FactSet Beats Expectations with Adjusted Diluted EPS of $4.28 in Q2 FY’25

FactSet (NYSE: FDS) reported its financial results for the second quarter of fiscal 2025, showcasing a notable increase in revenue and earnings per share (EPS). The company achieved GAAP revenues of $570.7 million, marking a 4.5% rise compared to the same period last year. Organic revenues also saw a growth of 4.0%, reaching $568.0 million. This boost in revenue was primarily driven by the company’s wealth and institutional buy-side clients.

Additionally, FactSet’s Annual Subscription Value (ASV) climbed to $2,306.1 million, reflecting a year-over-year increase of $120.5 million. Despite the revenue growth, FactSet experienced a slight decline in its operating margins. The GAAP operating margin fell to 32.5%, down from 33.3% in the previous year. Similarly, the adjusted operating margin decreased to 37.3% from 38.3%. This decline was attributed to higher technology-related expenses and acquisition-related professional fees, partially offset by revenue growth and reduced employee compensation costs.

On the earnings front, GAAP diluted EPS rose by 3.0% to $3.76, while adjusted diluted EPS increased by 1.4% to $4.28.FactSet’s cash flow performance also stood out, with net cash provided by operating activities reaching $174.0 million. Free cash flow increased significantly by 23.3% to $150.2 million, driven by higher net cash generated from operating activities.

The company’s effective tax rate decreased to 15.9% from 16.4% in the prior year, mainly due to lower U.S. tax on foreign earnings.

FactSet Reports Better than Expected Results for Q2 FY’25

In the second quarter of fiscal 2025, FactSet’s performance exceeded market expectations in some areas while falling short in others. The company’s reported GAAP revenues of $570.7 million slightly surpassed the anticipated $570.13 million, showcasing a positive revenue trend.

However, the company’s GAAP diluted EPS of $3.76 fell short of the expected EPS of $4.21. On the other hand, the adjusted diluted EPS of $4.28 exceeded expectations, reflecting a 1.4% increase from the prior year period.

The discrepancy between FactSet’s actual EPS and expectations can be attributed to increased operating expenses, including acquisition-related fees and technology investments. Despite these challenges, FactSet’s revenue growth and operational efficiency allowed it to achieve an adjusted operating margin of 37.3%, which, although lower than the previous year, remained within the company’s guidance range.

FactSet’s ability to maintain strong revenue growth in the face of rising expenses demonstrates its capacity to adapt to market conditions and invest in strategic priorities. The company’s focus on cost discipline and efficiency has helped mitigate the impact of increased expenses, allowing it to deliver solid financial performance in the first half of the fiscal year.

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FactSet Expects Organic ASV to Grow Between $100M and $130M for Fiscal 2025

FactSet provided updated guidance for fiscal 2025, reflecting its confidence in continued growth and performance. The company expects organic ASV to grow between $100 million and $130 million, with GAAP revenues projected to fall within the range of $2,305 million to $2,325 million. FactSet’s guidance for adjusted operating margin remains unchanged at 36% to 37%, while the GAAP operating margin is expected to be between 32.0% and 33.0%.

FactSet’s annual effective tax rate is anticipated to remain stable at 17% to 18%, and the company has reaffirmed its adjusted diluted EPS guidance range of $16.80 to $17.40. The company’s strategic investments in technology and acquisitions, such as LiquidityBook and LogoIntern, are expected to enhance its capabilities and drive future growth.

CEO Phil Snow expressed optimism about FactSet’s growth prospects, citing a strong pipeline and constructive client engagement as key factors supporting the company’s positive outlook.

Disclaimer: The author does not hold or have a position in any securities discussed in the article. All stock prices were quoted at the time of writing.