company was in material compliance with all of the covenants ofand requirements within the 20172019 Credit Agreement as of November 30, 2017.2020.2017.12. COMMITMENTS AND CONTINGENCIESCommitments represent obligations, such as those for future purchases of goods or services, that are not yet recorded on the balance sheet as liabilities. FactSet records liabilities for commitments when incurred (i.e., when the goods or services are received).Lease CommitmentsAt November 30, 2017, the Company leased approximately 202,000 square feet of office space at its headquarters in Norwalk, Connecticut. Including new lease agreements executed during fiscal 2018, the Company’s worldwide leased office space increased to approximately 1,612,100 square feet at November 30, 2017, up 469,100 square feet, or 41.0%, from August 31, 2017. This increase was primarily due to new leases for additional office space in the Philippines. The Company’s significant locations are listed under Item 2, Properties, within the Annual Report on Form 10-K for the fiscal year ended August 31, 2017. The non-cancelable operating leases expire on various dates through 2031. The Company believes the amount of leased office space as of November 30, 2017 is adequate for its current needs and that additional space is available for lease to meet any future needs.Total minimum rental payments associated with the leases are recorded as rent expense (a component of SG&A expense) on a straight-line basis over the periods of the respective non-cancelable lease terms. Future minimum commitments for the Company’s operating leases in place as of November 30, 2017 are as follows: $ 29,729 36,729 28,669 21,558 20,858 144,761 $ 282,304 Rent expense (including operating costs) for all operating leases amounted to $13.0 million and $11.4 million during the three months ended November 30, 2017 and 2016, respectively. At November 30, 2017 and August 31, 2017, deferred rent reported within the Consolidated Balance Sheets totaled $37.3 million and $37.4 million, of which $33.2 million and $33.5 million, respectively, was reported as a non-current liability within the line item Deferred Rent and Other Non-Current LiabilitiesApproximately $1.9 million of standby letters of credit have been issued during the ordinary course of business in connection with the Company’s current leased office space as of November 30, 2017. These standby letters of credit contain covenants that, among other things, require FactSet to maintain minimum levels of consolidated net worth and certain leverage and fixed charge ratios. As of November 30, 2017, FactSet was in material compliance with all covenants contained in the standby letters of credit.Purchase Commitments with SuppliersPurchase obligations represent payments due in future periods in respect of commitments to the Company’sCompany’s various data vendors as well as commitments to purchase goods and services such as telecommunication and computer maintenance services. These purchase commitments are agreements that are enforceable and legally binding on FactSet, and thatthey specify all significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction. As of August 31, 2017,2020, the Company had total purchase commitments with suppliers of $81.0$226.0 million. During the three months ended November 30, 2020, FactSet entered into a software subscription agreement with total purchase commitments of approximately $10.0 million with a contract term of three years. There were no other material changes in the Company’s purchase commitments during the first three months ended November 30, 2020.Letters of fiscal 2018.From time to time, FactSet is required to obtain letters of credit in the ordinary course of business, with approximately $2.9 million of standby letters of credit outstanding as of November 30, 2020. These standby letters of credit utilize the same covenants included in the 2019 Credit Agreement. Refer to Note 11, Debt for more information on these covenants.ContingenciesIncome TaxesUncertain income tax positions are accounted for in accordance with applicable accounting guidance, (seerefer to Note 15).9, Income Taxes, for further details. FactSet is currently under audit by tax authorities and has reserved for potential adjustments to its provision for income taxes that may result from examinations by, or any negotiated settlements with, these tax authorities. The Company believes that the final outcome of these examinations or settlements will not have a material effect on its results of operations. If events occur which indicate payment of these amounts is unnecessary, the reversal of the liabilities would result in the recognition of tax benefits in the period FactSet determines the liabilities are no longer necessary. If the Company’s estimates of the federal, state, and foreign income tax liabilities are less than the ultimate assessment, a further charge to expense would result.FactSet accrues non income-taxnon-income tax liabilities for contingencies when management believes that a loss is probable, and the amounts can be reasonably estimated, while contingent gains are recognized only when realized. The Company is subject toengaged in various legal proceedings, claims and litigation arisingthat have arisen in the ordinary course of business, including employment matters, commercial and intellectual property litigation. The outcome of all the matters against the Company is subject to future resolution, including the uncertainties of litigation. Based on information available at November 30, 2017,2020, FactSet’s management does not believebelieves that the ultimate outcome of these unresolved matters against the Company, individually or in the aggregate, is likely towill not have a material adverse effect on the Company's consolidated financial position, its results of operations or its cash flows.Sales Tax MattersIn August 2019, FactSet received a Notice of Intent to Assess (the "Notice") additional sales taxes, interest and underpayment penalties from the Commonwealth of Massachusetts Department of Revenue (the "Commonwealth") relating to prior tax periods. The Notice follows FactSet's previously disclosed response to a letter from the Commonwealth requesting additional sales information. Based upon the Notice, it is the Commonwealth's intention to assess sales/use tax, interest and penalties on previously recorded sales transactions. The Company filed an appeal to the Notice and intends to contest any such assessment, if assessed, and continues to cooperate with the Commonwealth's inquiry. Due to the uncertainty surrounding the assessment process, the Company is unable to reasonably estimate the ultimate outcome of this matter and, as such, has not recorded a liability as of November 30, 2020. FactSet believes that it will ultimately prevail if the Company is presented with a formal assessment; however, if FactSet does not prevail, the amount could have a material impact on the Company’s consolidated financial position, cash flows and results of operations.IndemnificationsAs permitted or required under Delaware law and to the maximum extent allowable under that law, FactSet has certain obligations to indemnify its current and former officers and directors for certain events or occurrences while the officer or director is, or was, serving at FactSet’sFactSet’s request in such capacity. These indemnification obligations are valid as long as the director or officer acted in good faith and in a manner the person reasonably believed to be in, or not opposed to, the best21interests of the Company, and with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. The maximum potential amount of future payments FactSet could be required to make under these indemnification obligations is unlimited; however, FactSet has a director and officer insurance policy that it believes mitigates FactSet'sFactSet’s exposure and may enable FactSet to recover a portion of any future amounts paid. The Company believes the estimated fair value of these indemnification obligations is immaterial.Concentrations of Credit RiskCash equivalentsCashFinancial instruments that potentially subject FactSet to concentrations of credit risk consist primarily of cash, cash equivalents and investment securities. The Company is exposed to credit risk for cash and cash equivalents held in financial institutions in the event of a default, to the extent that such amounts are maintained primarily with fivein excess of applicable insurance limits. To mitigate associated concentration risk, FactSet utilizes credit-worthy financial institutions. Deposits held with banks may exceed the amount of insurance provided on such deposits. These deposits may be redeemed upon demand and are maintained with financial institutions with reputable credit and therefore bear minimal credit risk. The Company also seeks to mitigate its credit risks by spreading such risks across multiple counterparties and monitoring the risk profiles of these counterparties.Accounts ReceivableAccounts receivable are unsecured and are derived from revenuesrevenue earned from clients located around the globe. FactSet The Company does not require collateral from its clients but performs credit evaluations on an ongoing basis. The Company maintains reserves for potential write-offs and evaluates the adequacy of the reserves periodically. These losses have historically been within expectations. No single client represented 10% or more than 3% of FactSet’s total revenuessubscription revenue in any period presented. At November 30, 2017, the Company’s largest individual client accounted for 7% of total annual subscriptions and subscriptions from the ten largest clients did not surpass 20% of total annual subscriptions, slightly higher than the percentages as of August 31, 2017. As of November 30, 2017,2020, the receivable reserve was $2.9$7.3 million compared to a reserve of $2.7$8.0 million as of August 31, 2017.Derivative InstrumentsAs a result of theFactSet's use of derivative instruments exposes the Company is exposed to counterpartycredit risk to the extent that the counterparties may be unable to meet the terms of their agreements. To mitigate credit risk, the Company limits counterparties to credit-worthy financial institutions and distributes contracts among these institutions to reduce the concentration of credit risk. FactSet does not expect any losses as a result of default of its counterparties.Concentrations ofOtherRiskData Content ProvidersFactSet relies on certain data sets where there are a limited number of suppliers. The Company makes every effort to assure that, where reasonable, alternative sources are available. FactSet is not dependent on any one third-party data supplier in order to meet the needs of its clients. FactSet combines the data from these commercial databases into its own dedicated single online service, which its clients access to perform their analysis. No single vendor or data supplier represented more than 10% of FactSet's total data costs for the three months ended November 30, 2020 or November 30, 2019.13.STOCKHOLDERS’ EQUITYShares of common stock outstanding were as follows:Three Months Ended November 30, (in thousands) 2020 2019 Balance, beginning of year at September 1, 2020 and 2019, respectively 38,030 38,118 Common stock issued for employee stock plans 117 135 Repurchase of common stock from employees(1)(7) (6) Repurchase of common stock under the share repurchase program (132) (343) Balance at November 30, 2020 and November 30, 2019, respectively 38,008 37,904 (1)For the three months ended November 30, 2020 and November 30, 2019, the Company repurchased 6,728 and 5,778 shares, or $2.1 million and $1.5 million, of common stock, respectively, in settlement of employee tax withholding obligations due upon the vesting of restricted stock and exercise of stock options.Share Repurchase ProgramRepurchases of shares of common stock are made from time to time in the open market and privately negotiated transactions, subject to market conditions. For the three months ended November 30, 2020 and 2019, the Company repurchased 131,800 shares for $43.1 million and 343,000 shares for $84.4 million, respectively.22On March 24, 2020, the Board of Directors of FactSet approved a $220.0 million increase to the existing share repurchase program. As of November 30, 2020, $215.9 million remained authorized for future share repurchases. There is no defined number of shares to be repurchased over a specified timeframe through the life of the share repurchase program. It is expected that share repurchases will be paid using existing and future cash generated by operations.Restricted StockRestricted stock awards entitle the holders to receive shares of common stock as the awards vest over time. For the three months ended November 30, 2020, 17,946 shares of previously granted restricted stock vested and were included in common stock outstanding as of November 30, 2020 (recorded net of 6,728 shares repurchased from employees at a cost of $2.1 million to cover their cost of taxes upon vesting of the restricted stock). During the three months ended November 30, 2019, 15,376 shares of previously granted restricted stock vested and were included in common stock outstanding as of November 30, 2019 (recorded net of 5,778 shares repurchased from employees at a cost of $1.5 million to cover their cost of taxes upon vesting of the restricted stock).DividendsThe Company’s Board of Directors declared the following dividends for the first three months of fiscal 2021 and 2020 respectively:Year Ended Dividends per
Share of
Common StockRecord Date Total $ Amount
(in thousands)Payment Date Fiscal 2021 First Quarter $ 0.77 November 30, 2020 $ 29,266 December 17, 2020 Fiscal 2020 First Quarter $ 0.72 November 29, 2019 $ 27,291 December 19, 2019 Future cash dividend payments will depend on the Company’s earnings, capital requirements, financial condition and other factors considered relevant by the Company and are subject to final determination by the Company’s Board of Directors.Accumulated Other Comprehensive LossThe components of AOCL are as follows:(in thousands) November 30, 2020 August 31, 2020 Accumulated unrealized losses on cash flow hedges $ (1,707) $ (1,591) Accumulated foreign currency translation adjustments (37,369) (37,702) Total AOCL $ (39,076) $ (39,293) 2314.EARNINGS PER SHAREA reconciliation of the weighted average shares outstanding used in the basic and diluted earnings per share ("EPS") computations is as follows:(in thousands, except per share data) Net Income
(Numerator)Weighted
Average
Common Shares
(Denominator)Per Share
AmountFor the three months ended November 30, 2020 Basic EPS Income available to common stockholders $ 101,206 38,007 $ 2.66 Diluted EPS Dilutive effect of stock options and restricted stock 690 Income available to common stockholders plus assumed conversions $ 101,206 38,697 $ 2.62 For the three months ended November 30, 2019 Basic EPS Income available to common stockholders $ 93,957 37,978 $ 2.47 Diluted EPS Dilutive effect of stock options and restricted stock 609 Income available to common stockholders plus assumed conversions $ 93,957 38,587 $ 2.43 Dilutive potential common shares consist of stock options and unvested performance-based awards. There were 1,750 stock options excluded from the calculation of diluted EPS for the three months ended November 30, 2020, because their inclusion would have been anti-dilutive. For the three months ended November 30, 2019, the number of stock options excluded from calculation of diluted EPS was 20,128.Performance-based awards are omitted from the calculation of diluted EPS until it is determined that the performance criteria has incorporated counterparty risk intobeen met at the end of the reporting period. For the three months ended November 30, 2020, there were 72,090 performance-based awards excluded from the calculation of diluted EPS. For the three months ended November 30, 2019, there were 36,501 performance-based awards excluded from the calculation of diluted EPS.15. STOCK-BASED COMPENSATIONStock-based CompensationThe Company recognized total stock-based compensation expense of $11.3 million and $9.8 million during the three months ended November 30, 2020 and 2019, respectively. As of November 30, 2020, $117.0 million of total unrecognized compensation expense related to non-vested equity awards is expected to be recognized over a weighted average period of 3.4 years. Stock-based compensation expense related to the FactSet Research Systems Inc. Employee Stock Purchase Plan, as Amended and Restated (the "ESPP") was $0.5 million for both the three months ended November 30, 2020 and 2019.As of November 30, 2020, FactSet had 5.1 million share-based awards available for grant under the FactSet Research Systems Inc. Stock Option and Award Plan, as Amended and Restated (the "LTIP") and 0.2 million share-based awards available for grant under the FactSet Research Systems Inc. Non-Employee Directors' Stock Option and Award Plan, as Amended and Restated (the "Director Plan").Employee Stock Option AwardsDuring the three months ended November 30, 2020, FactSet granted 408,093 stock options with a weighted average exercise price of $316.71 to existing employees of the Company, using the lattice-binomial option-pricing model. The majority of the stock options granted during the first three months of fiscal 2021 related to the annual employee grant on November 9, 2020 under the LTIP. These stock option awards vest 20% annually on the anniversary date of the grant and are fully vested after five years, expiring ten years from the date of grant.24The estimated fair value of its derivative assetsemployee stock options granted on November 9, 2020 was determined with the following assumptions:November 9, 2020 Grant Details Risk-free interest rate 0.10% - 0.80% Expected life (years) 7.13 Expected volatility 27.5 % Dividend yield 0.91 % Estimated fair value $78.23 Exercise price $316.71 Fair value as a percentage of exercise price 24.7 % Non-Employee Director Stock Option GrantThe Director Plan provides for the grant of share-based awards, including stock options, to non-employee directors of FactSet. As of November 30, 2020, shares available for future grant under the Director Plan were 249,886. The expiration date of the Director Plan is December 19, 2027.Restricted Stock UnitsDuring the first three months of fiscal 2021, FactSet granted 41,358 non-performance based restricted stock units ("RSUs") and its own credit risk into36,424 performance-based restricted stock units ("PRSUs"). RSUs and PRSUs granted during the period were related to the annual employee grant on November 9, 2020. The RSUs and PRSUs granted had a weighted average grant date fair value of $306.37 under the LTIP. The RSUs and PRSUs granted to employees entitle the holders to shares of common stock as the units vest over time or the performance period, but not to dividends declared on the underlying shares while the restricted stock is unvested. The grant date fair value of restricted stock units is measured by reducing the grant date price of FactSet's common stock by the present value of the Company’s derivative liabilities, when applicable. FactSet calculates credit risk from observable data relateddividends expected to CDS as quoted by publicly available information. Counterparty risk is represented by CDS spreads relatedbe paid on the underlying stock during the requisite service period, discounted at the appropriate risk-free interest rate. The majority of the RSUs granted vest 20% annually on the anniversary date of grant and are fully vested after five years and the majority of the granted PRSUs cliff vest on the third anniversary of the grant date, subject to the senior secured debtachievement of certain performance metrics. The remaining RSUs and PRSUs were granted to TVL employees as part of their transition to FactSet and vest 50% on the second anniversary of grant and 25% percent on each of the respective bank with whomthird and fourth anniversaries of grant, subject to the achievement of certain performance metrics for the PRSUs.Employee Stock Purchase PlanShares of FactSet has executed these derivative transactions. Because CDS spreadcommon stock may be purchased by eligible employees under the ESPP in three-month intervals. The purchase price is equal to 85% of the lesser of the fair market value of the Company’s common stock on the first day or the last day of each three-month offering period. Employee purchases may not exceed 10% of their gross compensation and there is a $25,000 contribution limit per employee during an offering period. Dividends paid on shares held in the ESPP are used to purchase additional ESPP shares at the market price on the dividend payment date.During the three months ended November 30, 2020, employees purchased 9,269 shares at a weighted average price of $286.58 compared to 11,159 shares at a weighted average price of $220.70 for the three months ended November 30, 2019. At November 30, 2020, the ESPP had 168,535 shares reserved for future issuance.16. SEGMENTINFORMATIONOperating segments are defined as components of an enterprise that have the following characteristics: (i) it engages in business activities from which it may earn revenue and incur expense, (ii) its operating results are regularly reviewed by the company's chief operating decision maker ("CODM") for resource allocation decisions and performance assessment, and (iii) its discrete financial information is not available for FactSet,available. The Company's Chief Executive Officer functions as FactSet's CODM.The Company’s operating segments are aligned with how the Company, including its CODM, manages the business and the geographic markets in which it serves, with a primary focus on providing integrated global financial and economic information. The Company’s internal financial reporting structure is based on 3 segments: the Americas, EMEA and Asia Pacific. Within each of the segments, the Company primarily delivers insight and information through four workflow solutions including Research, Analytics and Trading, CTS and Wealth. These workflow solutions provide global financial and economic information to investment managers, investment banks and other financial services professionals.25The Americas segment serves our clients throughout North, Central, and South America. The EMEA segment serves our clients in countries in Europe and Africa. The Asia Pacific segment serves our clients in countries in Asia and Australia. Segment revenue reflects sales to clients based in these respective geographic locations.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, office and other direct expenses. Expenditures associated with the Company’s credit risk is determineddata centers, third-party data costs and corporate headquarters charges are recorded by the Americas segment and are not allocated to the other segments. The content collection centers, located in India, the Philippines, and Latvia, benefit all the Company’s operating segments, and thus the expenses incurred at these locations are allocated to each segment based on using a simple averagepercentage of CDS spreads for peer companies as determined by FactSet. To mitigate counterparty credit risk, FactSet enters into contracts with large financial institutions and regularly reviews credit exposure balances as well asrevenue.The following tables reflect the creditworthinessresults of operations of the counterparties.18. SUBSEQUENT EVENTSDepartureCompany's segments for the three months ended November 30, 2020 and November 30, 2019:(in thousands) Americas EMEA Asia Pacific Total For the three months ended November 30, 2020 Revenue $ 244,337 $ 105,777 $ 38,092 $ 388,206 Operating income $ 56,376 $ 40,634 $ 24,021 $ 121,031 Capital expenditures $ 9,560 $ 319 $ 8,454 $ 18,333 For the three months ended November 30, 2019 Revenue $ 231,330 $ 100,830 $ 34,498 $ 366,658 Operating income $ 49,623 $ 41,218 $ 22,345 $ 113,186 Capital expenditures $ 24,024 $ 1,168 $ 1,588 $ 26,780 The following table reflects the total assets for the Company's segments:Segment Assets (in thousands)November 30, 2020 August 31, 2020 Americas $ 1,071,502 $ 1,111,600 EMEA 807,156 757,524 Asia Pacific 220,768 214,264 Total assets $ 2,099,426 $ 2,083,388 26Returning Value to StockholdersOn November 8, 2017, FactSet’s4, 2020, our Board of Directors approved a regular quarterly dividend of $0.56$0.77 per share, or $2.24 per share per annum.share. The cash dividend of $21.9$29.1 million was paid on December 19, 201717, 2020 to common stockholders of record at the close of business on November 30, 2017.2020. We repurchased 164,920131,800 shares of common stock for $30.9$43.1 million during the first quarter of fiscal 20182021 under our existing share repurchase program. OverFor the last 12three months ended November 30, 2020, we have returned $290.5$72.2 million to stockholders in the form of share repurchases and dividends, funded by cash generated from operations. dividends. Over the last 12 months, we returned $270.6 million to stockholders in the form of share repurchases and dividends.On March 27, 2017, the24, 2020, our Board of Directors of FactSet approved a $300.0$220.0 million expansion ofincrease to the existing share repurchase program. IncludingAs a result of this expansion, $213.2$215.9 million is available for future share repurchases as of November 30, 2017.Capital2020.Capital ExpendituresCapital expenditures infor the first quarter of fiscal 2018three months ended November 30, 2020 were $5.9$18.3 million, compared with $12.5to $26.8 million a year ago. Approximately $3.5 million, or 59%,for the three months ended November 30, 2019. The majority of our capital expenditures was primarily for purchasesduring the three months ended November 30, 2020 related to the development of new computer equipment for our recent acquisitions, additional servers in our existing data centersinternal-use software and new laptop computers and peripherals for our growing employee base. The remainderthe build-out of our office space in the Philippines. The decrease from the prior year period was mainly due to capital expenditures was primarily forincurred during the build outthree months ended November 30, 2019 related to the build-out of office space including $1.0 millionour new corporate headquarters in Norwalk, Connecticut, partially offset by an increase in capitalized internal-use software during the Netherlands and $0.6 million in New York.30Results of OperationsFor an understanding of the significant factors that influenced our performance for the three months ended November 30, 20172020 and 2016, respectively,November 30, 2019, the following discussion should be read in conjunction with the Consolidated Financial Statements and the Notes to Consolidated Financial Statementsrelated notes presented in this Quarterly Report on Form 10-Q. $ 329,141 $ 288,063 14.3 % $ 161,524 $ 127,250 26.9 % $ 78,519 $ 70,494 11.4 % $ 89,098 $ 90,319 (1.4 )% $ 70,379 $ 66,583 5.7 % $ 1.77 $ 1.66 6.6 % 39,680 40,100 RevenuesRevenues Three Months Ended November 30, (in thousands, except per share data) 2020 2019 Change Revenue $ 388,206 $ 366,658 5.9 % Cost of services $ 188,088 $ 164,957 14.0 % Selling, general and administrative $ 79,087 $ 88,515 (10.7) % Operating income $ 121,031 $ 113,186 6.9 % Net income $ 101,206 $ 93,957 7.7 % Diluted earnings per common share $ 2.62 $ 2.43 7.8 % Diluted weighted average common shares 38,697 38,587 RevenueThree months ended November 30, 2020 compared to three months ended November 30, 2019Revenue for the three months ended November 30, 2017 were $329.12020 was $388.2 million, up 14.3%an increase of 5.9%. The increase in revenue was largely attributed to increased sales and price increases partially offset by cancellations by existing clients and increased sales to new clients. This was driven by increased revenue across all our geographic segments primarily from the Americas, followed by EMEA and Asia Pacific. The increase in segment revenue was due to increased revenue in our workflow solutions, most notably by Analytics and Trading and CTS, followed by Wealth, compared to the prior year. The increase in revenue was driven by new revenue from acquisitions and organic ASV growth of 5.1%, primarily from our analytics and CTS products, along with a solid performance from our wealth product. Within analytics we saw strong contribution from Risk, Portfolio Reporting, Portfolio Services and Fixed. CTS had a strong quarter with continued momentum around our expanding suite5.9% was reflective of standard data feeds. Offsetting the positive factors associated with our revenue growth, we experienced cancellations due to a shift from active to passive investing, focus placed on total cost ownership and firm consolidations. Excluding the effects of acquisitions and dispositions completed in the last 12 months and foreign currency, our organic revenue growth of 5.1% or $386.7 million in organic revenue, a 50 basis point increase from deferred revenue fair value adjustments from purchase accounting and acquisition-related revenue and a 30 basis point increase from foreign currency exchange rate for the quarter was 5.8%.fluctuations.RevenuesRevenue by Geographic Region $ 208,768 $ 190,627 9.5 % 63.4 % 66.2 % $ 91,727 $ 71,863 27.6 % 28,646 25,573 12.0 % $ 120,373 $ 97,436 23.5 % 36.6 % 33.8 % $ 329,141 $ 288,063 14.3 % ThreeOperating Segment Three Months Ended November 30, (in thousands) 2020 2019 Change Americas $ 244,337 $ 231,330 5.6 % % of revenue 62.9 % 63.1 % EMEA $ 105,777 $ 100,830 4.9 % % of revenue 27.2 % 27.5 % Asia Pacific $ 38,092 $ 34,498 10.4 % % of revenue 9.8 % 9.4 % Consolidated $ 388,206 $ 366,658 5.9 % Three months ended November 30, 20172020 compared to three monthsmonths ended November 30, 2016Revenues2019Revenue from our U.S.Americas segment increased 9.5%5.6% to $208.8$244.3 million during the three months ended November 30, 20172020, compared to $231.3 million from the same period a year ago,ago. This year-over-year revenue increase was largely attributed to increased sales and price increases partially offset by cancellations by existing clients and increased sales to new clients. This increase was driven by increased sales of our workflow solutions, primarily in Analytics and Trading and CTS, followed by Wealth. The revenue growth of 5.6% was reflective of organic revenue growth of 5.1% and a result of strong performance50 basis point increase from the analytics suitedeferred revenue fair value adjustments from purchase accounting and data feed products. Excluding the effects of acquisitions and dispositions completed in the last 12 months, organic revenues in the U.S. were up 4.8% compared to the year ago first quarter. Revenuesacquisition-related revenue. Revenue from our U.S.Americas operations accounted for 63.4%62.9% of our consolidated revenues duringrevenue for the first quarter of fiscal 2018, a decreasethree months ended November 30, 2020, down from 63.1% in the prior year as U.S. sales growth was outpaced by international growth.European revenues grew 27.6% due primarilyperiod.31EMEA revenue increased 4.9% to recent acquisitions, which have significant operations in$105.8 million during the European markets. Organic revenues in the European segment were up 5.9%three months ended November 30, 2020, compared to $100.8 million from the same period a year ago first quarter. Growth ratesago. This year-over-year revenue increase was largely attributed to increased sales and price increases partially offset by cancellations by existing clients and increased sales to new clients. This increase was driven by increased sales of our workflow solutions, mainly in Europe have been negatively impacted by the regulatory environmentAnalytics and political events, resulting in delayed purchasing decisions. ForeignTrading and CTS. The revenue growth of 4.9% was reflective of organic revenue growth of 3.4%, a 100 basis point increase from foreign currency exchange rate fluctuations and a 50 point basis point increase from deferred revenue fair value adjustments from purchase accounting.Asia Pacific revenue increased 10.4% to $38.1 million during the three months ended November 30, 2020, compared to $34.5 million from the same period a year ago. This year-over-year revenue increase was largely due to increased sales and price increases partially offset by cancellations by existing clients and increased sales to new clients. This increase was driven by increased sales of our European growth rate by 140 basis points.Asia Pacificworkflow solutions, primarily in Analytics and Trading and CTS. The revenue growth of 12.0%10.4% was primarily due to anreflective of organic revenue growth of 9.8% and a 60 basis point increase in the analytics suite and workstation sales to asset managers. Foreignfrom foreign currency exchange rate fluctuations reduced our Asia Pacific growth ratefluctuations.Revenue by 20 basis points.Operating Expenses $ 161,524 $ 127,250 26.9 % 78,519 70,494 11.4 % $ 240,043 $ 197,744 21.4 % $ 89,098 $ 90,319 (1.4 )% 27.1 % 31.4 % Cost of ServicesThree months ended November 30, 20172020 compared to three months ended November 30, 2016For2019The revenue growth of 5.9% across our operating segments was primarily driven by increased revenue from Analytics and Trading and CTS followed by Wealth for the three months ended November 30, 2017, cost of services increased 26.9% to $161.5 million compared to $127.3 million in the same period a year ago. Cost of services, expressed as a percentage of revenues, was 49.1% during the first quarter of fiscal 2018, an increase of 490 basis points over the prior year period due to higher employee compensation, amortization of intangible assets, and data costs.Employee compensation, when expressed as a percentage of revenues increased 200 basis points in the first quarter of fiscal 20182020, compared to the same period a year ago. The revenue increase isfrom Analytics and Trading was primarily due to increased demand for our risk management, portfolio reporting, performance and portfolio analytics solutions. The increase in CTS revenue was driven mainly by higher sales of core and premium content sets, specifically related to company financial data and data management solutions. Wealth also experienced an increase in net new employeesrevenue mainly due to higher sales of 708 over the last 12our workstation product.32Operating Expenses Three Months Ended November 30, (in thousands) 2020 2019 Change Cost of services $ 188,088 $ 164,957 14.0 % Selling, general and administrative 79,087 88,515 (10.7) % Total operating expenses $ 267,175 $ 253,472 5.4 % Operating Income $ 121,031 $ 113,186 6.9 % Operating Margin 31.2 % 30.9 % Cost of ServicesThree months with the majority of their compensation included in costended November 30, 2020compared to three months endedNovember 30, 2019Cost of services as well as base salary changes and incremental hires in our centers of excellence located in India andincreased 14.0% to $188.1 million for the Philippines and a non-recurring pre-tax charge of approximately $3.2 million related to restructuring actions initiated by the Company. As ofthree months ended November 30, 2017, approximately 72% of our employee base performed operational roles.Amortization of acquired intangible assets, when expressed as a percentage of revenues, increased 60 basis points in the first quarter of fiscal 20182020, compared to $165.0 million in the same period a year ago, primarily due to our fiscal 2017 acquisitions, which added approximately $93.2 millionan increase in employee compensation expense and computer-related expenses.Cost of intangible assets to be amortized over a weighted-average life of 11.5 years. These intangible assets were amortized for the full first quarter of fiscal 2018, however, the first quarter of fiscal 2017 did not include a similar amount of acquisition amortization due to the dates of each acquisition. Data costs increased 80 basis pointsservices, when expressed as a percentage of revenues due primarily to our recently acquired businesses. Selling, General and AdministrativeThree months ended November 30, 2017 compared to three months ended November 30, 2016Forrevenue, was 48.5% for the three months ended November 30, 2017, SG&A expenses increased to $78.5 million, up 11.4%, from $70.5 million in the same period a year ago. SG&A expenses, expressed as a percentage of revenues, were 23.9% during the first quarter of fiscal 2018, a decrease of 70 basis points over the prior year period as a result of foreign exchange hedges, partially offset by2020, an increase of 40350 basis points in compensation expense.The increase to employee compensation as a percentage of revenue compared to the same period a year agoago. This increase was primarily due to an increase in computer-related expenses, employee compensation expense and intangible asset amortization, partially offset by a reduction in computer depreciation, when expressed as a percentage of revenue. Computer-related expenses increased 190 basis points, primarily to the current year non-recurring pre-tax charge of approximately $3.3 milliondriven by increased technology investments related to restructuring actions initiatedour migration to cloud-based hosting services and licensed software arrangements. Employee compensation expense increased 170 basis points, primarily driven by a net increase in employee headcount of 757 employees, most of whom are located in lower cost locations, with the Companymajority of their salaries included in cost of services. Employee compensation expense also increased due to higher annual base salaries and an increase in headcount year over year.Operating Incomeyear-over-year variable compensation, partially offset by higher capitalization of compensation costs related to development of our internal-use software projects. Intangible asset amortization increased 30 basis points due to a higher investment in capitalized internal-use software that has been placed in service. Computer depreciation decreased 30 basis points mainly due to an overall reduction in computer equipment as we migrate to cloud-based hosting services.Selling, General and Operating MarginThree months endedNovember 30, 2017 2020compared to three months endedNovember 30, 2016Operating income 2019Selling, general and administrative ("SG&A") expenses decreased 1.4%10.7% to $89.1$79.1 million for the three months ended November 30, 20172020, compared to $88.5 million for the same period a year ago, primarily due to a decrease in non-compensatory employee-related expenses.SG&A expenses, when expressed as a percentage of revenue, were 20.4% for the three months ended November 30, 2020, a decrease of 380 basis points over the prior year period. This decrease was primarily driven by a decrease in non-compensatory employee-related expenses and a reduction in occupancy costs, partially offset by higher stock-based compensation costs. Non-compensatory employee-related expenses, inclusive of travel, entertainment and office expenses, decreased 230 basis points mainly due to restrictions and impacts related to the COVID-19 pandemic as most employees continue to work from home. Occupancy costs decreased 60 basis points, as the three months ended November 30, 2019 included costs related to concurrent lease expenses of our new and prior corporate headquarters in Norwalk, Connecticut. Stock-based compensation increased 50 basis points primarily due to the accelerated recognition of expense associated with certain retirement provisions in our employee equity award plan. For these employees, the amortization of new grants was recognized over the period from the grant date to the retirement-eligible date if such period was shorter than the standard vesting schedule.Operating Income and Operating MarginThree months endedNovember 30, 2020compared to three months endedNovember 30, 2019Operating income increased 6.9% to $121.0 million for the three months ended November 30, 2020 compared to $113.2 million in the prior year. Operating income increased due to higher revenue and a reduction in non-compensatory employee-related expenses, partially offset by an increase in employee compensation expense and computer-related expenses compared to the prior year period. OurOperating margin increased to 31.2% during the three months ended November 30, 2020 compared to 30.9% in the prior year period. This increase in operating margin during the first quarter of fiscal 2018 was 27.1%, down from 31.4%on a year ago. The lower operating marginyear-over-year basis was primarily due to increaseshigher revenue and a decrease in non-compensatory employee-related expenses, occupancy costs and computer depreciation, partially offset by33higher computer-related expenses, employee compensation costs, including non-recurring restructuring actions initiated by the Company, as well as data costs,expenses, stock-based compensation expense and amortization of intangible assets, partially offset bywhen expressed as a gain on foreign exchange hedges.Operating Income by percentage of revenue.Segment $ 40,771 $ 40,005 1.9 % 32,970 36,584 (9.9 )% 15,357 13,730 11.8 % $ 89,098 $ 90,319 (1.4 )% Reportable SegmentsOur operating segments are aligned with how we manage the business, and the demographicgeographic markets in which we serve, and how theour chief operating decision maker ("CODM"), our Chief Executive Officer, assesses performance. Our internal financial reporting structure is based on three reportable segments, the U.S., EuropeAmericas, EMEA and Asia Pacific, whichPacific. Within each of our segments, we believe helps us better manage the businessprimarily deliver insight and view the markets we serve. Sales, consulting, data collection, product developmentinformation through our four workflow solutions of Research, Analytics and software engineering are the primary functional groups within each segment. Trading, CTS and Wealth.Each segment records compensation expense including(including stock-based compensation, amortization of intangible assets,compensation), depreciation of furniture and fixtures, amortization of lease right-of-use ("ROU") assets, leasehold improvements and intangible assets, as well as communication costs, professional fees, rent expense, travel, office and other direct expenses. Expenditures associated with our data centers, third partythird-party data costs and corporate headquarters charges are recorded by the U.S.Americas segment and are not allocated to the other segments. The content collection centers, located in India, and the Philippines, and Latvia, benefit all of our operating segments, soand thus the expenses incurred at these locations are allocated to each segment based on a percentage of revenues.Operating Income by Segment Three Months Ended November 30, (in thousands) 2020 2019 Change Americas $ 56,376 $ 49,623 13.6 % EMEA 40,634 41,218 (1.4) % Asia Pacific 24,021 22,345 7.5 % Total Operating Income $ 121,031 $ 113,186 6.9 % Three months endedNovember 30, 2017 2020compared to three months endedNovember 30, 2016U.S.2019Americas operating income increased 1.9%13.6% to $40.8$56.4 million during the three months ended November 30, 20172020 compared to $40.0$49.6 million in the same period a year ago. The increase in U.S.Americas operating income iswas primarily fromdue to revenue growth of 9.5%5.6% and a decrease in non-compensatory employee-related expenses, partially offset by higher employee compensation and data costs. U.S. revenue growth was driven by U.S. organic ASV growth of 3.9% and strong performance in our analytics suite and data feed products. Excluding the effect of acquisitions and dispositions in the last 12 months, U.S. employee headcount grew 2.1% year over year, leading to an increase in computer-related expenses and employee compensation expense. Non-compensatory employee-related expenses, inclusive of travel, entertainment and office expenses, decreased mainly due to restrictions and impacts related to the COVID-19 pandemic. Computer-related expenses increased primarily due to increased technology investments related to our migration to cloud-based hosting services and licensed software arrangements. Employee compensation expense increased mainly due to a net increase in employee headcount of 142 employees, higher annual base salaries and an increase in year-over-year variable compensation, partially offset by higher capitalization of compensation costs related benefits. Data costs increased due primarily to higher third-party data costs fromdevelopment of our recent acquisitions and additional users of FactSet, along with increased data fees from certain vendors. Europeaninternal-use software projects.EMEA operating income decreased 9.9%1.4% to $33.0$40.6 million during the three months ended November 30, 20172020 compared to $36.6$41.2 million in the same period a year ago. The decrease in EuropeanEMEA operating incomeincome was primarily due to higher employee compensation, amortizationrevenue growth of intangible assets, and data cost4.9%, partially offset by revenue growth of 27.6%. The impact of foreign currency decreased operating income by $0.3 million year over year.an increase in employee compensation expense. Employee compensation was higher year over year as a result of 333 net new employees in our European offices in the last 12 months. These employees are primarily from our recent acquisitions. Amortization of intangible assetsexpense increased mainly due to intangible assets acquired from the recent acquisitions, the majoritya net increase in employee headcount of which reside73 employees, higher annual base salaries and an increase in our European segment. Data costs increased due primarily to higher third-party data costs related to our recently acquired businesses. year-over-year variable compensation.11.8%7.5% to $15.4$24.0 million during the three months ended November 30, 20172020, compared to $13.7$22.3 million in the same period a year ago. The increase in the Asia Pacific operating income was mainly due to revenue growth of 12.0%,10.4% and a decrease in non-compensatory employee-related expenses, partially offset by increases in employee compensation. The impact of foreign currency increased Asia Pacific operating income by $0.5 million year over year. Asia Pacific revenue growth was due primarily to an increase in analyticsemployee compensation expense. Non-compensatory employee-related expenses, inclusive of travel, entertainment and workstation salesoffice expenses, decreased mainly due to asset managers.restrictions and impacts related to the COVID-19 pandemic. Employee compensation was higher year over year asexpense34increased mainly due to a result of a 6.0%net increase in our Asia Pacific workforce in the last 12 months.Income Taxes, Net Income and Diluted Earnings per Share $ 15,800 $ 23,237 (32.0 )% $ 70,379 $ 66,583 5.7 % $ 1.77 $ 1.66 6.6 % Three Months Ended November 30, (in thousands, except for per share data) 2020 2019 Change Provision for income taxes $ 19,026 $ 14,784 28.7 % Net income $ 101,206 $ 93,957 7.7 % Diluted earnings per common share $ 2.62 $ 2.43 7.8 % Income TaxesThree months endedNovember 30, 2017 2020compared to three months endedNovember 30, 2019Our effective tax rate is lower than the applicable U.S. corporate income tax rate for the three months ended November 30, 2016For the three months ended November 30, 2017,2020, the provision for income taxes was $15.8$19.0 million, down 32.0%compared to $14.8 million from the same period a year ago. The provision for income taxes decreased year over year primarilyincreased due to the recognition of $4.1 million of excess tax benefits associated with an employee share-based payment accounting standard update adoptedhigher operating income and a reduction in first quarter of fiscal 2018. Additionally, we recognized $1.5 million of income tax benefits from settlements with tax authorities during the first quarter of fiscal 2018. As a result of these tax benefits, our effective tax rate declined to 18.3% in the first quarter of fiscal 2018 from 25.9% in the first quarter of fiscal 2017. Net Income and Diluted Earnings per ShareThree months ended November 30, 2017 compared to three months ended November 30, 2016Net income increased 5.7% to $70.4 million and diluted earnings per share increased 6.6% to $1.77 for the three months ended November 30, 2017,2020, compared to the same period a year ago. The income tax benefit for the three months ended November 30, 2016. Net income and earnings per share increased during2020 was $3.0 million related to windfall tax benefits from stock-based compensation compared to $5.9 million for the first quarterthree months ended November 30, 2019 related to the remeasurement of fiscal 2018a foreign net deferred tax position due to a lower provision for income taxes, partially offset by slightly lower operating incomechanges in the jurisdiction's tax rate, finalizing prior years' tax returns, and an increase in interest expense associated with our outstanding debt. The provision for income taxes decreased year over year due primarily to the recognition of excesswindfall tax benefits associated with an employee share-based payment accounting standard update adopted in first quarter of fiscal 2018. The increase in diluted earnings per share was also driven by a decrease in diluted shares outstanding as a result of share repurchases.Adjusted from stock-based compensation.Net Income and Diluted Earnings per Share (non-GAAP)Financial measures in accordance with U.S. GAAP including operatingThree monthsendedNovember 30, 2020compared to three months endedNovember 30, 2019Net income increased 7.7% to $101.2 million and margin, netdiluted earnings per share ("EPS") increased 7.8% to $2.62 for the three months ended November 30, 2020, compared to the same period a year ago. Net income and diluted EPS have been adjusted below. These adjustedincreased primarily due to increased operating income and a reduction in interest expense, net, partially offset by an increase in the provision for income taxes.Non-GAAP Financial MeasuresTo supplement the financial measures prepared in accordance with GAAP, we use non-GAAP financial measures including organic revenue, adjusted operating margin, adjusted net income and adjusted diluted EPS. The reconciliations of these non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP are used bothshow in presenting our resultsthe tables below. These non-GAAP financial measures should not be considered in isolation from, as a substitute for or superior to, stockholders andfinancial measures reported in accordance with GAAP. Moreover, these non-GAAP financial measures have limitations in that they do not reflect all the investment community, and also in our internal evaluation and managementitems associated with the operations of the business. Webusiness as determined in accordance with GAAP. Other companies may calculate similarly titled non-GAAP financial measures differently that we do, limiting the usefulness of those measures for comparative purposes.Despite the limitations of these non-GAAP financial measures, we believe that these adjusted financial measures, and the information they provide, are useful to investors because they permit investors to view the Company’sin viewing our performance using the same tools that wemanagement uses to gauge progress in achieving our goals. Adjusted measures may also facilitate comparisons to FactSet’sour historical performance.Adjusted35The table below provides an unaudited reconciliation of revenue to organic revenue. Three Months Ended November 30, (In thousands) 2020 2019 Change Revenue $ 388,206 $ 366,658 5.9 % Deferred revenue fair value adjustment(1)60 1,216 Acquired revenue(2)(375) — Currency impact (1,240) — Organic revenue $ 386,651 $ 367,874 5.1 % (1)Deferred revenue fair value adjustment from purchase accounting(2)Acquired revenues from acquisitions completed within the last 12 months36The table below provides an unaudited reconciliation of operating income, operating margin, net income and diluted EPS to adjusted operating income, adjusted operating margin, adjusted net income and adjusted diluted EPS. Three Months Ended November 30, (In thousands, except per share data) 2020(1)2019(2)Change Operating income $ 121,031 $ 113,186 6.9 % Intangible asset amortization 5,699 5,152 Deferred revenue fair value adjustment 60 1,216 Other items 6,213 5,168 Adjusted operating income $ 133,003 $ 124,722 6.6 % Adjusted operating margin 34.3 % 33.9 % Net income $ 101,206 $ 93,957 7.7 % Intangible asset amortization(3)4,797 4,181 Deferred revenue fair value adjustment(4)51 987 Other items(5)5,229 4,011 Income tax items — (3,481) Adjusted net income $ 111,283 $ 99,655 11.7 % Diluted earnings per common share $ 2.62 $ 2.43 7.8 % Intangible asset amortization 0.12 0.11 Deferred revenue fair value adjustment — 0.03 Other items 0.14 0.10 Income tax items — (0.09) Adjusted diluted earnings per common share $ 2.88 $ 2.58 11.6 % Weighted average common shares (Diluted) 38,697 38,587 (1)Operating income, net income and diluted EPS for the three monthsmonths ended November 30, 2017 was $80.9 million, an increase of 15.4% from the prior year period. As presented in the table below,2020 were adjusted net income for the quarter ended November 30, 2017 excludes $4.6 million (after-tax) ofto exclude (i) acquired intangible asset amortization, $2.0 million (after-tax) related to(ii) deferred revenue fair value adjustments from purchase accounting, $5.4 million (after-tax) of non-recurring restructuring actions and $1.5 million of(iii) other items primarily related to professional fees associated with the ongoing content and technology investment plan and facilities costs.(2)Operating income, tax benefits primarily from settlements with taxing authorities. Adjusted net income and diluted EPS for the three months ended November 30, 2016 was $70.1 million, which excludes $2.8 million of after-tax2019 were adjusted to exclude (i) acquired intangible asset amortization, and $0.7 million of after-tax non-recurring items primarily related to legal matters.Fiscal 2018 first quarter adjusted diluted EPS of $2.04 excludes the net effect of the $0.12 detriment from the intangible asset amortization, $0.05 detriment from the(ii) deferred revenue fair value adjustments $0.14 detriment from non-recurring restructuring actionspurchase accounting, and $0.04 benefit from income tax benefits(iii) other items primarily from settlements with taxing authorities. Fiscal 2017 first quarter adjusted diluted EPS of $1.75 excludes a $0.09 detriment from therelated to severance, professional fees related to infrastructure upgrade activities and facilities costs.(3)The acquired intangible asset amortization and non-recurring acquisition costs. Three months ended November 30, $ 70,379 $ 66,583 5.7 % 4,625 2,783 2,042 5,367 707 (1,547 ) $ 80,866 $ 70,073 15.4 % $ 1.77 $ 1.66 6.6 % 0.12 0.07 0.05 0.14 0.02 (0.04 ) $ 2.04 $ 1.75 16.6 % 39,680 40,100 The presentationwas recorded net of the financial information above is not intended to be considered in isolation or as a substitutetax provision of $0.9 the financial information prepared and presented in accordance with GAAP.LiquidityThe table below, for the periods indicated, provides selected cash flow information: $ 61,143 $ 51,113 (5,912 ) (12,537 ) $ 55,231 $ 38,576 $ (5,445 ) $ (81,425 ) $ (30,814 ) $ (17,531 ) $ 221,933 $ 173,288 (1)Included in net cash used in investing activities during each fiscal year reported.(2)We define free cash flow as cash provided by operating activities, which includes the cash cost for taxes and changes in working capital, less capital expenditures.Cash and cash equivalents aggregated to $221.9 million, or 15.5% of our total assets at November 30, 2017, compared with $194.7 million, or 13.8% of our total assets at August 31, 2017. Our cash and cash equivalents increased $27.2 million during the first three months of fiscal 2018 due to cash provided by operations of $61.1 million, $22.1 million in proceeds from the exercise of employee stock options and $2.3 million from the effects of foreign currency fluctuation. These cash inflows were partially offset by $21.7 million in dividend payments, $5.9 million of capital expenditures and $31.7 million in share repurchases, which included $30.9 million under the existing share repurchase program and $0.8 million in shares repurchased from employees to cover their cost of taxes upon vesting of restricted stock.Free cash flow generated in the three months ended November 30, 20172020, compared to $1.0(4)The deferred revenue fair value adjustment was $55.2recorded net of a tax provision of zerofor thethree months ended November 30, 2020, compared to $0.2 million an increasefor the same period in the prior year.(5)Other items were recorded net of 43.2% a tax provision of $1.0millionforthethree months ended November 30, 2020,compared to a year ago. The free cash flow was attributable to $70.4$1.2 million of net income, increased by $22.7 million of non-cash items, less $31.9 million of negative working capital changes and $5.9 million in capital expenditures. The year over year free cash flow increase was driven primarily by an increase in non-cash items of $6.7 million, an increase in net income of $3.8 million and lower capital expenditures of $6.6 million. The increase in non-cash items was attributable to an increase in intangible asset amortization associated with our recent acquisitions, partially offset by the impact from the adoption of the accounting standard updatetax benefit for share-based payments resulting in a decrease in the deferred income taxes and tax benefits from share-based payment arrangements compared to prior year. Free cash flow generated over the last twelve months was $300.3 million. Included in the twelve-month calculation of free cash flow was $330.6 million of net cash provided by operations less $30.2 million of capital expenditures.Net cash used in investing activities was $5.4 million in the first three months of fiscal 2018, representing a $76.0 million decrease from the same period a year ago. This decrease was due primarily to a net cash outflow of $71.7 million in the first quarterprior year.37Liquidity and Capital ResourcesOur primary sources of CYMBA and Vermilion. Additionally,liquidity have been our cash used in investing activities decreased year over year due to lower capital expenditures of $6.6 million, offset by a decrease in proceedsflows generated from the sales of investments (net of purchases) of $2.3 million year over year.During the first three months of fiscal 2018, net cash used in financing activities was $30.8 million, representing a $13.3 million increase in cash used in financing activities. The year over year increase in cash used in financing activities was due primarily to lower proceeds from long-term debt of $65.0 million and a reduction of tax benefits from share-based payment arrangements due to the adoption of the accounting standard update of $5.5 million. This was offset by a decrease in share repurchases of $53.2 million and a decrease in proceeds from employee stock plans of $5.4 million.We expect that for at least the next 12 months, our operating expenses will continue to constitute a significant use of our cash. As of November 30, 2017, our totaloperations, existing cash and cash equivalents worldwide was $221.9 million with $574.7 million in outstanding borrowings (netand, when needed, our credit capacity under our existing credit facility. We have primarily used these sources of $0.3 million of unamortizedliquidity to, among other things, service our existing and future debt issuance costs). Approximately $44.8 millionobligations, fund our working capital requirements for operations and capital expenditures, investments, acquisitions, dividend payments and repurchases of our total available cashcommon stock. Based on past performance and cash equivalents is held in bank accounts located within the U.S., $137.2 million in Europe (predominantly within the UK, France, and Germany) and the remaining $39.9 million is held in the Asia Pacific region. Wecurrent expectations, we believe our liquidity, (including cash on hand, cash from operating activities and other cash flows that we expect to generate) within each geographic segment will be sufficient to meet our short-term and long-term operating requirements, as they occur, including working capital needs, capital expenditures, dividend payments, stock repurchases, growth objectives andalong with other financing activities. In addition, we expect existing foreign cash, cash equivalents and cash flows from operations to continue to be sufficientalternatives, will provide us the necessary capital to fund these transactions and achieve our foreign operating activities and cash commitmentsplanned growth for investing activities, such as capital expenditures, for at least the next 12 months and thereafter, for the foreseeable future.Capital ResourcesCapital ExpendituresCapital expenditures in the first quarterSources of fiscal 2018 were $5.9 million, compared with $12.5 million a year ago. Approximately $3.5 million, or 59%, of our capital expenditures was primarily for purchases of new computer equipment for our recent acquisitions, additional servers in our existing data centers and new laptop computers and peripherals for our growing employee base. The remainder of our capital expenditures was primarily for the build out of office space including $1.0 million in the Netherlands and $0.6 million in New York.Capital NeedsLong-Term DebtOn March 17, 2017, 29, 2019, we entered into a Credit Agreement (the “2017 Credit Agreement”) between FactSet, as the borrower, andcredit agreement with PNC Bank, National Association (“PNC”("PNC") (the "2019 Credit Agreement"), as the administrative agent and lender. The 2017 Credit Agreementwhich provides for a $575.0$750.0 million revolving credit facility (the “2017"2019 Revolving Credit Facility”Facility"). We may request borrowings under the 20172019 Revolving Credit Facility until its maturity date of March 17, 2020.29, 2024. The 20172019 Credit Agreement also allows us, subject to certain requirements, to arrange for additional borrowings with PNC for an aggregate amount of up to $225.0$500.0 million, provided that any such request for additional borrowings must be in a minimum amount of $25.0 million. At our option,As of November 30, 2020, we have borrowed $575.0 million of the available $750.0 million provided by the 2019 Revolving Credit Facility, resulting in $175.0 million available to be withdrawn. We are required to pay a borrowing may becommitment fee using a pricing grid which was 0.10% as of November 30, 2020. This fee is based on the daily amount by which the available balance in the form of a base rate2019 Revolving Credit Facility exceeds the borrowed amount. All outstanding loan or a LIBOR rate loan. amounts are reported as Long-term debt within the Consolidated Balance Sheets at November 30, 2020 and August 31, 2020. The principal balance is payable in full on the maturity date.Borrowings under the loan bear interest on the outstanding principal amount at a rate equal to LIBOR plus a spread using a debt leverage pricing grid, which was 0.875% as of November 30, 2020. The variable rate of interest on the daily2019 Revolving Credit Facility can expose us to interest rate volatility due to changes in LIBOR. To mitigate this exposure, on March 5, 2020, we entered into an interest rate swap agreement with a notional amount of $287.5 million to hedge the variable interest rate obligation on a portion of our outstanding balance under the 2019 Revolving Credit Facility. Under the terms of the interest rate swap agreement, we will pay interest at a fixed rate of 0.7995% and receive variable interest payments based on the same one-month LIBOR utilized to calculate the interest expense from the 2019 Revolving Credit Facility. The interest rate plus 1.00%swap agreement matures on March 29, 2024.Including the effects of the interest rate swap agreement, the weighted average interest rate on amounts outstanding under our 2019 Revolving Credit Facility was 1.40% for the three months ended November 30, 2020. The weighted average interest rate for the fiscal year ended August 31, 2020 was 2.20%. Interest on the loan outstanding balance under the 2019 Revolving Credit Facility is payable quarterly, in arrears, and on the maturity date. There are no prepayment penalties if we elect to prepay the outstanding loan amounts prior to the scheduled maturity date. The principal balance is payable in full on the maturity date. In conjunction with our entrance into the 20172019 Credit Agreement we borrowed $575.0 million in the form of a LIBOR rate loan under the 2017 Revolving Credit Facility. Proceeds from the 2017 Revolving Credit Facility were also used to fund our acquisition of BISAM.All outstanding loan amounts are reported as Long-term debt within the Consolidated Balance Sheet, presented net of related loan origination fees at November 30, 2017. The loan origination fees are amortized into interest expense over the term of the loan using the effective interest method. During the three months ended November 30, 2017contains covenants and 2016, we paid approximately $3.4 million and $1.1 million in interest on our outstanding debt amounts, respectively. As of November 30, 2017, no commitment fee was owed by us since we borrowed the full amount under the 2017 Credit Agreement.The 2017 Credit Agreement contained covenantsrequirements restricting certain FactSet activities, which are usual and customary for this type of loan. In addition, the 20172019 Credit Agreement requiredrequires that we maintain a consolidated net leverage ratio, as measured by total net funded debt/EBITDA (as defined in the 2019 Credit Agreement) below a specified level as of the end of each fiscal quarter. We were in material compliance with all of the covenants ofand requirements within the 20172019 Credit Agreement as of November 30, 2017.As part of the Truvalue Labs, Inc. ("TVL") acquisition, FactSet assumed an additional $1.1 million in long-term debt. Refer to Note 7, Acquisition for further discussion on the TVL acquisition.Uses of LiquidityReturning Value to ShareholdersFor the three months ended November 30, 2017,2020, we returned $72.2 million to stockholders in the fair valueform of share repurchases and dividends. Over the last 12 months, we returned $270.6 million to stockholders in the form of share repurchases and dividends.Share Repurchase ProgramRepurchases of shares of our long-term debt was $575 million, which we believe approximated the carrying amount as the terms and interest rates approximate market rates given its floating interest rate basis.Letters of CreditFrom time to time, wecommon stock are required to obtain letters of credit in the ordinary course of business. Approximately $1.9 million of standby letters of credit have been issued in connection with our current leased office space as of November 30, 2017. These standby letters of credit contain covenants that, among other things, require us to maintain minimum levels of consolidated net worth and certain leverage and fixed charge ratios. As of November 30, 2017 and August 31, 2017, we were in material compliance with all covenants contained in the standby letters of credit.Foreign CurrencyForeign Currency ExposureCertain wholly owned subsidiaries within the European and Asia Pacific segments operate under a functional currency different from the U.S. dollar. The financial statements of these foreign subsidiaries are translated into U.S. dollars using period-end rates of exchange for assets and liabilities and average rates for the period for revenues and expenses. Translation gains and losses that arise from translating assets, liabilities, revenues and expenses of foreign operations are recorded in accumulated other comprehensive loss as a component of stockholders’ equity.As of November 30, 2017, our annualized non-U.S. dollar denominated revenues are estimated to be $82.8 million while our non-U.S. dollar denominated expenses are estimated to be $316.4 million, which translates into a net foreign currency exposure of $233.7 million. Our foreign currency exchange exposure is related to our operating expense base in countries outside the U.S., where 74% of our employees were located as of November 30, 2017. During the first three months of fiscal 2018, foreign currency movements increased operating income by $0.1 million, compared to $1.8 million a year ago.Foreign Currency HedgesAs of November 30, 2017, we maintained foreign currency forward contracts to hedge approximately 75% of our Indian Rupee exposure through the third quarter of fiscal 2019. The gross notional value of foreign currency forward contracts to purchase Indian Rupees with U.S. dollars was Rs. 3.3 billion.There were no other outstanding foreign currency forward contracts as of November 30, 2017. A gain on derivatives of $0.8 million was recorded into operating income during the first quarter of fiscal 2018, compared to a loss of $1.4 million in the year ago first quarter.Off-Balance Sheet ArrangementsAt November 30, 2017 and August 31, 2017, we had no off-balance sheet financing or other arrangements with unconsolidated entities or financial partnerships (such as entities often referred to as structured finance or special purpose entities) established for purposes of facilitating off-balance sheet financing, other debt arrangements, or other contractually limited purposes.Share Repurchase ProgramRepurchases will be made from time to time in the open market and privately negotiated transactions, subject to market conditions. DuringIn the first quarter of fiscal 2018, FactSetthree months ended November 30, 2020, we repurchased 164,920131,800 shares for $30.9$43.1 million under the Company’sour existing share repurchase program. Over the last 12 months, FactSet has returned $290.5program compared to 343,000 shares for $84.4 million to stockholders in the formsame period a38year ago. As of November 30, 2017, $213.22020, $215.9 million isremains available under the share repurchase program for future share repurchases underrepurchases. There is no defined number of shares to be repurchased over a specified timeframe through the existinglife of the share repurchase program. It is expected that share repurchases will be paid using existing and future cash generated by operations.DividendsOn November 4, 2020, our Board of Directors approved a regular quarterly dividend of $0.77 per share. The cash dividend of $29.1 million was paid on December 17, 2020, to common stockholders of record at the close of business on November 30, 2020. Future cash dividends will depend on our earnings, capital requirements, financial condition and other factors considered relevant by us and is subject to final determination by our Board of Directors.AcquisitionsOn November 2, 2020, FactSet acquired all of the outstanding shares of TVL for a purchase price of $41.9 million, subject to working capital and other adjustments. TVL is a leading provider of ESG information derived from artificial intelligence, and the acquisition of TVL further enhances FactSet's commitment to providing industry leading access to ESG data across its platforms. Refer to Note 7, Acquisition for further discussion on the TVL acquisition.Summary of Cash FlowsThe table below, for the periods indicated, provides selected cash flow information:Three months ended November 30, (in thousands) 2020 2019 Net cash provided by operating activities $ 89,276 $ 95,791 Net cash used in investing activities (58,322) (27,143) Net cash used by financing activities (56,377) (94,955) Effect of exchange rate changes on cash and cash equivalents (45) 2,725 Net decrease in cash and cash equivalents $ (25,468) $ (23,582) Cash and cash equivalents aggregated to $560.1 million as of November 30, 2020, compared to $585.6 million as of August 31, 2020. Our cash and cash equivalents decreased $25.5 million during the first three months of fiscal 2021, primarily due to cash outflows of $43.1 million in share repurchases, $41.9 million for the acquisition of a business, $29.1 million in dividend payments, and $18.3 million of capital expenditures, partially offset by inflows of $89.3 million of net cash provided by operating activities and $18.0 million in proceeds from the exercise of employee stock options.Our cash and cash equivalents are held in numerous locations throughout the world, with $229.0 million within the Americas, $281.5 million within EMEA (predominantly within the UK, France, and Germany) and the remaining $49.6 million within Asia Pacific (predominantly within the Philippines and India) as of November 30, 2020. We intend to reinvest substantially all of our accumulated undistributed foreign earnings, except in instances where repatriation would result in minimal additional tax.OperatingFor the three months ended November 30, 2020, net cash provided by operating was $89.3 million compared to $95.8 million during the same period a year ago, a decrease of $6.5 million. This decrease was primarily driven by the timing of lease incentive payments and certain working capital changes, offset by higher net income and cash generated from the operations of the business.InvestingNet cash used in investing activities was $58.3 million in the three months ended November 30, 2020, representing a $31.2 million increase from the same period a year ago. This increase was due primarily to the acquisition of TVL for approximately $41.9 million in cash, net of cash acquired, partially offset by an $8.4 million decrease in capital expenditures. Capital expenditures decreased due to increased spend during the three months ended November 30, 2019, primarily related to the build-out of our new corporate headquarters in Norwalk, Connecticut compared to reduced spend during the three months ended November 30, 2020 primarily related to the build-out of our office space in the Philippines and capitalized internal-use software.39FinancingNet cash used by financing activities was $56.4 million in the three months ended November 30, 2020, representing a $38.6 million decrease in cash used by financing activities from the same period a year ago. The decrease was primarily due to a $41.3 million decrease in share purchases and a $1.3 million increase in proceeds from employee stock plans, partially offset by a $1.8 million increase in dividend payments.Free Cash FlowWe define free cash flow, a non-GAAP financial measure, as cash provided by operating activities less purchases of property, equipment, leasehold improvements and intangible assets. We present free cash flow solely as a supplemental disclosure to provide useful information to investors about the amount of cash generated by the business after necessary capital expenditures. We consider free cash flow to be a liquidity measure that provides useful information to management and investors about the amount of cash generated by the business after necessary capital expenditures. The following table reconciles our net cash provided by operating activities to free cash flow:Three months ended November 30, (in thousands) 2020 2019 Net cash provided by operating activities $ 89,276 $ 95,791 Capital expenditures(1)(18,333) (26,780) Free cash flow $ 70,943 $ 69,011 (1) Capital expenditures are included in net cash used in investing activities during each fiscal period reported.Free cash flow generated in the three months ended November 30, 2020 was $70.9 million, an increase of 2.8% compared to a year ago. Free cash flow increased $1.9 million year-over-year due to an $8.4 million decrease in capital expenditures, partially offset by a $6.5 million decrease in operating cash flows.Contractual ObligationsFluctuations in our operating results, the degree of success of our accounts receivable collection efforts, the timing of tax and other payments, as well as necessary capital expenditures to support growth of our operations, will impact our liquidity and cash flows in future periods. The effect of our contractual obligations on our liquidity and capital resources in future periods should be considered in conjunction with the factors mentioned here. As of August 31, 2017,2020, we had total purchase commitments of $81.0$226.0 million. There were no material changes in our purchase commitments duringDuring the first three months of fiscal 2018.At ended November 30, 2017,2020 we leasedentered into a software subscription agreement with total purchase commitment of approximately 1,612,100 square feet$10.0 million with a contract term of office space, which we believe is adequate for our current needs and that additional space is available for lease to meet any future needs. Including new lease agreements executed during fiscal 2018, our worldwide-leased office space increased by approximately 469,100 square feet, or 41.0%, from August 31, 2017. This increase was primarily due to new leases for expanded office spaceAs disclosed earlier in the Philippines. Future minimum commitments for our operating leases in placeLiquidity and Capital Resources section of this MD&A, we entered into the 2019 Credit Agreement on March 29, 2019 and borrowed $575.0 million. The loan balance of $575.0 million remains outstanding as of November 30, 2017 totaled $282.3 million, which is comparable2020. Refer to $281.7 million as of August 31, 2017.As disclosedNote 11, Capital Resources sectionnotes to the Consolidated Financial Statements included in Part I, Item 1, Financial Information, of the MD&A, FactSet entered into the 2017 Credit Agreementthis Quarterly Report on March 17, 2017 and borrowed $575.0 million.With the exceptionForm 10-Q for a discussion of the new leases entered into in the ordinary course of business, thereour Long-term debt borrowings.There were no other significant changes to our contractual obligations during the first three months of fiscal 2018.DividendsOn2021.Off-Balance Sheet ArrangementsAt November 8, 2017,30, 2020 and August 31, 2020, we had no off-balance sheet financing or other arrangements with unconsolidated entities or financial partnerships (such as entities often referred to as structured finance or special purpose entities) established for purposes of facilitating off-balance sheet financing, other debt arrangements, or other contractually limited purposes.Foreign CurrencyForeign Currency ExposureOur investments in certain wholly-owned subsidiaries within the EMEA and Asia Pacific segments, where approximately 76% of our Boardemployees are located, are exposed to volatility in currency exchange rates through translation of Directors approvedthe foreign subsidiaries'40net assets or liabilities from their respective functional currencies into U.S. dollars, using an end of period exchange rate. The net translation gains and losses are recorded in accumulated other comprehensive loss as a quarterly cash dividendcomponent of $0.56 per share, or $2.24 per share per annum.stockholders’ equity.During the three months ended November 30, 2020, foreign currency movements increased operating income by $0.6 million, compared to a $1.0 million increase to operating income a year ago. To mitigate the foreign currency exposure, we entered into a series of forward contracts to hedge a portion of our British Pound Sterling, Euro, Indian Rupee, and Philippine Peso exposures ranging from 25% to 75% over their respective hedged periods as of November 30, 2020. The cash dividendcurrent foreign currency forward contracts are set to mature at various points between the second quarter of $21.9fiscal 2021 through the first quarter of fiscal 2022.As of November 30, 2020, the gross notional value of foreign currency forward contracts to purchase Philippine Pesos and Indian Rupees with U.S. dollars was ₱1.3 billion and Rs2.4 billion, respectively. The gross notional value of foreign currency forward contracts to purchase U.S. dollars with Euros and British Pound Sterling was €36.3 million and £37.6 million, respectively.A gain on derivatives of $0.3 million was paid on December 19, 2017, to common stockholders of record onrecorded into operating income for the three months ended November 30, 2017. Future cash dividends will depend2020, compared to a loss on our earnings, capital requirements, financial condition and other factors considered relevant by us and is subject to final determination by our Boardderivatives of Directors.Significant $0.7 million in the same period a year ago.Critical Accounting Policies and Critical Accounting EstimatesWe describe our significant accounting policies in Note 3, Summary of SignificantAccounting Policies, of the Notesnotes to our Consolidated Financial Statements included in Item 8 of our Annual Report on Form 10-K for the fiscal year ended August 31, 2020. The accounting policies used in preparing our Consolidated Financial Statements for the first three months of fiscal 2021 are applied consistently with those described in our Annual Report on Form 10-K for the fiscal year ended August 31, 2017.We discuss our critical accounting estimates in Management’sItem 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended August 31, 2017.2020. There were no significant changes in our accounting policies or critical accounting estimates during the first three months of fiscal 2018.New Accounting PronouncementsSee Note 3, Recent Accounting Pronouncements, in the Notesnotes to the Consolidated Financial Statements included in Part I, Item 1, Financial Information, of this Quarterly Report on Form 10-Q for a full description of recent accounting pronouncements, including the expected dates of adoption, which we include herein by reference.Market TrendsIn the ordinary course41Table of business, we are exposed to financial risks involving the volatility of equity markets as well as foreign currency and interest rate fluctuations.Shift from Active to Passive Investment ManagementApproximately 84.2% of our ASV is derived from our 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 also could cause a significant increase in redemption requests to move money out of equities and into other asset classes. Moreover, a shift from active investment management to passive investment management can result in lower demand for our services. Our investment banking clients, that provide M&A advisory work, capital markets services and equity research, account for approximately 15.8% of our ASV. A significant portion of these revenues relate to services deployed by large, bulge bracket banks. Credit continues to impact many of the large banking clients due to the amount of leverage deployed in past operations. Our clients could also encounter similar problems. A lack of confidence in the global banking system could cause declines in M&A funded by debt. Additional uncertainty, consolidation and business failures in the global investment banking sector could adversely affect our financial results and future growth. Regardless, the size of banks in general is shrinking as they deleverage their balance sheets and adjust their expense bases to future revenue opportunities. Our revenues may decline if banks, including those involved in recent merger activity, significantly reduce headcount in the areas of corporate M&A, capital markets and equity research to compensate for the issues created by other departments.Foreign Currency VolatilityDue 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 will correspondingly increase. To manage this exposure, we utilize derivative instruments (foreign currency forward contracts). By their nature, all derivative instruments involve, to varying degrees, 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 associated with changes in foreign currency.BrexitVolatility is expected to continue in the short term as the UK negotiates its exit from the European Union. As the negotiation process continues and the timeframe from the initial vote increases, the UK economic performance has been stronger than originally expected. Increased European confidence and UK consumer spending has contributed to the recovery of the economic outlook. In the longer term, as negotiations continue, any impact from Brexit on us will depend, in part, on the outcome of tariff, trade, regulatory and other negotiations. Although it is unknown what the result of those negotiations will be, it is possible that new terms may adversely affect our operations and financial results. While we evaluate our own risks and uncertainty related to Brexit, we will continue to partner with our clients to help them navigate the fluctuating international markets.MiFID IIThe Markets in Financial Instruments Directive ("the Directive") is the European Union's regulation of financial markets. On January 3, 2018, the Directive will apply "MiFID II" to ensure fairer, safer and more efficient markets and facilitate greater transparency for all participants. Research is one area where both buy-side and sell-side clients that have seen and will continue to see significant change requirements as a result of the MiFID II inducement rules. The goal of the new legislative framework is to strengthen investor protection and improve the functioning of financial markets making them more efficient, resilient and transparent. New reporting requirements and tests will increase the amount of information available, and reduce the use of dark pools and OTC trading. MiFID II requirements have meant pricing models and business practices have had to adapt significantly. We will continue to evaluate our own risks and uncertainty related to MiFID II and partner with our clients to help them navigate these new rules. However, recently we have noticed a substantial interest in our research unbundling solutions, which is part of the opportunity for us, but more importantly, allows our clients to leverage our technology solutions for MiFID II compliance.Forward-Looking FactorsForward-Looking StatementsIn addition to current and historical information, this Quarterly Report on Form 10-Q, including Management’s Discussion and Analysis of Financial Condition and Results of Operations, contains forward-looking statements regarding future events and our future results that are based on management’s current expectations, estimates, forecast and projections about the industries in which we operate and the beliefs and assumptions of our management. All statements, other than statements of historical facts, are statements that could be deemed to be forward-looking statements. These include statements about our strategy for growth, product development, market position, subscriptions and expected expenditures and financial results. Forward-looking statements may be identified by words like “expects,” “anticipates,” “plans,” “intends,” “projects,” “should,” “indicates,” “continues,” “ASV,” “subscriptions,” “believes,” “estimates,” “may” and similar expressions. In addition, any statements that refer to projections of our future financial performance, our anticipated growth, trends in our business and other characterizations of future events or circumstances are forward-looking statements. Readers are cautioned that these forward-looking statements are only predictions and not guarantees of future performance and involve a number of risks, uncertainties and assumptions. Therefore, actual results may differ materially from what is expressed or forecasted in such forward-looking statements. We will publicly update forward-looking statements as a result of new information or future events in accordance with applicable Securities and Exchange Commission regulations.We intend that all forward-looking statements we make will be subject to safe harbor protection of the federal securities laws as found in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.These statements involve certain known and unknown risks and uncertainties that could cause our actual results to differ materially from those expressed or implied in our forward-looking statements. Such risks and uncertainties include, among others, those listed below. We do not intend, and undertake no obligation, to update any of our forward-looking statements after the date of this Quarterly Report to reflect actual results or future events or circumstances.Business OutlookStarting with the first quarter of fiscal 2018, the Company will provide annual guidance and discontinue quarterly guidance. The following forward-looking statements reflect our expectations as of December 19, 2017. Given the risk factors, uncertainties and assumptions discussed above, actual results may differ materially. We do not intend to update our forward-looking statements until our next quarterly results announcement, other than in publicly available statements. Both GAAP operating margin and GAAP diluted EPS guidance do not include the effects of any non-recurring benefits or charges that may arise in the next three quarters of fiscal 2018.Fiscal 2018 Expectations:-Organic ASV is expected to increase in the range of $65 million and $85 million over fiscal 2017 implying a growth rate in the range of 4.9% to 6.5%.-GAAP Revenues are expected to be in the range of $1.34 billion and $1.36 billion.-GAAP operating margin is expected to be in the range of 28.5% and 30.0%. Adjusted operating margin is expected to be in the range of 31.0% and 32.5%.-The annual effective tax rate is expected to be in the range of 21.0% and 22.5%. This guidance incorporates the impact from an accounting standard update, which affects the accounting for employee share-based payment transactions, including income taxes and classification of excess tax benefits in the statement of cash flows. The projected tax rate range does not incorporate any impact from the recently signed U.S. corporate tax reform bill.-GAAP diluted EPS is expected to be in the range of $7.60 and $7.80. Adjusted diluted EPS is expected to be in the range of $8.25 and $8.45. The midpoint of the adjusted EPS range represents 14% growth over the prior year. Adjusted diluted EPS for the fiscal 2018 includes an estimated $0.26 impact from the aforementioned accounting standard update.ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKIn the normal course of business, wewe are exposed to foreign currency exchange risk and interest rate risk that could impact our financial position and results of operations.Foreign Currency Exchange RiskWeIn the normal course of business, we are exposed to foreign currency exchange risk as we conduct business outside the U.S. in several currencies including the British Pound Sterling, Euro, Indian Rupee, Japanese Yen and Philippine Peso. The financial statements of these foreign subsidiaries are translatedChanges in the exchange rates for such currencies into U.S. dollars using period-end ratescan affect our revenues, earnings, and the carrying values of exchange forour assets and liabilities and average rates for the period for revenues and expenses. Over the next 12 months,in our non-U.S. dollar denominated revenues expected to be recognized are estimated to be $82.8 million while our non-U.S. dollar denominated expenses are estimated to be $316.4 million, which translates into a net foreign currency exposure of $233.7 million. To the extent that our international activities recorded in local currencies increase in the future, our exposure to fluctuations in currency exchange rates will correspondingly increase. consolidated balance sheet, either positively or negatively.To manage the exposures related to the effects of foreign exchange rate fluctuations, we utilize derivative instruments (foreign currency forward contracts). By their nature, all derivative instruments involve, to varying degrees, 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. We do not believe there is significant risk of loss in the event of non-performance by the counterparties associated with these instruments because these transactions are executed with a major financial institution. Further, our policy is to deal with counterparties having a minimum investment grade or better credit rating. Credit risk is managed through the continuous monitoring of exposures to such counterparties. Our primary objective in holding derivatives is to reduce the volatility of earnings associated with changes in foreign currency.As of November 30, 2017, we maintained the following foreign currency forward contracts to approximately 75% of our Indian Rupee exposure through the third quarter of fiscal 2019. The gross notional value of foreign currency forward contracts to purchase Indian Rupees with U.S. dollars was Rs. 3.3 billion.A gain on derivatives of $0.8 million was recorded into operating income during the first quarter of fiscal 2018, compared to a loss on derivatives of $1.4 million in the year ago first quarter. The gains and losses on foreign currency forward contracts mitigate the variability in operating expenses associated with currency movements. These transactions are designated and accounted for as cash flow hedges in accordance with applicable accounting guidance. The changes in fair value for these foreign currency forward contracts are initially reported as a component of accumulatedAccumulated other comprehensive loss ("AOCL") and subsequently reclassified into operating expenses when the hedged exposure affects earnings. The related cash flow impacts of all of our derivative activities are reflected as cash flows from operating activities.2017.2020. If the U.S. dollar had been 10% weaker, the fair value of outstanding foreign currency forward contracts would have increased by $4.7$14.8 million, which would have had an immaterial impact on our Consolidated Balance Sheet. Such a change in fair value of our financial instruments would be substantially offset by changes in our expense base. HadIf we not had anyno hedges in place as of November 30, 2017,2020, a hypothetical 10% weaker U.S. dollar against all foreign currencies from the quoted foreign currency exchange rates at November 30, 2017,2020, with operating results held constant in local currencies, would result in a decrease in operating income by $22.8$40.5 million over the next 12 months. A hypothetical 10% weaker U.S. dollar against all foreign currencies at November 30, 20172020 would increasehave increased the fair value of total assets by $71.3$68.5 million and equity by $64.5$42.2 million.Volatility in the British Pound Sterling exchange rate is expected to continueremains a possibility in the short term as the UK negotiatescontinues the transition resulting from its exit from the European Union. In the longer term, any impact from Brexit on will depend on, in part, on the outcome of tariff, trade, regulatory, and other negotiations.Refer to Note 6, Derivative Instruments in the Notes to the Company’s Consolidated Financial Statements included in Part I, Item 1. of this Quarterly Report on Form 10-Q for more information on our foreign currency exposures and our foreign currency forward contracts.Interest Rate RiskCash and Cash Equivalents -The fair market value of our Cash and cash equivalents and investmentsInvestments at November 30, 20172020 was $253.6$578.3 million. Our cash and cash equivalents consist of demand deposits and money market funds with original maturities of three months or less and are reported at fair value. Our investments consistWe are exposed to interest rate risk through fluctuations of both mutual funds and certificates of deposit as both are part of the Company’s investment strategy. These mutual funds and certificates of deposit are included as Investments (short-term)interest rates on our Consolidated Balance Sheets as the certificates of deposit have original maturities greater than three months, but less than one year and the mutual funds can be liquidated at that Company’s discretion. The mutual funds and certificates of deposit are held for investment and are not considered debt securities. It is anticipated that the fair market value of our cash and investments will continue to be immaterially affected by fluctuations in interest rates. Preservation of principal is the primary goal of our cash and investment policy. Pursuant to our established investment guidelines, we try to achieve high levels of credit quality, liquidity and diversification. Our investment guidelines do not permit us to invest in puts, calls, strips, short sales, straddles, options, commodities, precious metals, futures or investments on margin. Becauseinvestments. As we have a restrictive investment policy, our financial exposure to fluctuations in interest rates is expected to remain low. We do not believe thatRefer to Note 3, Summary of Significant Accounting Policies, in the value or liquidityNotes to the Company’s Consolidated Financial Statements included in Item 8 of our Annual Report on Form 10-K for more information on our cash and cash equivalents and investments have been significantly impacted by current market events.Debt -As of November 30, 2017, the fair value of our2020, we had long-term debt was $575outstanding of $575.5 million, which approximated its carrying amount and was determined based on quoted market prices for debt withincluded a similar maturity. It is anticipated thatprincipal balance of $575.0 million related to the fair market value of our debt will continue to be immaterially affected by fluctuations in interest rates and we do not believe that the value of our debt has been significantly impacted by current market events.2019 Revolving Credit Facility. The debt2019 Revolving Credit Facility bears interest on the outstanding principal amountprinciple at a rate equal to the daily LIBOR plus a spread, using a debt leverage pricing grid. The variable rate plus 1.00%. During the three months ended November 30, 2017 and 2016, we paid approximately $3.4 million and $1.1 million inof interest on our 2019 Revolving Credit Facility can expose us to interest rate volatility due to changes in LIBOR. To mitigate this exposure, on March 5, 2020, we entered into an interest rate swap agreement with a notional amount of $287.5 million to hedge the variable interest rate obligation, effectively converting the floating interest rate to fixed for the hedged portion. Thus, we are only exposed to base interest rate risk on floating rate borrowings in excess of any amounts that are not hedged, or $287.5 million of our outstanding debt amounts, respectively.principal balance under the 2019 Revolving Credit Facility. Assuming all terms of our outstanding long-term debt remained the same, a hypothetical 25 basis point change (up or down) in the one-month LIBOR rate would result in a $1.4$0.7 million change into our annual interest expense.expense for the portion of the long-term debt not hedged by the interest rate swap42agreement. Refer to Note 11, Debt, in the Notes to the Company’s Consolidated Financial Statements included in Item 1. of this Quarterly Report on Form 10-Q for additional information regarding our outstanding debt obligations.ITEM 4.CONTROLS AND PROCEDURESEvaluation of Disclosure Controls and ProceduresUnder the supervision and with the participation of the Company’sThe Company’s management, including theits principal executive officer and principal financial officer, the Company hashave evaluated the effectiveness of itsthe Company’s disclosure controls and procedures pursuant to Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as of the end of the period covered by this report. Based on that evaluation,report, and the principal executive officer and principal financial officer have concluded that the Company’s disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, (the “Exchange Act”) are effective to ensure that information required to be disclosedas of the end of the period covered by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms and is accumulated and communicated to the Company’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.Changes in Internal Control over Financial ReportingThere have been no changes in the Company’sCompany’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the Company’s first quarter of fiscal 2018three months ended November 30, 2020 that hashave materially affected, or isare reasonably likely to materially affect, the Company’s internal control over financial reporting.43PART II – OTHER INFORMATIONPART II – OTHER INFORMATIONITEM 1. LEGAL PROCEEDINGSThe information set forth under "Contingencies" in Note 17, 12, Commitments and Contingencies,contained in the Notes to the Consolidated Financial Statements of this Quarterly Report on Form 10-Q is incorporated by reference in answer to this Item.44ITEM 1A. RISK FACTORSThere were no material changes during the first three months of fiscal 20182021 to the risk factors identified in the Company’s fiscal 2017Company's Annual Report on Form 10-K.Legal & Regulatory RisksLegislative and regulatory changes in the environments in which we and our clients operateAs a business, we are 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 or conflict, 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. Uncertainty caused by political change globally, and complex relationships across countries, including the U.S. and nations in Europe and Asia, heightens the risk of regulatory uncertainty.Many of our clients operate within a highly regulated environment and must comply with governmental legislation and regulations. The U.S. regulators have increased their focus on the regulation of the financial services industry. Increased regulation of our clients may increase their expenses, causing them to seek to limit or reduce their costs from outside services such as ours. Additionally, if our clients are subjected to investigations or legal proceedings they may be adversely impacted, possibly leading to their liquidation, bankruptcy, receivership, reduction in assets under management, or diminished operations, which would adversely affect our revenue. Recent regulatory changes that we believe might materially impact us and our clients include:MiFIDIn the European Union, the new version of the Markets in Financial Instruments Directive (recast), also known as "MiFID II" became effective in January 2018. MiFID II built upon many of the initiatives introduced through MiFID and is intended to help improve the functioning of the European Union single market by achieving a greater consistency of regulatory standards. MiFID originally became effective in 2007. 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. We continue to monitor the impact of MiFID II on the investment process and trade lifecycle. We also continue to review the application of key MiFID II requirements and plan to work with our clients to navigate through them.BrexitOn January 31, 2020, the United Kingdom (the "UK") formally left the European Union (the "EU") when the UK-EU Withdrawal Agreement became effective. Under the Withdrawal Agreement, a transition period began that ran until December 31, 2020. On January 1, 2021, the UK left the EU Single Market and Customs Union, as well as all EU policies and international agreements. As a result, the free movement of persons, goods, services and capital between the UK and the EU ended, and the EU and the UK formed two separate markets and two distinct regulatory and legal spaces. On December 24, 2020, the European Commission reached a trade agreement with the UK on the terms of its future cooperation with the EU (the "Trade Agreement"). The Trade Agreement offers UK and EU companies preferential access to each other’s markets, ensuring imported goods will be free of tariffs and quotas; however, economic relations between the UK and the EU will now be on more restricted terms than existed previously. The Trade Agreement does not incorporate the full scope of the services sector, and businesses such as banking and finance face a more uncertain future. The UK and EU plan to put in place a regulatory dialogue on financial services based on a separate memorandum of understanding by March 2021. At this time, we cannot predict the impact that the Trade Agreement and any future agreements on services, particularly financial services, will have on our business and our clients, and it is possible that new terms may adversely affect our operations and financial results. We continue to evaluate our own risks and uncertainty related to Brexit and partner with our clients to help them navigate the possible changes in the UK-EU market. This uncertainty may have an impact on our clients’ expansion or spending plans, which may in turn negatively impact our revenue or growth.45ITEM2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDSItems 2(a) and (b) are not applicable as there have been no unregistered sales of equity securities.(c) (i)Issuer Purchases of Equity Securities (in thousands, except share and per share data)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 November 30, 2017:
of shares
purchased
price paid per
share
shares purchased as
part of publicly
announced plans or
programs
(or approximate dollar value)
that may yet be
purchased under the plans or
programs (in US$) 20,000 $ 180.34 20,000 $ 240,504 45,000 $ 177.79 45,000 $ 232,504 99,920 $ 193.44 99,920 $ 213,176 164,920 164,920 Period Total Number ofShares Purchased(1)Average Price
Paid per ShareTotal Number of Shares Purchased as Part of Publicly Announced Plans or Programs(2)Maximum Number of Shares (or Approximate Dollar Value)that May Yet be Purchased Under the Plans or Programs (in US$)(2)September 2020 14,000 $ 333.72 14,000 $ 254,323 October 2020 82,662 $ 327.08 80,800 $ 227,916 November 2020 41,866 $ 323.79 37,000 $ 215,851 Total 138,528 131,800 (1)Includes131,800shares purchased under the existing stock repurchase program, as well as 6,728 shares repurchased from employees to cover their cost of taxes upon vesting of restricted stock and exercise of stock options.(2)Repurchases may be made from time to time in the open market and privately negotiated transactions, subject to market conditions. No minimum number of shares to be repurchased has been fixed. There is no timeframe to complete the repurchase program and it is expected that share repurchases will be paid using existing and future cash generated by operations.ITEM 3. DEFAULTS UPON SENIOR SECURITIESNone.ITEM 4. MINE SAFETY DISCLOSURESNot applicable.ITEM 5. OTHER INFORMATIONNone.46ITEM 6. EXHIBITS(a) EXHIBITS:EXHIBITSThe information required by this Item is set forth below.EXBHITNUMBERDESCRIPTIONIncorporated by Reference 10.1ExhibitDescriptionSeparation Agreement and General Release of Claims, dated November 13, 2017 File No. Exhibit No. Filing Date FiledHerewith31.1Section 302 Certification of Principalthe Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amendedX Section 302 Certification of Principalthe Chief Financial OfficerX X Certification of Principal Executivethe Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002X 32.2Section 906 Certification of Principal Financial Officer101.INSX DocumentX DocumentX X DocumentX DocumentX 104 Cover page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) X SIGNATURES(1) Indicates a management contract or compensatory plan or arrangement47SIGNATURESPursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.FACTSET RESEARCH SYSTEMS INC.
(Registrant)(Registrant)Date: January 6, 2021 /s/ HELEN L. SHAN Date: January 9, 2018/s/ MAURIZIO NICOLELLIMaurizio NicolelliSenior Executive Vice President and Chief Financial Officer(Principal Financial Officer) /s/ MATTHEW J. MCNULTYMatthew J. McNultyGregory T. Moskoff Senior Vice President, Controller and Chief Accounting Officer 48EXHIBIT INDEXEXBHITNUMBERDESCRIPTION10.1Separation Agreement and General Release of Claims, dated November 13, 201731.131.232.132.2101.INSXBRL Instance Document101.SCHXBRL Taxonomy Extension Schema Document101.CALXBRL Taxonomy Extension Calculation Linkbase Document101.DEFXBRL Taxonomy Extension Definition Linkbase Document101.LABXBRL Taxonomy Extension Label Linkbase Document101.PREXBRL Taxonomy Extension Presentation Linkbase Document42