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FactSet Research Systems (FDS)Stock (Information & Delivery Services Industry)
 FactSet's revenues have grown for 27 consecutive years[4] as a result of its high client retention rate and the regular addition of new and improved products and information services.[5] For the past 17 years, FactSet has retained at least 95% of its clients, annually.[6]
[edit] Business OverviewFactSet aggregates financial data for tens of thousands of companies and securities across the globe from more than 200 financial databases (including "premium" data providers such as Thomson/Reuters, Merrill Lynch, and Lehman Brothers)[1] and implements this data onto a single online platform for financial research.[1] Generally, professional investment institutions purchase monthly subscriptions to the services at variable cost[1][7] though, in some cases, FactSet receives revenue from commissions for trades brokered through its subsidiary FDS.[8] [edit] Business and Financial Metrics Over the last three years, FactSet's revenues and net income have steadily increased.[9][10] In 2005, revenue grew 24% from $252 million in 2004 to $313 million while net income rose 24% from $58 million to $71.8 million.[9] In fiscal years 2006 and 2007, revenue grew 24% and 23% to $387 million and $476 million, respectively, while net income increased 15% and 33% to $82.9 million and $110 million.[9] Based solely on subscription services currently supplied (i.e. not accounting for new customers or the addition of new services by existing customers) FactSet expects subscription revenues for fiscal 2008 of $517 million.[11] Meanwhile, in fiscal 2007 FactSet spent $153 million on "Costs of Services" (which includes data acquisition costs and compensation for the company's software engineering group).[12] This was a 26% increase from the previous year's expenditures of $121 million.[13] These expenditures account for the growth of the company's primary business: the acquisition of data the development of analytical applications.[14]
[edit] Business SegmentsFactSet has one primary product (financial information) that is distributed through two general types of services: those provided for investment management ("buy-side") clients, and those provided for investment banking ("sell-side") clients.[1][15] Pricing is variable but, in general, costs about $50K per year for the first two users, plus an additional $6K for each additional user.[7] [edit] Subscriptions and Commissions from Investment Management Clients (77% of Total Revenues)Investment Management clients (e.g. asset managers, hedge funds, and other "buy-side" institutions) account for 77% of total revenues.[1][3] These customers pay for FactSet's information services either in cash (billed monthly) or in commissions from securities transactions brokered by the company's wholly owned subsidiary FDS.[8] FactSet's platform for Investment Management clients is called Directions[16] and includes suites of applications for the analysis of companies and markets, as well as performance analysis of portfolios and fundamental investment strategies in addition to real time news and price quotes.[17][18][19][20][21][22]  [edit] Subscriptions from Investment Banking Clients (23% of Total Revenues)The remainder of FactSet's revenue comes from investment banking clients ("sell-side" institutions)[1][3] who pay a monthly subscription fee for access to the company's services.[8] FactSet's central investment banking product is called IB Central[23] and, like Directions for investment management clients, is comprised of suites of applications for performing tasks including analysis of companies and industries, tracking mergers and acquisitions, and compiling research data into presentations. [24][25][26] [edit] Key Trends and Forces[edit] FactSet Maintains an Extremely High Client Retention Rate While Continuing to Add New CustomersFor the past 17 consecutive years, FactSet's client retention rate has been in excess of 95%.[6][27] Fiscal 2007 saw a net increase of 168 clients, a 9% increase over the prior 12 months and bringing the total client count to 1,953.[11] From those clients there were approximately 35,000 users, a 17.4% increase from the 2006 total of approximately 29,800.[11] [edit] FactSet Gets 30% of Its Revenue From International ClientsIn Fiscal 2007, 29.5% of FactSet's total revenue ($141 million) came from international clients.[28] This is a 28% increase from the previous year's total of $110 million.[28] FactSet's international diversification protects the company against a downturn in any one particular economy.[4] [edit] FactSet is Particularly Vulnerable to a Downturn In The Financial Services IndustryOne hundred percent of FactSet's clients operate in the financial services industry.[1] FactSet's revenue comes from the subscription fees of these clients as well as per user fees beyond the first two users per client.[11][7] Therefore, a downturn in the financial services industry would diminish earnings as Wall Street firms cut personnel and, thus FactSet's user base.[11] [edit] CompetitionAs FactSet operates in the Information & Delivery Services industry, they compete with anyone who offers financial data and analysis products (including organizations who's data FactSet is aggregating)[5]. Some of the major competitors in FactSet's arena include:
[edit] FactSet Compared with Three Competitors[28][34][35][36]
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