FactSet Research Systems Inc. (NYSE:FDS) misses earnings expectations

FactSet Research Systems Inc. (NYSE:FDS) stock fell 0.86% (As on September 23, 11:37:47 AM UTC-4, Source: Google Finance) after the company posted mixed results for the fourth quarter of FY 22. Organic revenue, which excludes any impact from foreign exchange, acquisitions during the last 12 months and deferred revenue amortization, increased 10% to $453 million over the prior year period. Organic Q4 ASV plus professional services of $1.8 billion, up 9.3% year over year. Client count as of August 31, 2022 was 7,538, a net increase of 219 clients in the past three months, primarily driven by an increase in corporate and wealth clients. The count includes clients with ASV of $10,000 and more. User count increased by 6,284 to 179,982 in the past three months, primarily driven by an increase in wealth management users.

For the geographic segments, organic revenue growth was over the prior year period for the Americas was 9%, EMEA was 8% and Asia Pacific at 18%. Adjusted EBITDA in the fourth quarter increased to $158.5 million, up 16% year-over-year. The free cash flow was $136 million for the quarter, a decrease of 20% over the same period last year, driven by higher working capital, which includes the timing of estimated tax payments and deferred revenue movements related to CGS. Further, in the fourth quarter, the company made a planned prepayment of $125 million, bringing the gross leverage ratio down to 3.1x from the initial 3.9x level when the company financed the CGS acquisition. The company expects to make 2 more payments of $125 million in each of the next 2 quarters, enabling the company to reach the gross leverage target of 2x to 2.5x in the second half of fiscal 2023.

FDS in the fourth quarter of FY 22 has reported the adjusted earnings per share of $3.13, missing the analysts’ estimates for the adjusted earnings per share of $3.25, according to the Zacks Consensus Estimate. The company had reported the adjusted revenue growth of 21 percent to $499.3 million in the fourth quarter of FY 22, beating the analysts’ estimates for revenue by 1.46%.

For fiscal year 2023, the company expects incremental growth to be in the range of $150 million to $180 million for organic ASV plus professional services. The company expects adjusted operating margin of 34% to 35%, with the midpoint providing 60 basis points of margin expansion. The company expects adjusted EPS of $14.50 to $14.90, representing almost 10% growth at the midpoint.

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