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UNITED STATES

SECURITIES AND EXCHANGEEXCHANGECOMMISSION

Washington, D.C. 20549

Form 10-Q

_________________________________________________

☒

xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended November 30, 2017

2022

OR

☐

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______to ______


Commission File Number: 1-11869

FACTSET RESEARCH SYSTEMS INC.

(Exact name of registrant as specified in its charter)

fds-20221130_g1.jpg
_________________________________________________

Delaware

13-3362547

(State or other jurisdiction of


incorporation or organization)

(I.R.S. Employer


Identification No.)

601 Merritt 7, Norwalk, Connecticut

06851

45 Glover Avenue, Norwalk, Connecticut
06850
(Address of principal executive office)

offices)

(Zip Code)

Registrant’s

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

Former name, former address and former fiscal year, if changed since last report: None

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbols(s)Name of each exchange on which registered
Common Stock, $0.01 Par ValueFDSNew York Stock Exchange LLC
The Nasdaq Stock Market

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

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

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

Large accelerated filer ☒Accelerated filer ☐Non-accelerated filer ☐Smaller reporting company ☐Emerging growthcompany ☐

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

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

x

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:
The number of shares outstanding of the registrant’s common stock, $.01 par value, as of December 31, 2017 was 39,023,879.

27, 2022 was 38,251,828.

Table of Contents

FactSet Research Systems Inc.

Form 10-Q

For the Quarter EndedNovember 30, 2017

2022

Index

Page

Part I

FINANCIAL INFORMATION

Page

3

4

Consolidated Statements of Comprehensive Income for thethree months ended November 30, 20172022 and 2016

2021

4

5

Consolidated Balance Sheets at November 30, 20172022 and August 31, 2017

2022

5

6

6

7
8

7

9

Management’s

27

30

38

47

39

49

Part II

OTHER INFORMATION

49
49

Item 1.

Legal Proceedings

40

Item 1A.

Risk Factors

40

40

49
50

Item 3.

Defaults Upon Senior Securities

40

40

50
50

Other Information

40

50

Item 6.

Exhibits 

41

Signatures 

41

52

For additional information about FactSet Research Systems Inc. and access to its Annual Reports to Stockholders and Securities and Exchange Commission filings, free of charge, please visit theFactSet’s website at http:(https://investor.factset.cominvestor.factset.com). Any information on or linked from the website is not incorporated by reference into this Quarterly Report on Form 10-Q.












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Special Note Regarding Forward-Looking Statements
FactSet Research Systems Inc. has made statements under the captions Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations, Part II, Item 1A. Risk Factors, and in other sections of this Quarterly Report on Form 10-Q for the three months ended November 30, 2022, that are forward-looking statements. In some cases, you can identify these statements by words such as "may," "might," "will," "should," "expects," "plans," "anticipates," "believes," "estimates," "intends," "projects," "indicates," "predicts," "potential," or "continue," and similar expressions.
These forward-looking statements, which are subject to risks, uncertainties and assumptions about us, may include projections of our future financial performance and anticipated trends in our business. These statements are only predictions based on our current expectations, estimates, forecasts and projections about future events. These statements are not guarantees of future performance and involve a number of risks, uncertainties and assumptions. There are many important factors that could cause our actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied by the forward-looking statements, including the numerous factors discussed under Item 1A. Risk Factors in our Annual Report on Form 10-K for the fiscal year ended August 31, 2022, that should be specifically considered.
Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of any of these forward-looking statements. Forward-looking statements speak only as of the date they are made, and actual results could differ materially from those anticipated in forward-looking statements. We do not intend, and are under no duty, to update any of these forward-looking statements after the date of this Quarterly Report on Form 10-Q to reflect actual results, future events or circumstances, or revised expectations.
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.

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PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

FactSet Research Systems Inc.

CONSOLIDATED STATEMENTS OF INCOME – Unaudited

 

 

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)20222021
Revenues$504,815 $424,725 
Operating expenses
Cost of services227,042 207,131 
Selling, general and administrative105,596 91,238 
Asset impairments282 3,695 
Total operating expenses332,920 302,064 
Operating income171,895 122,661 
Other income (expense), net
Interest expense, net(14,332)(1,494)
Other income (expense), net322 (1,237)
Total other income (expense), net(14,010)(2,731)
Income before income taxes157,885 119,930 
Provision for income taxes21,087 12,283 
Net income$136,798 $107,647 
Basic earnings per common share$3.59 $2.86 
Diluted earnings per common share$3.52 $2.79 
Basic weighted average common shares38,122 37,678 
Diluted weighted average common shares38,914 38,641 

The accompanying notes are an integral part of these consolidated financial statements.

Consolidated Financial Statements.










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FactSet Research Systems Inc.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME – Unaudited

 

 

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)20222021
Net income$136,798 $107,647 
Other comprehensive income (loss), net of tax
Net unrealized gain (loss) on cash flow hedges*6,555 5 
Foreign currency translation adjustment gains (losses)8,769 (18,713)
Other comprehensive income (loss)15,324 (18,708)
Comprehensive income$152,122 $88,939 
*For the three months ended November 30, 2017,2022 and 2021, the unrealized loss on cash flow hedges was net of tax benefits of $288. For the three months ended November 30, 2016, the unrealized gain on cash flow hedges waswere net of a tax expense of $261.

$2,264 thousand and $1 thousand, respectively.

The accompanying notes are an integral part of theseConsolidated Financial Statements.

5
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FactSet Research Systems Inc.
CONSOLIDATEDBALANCE SHEETS– Unaudited
(In thousands, except share data)November 30, 2022August 31, 2022
ASSETS
Cash and cash equivalents$437,142 $503,273 
Investments32,572 33,219 
Accounts receivable, net of reserves of $3,532 at November 30, 2022 and $2,776 at August 31, 2022227,489 204,102 
Prepaid taxes32,178 38,539 
Prepaid expenses and other current assets99,826 91,214 
Total current assets829,207 870,347 
Property, equipment and leasehold improvements, net79,296 80,843 
Goodwill974,846 965,848 
Intangible assets, net1,882,983 1,895,909 
Deferred taxes3,653 3,153 
Lease right-of-use assets, net154,125 159,458 
Other assets53,430 38,747 
TOTAL ASSETS$3,977,540 $4,014,305 
LIABILITIES
Accounts payable and accrued expenses$122,710 $108,395 
Current lease liabilities28,970 29,185 
Accrued compensation48,067 114,808 
Deferred revenues150,264 152,039 
Dividends payable34,010 33,860 
Total current liabilities384,021 438,287 
Long-term debt1,859,096 1,982,424 
Deferred taxes10,991 8,800 
Deferred revenues, non-current8,697 7,212 
Taxes payable35,334 34,211 
Long-term lease liabilities201,964 208,622 
Other liabilities3,309 3,341 
TOTAL LIABILITIES$2,503,412 $2,682,897 
Commitments and contingencies (see Note 12)
STOCKHOLDERS’ EQUITY
Preferred stock, $0.01 par value, 10,000,000 shares authorized, none issued$— $— 
Common stock, $0.01 par value; 150,000,000 shares authorized; 41,848,430 and 41,653,218 shares issued; 38,214,108 and 38,044,756 shares outstanding at November 30, 2022 and August 31, 2022, respectively418 417 
Additional paid-in capital1,225,947 1,190,350 
Treasury stock, at cost: 3,634,322 and 3,608,462 shares at November 30, 2022 and August 31, 2022, respectively(941,705)(930,715)
Retained earnings1,282,527 1,179,739 
Accumulated other comprehensive loss(93,059)(108,383)
TOTAL STOCKHOLDERS’ EQUITY$1,474,128 $1,331,408 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY$3,977,540 $4,014,305 
The accompanying notes are an integral part of these consolidated financial statements.

Consolidated Financial Statements.

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FactSet Research Systems Inc.

CONSOLIDATED BALANCE SHEETS

  

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)20222021
CASH FLOWS FROM OPERATING ACTIVITIES
Net income$136,798 $107,647 
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization25,997 17,208 
Amortization of lease right-of-use assets9,697 11,117 
Stock-based compensation expense12,175 10,401 
Deferred income taxes(745)1,507 
Asset impairments282 3,695 
Changes in assets and liabilities, net of effects of acquisitions
Accounts receivable, net of reserves(23,647)(5,268)
Accounts payable and accrued expenses18,744 20,702 
Accrued compensation(66,796)(53,457)
Deferred revenues(290)(10,248)
Taxes payable, net of prepaid taxes6,995 (9,524)
Lease liabilities, net(11,237)(11,992)
Other, net(1,337)(8,870)
Net cash provided by operating activities106,636 72,918 
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, equipment, leasehold improvements and internal-use software(17,960)(8,583)
Acquisition of businesses, net of cash and cash equivalents acquired— (50,018)
Purchases of investments(9,892)(250)
Net cash used in investing activities(27,852)(58,851)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of debt(125,000)— 
Dividend payments(33,665)(30,656)
Proceeds from employee stock plans23,423 35,763 
Repurchases of common stock— (18,639)
Other financing activities(10,990)(2,950)
Net cash provided by / (used in) financing activities(146,232)(16,482)
Effect of exchange rate changes on cash and cash equivalents1,317 (5,550)
Net increase (decrease) in cash and cash equivalents(66,131)(7,965)
Cash and cash equivalents at beginning of period503,273 681,865 
Cash and cash equivalents at end of period$437,142 $673,900 

The accompanying notes are an integral part of these consolidated financial statements.

Consolidated Financial Statements.


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FactSet Research Systems Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS–CHANGES IN STOCKHOLDERS’ EQUITY- Unaudited

  

Three months Ended

 

 

(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 

For the Three Months Ended November 30, 2022
(in thousands, except share data)Common StockAdditional
Paid-in
Capital		Treasury StockRetained
Earnings		Accumulated
Other
Comprehensive Loss		Total
Stockholders’
Equity
SharesPar ValueSharesAmount
Balance as of August 31, 202241,653,218 $417 $1,190,350 3,608,462 $(930,715)$1,179,739 $(108,383)$1,331,408 
Net income136,798 136,798 
Other comprehensive income (loss)15,324 15,324 
Common stock issued for employee stock plans131,423 1 23,422 410 (166)23,257 
Vesting of restricted stock63,789 — 25,450 (10,824)(10,824)
Repurchases of common stock— 
Stock-based compensation expense12,175 12,175 
Dividends declared(34,010)(34,010)
Balance as of November 30, 202241,848,430 $418 $1,225,947 3,634,322 $(941,705)$1,282,527 $(93,059)$1,474,128 



For the Three Months Ended November 30, 2021
(in thousands, except share data)Common StockAdditional
Paid-in
Capital		Treasury StockRetained
Earnings		Accumulated
Other
Comprehensive
Loss		Total
Stockholders’
Equity
SharesPar ValueSharesAmount
Balance as of August 31, 202141,163,192 $412 $1,048,305 3,547,773 $(905,917)$912,515 $(38,962)$1,016,353 
Net income107,647 107,647 
Other comprehensive income (loss)(18,708)(18,708)
Common stock issued for employee stock plans192,349 2 35,761 35,763 
Vesting of restricted stock17,349 — 6,747 (2,949)(2,949)
Repurchases of common stock46,200 (18,639)(18,639)
Stock-based compensation expense10,401 10,401 
Dividends declared(30,973)(30,973)
Balance as of November 30, 202141,372,890 $414 $1,094,467 3,600,720 $(927,505)$989,189 $(57,670)$1,098,895 
The accompanying notes are an integral part of these consolidated financial statements.

Consolidated Financial Statements.


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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FactSet Research Systems Inc.

November 30, 2017

2022

(Unaudited)

Page
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1. ORGANIZATION AND NATURE DESCRIPTION OF BUSINESS

FactSet Research Systems Inc. (the “Company”and its wholly-owned subsidiaries (collectively, "we," "our," "us," the "Company" or “FactSet”"FactSet") is a global providerfinancial data and analytics company with an open and flexible digital platform that drives the investment community to see more, think bigger and do its best work. Our strategy is to build the leading open content and analytics platform to deliver a differentiated advantage for our clients’ success.
For 45 years, our platform has delivered expansive data, sophisticated analytics and flexible technology used by global financial professionals to power their critical investment workflows. As of integrated financial information, analytical applications and industry-leading service for the global investment community. The Company delivers insight and information toNovember 30, 2022, we had more than 7,600 clients comprised of approximately 181,000 investment professionals, through its analytics, services, content,including asset managers, bankers, wealth managers, asset owners, channel partners, hedge funds, corporate users, private equity and technology. These professionals include portfolio managers, investment research professionals, investment bankers, risk and performance analysts, and wealth advisors. From streaming real-time data to historical information, including quotes, estimates, news and commentary, FactSet offers unique and third-party content through desktop, web, mobileventure capital professionals. Our on- and off-platform solutions. The Company’s broad application suite offers tools and resources including company and industry analyses, full screening tools, portfolio analysis, risk profiles, alpha-testing, portfolio optimization and research management solutions. With recent acquisitions, FactSet has continued to expand its solutions acrossspan the investment lifecycle from idea generation toincluding investment research, portfolio construction and analysis, trade execution, performance measurement, risk management and client reporting. The Company’sOur revenues are primarily derived from subscriptions to our multi-asset class data and solutions powered by our connected content, referred to as our "content refinery". Our products and services suchinclude workstations, portfolio analytics and enterprise solutions.
We provide financial data and market intelligence on securities, companies, industries and people to enable our clients to research investment ideas, as workstations, analytics, enterprisewell as to analyze, monitor and manage their portfolios. We combine dedicated client service with open and flexible technology offerings, including a configurable desktop and mobile platform, comprehensive data research management,feeds, cloud-based digital solutions and trade execution.

application programming interfaces ("APIs"). Our CUSIP Global Services ("CGS") business supports security master files relied on by the investment industry for critical front, middle and back office functions.

We drive our business based on our detailed understanding of our clients’ workflows, which helps us to solve their most complex challenges. We provide them with an open digital platform, connected and reliable data, next-generation workflow solutions and highly committed service specialists.
We operate our business through three reportable segments ("segments"): the Americas, EMEA and Asia Pacific. Refer to Note 16, Segment Information, for further discussion. For each of our segments, we execute our strategy through three workflow solutions: Research & Advisory; Analytics & Trading; and Content & Technology Solutions ("CTS").
2. BASISSUMMARY OF PRESENTATION

FactSet conductsSIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation
We conduct business globally and is managedmanage our business on a geographic basis. The accompanying consolidated financial statements includeunaudited Consolidated Financial Statements and Notes to the accounts of the Company and its wholly owned subsidiaries. All intercompany activity and balances have been eliminated from the consolidated financial statements.

The unaudited condensed consolidated financial statements of FactSet and the accompanying notesConsolidated 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 information and footnotes required by GAAP for annual financial statements; as such, the information in this Quarterly Report on Form 10-Q should be read in conjunction with the audited Consolidated Financial Statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended August 31, 2022. The accompanying unaudited Consolidated Financial Statements include our accounts and those of our wholly-owned subsidiaries; all intercompany activity and balances have been eliminated.

In the opinion of management, the accompanying condensed consolidated financial statementsunaudited Consolidated Financial Statements include all normal recurring adjustments, transactions or events discretely impacting the interim periods considered necessary to present fairly state our results of operations, financial position, cash flows and cash flows.equity.
Reclassifications
We reclassified comparative figures for the three months ended November 30, 2021 related to the impairment of our lease right-of-use ("ROU") assets and property, equipment and leasehold improvements to Asset impairments in the Consolidated Statements of Income and Consolidated Statements of Cash Flows to conform to the current year's presentation. The informationreclassifications to Asset impairments in this Form 10-Q should be readthe Consolidated Statements of Income was from Selling, general and administrative and Cost of services and in conjunctionthe Consolidated Statements of Cash Flows was from Depreciation and amortization and Lease liabilities, net.
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Use of Estimates
The preparation of our Consolidated Financial Statements and related disclosures, in conformity with GAAP, required management to make estimates and assumptions that affect the consolidatedreported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and notes thereto includedthe reported amounts of revenues and expenses during the reporting period. Significant estimates may have been made in areas that include income taxes, stock-based compensation, goodwill and intangible assets, business combinations, long-lived assets and contingencies. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results could differ from those estimates.
Concentrations of Credit Risks
Cash equivalents
Financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash and cash equivalents. We are exposed to credit risk for cash and cash equivalents held in financial institutions in the Company’s Annual Reportevent of a default, to the extent that such amounts are in excess of applicable insurance limits. We have not experienced any losses from maintaining cash accounts in excess of such limits. We do not believe our concentration of cash and cash equivalents presents a significant credit risk as the counterparties to the instruments consist of multiple high-quality, credit-worthy financial institutions.
Accounts Receivable
Our accounts receivable credit risk is dependent upon the financial stability of our individual clients; however, this risk is generally limited due to our large and geographically dispersed client base. No single client represented more than 3% of our total subscription revenues in any period presented. The receivable reserve was $3.5 million and $2.8 million as of November 30, 2022 and August 31, 2022, respectively. We do not require collateral from our clients.
Derivative Instruments
Our use of derivative instruments exposes us to credit risk to the extent counterparties may be unable to meet the terms of their agreements. To mitigate credit risk, we limit counterparties to credit-worthy financial institutions and use several institutions to reduce concentration risk. We do not expect any losses as a result of default by our counterparties.
Concentrations ofData Providers
We integrate data from various third-party sources into our hosted proprietary data and analytics platform, which our clients access to perform their analyses. As certain data sources have a limited number of suppliers, we make every effort to assure that, where reasonable, alternative sources are available. We are not dependent on Form 10-Kany individual third-party data supplier in order to meet the needs of our clients, with only two data suppliers each representing more than 10% of our total data costs for the fiscal yearthree months ended August 31, 2017.

The Company has evaluated subsequent events through the date that the financial statements were issued.

3. RECENT ACCOUNTING PRONOUNCEMENTS

As of the beginning of fiscal 2018, FactSet implemented all applicableNovember 30, 2022.

Recently Adopted Accounting Pronouncements
We did not adopt any new accounting standards andor updates issued by the Financial Accounting Standards Board (“FASB”("FASB") that were in effect. There were no new standards or updates adopted during the first three months of fiscal 2018ended November 30, 2022 that had a material impact on our Consolidated Financial Statements.
Accounting Pronouncements Not Yet Adopted
Inflation Reduction Act of 2022
On August 16, 2022, the consolidated financial statements.

New Accounting Standards or Updates Recently Adopted

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 changeInflation Reduction Act ("IRA") was signed into law. The IRA contains several revisions to the balance sheet presentation only. The changes have been applied prospectively as permittedInternal Revenue Code effective in taxable years beginning after December 31, 2022, including a 15% minimum income tax on certain large corporations and a 1% excise tax on corporate stock repurchases by publicly traded U.S. corporations. We are in the standard and prior periods have not been restated.

Share-Based Payments

Duringprocess of evaluating the first quarter of fiscal 2018, FactSet adopted the accounting standard update issued by the FASB in March 2016, which simplifies several aspectsimpact 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 relatedIRA. We do not expect this law 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 ofour Consolidated 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

In January 2017, the FASB issued an accounting standard update, which removes the requirement for companies to compare the implied fair value of goodwill with its carrying amount as part of step 2 of the goodwill impairment test. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. This accounting standard update will be effective for FactSet beginning in the first quarter of fiscal 2021, with early adoption permitted for any impairment tests performed after January 1, 2017. The Company is currently evaluating the impact of this accounting standard update on its consolidated financial statements.

Statements.

Hedge Accounting Simplification

In August 2017, the FASB issued an accounting standard update to reduce the complexity of and simplify the application of hedging accounting. The guidance refines and expands hedge accounting for both financial and nonfinancial risk components, eliminates the need to separately measure and report hedge ineffectiveness, and aligns the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements. This guidance will be effective for FactSet beginning in the first quarter of fiscal 2020, with early adoption permitted. The Company is currently evaluating the impact of this accounting standard update on its consolidated financial statements.

No other new accounting pronouncements issued or effective as of November 30, 20172022 have had, or are expected to have, ana material impact on our Consolidated Financial Statements.

3.REVENUE RECOGNITION
We derive most of our revenues by providing client access to our multi-asset class solutions powered by our content refinery available over the Company’s consolidatedassociated contractual term (referred to as the "Hosted Platform"). The Hosted Platform is a subscription-
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based service that provides client access to various combinations of products and services including workstations, portfolio analytics and enterprise solutions. In addition, through our CGS platform, we provide subscription access to a database of universally recognized identifiers reflecting differentiating characteristics for issuers and their financial statements.

instruments (referred to as the "Identifier Platform").

We determined that the majority of each of our Hosted Platform and Identifier Platform services represents a single performance obligation covering a series of distinct products and services that are substantially the same and that have the same pattern of transfer to the client. We also determined the primary nature of the promise to the client is to provide daily access to each of these data and analytics platforms. These platforms provide integrated financial information, analytical applications and industry-leading service for the investment community. Based on the nature of the services and products offered by these platforms, we apply an output time-based measure of progress as the client is simultaneously receiving and consuming the benefits of the platform. We recognize revenue for the majority of these platforms in accordance with the 'as invoiced' practical expedient as the amount of consideration that we have the right to invoice corresponds directly with the value of our performance to date.
We do not consider payment terms as a performance obligation for clients with contractual terms that are one year or less and we have elected the practical expedient.
Contracts with clients can include certain fulfillment costs, comprised of up-front costs to allow for the delivery of products and services, which are recoverable. Fulfillment costs are recognized as an asset, with the current portion recorded in the Prepaid expenses and other current assets and the non-current portion recorded in Other assets, based on the term of the license period. The fulfillment costs are amortized consistent with the associated revenues for providing the services. There are no significant judgments that would impact the timing of revenue recognition.
The majority of client contracts have a duration of one year or the amount we are entitled to receive corresponds directly with the value of performance obligations completed to date, and therefore, we do not disclose the value of the remaining unsatisfied performance obligations. 
Disaggregated Revenues
We disaggregate revenues from contracts with clients by our segments which consist of the Americas, EMEA and Asia Pacific. We believe these segments are reflective of how we manage our business and the markets in which we serve and best depict the nature, amount, timing and uncertainty of revenues and cash flows related to contracts with clients. Segment revenues reflect sales to our clients based on their respective geographic locations. Refer to Note 16, Segment Information, for further information. 
The following table presents this disaggregation by segment:
 Three Months Ended
November 30,
(in thousands)20222021
Americas$323,367 $266,913 
EMEA130,738 115,003 
Asia Pacific50,710 42,809 
Total Revenues$504,815 $424,725 
4.FAIRVALUE MEASURES

Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability (i.e., the “exit price”"exit price") in an orderly transaction between market participants at the measurement date. In determining fair value, the use of various valuation methodologies, including market, income and cost approaches, is permissible. The Company considersWe consider the principal or most advantageous market in which itwe would transact and considersconsider assumptions that market participants would use when pricing the asset or liability.

Fair Value Hierarchy

The accounting guidance for fair value measurements establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. There are three levels of
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inputs that may be used to measure fair value based on the reliability of inputs. A financial instrument’sinstrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The Company’sOur assessment of the significance of a particular input to the fair value measurement requires judgment and may affect theirits placement within the fair value hierarchy levels. FactSet hasWe have categorized itsour cash equivalents, investments and derivatives within the fair value hierarchy as follows:

Level 1 – applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities. These Level 1 assets and liabilities include the Company’s corporate money market funds that are classified as cash equivalents.

Level 2 – applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data. The Company’s certificates of deposit, mutual funds and derivative instruments are classified as Level 2.

Level 3 – applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities. There were no Level 3 assets or liabilities held by the Company as of November 30, 2017 or August 31, 2017.

(a)

(a) Assets and Liabilities Measured atFair Value on a Recurring Basis

The following tables showsshow, by level within the fair value hierarchy, the Company’sour assets and liabilities that are measured at fair value on a recurring basis atas of November 30, 20172022 and August 31, 2017:

  

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

 $—  $—  $—  $— 

(1)

The Company’s corporate money market funds are traded in an active market and the net asset value of each fund on the last day of the quarter is used to determine its fair value. As such, the Company’s corporate money market funds are classified as Level 1 and included in cash and cash equivalents on the Consolidated Balance Sheets.

(2)

The Company’s mutual funds have a fair value based on the fair value of the underlying investments held by the mutual funds allocated to each share of the mutual fund using a net asset value approach. The fair value of the underlying investments is based on observable inputs. As such, the Company’s mutual funds are classified as Level 2 and are classified as investments (short-term) on the Consolidated Balance Sheets.

(3)

The Company’s certificates of deposit held for investment are not debt securities and are classified as Level 2. These certificates of deposit have original maturities greater than three months, but less than one year and, as such, are classified as investments (short-term) on the Consolidated Balance Sheets.

(4)

The Company utilizes the income approach to measure fair value for its derivative instruments (foreign currency forward contracts). The income approach uses pricing models that rely on market observable inputs such as spot, forward and interest rates, as well as credit default swap spreads and therefore, are classified as Level 2.

The Company2022. We did not have any transfers between Level 1 and Level 2levels of fair value measurements during the periods presented.

(b)presented below. We held no Level 3 assets or liabilities measured at fair value on a recurring basis as of November 30, 2022 and August 31, 2022.

 Fair Value Measurements at November 30, 2022
(in thousands)Level 1Level 2Total
Assets   
Corporate money market funds(1)
$210,951 $— $210,951 
Mutual funds(2)
— 32,572 32,572 
Derivative instruments(3)
— 15,410 15,410 
Total assets measured at fair value$210,951 $47,982 $258,933 
Liabilities
Derivative instruments(3)
$— $2,486 $2,486 
Total liabilities measured at fair value$— $2,486 $2,486 
 Fair Value Measurements at August 31, 2022
(in thousands)Level 1Level 2Total
Assets   
Corporate money market funds(1)
$179,330 $— $179,330 
Mutual funds(2)
— 33,219 33,219 
Derivative instruments(3)
— 12,412 12,412 
Total assets measured at fair value$179,330 $45,631 $224,961 
Liabilities
Derivative instruments(3)
$— $8,307 $8,307 
Total liabilities measured at fair value$— $8,307 $8,307 
(1) Our corporate money market fundsarereadily convertible into cashand the net asset value of each fund on the last day of the quarter is used to determine its fair value. Our corporate money market funds are included in Cash and cash equivalents withinthe Consolidated BalanceSheets.
(2) Our mutual funds have a fair value based on the fair value of the underlying investments held by the mutual funds, allocated to each share of the mutual fund using a net asset value approach. The fair value of the underlying investments is based on observable inputs. Our mutual funds are included inInvestments (short-term) within the Consolidated Balance Sheets.
(3) Our derivative instruments include our foreign exchange forward contracts and interest rate swap agreements. We utilize the income approach to measure fair value for our foreign exchange forward contracts. The income approach uses pricing models that rely on
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market observable inputs such as spot, forward and interest rates, as well as credit default swap spreads. To estimate fair value for our interest rate swap agreements, we utilize a present value of future cash flows, leveraging a model-derived valuation that uses observable inputs such as interest rate yield curves. Refer to Note 5, Derivative Instruments, for more information on our derivative instruments and their classification within the Consolidated Balance Sheets.
(b) Assets and Liabilities Measured at Fair Value on a Non-recurringNon-Recurring Basis

Certain assets, including goodwill and intangible assets,

Assets and liabilities that are measured at fair value on a non-recurring basis; that is, thebasis relate primarily to our tangible fixed assets, lease ROU assets, goodwill and liabilities are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances such as when they are deemed to be other-than-temporarily impaired.intangible assets. The fair values of these non-financial assets and liabilities are determined based on valuation techniques using the best information available, and may include quoted market prices, market comparables,comparable information, and discounted cash flow projections. An impairment charge is recorded when the cost exceeds its fair value, based upon the results of such valuations. During the three months ended November 30, 2017, no fair value adjustments or material fair value measurements were required for the Company’sThese non-financial assets are required to be assessed for impairment whenever events or liabilities.

circumstances indicate their carrying value may not be fully recoverable, and at least annually for goodwill.

(c) Assets and Liabilities Measured at Fair Value for Disclosure PurposesOnly

As of November 30, 2017 and August 31, 2017, the

We elected not to carry our Long-term debt at fair value. The carrying value of the Company’s long-termour Long-term debt was $575 million, respectively, which approximated its carrying amount given its floating interest rate basis. is net of related unamortized discount and debt issuance costs.
The fair value of our Senior Notes is estimated based on quoted prices in active markets as of the Company’s long-term debt was determinedreporting date, given that the Senior Notes are publicly traded, which are considered Level 1 inputs. The fair value of our 2022 Credit Facilities is estimated based on quoted market prices for similar instruments, adjusted for unobservable inputs to ensure comparability to our investment rating, maturity terms and principal outstanding, which are considered Level 3 inputs. Refer to Note 11, Debt for definitions of these terms and more information on the Senior Notes and 2022 Credit Facilities.
The following table summarizes information on our outstanding debt with a similar maturity,as of November 30, 2022 and thus categorized as Level 2 in the fair value hierarchy.

August 31, 2022:
November 30, 2022August 31, 2022
(in thousands)Fair Value HierarchyPrincipal AmountEstimated Fair ValuePrincipal AmountEstimated Fair Value
2027 NotesLevel 1$500,000 $455,470 $500,000 $470,525 
2032 NotesLevel 1500,000 419,860 500,000 438,205 
2022 Term FacilityLevel 3625,000 627,344 750,000 750,975 
2022 Revolving FacilityLevel 3250,000 246,562 250,000 249,075 
Total principal amount$1,875,000 $1,749,236 $2,000,000 $1,908,780 
Total unamortized discounts and debt issuance costs(15,904)(17,576)
Total net carrying value of debt$1,859,096 $1,982,424 

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5. DERIVATIVE INSTRUMENTS

Cash Flow Hedges

FactSet conducts business outside the U.S. in several currencies including the British Pound Sterling, Euro, Indian Rupee, Japanese Yen and Philippine Peso. As such, it is exposed to movements in foreign currency exchange rates compared to the U.S. dollar. The Company utilizes derivative instruments (foreign currency forward contracts) to manage the exposures related to the effects of foreign exchange rate fluctuations and reduce the volatility of earnings and cash flows associated with changes in foreign currency. The Company does not enter into foreign currency forward contracts for trading or speculative purposes.

In designing a specificour hedging approach, FactSet consideredwe consider several factors, including offsetting exposures, the significance of exposures, the forecasting of risk and the potential effectiveness of the hedge.hedge to reduce the volatility of our earnings and cash flows. Factors considered in the decision to hedge an underlying market exposure include the materiality of the risk, the volatility of the market, the duration of the hedge, the degree to which the underlying exposure is committed to, and the availability, effectiveness and cost of derivative instruments. Derivative instruments are only utilized for risk management purposes and are not used for speculative or trading purposes. We limit counterparties to credit-worthy financial institutions. Refer to Note 2, Summary of Significant Accounting Policies - Concentrations of Credit Risk, for further discussion on counterparty credit risk. 
We leverage foreign currency forward contracts and interest rate swaps to mitigate certain operational exposures from the impact of changes in foreign currency exchange rates and to manage our interest rate exposure. We have designated and accounted for these derivatives as cash flow hedges with the unrealized gains or losses recorded in Accumulated Other Comprehensive Loss ("AOCL"), net of tax, in the Consolidated Balance Sheets. Realized gains or losses resulting from settlement of our forward contracts and swap agreements are subsequently reclassified into Selling, general and administrative ("SG&A") and Interest expense, net, respectively, in the Consolidated Statements of Income when the hedges are settled.
Foreign Currency Forward Contracts
As we conduct business outside the U.S. in several currencies, we are exposed to movements in foreign currency exchange rates. The gains and losses on foreign currency forward contracts offset the variability in operating expenses associated with currency movements. The changes in fair value for these foreign currency forward contracts are initially reported as a component of accumulated other comprehensive loss (“AOCL”) and subsequently reclassified into operating expenses when the hedged exposure affects earnings. There was no discontinuance of cash flow hedges during the first three months of fiscal 2018 and 2017, and as such, no corresponding gains or losses related to changes in the value of the Company’s contracts were reclassified into earnings prior to settlement.

As of November 30, 2017, FactSet2022, we maintained the followinga series of foreign currency forward contracts to hedge approximately 75%a portion of itsour exposures related to our primary currencies of the British Pound Sterling, Euro, Indian Rupee and Philippine Peso. We entered into these contracts to mitigate our currency exposure throughranging from 25% to 75%, over their respective hedged periods, which are set to mature at various points between the thirdsecond quarter of fiscal 2019.

2023 through the first quarter of fiscal 2024.

The following is a summary 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 

As of November 30, 2017,table summarizes the gross notional value of foreign currency forward contracts to purchase British Pound Sterling, Euros, Indian Rupees and Philippine Pesos with U.S. dollars was Rs. 3.3 billion.

Counterparty Creditas of November 30, 2022 and August 31, 2022.

November 30, 2022August 31, 2022
(in thousands)Local Currency AmountNotional Contract Amount (USD)Local Currency AmountNotional Contract Amount (USD)
British Pound Sterling£48,000 $57,337 £44,200 $55,567 
Euro€38,000 39,892 €37,500 40,679 
Indian RupeeRs2,739,827 33,600 Rs2,667,928 33,600 
Philippine Peso₱1,540,066 27,300 ₱1,462,060 27,000 
Total$158,129 $156,846 
Refer to Foreign Currency Transaction Risk

As in Item 3. Quantitative and Qualitative Disclosures About Market Risk of this Quarterly Report on Form 10-Q for further discussion of our exposure to foreign exchange rate fluctuations.

Interest Rate Swap Agreements
2020 Swap Agreement
On March 5, 2020, we entered into an interest rate swap agreement ("2020 Swap Agreement") with a resultnotional amount of $287.5 million. The 2020 Swap Agreement hedged a portion of our then outstanding floating LIBOR rate debt with a fixed interest rate of 0.7995% to mitigate our interest rate exposure. On March 1, 2022, we terminated the 2020 Swap Agreement, which resulted in a one-time benefit of $3.5 million recognized in Interest expense, net in the Consolidated Statements of Income during the third quarter of fiscal 2022, based on its fair market value.
2022 Swap Agreement
On March 1, 2022, we entered into an interest rate swap agreement ("2022 Swap Agreement") with a notional amount of $800.0 million to hedge a portion of our outstanding floating Secured Overnight Financing Rate ("SOFR") rate debt with a fixed
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interest rate of 1.162%. The notional amount of the use2022 Swap Agreement declines by $100.0 million on a quarterly basis as of derivative instruments,May 31, 2022 and is maturing on February 28, 2024. As of November 30, 2022, the Company is exposed to counterparty credit risk. FactSet has incorporated counterparty risk into the fair value of its derivative assets and its own credit risk into the valuenotional amount of the Company’s derivative liabilities, when applicable. FactSet calculates credit2022 Swap Agreement was $500.0 million.
Refer to Note 11, Debt, for further discussion of our outstanding floating SOFR rate debt. Refer to Interest Rate Risk in Part I, Item 3. Quantitative and Qualitative Disclosures About Market Risk of this Quarterly Report on Form 10-Q for further discussion of our exposure to interest rate risk from observable data related to credit default swaps (“CDS”) as quoted by publicly available information. Counterparty risk is represented by CDS spreads related to the senior securedon our long-term debt of the respective bank with whom FactSet has executed these derivative transactions. As CDS spread information is not available for FactSet, the Company’s credit risk is determined based on using a simple average of CDS spreads for peer companies. To mitigate counterparty credit risk, FactSet enters into contracts with large financial institutionsoutstanding.
Gross Notional Value and regularly reviews its credit exposure balances as well as the creditworthiness of the counterparties. The Company does not expect any losses as a result of default of its counterparties.

Fair Value of Derivative Instruments

The following table providesis a summary of the gross notional values of the derivative instruments:

(in thousands)
Gross Notional Value
November 30, 2022August 31, 2022
Foreign currency forward contracts$158,129 $156,846 
Interest rate swap agreement500,000 600,000 
Total cash flow hedges$658,129 $756,846 

The following is a summary of the fair valuevalues of our derivative instruments:

(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
(in thousands)Derivative AssetsDerivative Liabilities
Derivatives designated as hedging instrumentsBalance Sheet ClassificationNovember 30, 2022August 31, 2022Balance Sheet ClassificationNovember 30, 2022August 31, 2022
Foreign currency forward contractsPrepaid expenses and other current assets$2,467 $— Accounts payable and accrued expenses$2,486 $8,307 
Interest rate swap agreementPrepaid expenses and other current assets12,162 10,621 Accounts payable and accrued expenses— — 
Other assets781 1,791 Other liabilities— — 
Total cash flow hedges$15,410 $12,412 $2,486 $8,307 


All derivatives were designated as hedging instruments as of November 30, 20172022 and August 31, 2017, respectively.

2022.
Derivative Recognition

Derivatives in Cash Flow Hedging Relationships

The following table provides the pre-tax effect of derivative instruments in cash flow hedging relationships for the three months ended November 30, 20172022 and 2016:

(in thousands)

 

Loss Recognized

in AOCL on Derivatives
(Effective Portion)

 

Location of Loss
Reclassified from AOCL into Income
(Effective Portion)

 

Gain (Loss) Reclassified
from AOCL into Income
(Effective Portion)

 

Derivatives in Cash Flow Hedging Relationships

 

2017

  

2016

   

2017

  

2016

 

Foreign currency forward contracts

 $(1) $(649)

SG&A

 $763  $(1,357)

NoNovember 30, 2021, respectively:

Gain (Loss) Recognized in AOCL on DerivativesLocation of Gain (Loss) Reclassified from AOCL into IncomeGain (Loss) Reclassified from AOCL into Income
(in thousands)November 30,November 30,
Derivatives in Cash Flow Hedging Relationships2022202120222021
Foreign currency forward contracts$3,323 $(3,542)SG&A$(4,965)$(449)
Interest rate swap agreement3,428 2,583 Interest expense, net2,897 (516)
Total cash flow hedges$6,751 $(959)$(2,068)$(965)

As of November 30, 2022, we estimate that net pre-tax derivative gains of $12.1 million included in AOCL will be reclassified into earnings within the next 12 months. As of November 30, 2022, our cash flow hedges were highly effective with no amount of ineffectiveness was recorded in the Consolidated Statements of Income for these designated cash flow hedges and all components of each derivative’sderivative’s gain or loss waswere included in the assessment of hedge effectiveness. AsThere was no discontinuance of November 30, 2017, FactSet estimates that approximately $3.9 millionour
16
Table of net derivative gains related to its Contents
cash flow hedges included in AOCL will be reclassified into earnings within the next 12 months.

Offsetting of Derivative Instruments

FactSet’s master netting and other similar arrangements with its respective counterparties allow for net settlement under certain conditions. As of November 30, 2017 and August 31, 2017, there were no net settlements recorded on Consolidated Balance Sheets.

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, 20172022 or November 30, 2021, and 2016 are as follows:

  

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)

(1)

Reclassified to Selling, General and Administrative Expenses

The componentssuch, no corresponding gains or losses related to changes in the value 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 componentsour contracts were reclassified into earnings prior to settlement. 

Offsetting of an enterprise that engageDerivative Instruments
We enter into master netting arrangements designed to permit net settlement of derivative transactions among the respective counterparties, settled on the same date and in business activities from which they may earn revenuesthe same currency. As of November 30, 2022 and incur expenses, whose operating results are regularly reviewed byAugust 31, 2022, there were no material amounts recorded net on the enterprise’s chief operating decision maker to make decisions about resources to be allocatedConsolidated Balance Sheets.
6. ACQUISITIONS
During fiscal 2022 and 2021, we completed acquisitions of several businesses, with the most significant cash flows related 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”acquisitions of CUSIP Global Services ("CGS") 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,Cobalt Software, Inc. ("Cobalt").
CUSIP 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 which 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.

Services


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 benefit all of the Company’s operating segments and thus the expenses incurred at these locations are allocated to each segment based on a percentage of revenues. 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”)1, 2022, we completed the acquisition of CGS for a totalcash purchase price of $217.6 million. BISAM$1.932 billion, inclusive of working capital adjustments. CGS manages a database of 60 different data elements uniquely identifying more than 50 million global financial instruments. It is a globalthe foundation for security master files relied on by critical front, middle and back-office functions. CGS, operating on behalf of the American Bankers Association ("ABA"), is the provider of portfolio performanceCommittee on Uniform Security Identification Procedures ("CUSIP") and attribution, multi-asset risk, GIPS composites managementCUSIP International Number System ("CINS") identifiers globally and reporting. BISAM’s product offerings include B-One, BISAM’s cross-asset solution, which will servealso acts as the official numbering agency for International Securities Identification Number ("ISIN") identifiers in the United States and as a complement to both FactSet’s portfolio analytics suite and client reporting solutions, and Cognity, which enhances FactSet’s risk analysissubstitute number agency for derivatives and quantitative portfolio construction. These factors contributed to amore than 35 other countries. We believe that the CGS acquisition will significantly expand our critical role in the global capital markets. The CGS purchase price was in excess of the fair value of BISAM’s net tangible and intangible assets leading toacquired, resulting in the recognition of goodwill. At the time of acquisition, BISAM employed over 160 employees based primarily in its New York, Boston, Paris, London and Sofia offices. Total transaction costs related to the acquisition were $3.2 million in fiscal 2017 and were recorded within Selling, General and Administrative (“SG&A”) expenses in the Consolidated Statements of Income.

Allocation ofWe finalized the purchase price toaccounting for the assets acquired and liabilities assumed was finalizedCGS acquisition during the fourth quarter of fiscal 2017. There were no significant adjustments between2022 and did not record any material changes to the preliminary and final allocation. The total purchase price allocation.

The acquisition date fair values of major classes of assets acquired and liabilities assumed are as follows:
Acquisition Date Fair ValueAcquisition Date Useful LifeAmortization Method
(in thousands)(in years)
Current assets(1)
$29,728 
Amortizable intangible assets
ABA business process1,583,000 36 yearsStraight-line
Client relationships164,000 26 yearsStraight-line
Acquired databases46,000 15 yearsStraight-line
Goodwill214,970 
Current liabilities(2)
(104,691)
Deferred revenues, long-term(1,481)
Total purchase price$1,931,526 
(1) Includes an accounts receivable balance of $29.5 million.
(2) Includes a deferred revenues balance of $99.4 million. The CGS acquisition was allocated to BISAM’s net tangible and intangible assets based upon their estimatedaccounted for in accordance with our adoption of ASU No. 2021-08; as such, the deferred revenues did not include a fair value asadjustment. Refer to Note 2, Summary of Significant Accounting Policies in the dateNotes to the Consolidated Financial Statements included in Item 8. of acquisition.

(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 

our Annual Report on Form 10-K for the fiscal year ended August 31, 2022 for more information on ASU No. 2021-08.

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$215.0 million represents the excess of the CGS purchase price over the fair value of net assets acquired and considers future economic benefits that we expect to achieve as a result of the net tangible and intangible assets acquired. Goodwill generated from the BISAM acquisitionacquisition. The goodwill is included in the USAmericas segment and European segments and is not deductible for income tax purposes. The majority of the net assets acquired relate to an ABA business process intangible which is a renewable license agreement with the ABA to manage the issuance, maintenance and access to the CUSIP numbering system and related database of CUSIP identifiers. This intangible asset's valuation and associated useful life considers the nature of the business relationship, multi-year term of the current agreement and the likelihood of long-term renewals. The useful life assigned to the Client relationships intangible asset considers the strong historical client retention and

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Table of Contents
client renewals as a basis for expected future retention. The useful life assigned to Acquired databases considers the historical period of data collection and the limited changes to the data on an annual basis.
The results of CGS's operations of BISAM have been included in our Consolidated Financial Statements, within the Company’s Consolidated Statements of Income sinceAmericas, EMEA, and Asia Pacific segments, beginning with the completionclosing of the acquisition on March 17, 2017.1, 2022. CGS functions as part of CTS. Pro forma information has not been presented because the effect of the BISAMCGS acquisition iswas not material to our Consolidated Financial Statements.
Cobalt Software, Inc.
On October 12, 2021, we acquired all of the Company’s consolidated financial results.

Vermilion

On November 8, 2016, FactSet acquired Vermilion Holdings Limited (“Vermilion”)outstanding shares of Cobalt for a total purchase price of $67.9 million. Vermilion$50.0 million, net of cash acquired, and inclusive of working capital adjustments. Cobalt is a globalleading portfolio monitoring solutions provider for the private capital industry. This acquisition advances our strategy to scale our data and workflow solutions through targeted investments as part of client reportingour multi-year investment plan 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 aexpands our private markets offering. The Cobalt purchase price was in excess of the fair value of Vermilion’s net tangible and intangible assets leading toacquired, resulting in the recognition of goodwill. AtWe finalized the timepurchase accounting for the Cobalt acquisition during the fourth quarter of acquisition, Vermilion employed 59 individuals in its London, Bostonfiscal 2022 and Singapore offices. Total transaction costs relateddid not record any material changes to the acquisition were $0.7 million and recorded within SG&A expenses in the Consolidated Statements of Income.

Allocation of thepreliminary purchase price to theallocation.

The acquisition date fair values of major classes of 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 valueare 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.

Acquisition Date Fair ValueAcquisition Date Useful LifeAmortization Method
(in thousands)(in years)
Current assets$540 
Amortizable intangible assets
Software technology7,750 5 yearsStraight-line
Client relationships4,800 11 yearsStraight-line
Goodwill41,338 
Other assets34 
Current liabilities(4,437)
Other liabilities(7)
Total purchase price$50,018 
Goodwill totaling $51.2$41.3 million represents the excess of the Cobalt purchase price over the fair value of net assets acquired and is included in the net tangibleAmericas and intangible assets acquired.EMEA segments. Goodwill generated from the VermilionCobalt acquisition is included in the European segment and is not deductible for income tax purposes. The useful life assigned to the Client relationships intangible asset considers the historical client retention as a basis for expected future retention. The useful life assigned to Software technology considers our historical experience and anticipated technological changes.
The results of Cobalt's operations of Vermilion have been included in our Consolidated Financial Statements, within the Company’s Consolidated Statements of Income since the completion of theAmericas and EMEA segments, beginning with its acquisition on November 8, 2016.October 12, 2021. Pro forma information has not been presented because the effect of the VermilionCobalt acquisition iswere not material to the Company’s consolidated financial results.

9.our Consolidated Financial Statements.

7. GOODWILL

Changes in the carrying amount of goodwill by segment for the three months ended November 30, 20172022 are as follows:

(in thousands)

 

U.S.

  

Europe

  

Asia Pacific

  

Total

 

Balance at August 31, 2017

 $386,835  $317,759  $2,966  $707,560 

Foreign currency translations

  —   5,390   (49)  5,341 

Other adjustments

  (107)  (318)  —   (425)

Balance at November 30, 2017

 $386,728  $322,831  $2,917  $712,476 

(in thousands)
AmericasEMEAAsia PacificTotal
Balance at August 31, 2022$686,412 $277,087 $2,349 $965,848 
Foreign currency translations— 8,984 14 8,998 
Balance at November 30, 2022$686,412 $286,071 $2,363 $974,846 


Goodwill is not amortized as it is estimated to have an indefinite life. At least annually, the Company iswe are required to test goodwill at the reporting unit level, which is consistent with our segments, for potential impairment, and, if impaired, we write down our goodwill to fair value based on the present value of discounted cash flows. The Company’s reporting units evaluated for potential impairment were the U.S., Europe and Asia Pacific, which reflect the level of internal reporting the Company uses to manage its business and operations. The three reporting units are consistent with the operating segments reported as there is no discrete financial information available for the subsidiaries within each operating segment. The CompanyWe performed itsour annual goodwill impairment test
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during the fourth quarter of fiscal 2017,2022 utilizing a qualitative analysis, consistent with the timing and methodology of previous years, at which timeyears. We concluded it was determinedmore likely than not that there was no impairment, with the fair value of each of the Company’s reporting units significantly exceedingour segments was not less than its respective carrying value.

10.value and no impairment charge was required.

8. INTANGIBLE ASSETS

FactSet’s

We amortize intangible assets on a straight line basis over their estimated useful lives. The estimated useful life, gross carrying amounts and accumulated amortization totals related to our 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. are as follows:

November 30, 2022August 31, 2022
(in thousands, except useful lives)Estimated Useful Life (years)Gross Carrying AmountAccumulated AmortizationNet Carrying AmountGross Carrying AmountAccumulated AmortizationNet Carrying Amount
ABA business process36$1,583,000 $32,979 $1,550,021 $1,583,000 $21,986 $1,561,014 
Client relationships8 to 26264,742 59,313 205,429 263,163 55,405 207,758 
Software technology5 to 9123,584 100,609 22,975 122,363 96,567 25,796 
Developed technology3 to 589,081 37,870 51,211 80,956 33,676 47,280 
Acquired databases1546,000 2,300 43,700 46,000 1,533 44,467 
Data content5 to 2033,389 26,153 7,236 32,305 24,973 7,332 
Trade names156,751 4,340 2,411 6,693 4,431 2,262 
Total$2,146,547 $263,564 $1,882,983 $2,134,480 $238,571 $1,895,909 
The weighted average useful life of FactSet’s acquired identifiableour intangible assets at November 30, 20172022 was 11.532.8 years. The Company amortizesAs described in Note 6, Acquisitions, we acquired several intangible assets over their estimatedas part of the CGS acquisition. The weighted average useful life of our intangible assets at November 30, 2022, excluding those acquired from CGS, was 9.5 years. We assess intangible assets for indicators of impairment on a quarterly basis, including an evaluation of our useful lives which are evaluated quarterly to determine whetherif events and circumstances warrant a revision to the remaining period of amortization. There have been no changes to the estimateIf indicators of the remaining useful lives during the first three months of fiscal 2018. Amortizableimpairment are present, amortizable intangible assets are tested for impairment if indicators of impairment are present, based onby comparing the carrying value to undiscounted cash flows and, if impaired, written down to fair value based on discounted cash flows. NoWe have not identified a material impairment nor a material change to the estimated remaining useful lives of our intangible assets has been identified during any offor the periods presented.three months ended November 30, 2022 and November 30, 2021. 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:

At November 30, 2017

(in thousands)

 

Gross Carrying Amount

  

Accumulated Amortization

  

Net Carrying Amount

 

Data content

 $35,039  $19,890  $15,149 

Client relationships

  100,375   24,341   76,034 

Software technology

  106,610   34,362   72,248 

Non-compete agreements

  4,875   1,750   3,125 

Trade names

  4,113   1,795   2,318 

Total

 $251,012  $82,138  $168,874 

At August 31, 2017

(in thousands)

 

Gross Carrying Amount

  

Accumulated Amortization

  

Net Carrying Amount

 

Data content

 $34,116  $18,899  $15,217 

Client relationships

  99,779   22,339   77,440 

Software technology

  105,963   30,889   75,074 

Non-compete agreements

  4,833   1,518   3,315 

Trade names

  4,080   1,583   2,497 

Total

 $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, 20172022 and 2016,November 30, 2021 was $21.7 million and $10.1 million, respectively.
As of November 30, 2017,2022, estimated intangible asset amortization expense for each of the next five years and thereafter isare as follows:

Fiscal Year (in thousands)

Estimated Amortization Expense

 

2018 (remaining nine months)

 $18,533 

2019

  23,838 

2020

  23,120 

2021

  21,589 

2022

  19,259 

Thereafter

  62,535 

Total

 $168,874 

Fiscal Year (in thousands)
Estimated Amortization Expense
2023 (remaining nine months)$69,398 
202482,708 
202576,216 
202667,546 
202762,783 
Thereafter1,524,332 
Total$1,882,983 

11. COMMON STOCK AND EARNINGS PER SHARE

On 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:

  

Three Months ended

November 30,

 

(in thousands)

 

2017

  

2016

 

Balance at September 1

  39,023   40,038 

Common stock issued for employee stock plans

  256   310 

Repurchase of common stock from employees(1)

  (4

)

  (36

)

Repurchase of common stock under the share repurchase program

  (165

)

  (505

)

Repurchase of common stock under accelerated share repurchase agreement

  —   (103

)(2)

Balance at November 30, 2017 and 2016, respectively

  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:

(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

 $70,379   39,085  $1.80 

Diluted EPS

            

Dilutive effect of stock options and restricted stock

      595     

Income available to common stockholders plus assumed conversions

 $70,379   39,680  $1.77 

For the three months ended November 30, 2016

            

Basic EPS

            

Income available to common stockholders

 $66,583   39,827  $1.67 

Diluted EPS

            

Dilutive effect of stock options and restricted stock

      273     

Income available to common stockholders plus assumed conversions

 $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’ EQUITY

Preferred Stock

At 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 Stock

At 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 Stock

At 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 Program

Repurchases 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 Vesting

Restricted 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).

Dividends

The Company’s Board of Directors declared the following historical dividends: 

Declaration Date

 

Dividends Per
Share of
Common Stock

 

Type

Record Date

 

Total $ Amount
(in thousands)

 

Payment Date

November 8, 2017

 $0.56 

Regular (cash)

November 30, 2017

 $21,902 

December 19, 2017

August 10, 2017

 $0.56 

Regular (cash)

August 31, 2017

 $21,853 

September 19, 2017

May 5, 2017

 $0.56 

Regular (cash)

May 31, 2017

 $21,951 

June 20, 2017

February 6, 2017

 $0.50 

Regular (cash)

February 28, 2017

 $19,709 

March 21, 2017

November 10, 2016

 $0.50 

Regular (cash)

November 30, 2016

 $19,852 

December 20, 2016

August 5, 2016

 $0.50 

Regular (cash)

August 31, 2016

 $20,019 

September 20, 2016

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 PLANS

Stock Option Awards

The 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 Activity

During 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:

(in thousands, except per share data)

 

Number

Outstanding

  

Weighted Average Exercise Price Per Share

 

Balance at August 31, 2017

  3,366  $139.29 

Granted – nonperformance-based

  554  $189.98 

Exercised

  (226

)

 $104.90 

Forfeited

  (25

)

 $133.89 

Balance at November 30, 2017

  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 Options

Performance-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 Review

In 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:

Vesting Percentage (in thousands)

  

Cumulative

Catch-up Adjustment*

  

Remaining Expense

to be Recognized

 
0%  $(844)  — 
10%  $(633) $89 

40% (current expectation)

  $—  $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 Review

In 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:

Vesting Percentage (in thousands)

  

Cumulative

Catch-up Adjustment*

  

Remaining Expense

to be Recognized

 

0% (current expectation)

  $—  $— 
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 Review

In 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:

Vesting Percentage (in thousands)

  

Cumulative

Catch-up Adjustment*

  

Remaining Expense

to be Recognized

 

0% (current expectation)

  $—  $— 
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 Awards

The 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 Activity

During 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:

(in thousands, except per award data)

 

Number Outstanding

  

Weighted Average

Grant Date Fair Value Per Award

 

Balance at August 31, 2017

  182  $138.62 

Granted

  1  $182.17 

Forfeited

  (10) $114.37 

Vested(1)

  (11) $157.37 

Balance at November 30, 2017

  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 Grant

A summary of share-based awards available for grant is as follows:

(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

  897   42 

Granted – nonperformance-based options

  (554)  — 

Granted – performance-based options

  —   — 

Granted – restricted stock awards(1)

  (2)  — 

Share-based awards canceled/forfeited(2)

  51   — 

Balance at November 30, 2017

  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 Plan

Shares 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) Plan

The 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 COMPENSATION

The 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 Determinations

The 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:

Three months ended November 30,

 

2017

 

2016

Term structure of risk-free interest rate

  1.28%-2.41%  0.07%-2.09%

Expected life (years)

  7.4   7.4 

Term structure of volatility

  19%-29%  21%-30%

Dividend yield

  1.32%   1.18% 

Weighted average estimated fair value

  $48.27   $39.60 

Weighted average exercise price

  $189.98   $152.51 

Fair value as a percentage of exercise price

  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 Determinations

The 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 2018

There were no stock options granted to the Company’s non-employee Directors during the first quarter of fiscal 2018.

Fiscal 2017

There 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 rate

1.95

%

Expected life (years)

5.4

Expected volatility

22.7

%

Dividend yield

1.24

%


Restricted Stock Fair Value Determinations

Restricted 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 Determinations

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 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:

Three months ended November 30,

 

2017

  

2016

 

Risk-free interest rate

  1.11%  0.35%

Expected life (months)

  3   3 

Expected volatility

  7.97%  10.3%

Dividend yield

  1.42%  1.11%

Weighted average estimated fair value

 $25.79  $30.32 

Accuracy of Fair Value Estimates

The 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 TAXES

Income 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.

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Income Tax Provision for Income Taxes

and Effective Tax Rate

The provision for income taxes istaxes and effective tax rate are as follows:

  

Three months ended

November 30,

 

(in thousands)

 

2017

  

2016

 

Income before income taxes

 $86,179  $89,820 

Total provision for income taxes

 $15,800  $23,237 

Effective tax rate

  18.3%  25.9%

FactSet’s
Three Months Ended
November 30,
(in thousands)20222021
Income before income taxes$157,885 $119,930 
Provision for income taxes$21,087 $12,283 
Effective tax rate13.4 %10.2 %

Our effective tax rate is based on recurring factors and nonrecurringnon-recurring events, including the taxation of foreign income. The Company’sOur effective tax rate will vary based on, among other things, changes in levels of foreign income, as well as discrete and other nonrecurringnon-recurring events that may not be predictable. TheFor the three months ended November 30, 2022, our effective tax rate wasis lower than the applicable U.S. federalcorporate income tax rate of 35.0% in both periods presented above primarilymainly due to research and development ("R&D") tax credits, a foreign derived intangible income taxed("FDII") deduction and a tax benefit from the exercise of stock options.
For the three months ended November 30, 2022, the provision for income taxes was $21.1 million, compared with $12.3 million for the same period a year ago. The provision increased mainly due to higher pretax income at lowera higher effective tax rate and, to a lesser extent, an increase of the UK statutory tax rates thanrate.
10. LEASES
Our lease portfolio is primarily related to our office space, under various operating lease agreements. We review new arrangements at inception to evaluate whether we obtain substantially all the economic benefits of and have the right to control the use of an asset. Our lease ROU assets and lease liabilities are recognized based on the present value of future minimum lease payments at lease commencement (which includes fixed lease payments and certain qualifying index-based variable payments) over the reasonably certain lease term, leveraging an estimated IBR. Certain adjustments to calculate our lease ROU assets may be required due to prepayments, lease incentives received and initial direct costs incurred. We account for the lease and non-lease components as a single lease component, which we recognize over the expected term on a straight-line expense basis in occupancy costs (a component of SG&A expense) in our Consolidated Statements of Income.
As of November 30, 2022, we recognized $154.1 million of Lease right-of-use assets, net and $230.9 million of combined Current lease liabilities and Long-term lease liabilities in the U.S., R&D tax benefits, foreign tax credits,Consolidated Balance Sheets. Such leases have a remaining lease term ranging from less than one year to just over 13 years and did not include any renewal or termination options that were not yet reasonably certain to be exercised.
The following table reconciles our future undiscounted cash flows related to our operating leases and the recognition of $4.1 million of excess tax benefits associated withreconciliation to the new shared-based payment accounting standard updatecombined Current lease liabilities and $1.5 million of income tax benefits from settlements with tax authorities. These tax benefits were partially offset by additional state and local income taxes.


Deferred Tax Assets and Liabilities

The significant components of deferred tax assets that are recorded Long-term lease liabilitiesin the Consolidated Balance Sheets were as follows:

(in thousands)

 

November 30, 2017

  

August 31, 2017

 

Deferred tax assets:

        

Receivable reserve

 $913  $811 

Depreciation on property, equipment and leasehold improvements

  3,235   2,220 

Deferred rent

  11,452   11,615 

Stock-based compensation

  19,447   20,117 

Purchased intangible assets, including acquired technology

  (33,376)  (32,742)

Other

  5,304   8,059 

Total deferred tax assets

 $6,975  $10,080 

of November 30, 2022:
(in thousands)
Minimum Lease
Payments
Fiscal Years Ended August 31,
2023 (remaining nine months)$28,995 
202435,424 
202533,332 
202632,546 
202731,694 
Thereafter114,070 
Total$276,061 
Less: Imputed interest45,127 
Present value$230,934 

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The significantfollowing table includes the components of deferred tax liabilitiesour occupancy costs in our Consolidated Statements of Income:
Three Months Ended
November 30,
(in millions)
20222021
Operating lease cost(1)
$8.1 $10.5 
Variable lease cost(2)
$4.2 $2.9 
(1)    Operating lease costs include costs associated with fixed lease payments and index-based variable payments that qualified for lease     accounting under ASC 842, Leases and complied with the practical expedients and exceptions elected by us.
(2)    Variable lease costs include costs that were not fixed at the lease commencement date and are recordednot dependent on an index or rate. These costs were not included in the Consolidated Balance Sheets weremeasurement of lease liabilities and primarily include variable non-lease costs, such as follows:

(in thousands)

 

November 30, 2017

  

August 31, 2017

 

Deferred tax liabilities:

        

Stock-based compensation

 $(840) $(815)

Depreciation on property, equipment and leasehold improvements

  531   168 

Purchased intangible assets, including acquired technology

  25,569   26,231 

Other

  (232)  1,690 

Total deferred tax liabilities

 $25,028  $27,274 

No U.S. incomeutilities, real estate taxes, have been provided on undistributed foreign earningsinsurance 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 needsmaintenance, 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 extentlease costs for those leases 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 nature of the distribution. Therefore, the Company does not believe it is practicable to estimate, with reasonable accuracy, the hypothetical amount of the unrecognized deferred tax liability on its undistributed foreign earnings given the many factors and assumptions necessary to estimate the amount of the federal income tax that may be payable in the future on the undistributed earnings.

Unrecognized Tax Positions

Applicable accounting guidance prescribes a comprehensive modelqualified for the financial statement recognition, measurement, classification and disclosure of uncertain tax positions that a company has taken or expects 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-current 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 discussions 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.

short-term lease exception.

The following table summarizes our lease term and discount rate assumptions related to the changes inoperating leases recorded on the balance of gross unrecognized tax benefitsConsolidated Balance Sheets:
As of November 30, 2022As of August 31, 2022
Weighted average remaining lease term (in years)
8.48.6
Weighted average discount rate (IBR)
4.4 %4.4 %


The following table summarizes supplemental cash flow information related to our operating leases:
Three Months Ended
November 30,
(in millions)
20222021
Cash paid for amounts included in the measurement of lease liabilities$9.7 $11.1 
Lease ROU assets obtained in exchange for lease liabilities(1)
$0.1 $1.4 
(1)Primarily includes new lease arrangements entered into during the first three monthsperiod and contract modifications that extend our lease terms and/or provide additional rights.
11.DEBT
We elected not to carry our Long-term debt at fair value. The carrying value of fiscal 2018:

(in thousands)

 

Unrecognized income tax benefits at August 31, 2017

 $11,484 

Additions based on tax positions related to the current year

  448 

Additions for tax positions of prior years

  134 

Reductions from settlements with taxing authorities

  (2,601)

Unrecognized income tax benefits at November 30, 2017

 $9,465 

In the normal courseour debt is net of business, the Company’s tax filings are subject to audit by federal, staterelated unamortized discount and foreign tax authorities. Atdebt issuance costs. Our total debt obligations as of November 30, 2017, the Company remained subject to examination in the following major tax jurisdictions:

Major Tax Jurisdictions

Open Tax Years

U.S.

Federal

2014 through 2018

State (various)

2014 through 2018

Europe

France

2014 through 2018

United Kingdom

2016 through 2018

Germany

2017 through 2018

16. LONG-TERM DEBT

FactSet’s debt obligations2022 and August 31, 2022 consisted of the following:

(in thousands)

 

November 30,

2017

  

August 31,

2017

 

2017 Revolving Credit Facility

 $574,666  $575,000 

Total Outstanding Debt

 $574,666  $575,000 

(in thousands)Issuance DateContractual
Maturity Date		November 30, 2022August 31, 2022
2022 Credit Agreement
2022 Term Facility3/1/20223/1/2025625,000 750,000 
2022 Revolving Facility3/1/20223/1/2027250,000 250,000 
Senior Notes
2027 Notes3/1/20223/1/2027500,000 500,000 
2032 Notes3/1/20223/1/2032500,000 500,000 
Total unamortized discounts and debt issuance costs(15,904)(17,576)
Total Long-term debt$1,859,096 $1,982,424 
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As of November 30, 2022, annual maturities on our total debt obligations, based on contract maturity, were as follows:
(in thousands)
Maturities
Fiscal Years Ended August 31,
2023 (remaining nine months)$— 
2024— 
2025625,000 
2026— 
2027750,000 
Thereafter500,000 
Total$1,875,000 
2019 Credit Agreement
On March 17, 2017, the Company29, 2019, we entered into a Credit Agreement (the “2017 Credit Agreement”) between FactSet, as the borrower, andcredit agreement with PNC Bank, National Association (“PNC” (the "2019 Credit Agreement"), asand borrowed $575.0 million of the administrative agent and lender. The 2017 Credit Agreement provides for a $575.0available $750.0 million provided by the revolving credit facility thereunder (the “2017"2019 Revolving Credit Facility”Facility"). FactSet may request borrowingsBorrowings under the 20172019 Revolving Credit Facility until its maturity date of March 17, 2020. The 2017 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 million, provided that any such request for additional borrowings must be in a minimum amount of $25.0 million. Borrowings under the loan bearbore interest on the outstanding principal amount at a rate equal to the daily LIBOR rate plus 1.00%.a spread using a debt leverage pricing grid. Interest on the loanamounts outstanding isunder the 2019 Revolving Credit Facility was payable quarterly, in arrears, and on the maturity date. There are no prepayment penalties if the Company elects to prepay the outstanding loan amounts priorWe incurred approximately $0.9 million in debt issuance costs related to the scheduled maturity date. The principal balance is payable in full on2019 Credit Agreement.
On March 1, 2022, we terminated the maturity date.

In conjunction with FactSet’s entrance into the 20172019 Credit Agreement and amortized the Companyremaining related $0.4 million of capitalized debt issuance costs into Interest expense, net in the Consolidated Statements of Income.

2022 Credit Agreement
On March 1, 2022, we entered into a credit agreement (the "2022 Credit Agreement") and borrowed $575.0an aggregate principal amount of $1.0 billion under its senior unsecured term loan credit facility (the "2022 Term Facility") and $250.0 million of the available $500.0 million under its senior unsecured revolving credit facility (the "2022 Revolving Facility" and, together with the 2022 Term Facility, the “2022 Credit Facilities”). The 2022 Term Facility matures on March 1, 2025, and the 2022 Revolving Facility matures on March 1, 2027. The 2022 Revolving Facility allows for the availability of up to $100.0 million in the form of letters of credit and up to $50.0 million in the form of swingline loans. We may seek additional commitments under the 2022 Revolving Facility from lenders or other financial institutions up to an aggregate principal amount of $750.0 million.
We pay a commitment fee on the daily unused amount of the 2022 Revolving Facility using a pricing grid based upon our senior unsecured non-credit enhanced long-term debt rating and our total leverage ratio. The commitment fee remained at 0.125% from the borrowing date through November 30, 2022.
We used these borrowings, along with the net proceeds from the issuance of the Senior Notes (as defined below) and cash on hand, to finance the consideration for the CGS acquisition, to repay borrowings under the 2019 Credit Agreement and to pay related transaction fees, costs and expenses.
During fiscal 2022, we incurred approximately $9.5 million in debt issuance costs related to the 2022 Credit Facilities. Debt issuance costs are presented in the Consolidated Balance Sheets as a direct deduction from the carrying amount of the related debt liability. Debt issuance costs are amortized to Interest expense, net in the Consolidated Statements of Income over the contractual term of the debt on a straight-line basis, which approximates the effective interest method.
We may voluntarily prepay loans under the 2022 Credit Facilities at any time without premium or penalty. During the first quarter of fiscal 2023, we repaid $125.0 million under the 2022 Term Facility, inclusive of voluntary prepayments of $112.5 million. Since March 1, 2022, we have repaid $375.0 million under the 2022 Term Facility, inclusive of voluntary prepayments of $350.0 million.
As of November 30, 2022, the outstanding borrowings under the 2022 Credit Facilities bore interest at a rate equal to the applicable one-month Term SOFR rate plus a 1.1% spread (comprised of a 1.0% interest rate margin based on a debt leverage pricing grid plus 0.1% credit spread adjustment). The spread remained consistent from the borrowing date through November 30, 2022. Interest on the 2022 Credit Facilities is currently payable on the last business day of each month, in arrears.
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The 2022 Credit Agreement contains usual and customary event of default provisions for facilities of this type, which are subject to usual and customary grace periods and materiality thresholds. If an event of default occurs under the 2022 Credit Agreement, the lenders may, among other things, terminate their commitments and declare all outstanding borrowings immediately due and payable.
The 2022 Credit Agreement contains usual and customary affirmative and negative covenants for facilities of this type, including a financial covenant requiring maintenance of a total leverage ratio of no greater than 4.00 to 1.00 as of November 30, 2022. We were in compliance with all covenants and requirements of the 2022 Credit Agreement as of November 30, 2022.
Senior Notes
On March 1, 2022 we completed a public offering of $500.0 million aggregate principal amount of 2.900% Senior Notes due March 1, 2027 (the “2027 Notes”) and $500.0 million aggregate principal amount of 3.450% Senior Notes due March 1, 2032 (the “2032 Notes” and, together with the 2027 Notes, the “Senior Notes”). The Senior Notes were issued pursuant to an indenture, dated as of March 1, 2022, by and between us and U.S. Bank Trust Company, National Association, as trustee (the "Trustee"), as supplemented by the supplemental indenture, dated as of March 1, 2022, between us and the Trustee (the "Supplemental Indenture").
The Senior Notes were issued at an aggregate discount of $2.8 million during fiscal 2022 and we incurred approximately $9.1 million in debt issuance costs. Debt discounts and debt issuance costs are presented in the Consolidated Balance Sheets as a net direct deduction from the carrying amount of the related debt liability. The debt discounts and debt issuance costs are amortized to Interest expense, net in the Consolidated Statements of Income over the contractual term of the debt, leveraging the effective interest method.
Interest on the Senior Notes is payable semiannually in arrears on March 1 and September 1 of each year, with the first payment made on September 1, 2022.
We may redeem the Senior Notes, in whole or in part, at any time at specified redemption prices, plus any accrued and unpaid interest. Upon the occurrence of a change of control triggering event (as defined in the Supplemental Indenture), we must offer to repurchase the Senior Notes at 101% of their principal amount, plus any accrued and unpaid interest.
Swap Agreements
On March 5, 2020, we entered into the 2020 Swap Agreement to hedge a portion of our then outstanding floating LIBOR rate loan underdebt with a fixed interest rate of 0.7995%. On March 1, 2022, we terminated the 2017 Revolving Credit Facility. Proceeds from2020 Swap Agreement and concurrently entered into the 20172022 Swap Agreement to hedge a portion of our outstanding floating SOFR rate debt with a fixed interest rate of 1.162%. Refer to Note 5, Derivative Instruments for further discussion of the 2020 Swap Agreement and 2022 Swap Agreement.
Interest Expense
On March 1, 2022, the 2019 Revolving Credit Facility and 2020 Swap Agreement were also used to fund FactSet’s acquisition of BISAM.

All outstanding loan amounts are reported as Long-term debt withinboth terminated and concurrently replaced with the Consolidated Balance Sheet,2022 Credit Facilities, Senior Notes and net of related amortized 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. During2022 Swap Agreement.

For the three months ended November 30, 20172022 and 2016,November 30, 2021, we recorded interest expense on our outstanding debt, including the Company paid approximately $3.4related amortization of debt issuance costs and debt discounts, net of the effects of the related interest rate swap agreements, of $16.5 million and $1.1$1.9 million, respectively in Interest expense, net in the Consolidated Statements of Income.
Including the related amortization of debt issuance costs and debt discounts, net of the effects of the related interest rate swap agreement, the year-to-date weighted average interest rate on itsamounts outstanding under our outstanding debt amounts, respectively. As of November 30, 2017, no commitment fee was owed by FactSet since it borrowed the full amount under the 2017 Credit Agreement.

The 2017 Credit Agreement contained covenants restricting certain FactSet activities, which are usual3.12% and customary for this type of loan. In addition, the 2017 Credit Agreement required that FactSet maintain a consolidated leverage ratio, as measured by total 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 of the 2017 Credit Agreement2.02% as of November 30, 2017.

2022 and August 31, 2022, respectively. Refer to Note 5, Derivative Instruments for further discussion of the 2020 Swap Agreement and 2022 Swap Agreement.

17.12. COMMITMENTS AND CONTINGENCIES

Commitments represent obligations, such as those for future purchases of goods or services, that are not yet recorded on the balance sheet as liabilities. FactSet recordsWe record liabilities for commitments when incurred (i.e., when the goods or services are received).

Lease Commitments

At November 30, 2017,

We accrue non-income-tax liabilities for contingencies when we believe that a loss is probable, and the Company leased approximately 202,000 square feetamount can be reasonably estimated. Judgment is required to determine both probability and the estimated amount of office space at its headquarters in Norwalk, Connecticut. Including new lease agreements executed during fiscal 2018,loss. If the Company’s worldwide leased office space increased to approximately 1,612,100 square feet at November 30, 2017, up 469,100 square feet,reasonable
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estimate of a probable loss is a range, we record the most probable estimate of the loss 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,minimum amount when no amount 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, 2017range is adequate for its current needs and that additional space is available for lease to meeta better estimate than any future needs.

Total minimum rental payments associated with the leases are recorded as rent expense (a component of SG&A expense)other amount. We review accruals on a straight-linequarterly basis overand adjust, as necessary, to reflect the periodsimpact of the respective non-cancelable lease terms. Future minimum commitments for the Company’s operating leases in place asnegotiations, settlements, rulings, advice of November 30, 2017legal counsel and other current information. Contingent gains are as follows:

Years ended August 31, (in thousands)

 

Minimum Lease

Payments

 

2018 (remaining nine months)

 $29,729 

2019

  36,729 

2020

  28,669 

2021

  21,558 

2022

  20,858 

Thereafter

  144,761 

Total

 $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 Liabilities

Approximately $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 Suppliers

Purchase obligations represent payments due in future periods in respect of commitments to the Company’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 that 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, the Company had total purchase commitments with suppliers of $81.0 million. There were no material changes in the Company’s purchase commitments during the first three months of fiscal 2018.

Contingencies

Income Taxes

recognized only when realized.

Uncertain income tax positions are accounted for in accordance with applicable accounting guidance, (seerefer to Note 15). FactSet9, Income Taxes for further details.
Purchase Commitments with Suppliers and Vendors
Purchase obligations represent our legally-binding agreements to purchase fixed or minimum quantities at determinable prices. As of August 31, 2022, we had total purchase obligations with suppliers of $373.9 million. Our total purchase obligations as of August 31, 2022 primarily related to hosting services and data acquisition, and, to a lesser extent, by third-party software providers. Hosting services support our technology investments related to our migration to cloud-based hosting services, the majority of which rely on third-party hosting providers. Data is an integral component of the value we provide to our clients and third-party software mainly includes internal-use software licenses.
Since August 31, 2022, there were no material changes to our contractual obligations. We also have contractual obligations related to our lease liabilities and outstanding debt. Refer to Note 10, Leases and Note 11, Debt for information regarding lease commitments and outstanding debt obligations, respectively.
Capital Commitments
As of both November 30, 2022 and August 31, 2022, we had outstanding capital commitments related to an investment of $1.1 million.
Letters of Credit
From time to time, we are required to obtain letters of credit in the ordinary course of business. As of both November 30, 2022 and August 31, 2022, we had $0.5 million of standby letters of credit outstanding. No liabilities related to these arrangements are reflected in the Company's Consolidated Balance Sheets.
Contingencies
Legal Matters
We are engaged in various legal proceedings, claims and litigation that have arisen in the ordinary course of business. The outcome of all the matters against us are subject to future resolution, including the uncertainties of litigation. Based on information available at November 30, 2022, our management believes that the ultimate outcome of these unresolved matters against us, individually or in the aggregate, will not have a material adverse effect on our consolidated financial position, our results of operations or our cash flows.
Income Taxes
We are currently under audit by tax authorities and hashave reserved for potential adjustments to itsour provision for income taxes that may result from examinations by, or any negotiated settlements with, these tax authorities. The Company believesWe believe that the final outcome of these examinations or settlements will not have a material effect on itsour results of operations.operations nor our cash flows. 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 determineswe determine the liabilities are no longer necessary. If the Company’sour estimates of the federal, state and foreign income tax liabilities are less than the ultimate assessment, a further charge toadditional expense would result.

Sales Tax Matters

On August 8, 2019, we received a Notice of Intent to Assess (the "First Notice") additional sales taxes, interest and underpayment penalties (the “Sales Taxes”) from the Commonwealth of Massachusetts Department of Revenue (the "Commonwealth") relating to the tax periods from January 1, 2006 through December 31, 2013. On July 20, 2021, we received a Notice of Intent to Assess (the "Second Notice") additional Sales Taxes from the Commonwealth relating to the tax periods from January 1, 2014 through December 31, 2018. On December 29, 2022, we received a Notice of Intent to Assess (the “Third Notice"; cumulatively with the First and Second Notices, the “Notices”) additional Sales Taxes from the Commonwealth relating to the tax periods from January 1, 2019 through June 30, 2021. We have filed an appeal with respect to the First Notice

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Legal Matters

FactSet accrues non income-tax liabilities for contingencies when management believes

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and Second Notice, and intend to file an appeal with respect to the Third Notice, to contest all Sales Taxes that may be assessed. We continue to cooperate with the Commonwealth's inquiry with respect to the Notices.
We have concluded that a losspayment to the Commonwealth is probable and the amounts can be reasonably estimated, while contingent gains are recognized only when realized. The Companyprobable. We have recorded an accrual which is subjectnot material to legal proceedings, claims and litigation arising in the ordinary course of business, including intellectual property litigation. Based on information available at November 30, 2017, FactSet’s management does notour consolidated financial statements. While we believe that the ultimate outcomeassumptions and estimates used to determine the accrual are reasonable, future developments could result in adjustments being made to this accrual. If we are presented with a formal assessment for any of these unresolved matters, againstwe believe that we will ultimately prevail; however, if we do not prevail, the Company, individually or in the aggregate, is likely toamount of any assessment could have a material adverse effectimpact on the Company'sour consolidated financial position, its results of operations or itsand cash flows.

Indemnifications


As permitted or required under Delaware law and to the maximum extent allowable under that law, FactSet haswe have certain obligations to indemnify itseach of our current and former officers and directors for certain events or occurrences while the officer or director is, or was, serving at FactSet’sour 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 best interests of the Company,FactSet, and with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. TheIt is not possible to determine the maximum potential amount of future payments FactSet could be required to makefor claims made under thesethe indemnification obligations is unlimited;due to the unique set of facts and circumstances likely to be involved in each particular claim and indemnification provision; however, FactSet haswe have purchased a director and officer insurance policy that it believes mitigates FactSet'sour exposure and may enable FactSetus to recover a portion of any future amounts paid. We do not believe, based on historical experience and information currently available, that it is probable that any material amounts will be required to be paid under such indemnification agreements.
13.STOCKHOLDERS’ EQUITY
Share Repurchases
Three Months Ended
November 30,
(in thousands)20222021
Repurchase of common stock under the share repurchase program(1)
— (46)
Total cost of shares repurchased(1)
$— $18,639 
Amount authorized for future repurchase under the share repurchase program(2)
$181,300 $181,300 
(1) Amounts do not include 25,450 shares and 6,747 shares surrendered by grantees to satisfy withholding tax obligations due upon the vesting or exercise of stock-based awards valued at $10.8 million and $2.9 million during the three months ended November 30, 2022 and November 30, 2021, respectively.
(2) There is no defined number of shares to be repurchased over a specified timeframe through the life of the program. We may repurchase shares of our common stock under the program from time-to-time in the open market and privately negotiated transactions, subject to market conditions.
For the three months ended November 30, 2022, we did not make any repurchases under our existing program, compared to 46,200 shares repurchased for $18.6 million for the three months ended November 30, 2021. Beginning in the second quarter of fiscal 2022, we suspended our share repurchase program until at least the second half of fiscal 2023, with the exception of potential minor repurchases to offset dilution from grants of equity awards or repurchases to satisfy withholding tax obligations due upon the vesting of stock-based awards. The Company believessuspension of our share repurchase program allows us to prioritize the repayment of debt under the 2022 Credit Facilities. Refer to Note 11, Debt for more information on the 2022 Credit Facilities.
Equity-based Awards
Refer to Note 15, Stock-Based Compensation for more information on equity awards issued during the three months ended November 30, 2022 and November 30, 2021.

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Dividends
Our Board of Directors declared dividends during the three months ended November 30, 2022 and November 30, 2021 as follows:
Year EndedDividends per
Share of
Common Stock		Record DateTotal $ Amount
(in thousands)		Payment Date
Fiscal 2023
  First Quarter$0.89 November 30, 2022$34,010 December 15, 2022
Fiscal 2022
  First Quarter$0.82 November 30, 2021$30,973 December 16, 2021
Future cash dividend payments will depend on our earnings, capital requirements, financial condition and other factors considered relevant by us and are subject to final determination by our Board of Directors.
Accumulated Other Comprehensive Loss
The components of AOCL are as follows:
(in thousands)November 30, 2022August 31, 2022
Accumulated unrealized gains (losses) on cash flow hedges, net of tax$9,704 $3,149 
Accumulated foreign currency translation adjustments(102,763)(111,532)
Total AOCL$(93,059)$(108,383)
14.EARNINGS PER SHARE
Basic earnings per share ("EPS") is computed by dividing net income by the number of weighted average common shares outstanding during the period. Diluted EPS is computed using the treasury stock method, by dividing net income by the cumulative weighted average common shares that are outstanding or are issuable upon the exercise of outstanding stock-based compensation awards during the period. Stock-based compensation awards that are out-of-the-money and performance share units ("PSUs") in which the performance criteria have not been met as of November 30, 2022 are omitted from the calculation of diluted EPS.
A reconciliation of the weighted average shares outstanding used in the basic and diluted earnings per share ("EPS") computation is as follows:
Three Months Ended
November 30,
(in thousands, except per share data)20222021
Numerator
Net income used for calculating basic and diluted income per share$136,798 $107,647 
Denominator
Weighted average common shares used in the calculation of basic income per share38,122 37,678 
Common stock equivalents associated with stock-based compensation plan(1)
792 963 
Shares used in the calculation of diluted income per share38,914 38,641 
Basic income per share$3.59 $2.86 
Diluted income per share$3.52 $2.79 
(1)Dilutive potential common shares consist of stock options and unvested PSUs. For the three months ended November 30, 2022 and November 30, 2021, there were 545,510 and 298,900 common stock equivalents associated with our stock options excluded from the calculation of diluted EPS, respectively, as they were out-of-the-money and their inclusion would have been anti-dilutive. Common stock equivalents associated with our PSUs excluded from the calculation of diluted EPS for the three months ended November 30, 2022 and November 30, 2021, were 94,162 and 97,511, respectively.
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15. STOCK-BASED COMPENSATION
We measure compensation expense based on the grant date fair value for all stock-based awards made to our employees and to our non-employee directors ("non-employees") using the Black-Scholes model or the lattice-binomial option-pricing model ("binomial model").
We utilize the Black-Scholes model for new stock option grants and restricted stock units ("RSUs") granted to non-employees and common stock acquired under the FactSet Research Systems Inc. Employee Stock Purchase Plan, as Amended and Restated ("ESPP"). We use the binomial model for new employee stock option grants and employee RSUs and PSUs to estimate the grant-date fair value. We refer to RSUs and PSUs, collectively, as "Restricted Stock Awards."
Both models involve certain estimates and assumptions such as:
•Risk-free interest rate- based on the U.S. Treasury yield curve in effect at the time of grant with maturities equal to the expected terms of the stock-based awards granted.
•Expected life -the weighted average period the stock-based awards are expected to remain outstanding.
•Expected volatility- based on a blend of historical volatility of the stock-based award's useful life and the weighted average implied volatility for call option contracts traded in the 90 days preceding the stock-based award's valuation date.
•Dividend yield -the expectation of dividend payouts based on our history.
Additionally, the binomial model incorporates market conditions, vesting restrictions and exercise patterns.
For Restricted Stock Awards, the grant date fair value is measured by reducing the grant date price of our common stock 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.
For stock-based awards, we use the straight-line method to recognize compensation expense over the requisite service period. The amount of compensation expense that is recognized on any date is at least equal to the vested portion of the award on that date. Compensation expense for PSUs is recognized if the achievement of the performance condition is determined to be probable. We review the PSU performance conditions quarterly to ensure the compensation expense appropriately reflects the Company's expected achievement, as these awards are subject to upward or downward adjustment depending on whether the actual financial performance is above or below target levels, with the PSU payout ranging from 0% to 150% of the number of target shares. Compensation expense for stock-based awards is recorded net of estimated forfeitures, which are based on historical forfeiture rates and are revised if actual forfeitures differ from those estimates.
We recognized total stock-based compensation expense of $12.2 million and $10.4 million during the three months ended November 30, 2022 and November 30, 2021, respectively. As of November 30, 2022, $153.6 million of total unrecognized compensation expense related to non-vested awards is expected to be recognized over a weighted average period of 3.4 years. There was no stock-based compensation capitalized as of November 30, 2022 and November 30, 2021.
Employee Stock Option Awards
Under the FactSet Research Systems Inc. Stock Option and Award Plan, as Amended and Restated (the "LTIP"), we granted the following stock options for the three months ended November 30, 2022 and November 30, 2021, which are valued using the lattice-binomial option-pricing model. As of November 30, 2022, we had 4.2 million stock-based awards available for grant under the LTIP.
Three Months Ended
November 30,
20222021
Stock options granted(1)
267,296 299,702 
Weighted average exercise price$426.25 $434.82 
Weighted average grant date fair value$125.59 $102.40 
(1) The majority of the stock options granted relate to the November 1, 2022 and November 1, 2021 annual employee grants that both 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.
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We granted 266,051 employee stock options as part of the November 1, 2022 annual employee grant. The estimated fair value of these indemnification obligationsthis grant leveraged the following assumptions:
November 1, 2022 Annual Employee Grant Details
Risk-free interest rate3.99% - 4.51%
Expected life (years)6.62
Expected volatility24.7%
Dividend yield0.83%
Estimated fair value$125.62
Exercise price$426.25
Employee Restricted Stock Awards
Our LTIP provides for the grant of stock-based awards, including Restricted Stock Awards. The Restricted Stock Awards are subject to continued employment over a specified period. The Restricted Stock Awards granted to employees entitle the holders to shares of common stock as the Restricted Stock Awards vest over time, but not to dividends declared on the underlying shares, while the stock subject to the Restricted Stock Awards is immaterial.

Concentrationsunvested. Vesting of Credit Risk

Cash equivalents

Cashthe shares underlying the PSUs are also subject to achieving certain specified performance levels during the measurement period subsequent to the date of grant.

Under the LTIP, we granted the following Restricted Stock Awards with the associated weighted average grant date fair value, assuming a target payout for PSUs, for the three months ended November 30, 2022 and cash equivalentsNovember 30, 2021.
Three Months Ended
November 30,
20222021
RSUs Granted(1)
47,03843,613
PSUs Granted(2)
34,48230,460
Total Restricted Stock Awards81,52074,073
Restricted Stock Awards weighted average grant date fair value$415.31 $424.14 
(1) The majority of the RSUs granted relate to the November 1, 2022 and November 1, 2021 annual employee grants that both vest 20% annually on the anniversary date of grant and are maintained primarily withfully vested after five financial institutions. Deposits held with banks may exceedyears.
(2) The majority of the amountPSUs granted relate to the November 1, 2022 and November 1, 2021 annual employee grants that both cliff vest on the third anniversary of insurance provided on such deposits. These depositsthe grant date, subject to the achievement of certain performance metrics. The ultimate number of common shares that may be redeemed upon demand and are maintained with financial institutions with reputable credit and therefore bear minimal credit risk. The Company seeksearned pursuant to mitigate its credit risks by spreading such risks across multiple counterparties and monitoring the risk profiles of these counterparties.

Accounts Receivable

Accounts receivable are unsecured and derivedPSU awards range from revenues earned from clients located around the globe. FactSet 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 adequacy0% to 150% of the reserves periodically. These losses have historically been within expectations. No single client representednumber of target shares, depending on the level of the Company's achievement of stated financial performance objectives.

Employee Stock Purchase Plan
Shares of FactSet common stock may be purchased by eligible employees under our ESPP in three-month intervals. The purchase price is equal to 85% of the lesser of the fair market value of our 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. Shares purchased through the ESPP cannot be sold or more of FactSet’s total revenuesotherwise transferred for 18 months after purchase. Dividends paid on shares held in any period presented. Atthe ESPP are used to purchase additional ESPP shares at the market price on the dividend payment date.
Stock-based compensation expense related to the ESPP was $0.7 million for the three months ended November 30, 2017,2022 and $0.5 million for 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.three months ended November 30, 2021. As of November 30, 2017,2022 the receivable reserve was $2.9 million comparedESPP had 93,853 shares reserved for future issuance.
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16. SEGMENTINFORMATION
Operating segments are defined as components of an enterprise that have the following characteristics: (i) they engage in business activities from which they may earn revenue and incur expense, (ii) their operating results are regularly reviewed by the chief operating decision maker ("CODM") for resource allocation decisions and performance assessment, and (iii) their discrete financial information is available. Our Chief Executive Officer functions as our CODM.
Our operating segments are consistent with our reportable segments and how we, including our CODM, manage our business and the geographic markets in which we serve. Our internal financial reporting structure is based on three segments: the Americas; EMEA; and Asia Pacific.
The Americas segment serves our clients throughout North, Central, and South America. The EMEA segment serves our clients in Europe, the Middle East, and Africa. The Asia Pacific segment serves our clients in Asia and Australia. Segment revenues reflect sales to our clients based on their respective geographic locations.
Each segment records expenses related to its individual operations with the exception of expenditures associated with our data centers, third-party data costs and corporate headquarters charges, which 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 our segments, and the expenses incurred at these locations are allocated to each segment based on a reservepercentage of $2.7 millionrevenues.
The following tables reflect the results of operations of our segments as of August 31, 2017.

Derivative Instruments

As a resultNovember 30, 2022 and November 30, 2021:

(in thousands)AmericasEMEAAsia PacificTotal
For the three months ended November 30, 2022
   Revenues$323,367 $130,738 $50,710 $504,815 
   Operating income$67,531 $67,322 $37,042 $171,895 
   Capital expenditures$15,754 $573 $1,633 $17,960 
(in thousands)AmericasEMEAAsia PacificTotal
For the three months ended November 30, 2021
   Revenues$266,913 $115,003 $42,809 $424,725 
   Operating income$55,498 $40,654 $26,509 $122,661 
   Capital expenditures$7,203 $110 $1,270 $8,583 
Segment Total Assets
The following table reflects the total assets for our segments:
(in thousands)November 30, 2022August 31, 2022
Segment Assets
Americas$3,214,785 $3,191,313 
EMEA518,976 580,450 
Asia Pacific243,779 242,542 
Total assets$3,977,540 $4,014,305 

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Table of the use of derivative instruments, the Company is exposed to counterparty credit risk. FactSet has incorporated counterparty risk into the fair value of its derivative assets and its own credit risk into the value of the Company’s derivative liabilities, when applicable. FactSet calculates credit risk from observable data related to CDS as quoted by publicly available information. Counterparty risk is represented by CDS spreads related to the senior secured debt of the respective bank with whom FactSet has executed these derivative transactions. Because CDS spread information is not available for FactSet, the Company’s credit risk is determined based on using a simple average 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 as the creditworthiness of the counterparties.

18. SUBSEQUENT EVENTS

Departure of Executive Vice President, Chief Operating Officer

On November 14, 2017, the Company announced that Mark J. Hale would separate from his position as Executive Vice President, Chief Operating Officer. The separation was effective on December 31, 2017. Under the terms of the separation of employment and general release agreement with Mark J. Hale (the “Agreement”), Mr. Hale was scheduled to receive: (i) a payment of $427,500 on or before January 11, 2018; (ii) the acceleration of the vesting of certain outstanding restricted shares on December 31, 2017; and (iii) the acceleration of the vesting of certain outstanding stock options on December 31, 2017. In addition, the Agreement provides for a release of claims by Mr. Hale and the Company and other terms and conditions customary for agreements of this nature. The foregoing description of the Separation Agreement is a summary only and is qualified in its entirety by reference to the full text of the Separation Agreement which is attached hereto as Exhibit 10.1 to this Quarterly Report on Form 10-Q and incorporated herein by reference.

Recently Enacted Tax Reform Bill

On December 22, 2017, the Tax Cuts and Jobs Act (the “Tax Act”) was signed into U.S. law and included numerous provisions that significantly revise existing tax law. The Tax Act introduces changes, including the reduction of the corporate income statutory tax rate from 35% to 21% effective January 1, 2018 as well as a variety of other changes including the limitation of the tax deductibility of interest expense, acceleration of expensing of certain business assets, the transition of U.S. international taxation from a worldwide tax system to a territorial tax system, and reductions in the amount of executive pay that could qualify as a tax deduction. The Company is currently evaluating the impact of the Tax Act on its consolidated financial statements.


Contents

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management’s

This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“("MD&A”&A") should be read in conjunction with the Consolidated Financial Statements and related Notes included in this Quarterly Report on Form 10-Q, our Annual Report on Form 10-K for the fiscal year ended August 31, 2022, our Current Reports on Form 8-K and our other filings with the Securities and Exchange Commission. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed below. Factors that could cause such differences include, but are not limited to, those identified below and those discussed in Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended August 31, 2022.
Our MD&A is designed to provide a reader of our financial statements with a narrative from the perspective of our management on our financial condition, results of operations, liquidity and certain other factors that may affect our future results. Our MD&A is presented in the following sections:

•

Executive Overview

•

Key Metrics

•

Results of Operations

•

Liquidity

•

Capital Resources

•

Foreign Currency

•

Off-Balance Sheet Arrangements

•

Share Repurchase Program

•

Contractual Obligations

•

Dividends

•

Significant Accounting Policies and Critical Accounting Estimates

•

New Accounting Pronouncements

•

Market Trends

•

Forward-Looking Factors

•Executive Overview

•Annual Subscription Value ("ASV")
•Client and User Additions
•Employee Headcount
•Results of Operations
•Non-GAAP Financial Measures
•Liquidity and Capital Resources
•Off-Balance Sheet Arrangements
•Foreign Currency Exposure
•Critical Accounting Estimates
•New Accounting Pronouncements
Executive Overview
FactSet Research Systems Inc. (the “Company”and its wholly-owned subsidiaries (collectively, "we," "our," "us," the "Company" or “FactSet”"FactSet") is a global providerfinancial data and analytics company with an open and flexible digital platform that drives the investment community to see more, think bigger and do its best work. Our strategy is to build the leading open content and analytics platform to deliver a differentiated advantage for our clients’ success.
For 45 years, our platform has delivered expansive data, sophisticated analytics, and flexible technology used by global financial professionals to power their critical investment workflows. As of integrated financial information, analytical applications and industry-leading service for the global investment community. The Company delivers insight and information toNovember 30, 2022, we had more than 7,600 clients comprised of approximately 181,000 investment professionals, through its analytics, services, content,including asset managers, bankers, wealth managers, asset owners, channel partners, hedge funds, corporate users, private equity and technology. These professionals include portfolio managers, investment research professionals, investment bankers, risk and performance analysts, and wealth advisors. From streaming real-time data to historical information, including quotes, estimates, news and commentary, FactSet offers unique and third-party content through desktop, web, mobileventure capital professionals. Our on- and off-platform solutions. The Company’s broad application suite offers tools and resources including company and industry analyses, full screening tools, portfolio analysis, risk profiles, alpha-testing, portfolio optimization and research management solutions. With recent acquisitions, FactSet has continued to expand its solutions acrossspan the investment lifecycle from idea generation toincluding investment research, portfolio construction and analysis, trade execution, performance measurement, risk management and client reporting. The Company’sOur revenues are primarily derived from subscriptions to our multi-asset class data and solutions powered by our connected content, referred to as our "content refinery." Our products and services include workstations, portfolio analytics and enterprise solutions.
We provide financial data and market intelligence on securities, companies, industries and people to enable our clients to research investment ideas, as well as to analyze, monitor and manage their portfolios. We combine dedicated client service with open and flexible technology offerings, including a configurable desktop and mobile platform, comprehensive data feeds, cloud-based digital solutions and application programming interfaces ("APIs"). Our CUSIP Global Services ("CGS") business supports security master files relied on by the investment industry for critical front, middle and back office functions.
We drive our business based on our detailed understanding of our clients’ workflows, which helps us to solve their most complex challenges. We provide them with an open digital platform, connected and reliable data, next-generation workflow solutions and highly committed service specialists.
We operate our business through three segments: the Americas, EMEA and Asia Pacific. Refer to Note 16, Segment Information, for further discussion. For each of our segments, we execute our strategy through our three workflow solutions: Research & Advisory; Analytics & Trading; and Content & Technology Solutions ("CTS").
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Business Strategy
As the needs of our clients evolve, they seek personalized and connected data, tools for multi-asset class investing and reduced costs. Clients are also seeking cloud-based solutions, open and flexible systems and increased efficiencies to support their digital transformations.
Our strategy is to build the leading open content and analytics platform to deliver differentiated advantages for our clients’ success. To execute this strategy, we plan on:
•Growing our digital platform: We are scaling up our content refinery to offer a comprehensive and connected inventory of industry, proprietary and third-party data for the financial community. This data includes granular data for key industry verticals, private companies, wealth management, real-time data, and environmental, social and governance data ("ESG"). We are driving personalized workflow solutions for financial professionals, including asset managers, bankers, wealth managers, asset owners, channel partners, hedge funds, corporate users and private equity and venture capital professionals. Our goal is to offer an open ecosystem of cloud-based data and analytics, providing solutions and content that is accessible and flexible through many delivery methods, enabling our clients to more efficiently manage their workflows.
•Delivering execution excellence: We strive to be innovative and collaborative across our organization to remain responsive, flexible and agile. Our open ecosystem provides a digital foundation that powers client personalization and efficiency, firm-type product development and core process automation. We employ technology to accelerate content collection for industry, proprietary and third-party data. Additionally, our sales force is improving price realization by focusing on productivity, efficiency, and improved client outcomes. We are also optimizing our operations and cost base to improve returns on our investments in people and product. Finally, we are committed to promoting a modern work environment that preserves the benefit of flexibility while retaining talent, fostering creativity, innovation, and collaboration, and enabling mentorship.
•Driving a growth mindset: To drive sustainable growth, we are recruiting, training and empowering a diverse and operationally efficient workforce. As a performance-based culture, we are investing in talent that can create leading technological solutions and efficiently execute our strategy. We use partnerships and acquisitions to accelerate our growth in strategic areas.
Our strategy centers on a relentless focus on our clients and their FactSet experience. We aim to be a trusted partner and service provider, offering personalized digital products powered by cognitive computing to research ideas and uncover relevant insights. Additionally, we continually evaluate business opportunities such as workstations, analytics, enterprisepartnerships and acquisitions to increase our capabilities and competitive differentiation.
We are focused on growing our global business through three segments: the Americas, EMEA and Asia Pacific. We believe this geographic strategic alignment helps us better manage our resources, target our solutions and interact with our clients. We further execute on our growth strategy by offering data, research management,products and trade execution.

analytical applications within our three workflow solutions: Research & Advisory; Analytics & Trading; and CTS.

Fiscal 20182023 FirstQuarter in Review

Revenues in the first quarter of fiscal 2023 were $329.1$504.8 million, an increase of 14.3%18.9% from the prior year comparable period. Excluding the effects of acquisitions and dispositions completedRevenues increased across all our segments, primarily in the last 12 monthsAmericas and, foreign currency, organicto a lesser extent, EMEA and Asia Pacific, supported by increased revenues grew 5.8% overfrom each of our workflow solutions, mainly in CTS driven by the previous year. Annual subscription value (“ASV”)acquisition of CGS and, to a lesser extent, by Research & Advisory and Analytics & Trading. Organic revenues contributed to 8.3% of our growth during the first quarter grew 5.1% organically and totaled $1.32 billion as of November 30, 2017. In the last three months, we saw an increase in add-on sales and an addition of new clients,fiscal 2023, compared with strong performance from our analytics and content and technology solutions (“CTS”) offerings. Both of these products have demonstrated consistent growth over the last few years.

While this growth represented positive results in the current period, our organic ASV and revenue growth rates were below the growth experienced in the previous year. These metrics were impacted primarily by a shift in our clients from active to passive investing, a focus on total cost of ownership, and ongoing consolidation in the industry. Operating income decreased 1.4%, while diluted earnings per share (“EPS”) increased 6.6% compared to the prior year period. The decreaseRefer to Part I, Item 2. Results of Operations, Non-GAAP Financial Measures in the MD&A of this Quarterly Report on Form 10-Q for a reconciliation between revenues and organic revenues.

As of November 30, 2022, organic annual subscription value ("Organic ASV") plus Professional Services totaled $1.85 billion, an increase of 8.8% over November 30, 2021. Organic ASV increased across all our segments, with the majority of the increase related to the Americas and, to a lesser extent, EMEA and Asia Pacific, supported by increases in our workflow solutions, mainly Research & Advisory and Analytics & Trading, followed by CTS. Refer to Part I, Item 2 Annual Subscription Value in
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the MD&A of this Quarterly Report on Form 10-Q for the definitions of Organic ASV and Organic ASV plus Professional Services.
Operating margin increased to 34.1% during the three months ended November 30, 2022, compared with 28.9% in the prior year period. This increase in operating incomemargin was due primarily to highergrowth in revenues, lower employee compensation expense, data costs associated with our recent acquisitions,and occupancy costs, as well as, restructuringan impairment charge incurred in the prior year period, partially offset by higher amortization of intangible assets and royalty fees, when expressed as a percentage of revenues.
Diluted earnings per share ("EPS") increased 26.2% for the three months ended November 30, 2022, compared with the prior year period.
CUSIP Global Services Acquisition
On December 24, 2021, we entered into a definitive agreement to acquire CGS for $1.932 billion in cash, inclusive of working capital adjustments. The acquisition was completed on March 1, 2022. CGS, operating on behalf of the American Bankers Association ("ABA"), manages a database of 60 different data elements uniquely identifying more than 50 million global financial instruments. It is the foundation for security master files relied on by critical front, middle and back-office functions. CGS is the provider of Committee on Uniform Security Identification Procedures ("CUSIP") and CUSIP International Number System ("CINS") identifiers globally and also acts as the official numbering agency for International Securities Identification Number ("ISIN") identifiers in the United States. We believe that the CGS acquisition will significantly expand our critical role in the global capital markets. Revenues from CGS are recognized based on geographic business activities in accordance with how our operating segments are currently aligned. CGS functions as part of CTS.
The purchase price for the CGS acquisition was financed from the net proceeds of the issuance of the Senior Notes and borrowings under the 2022 Credit Facilities. Refer to Note 6, Acquisitions andNote 11, Debt for more information on these defined terms as well as our acquisition of CGS, the Senior Notes and the 2022 Credit Facilities.
COVID-19 Update
A novel strain of coronavirus, now known as COVID-19, was first reported in December 2019, with the World Health Organization characterizing COVID-19 as a pandemic on March 11, 2020. In response to the COVID-19 pandemic, we implemented a business continuity plan with a dedicated incident management team to respond quickly and provide ongoing guidance so that we could continue offering our clients uninterrupted products, services and support while also protecting our employees. We believe these actions initiatedhave been successful and that the pandemic, and our responses, have not significantly affected our financial results for the three months ended November 30, 2022. As of November 30, 2022, there have been minimal interruptions in our ability to provide our products, services and support to our clients. Our revenues, earnings and ASV are relatively stable and predictable as a result of our subscription-based business model and, accordingly, the COVID-19 pandemic has not had a material negative impact on our revenues, earnings or ASV.
Refer to Part I, Item 1. Business, Human Capital Management, How We Work and Item 1A. Risk Factors, Operational Risks of our Annual Report on Form 10-K for the fiscal year ended August 31, 2022 for further discussion of the potential impact of the COVID-19 pandemic on our business.
Ukraine/Russia Conflict
As the military conflict between Russia and Ukraine is ongoing, we continue to monitor the potential impact on our business, our people and our clients. We have taken all necessary steps to ensure compliance with all applicable regulatory restrictions on international trade and financial transactions. We have discontinued all commercial operations and delivery of products and services to clients in Russia; have terminated all contracts with vendors in Russia; and have suspended all new business, trials and prospecting activities in Russia. Total revenues associated with clients in Russia were not material to our consolidated financial results, and termination of Russian vendors has not had a material impact on our business or client relationships. We have no offices in Russia or Ukraine, and none of our employees or contractors has been directly impacted by the Company.

Ascrisis. We continue to monitor the regional and global ramifications of November 30, 2017, employee count was 9,421, up 8.1%the events in the past 12 months. Excluding workforces acquired in fiscal 2017, headcount increased 2.9% from a year ago. Ofarea, including the threatened disruptions to global energy markets, and are reviewing our total employees, 2,474 were locatedbusiness continuity plans to ensure that we are prepared in the U.S., 1,236 in Europe and 5,711event any of our offices are impacted. Our cybersecurity teams are ready to respond in the Asia Pacific region.

Additionally, FactSet won numerous awards including Excellence in Asset Managementevent of any attempted systems compromise.

Annual Subscription Value ("ASV")

We believe ASV reflects our ability to grow recurring revenues and Servicing, Datagenerate positive cash flow and Technology at the CIO Industry Innovation Awards, Best Overall Technology Provider at the Buy-Side Technology Awards from Waters Technology and Data Vendoris a key indicator of the Year at the Risk.Net Market Technology Awards.


Key Metrics

The following is a reviewsuccessful execution of our key metrics:

  

As of and for the

Three months ended November 30,

      

(in millions, except client and user counts)

 

2017

  

2016

  

Change

  

Revenues

 $329.1  $288.1   14.3% 

Operating income

 $89.1  $90.3   (1.4)% 

Net income

 $70.4  $66.6   5.7% 

Diluted EPS

 $1.77  $1.66   6.6% 

Free cash flow(1)

 $55.2  $38.6   43.2% 

ASV

 $1,319.9  $1,170.4   12.8%(2)(3)

Clients

  4,809   4,261   12.9%(4)

Users

  88,593   84,285   5.1%(5)

(1)

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. The presentation of free cash flow is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. We use free cash flow, a non-GAAP measure, both in presenting our results to stockholders and the investment community, and in our internal evaluation and management of the business. Management believes that this financial measure and the information we provide are useful to investors because they permit investors to view our performance using the same metric that we use to gauge progress in achieving our goals. Free cash flow is also an indication of cash flow that may be available to fund further investments in future growth initiatives.

(2)

ASV grew 5.1% organically year over year.

(3)

In the third quarter of fiscal 2017, FactSet changed its ASV definition to exclude professional services as these fees are not subscription based.

(4)

In the second quarter of fiscal 2017, FactSet changed its client count definition to capture clients with ASV greater than $10,000 versus the previous metric of clients with ASV greater than $24,000. The prior year client count was restated to reflect this change for comparison purposes.

(5)

In the second quarter of fiscal 2017, FactSet changed its user count definition to account for users from workstations previously not captured due to certain product bundling and also users of the StreetAccount web product. The prior year user count was restated to reflect this change for comparison purposes.

Annual Subscription Value

Annual subscription valuebusiness strategy.

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–"ASV" at any given point in time represents theour forward-looking revenues for the next twelve12 months from all subscription services currently being supplied to clients.clients, excluding revenues from Professional Services.
–"Organic ASV" at any point in time equals our ASV excluding ASV from acquisitions and dispositions completed within the last 12 months and the effects of foreign currency movements.
–"Professional Services" are revenues derived from project-based consulting and implementation, annualized over the past 12 months.
–"Organic ASV plus Professional Services" at any point in time equals the sum of Organic ASV and Professional Services.
Organic ASV plus Professional Services

The following table presents the calculation of Organic ASV plus Professional Services as of November 30, 2022. With proper notice to us,provided as contractually required, our clients are able tocan add to, delete portions of, or terminate service, at any time, subject to certain contractual limitations.
(in millions)As of November 30, 2022
As reported ASV plus Professional Services(1)
$2,016.0 
Currency impact(2)
(1.6)
Acquisition ASV(3)
(167.9)
Organic ASV plus Professional Services$1,846.5 
Organic ASV plus Professional Services growth rate8.8 %
(1)Includes $23.0 million in Professional Services.
(2)The impact from foreign currency movements.
(3)Acquired ASV totaled $1.32 billion at November 30, 2017. ASV excludes professional services fees billed in the last 12 months, which are not subscription-based. We have achieved organic ASV growth of $59.3 million, or 5.1%, overfrom acquisitions completed within the last 12 months.

As of November 30, 2022, Organic ASV excludesplus Professional Services was $1.85 billion, an increase of 8.8% compared with November 30, 2021. Organic ASV increased due mainly to increased sales to existing clients and, to a lesser extent, price increases to existing clients and new client sales, partially offset by existing client cancellations.

Organic ASV increased across all our segments, with the majority of the increase related to the Americas, followed by EMEA and Asia Pacific. This increase was driven by additional sales in our workflow solutions, primarily in Research & Advisory and Analytics & Trading, and, to a lesser extent, by CTS. Sales increased in Research & Advisory mainly due to higher demand for our workstations. Sales increased in Analytics & Trading mainly from our performance and reporting products, portfolio and benchmark services and portfolio analytics solutions. CTS sales increased primarily due to purchases of company financial data, such as fundamentals, estimates and ownership, along with data management solutions to empower data connectivity.
Segment ASV
As of November 30, 2022, ASV from acquisitionsthe Americas represented 64% of total ASV and dispositions completed withinwas $1,271.0 million, an increase from $1,054.9 million as of November 30, 2021. Americas Organic ASV increased to $1,146.6 million as of November 30, 2022, a 8.5% increase from the past 12 monthsprior year period. The increased Organic ASV in the Americas was primarily driven by increased sales of Research & Advisory and Analytics & Trading.
As of November 30, 2022, ASV from EMEA equaled 26% of total ASV and was $521.1 million, an increase from $452.0 million as of November 30, 2021. EMEA Organic ASV increased to $487.0 million as of November 30, 2022, a 8.8% increase from the effectsprior year period. The EMEA Organic ASV increase was mainly driven by higher sales of foreign currency.

Research & Advisory and Analytics & Trading, and, to a lesser extent CTS.

As of November 30, 2022, ASV from Asia Pacific represented 10% of total ASV and was $200.9 million, an increase from $175.4 million as of November 30, 2021. Asia Pacific Organic ASV increased to $189.9 million as of November 30, 2022, a 11.1% increase from the prior year period. The Asia Pacific Organic ASV increase was primarily due to increased sales of Analytics & Trading and Research & Advisory.
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Buy-side and Sell-side Organic ASV Growth
The buy-side and sell-side Organic ASV growth rates for the first quarter of fiscal 2018at November 30, 2022, compared with November 30, 2021, were 5.3%8.0% and 3.9%14.4%, respectively. Buy-side clients account for 84.2%approximately 83% of our Organic ASV, whileconsistent with the prior year period, and primarily include asset managers, wealth managers, asset owners, channel partners, hedge funds, and corporate firms. The remainder of our Organic ASV is derived from sell-side firms that perform mergers and acquisitionsprimarily include broker-dealers, banking and advisory, work,private equity and venture capital markets servicesfirms.
Client and equity research. User Additions
The table below presents our total clients and users:
As of November 30, 2022As of November 30, 2021Change
Clients(1)
7,631 76316,759 12.9 %
Users180,959 162,161 11.6 %
(1)The client count includes clients with ASV of $10,000 and above.
Our total client count was 7,631 as of November 30, 2022, a net increase in ASV was driven primarily by an increase in add-on sales and the addition of new12.9% or 872 clients partially offset by cancellations. The first quarter of fiscal 2018 growth rates for both buy and sell-side were a decrease from prior year growth rates, which is primarily attributed to a decrease in trading volumes from our Portware Executive Management System (“EMS”) product and an increase in client cancellations, partially offset by the addition of new clients.

ASV from U.S. operations was $824.9 million, increasing 7.8% over prior year and 3.9% organically. ASV from international operations was $495.0 million, increasing 22.2% over prior year and 7.3% organically. International ASV now represents 37.5% of total ASV, up from 34.6% a year ago. This substantial shift in ASV to international operations was due primarily to acquisitions completed in the last 12 months, mainly due to an increase in corporate clients, wealth management clients, private equity and increased growth in analyticsventure capital firms and workstationchannel partners. We believe this increase was primarily due to our expanded suite of on- and off-platform solutions, personalized content, and continued execution excellence by our sales to asset managers in Asia Pacific compared to the U.S.

Client and User Additions

Our total client count was 4,809 asfacing teams.

As of November 30, 2017,2022, there were 180,959 professionals using FactSet, representing a net increase of 65 clients in the past three months. In the second quarter of fiscal 2017, FactSet changed its client count definition to capture clients with ASV greater than $10,000 versus the previous metric of clients with ASV greater than $24,000. The prior year client count was restated to reflect this change for comparison purposes. Client count has increased by 12.9%11.6% or 18,798 users in the last 12 months. We continuemonths, primarily driven by an increase in wealth advisory professionals from our wealth management clients as well as an increase in sell-side users from our banking clients. The increase in users was mainly due to focus on expanding our current client base as it is essential to our long-term growth strategynew wealth management clients and encourages incremental sales growth of workstations, applications and contentincreased new hiring at our existingbanking clients.


As of November 30, 2017, there were 88,593 professionals using FactSet. In the second quarter of fiscal 2017, FactSet also changed its user count definition to account for users from workstations previously not captured due to certain product bundling and also StreetAccount web product users. The prior year user count was restated to reflect this change for comparison purposes. User count decreased 253 in the past three months primarily due to StreetAccount user cancellations. However, over the last 12 months, user count grew by 5.1% primarily due to expansion at existing clients and new client acquisition.

Annual clientASV retention as of November 30, 2017 was greater than 95% of ASV and 90%92% when expressed as a percentage of clients. Our retention success, demonstrating that a majority of our clients maintain their subscriptions to FactSet year over year, highlightsfor the strength of our business model. Atperiod ended November 30, 2017, our largest individual client accounted for 7%2022, with both percentages consistent with the prior year period.

Employee Headcount
As of total subscriptions and annual subscriptions from our ten largest clients did not surpass 20% of total client subscriptions.

Returning Value to Stockholders

On 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. We repurchased 164,920 shares for $30.9 million during the first quarter2022, our employee headcount was 11,627, an increase of fiscal 2018 under our existing share repurchase program. Over the last 12 months, we have returned $290.5 million to stockholders in the form of share repurchases and dividends, funded by cash generated from operations. On March 27, 2017, the Board of Directors of FactSet approved a $300.0 million expansion of the existing share repurchase program. Including this expansion, $213.2 million is available for future share repurchases6.7% compared with 10,898 employees as of November 30, 2017.

Capital Expenditures

Capital expenditures2021. This growth in headcount was primarily due to an increase of 7.1% in Asia Pacific, 6.5% in the first quarter of fiscal 2018Americas and 5.1% in EMEA. At November 30, 2022, 7,698 employees 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 serverslocated 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 millionAsia Pacific, 2,495 in the NetherlandsAmericas, and $0.6 million1,434 in New York.

EMEA.

Results of Operations

For an understanding of the significant factors that influenced our performance for the three months ended November 30, 20172022 and 2016, respectively,November 30, 2021, the following discussion should be read in conjunction with the Consolidated Financial Statements and therelated Notes to Consolidated Financial Statements presented in this Quarterly Report on Form 10-Q.

  

Three months ended November 30,

 

(in thousands, except per share data)

 

2017

  

2016

  

Change

 

Revenues

 $329,141  $288,063   14.3%

Cost of services

 $161,524  $127,250   26.9%

Selling, general and administrative ("SG&A")

 $78,519  $70,494   11.4%

Operating income

 $89,098  $90,319   (1.4)%

Net income

 $70,379  $66,583   5.7%

Diluted earnings per common share

 $1.77  $1.66   6.6%

Diluted weighted average common shares

  39,680   40,100     

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The following table summarizes the results of operations for the periods described:
Three Months Ended
 November 30,Change% Change
(in thousands, except per share data)20222021
Revenues$504,815 $424,725 $80,090 18.9 %
Cost of services227,042 207,131 $19,911 9.6 %
Selling, general and administrative105,596 91,238 $14,358 15.7 %
Asset impairments282 3,695 $(3,413)(92.4)%
Operating income$171,895 $122,661 $49,234 40.1 %
Net income$136,798 $107,647 $29,151 27.1 %
Diluted weighted average common shares38,914 38,641 273
Diluted earnings per common share$3.52 $2.79 $0.73 26.2 %
Revenues

Three months ended November 30, 2022 compared with three months ended November 30, 2021
Revenues for the three months ended November 30, 20172022 were $329.1$504.8 million, up 14.3%an increase of 18.9%. The increase in revenues was largely attributed to increased sales to existing clients and, to a lesser extent, price increases to existing clients and new client sales, partially offset by existing client cancellations. Revenues increased across all our segments, primarily from the Americas, followed by EMEA and Asia Pacific, driven by increased revenues in all our workflow solutions, mainly in CTS driven by the acquisition of CGS, followed by Research & Advisory and Analytics & Trading, compared towith 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 suite of standard data feeds. Offsetting the positive factors associated with our revenue growth, we experienced cancellations dueOrganic revenues increased 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 rate$459.9 million for the quarter was 5.8%.


Revenues by Geographic Region

  

Three months ended November 30,

 

(in thousands)

 

2017

  

2016

  

Change

 

U.S.

 $208,768  $190,627   9.5%

% of revenues

  63.4%  66.2%    

Europe

 $91,727  $71,863   27.6%

Asia Pacific

  28,646   25,573   12.0%

International

 $120,373  $97,436   23.5%

% of revenues

  36.6%  33.8%    

Consolidated

 $329,141  $288,063   14.3%

Threethree months ended November 30, 2017 compared2022, a 8.3% increase over the prior year period. Refer to three monthsPart I, Item 2. Results of Operations, Non-GAAP Financial Measures in the MD&A of this Quarterly Report on Form 10-Q for further discussion on organic revenues.

The growth in revenues of 18.9% was reflective of organic revenues growth of 8.3% and a 11.4% increase primarily due to the impact of acquisition-related revenues, partially offset by a 0.8% decrease from foreign currency exchange rate fluctuations.
Revenues by Segment
The following table summarizes our revenues by segment for the periods described:
 Three Months Ended
November 30,% Change
(in thousands)20222021
Americas$323,367 $266,913 21.2 %
% of revenues64.1 %62.8 %
EMEA$130,738 $115,003 13.7 %
% of revenues25.9 %27.1 %
Asia Pacific$50,710 $42,809 18.5 %
% of revenues10.0 %10.1 %
Consolidated$504,815 $424,725 18.9 %
35
Table of Contents
Three months ended November 30, 2016

Revenues from our U.S. segment2022 compared with three months ended November 30, 2021

Americas
Americas revenues increased 9.5%21.2% to $208.8$323.4 million during the three months ended November 30, 20172022, compared to the same period a year ago, primarily a result of strong performancewith $266.9 million from the analytics suite 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. Revenues from our U.S. operations accounted for 63.4% of our consolidated revenues during the first quarter of fiscal 2018, a decrease from the prior year, as U.S. sales growth was outpaced by international growth.

European revenues grew 27.6% due primarily to recent acquisitions, which have significant operations in the European markets. Organic revenues in the European segment were up 5.9% compared to the year ago first quarter. Growth rates in Europe have been negatively impacted by the regulatory environment and political events, resulting in delayed purchasing decisions. Foreign currency exchange rate fluctuations increased our European growth rate by 140 basis points.

Asia Pacific revenue growth of 12.0% was primarily due to an increase in the analytics suite and workstation sales to asset managers. Foreign currency exchange rate fluctuations reduced our Asia Pacific growth rate by 20 basis points.

Operating Expenses

  

Three months ended November 30,

 

(in thousands)

 

2017

  

2016

  

Change

 

Cost of services

 $161,524  $127,250   26.9%

SG&A

  78,519   70,494   11.4%

Total operating expenses

 $240,043  $197,744   21.4%

Operating Income

 $89,098  $90,319   (1.4)%

Operating Margin

  27.1%  31.4%    

Cost of Services

Three months ended November 30, 2017 compared to three months ended November 30, 2016

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 2018 compared to the same period a year ago. The increased revenues were driven by higher sales in all of our workflow solutions, primarily in CTS, followed by Research & Advisory. The growth in revenues of 21.2% was reflective of a 7.6% increase isin organic revenues and a 13.6% increase from acquisition-related revenues.


EMEA
EMEA revenues increased 13.7% to $130.7 million during the three months ended November 30, 2022, compared with $115.0 million from the same period a year ago. The increased revenues were driven by higher sales in all of our workflow solutions, primarily in CTS. The growth in revenues of 13.7% was due to a 7.2% increase in organic revenues and an 8.1% from acquisition-related revenues, partially offset by a 1.6% decrease driven by the effects of foreign currency exchange rate fluctuations.
Asia Pacific
Asia Pacific revenues segment increased 18.5% to $50.7 million during the three months ended November 30, 2022, compared with $42.8 million from the same period a year ago. The increased revenues were driven by higher sales in all of our workflow solutions, primarily in CTS, followed by Analytics & Trading and Research & Advisory. The growth in revenues of 18.5% was reflective of 14.9% increase in organic revenues and a 7.3% increase from acquisition-related revenues, partially offset by a 3.7% decrease driven by the effects of foreign currency exchange rate fluctuations.
Revenues by Workflow Solution
Three months ended November 30, 2022 compared with three months ended November 30, 2021
The growth in revenues of 18.9% for the three months ended November 30, 2022, compared with the same period a year ago, was due to revenue growth across each of our segments supported by increased revenues from our workflow solutions, primarily from CTS, followed by Research & Advisory and Analytics & Trading. The increase in CTS revenues was driven mainly by CGS related data licensing and issuance revenues. The increase in Research & Advisory revenues was driven mainly by higher demand for our workstations. The increase in revenues from Analytics & Trading was primarily due to an increase in net new employeesincreased demand for our performance and portfolio reporting products, portfolio and benchmark services and portfolio analytics solutions.
Operating Expenses
Principal Operating Costs and Expenses
Cost of 708 over the last 12 months, with the majorityservices is mainly comprised of theiremployee compensation included incosts and also includes expenses related to data costs, computer-related expenses, amortization of identifiable intangible assets, royalty fees, client-related communication costs and computer depreciation.
Selling, general and administrative ("SG&A") consists primarily of employee compensation costs and also includes expenses related to occupancy costs, professional fees, depreciation of furniture and fixtures, amortization of leasehold improvements, travel and entertainment expenses, marketing costs, non-compensatory employee expenses, internal communication costs and bad debt expense.
Employee compensation costs are a major component of both our cost of services and SG&A. These expenses primarily include costs related to salaries, incentive compensation and sales commissions, stock-based compensation, benefits, employment taxes, and any applicable restructuring costs.
We assign employee compensation costs between costs of services and SG&A based on the roles and activities associated with each employee. We categorize employees within the content collection, consulting, product development, software and systems engineering groups as well as base salary changes and incremental hirescost of services personnel. Employees included in our centerssales department and those that serve in various other support departments, including marketing, finance, legal, human resources and administrative services, are classified as SG&A.
Asset impairments consist primarily of excellence located in Indiaexpenses recognized when the carrying amount of an asset exceeds its fair value.
36
Table of Contents
The following table summarizes the components of our total operating expenses and operating margin for the Philippines and a non-recurring pre-tax chargeperiods described:

 Three Months Ended
November 30,
(in thousands)20222021% Change
Cost of services$227,042 $207,131 9.6 %
SG&A105,596 91,238 15.7 %
Asset impairments282 3,695 (92.4)%
Total operating expenses$332,920 $302,064 10.2 %
Operating income$171,895 $122,661 40.1 %
Operating margin34.1 %28.9 %
Cost of approximately $3.2 million related to restructuring actions initiated by the Company. As ofServices
Three months ended November 30, 2017, approximately 72%2022compared with three months endedNovember 30, 2021
Cost of our employee base performed operational roles.


Amortization of acquired intangible assets, when expressed as a percentage of revenues, increased 60 basis points inservices increased 9.6% to $227.0 million for the first quarter of fiscal 2018three months ended November 30, 2022, compared towith $207.1 million for the same period a year ago, primarily due to our fiscal 2017 acquisitions, which added approximately $93.2 millionan increase in amortization of intangible assets and royalty fees related to be amortized over a weighted-average lifeour CGS acquisition and computer-related expenses.

Cost 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 Administrative

Three months ended November 30, 2017 compared to three months ended November 30, 2016

Forwas 45.0% for the three months ended November 30, 2017, 2022, a decrease of 380 basis points over the prior year period. This decrease was primarily due to lower employee compensation costs and data costs, partially offset by higher amortization of intangible assets and royalty fees.

•Employee compensation costs decreased 560 basis points primarily due to a one-time restructuring charge to drive organizational realignment incurred during the three months ended November 30, 2021 and increased capitalization of compensation costs related to development of our internal-use software projects, partially offset by higher annual base salaries and higher variable compensation expense. The increase in annual base salaries was mainly due to a net headcount increase in cost of services of 558, partially offset by a shift of our headcount from high to low cost locations.
•Data costs decreased by 160 basis points due to the release of certain accruals related to the successful resolution of exchange audits, partially offset by increased data prices and usage-based fees.
•Amortization of intangible assets increased 190 basis points mainly due to increased amortization related to acquired intangible assets, primarily from the CGS acquisition.
•Royalty fees increased cost of services by 170 basis points due to contracts acquired in connection with the acquisition of CGS.
Selling, General and Administrative
Three months endedNovember 30, 2022compared with three months endedNovember 30, 2021
SG&A expenses increased 15.7% to $78.5$105.6 million up 11.4%,for the three months ended November 30, 2022, compared with $91.2 million from $70.5 million in the same period a year ago. ago, primarily due to higher employee compensation expense and travel expenses.

SG&A expenses, expressed as a percentage of revenues, were 23.9% during20.9% for the first quarter of fiscal 2018,three months ended November 30, 2022, a decrease of 7060 basis points over the prior year period as a result of foreign exchange hedges,period. This decrease was primarily due to lower occupancy costs, partially offset by an increase of 40higher travel expenses.
•Occupancy costs decreased by 90 basis points in compensation expense.

The increase to employee compensationmainly driven by vacating leased office space and recognizing an impairment charge during fiscal 2022, thereby reducing occupancy costs recorded over the remaining lease terms.

•Travel expenses increased as a percentage of revenue compared to the same period a year ago was due primarily towe lifted our COVID-19 travel restrictions during the current year non-recurring pre-tax chargeyear.
37
Table of approximately $3.3 million related to restructuring actions initiated by the Company and an increase in headcount year over year.

Operating Income and Operating Margin

Contents

Asset Impairments
Three months ended November 30, 2017 2022compared towith three months endedNovember 30, 2016

Operating income decreased 1.4% to $89.12021

Asset impairments were $0.3 million for the three months ended November 30, 20172022, compared with $3.7 million in the same period a year ago. The impairment charges incurred during the three months ended November 30, 2021 related to our lease right-of-use ("ROU") assets and property, equipment and leasehold improvements associated with vacating certain leased office space.
Operating Income and Operating Margin
Three months endedNovember 30, 2022compared with three months endedNovember 30, 2021
Operating income increased 40.1% to $171.9 million for the three months ended November 30, 2022, compared with $122.7 million in the prior year. This increase was primarily due to growth in revenues, partially offset by an increase in amortization of intangible assets, royalty fees, employee compensation expense, computer-related expenses and travel expenses. Foreign currency exchange rate fluctuations, net of hedge activity, increased operating income by $8.6 million for the three months ended November 30, 2022, compared with a decrease of $4.3 million during the three months ended November 30, 2021
Operating margin increased to 34.1% during the three months ended November 30, 2022, compared with 28.9% in the prior year period. Our operatingOperating margin during the first quarter of fiscal 2018 was 27.1%, down from 31.4% a year ago. The lower operating margin was primarilyincreased mainly due to increasesgrowth in revenues, lower employee compensation costs, including non-recurring restructuring actions initiated by the Company, as well asexpense, data costs and occupancy costs, an impairment charge incurred in the prior year period, partially offset by higher amortization of intangible assets, partially offset byroyalty fees and travel expenses, when expressed as a gain on foreign exchange hedges.

Operatingpercentage of revenues.

Operating Income by Segment

  

Three months ended November 30,

 

(in thousands)

 

2017

  

2016

  

Change

 

U.S.

 $40,771  $40,005   1.9%

Europe

  32,970   36,584   (9.9)%

Asia Pacific

  15,357   13,730   11.8%

Consolidated

 $89,098  $90,319   (1.4)%

Our operating segments are aligned with how we manage the business and the demographic markets in which we serve and how the chief operating decision maker assesses performance.

Our internal financial reporting structure is based on three reportable segments,segments: the U.S., EuropeAmericas; EMEA; and Asia Pacific, which we believe helps us better manage the business and view the markets we serve. Sales, consulting, data collection, product development and software engineering are the primary functional groups within each segment. Each segment records compensation expense, including stock-based compensation, amortization of intangible assets, depreciation of furniture and fixtures, amortization of leasehold improvements, communication costs, professional fees, rent expense, travel, office and other direct expenses. Expenditures associated withPacific. Refer to Note 16, Segment Information for further discussion regarding our data centers, third party data costs and corporate headquarters charges are recorded by the U.S. segment and are not allocated to the other segments. The content collection centers located in India andfollowing table summarizes our operating income by segment for the Philippines benefit all of our segments, so the expenses incurred at these locations are allocated to each segment based on a percentage of revenues.

periods described:

 Three Months Ended
November 30,% Change
(in thousands)20222021$ Change
Americas$67,531 $55,498 $12,033 21.7 %
EMEA67,322 40,654 26,668 65.6 %
Asia Pacific37,042 26,509 10,533 39.7 %
Total Operating Income$171,895 $122,661 $49,234 40.1 %
Three months endedNovember 30, 2017 2022compared towith three months endedNovember 30, 2016

U.S.2021

Americas
Americas operating income increased 1.9%21.7% to $40.8$67.5 million during the three months ended November 30, 20172022, compared to $40.0with $55.5 million in the same period a year ago. TheThis increase was primarily due to growth in U.S. operating income is primarily from revenue growthrevenues of 9.5%21.2%, partially offset by higher amortization of intangible assets, royalty fees, employee compensation expense and data costs.  U.S. revenue growth was driven by U.S. organic ASV growthcomputer-related expenses.

•Amortization of 3.9% and strong performanceintangible assets primarily increased due to amortization related to acquired intangible assets, mainly from the CGS acquisition.
•Royalty fees increased due to contracts acquired in our analytics suite and data feed products.  Excludingconnection with the effectacquisition of acquisitions and dispositions in the last 12 months, U.S. employee headcount grew 2.1% year over year, leadingCGS.
•Employee compensation expense increased primarily due to an increase in annual base salary, inclusive of a net increase in employee headcount of 152 and an increase in stock-based compensation expense and related benefits.  Data costspayroll taxes, partially offset by the impact of a one-time restructuring charge incurred during the three months ended November 30, 2021 to drive organizational realignment.
•Computer-related expenses increased primarily due primarily to higher third-party data costsincreased spend from our recent acquisitions and additional usersmigration to cloud-based hosting services to support our transition to a hybrid cloud strategy, as well as expenses related to licensed software arrangements.
38
Table of FactSet, along with increased data fees from certain vendors. 

EuropeanContents

EMEA
EMEA operating income decreased 9.9%increased 65.6% to $33.0$67.3 million during the three months ended November 30, 20172022, compared to $36.6with $40.7 million inrecognized during the same period a year ago. The decrease in European operating incomeThis increase was primarily due to higher employee compensation, amortizationgrowth in revenues of intangible assets,13.7% and a reduction in data costcosts. Data costs were lower due to the successful resolution of exchange audits, partially offset by revenue growth of 27.6%. The impact of foreign currency decreased operating income by $0.3 million year over year.  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 assets increased due to intangible assets acquired from the recent acquisitions, the majority of which reside in our European segment.  Data costs increased due primarily to higher third-party data costs related to our recently acquired businesses. 

prices and usage-based fees.
Asia Pacific

Asia Pacific operating income increased 11.8%39.7% to $15.4$37.0 million during the three months ended November 30, 20172022, compared with $26.5 million from the prior year. This increase was mainly due to $13.7growth in revenues of 18.5%, partially offset by higher employee compensation expense. Employee compensation expense increased mainly due to higher annual base salaries, inclusive of a net increase in employee headcount of 508.

Income Taxes
The provision for income taxes and the effective tax rate is as follows:
Three Months Ended
November 30,
(in thousands)20222021$ Change% Change
Income before income taxes$157,885 $119,930 $37,955 31.6 %
Provision for income taxes$21,087 $12,283 $8,804 71.7 %
Effective tax rate13.4 %10.2 %3.1 %30.4 %
Our effective tax rate is based on recurring factors and non-recurring events, including the taxation of foreign income. Our effective tax rate will vary based on, among other things, changes in levels of foreign income, as well as discrete and other non-recurring events that may not be predictable. For the three months ended November 30, 2022, our effective tax rate is lower than the applicable U.S. corporate income tax rate mainly due to research and development ("R&D") tax credits, a foreign derived intangible income ("FDII") deduction and a tax benefit from the exercise of stock options.
Three months endedNovember 30, 2022compared with three months endedNovember 30, 2021
For the three months ended November 30, 2022, the provision for income taxes was $21.1 million, incompared with $12.3 million for the same period a year ago. The increase in the Asia Pacific operating income wasprovision increased mainly due to revenue growth of 12.0%, partially offset by increases in employee compensation. The impact of foreign currency increased Asia Pacific operatinghigher pretax income by $0.5 million year over year. Asia Pacific revenue growth was due primarilyat a higher effective tax rate and, to a lesser extent, an increase in analytics and workstation sales to asset managers. Employee compensation was higher year over year as a result of a 6.0% increase in our Asia Pacific workforce in the last 12 months.

Income Taxes, UK statutory tax rate.

Net Income and Diluted Earnings per Share

  

Three months ended November 30,

 

(in thousands)

 

2017

  

2016

  

Change

 

Provision for income taxes

 $15,800  $23,237   (32.0)%

Net income

 $70,379  $66,583   5.7%

Diluted earnings per share

 $1.77  $1.66   6.6%

Income Taxes

 Three Months Ended
November 30,
(in thousands, except for per share data)20222021Change% Change
Net income$136,798 $107,647 $29,151 27.1 %
Diluted weighted average common shares38,914 38,641 273 0.7 %
   Diluted earnings per common share$3.52 $2.79 $0.73 26.2 %
Three monthsendedNovember 30, 2017 2022compared towith three months endedNovember 30, 2016

For the three months ended November 30, 2017, the provision for income taxes was $15.8 million, down 32.0% from the same period a year ago.  The provision for income taxes decreased year over year primarily due to the recognition of $4.1 million of excess tax benefits associated with an employee share-based payment accounting standard update adopted 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 Share

Three months ended November 30, 2017 compared to three months ended November 30, 2016

2021

Net income increased 5.7%27.1% to $70.4$136.8 million and diluted earnings per share ("EPS") increased 6.6%26.2% to $1.77$3.52 for the three months ended November 30, 2017,2022, compared towith the three months ended November 30, 2016.same period a year ago. Net income and earnings per sharediluted EPS increased during the first quarter of fiscal 2018primarily due to a lower provision forhigher operating income, taxes, partially offset by slightly lower operating income and an increase in interest expense associated with ouras a result of higher outstanding debt. Thedebt and an increase in the provision for income taxes decreaseddue to higher pretax income at a higher effective tax rate, compared with the prior year over year due primarily toperiod.
39
Table of Contents
Non-GAAP Financial Measures
To supplement the recognition of excess 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 Net Income and Diluted Earnings per Share (non-GAAP)

Financialfinancial measures prepared in accordance with U.S. GAAPgenerally accepted accounting principles in the United States ("GAAP"), we use non-GAAP financial measures including organic revenues, adjusted operating income, andadjusted operating margin, adjusted net income, EBITDA, adjusted EBITDA and adjusted diluted EPS have been adjusted below. These adjustedEPS. The reconciliations from our financial measures calculated and presented in accordance with GAAP to these non-GAAP financial measures are used bothshown in presentingthe tables below. These non-GAAP financial measures should not be considered in isolation from, as a substitute for or superior to, financial measures reported in accordance with GAAP. Moreover, these non-GAAP financial measures have limitations in that they do not reflect all the items associated with the operations of our results to stockholders andbusiness as determined in accordance with GAAP. Other companies may calculate similarly titled non-GAAP financial measures differently than we do, limiting the investment community, and also in our internal evaluation and managementusefulness of those measures for comparative purposes.

Despite the business. Welimitations 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.

Adjusted revenues exclude the impact of the fair value of deferred revenues acquired in a business combination. Organic revenues further excludes revenues related to acquisitions and dispositions completed in the last 12 months and foreign currency movements in all periods presented.
The table below provides an unaudited reconciliation of revenues to adjusted revenues and organic revenues.
 Three Months Ended
November 30,% Change
(In thousands)20222021$ Change
Revenues$504,815 $424,725 $80,090 18.9 %
   Deferred revenues fair value adjustment(1)
— 86 (86)
Adjusted revenues$504,815 $424,811 $80,004 18.8 %
   Acquired revenues(2)
(48,455)— (48,455)
   Currency impact(3)
3,500 — 3,500 
Organic revenues$459,860 $424,811 $35,049 8.3 %
(1) Reflects the amortization effect of the purchase accounting adjustment related to the fair value of acquired deferred revenues for acquisitions prior to fiscal 2022. Acquisitions thereafter do not include this adjustment in accordance with our adoption of ASU No. 2021-08, Business Combinations: Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (Topic 805).
(2) Revenues from acquisitions completed within the last 12 months.
(3) The impact from foreign currency movements year over year.
The 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, EBITDA, adjusted EBITDA and adjusted diluted EPS. Adjusted operating income and margin, adjusted net income, and adjusted diluted earnings per share exclude intangible asset amortization, the impact of the fair valuing of deferred revenues acquired in a business combination and non-recurring items. EBITDA excludes interest expense, provision for income taxes and depreciation and amortization expense, while Adjusted EBITDA further excludes non-recurring non-cash expenses.





40
Table of Contents
 Three Months Ended
November 30,
(In thousands, except per share data)20222021% Change
Operating income$171,895 $122,661 40.1 %
Deferred revenues fair value adjustment— 86 
Intangible asset amortization18,008 6,052 
Business acquisition / integration costs(1)
3,499 — 
Restructuring / severance— 9,028 
Real estate charges(2)
— 3,695 
Transformation costs (3)
— 1,188 
     Adjusted operating income$193,402 $142,710 35.5 %
     Operating margin34.1 %28.9 %
     Adjusted operating margin(4)
38.3 %33.6 %
Net income$136,798 $107,647 27.1 %
Deferred revenues fair value adjustment— 77 
Intangible asset amortization15,577 5,419 
Business acquisition / integration costs(1)
3,026 — 
Restructuring / severance— 8,084 
Real estate charges(2)
— 3,309 
Transformation costs(3)
— 1,064 
Income tax items(230)(259)
     Adjusted net income(5)
$155,171 $125,341 23.8 %
Net income$136,798 $107,647 
Interest expense16,537 1,972 
Income taxes21,087 12,283 
Depreciation and amortization expense25,997 19,432 
EBITDA$200,419 $141,334 41.8 %
Real estate charges(2)
— 3,695 
Adjusted EBITDA$200,419 $145,029 38.2 %
Diluted earnings per common share$3.52 $2.79 26.2 %
Deferred revenues fair value adjustment— 0.00 
Intangible asset amortization0.40 0.14 
Business acquisition / integration costs(1)
0.08 — 
Restructuring / severance— 0.21 
Real estate charges(2)
— 0.09 
Transformation costs(3)
— 0.03 
Income tax items(0.01)(0.01)
     Adjusted diluted earnings per common share(5)
$3.99 $3.25 22.8 %
Weighted average common shares (Diluted)38,914 38,641 
(1)Related to integration costs of our CGS acquisition.
(2)Related to impairment charges of our lease ROU assets and property, equipment and leasehold improvements associated with vacating certain leased office space.
(3)Primarily related to professional fees associated with our ongoing multi-year investment plan.
(4)Adjusted operating margin is calculated as Adjusted operating income divided by Adjusted revenues as shown in the revenues reconciliation table above.
(5)For purposes of calculating Adjusted net income and Adjusted diluted earnings per share, all adjustments were taxed at the quarterly effective tax rates of 13.5% for the three months ended November 30, 2017 was $80.9 million, an increasefiscal 2023 and 10.5% for fiscal 2022.
41
Table of 15.4% from the prior year period. As presented in the table below, adjusted net income for the quarter ended November 30, 2017 excludes $4.6 million (after-tax) of intangible asset amortization, $2.0 million (after-tax) related to deferred revenue fair value adjustments from purchase accounting, $5.4 million (after-tax) of non-recurring restructuring actionsContents
Liquidity and $1.5 million of income tax benefits primarily from settlements with taxing authorities. Adjusted net income for the three months ended November 30, 2016 was $70.1 million, which excludes $2.8 million of after-tax intangible asset amortization and $0.7 million of after-tax non-recurring items primarily related to legal matters.

Capital Resources

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 deferred revenue fair value adjustments, $0.14 detriment from non-recurring restructuring actions and $0.04 benefit from income tax benefits primarily from settlements with taxing authorities. Fiscal 2017 first quarter adjusted diluted EPS of $1.75 excludes a $0.09 detriment from the intangible asset amortization and non-recurring acquisition costs.

  Three months ended November 30,    

(In thousands, except per share data)

 

2017

  

2016

  

Change

 
             

GAAP net income

 $70,379  $66,583   5.7%

Intangible asset amortization

  4,625   2,783     

Deferred revenue fair value adjustment

  2,042  

─

     

Other non-recurring items

  5,367   707     

Income tax benefits

  (1,547) 

─

     

Adjusted net income

 $80,866  $70,073   15.4%
             

GAAP diluted earnings per common share

 $1.77  $1.66   6.6%

Intangible asset amortization

  0.12   0.07     

Deferred revenue fair value adjustment

  0.05  

─

     

Other non-recurring items

  0.14   0.02     

Income tax benefits

  (0.04) 

─

     

Adjusted diluted earnings per common share

 $2.04  $1.75   16.6%

Weighted average common shares (diluted)

  39,680   40,100     

The presentation of the financial information above is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP.

Liquidity

The table below, for the periods indicated, provides selectedOur cash flow information:

  

Three months ended November 30,

 

(in thousands)

 

2017

  

2016

 

Net cash provided by operating activities

 $61,143  $51,113 

Capital expenditures (1)

  (5,912)  (12,537)

Free cash flow (2)

 $55,231  $38,576 

Net cash used in investing activities

 $(5,445) $(81,425)

Net cash used in financing activities

 $(30,814) $(17,531)
         

Cash and cash equivalents at end of period

 $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. Ourflows provided by operating activities, existing cash and cash equivalents, increased $27.2supplemented with our long-term debt borrowings, have been sufficient to fund our operations while allowing us to invest in activities that support the long-term growth of our operations. Generally, some or all of the remaining available cash flow has been used to, among other things, service our existing and future debt obligations, satisfy our working capital requirements and fund our capital expenditures, acquisitions, dividend payments and repurchases of our common stock. Based on past performance and current expectations, we believe our sources of liquidity, including the available capacity under our existing revolving credit facility and other financing alternatives, will provide us the necessary capital to fund these transactions and achieve our planned growth for the next 12 months and the foreseeable future.

Sources of Liquidity
Long-Term Debt & Swap Agreements
2022 Credit Agreement
On March 1, 2022, we entered into a credit agreement (the "2022 Credit Agreement") and borrowed an aggregate principal amount of $1.0 billion under its senior unsecured term loan credit facility (the “2022 Term Facility”) and $250.0 million duringof the first three monthsavailable $500.0 million under its senior unsecured revolving credit facility (the “2022 Revolving Facility” and, together with the 2022 Term Facility, the “2022 Credit Facilities”). The 2022 Term Facility matures on March 1, 2025, and the 2022 Revolving Facility matures on March 1, 2027. The 2022 Revolving Facility allows for the availability of fiscal 2018 dueup to cash provided by operations of $61.1 million, $22.1$100.0 million in the form of letters of credit and up to $50.0 million in the form of swingline loans. We may seek additional commitments under the 2022 Revolving Facility from lenders or other financial institutions up to an aggregate principal amount of $750.0 million.
We pay a commitment fee on the daily unused amount of the 2022 Revolving Facility using a pricing grid based upon our senior unsecured non-credit enhanced long-term debt rating and our total leverage ratio. The commitment fee remained at 0.125% from the borrowing date through November 30, 2022. During fiscal 2022, we incurred approximately $9.5 million in debt issuance costs related to the 2022 Credit Facilities.
We used these borrowings, along with the net proceeds from the exerciseissuance of employee stock optionsthe Senior Notes (as defined below) and $2.3 million fromcash on hand, to finance 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 millionconsideration for the CGS acquisition, to repay borrowings under the existing share repurchase program2019 Credit Agreement (as defined below) and $0.8 million in shares repurchased from employees to cover their cost of taxes upon vesting of restricted stock.

pay related transaction fees, costs and expenses.

Free cash flow generated inWe may voluntarily prepay loans under the three months ended November 30, 2017 was $55.2 million, an increase of 43.2% compared to a year ago. The free cash flow was attributable to $70.4 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 update 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 in2022 Credit Facilities at any time without premium or penalty. During the first quarter of fiscal 2017 for2023, we repaid $125.0 million under the acquisitions2022 Term Facility, inclusive of CYMBA and Vermilion. Additionally, cash used in investing activities decreased year over year due to lower capital expendituresvoluntary prepayments of $6.6$112.5 million. Since March 1, 2022, we have repaid $375.0 million offset by a decrease in proceeds fromunder the sales2022 Term Facility, inclusive of investments (netvoluntary prepayments 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$350.0 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, 2022, the outstanding borrowings under the 2022 Credit Facilities bore interest at a rate equal to the applicable one-month Term Secured Overnight Financing Rate ("SOFR") rate plus a 1.1% spread (comprised of a 1.0% interest rate margin based on a debt leverage pricing grid plus 0.1% credit spread adjustment). The spread remained consistent from the borrowing date through November 30, 2022. Interest on the 2022 Credit Facilities is currently payable on the last business day of each month, in arrears.
The 2022 Credit Agreement contains usual and customary event of default provisions for facilities of this type, which are subject to usual and customary grace periods and materiality thresholds. If an event of default occurs under the 2022 Credit Agreement, the lenders may, among other things, terminate their commitments and declare all outstanding borrowings immediately due and payable.
The 2022 Credit Agreement contains usual and customary affirmative and negative covenants for facilities of this type, including a financial covenant requiring maintenance of a total leverage ratio of no greater than 4.00 to 1.00 as of November 30, 2022. We were in compliance with all covenants and requirements of the 2022 Credit Agreement as of November 30, 2022.
Refer to Note 11, Debt for further discussion of the 2022 Credit Agreement.
2022 Swap Agreement
On March 1, 2022, we entered into the 2022 Swap Agreement to hedge a portion of our outstanding floating SOFR rate debt with a fixed interest rate of 1.162%. Refer to Note 5, Derivative Instruments, 2017, our total cashfor defined terms and cash equivalents worldwide was $221.9more information on the 2022 Swap Agreement.
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Senior Notes
On March 1, 2022 we completed a public offering of $500.0 million aggregate principal amount of 2.900% Senior Notes due March 1, 2027 (the “2027 Notes”) and $500.0 million aggregate principal amount of 3.450% Senior Notes due March 1, 2032 (the “2032 Notes” and, together with $574.7the 2027 Notes, the “Senior Notes”). The Senior Notes were issued pursuant to an indenture, dated as of March 1, 2022, by and between us and U.S. Bank Trust Company, National Association, as trustee (the "Trustee"), as supplemented by the supplemental indenture, dated as of March 1, 2022, between us and the Trustee (the "Supplemental Indenture").
Interest on the Senior Notes is payable semiannually in arrears on March 1 and September 1 of each year, with the first payment made on September 1, 2022. The Senior Notes were issued at an aggregate discount of $2.8 million during fiscal 2022 and we incurred approximately $9.1 million in outstanding borrowings (net of $0.3 million of unamortized debt issuance costs). Approximately $44.8 millioncosts.
We may redeem the Senior Notes, in whole or in part, at any time at specified redemption prices, plus any accrued and unpaid interest. Upon the occurrence of our total available cash 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 helda change of control triggering event (as defined in the Asia Pacific region. We believe our liquidity (including cash on hand, cash from operating activitiesSupplemental Indenture), we must offer to repurchase the Senior Notes at 101% of their principal amount, plus any accrued 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 and other financing activities. In addition, we expect existing foreign cash, cash equivalents and cash flows from operations to continue to be sufficient to fund our foreign operating activities and cash commitments for investing activities, such as capital expenditures, for at least the next 12 months, and thereafter, for the foreseeable future.

Capital Resources

Capital Expenditures

Capital expenditures in the first quarter 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 Needs

Long-Term Debt

unpaid interest.

2019 Credit Agreement
On 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”(the "2019 Credit Agreement"), asand borrowed $575.0 million of the administrative agent and lender. The 2017 Credit Agreement provides for a $575.0available $750.0 million provided by the revolving credit facility thereunder (the “2017"2019 Revolving Credit Facility”Facility"). We may request borrowingsBorrowings under the 20172019 Revolving Credit Facility until its maturity date of March 17, 2020. The 2017 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 million, provided that any such request for additional borrowings must be in a minimum amount of $25.0 million. At our option, a borrowing may be in the form of a base rate loan or a LIBOR rate loan. Borrowings under the loan bearbore interest on the outstanding principal amount at a rate equal to the daily LIBOR rate plus 1.00%.a spread using a debt leverage pricing grid. Interest on the loanamounts outstanding isunder the 2019 Revolving Credit Facility was payable quarterly, in arrears, and on the maturity date. There are no prepayment penalties if
As of March 1, 2022, we elect to prepay the outstanding loan amounts prior to the scheduled maturity date. The principal balance is payablerepaid in full and terminated the 2019 Credit Agreement. Refer to Note 11, Debt for more information on the maturity date.    

termination.
Uses of Liquidity

Returning Value to Shareholders

In conjunction with our entrance into the 2017 Credit Agreement, we borrowed $575.0

We returned $33.7 million in the form of a LIBOR rate loan underdividends and $49.3 million in the 2017 Revolving Credit Facility. Proceeds fromform of share repurchases and dividends to shareholders during 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 atthree months ended November 30, 2017. The loan origination fees are amortized into interest expense over2022 and November 30, 2021, respectively. Over the termlast 12 months, we returned $128.9 million to stockholders in the form of dividends. Refer to the Share Repurchase Program below for more information on the loan using the effective interest method. current suspension of our share repurchase program.

Dividends
During the three months ended November 30, 20172022 and 2016,November 30, 2021, we paid approximately $3.4dividends of $33.7 million and $1.1$30.7 million, in interestrespectively. Our dividends per share related to dividends paid during the three months ended November 30, 2022 increased 8.5% compared to the three months ended November 30, 2021.
Fiscal 2022 marked 23 consecutive fiscal years of dividend increases, highlighting our continued commitment to returning value to stockholders. Future dividends will depend on our outstanding debt amounts, respectively. earnings, capital requirements, financial condition and other factors considered relevant by us and are subject to final determination by our Board of Directors.
Share Repurchase Program
As of November 30, 2017,2022, $181.3 million remained authorized for future share repurchases under our share repurchase program. There is no commitment fee was owed by us since we borroweddefined number of shares to be repurchased over a specified timeframe through the full amountlife of the program. We may repurchase shares of our common stock under the 2017program from time-to-time in the open market and privately negotiated transactions, subject to market conditions.
We did not repurchase any shares during the three months ended November 30, 2022, compared with 46,200 shares for $18.6 million during the three months ended November 30, 2021. Beginning in the second quarter of fiscal 2022, we suspended our share repurchase program until at least the second half of fiscal 2023, with the exception of potential minor repurchases to offset dilution from grants of equity awards or repurchases to satisfy withholding tax obligations due upon the vesting of stock-
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based awards. The suspension of our share repurchase program allows us to prioritize the repayment of debt under the 2022 Credit Agreement.

The 2017Facilities. Refer to Note 11, Debt for more information on the 2022 Credit Agreement contained covenants restricting certain FactSet activities, which are usualFacilities.

Capital Expenditures
For the three months ended November 30, 2022, capital expenditures increased by 109.3% to $18.0 million, compared with $8.6 million during the same period a year ago. This increase was primarily due to higher expenditures related to the development of capitalized internal-use software, followed by an increase in technology expenditures.
Acquisitions
CUSIP Global Services
On March 1, 2022, we completed the acquisition of CGS for a cash purchase price of $1.932 billion, inclusive of working capital adjustments. CGS manages a database of 60 different data elements uniquely identifying more than 50 million global financial instruments. It is the foundation for security master files relied on by critical front, middle and customary for this type of loan. In addition, the 2017 Credit Agreement required that we maintain a consolidated leverage ratio, as measured by total funded debt/EBITDA below a specified level asback-office functions. CGS, operating on behalf of the endABA, is the provider of each fiscal quarter.CUSIP and CINS identifiers globally and also acts as the official numbering agency for ISIN identifiers in the United States and as a substitute number agency for more than 35 other countries. We werebelieve that the CGS acquisition will significantly expand our critical role in material compliance withthe global capital markets.
Cobalt Software, Inc.
On October 12, 2021, we acquired all of the covenantsoutstanding shares of Cobalt Software, Inc. ("Cobalt") for a purchase price of $50.0 million, net of cash acquired, and inclusive of working capital adjustments. Cobalt is a leading portfolio monitoring solutions provider for the private capital industry. This acquisition advances our strategy to scale our data and workflow solutions through targeted investments as part of our multi-year investment plan and expands our private markets offering.
Refer to Note 6, Acquisitions,for further discussion of the 2017 Credit AgreementCGS and Cobalt acquisitions.
Contractual Obligations
Purchase obligations represent our legally-binding agreements to purchase fixed or minimum quantities at determinable prices. As of August 31, 2022, we had total purchase commitments of $373.9 million, primarily related to hosting services and data acquisition, followed by third-party software providers. Hosting services support our technology investments related to our migration to cloud-based hosting services, the majority of which rely on third-party hosting providers. Data is an integral component of the value we provide to our clients. Third-party software mainly includes internal-use software licenses.
Since August 31, 2022, there were no material changes to our contractual obligations. We also have contractual obligations related to our lease liabilities and outstanding debt. Refer to Note 10, Leases, Note 11, Debt and Note 12, Commitments and Contingencies for information regarding our contractual obligations related to our lease liabilities, outstanding debt and other commitments, respectively.
Summary of Cash Flows
As of November 30, 2022, Cash and cash equivalents were $437.1 million, compared with $673.9 million as of November 30, 2017.

As2021. Our cash and cash equivalents are held in numerous locations throughout the world, with $234.1 million in the Americas, $116.2 million in EMEA (predominantly in the UK) and the remaining $86.8 million in Asia Pacific (predominantly in India and the Philippines) as ofNovember 30, 2017,2022. We permanently reinvest all foreign unremitted earnings, except in jurisdictions where earnings can be repatriated substantially free of tax.

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The table below, for the fair valueperiods indicated, provides selected cash flow information:
Three Months Ended
November 30,
(in thousands)20222021$ Change% Change
Net cash provided by operating activities$106,636 $72,918 $33,718 46.2 %
Net cash used in investing activities(27,852)(58,851)30,999 (52.7)%
Net cash provided by/(used in) financing activities(146,232)(16,482)(129,750)787.2 %
Effect of exchange rate changes on cash and cash equivalents1,317 (5,550)6,867 (123.7)%
Net increase (decrease) in cash and cash equivalents$(66,131)$(7,965)$(58,166)730.3 %
Operating
For the three months ended November 30, 2022, net cash provided by operating activities was $106.6 million, which included net income of $136.8 million, non-cash charges of $47.4 million and higher working capital requirements of $77.6 million. The non-cash charges were primarily driven by $26.0 million of depreciation and amortization and $12.2 million of stock-based compensation expense. The change in our working capital was primarily due to a cash outflow of $66.8 million related to our variable compensation payment.
For the three months ended November 30, 2021, net cash provided by operating activities was $72.9 million, which consisted of net income of $107.6 million, non-cash charges of $43.9 million and higher working capital requirements of $78.7 million. The non-cash charges were primarily driven by $17.2 million of depreciation and amortization and $11.1 million in amortization of lease ROU assets. The change in our working capital was primarily due to a cash outflow of $53.5 million related to our variable compensation payment.
Investing
For the three months ended November 30, 2022, net cash used in investing activities was $27.9 million. The cash used in investing activities was primarily due to an increase in capital expenditures of $18.0 million mainly due to capitalization of compensation costs related to development of our long-term debtinternal-use software projects.
For the three months ended November 30, 2021, net cash used in investing activities was $575$58.9 million. The cash used in investing activities was primarily due to the purchase of Cobalt for $50.0 million.
Financing
For the three months ended November 30, 2022, net cash used in financing activities was $146.2 million, which we believe approximatedconsisting mainly of $125.0 million related to the carrying amount aspartial repayment of the terms2022 Term Facility and interest rates approximate market rates given its floating interest rate basis.

Letters of Credit

From time to time, we are required to obtain letters of credit in the ordinary course of business. Approximately $1.9$33.7 million of standby lettersdividend payments, partially offset by $23.4 million of credit have been issued in connection with our current leased office space as ofproceeds from employee stock plans.

For the three months ended November 30, 2017. These standby letters2021, net cash used in financing activities was $16.5 million, consisting mainly of credit contain covenants$33.7 million of dividend payments and $18.6 million of repurchases of common stock, partially offset by $35.8 million of proceeds from employee stock plans.
Free Cash Flow
We define free cash flow, a non-GAAP financial measure, as cash provided by operating activities less purchases of property, equipment, leasehold improvements and capitalized internal-use software. We believe free cash flow is a liquidity measure that among other things, require usprovides useful information to maintain minimum levelsmanagement and investors about the amount of cash generated by the business that, after capital expenditures, can be used for strategic opportunities, including returning value to shareholders, investing in our business, making strategic acquisitions and strengthening the balance sheet. Free cash flow should be considered in addition to, rather than as a substitute for, consolidated net worthincome as a measure of our performance and certain leverage and fixed charge ratios. Asnet cash provided by operating activities as a measure of our liquidity.
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The following table reconciles our net cash provided by operating activities to free cash flow:
Three Months Ended
November 30,
(in thousands)20222021Change
Net cash provided by operating activities$106,636 $72,918 $33,718 
Less: purchases of property, equipment, leasehold improvements and internal-use software(17,960)(8,583)(9,377)
Free cash flow$88,676 $64,335 $24,341 
We generated free cash flow of $88.7 million during the three months ended November 30, 20172022, an increase of $24.3 million compared with the same period a year ago. This change reflects a $33.7 million increase in cash provided by operating activities, mainly due to higher net income, partially offset by a $9.4 million increase in capital expenditures, primarily driven by an increase in capitalized costs related to internal-use software.
Off-Balance Sheet Arrangements
At November 30, 2022 and August 31, 2017, we were in material compliance with all covenants contained in the standby letters of credit.

Foreign Currency

Foreign Currency Exposure

Certain 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 Hedges

As 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 Arrangements

At November 30, 2017 and August 31, 2017,2022, 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 Program

Repurchases will

Foreign Currency Exposure
As we operate globally, we are exposed to the risk that our financial condition, results of operations and cash flows could be madeimpacted by changes in foreign currency exchange rates. To mitigate this foreign currency exposure, we entered into a series of forward contracts to hedge a portion of our foreign currency exposures related to the British Pound Sterling, Euro, Indian Rupee and Philippine Peso. As of November 30, 2022, these forward contracts hedge a portion of our foreign currency transaction exposure ranging from time25% to time in75%, over their respective hedged periods, which are set to mature at various points between the open market and privately negotiated transactions, subject to market conditions. Duringsecond quarter of fiscal 2023 through the first quarter of fiscal 2018, FactSet repurchased 164,920 shares for $30.92024.
During the three months ended November 30, 2022, foreign currency exchange rate fluctuations, net of hedge activity, increased operating income by $8.6 million, under the Company’s existing share repurchase program. Over the last 12 months, FactSet has returned $290.5compared with a decrease of $4.3 million to stockholdersoperating income a year ago. A loss on foreign currency forward contracts of $5.0 million was recorded into operating income for the three months ended November 30, 2022, compared with a loss on forward currency forward contracts of $0.4 million in the formsame period a year ago.
The following table summarizes the gross notional value of share repurchasesforeign currency forward contracts to purchase the British Pound Sterling, Euro, Indian Rupee, and dividends. AsPhilippine Peso with U.S. dollars:

November 30, 2022November 30, 2021
(in thousands)Local Currency AmountNotional Contract Amount (USD)Local Currency AmountNotional Contract Amount (USD)
British Pound Sterling£48,000 $57,337 £44,200 $55,567 
Euro€38,000 39,892 €37,500 40,679 
Indian RupeeRs2,739,827 33,600 Rs2,667,928 33,600 
Philippine Peso₱1,540,066 27,300 ₱1,462,060 27,000 
Total$158,129 $156,846 

Critical Accounting Estimates

We prepare the Consolidated Financial Statements in conformity with GAAP, which requires us to make certain estimates and apply judgements that affect the reported amounts of November 30, 2017, $213.2 million is available for future share repurchases under the existing share repurchase program.

assets, liabilities, revenues and expenses and related disclosures. We base

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Fluctuations in

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our operating results, the degree of success of our accounts receivable collection efforts, the timing of taxestimates on historical experience 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, we had total purchase commitments of $81.0 million. There were no material changes in our purchase commitments during the first three months of fiscal 2018.

At November 30, 2017, we leased approximately 1,612,100 square feet of office space, whichassumptions that we believe is adequate for our current needsto be reasonable at the time the Consolidated Financial Statements are prepared 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%,as such, they may ultimately differ materially from August 31, 2017. This increase was primarily due to new leases for expanded office space in the Philippines. Future minimum commitments for our operating leases in place as of November 30, 2017 totaled $282.3 million, which is comparable to $281.7 million as of August 31, 2017.

As disclosed in the Capital Resources section of the MD&A, FactSet entered into the 2017 Credit Agreement on March 17, 2017 and borrowed $575.0 million.

With the exception of the new leases entered into in the ordinary course of business, there were no other significant changes to our contractual obligations during the first three months of fiscal 2018.

Dividends

On November 8, 2017, our Board of Directors approved a quarterly cash 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 on November 30, 2017. 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.

Significant Accounting Policies and Critical Accounting Estimates

actual results.

We describe our significant accounting policies in Note 3, 2, Summary of SignificantAccounting Policies, of the Notes to the Consolidated Financial Statements included in Item 8 of our Annual Report on Form 10-K for the fiscal year ended August 31, 2017.

2022. These accounting policies were consistently applied in preparing our Consolidated Financial Statements for the three months ended November 30, 2022.

We discussdisclosed our critical accounting estimates in Management’s Discussion and AnalysisPart II, Item 7 Critical Accounting Estimates in the MD&A of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended August 31, 2017.2022. There were no significant changes in our accounting policies or critical accounting estimates during the first three months of fiscal 2018.

ended November 30, 2022.

New Accounting Pronouncements

See Note 3, Recent2, Summary of Significant Accounting PronouncementsPolicies, in the Notes to the Consolidated Financial Statements included in Part I, Item 1 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 Trends

In the ordinary course 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 Management

Approximately 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 Volatility

Due to the global nature of our operations, we conduct business outside the U.S. in several currencies including the British Pound Sterling, Euro, Indian Rupee, Japanese Yen and Philippine Peso. To the extent that our international activities increase in the future, our exposure to fluctuations in currency exchange rates 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.

Brexit

Volatility 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 II

The 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 Factors

Forward-Looking Statements

In 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 Outlook

Starting 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 RISK

In 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.

Current market events have not required us to modify materially or change our financial risk management strategies with respect to our exposures to foreign currency exchange risk or interest rate risk.

Foreign Currency ExchangeTransaction Risk

We conduct business outsideoperate on a global basis and are exposed to the U.S.risk that our financial condition, results of operations and cash flows could be impacted by changes in severalforeign currency exchange rates. To mitigate the volatility and uncertainty of our exchange rate risk, we entered into foreign currency forward contracts with major institutions related to our primary currencies includingof the British Pound Sterling, Euro, Indian Rupee Japanese Yen and Philippine Peso. The financial statementsAs of November 30, 2022, these foreign subsidiaries are translated into U.S. dollars using period-end ratesforward contracts hedge a portion of exchange for assets and liabilities and average rates for the period for revenues and expenses. Over the next 12 months, 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 transaction exposure of $233.7 million. To the extent that our international activities recorded in local currencies increase in the future, our exposureranging from 25% to fluctuations in currency exchange rates will correspondingly increase. To manage the exposures related to the effects of foreign exchange rate fluctuations, we utilize derivative instruments (foreign currency forward contracts). By75% over 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.respective hedged periods. 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 recordedenter 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. for trading or speculative purposes.

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.


A sensitivity analysis was performed based onDuring the estimated fair value of allthree months ended November 30, 2022, we recognized a loss on foreign currency forward contracts outstanding at of $5.0 million, compared with a loss of $0.4 million in the same period a year ago. During three months ended November 30, 2017. If2022, foreign currency exchange rate fluctuations, net of hedge activity, increased operating income by $8.6 million, compared with a decrease of $4.3 million during the U.S. dollar had been 10% weaker,three months ended November 30, 2021.

We performed a sensitivity analysis to determine the effects on both the fair value of our outstanding foreign currency forward contracts and our operating income, excluding these forward contracts, of a hypothetical devaluation of the U.S. dollar by 10% as of November 30, 2022,  relative to the other foreign currencies in which we transact. Based on the financial results for the three months ended November 30, 2022, the fair value of our outstanding forward contracts would have increased by $4.7$15.4 million whichand our operating income, excluding these forward contracts, would have had an immaterial impactdecreased by $11.2 million. This sensitivity analysis has inherent limitations as it disregards the possibility that rates of multiple foreign currencies will not always move in the same direction relative to the value of the U.S. dollar over time and does not account for our forward contracts that we utilize to mitigate fluctuations in exchange rates.
Refer to Note 5, Derivative Instruments in the Notes of this Quarterly Report for more information on our Consolidated Balance Sheet. Such a change in fair valueforeign currency exposures and our foreign currency forward contracts.
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Foreign Currency Translation Risk
We are exposed to foreign currency risk due to the translation of our financial instruments would be substantially offset by changesresults from certain international operations into U.S. Dollars, as part of the consolidation process. Fluctuations in our expense base. Had we not had any hedges in place as of November 30, 2017, a hypothetical 10% weaker U.S. dollar against all foreign currencies from the quoted foreign currency exchange rates atcan create volatility in our results of operations and our financial condition. We recorded a translation gain of $8.8 million and a loss of $18.7 million in AOCL for the three months ended November 30, 2017, would result in a decrease in operating income by $22.8 million over the next 12 months. A hypothetical 10% weaker U.S. dollar against all foreign currencies at November 30, 2017 would increase the fair value of total assets by $71.3 million2022 and equity by $64.5 million.

Volatility in the British Pound Sterling exchange rate is expected to continue in the short term as the UK negotiates its exit from the European Union. In the longer term, any impact from Brexit on will depend, in part, on the outcome of tariff, trade, regulatory and other negotiations.

2021, respectively.

Interest Rate Risk

Cash and Cash Equivalents - The fair market valueand Investments
As of our cash and investments at November 30, 2017 was $253.62022, we had Cash and cash equivalents of $437.1 million and Investments of $32.6 million. Our cashCash and cash equivalents consist of cash and highly liquid investments including demand deposits and money market funds, with original maturities of three months or less and are reported at fair value. Our investmentsour Investments consist of both mutual funds and certificatesfunds. We are exposed to interest rate risk through fluctuations 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 2, Summary of Significant Accounting Policies in the value or liquidityNotes to the Consolidated Financial Statements included in Item 8. of our Annual Report on Form 10-K for more information on our cash and investments have been significantly impacted by current market events.

cash equivalents.

Debt -
2022 Credit Agreement
As of November 30, 2017, the fair value of2022 our long-term debt was $575 million, which approximated its carrying amount and was determined based on quoted market prices foroutstanding debt with a similar maturity. It is anticipated thatvariable rate of interest included $625.0 million under the fair market value of our debt will continue to be immaterially affected by fluctuations in interest rates2022 Term Facility and we do not believe that$250.0 million under the value of our debt has been significantly impacted by current market events. The debt bears interest on the outstanding principal amount at a rate equal to the daily LIBOR rate plus 1.00%.2022 Revolving Facility. During the three months ended November 30, 2017 and 2016, we paid approximately $3.4 million and $1.1 million in2022, the outstanding borrowings under the 2022 Credit Facilities bore interest at a rate equal to the applicable one-month Term SOFR rate plus a spread using a debt leverage pricing grid, currently at 1.1% (comprised of a 1.0% interest rate margin based on a debt leverage pricing grid plus a 0.1% credit spread adjustment). The spread remained consistent from the date of borrowing through November 30, 2022.
The variable rate of interest on our debt creates exposure to interest rate volatility due to changes in SOFR. To mitigate this exposure, on March 1, 2022, we entered into the 2022 Swap Agreement to hedge a portion of our outstanding floating SOFR rate debt with a fixed interest rate of 1.162%, to maintain an intended fixed to floating interest rate ratio. The notional amount of the 2022 Swap Agreement declines by $100.0 million on a quarterly basis and was $500.0 million as of November 30, 2022. The 2022 Swap Agreement is maturing on February 28, 2024.
Thus, our exposure is limited to fluctuations in SOFR on our borrowings from the 2022 Credit Facilities in excess of amounts respectively.that are not hedged, or $375.0 million of our outstanding principal balance. 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 $1.4SOFR provided exposure of $0.9 million change into our annual interest expense.

Refer to Note 11, Debt for more information on our 2022 Term Facility and 2022 Revolving Facility. Refer to Note 5, Derivative Instruments for more information on our 2022 Swap Agreement.
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ITEM 4.CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of the Company’s

Our management, including the principal executive officerour Principal Executive Officer and principal financial officer, the Company hasPrincipal Financial Officer, have evaluated the effectiveness of itsour 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 onAs permitted by SEC guidance that an assessment of internal controls over financial reporting of a recently acquired business may be excluded from management's evaluation the principal executive officer and principal financial officer have concluded that the Company’sof disclosure controls and procedures for up to a year from the date of acquisition, we have excluded CGS from management's assessment on internal control over financial reporting for the quarter ended November 30, 2022. We will continue to evaluate the effectiveness of internal controls over financial reporting as defined in Rules 13a-15(e)we complete the integration of CGS. CGS represents 10% percent of our consolidated revenues for the three months ended November 30, 2022 and 15d-15(e) underexcluding goodwill and intangible assets, CGS represented 7% percent of our total assets as of November 30, 2022.
Based on their evaluation, our Principal Executive Officer and Principal Financial Officer have concluded that our disclosure controls and procedures, excluding those related to CGS, were effective as of the Securities Exchange Actend of 1934, as amended, (the “Exchange Act”) are effective to ensure that information required to be disclosedthe 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.

this report.

Changes in Internal Control over Financial Reporting

There have been no changes in the Company’sour 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, 2022 that hashave materially affected, or isare reasonably likely to materially affect, the Company’sour internal control over financial reporting.



PART II – OTHER INFORMATION

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The 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.

ITEM 1A. RISK FACTORS

There werehave been no material changes during the first three months of fiscal 2018 to the risk factors identified in the Company’s fiscal 2017our Annual Report on Form 10-K.

10-K for the fiscal year ended August 31, 2022.

ITEM2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Items 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 per share data)

The following table provides a month-to-month summary of theour share repurchase activity under the current stock repurchase program during the three months ended November 30, 2017:

Period

 

Total number
of shares
purchased

  

Average
price paid per
share

  

Total number of
shares purchased as
part of publicly
announced plans or
programs

  

Maximum number of shares
(or approximate dollar value)
that may yet be
purchased under the plans or
programs (in US$)

 
                 

September 2017

  20,000  $180.34   20,000  $240,504 

October 2017

  45,000  $177.79   45,000  $232,504 

November 2017

  99,920  $193.44   99,920  $213,176 

Total

  164,920       164,920     
2022:
Period
Total Number of
Shares Purchased(1)
Average Price
Paid per Share
Total 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 202220 $443.22 — $181,254 
October 2022390 $403.46 — $181,254 
November 202225,450 $425.31 — $181,254 
Total25,860 — 
(1)Relates to shares repurchased to satisfy withholding tax obligations due upon the vesting or exercise of stock-based awards.
(2)As of November 30, 2022, a total of $181.3 million remained available for future share repurchases under our existing share repurchase program. Repurchases may be made from time to time in the open market and privately negotiated transactions, subject
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to market conditions. No minimum number of shares to be repurchased has been fixed. There is no timeframe to complete the share repurchase program and it is expected that share repurchases will be paid using existing and future cash generated by operations. Beginning in the second quarter of fiscal 2022, we suspended our share repurchase program until at least the second half of fiscal 2023, with the exception of potential minor repurchases to offset dilution from grants of equity awards or repurchases to satisfy withholding tax obligations due upon the vesting of stock-based awards. The suspension of our share repurchase program allows us to prioritize the repayment of debt under the 2022 Credit Facilities. Refer to Note 11, Debt for more information on the 2022 Credit Facilities.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.



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ITEM 6. EXHIBITS

(a) EXHIBITS:

EXBHIT

NUMBER

DESCRIPTION

Incorporated by Reference

10.1

Exhibit Number		Exhibit
Description

Separation Agreement and General Release of Claims, dated November 13, 2017 

Form		File No.Exhibit No.Filing DateFiled
Herewith

31.1

Section 302

Certification of Principalthe Chief Executive Officer

pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended		X

Section 302 Certification of Principalthe Chief Financial Officer

pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended		X

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

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 2002		X

32.2

101.INS

Section 906 Certification of Principal Financial Officer

101.INS

XBRL Instance Document

- The instance document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document		X

101.SCH

XBRL Taxonomy Extension Schema Document

X

101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document

X

101.DEF

XBRL Taxonomy Extension Definition Linkbase Document

X

101.LAB

XBRL Taxonomy Extension Label Linkbase Document

X

101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document

X
104Cover page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)X

SIGNATURES

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SIGNATURES
Pursuant 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 5, 2023/s/ LINDA S. HUBER

Date: January 9, 2018

/s/ MAURIZIO NICOLELLI

Linda S. Huber

Maurizio Nicolelli

Senior Executive Vice President, Chief Financial Officer


(Principal Financial Officer)

/s/ MATTHEW J. MCNULTY

Matthew J. McNulty

Vice President, Controller

/s/ GREGORY T. MOSKOFF

Gregory T. Moskoff

Managing Director, Controller and Chief Accounting Officer
(Principal Accounting Officer)



52

EXHIBIT INDEX

EXBHIT

NUMBER

DESCRIPTION

10.1

Separation Agreement and General Release of Claims, dated November 13, 2017

31.1

Section 302 Certification of Principal Executive Officer

31.2

Section 302 Certification of Principal Financial Officer

32.1

Section 906 Certification of Principal Executive Officer

32.2

Section 906 Certification of Principal Financial Officer

101.INS

XBRL Instance Document

101.SCH

XBRL Taxonomy Extension Schema Document

101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

XBRL Taxonomy Extension Label Linkbase Document

101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document

42