FACTSET RESEARCH SYSTEMS INC

FACTSET RESEARCH SYSTEMS INC Annual Report - Plain English Summary for Investors

---

1. What Does FactSet Do?

FactSet is the "Google for finance professionals." They provide a digital platform packed with financial data, analytics, and AI tools used by 237,000 investment professionals at banks, hedge funds, and wealth management firms. Their tools help clients research stocks, manage portfolios, and automate tasks.

Key Stats (as of 2025):

• 9,000+ clients globally
• Core products: Workstations, portfolio analytics, enterprise data feeds
• Heavy focus on AI tools to speed up financial analysis (think ChatGPT for stock research)

---

2. Financial Performance: The Big Numbers

Fiscal 2025 Highlights:

• Revenue: $2.32 billion (up 5.4% from last year)
  • Growth drivers: 4.4% from existing clients, 0.9% from acquisitions
• Operating Income: $748 million (up 6.7%)
• Profit (Net Income): $13.91 per share (up 11.8%)
  • Boosted by a one-time gain from selling a non-core business unit
• Subscription Pipeline: $2.37 billion (up 5.7%) – shows strong future demand

Margins & Efficiency:

• Operating margin: 32.2% (up from 31.8% last year)
• Cut administrative costs by 2.9% ($475.7M vs. $489.8M) due to resolved tax disputes

---

3. Wins vs. Challenges

What Went Well:

• Core products (Workstations & CGS) drove growth – clients still rely on their bread-and-butter tools.
• Americas region (their largest market) outperformed Europe and Asia.
• Sold a non-core business unit for a cash boost (like decluttering your garage and making money).

Challenges:

• Data/tech costs jumped 8.5% ($1.1B vs. $1.01B) due to:
  • Writing off millions in outdated software (like paying for unused subscriptions)
  • Higher employee pay and pricier tech infrastructure
• Relied heavily on 2 suppliers for 22% of total costs – risky if prices rise or relationships sour.
• AI investments continue to eat into cash reserves (like renovating your house while still paying the mortgage).

---

4. Financial Health Check

The Good:

• Steady 32%+ operating margins – they’re efficient at turning revenue into profit.
• $460 million returned to shareholders via dividends and stock buybacks.
• $500 million in long-term debt (due 2027 and 2032) is manageable with current cash flow.

Watch Outs:

• Auditors flagged concerns about financial controls (not a crisis, but worth monitoring).
• Exact cash reserves weren’t disclosed, but they hold "significant" safe, liquid assets.

---

5. Risks to Keep You Up at Night

• Supplier Dependency: 22% of costs tied to just two vendors – a price hike could hurt margins.
• Tech Arms Race: Falling behind on AI tools might push clients to competitors like Bloomberg.
• Economic Slowdown: Fewer IPOs and mergers = less demand for financial data.
• Tax Disputes: Old sales tax issues (dating to 2019) could resurface. The company didn’t share new details.

---

The Bottom Line for Investors

Reasons to Like FactSet:

• Steady growth: 5%+ revenue growth in a shaky economy is impressive.
• Profit machine: 32% margins and 11.8% EPS growth show disciplined spending.
• Dividend reliability: 26-year dividend streak – a sign of financial maturity.

Reasons to Be Cautious:

• Margin pressure: Rising data/tech costs could squeeze profits if growth slows.
• Debt timing: $500M debt isn’t scary now, but refinancing in a high-rate environment could bite.
• Transparency gaps: Limited details on cash reserves and tax disputes.

Final Take:
FactSet is a "slow and steady" pick. It’s not a hyper-growth stock, but its reliable margins, sticky client base, and AI investments make it a solid hold for conservative investors. Watch for:

1. AI adoption rates – are clients actually using their new tools?
2. Q1 2026 margins – can they keep costs under control?
3. Debt management – any moves to refinance early?

Fun fact: Serving 9,000+ clients is like providing coffee to every hotel in Las Vegas… 3 times over.

Investment Grade:
🟢 Moderate Buy (for investors comfortable with steady returns and moderate risk)

---

Need more details? FactSet’s annual report had gaps in transparency – something to consider if you value clear disclosure. ☕