This Management's Discussion and Analysis of Financial Condition and Results of
Operations ("MD&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, 2021 ,
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, 2021 .
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
•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
•Critical Accounting Policies and Estimates
•New Accounting Pronouncements
Executive Overview
FactSet Research Systems Inc. and its wholly-owned subsidiaries (collectively, "we," "our," "us," the "Company" or "FactSet") is a global financial data and analytics company with an open and flexible digital platform which focuses on driving 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 that delivers a differentiated advantage for our clients' success. For over 40 years, the FactSet platform has delivered expansive data, sophisticated analytics, and flexible technology that global financial professionals need to power their critical investment workflows. Approximately 174,000 investment professionals including asset managers, asset owners, bankers, wealth managers, corporate users, private equity and venture capital professionals, and others use our personalized solutions to identify opportunities, explore ideas, and gain a competitive advantage. Our solutions span investment research, portfolio construction and analysis, trade execution, performance measurement, risk management, and reporting across the investment lifecycle. We provide financial data and market intelligence on securities, companies, industries and people to enable our clients to research investment ideas, as well as offering them the capabilities to analyze, monitor and manage their portfolios. We combine dedicated client service with open and flexible technology offerings, such as a configurable desktop and mobile platform, comprehensive data feeds, cloud-based digital solutions, and application programming interfaces ("APIs"). We are a central figure within the global securities marketplace and a foundation for security master files relied on by critical front, middle and back-office functions around the world through CUSIPGlobal Services ("CGS"). Our revenues are primarily derived from subscriptions to our products and services such as workstations, portfolio analytics, and market data. We advance our industry by comprehensively understanding our clients' workflows, solving their most complex challenges, and helping them achieve their goals. By providing them with the leading open content and analytics platform, an expansive universe of connected data they can trust, next-generation workflow support designed to help them grow and see their next best action, and the industry's most committed service specialists, we put our clients in a position to outperform. We are focused on growing our business through three reportable segments ("segments"): theAmericas , EMEA andAsia Pacific . Refer to Note 17, Segment Information for further discussion. Within each of our segments, we deliver insight and information through our three workflows: Research & Advisory Solutions; Analytics & Trading Solutions; and Content & Technology Solutions ("CTS"). 35
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Business strategy
Client needs and market dynamics continue to evolve at an accelerated pace with
an increasing demand for differentiated, personalized, and connected data, an
ongoing shift to multi-asset class investing, and cost rationalization as the
shift from active to passive investing continues. Clients are seeking new
cloud-based solutions that enable self-service and automation, open and flexible
systems, and increased efficiencies when integrating and managing data as part
of their own broader digital transformations.
FactSet's strategy focuses on building the leading open content and analytics
platform that delivers differentiated advantages for our clients' success, in
keeping with our purpose of enabling the investment community to see more, think
bigger and do their best work. We want to be the trusted partner of choice for
clients, to anticipate their needs and provide them with the most innovative
solutions to make them more efficient. This includes transforming the way our
clients discover, decide, and act on an opportunity using our digital platform;
purposefully increasing our pace and speed to market by streamlining how we
work; and investing in our future workforce. To execute on our strategy, we plan
on the following:
•Growing our digital platform: Scaling up our content refinery by providing the
most comprehensive and connected inventory of industry, proprietary, and
third-party data for the financial community, including granular data for key
industry verticals, private companies, wealth, and environmental social and
governance ("ESG"). Driving next-generation workflow solutions by creating
personalized and integrated solutions to streamline workflows which includes
solutions for asset managers, asset owners, sell side, wealth and corporate
clients. Our goal is to deliver tangible efficiencies to our clients by
connecting data and analytics with a cloud based eco-system, enabling them to
manage work more effectively through an integrated investment lifecycle.
•Delivering execution excellence: Building a more agile and digital first-minded
organization that increases the speed of our product creation and go-to-market
strategy. To capitalize on market trends and give our clients innovative tools,
we plan to release new products built on a cloud-based digital foundation as
well as migrating our existing data and applications to the cloud. Additionally,
we expect to rationalize our existing product portfolio to reinvest in higher
return products.
•Driving a growth mindset: Recruiting, training and empowering a diverse and
operationally efficient workforce to drive sustainable growth. To drive a more
performance-based culture, we are investing in talent who can create leading
technological solutions, efficiently execute our go-to-market strategy and
achieve our growth targets.
At the center of our strategy is the relentless focus on our clients and their
FactSet experience. We want to be a trusted partner and service provider,
offering hyper-personalized digital products for clients to research ideas,
uncover relevant insights, and leverage cognitive computing to help get the most
out of their data and analytics. Additionally, we continually evaluate business
opportunities such as acquisitions and partnerships to help us expand our
capabilities and competitive differentiators across the investment portfolio
lifecycle.
We are focused on growing our global business in three segments: the Americas ,
EMEA and Asia Pacific . We believe this geographical 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, products, and
analytical applications within our three workflow solutions: Research &
Advisory; Analytics & Trading ; and CTS.
Review of the third quarter of fiscal 2022
Revenues in the third quarter of fiscal 2022 were$488.8 million , an increase of 22.3% from the prior year period. Revenues increased across each of our geographic segments, primarily in theAmericas , followed by EMEA andAsia Pacific , supported by increased revenues in all our workflow solutions, mainly in CTS, followed by Research & Advisory andAnalytics & Trading . Organic revenues contributed 10.5% of the growth during the third quarter of fiscal 2022, compared with the prior year period. Organic revenues exclude revenue related to acquisitions and dispositions completed in the last 12 months, the amortization of deferred revenues' fair value adjustments from purchase accounting related to acquisitions prior to fiscal 2022, and the impacts of foreign currency movements on the current year period. Acquisitions during fiscal 2022 and all future acquisitions will be accounted for in accordance with our adoption of ASU 2021-08 and will not include a fair value adjustment. Refer to Note 3, 36
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Recent Accounting Pronouncements for more information on ASU 2021-08. Refer to Non-GAAP Financial Measures in Part I, Item 2 of this Quarterly Report on Form 10-Q for a reconciliation between revenues and organic revenues. As ofMay 31, 2022 , organic annual subscription value ("Organic ASV") plus Professional Services totaled$1.77 billion , an increase of 10.1% overMay 31, 2021 . Organic ASV increased across all our segments, with the majority of the increase related to theAmericas , followed by EMEA andAsia Pacific , supported by increases in our workflow solutions, mainly Research & Advisory, followed byAnalytics & Trading and CTS. Refer to Annual Subscription Value in Part I, Item 2 of this Quarterly Report on Form 10-Q for the definitions of Organic ASV and Organic ASV plus Professional Services. Operating income decreased 17.4% and diluted earnings per share ("EPS") decreased 26.3% for the three months endedMay 31, 2022 compared with the prior year period. Operating margin decreased to 19.9% during the three months endedMay 31, 2022 compared with 29.5% in the prior year period. This decrease in operating margin on a year-over-year basis was primarily due to impairment charges related to vacating certain leased office space, higher professional fees driven by costs incurred in connection with the acquisition of CGS, higher amortization of intangibles related to amortization of acquired intangibles and higher royalty fees related to certain contracts acquired as part of the acquisition of CGS, partially offset by growth in revenues and lower costs related to employee compensation, when expressed as a percentage of revenue.
Acquisition of CUSIP Global Services
OnDecember 24, 2021 , we entered into a definitive agreement to acquire CGS, previously operated by S&P Global Inc. on behalf of theAmerican Bankers Association , for$1.932 billion in cash, inclusive of preliminary working capital adjustments. The acquisition was completed onMarch 1, 2022 . 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 back-office functions. CGS is the exclusive provider ofCommittee on Uniform Security Identification Procedures ("CUSIP") and CUSIP International Number System ("CINS") identifiers globally and also acts as the official numbering agency forInternational Securities Identification Number ("ISIN") identifiers inthe United States . We anticipate that the CGS acquisition will significantly expand our critical role in the global capital markets. Revenue from CGS will be recognized based on geographic business activities in accordance with how our operating segments are currently aligned. CGS will function 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 7, Acquisitions and Note 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 ("COVID-19"), was first reported inDecember 2019 , and it has since extensively impacted the global health and economic environment, with theWorld Health Organization characterizing COVID-19 as a pandemic onMarch 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 have been successful and that the pandemic, and our responses, have not significantly affected our financial results for the three months endedMay 31, 2022 . At the outset of the pandemic, we required the vast majority of our employees at our offices across the globe (including our corporate headquarters) to work remotely and implemented global travel restrictions for our employees. Since that time, we have re-opened many of our offices globally with a focus on safety, while acting consistently with applicable local regulations. We anticipate that the ability to open offices will vary significantly from region to region based on a number of factors, including the availability of COVID-19 vaccines and the spread of COVID-19 variants. Our offices will not re-open fully until local authorities permit us to do so and our own criteria and conditions to ensure employee health and safety are satisfied. As ofMay 31, 2022 , there have been minimal interruptions in our ability to provide our products, services and support to our clients. Working remotely has had relatively little impact on the productivity of our employees, including our ability to gather content. We continue to work closely with our clients to provide consistent access to our products and services and have remained flexible to achieve client priorities. Based on our success working in a remote environment during the COVID-19 pandemic, we have implemented a new work standard under which employees in many of our locations, where permitted by local laws and regulations, and where the role permits, have the opportunity to choose between different work arrangements. These include working in a hybrid arrangement, 37
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where an employee can split time between working from the office and working from a pre-approved remote location, or a fully remote arrangement, where an employee can work entirely from a pre-approved remote location. Our revenues, earnings, and ASV are relatively stable and predictable as a result of our subscription-based business model. To date, the COVID-19 pandemic has not had a material negative impact on our revenues, earnings or ASV. As we continue to work in remote and hybrid environments, reductions in discretionary spending, particularly travel and entertainment, have more than offset any related increased expenses. Given our transition to our new work standard, we anticipate that many of these expense reductions will continue going forward, including incurring less travel and entertainment spending than we did pre-pandemic. We also reassessed our real estate footprint in light of these new work arrangements and have exited office space that we believe will no longer be necessary. For the nine months endedMay 31, 2022 , we recognized$62.2 million in impairment charges related to vacating certain leased office space to resize our real estate footprint for the hybrid work environment. While we will continue to evaluate our real estate needs, we expect that this initiative is largely complete, and we do not currently anticipate additional similarly-sized real estate impairment charges as part of the reduction of our real estate footprint. Refer to Item 1A. Risk Factors of our Annual Report on Form 10-K for the fiscal year endedAugust 31, 2021 for further discussion of the potential impact of the COVID-19 pandemic on our business.
As the Russian invasion ofUkraine continues to evolve, we are closely monitoring the current and 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. OnMarch 18, 2022 , we announced that we are discontinuing all commercial operations and delivery of products and services to clients insideRussia . In addition, we have identified all active vendors inRussia and have terminated our contracts with them. We have suspended all new business, trials, and prospecting activities inRussia . Total revenues associated with clients inRussia are not material to our consolidated financial results, and we anticipate termination of Russian vendors will not have a material impact on our business or client relationships. We have no offices inRussia orUkraine , and none of our employees or contractors has been directly impacted by the crisis. We are monitoring the regional and global ramifications of the unfolding events in the area, are in close contact with our office inLatvia , and are reviewing our business continuity plans to ensure that we are prepared in the event this office is impacted. Our cybersecurity teams are on high alert and ready to respond in the event of an attempted systems compromise.
Annual Subscription Value (“ASV”)
We believe ASV reflects our ability to grow recurring revenue and generate positive cash flow and is the key indicator of successful execution of our business strategy.
-"ASV" at any point in time represents our forward-looking revenues for the next 12 months from all subscription services currently being supplied to 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 on the current year period. -"Professional Services" are revenues derived from project-based consulting and implementation. -"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 ofMay 31, 2022 . With proper notice provided as contractually required, our clients can add to, delete portions of, or terminate service, subject to certain limitations. (in millions) As ofMay 31, 2022
As reported ASV plus Professional Services(1) $1,939.9 Currency impact(2)
5.6 Acquisition ASV(3) (170.5) Organic ASV plus Professional Services $ 1,775.0 Organic ASV plus Professional Services growth rate 10.1 %
(1)Includes
(2)The impact of currency movements.
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(3) Acquisition of ASV as part of acquisitions made in the last 12 months.
As ofMay 31, 2022 , Organic ASV plus Professional Services was$1.77 billion , an increase of 10.1% compared withMay 31, 2021 . The increase in year-over-year Organic ASV was largely attributed to increased sales to existing clients, inclusive of price increases, followed by new client sales, partially offset by existing client cancellations. Organic ASV increased across all our geographic segments, with the majority of the increase related to theAmericas , followed by EMEA andAsia Pacific . This increase was driven by additional sales in our workflow solutions, primarily Research & Advisory, followed byAnalytics & Trading and CTS. Sales increased in Research & Advisory mainly due to higher demand for our workstations. Sales increased inAnalytics & Trading mainly from demand for our portfolio analytics solutions and performance and reporting products. 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.
Segmented VAS
As ofMay 31, 2022 , ASV from theAmericas represented 64% of total ASV and was$1,220.4 million , an increase from$993.4 million as ofMay 31, 2021 .Americas Organic ASV increased to$1,093.4 million as ofMay 31, 2022 , a 10.1% increase compared withMay 31, 2021 . As ofMay 31, 2022 , ASV from EMEA represented 26% of total ASV and was$503.1 million , an increase from$436.4 million as ofMay 31, 2021 . EMEA Organic ASV increased to$471.0 million as ofMay 31, 2022 , a 8.3% increase compared withMay 31, 2021 . As ofMay 31, 2022 , ASV fromAsia Pacific represented 10% of total ASV and was$192.0 million , an increase from$163.4 million as ofMay 31, 2021 .Asia Pacific Organic ASV increased to$186.1 million as ofMay 31, 2022 , a 14.3% increase compared withMay 31, 2021 . The increase in Organic ASV across all our segments was largely attributed to increased sales to existing clients, inclusive of price increases, followed by new client sales, partially offset by existing client cancellations. Organic ASV increased in theAmericas primarily due to higher sales in Research & Advisory, followed byAnalytics & Trading . EMEA Organic ASV increased due to higher sales in Research & Advisory, followed by CTS andAnalytics & Trading . The increase in Asia Pacific Organic ASV was driven by higher sales in Research & Advisory, followed byAnalytics & Trading and CTS.
Buy-Side and Sell-Side ASV Organic Growth
Buy-side and sell-side Organic ASV growth rates atMay 31, 2022 , compared withMay 31, 2021 , were 9.6% and 12.9%, respectively. Buy-side clients account for approximately 84% of our Organic ASV, consistent with the prior year period, primarily including 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, primarily including broker-dealers, banking and advisory, private equity and venture capital firms.
Adding Customers and Users
The table below shows our total customers and users:
As of May 31, 2022 As of May 31, 2021 Change Clients(1) 7,319 6,172 18.6 % Users 173,698 155,004 12.1 %
(1)The number of customers includes customers with an ASV of
Our total client count was 7,319 as ofMay 31, 2022 , a net increase of 18.6%, or 1,147 clients, in the last 12 months, mainly due to an increase in corporate, wealth management and private equity and venture capital clients. This increase is due to our continued focus on our on- and off-platform workflow-focused solutions, connected content and client-focused services. As ofMay 31, 2022 , there were 173,698 professionals using FactSet, representing a net increase of 12.1%, or 18,694 users, in the last 12 months, driven primarily by an increase in banking clients from the sell-side, followed by an increase in wealth management clients, asset managers and corporate clients from the buy-side. The increase in users was mainly due to increased new hiring at our banking clients and the addition of new clients. 39
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Annual client retention was greater than 95% of ASV for the period endedMay 31, 2022 , consistent with the prior year period. When expressed as a percentage of clients, annual retention was approximately 92% for the period endedMay 31, 2022 , an improvement from approximately 91% for the period endedMay 31, 2021 .
Number of employees
As ofMay 31, 2022 , our employee headcount was 10,691, a decrease of 0.2% compared with 10,713 employees as ofMay 31, 2021 . This reduction in headcount was primarily due to a decrease of 6.2% in theAmericas and a decrease of 0.1% in EMEA, partially offset by an increase of 1.9% inAsia Pacific . AtMay 31, 2022 , 7,056 employees were located inAsia Pacific , 2,287 in theAmericas , and 1,348 in EMEA. Results of Operations For an understanding of the significant factors that influenced our performance for the three and nine months endedMay 31, 2022 andMay 31, 2021 , the following discussion should be read in conjunction with the Consolidated Financial Statements and related notes presented in this Quarterly Report on Form 10-Q. The following table summarizes the results of operations for the periods described: Three Months Ended Nine Months Ended May 31, May 31, (in thousands, except per share data) 2022 2021 % Change 2022 2021 % Change Revenues$ 488,751 $ 399,558 22.3 %$ 1,344,595 $ 1,179,551 14.0 % Cost of services$ 222,618 $ 205,257 8.5 %$ 629,162 $ 588,868 6.8 % Selling, general and administrative$ 119,881 $ 76,599 56.5 %$ 309,185 $ 235,818 31.1 % Long-lived asset impairments$ 48,998 $ - N/M$ 62,985 $ - N/M Operating income$ 97,254 $ 117,702 (17.4) %$ 343,263 $ 354,865 (3.3) % Net income$ 74,910 $ 100,679 (25.6) %$ 292,495 $ 298,528 (2.0) % Diluted earnings per common share$ 1.93 $ 2.62 (26.3) %$ 7.58 $ 7.73 (1.9) % Diluted weighted average common shares 38,720 38,488 38,607 38,602 Revenues
Three months completed
Revenues for the three months endedMay 31, 2022 were$488.8 million , an increase of 22.3%. The increase in revenues was largely attributable to increased sales to existing clients, inclusive of price increases, followed by new client sales, partially offset by existing client cancellations. Revenues increased across all our geographic segments, primarily from theAmericas , followed by EMEA andAsia Pacific , driven by increased revenues in all of our workflow solutions, primarily in CTS, followed by Research & Advisory andAnalytics & Trading , compared with the prior year. Organic revenues increased to$441.7 million for the three months endedMay 31, 2022 , a 10.5% increase over the prior year period. The growth in revenues of 22.3% was composed of growth in organic revenues of 10.5% and a 12.3% increase primarily related to acquisition-related revenues, partially offset by a 0.5% decrease from foreign currency exchange rate fluctuations.
End of nine months
Revenues for the nine months endedMay 31, 2022 was$1,344.6 million , an increase of 14.0%. The increase in revenues was largely attributable to increased sales to existing clients, inclusive of price increases, followed by new client sales, partially offset by existing client cancellations. Revenues increased across all our geographic segments, primarily from theAmericas , followed by EMEA andAsia Pacific , driven by increased revenues in all of our workflow solutions, primarily in CTS and Research & Advisory, followed byAnalytics & Trading , compared with the prior year. Organic revenues increased to$1,295.6 million for the nine months endedMay 31, 2022 , a 9.8% increase over the prior year period. The growth in revenues of 14.0% was reflective of organic revenue growth of 9.8% and a 4.5% increase primarily related to acquisition-related revenue, partially offset by a 0.3% decrease from foreign currency exchange rate fluctuations. 40 -------------------------------------------------------------------------------- Table of Contents Revenues by Segment Three Months Ended Nine Months Ended May 31, May 31, (in thousands) 2022 2021 % Change 2022 2021 % Change Americas$ 309,740 $ 253,786 22.0 %$ 850,312 $ 746,112 14.0 % % of revenues 63.4 % 63.5 % 63.2 % 63.3 % EMEA$ 128,326 $ 106,833 20.1 %$ 357,920 $ 318,103 12.5 % % of revenues 26.3 % 26.7 % 26.6 % 26.9 %
$ 115,336 18.2 % % of revenues 10.3 % 9.8 % 10.2 % 9.8 %
Consolidated
Three months completed
Revenues from ourAmericas segment increased 22.0% to$309.7 million during the three months endedMay 31, 2022 , compared with$253.8 million from the same period a year ago. The increased revenues were driven by higher sales in all of our workflow solutions, primarily in Research & Advisory and CTS, followed byAnalytics & Trading . The growth in revenues of 22.0% was reflective of increased organic revenues of 7.4% and a 14.6% increase primarily due to the impact of acquisition-related revenues.
EMEA
Revenues from our EMEA segment increased 20.1% to$128.3 million during the three months endedMay 31, 2022 , compared with$106.8 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 Research & Advisory andAnalytics & Trading . The growth in revenues of 20.1% was reflective of increased organic revenues of 13.2% and an 8.2% increase primarily due to the impact of acquisition-related revenues, partially offset by a 1.3% decrease related to foreign currency exchange rate fluctuations.
Revenues from ourAsia Pacific segment increased 30.2% to$50.7 million during the three months endedMay 31, 2022 , compared with$38.9 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 Research & Advisory andAnalytics & Trading . The growth in revenues of 30.2% was reflective of increased organic revenues of 23.6% and an 8.9% increase due to the impact of acquisition-related revenues, partially offset by a 2.3% decrease related to foreign currency exchange rate fluctuations.
End of nine months
Revenues from ourAmericas segment increased 14.0% to$850.3 million during the nine months endedMay 31, 2022 , compared with$746.1 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 and Research & Advisory, followed byAnalytics & Trading . The growth in revenues of 14.0% was due to organic revenue growth of 8.4% and a 5.6% increase primarily due to the impact of acquisition-related revenue.
EMEA
Revenues from our EMEA segment increased 12.5% to$357.9 million during the nine months endedMay 31, 2022 , compared with$318.1 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 Research & Advisory andAnalytics & Trading . The growth in revenues of 12.5% was driven by organic revenue growth of 10.5% and a 2.7% increase primarily due to the impact of acquisition-related revenue, partially offset by an 0.7% decrease from foreign currency exchange rate fluctuations. 41 -------------------------------------------------------------------------------- Table of ContentsAsia Pacific Revenues from ourAsia Pacific segment increased 18.2% to$136.4 million during the nine months endedMay 31, 2022 , compared with$115.3 million from the same period a year ago. The increased revenues were driven by higher sales across all of our workflow solutions, primarily in CTS, followed byAnalytics & Trading and Research & Advisory. The growth in revenues of 18.2% was due mainly to organic revenues growth of 17.0% and a 3.0% increase from acquisition-related revenue, partially offset by a 1.8% decrease from foreign currency exchange rate fluctuations.
Revenue by workflow solution
Three months completed
The growth in revenues of 22.3% for the three months endedMay 31, 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 andAnalytics & Trading . The increase in CTS revenues was driven mainly by sales of company financial data, such as fundamentals, estimates and ownership, and the inclusion of CUSIP 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 fromAnalytics & Trading was primarily due to increased demand for our portfolio analytics solutions.
End of nine months
The growth in revenues of 14.0% for the nine months endedMay 31, 2022 , compared with the same period a year ago, was due to revenue growth across our segments supported by increased revenues from our workflow solutions, primarily from CTS and Research & Advisory, followed byAnalytics & Trading . The increase in CTS revenues was driven mainly by increased purchases of company financial data, such as fundamentals, estimates and ownership, and the inclusion of CUSIP related data licensing and issuance revenues. The increase in Research & Advisory revenues was driven mainly by higher demand for our workstations. The increase inAnalytics & Trading revenues was mainly due to increased sales of our performance and reporting products and portfolio analytics solutions. Operating Expenses Three Months Ended Nine Months Ended May 31, May 31, (in thousands) 2022 2021 % Change 2022 2021 % Change Cost of services$ 222,618 $ 205,257 8.5 %$ 629,162 $ 588,868 6.8 % Selling, general and administrative 119,881 76,599 56.5 % 309,185 235,818 31.1 % Long-lived asset impairments 48,998 - N/M 62,985 -
N/M
Total operating expenses$ 391,497 $ 281,856 38.9 %$ 1,001,332 $ 824,686 21.4 % Operating income$ 97,254 $ 117,702 (17.4) %$ 343,263 $ 354,865 (3.3) % Operating margin 19.9 % 29.5 % 25.5 % 30.1 % Cost of Services
Three months completed
Cost of services increased 8.5% to$222.6 million for the three months endedMay 31, 2022 , compared with$205.3 million in the same period a year ago, primarily due to an increase in amortization of intangible assets and royalty fees, partially offset by a decrease in employee compensation expense. Cost of services, when expressed as a percentage of revenues, was 45.5% for the three months endedMay 31, 2022 , a decrease of 580 basis points compared with the same period a year ago. This decrease was primarily due to lower employee compensation expense, partially offset by an increase in amortization of intangible assets and royalty fees. Employee compensation expense decreased 740 basis points, due primarily to a shift in headcount distribution from higher to lower cost locations and a net reduction in cost of services employee headcount of 138, partially offset by higher base salaries. Amortization of intangible assets increased 230 basis points mainly due to increased amortization related to acquired intangible 42
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TOC assets. The royalties increased the cost of services by 170 basis points due to contracts acquired as part of the CGS acquisition.
End of nine months
For the nine months ended
Cost of services, when expressed as a percentage of revenues, was 46.8% for the nine months endedMay 31, 2022 , a decrease of 310 basis points compared with the same period a year ago. This decrease was primarily driven by lower employee compensation expense and data costs, partially offset by higher amortization of intangible assets and royalty fees as a percentage of revenue. Employee compensation expense decreased 390 basis points, primarily due to a shift in headcount distribution from higher to lower cost locations and a net reduction in cost of services employee headcount of 138, partially offset by higher annual base salaries, a one-time restructuring charge to drive organizational realignment and a decrease in capitalization of compensation costs related to development of our internal-use software projects. Data costs decreased 50 basis points, primarily due to revenue growth outpacing the cost of content, partially offset by a non-recurring charge for certain data content. Amortization of intangible assets increased 100 basis points, mainly due to higher amortization related to acquired intangibles and increased amortization from capitalized internal-use software. Royalty fees increased cost of services 60 basis points due to contracts acquired in connection with the acquisition of CGS.
Selling, general and administrative expenses
Three months completed
Selling, general and administrative ("SG&A") expenses increased 56.5% to $119.9
million for the three months ended May 31, 2022 , compared with $76.6 million for
the same period a year ago, primarily due to higher employee compensation
expense and professional fees.
SG&A expenses, when expressed as a percentage of revenues, were 24.5% for the
three months ended May 31, 2022 , an increase of 540 basis points over the prior
year period. This increase was primarily due to higher professional fees and
employee compensation expense as a percentage of revenue. Professional fees
increased 270 basis points, primarily driven by costs incurred in connection
with the acquisition of CGS. Employee compensation expense increased 140 basis
points, primarily due to increased variable compensation, a net increase in SG&A
employee headcount of 116, increased stock-based compensation expense and higher
annual base salaries.
End of nine months
For the nine months endedMay 31, 2022 , SG&A expenses increased 31.1% to$309.2 million , compared with$235.8 million for the same period a year ago, primarily due to higher employee compensation expense and professional fees. SG&A expenses, expressed as a percentage of revenues, were 23.0% for the nine months endedMay 31, 2022 , an increase of 300 basis points over the prior year period. This increase was primarily driven by higher professional fees and employee compensation expense as a percentage of revenue. Professional fees increased 130 basis points, primarily driven by costs incurred in connection with the acquisition of CGS. Employee compensation expense increased 100 basis points, primarily due to increased variable compensation, a net increase in SG&A employee headcount of 116, higher annual base salaries and higher stock-based compensation expense. Long-Lived Asset Impairments
Three months completed
Long-lived asset impairments were$49.0 million , or 10.0% when expressed as a percentage of revenues, for the three months endedMay 31, 2022 . The impairment charges related primarily to lease ROU assets and Property, equipment and leasehold improvements ("PPE") associated with vacating certain leased office space. We fully impaired the lease ROU assets for locations we vacated with no intention to sublease. We recognized an impairment for locations we intend to sublease when the estimated fair value of the lease ROU asset was less than its carrying value. Substantially all the PPE associated with the vacated lease office space was fully impaired as there are no expected future cash flows related to these items. Impairment charges related to our lease ROU assets and PPE were$24.2 million and$24.6 million , respectively, for the three months endedMay 31, 2022 . 43
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End of nine months
Long-lived asset impairments were$63.0 million , or 4.7% when expressed as a percentage of revenues, for the nine months endedMay 31, 2022 . The impairment charges related primarily to lease ROU assets and PPE associated with vacating certain leased office space. We fully impaired the lease ROU assets for locations we vacated with no intention to sublease. We recognized an impairment for locations we intend to sublease when the estimated fair value of the lease ROU asset was less than its carrying value. Substantially all the PPE associated with the vacated lease office space was fully impaired as there are no expected future cash flows related to these items. Impairment charges related to our lease ROU assets and PPE were$31.5 million and$30.7 million , respectively, for the nine months endedMay 31, 2022 .
Operating profit and operating margin
Three months completed
Operating income decreased 17.4% to$97.3 million for the three months endedMay 31, 2022 , compared with$117.7 million in the prior year. Operating income decreased primarily due to impairment of long-lived assets, higher professional fees, higher amortization of intangible assets, higher employee compensation expense and higher royalty fees, partially offset by growth in revenues of 22.3%. Foreign currency exchange rate fluctuations, net of hedge activity, decreased operating income by$1.3 million . Operating margin decreased to 19.9% during the three months endedMay 31, 2022 , compared with 29.5% in the prior year period. Operating margin decreased mainly due to the impairment of long-lived assets, professional fees, amortization of intangible assets and royalty fees, partially offset by growth in revenues and lower employee compensation expense.
End of nine months
Operating income decreased 3.3% to$343.3 million for the nine months endedMay 31, 2022 compared with$354.9 million in the prior year period. Operating income decreased primarily due to impairment of long-lived assets, higher employee compensation expense, professional fees, amortization of intangible assets, computer-related expenses, royalty fees and data costs, partially offset by growth in revenues of 14.0%. Foreign currency exchange rate fluctuations, net of hedge activity, decreased operating income by$6.7 million .
Operating margin decreased to 25.5% for the nine months ended
Operating result by segment
Our internal financial reporting structure is based on three reportable segments:
Three Months Ended Nine Months Ended
May 31, May 31,
(in thousands) 2022 2021 % Change 2022 2021 % Change
Americas $ 11,212 $ 51,800 (78.4) % $ 115,613 $ 161,789 (28.5) %
EMEA 53,228 41,468 28.4 % 139,826 122,392 14.2 %
Asia Pacific 32,814 24,434 34.3 %
87,824 70,684 24.2% Total operating income
Three months completed
Americas operating income decreased 78.4% to$11.2 million during the three months endedMay 31, 2022 , compared with$51.8 million in the same period a year ago. This decrease in operating income was due to an impairment of long-lived assets, higher amortization of intangible assets, professional fees, employee compensation expense and royalty fees, partially offset by growth in revenues of 22.0%. The impairment charges related mainly to lease ROU assets and PPE associated with vacating certain leased office space. Amortization of intangible assets increased primarily due to increased amortization related to 44
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acquired intangibles. Professional fees increased primarily due to costs incurred in connection with the acquisition of CGS. Employee compensation expense increased mainly due to increased variable compensation, higher stock compensation expense and higher annual base salaries, partially offset by a net decrease in employee headcount of 152. Royalty fees increased due to contracts acquired in connection with the acquisition of CGS.
EMEA
EMEA operating income increased 28.4% to$53.2 million during the three months endedMay 31, 2022 , compared with$41.5 million recognized during the same period a year ago. The increase in EMEA operating income was due to growth in revenues of 20.1% as well as lower bad debt expense and employee compensation expense, partially offset by an impairment of long-lived assets. Employee compensation expense decreased mainly due to lower annual base salaries primarily driven by foreign currency exchange rate fluctuations and restructuring charges. The impairment charges related mainly to our lease ROU assets and PPE associated with vacating certain leased office space.
Asia Pacific operating income increased 34.3% to$32.8 million during the three months endedMay 31, 2022 , compared with$24.4 million in the same period a year ago. This increase in operating income was mainly due to growth in revenues of 30.2%, 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 132.
End of nine months
Americas operating income decreased 28.5% to$115.6 million during the nine months endedMay 31, 2022 , compared with$161.8 million in the same period a year ago. This decrease in operating income was due to an impairment of long-lived assets, higher employee compensation expense, professional fees, amortization of intangible assets, computer related expenses and royalty fees, partially offset by growth in revenues of 14.0%. The impairment charges related mainly to our lease ROU assets and PPE associated with vacating certain leased office space. Employee compensation expense increased primarily due to increased variable compensation, higher stock compensation expense, the impact of a one-time restructuring charge to drive organizational realignment, and a decrease in capitalization of compensation costs related to development of our internal-use software projects, partially offset by a decrease in annual base salary driven by a net decrease in employee headcount of 152. Professional fees increased primarily due to costs incurred in connection with the acquisition of CGS. Amortization of intangible assets increased primarily due to increased amortization related to acquired intangibles, as well as continued investment in capitalized internal-use software, with more assets placed in service. Computer-related expenses increased primarily due to increased spend from our migration to cloud-based hosting services and licensed software arrangements. Royalty fees increased due to contracts acquired in connection with the acquisition of CGS.
EMEA
EMEA operating income increased 14.2% to$139.8 million during the nine months endedMay 31, 2022 , compared with$122.4 million in the same period a year ago. The increase in EMEA operating income was primarily due to growth in revenues of 12.5%, a decrease in bad debt expense and amortization of intangible assets, partially offset by an impairment of long-lived assets, higher employee compensation expense and data costs. Amortization of intangible assets decreased as certain acquired intangible assets were fully amortized during the third quarter of fiscal 2022. The impairment charges related mainly to our lease ROU assets and PPE associated with vacating certain leased office space. Employee compensation expense increased mainly due to the impact of a one-time restructuring charge to drive organizational realignment. Data costs increased primarily due to a non-recurring charge for certain data content.
Asia Pacific operating income increased 24.2% to$87.8 million during the nine months endedMay 31, 2022 , compared with$70.7 million in the same period a year ago. The increase inAsia Pacific operating income was mainly due to growth in revenues of 18.2%, partially offset by an increase in employee compensation expense. Employee compensation expense increased mainly due to higher annual base salaries, inclusive of a net increase in employee headcount of 132, and increased variable compensation. 45
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Income taxes, net income and diluted earnings per share
Income taxes
The provision for income taxes is as follows:
Three Months Ended Nine Months Ended
May 31, May 31,
(in thousands) 2022 2021 2022 2021
Income before income taxes $ 85,280 $ 114,276 $ 327,166 $ 349,174
Provision for income taxes $ 10,370 $ 13,597 $ 34,671 $ 50,646
Effective tax rate 12.2 % 11.9 % 10.6 % 14.5 %
Our effective tax rate is lower than the applicable U.S. corporate income tax
rate for the three and nine months ended May 31, 2022 , driven mainly by research
and development ("R&D") tax credits and a foreign derived intangible income
("FDII") deduction. Our effective tax rate for the three and nine months ended
May 31, 2022 is further reduced by windfall tax benefits associated with the
employee exercise of stock options.
Three months completed
For the three months endedMay 31, 2022 , the provision for income taxes was$10.4 million , compared with$13.6 million for the same period a year ago. The provision decreased mainly due to lower pretax income for the three months endedMay 31, 2022 , compared with the prior year period.
End of nine months
For the nine months endedMay 31, 2022 , the provision for income taxes was$34.7 million , compared with$50.6 million for the same period a year ago. The provision decreased mainly due to lower pretax income and$12.0 million in higher windfall tax benefit from stock-based compensation for the nine months endedMay 31, 2022 , compared with the prior year period.
Net earnings and diluted earnings per share
Three Months Ended Nine Months Ended
May 31, May 31,
(in thousands, except for per share
data) 2022 2021 % Change 2022 2021 % Change
Net income $ 74,910 $ 100,679 (25.6) % $ 292,495 $ 298,528 (2.0) %
Diluted earnings per common share
(26.3) %$ 7.58 $ 7.73 (1.9) % Diluted weighted average common shares 38,720 38,488 0.6 % 38,607 38,602 - %
Three months completed
Net income decreased 25.6% to$74.9 million and diluted earnings per share ("EPS") decreased 26.3% to$1.93 for the three months endedMay 31, 2022 , compared with the same period a year ago. Net income and diluted EPS decreased primarily due to lower operating income mainly due to impairment charges related to vacating certain leased office space and higher interest expense related to our debt refinancing, partially offset by a reduction in the provision for income taxes. EPS also decreased due to an increase in our diluted weighted average shares outstanding compared to the same period a year ago.
End of nine months
Net income decreased 2.0% to$292.5 million and diluted EPS decreased 1.9% to$7.58 for the nine months endedMay 31, 2022 , compared with the same period a year ago. Net income and diluted EPS decreased primarily due to lower operating income mainly due to impairment charges related to vacating certain leased office space and higher interest expense related to our debt refinancing, partially offset by a reduction in the provision for income taxes. 46
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Non-GAAP Financial Measures
To supplement the financial measures prepared in accordance with generally accepted accounting principles inthe United States ("GAAP"), we use non-GAAP financial measures including organic revenues, adjusted operating income, adjusted operating margin, adjusted net income, EBITDA, adjusted EBITDA and adjusted diluted EPS. The reconciliations of these non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP are show in the 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 the business as determined in accordance with GAAP. Other companies may calculate similarly titled non-GAAP financial measures differently that we do, limiting the usefulness of those measures for comparative purposes. Despite the limitations of these non-GAAP financial measures, we believe these adjusted financial measures, and the information they provide, are useful in viewing our performance using the same tools that management uses to gauge progress in achieving our goals. Adjusted measures may also facilitate comparisons to our historical performance.
The table below provides an unaudited reconciliation of revenue with adjusted revenue and organic revenue.
Three Months Ended
May 31,
(In thousands) 2022 2021 % Change
Revenues $ 488,751 $ 399,558 22.3 %
Deferred revenues fair value adjustment(1) 1 181
Adjusted revenues 488,752 399,739 22.3 %
Acquired revenues(2) (49,385) -
Currency impact(3) 2,326 -
Organic revenues $ 441,693 $ 399,739 10.5 %
(1)The amortization effect of the purchase accounting adjustment on the fair
value of acquired deferred revenues.
(2)Revenues from acquisitions completed within the last 12 months.
(3)The impact from foreign currency movements over the past 12 months.
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The table below provides an unaudited reconciliation of operating income, operating margin, net income and diluted EPS with adjusted operating income, adjusted operating margin, adjusted net income, EBITDA, adjusted EBITDA and adjusted diluted EPS.
Three Months Ended
May 31,
(In thousands, except per share data) 2022 2021 % Change
Operating income $ 97,254 $ 117,702 (17.4) %
Deferred revenues fair value adjustment 1 181
Intangible asset amortization 18,548 5,741
Real estate charges(4) 48,797 -
Business acquisition costs 12,408 -
Restructuring / severance 1,079 -
Transformation costs (1) 979 2,841
Adjusted operating income $ 179,066 $ 126,465 41.6 %
Operating margin 19.9 % 29.5 %
Adjusted operating margin(2) 36.6 %
31.6%
Net income$ 74,910 $ 100,679 (25.6) % Deferred revenues fair value adjustment 1
150
Intangible asset amortization 16,184 4,746 Real estate charges(4) 42,577 - Business acquisition costs 10,827 - Restructuring / severance 941 - Transformation costs(1) 854 2,349 Income tax items (500) (3,114) Adjusted net income(3)$ 145,794 $ 104,810 39.1 % Net income$ 74,910 $ 100,679 Interest expense, net 12,051 1,839 Income taxes 10,370 13,597 Depreciation and amortization expense 27,349 17,223 EBITDA$ 124,680 $ 133,338 (6.5) % Real estate charges(4) 48,797 - Adjusted EBITDA$ 173,477 $ 133,338 30.1 % Diluted earnings per common share$ 1.93 $ 2.62 (26.3) % Deferred revenues fair value adjustment 0.00 0.00 Intangible asset amortization 0.42 0.12 Real estate charges(4) 1.10 - Business acquisition costs 0.28 - Restructuring / severance 0.02 - Transformation costs(1) 0.02 0.06 Income tax items (0.01) (0.08)
Adjusted diluted earnings per common share(3)
38,720
38,488
(1)Costs mainly related to professional fees associated with the current multi-year investment plan.
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(2) Adjusted operating margin is calculated as adjusted operating income divided by adjusted revenues, as shown in the revenue reconciliation table above.
(3)For purposes of calculating Adjusted net income and Adjusted diluted earnings per share, Intangible asset amortization, Deferred revenues fair value adjustments and other items were taxed at the quarterly effective tax rates of 12.7% for fiscal 2022 and 17.3% for fiscal 2021.
(4)Costs related to impairment charges on our rental ROU and PPE assets associated with the release of certain leased office space.
Cash and capital resources
Our cash flows provided by operating activities, existing cash and cash equivalents, supplemented 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, investments, 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 2022 Credit Agreement OnMarch 1, 2022 , we entered into a credit agreement (the "2022 Credit Agreement") which provides for a senior unsecured term loan credit facility in an aggregate principal amount of$1.0 billion (the "2022 Term Facility") and a senior unsecured revolving credit facility in an aggregate principal amount of$500.0 million (the "2022 Revolving Facility" and, together with the 2022 Term Facility, the "2022 Credit Facilities"). The 2022 Term Facility matures onMarch 1, 2025 , and the 2022 Revolving Facility matures onMarch 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 . OnMarch 1, 2022 , we borrowed$1.0 billion under the 2022 Term Facility and$250.0 million of the available$500.0 million under the 2022 Revolving Facility. We are required to pay a commitment fee on the daily unused amount of the 2022 Revolving Facility using a pricing grid which was 0.125% as ofMay 31, 2022 and can fluctuate between 0.10% per annum and 0.25% per annum. 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 the third quarter of 2022, we incurred approximately$9.5 million in debt issuance costs related to the 2022 Credit Facilities. We defer costs we incur to issue debt, which are presented in the Consolidated Balance Sheets as a direct deduction from the carrying amount of the related debt liability, and we amortize these costs to Interest expense, net in the Consolidated Statements of Income over the contractual term on a straight-line basis, which approximates the effective interest method. Loans under the 2022 Term Facility are subject to scheduled amortization payments on the last day of each fiscal quarter, commencing withAugust 31, 2022 and ending on the last such day to occur prior to the maturity date. Each amortization payment is equal to 1.25% of the original principal amount of the 2022 Term Facility. Any remaining outstanding principal will be repaid in full onMarch 1, 2025 , the maturity date of the 2022 Term Facility. The 2022 Credit Facilities are not otherwise subject to any mandatory prepayments. We may voluntarily prepay loans under the 2022 Credit Facilities at any time without premium or penalty. Prepayments of the 2022 Term Facility shall be applied to reduce the subsequent scheduled amortization payments in direct order of maturity. During the third quarter of fiscal 2022, we repaid$125.0 million under the 2022 Term Facility. The 2022 Credit Agreement provides that loans denominated inU.S. dollars, at our option, will bear interest at either (i) one-month Term SOFR (with a 10 basis points credit spread adjustment and subject to a "zero" floor), (ii) Daily Simple SOFR (with a 10 basis points credit spread adjustment and subject to a "zero" floor) or (iii) an alternate base rate. Under the 2022 Credit Agreement, loans denominated in Pounds Sterling will bear interest at Daily Simple SONIA (subject to a "zero" floor) and 49
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loans denominated in Euros will bear interest at EURIBOR (subject to a "zero" floor), in each case, plus an applicable interest rate margin. The interest rate margin will be based upon our senior unsecured non-credit enhanced long-term debt rating and our total leverage ratio.
Outstanding borrowings under the 2022 Term Facility through the third quarter of fiscal 2022 bore interest at a rate equal to the applicable forward SOFR rate plus a spread using a debt leverage pricing grid currently at 1.1%.
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.
Refer to Note 12, Debt for further discussion of the 2022 Credit Agreement.
Senior Notes
OnMarch 1, 2022 we completed a public offering of$500.0 million aggregate principal amount of 2.900% Senior Notes dueMarch 1, 2027 (the "2027 Notes") and$500.0 million aggregate principal amount of 3.450% Senior Notes dueMarch 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 ofMarch 1, 2022 , by and between us andU.S. Bank Trust Company, National Association , as trustee (the "Trustee"), as supplemented by the supplemental indenture, dated as ofMarch 1, 2022 , between us and the Trustee (the "Supplemental Indenture"). The Senior Notes were issued at an aggregate discount of$2.8 million , and during the third quarter of 2022, we incurred approximately$9.1 million in debt issuance costs related to the Senior Notes. We deferred the debt discounts and costs we incurred to issue debt, which are presented in the Consolidated Balance Sheets as a net direct deduction from the carrying amount of the related debt liability, and we amortize these costs to Interest expense, net in the Consolidated Statements of Income over the contractual term leveraging the effective interest method.
The 2027 Bonds and the 2032 Bonds will mature on
The Senior Notes are unsecured unsubordinated obligations and will be effectively subordinated to any of our existing and future secured obligations to the extent of the value of the assets securing such obligations.
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 accrued and unpaid interest, if any.
Exchange contract 2022
OnMarch 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 6, Derivative Instruments, for defined terms and more information on the 2022 Swap Agreement.
Credit agreement 2019
OnMarch 29, 2019 , we entered into a credit agreement withPNC Bank, National Association ("PNC") (the "2019 Credit Agreement"), which provided for a$750.0 million revolving credit facility (the "2019 Revolving Credit Facility"). The 2019 Revolving Credit Facility allowed for borrowings until its maturity date ofMarch 29, 2024 . The 2019 Credit Agreement also allowed for, subject to certain requirements, additional borrowings with PNC for an aggregate amount up to$500.0 million , provided that any such request for additional borrowings must be in a minimum amount of$25.0 million . 50
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We borrowed$575.0 million of the available$750.0 million provided by the 2019 Revolving Credit Facility, resulting in$175.0 million that was available to be borrowed. We were required to pay a commitment fee using a pricing grid based on the daily amount by which the available balance in the 2019 Revolving Credit Facility exceeded the borrowed amount. All outstanding loan amounts were reported as Long-term debt within the Consolidated Balance Sheets. Borrowings under the 2019 Revolving Credit Facility bore interest on the outstanding principal amount at a rate equal to the daily LIBOR plus a spread using a debt leverage pricing grid. Interest on the amounts outstanding under the 2019 Revolving Credit Facility was payable quarterly, in arrears, and on the maturity date. During fiscal 2019, we incurred approximately$0.9 million in debt issuance costs related to the 2019 Credit Agreement. These costs were capitalized as debt issuance costs and were amortized into Interest expense, net in the Consolidated Statements of Income ratably over the term of the 2019 Credit Agreement. The 2019 Credit Agreement contained covenants and requirements restricting certain of our activities, which were usual and customary for this type of loan. In addition, the 2019 Credit Agreement required that we maintain a consolidated net leverage ratio, as measured by total net funded debt/EBITDA (as defined in the 2019 Credit Agreement), below a specified level as of the end of each fiscal quarter.
From
Uses of liquidity
Return value to shareholders
For the nine months ended
Share buyback program
Under our share buyback program, we may repurchase common stock from time to time in the open market and in privately negotiated transactions, subject to market conditions.
Beginning in the second quarter of fiscal 2022, we suspended our share repurchase program through 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 of the 2022 Credit Facilities. Refer to Note 12, Debt for more information on the 2022 Credit Facilities. As such, for the three months endedMay 31, 2022 , we did not make any repurchases under our existing share repurchase program, compared to 178,100 shares repurchased for$57.6 million for the three months endedMay 31, 2021 . During the nine months endedMay 31, 2022 , we repurchased 46,200 shares for$18.6 million under our existing share repurchase program, compared with 531,859 shares for$172.2 million in the same period a year ago. As ofMay 31, 2022 ,$181.3 million remained available under the share repurchase program for future share repurchases. There is no defined number of shares to be repurchased over a specified timeframe through the life of the share repurchase program. It is expected that share repurchases will be paid using existing and future cash generated by operations.
Capital expenditure
For the nine months endedMay 31, 2022 , capital expenditures were$36.0 million , compared with$47.4 million during the same period a year ago, a decrease of$11.6 million . Capital expenditures decreased primarily due to costs incurred for the build-out of our office space inthe Philippines during the nine months endedMay 31, 2021 , partially offset by higher expenditures related to the development of capitalized internal-use software and peripherals for office space primarily inIndia during the nine months endedMay 31, 2022 . 51
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Dividends
OnApril 28, 2022 , our Board of Directors approved a regular quarterly dividend of$0.89 per share. The increase of$0.07 per share, or 8.5%, in the amount of our quarterly dividend marked the 23rd consecutive year we have increased dividends, highlighting our continued commitment to returning value to our shareholders. Dividends of$33.8 million were paid onJune 16, 2022 to common stockholders of record at the close of business onMay 31, 2022 . Future cash dividends 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.
Acquisitions
During fiscal 2022 and 2021, we completed acquisitions of several businesses, with the most significant cash flows related to the acquisitions of CGS,Cobalt Software, Inc. ("Cobalt") andTruvalue Labs, Inc. ("TVL"). OnMarch 1, 2022 , we completed the acquisition of CGS, previously operated by S&P Global Inc. on behalf of theAmerican Bankers Association , for a cash purchase price of$1.932 billion , inclusive of preliminary working capital adjustments. CGS manages a database of 60 different data elements uniquely identifying more than 50 million global financial instruments. CGS is the exclusive provider ofCommittee on Uniform Security Identification Procedures ("CUSIP") and CUSIP International Number System ("CINS") identifiers globally and also acts as the official numbering agency forInternational Securities Identification Number ("ISIN") identifiers inthe United States and as a substitute number agency for more than 35 other countries. We anticipate that the CGS acquisition will significantly expand our critical role in the global capital markets. OnOctober 12, 2021 , we acquired all of the outstanding shares of Cobalt for a purchase price of$50.0 million , net of cash acquired. 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. OnNovember 2, 2020 , we acquired all of the outstanding shares of TVL for a purchase price of$41.9 million , net of cash acquired. TVL is a leading provider of ESG information. TVL applies artificial intelligence driven technology to over 100,000 unstructured text sources in multiple languages, including news, trade journals, and non-governmental organizations and industry reports, to provide daily signals that identify positive and negative ESG behavior. The acquisition of TVL further enhances our commitment to providing industry leading access to ESG data across our platforms.
Refer to Note 7, Acquisitions, for a more detailed discussion of the acquisitions of CGS, Cobalt and TVL.
Contractual Obligations Purchase obligations represent our legally-binding agreements to purchase fixed or minimum quantities at determinable prices. Our purchase obligations consist of two primary arrangements, data content and hosting services. We also have contractual obligations related to our lease liabilities and outstanding debt. The effect of our contractual obligations on our liquidity and capital resources in future periods should incorporate the information described in Note 14, Commitments and Contingencies in the Notes to the Consolidated Financial Statements included in Part II, Item 8 in our Annual Report on Form 10-K for fiscal year endedAugust 31, 2021 , in conjunction with the factors mentioned here. As ofAugust 31, 2021 , we had total purchase commitments of$191.9 million . During the second quarter of fiscal 2022, we entered into a software subscription agreement with total purchase commitments of approximately$10 million with a contract term of three years. During the third quarter of fiscal 2022, we entered into a cloud hosting contract with a total purchase commitments of approximately $$275.0 million with a contract term of six years. This cloud hosting contract replaced a previous contract which was included in theAugust 31, 2021 balance with a minimum purchase commitment of$125.0 million . Refer to Note 11, Leases and Note 12, Debt for information regarding lease commitments and outstanding debt obligations, respectively. 52
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