# FactSet (FDS) Financial Model

Free Excel 3-statement financial model and company analysis for FactSet.

- Canonical: https://finamodel.com/companies/factset
- Industry: Capital Markets
- Downloadable model: Yes
- Excel download: https://finamodel.com/company-models/FDS.xlsx

## Model Purpose

This model evaluates the intrinsic equity value and cash flow generation capacity of FactSet Research Systems Inc. to determine if its premium valuation multiple is justified by its highly recurring Annual Subscription Value (ASV) growth and operating margin expansion.

## Company Overview

FactSet provides financial data, analytics, and open technology platforms to global investment professionals, including asset managers, wealth managers, and investment banks. The company aggregates third-party data, integrates it with proprietary data, and delivers it through desktop workstations, data feeds, and APIs.

Business segments are reported geographically based on client location:
* Americas (approximately 64% of revenue)
* EMEA (approximately 26% of revenue)
* Asia Pacific (approximately 10% of revenue)

FactSet operates a highly recurring, asset-light subscription business model where over 95% of revenue is subscription-based. Its competitive position is strong, operating in an oligopoly alongside Bloomberg, LSEG (Refinitiv), and S&P Capital IQ, competing primarily on workflow integration, customer service, and open architecture. Recent major events include the transformational $1.9 billion acquisition of CUSIP Global Services (CGS) in 2022, and recent bolt-on acquisitions of Irwin and LiquidityBook to bolster its investor relations and trading workflow capabilities.

## Revenue Deep Dive



### Americas

* **Segment name:** Americas
* **Revenue driver formula:** Beginning Americas ASV + Net New Americas ASV (driven by Client Count x Average ASV per Client)
* **Historical growth rate:** 5% to 7% CAGR
* **Key growth levers and headwinds:** Wealth management expansion, private markets data demand, and price increases offset by banking sector headcount reductions.
* **Pricing dynamics:** Contractual annual price increases typically tied to inflation or product enhancements.
* **Revenue recognition notes:** Subscription revenue is recognised rateably over the contract term (typically one to three years).
* **Seasonality:** Q4 (ending August) is typically the strongest quarter for ASV generation due to the enterprise sales cycle and annual budget renewals.

### EMEA

* **Segment name:** EMEA
* **Revenue driver formula:** Beginning EMEA ASV + Net New EMEA ASV
* **Historical growth rate:** 3% to 5% CAGR
* **Key growth levers and headwinds:** Regulatory data requirements and ESG integration, offset by sluggish European macroeconomic growth and asset manager consolidation.
* **Pricing dynamics:** Contractual, but subject to foreign exchange translation effects (GBP and EUR) before constant-currency adjustments.
* **Revenue recognition notes:** Rateable over the contract term.
* **Seasonality:** Similar to Americas, with a heavy weighting towards the fiscal fourth quarter.

### Asia Pacific

* **Segment name:** Asia Pacific
* **Revenue driver formula:** Beginning Asia Pacific ASV + Net New Asia Pacific ASV
* **Historical growth rate:** 8% to 11% CAGR
* **Key growth levers and headwinds:** Emerging market wealth creation and new institutional fund formation, offset by local market data competition.
* **Pricing dynamics:** Contractual, often priced in USD or local currency depending on the jurisdiction.
* **Revenue recognition notes:** Rateable over the contract term.
* **Seasonality:** Less pronounced than Americas, but still follows the fiscal year-end budget cycle.

## Cost Structure



### Variable Costs / COGS

* **Line-by-line breakdown:** Cost of Services includes third-party data collection fees, amortisation of acquired data and technology, computer hardware depreciation, and hosting/cloud infrastructure costs.
* **Gross margin range:** 52% to 54% historically.
* **Key input costs and commodity exposures:** Cloud computing costs (AWS transition) and licensing fees paid to exchanges and third-party data providers.
* **How COGS scales with revenue:** High operating leverage. Once a dataset is integrated, the marginal cost of delivering it to an additional user is near zero, though third-party data fees often scale with user count.

### Operating Expenses

* **R&D:** FactSet does not report R&D as a separate line item; it is embedded within Cost of Services and SG&A. However, capitalised software development costs are material and must be tracked.
* **SG&A:** Reported as "Selling, General and Administrative". It includes sales commissions, marketing, administrative headcount, and professional fees. It typically runs at 20% to 23% of revenue.
* **Depreciation & Amortisation:** Significant due to the CUSIP acquisition. Amortisation of intangible assets runs at approximately 4% to 5% of revenue.
* **Stock-Based Compensation:** Typically 2% to 3% of revenue, heavily weighted towards restricted stock units for senior staff and developers.
* **Restructuring / one-time charges:** Infrequent, but the company occasionally takes real estate impairment charges as it shifts to a hybrid workforce and relocates roles to lower-cost centres (e.g., India, Philippines).

### Margin Profile

* **Gross margin:** 52% to 54%.
* **EBITDA margin:** 36% to 39%.
* **Operating margin:** GAAP operating margin is 31% to 34%; Adjusted operating margin is 36% to 37% (excluding acquisition-related amortisation).
* **Margin trend:** Expanding slowly. Management is committed to a medium-term target of expanding adjusted operating margins through cloud efficiencies and shifting headcount to lower-cost geographies.

## Balance Sheet Structure

* **Total assets:** Approximately $4.3 billion.
* **Key asset categories:** Goodwill and Intangible Assets dominate the balance sheet following the CUSIP acquisition.
* **Goodwill & intangibles as % of total assets:** Approximately 65% to 70%.
* **Working capital profile:**
  * **Days Sales Outstanding (DSO):** 35 to 45 days.
  * **Days Inventory Outstanding (DIO):** 0 days (not applicable).
  * **Days Payable Outstanding (DPO):** 25 to 35 days.
  * **Net working capital as % of revenue:** Structurally negative (typically -5% to -10%) due to high deferred revenue.
  * **Is working capital positive or negative?** Negative. FactSet bills clients annually in advance, creating a deferred revenue liability. This provides a working capital advantage, funding growth internally.
* **PP&E:** Very light (under 5% of assets), consisting mostly of leasehold improvements and computer equipment.
* **Right-of-use assets / operating leases:** Material due to global office footprint, representing approximately $150 million to $200 million.

## Capital Expenditure & Investment

* **Capex as % of revenue:** 3% to 5% (including capitalised software).
* **Maintenance capex vs. growth capex:** Mostly growth capex (capitalised software development for new AI and platform features) and cloud migration costs. Physical maintenance capex is minimal.
* **Major capex programmes underway:** Transition to a fully cloud-based architecture and integration of generative AI features into the workstation.
* **Capitalised software / development costs:** Highly material. FactSet capitalises a significant portion of internal software development, which is then amortised over 3 to 5 years.
* **M&A pattern:** Historically a bolt-on acquirer (e.g., Irwin, LiquidityBook, Cobalt), but capable of transformational deals (CUSIP Global Services).
* **Typical acquisition multiple paid:** 15x to 20x EBITDA for high-quality data assets.

## Debt & Capital Structure

* **Total debt:** Approximately $1.5 billion to $1.7 billion (gross).
* **Debt/EBITDA ratio:** Currently around 1.5x to 1.8x, down from over 2.5x immediately following the CUSIP acquisition.
* **Credit rating:** Investment grade (Baa3/BBB- equivalent).
* **Key debt instruments:** Senior notes and a revolving credit facility.
* **Maturity profile:** Staggered maturities with significant tranches due in the late 2020s and early 2030s.
* **Interest rate profile:** Predominantly fixed-rate senior notes, with a weighted average cost of debt around 3.5% to 4.5%.
* **Covenants:** Standard leverage and interest coverage ratios; currently operating well within limits.
* **Share repurchase programme:** Highly active. The Board recently increased the repurchase authorisation to $1 billion.
* **Dividend policy:** FactSet is a dividend aristocrat, having increased its dividend for over 25 consecutive years. Payout ratio is typically 25% to 30%, yielding around 1.0% to 1.5%.

## Cash Flow Characteristics

* **Operating cash flow conversion:** Consistently >1.1x Net Income.
* **Free cash flow margin:** 25% to 30% of revenue.
* **Major non-cash items:** Depreciation, amortisation of acquired intangibles, stock-based compensation, and deferred taxes.
* **Working capital cash flow impact:** Source of cash. As ASV grows, deferred revenue grows, providing a continuous cash flow tailwind.
* **Capex intensity:** Low. Capital expenditures and capitalised software combined rarely exceed 5% of revenue.
* **Cash tax rate vs. GAAP effective tax rate:** Cash taxes are generally aligned with the GAAP effective tax rate (17% to 18%), though timing differences arise from stock-based compensation deductions.

## Sheet Structure

1. **Assumptions**: Master sheet for all macroeconomic, segment growth, margin, and capital allocation hardcodes.
2. **ASV & Revenue Build**: Calculates Beginning ASV, Net New ASV, and Ending ASV for Americas, EMEA, and Asia Pacific. Converts ASV to GAAP Revenue based on historical realisation rates.
3. **Income Statement**: GAAP format mirroring the 10-K. Revenues, Cost of Services, SG&A, Operating Income, Interest Expense, Tax, and Net Income. Includes a reconciliation to Adjusted Operating Income and Adjusted EPS.
4. **Balance Sheet**: Assets (Cash, Accounts Receivable, PP&E, Operating Lease ROU, Goodwill, Intangibles) and Liabilities (Accounts Payable, Deferred Revenue, Long-Term Debt, Operating Lease Liabilities, Equity).
5. **Cash Flow Statement**: Indirect method. Net Income, D&A, SBC, Working Capital changes (specifically calling out Deferred Revenue), Capex, Capitalised Software, Debt Repayment, Dividends, and Share Repurchases.
6. **Debt & Interest Schedule**: Tracks senior notes, revolving credit facility, interest expense calculation, and mandatory vs. optional principal repayments.
7. **Working Capital & Deferred Revenue**: Detailed schedules for DSO, DPO, and the deferred revenue waterfall (Beginning Balance + Billings - Revenue Recognised = Ending Balance).
8. **PP&E & Intangibles**: Waterfall for gross PP&E, accumulated depreciation, capitalised software, and amortisation of acquisition-related intangibles.
9. **DCF Valuation**: Unlevered free cash flow calculation, WACC build, terminal value (Gordon Growth), and implied share price.

## Key Financial Relationships

1. `Ending ASV = Beginning ASV + Net New ASV` (calculated separately for Americas, EMEA, and Asia Pacific).
2. `GAAP Revenue = (Beginning ASV + Ending ASV) / 2 * Realisation Factor` (Realisation factor is historically ~98-100% as ASV translates to revenue).
3. `Cost of Services = GAAP Revenue * Cost of Services Margin` (historically 46-48%).
4. `SG&A Expense = GAAP Revenue * SG&A Margin` (historically 20-23%).
5. `Adjusted Operating Income = GAAP Operating Income + Amortisation of Acquired Intangibles + Restructuring Charges`.
6. `Deferred Revenue (Ending) = Deferred Revenue (Beginning) + Total Billings - GAAP Revenue`.
7. `Accounts Receivable = (GAAP Revenue / 365) * DSO`.
8. `Capitalised Software Additions = GAAP Revenue * Capitalised Software %`.
9. `Interest Expense = Average Debt Balance * Weighted Average Interest Rate`.
10. `Share Count (Ending) = Share Count (Beginning) - (Share Repurchase Amount / Average Share Price) + Shares Issued for SBC`.
11. `Dividends Paid = Annual Dividend Per Share * Average Share Count`.
12. `Unlevered Free Cash Flow = Adjusted Operating Income * (1 - Tax Rate) + D&A - Capex - Capitalised Software Additions + Change in Net Working Capital`.

## Cross-Sheet Dependencies

* The **ASV & Revenue Build** is the primary engine of the model. It feeds GAAP Revenue into the **Income Statement** and drives Accounts Receivable and Deferred Revenue in the **Working Capital** sheet.
* The **Income Statement** generates Net Income, which feeds the top of the **Cash Flow Statement** and Retained Earnings on the **Balance Sheet**.
* The **Working Capital** sheet calculates the change in NWC, which feeds the **Cash Flow Statement** and **DCF Valuation**.
* The **Debt & Interest Schedule** creates a circular reference: Interest Expense feeds the **Income Statement**, which changes Net Income, which changes Cash Flow, which dictates the cash available for debt paydown or the need for revolver drawdowns, which in turn changes the Debt Balance and Interest Expense.
* The **Cash Flow Statement** ending cash balance links to the **Balance Sheet** cash line to ensure the balance sheet balances.

## Sign Convention

* **Income Statement:** Revenues are positive. All expenses (Cost of Services, SG&A, Interest, Taxes) are entered as positive numbers and subtracted in subtotal formulas (e.g., `Gross Profit = Revenue - Cost of Services`).
* **Balance Sheet:** All assets, liabilities, and equity balances are positive.
* **Cash Flow Statement:** Cash inflows (e.g., Net Income, D&A, increase in Deferred Revenue) are positive. Cash outflows (e.g., Capex, Share Repurchases, Dividends, increase in Accounts Receivable) are negative.
* **Debt Schedule:** Debt balances are positive. Borrowings are positive, repayments are negative.

## Things Most Likely to Go Wrong

1. Confusing ASV with GAAP Revenue. ASV is a forward-looking 12-month metric. The model must translate ASV into recognised GAAP revenue, not use ASV directly on the Income Statement.
2. Mishandling the deferred revenue cash flow benefit. Because FactSet bills upfront, growth in ASV creates a massive cash inflow in working capital. Failing to link deferred revenue growth to cash flow will severely understate Free Cash Flow.
3. Ignoring capitalised software. FactSet capitalises a large portion of its development costs. If these are modelled purely as SG&A expense, operating margins will look artificially low, and cash flow from investing activities will be misstated.
4. Overlooking the amortisation of acquired intangibles. The CUSIP acquisition created significant intangible amortisation. This must be added back to calculate Adjusted Operating Margin (which management guides to) and Unlevered Free Cash Flow.
5. Miscalculating share repurchases. FactSet uses its strong free cash flow to aggressively buy back stock. The model must dynamically reduce the share count, which significantly impacts EPS.
6. Foreign exchange impacts on EMEA and APAC ASV. While the model projects in USD, historical ASV growth in these regions includes FX swings. The model should project on a constant-currency basis to reflect true organic growth.
7. Circularity in the debt schedule. The revolver sweep must be built with a toggle to break the circular reference between interest expense and cash balances.
8. Misaligning client count and user count. FactSet charges based on both enterprise licenses and individual user seats. The model should ensure implied ARPU (Average Revenue Per User) remains logical compared to historical trends.

## Validation Checks

1. "ASV Retention should remain >95%; flag if the implied churn rate exceeds 5%."
2. "Adjusted Operating Margin should be in the 36.0% to 37.0% range based on management guidance; flag if outside this band."
3. "OCF/Net Income conversion should be >1.1x due to deferred revenue dynamics; flag if it drops below 1.0x."
4. "Total Assets = Total Liabilities + Equity in every period (Balance Sheet must balance to zero)."
5. "Effective tax rate should be 17.0% to 18.0%; flag if the model calculates a rate outside this range."
6. "Capex plus Capitalised Software as a % of revenue should run between 3.0% and 5.0%."
7. "Gross Debt/EBITDA should remain below 2.0x; flag if leverage exceeds this threshold."
8. "Dividend payout ratio should remain within 25% to 30% based on stated policy."

## Key Assumptions (Default Values)

| Assumption | Default Value | Unit | Rationale |
|---|---|---|---|
| Americas ASV Growth | 6.0 | % | Aligns with recent organic growth driven by wealth and asset managers. |
| EMEA ASV Growth | 4.0 | % | Reflects recent Q1 FY26 organic growth rate in the region. |
| Asia Pacific ASV Growth | 8.0 | % | Reflects recent Q1 FY26 organic growth rate in the region. |
| Cost of Services Margin | 46.5 | % | Implies a Gross Margin of 53.5%, consistent with recent historical averages. |
| SG&A Margin | 21.0 | % | Consistent with historical run-rate excluding one-time restructuring. |
| Intangible Amortisation % of Rev | 4.5 | % | Based on run-rate amortisation from the CUSIP and other acquisitions. |
| Effective Tax Rate | 17.5 | % | Midpoint of management's FY25/FY26 guidance range (17% to 18%). |
| DSO (Days Sales Outstanding) | 40 | Days | Calculated from historical Accounts Receivable and Revenue. |
| DPO (Days Payable Outstanding) | 30 | Days | Calculated from historical Accounts Payable and Cost of Services. |
| Capex & Cap Software % of Rev | 4.0 | % | Historical average for infrastructure and capitalised development. |
| Average Interest Rate on Debt | 4.0 | % | Weighted average cost of existing senior notes and facility. |
| Annual Share Repurchases | 400 | $ Millions | Run-rate assumption based on the recent $1 billion authorisation. |
| Dividend Payout Ratio | 28.0 | % | Consistent with historical dividend policy and aristocrat status. |
| WACC | 8.5 | % | Standard discount rate for a stable, high-margin data provider. |
| Terminal Growth Rate | 3.0 | % | Reflects long-term pricing power and structural market growth. |

## Data Sources & Benchmarks

* **Filings:** SEC EDGAR (Form 10-K, 10-Q, 8-K) and the FactSet Investor Relations page (investor.factset.com).
* **Key Peers:** S&P Global (SPGI), Moody's (MCO), MSCI Inc. (MSCI), London Stock Exchange Group / Refinitiv (LSEG), Morningstar (MORN).
* **Industry Data:** Burton-Taylor International Consulting reports on financial market data/analysis industry spend and market share.
* **Consensus Estimates:** Visible Alpha or Bloomberg consensus for ASV growth, Adjusted EPS, and Adjusted Operating Margin.

## Sources

* FactSet Research Systems Inc. Form 10-K for the fiscal year ended August 31, 2025 (SEC EDGAR).
* FactSet Q1 Fiscal 2026 Earnings Release (December 18, 2025) - https://investor.factset.com
* FactSet Q1 Fiscal 2026 Earnings Call Transcript (December 18, 2025).
* FactSet Form 10-Q filings for fiscal 2025 and Q1 2026.

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## Frequently asked questions

### What does FactSet Research Systems Inc. do?

FactSet provides financial data, analytics, and open technology platforms to global investment professionals, including asset and wealth managers, and investment banks. The company aggregates third-party data, integrates it with proprietary data, and delivers it through desktop workstations, data feeds, and APIs.

### How does FactSet generate its revenue?

FactSet operates a highly recurring, asset-light subscription business model, with over 95% of its revenue coming from subscriptions. Revenue growth is primarily driven by increases in its Annual Subscription Value (ASV) and operating margin expansion.

### What is FactSet's capital expenditure strategy?

FactSet's capital expenditure typically ranges from 3% to 5% of revenue, including capitalized software development. This capex is mostly growth-oriented, focusing on developing new AI and platform features, as well as transitioning to a fully cloud-based architecture.

### What are the key factors driving FactSet's intrinsic valuation?

The financial model evaluates FactSet's intrinsic equity value and cash flow generation capacity. Key drivers for its valuation include its highly recurring Annual Subscription Value (ASV) growth and consistent operating margin expansion.

### Can I download an Excel financial model for FactSet (FDS)?

Yes, an Excel financial model for FactSet (FDS) is available for download. This model provides a forecast horizon for the company's financials from FY2026 through FY22030.

### How does FactSet's working capital structure benefit the company?

FactSet maintains a structurally negative net working capital, typically ranging from -5% to -10% of revenue. This is primarily due to billing clients annually in advance, which creates a significant deferred revenue liability. This structure provides a working capital advantage, enabling the company to fund growth internally.

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