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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_________________________________________________

Form 10-Q

_________________________________________________

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended February 28, 2023

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______to ______

Commission File Number: 1-11869

_________________________________________________

FACTSET RESEARCH SYSTEMS INC.

(Exact name of registrant as specified in its charter)

_________________________________________________

Delaware	13-3362547
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

45 Glover Avenue, Norwalk, Connecticut	06850
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (203) 810-1000

Former name, former address and former fiscal year, if changed since last report: None

_________________________________________________

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbols(s)	Name of each exchange on which registered
Common Stock, $0.01 Par Value	FDS	New York Stock Exchange LLC
		The Nasdaq Stock Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer x   Accelerated filer ☐   Non-accelerated filer ☐   Smaller reporting company ☐   Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No x

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:

The number of shares outstanding of the registrant’s common stock, $.01 par value, as of March 27, 2023 was 38,319,485.

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FactSet Research Systems Inc.

Form 10-Q

For the Quarter Ended February 28, 2023

Index

		Page
Part I	FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Statements of Income for the three and six months ended February 28, 2023 and 2022	4
	Consolidated Statements of Comprehensive Income for the three and six months ended February 28, 2023 and 2022	5
	Consolidated Balance Sheets at February 28, 2023 and August 31, 2022	6
	Consolidated Statements of Cash Flows for the six months ended February 28, 2023 and 2022	7
	Consolidated Statements of Changes in Stockholders’ Equity for the three and six months ended February 28, 2023 and 2022	8
	Notes to the Consolidated Financial Statements	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	34
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	54
Item 4.	Controls and Procedures	56
Part II	OTHER INFORMATION
Item 1.	Legal Proceedings	56
Item 1A.	Risk Factors	56
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	56
Item 3.	Defaults Upon Senior Securities	57
Item 4.	Mine Safety Disclosures	57
Item 5.	Other Information	57
Item 6.	Exhibits	57
	Signatures	59

For additional information about FactSet Research Systems Inc. and access to its Annual Reports to Stockholders and Securities and Exchange Commission filings, free of charge, please visit FactSet’s website (https://investor.factset.com). Any information on or linked from the website is not incorporated by reference into this Quarterly Report on Form 10-Q.

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Special Note Regarding Forward-Looking Statements

FactSet Research Systems Inc. has made statements under the captions Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations, Part II, Item 1A. Risk Factors, and in other sections of this Quarterly Report on Form 10-Q for the three and six months ended February 28, 2023, that are forward-looking statements. In some cases, you can identify these statements by words such as "may," "might," "will," "should," "expects," "plans," "anticipates," "believes," "estimates," "intends," "projects," "indicates," "predicts," "potential," or "continue," and similar expressions.

These forward-looking statements, which are subject to risks, uncertainties and assumptions about us, may include projections of our future financial performance and anticipated trends in our business. These statements are only predictions based on our current expectations, estimates, forecasts and projections about future events. These statements are not guarantees of future performance and involve a number of risks, uncertainties and assumptions. There are many important factors that could cause our actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied by the forward-looking statements, including the numerous factors discussed under Item 1A. Risk Factors in our Annual Report on Form 10-K for the fiscal year ended August 31, 2022, that should be specifically considered.

Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of any of these forward-looking statements. Forward-looking statements speak only as of the date they are made, and actual results could differ materially from those anticipated in forward-looking statements. We do not intend, and are under no duty, to update any of these forward-looking statements after the date of this Quarterly Report on Form 10-Q to reflect actual results, future events or circumstances, or revised expectations.

We intend that all forward-looking statements we make will be subject to safe harbor protection of the federal securities laws as found in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.

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PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

FactSet Research Systems Inc.

CONSOLIDATED STATEMENTS OF INCOME – Unaudited

	Three Months Ended				Six Months Ended
	February 28,				February 28,
(in thousands, except per share data)	2023		2022		2023		2022
Revenues	$	515,085	$	431,119	$	1,019,900	$	855,844
Operating expenses
Cost of services	240,806		199,413		467,848		406,544
Selling, general and administrative	104,582		98,066		210,178		189,304
Asset impairments	447		10,292		729		13,987
Total operating expenses	345,835		307,771		678,755		609,835
Operating income	169,250		123,348		341,145		246,009
Other income (expense), net
Interest expense, net	(13,834)		(1,673)		(28,166)		(3,167)
Other income (expense), net	1,346		281		1,668		(956)
Total other income (expense), net	(12,488)		(1,392)		(26,498)		(4,123)
Income before income taxes	156,762		121,956		314,647		241,886
Provision for income taxes	25,169		12,018		46,256		24,301
Net income	$	131,593	$	109,938	$	268,391	$	217,585
Basic earnings per common share	$	3.44	$	2.91	$	7.03	$	5.77
Diluted earnings per common share	$	3.38	$	2.84	$	6.89	$	5.63
Basic weighted average common shares	38,281		37,837		38,201		37,685
Diluted weighted average common shares	38,981		38,761		38,947		38,628

The accompanying notes are an integral part of these Consolidated Financial Statements.

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FactSet Research Systems Inc.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME – Unaudited

	Three Months Ended				Six Months Ended
	February 28,				February 28,
(in thousands)	2023		2022		2023		2022
Net income	$	131,593	$	109,938	$	268,391	$	217,585
Other comprehensive income (loss), net of tax
Net unrealized gain (loss) on cash flow hedges*	(2,254)		4,805		4,301		4,810
Foreign currency translation adjustment gains (losses)	3,070		(2,983)		11,839		(21,696)
Other comprehensive income (loss)	816		1,822		16,140		(16,886)
Comprehensive income	$	132,409	$	111,760	$	284,531	$	200,699

*Presented net of a tax benefit of $779 thousand and a tax expense of $468 thousand for the three months ended February 28, 2023 and February 28, 2022, respectively. Presented net of a tax expense of $1,485 thousand and $469 thousand for the six months ended February 28, 2023 and February 28, 2022, respectively.

The accompanying notes are an integral part of these Consolidated Financial Statements.

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FactSet Research Systems Inc.

CONSOLIDATED BALANCE SHEETS – Unaudited

(in thousands, except share data)	February 28, 2023		August 31, 2022
ASSETS
Cash and cash equivalents	$	445,326	$	503,273
Investments	32,022		33,219
Accounts receivable, net of reserves of $3,120 at February 28, 2023 and $2,776 at August 31, 2022	257,408		204,102
Prepaid taxes	41,605		38,539
Prepaid expenses and other current assets	82,293		91,214
Total current assets	858,654		870,347
Property, equipment and leasehold improvements, net	81,790		80,843
Goodwill	977,359		965,848
Intangible assets, net	1,869,774		1,895,909
Deferred taxes	5,662		3,153
Lease right-of-use assets, net	150,174		159,458
Other assets	57,662		38,747
TOTAL ASSETS	$	4,001,075	$	4,014,305
LIABILITIES
Accounts payable and accrued expenses	$	120,223	$	108,395
Current lease liabilities	28,573		29,185
Accrued compensation	63,720		114,808
Deferred revenues	164,190		152,039
Dividends payable	34,099		33,860
Total current liabilities	410,805		438,287
Long-term debt	1,735,609		1,982,424
Deferred taxes	6,600		8,800
Deferred revenues, non-current	6,137		7,212
Taxes payable	34,825		34,211
Long-term lease liabilities	196,669		208,622
Other liabilities	3,276		3,341
TOTAL LIABILITIES	$	2,393,921	$	2,682,897
Commitments and contingencies (see Note 12)
STOCKHOLDERS’ EQUITY
Preferred stock, $0.01 par value, 10,000,000 shares authorized, none issued	$	—	$	—
Common stock, $0.01 par value; 150,000,000 shares authorized; 41,949,883 and 41,653,218 shares issued; 38,313,708 and 38,044,756 shares outstanding at February 28, 2023 and August 31, 2022, respectively	420		417
Additional paid-in capital	1,261,452		1,190,350
Treasury stock, at cost: 3,636,175 and 3,608,462 shares at February 28, 2023 and August 31, 2022, respectively	(942,496)		(930,715)
Retained earnings	1,380,021		1,179,739
Accumulated other comprehensive loss	(92,243)		(108,383)
TOTAL STOCKHOLDERS’ EQUITY	$	1,607,154	$	1,331,408
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	4,001,075	$	4,014,305

The accompanying notes are an integral part of these Consolidated Financial Statements.

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FactSet Research Systems Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS – Unaudited

	Six Months Ended
	February 28,
(in thousands)	2023		2022
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	268,391	$	217,585
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization	52,208		32,827
Amortization of lease right-of-use assets	19,596		22,172
Stock-based compensation expense	27,500		25,937
Deferred income taxes	(6,470)		(3,264)
Asset impairments	729		13,987
Changes in assets and liabilities, net of effects of acquisitions
Accounts receivable, net of reserves	(54,294)		(37,704)
Accounts payable and accrued expenses	12,102		10,183
Accrued compensation	(51,714)		(34,680)
Deferred revenues	11,069		6,201
Taxes payable, net of prepaid taxes	(2,576)		(21,824)
Lease liabilities, net	(22,877)		(23,863)
Other, net	17,650		(12,605)
Net cash provided by operating activities	271,314		194,952
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, equipment, leasehold improvements and capitalized internal-use software	(35,416)		(20,546)
Acquisition of businesses, net of cash and cash equivalents acquired	—		(50,018)
Purchases of investments	(10,889)		(250)
Net cash provided by (used in) investing activities	(46,305)		(70,814)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of debt	(250,000)		—
Dividend payments	(67,478)		(61,448)
Proceeds from employee stock plans	43,605		56,928
Repurchases of common stock	—		(18,639)
Other financing activities	(11,781)		(3,258)
Net cash provided by (used in) financing activities	(285,654)		(26,417)
Effect of exchange rate changes on cash and cash equivalents	2,698		(6,574)
Net increase (decrease) in cash and cash equivalents	(57,947)		91,147
Cash and cash equivalents at beginning of period	503,273		681,865
Cash and cash equivalents at end of period	$	445,326	$	773,012

The accompanying notes are an integral part of these Consolidated Financial Statements.

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FactSet Research Systems Inc.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY- Unaudited

For the Three Months Ended February 28, 2023

(in thousands, except share data)	Common Stock			Additional Paid-in Capital		Treasury Stock			Retained Earnings		Accumulated Other Comprehensive Loss		Total Stockholders’ Equity
	Shares	Par Value				Shares	Amount
Balance as of November 30, 2022	41,848,430	$	418	$	1,225,947	3,634,322	$	(941,705)	$	1,282,527	$	(93,059)	$	1,474,128
Net income									131,593				131,593
Other comprehensive income (loss)											816		816
Common stock issued for employee stock plans	95,543	1		20,180									20,181
Vesting of restricted stock	5,910	1				1,853	(791)						(790)
Stock-based compensation expense				15,325									15,325
Dividends declared									(34,099)				(34,099)
Balance as of February 28, 2023	41,949,883	$	420	$	1,261,452	3,636,175	$	(942,496)	$	1,380,021	$	(92,243)	$	1,607,154
For the Six Months Ended February 28, 2023
(in thousands, except share data)	Common Stock			Additional Paid-in Capital		Treasury Stock			Retained Earnings		Accumulated Other Comprehensive Loss		Total Stockholders’ Equity
	Shares	Par Value				Shares	Amount
Balance as of August 31, 2022	41,653,218	$	417	$	1,190,350	3,608,462	$	(930,715)	$	1,179,739	$	(108,383)	$	1,331,408
Net income									268,391				268,391
Other comprehensive income (loss)											16,140		16,140
Common stock issued for employee stock plans	226,966	2		43,602		410	(166)						43,438
Vesting of restricted stock	69,699	1				27,303	(11,615)						(11,614)
Stock-based compensation expense				27,500									27,500
Dividends declared									(68,109)				(68,109)
Balance as of February 28, 2023	41,949,883	$	420	$	1,261,452	3,636,175	$	(942,496)	$	1,380,021	$	(92,243)	$	1,607,154

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For the Three Months Ended February 28, 2022

(in thousands, except share data)	Common Stock			Additional Paid-in Capital		Treasury Stock			Retained Earnings		Accumulated Other Comprehensive Loss		Total Stockholders’ Equity
	Shares	Par Value				Shares	Amount
Balance as of November 30, 2021	41,372,890	$	414	$	1,094,467	3,600,720	$	(927,505)	$	989,189	$	(57,670)	$	1,098,895
Net income									109,938				109,938
Other comprehensive income (loss)											1,822		1,822
Common stock issued for employee stock plans	111,360	1		21,163		260	(128)						21,036
Vesting of restricted stock	1,011	—				415	(181)						(181)
Stock-based compensation expense				15,536									15,536
Dividends declared									(31,065)				(31,065)
Balance as of February 28, 2022	41,485,261	$	415	$	1,131,166	3,601,395	$	(927,814)	$	1,068,062	$	(55,848)	$	1,215,981
For the Six Months Ended February 28, 2022
(in thousands, except share data)	Common Stock			Additional Paid-in Capital		Treasury Stock			Retained Earnings		Accumulated Other Comprehensive Loss		Total Stockholders’ Equity
	Shares	Par Value				Shares	Amount
Balance as of August 31, 2021	41,163,192	$	412	$	1,048,305	3,547,773	$	(905,917)	$	912,515	$	(38,962)	$	1,016,353
Net income									217,585				217,585
Other comprehensive loss											(16,886)		(16,886)
Common stock issued for employee stock plans	303,709	3		56,924		260	(128)						56,799
Vesting of restricted stock	18,360	—				7,162	(3,130)						(3,130)
Repurchases of common stock						46,200	(18,639)						(18,639)
Stock-based compensation expense				25,937									25,937
Dividends declared									(62,038)				(62,038)
Balance as of February 28, 2022	41,485,261	$	415	$	1,131,166	3,601,395	$	(927,814)	$	1,068,062	$	(55,848)	$	1,215,981

The accompanying notes are an integral part of these Consolidated Financial Statements.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FactSet Research Systems Inc.

February 28, 2023

(Unaudited)

		Page
Note 1	Description of Business	11
Note 2	Summary of Significant Accounting Policies	11
Note 3	Revenue Recognition	12
Note 4	Fair Value Measures	13
Note 5	Derivative Instruments	16
Note 6	Acquisitions	18
Note 7	Goodwill	20
Note 8	Intangible Assets	21
Note 9	Income Taxes	21
Note 10	Leases	22
Note 11	Debt	24
Note 12	Commitments and Contingencies	26
Note 13	Stockholders' Equity	28
Note 14	Earnings Per Share	29
Note 15	Stock-Based Compensation	30
Note 16	Segment Information	32

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1. DESCRIPTION OF BUSINESS

FactSet Research Systems Inc. and its wholly-owned subsidiaries (collectively, "we," "our," "us," the "Company" or "FactSet") is a global financial digital platform and enterprise solutions provider with open and flexible solutions that drive 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.

Fiscal 2023 marks the 45th year our platform has delivered expansive data, sophisticated analytics and flexible technology used by global financial professionals to power their critical investment workflows. As of February 28, 2023, we had more than 7,700 clients comprised of approximately 186,000 investment professionals, including asset managers, bankers, wealth managers, asset owners, channel partners, hedge funds, corporate users, private equity and venture capital professionals. Our on- and off-platform solutions span the investment lifecycle including investment research, portfolio construction and analysis, trade execution, performance measurement, risk management and reporting. Our revenues are primarily derived from subscriptions to our multi-asset class data and solutions powered by our connected content, referred to as our "content refinery." Our products and services include workstations, portfolio analytics and enterprise solutions.

We provide financial data and market intelligence on securities, companies, industries and people to enable our clients to research investment ideas, as well as to analyze, monitor and manage their portfolios. We combine dedicated client service with open and flexible technology offerings, including a configurable desktop and mobile platform, comprehensive data feeds, cloud-based digital solutions and application programming interfaces ("APIs"). Our CUSIP Global Services ("CGS") business supports security master files relied on by the investment industry for critical front, middle and back office functions.

We drive our business based on our detailed understanding of our clients’ workflows, which helps us to solve their most complex challenges. We provide them with an open digital platform, connected and reliable data, next-generation workflow solutions and highly committed service specialists.

We operate our business through three reportable segments ("segments"): the Americas, EMEA and Asia Pacific. Refer to Note 16, Segment Information, for further discussion. For each of our segments, we execute our strategy through three workflow solutions: Research & Advisory; Analytics & Trading; and Content & Technology Solutions ("CTS").

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

We conduct business globally and manage our business on a geographic basis. The accompanying unaudited Consolidated Financial Statements and Notes to the Consolidated Financial Statements included in this Quarterly Report on Form 10-Q are prepared in accordance with generally accepted accounting principles in the United States ("GAAP") for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all information and footnotes required by GAAP for annual financial statements; as such, the information in this Quarterly Report on Form 10-Q should be read in conjunction with the audited Consolidated Financial Statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended August 31, 2022. The accompanying unaudited Consolidated Financial Statements include our accounts and those of our wholly-owned subsidiaries; all intercompany activity and balances have been eliminated.

In the opinion of management, the accompanying unaudited Consolidated Financial Statements include all normal recurring adjustments, transactions or events discretely impacting the interim periods considered necessary to present fairly our results of operations, financial position, cash flows and equity.

Reclassifications

In the Consolidated Statements of Income, we reclassified comparative figures for the three and six months ended February 28, 2022 from both Selling, general and administrative and Cost of services to Asset impairments, primarily related to the impairment of our lease right-of-use ("ROU") assets and property, equipment and leasehold improvements, to conform to the current year's presentation.

Use of Estimates

The preparation of our Consolidated Financial Statements and related disclosures in conformity with GAAP, required management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of

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contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates may have been made in areas that include income taxes, stock-based compensation, goodwill and intangible assets, business combinations, long-lived assets, contingencies and impairment assessments. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results could differ from those estimates.

Concentrations of Credit Risks

Cash equivalents

Financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash and cash equivalents. We are exposed to credit risk for cash and cash equivalents held in financial institutions in the event of a default, to the extent that such amounts are in excess of applicable insurance limits. We have not experienced any losses from maintaining cash accounts in excess of such limits. We do not believe our concentration of cash and cash equivalents presents a significant credit risk as the counterparties to the instruments consist of multiple high-quality, credit-worthy financial institutions.

Accounts Receivable

Our accounts receivable credit risk is dependent upon the financial stability of our individual clients; however, this risk is generally limited due to our large and geographically dispersed client base. No single client represented more than 3% of our total subscription revenues in any period presented. The receivable reserve was $3.1 million and $2.8 million as of February 28, 2023 and August 31, 2022, respectively. We do not require collateral from our clients.

Derivative Instruments

Our use of derivative instruments exposes us to credit risk to the extent counterparties may be unable to meet the terms of their agreements. To mitigate credit risk, we limit counterparties to credit-worthy financial institutions and use several institutions to reduce concentration risk. We do not expect any losses as a result of default by our counterparties.

Concentrations of Data Providers

We integrate data from various third-party sources into our hosted proprietary data and analytics platform, which our clients access to perform their analyses. As certain data sources have a limited number of suppliers, we make every effort to assure that, where reasonable, alternative sources are available. We are not dependent on any individual third-party data supplier in order to meet the needs of our clients, with only two data suppliers each representing more than 10% of our total data costs for the six months ended February 28, 2023.

Recently Adopted Accounting Pronouncements

We did not adopt any new standards or updates issued by the Financial Accounting Standards Board ("FASB") during the three and six months ended February 28, 2023 that had a material impact on our Consolidated Financial Statements.

Accounting Pronouncements Not Yet Adopted

There were no new accounting pronouncements issued or effective as of February 28, 2023 that had, or are expected to have, a material impact on our Consolidated Financial Statements.

3. REVENUE RECOGNITION

We derive most of our revenues by providing client access to our multi-asset class solutions, powered by our content refinery, over the associated contractual term (referred to as the "Hosted Platform"). The Hosted Platform is a subscription-based service that provides client access to various combinations of products and services including workstations, portfolio analytics and enterprise solutions. In addition, through our CGS platform, we provide subscription access to a database of universally recognized identifiers, enabling differentiating characteristics for issuers and their financial instruments (referred to as the "Identifier Platform").

We determined that the majority of each of our Hosted Platform and Identifier Platform services represents a single performance obligation covering a series of distinct products and services that are substantially the same and that have the same pattern of transfer to the client. We also determined the primary nature of the promise to the client is to provide daily access to each of these data and analytics platforms. These platforms provide integrated financial information, analytical applications and industry-leading service for the investment community. Based on the nature of the services and products offered by these platforms, we apply an output time-based measure of progress as the client is simultaneously receiving and consuming the

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benefits of the platform. We recognize revenue for the majority of these platforms in accordance with the 'as invoiced' practical expedient as the amount of consideration that we have the right to invoice corresponds directly with the value of our performance to date.

We do not consider payment terms as a performance obligation for clients with contractual terms that are one year or less and we have elected the practical expedient.

Contracts with clients can include certain fulfillment costs, comprised of up-front costs to allow for the delivery of products and services, which are recoverable. Fulfillment costs are recognized as an asset, with the current portion recorded in Prepaid expenses and other current assets and the non-current portion recorded in Other assets in the Consolidated Balance Sheets, based on the term of the license period. The fulfillment costs are amortized consistent with the associated revenues for providing the services. There are no significant judgments that would impact the timing of revenue recognition.

The majority of client contracts have a duration of one year or the amount we are entitled to receive corresponds directly with the value of performance obligations completed to date, and therefore, we do not disclose the value of the remaining unsatisfied performance obligations. 

Disaggregated Revenues 

We disaggregate revenues from contracts with clients by our segments which consist of the Americas, EMEA and Asia Pacific. We believe these segments are reflective of how we manage our business and the markets in which we serve and best depict the nature, amount, timing and uncertainty of revenues and cash flows related to contracts with clients. Segment revenues reflect sales to our clients based on their respective geographic locations. Refer to Note 16, Segment Information, for further information. 

The following table presents this disaggregation by segment:

	Three Months Ended				Six Months Ended
	February 28,				February 28,
(in thousands)	2023		2022		2023		2022
Americas	$	331,121	$	273,659	$	654,488	$	540,572
EMEA	132,508		114,591		263,246		229,594
Asia Pacific	51,456		42,869		102,166		85,678
Total Revenues	$	515,085	$	431,119	$	1,019,900	$	855,844

4. FAIR VALUE MEASURES

Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability (i.e., the "exit price") in an orderly transaction between market participants at the measurement date. In determining fair value, the use of various valuation methodologies, including market, income and cost approaches, is permissible. We consider the principal or most advantageous market in which we would transact and consider assumptions that market participants would use when pricing the asset or liability. 

Fair Value Hierarchy 

The accounting guidance for fair value measurements establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. There are three levels of inputs that may be used to measure fair value based on the reliability of inputs. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement requires judgment and may affect its placement within the fair value hierarchy levels. We have categorized our cash equivalents, investments and derivatives within the fair value hierarchy as follows: 

Level 1 – applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

Level 2 – applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

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Level 3 – applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

(a) Assets and Liabilities Measured at Fair Value on a Recurring Basis 

The following tables show, by level within the fair value hierarchy, our assets and liabilities that are measured at fair value on a recurring basis as of February 28, 2023 and August 31, 2022. We did not have any transfers between levels of fair value measurements during the periods presented below. We held no Level 3 assets or liabilities measured at fair value on a recurring basis as of February 28, 2023 and August 31, 2022.

	Fair Value Measurements at February 28, 2023
(in thousands)	Level 1		Level 2		Total
Assets
Corporate money market funds(1)	$	163,032	$	—	$	163,032
Mutual funds(2)	—		32,022		32,022
Derivative instruments(3)	—		11,583		11,583
Total assets measured at fair value	$	163,032	$	43,605	$	206,637
Liabilities
Derivative instruments(3)	$	—	$	1,692	$	1,692
Total liabilities measured at fair value	$	—	$	1,692	$	1,692

	Fair Value Measurements at August 31, 2022
(in thousands)	Level 1		Level 2		Total
Assets
Corporate money market funds(1)	$	179,330	$	—	$	179,330
Mutual funds(2)	—		33,219		33,219
Derivative instruments(3)	—		12,412		12,412
Total assets measured at fair value	$	179,330	$	45,631	$	224,961
Liabilities
Derivative instruments(3)	$	—	$	8,307	$	8,307
Total liabilities measured at fair value	$	—	$	8,307	$	8,307

(1) Our corporate money market funds are readily convertible into cash and the net asset value of each fund on the last day of the quarter is used to determine its fair value. Our corporate money market funds are included in Cash and cash equivalents within the Consolidated Balance Sheets.

(2) Our mutual funds' fair value is based on the fair value of the underlying investments held by the mutual funds, allocated to each share of the mutual fund using a net asset value approach. The fair value of the underlying investments is based on observable inputs. Our mutual funds are included in Investments (short-term) within the Consolidated Balance Sheets.

(3) Our derivative instruments include our foreign exchange forward contracts and interest rate swap agreements. We utilize the income approach to measure fair value for our foreign exchange forward contracts. The income approach uses pricing models that rely on market observable inputs such as spot, forward and interest rates, as well as credit default swap spreads. To estimate fair value for our interest rate swap agreements, we utilize a present value of future cash flows, leveraging a model-derived valuation that uses observable inputs such as interest rate yield curves. Refer to Note 5, Derivative Instruments, for more information on our derivative instruments and their classification within the Consolidated Balance Sheets.

(b) Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis

Assets and liabilities that are measured at fair value on a non-recurring basis relate primarily to our tangible fixed assets, lease ROU assets, goodwill and intangible assets. The fair values of these non-financial assets and liabilities are determined based on valuation techniques using the best information available, and may include quoted market prices, market comparable information and discounted cash flow projections. These non-financial assets are required to be assessed for impairment whenever events or circumstances indicate their carrying value may not be fully recoverable, and at least annually for goodwill.

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Asset impairments incurred during the three and six months ended February 28, 2022 were $10.3 million and $14.0 million, respectively, with no similar level of impairment recorded during the three and six ended February 28, 2023. The asset impairments recognized during the three and six months ended February 28, 2022 included a respective $9.7 million and $13.4 million charge related to our lease ROU assets and property, equipment and leasehold improvements associated with vacating certain leased office space. For those locations we anticipated subleasing, we estimated the fair value of the lease ROU assets as of the cease use date, using a market approach, based on expected future cash flows from sublease income. To complete this assessment we relied on certain assumptions, which included estimates of the rental rate, period of vacancy, incentives and annual rent increases. We fully impaired the lease ROU assets for locations we will not sublease and substantially all the property, equipment and leasehold improvements associated with the related vacated leased office space as there are no expected cash flows related to these items. Due to the subjective nature of the unobservable inputs used, the fair value measurement for the asset impairments are classified within Level 3 of the fair value hierarchy.

(c) Assets and Liabilities Measured at Fair Value for Disclosure Purposes Only 

We elected not to carry our Long-term debt at fair value. The carrying value of our Long-term debt is net of related unamortized discount and debt issuance costs.

The fair value of our Senior Notes is estimated based on quoted prices in active markets as of the reporting date, given that the Senior Notes are publicly traded, which are considered Level 1 inputs. The fair value of our 2022 Credit Facilities is estimated based on quoted market prices for similar instruments, adjusted for unobservable inputs to ensure comparability to our investment rating, maturity terms and principal outstanding, which are considered Level 3 inputs. Refer to Note 11, Debt for definitions of these terms and more information on the Senior Notes and 2022 Credit Facilities.

The following table summarizes information on our outstanding debt as of February 28, 2023 and August 31, 2022:

		February 28, 2023				August 31, 2022
(in thousands)	Fair Value Hierarchy	Principal Amount		Estimated Fair Value		Principal Amount		Estimated Fair Value
2027 Notes	Level 1	$	500,000	$	460,470	$	500,000	$	470,525
2032 Notes	Level 1	500,000		419,705		500,000		438,205
2022 Term Facility	Level 3	500,000		503,125		750,000		750,975
2022 Revolving Facility	Level 3	250,000		248,438		250,000		249,075
Total principal amount		$	1,750,000	$	1,631,738	$	2,000,000	$	1,908,780
Total unamortized discounts and debt issuance costs		(14,391)				(17,576)
Total net carrying value of debt		$	1,735,609			$	1,982,424

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5. DERIVATIVE INSTRUMENTS

Cash Flow Hedges 

In designing our hedging approach, we consider several factors, including offsetting exposures, the significance of exposures, the forecasting of risk and the potential effectiveness of the hedge to reduce the volatility of our earnings and cash flows. Factors considered in the decision to hedge an underlying market exposure include the materiality of the risk, the volatility of the market, the duration of the hedge, the degree to which the underlying exposure is committed to, and the availability, effectiveness and cost of derivative instruments. Derivative instruments are only utilized for risk management purposes and are not used for speculative or trading purposes. We limit counterparties to credit-worthy financial institutions. Refer to Note 2, Summary of Significant Accounting Policies - Concentrations of Credit Risk, for further discussion on counterparty credit risk. 

We leverage foreign currency forward contracts and interest rate swaps to mitigate certain operational exposures from the impact of changes in foreign currency exchange rates and to manage our interest rate exposure. We have designated and accounted for these derivatives as cash flow hedges with the unrealized gains or losses recorded in Accumulated Other Comprehensive Loss ("AOCL"), net of tax, in the Consolidated Balance Sheets. Realized gains or losses resulting from settlement of our forward contracts and swap agreements are subsequently reclassified into Selling, general and administrative ("SG&A") and Interest expense, net, respectively, in the Consolidated Statements of Income when the hedges are settled.

Foreign Currency Forward Contracts

As we conduct business outside the U.S. in several currencies, we are exposed to movements in foreign currency exchange rates. The gains and losses on foreign currency forward contracts offset the variability in operating expenses associated with currency movements. As of February 28, 2023, we maintained a series of foreign currency forward contracts to hedge a portion of our exposures related to our primary currencies of the British Pound Sterling, Indian Rupee, Euro and Philippine Peso. We entered into these contracts to mitigate our currency exposure ranging from 25% to 75%, over their respective hedged periods, which are set to mature at various points between the third quarter of fiscal 2023 through the second quarter of fiscal 2024.

The following table summarizes the gross notional value of foreign currency forward contracts to purchase British Pound Sterling, Euros, Indian Rupees and Philippine Pesos with U.S. dollars as of February 28, 2023 and August 31, 2022.

	February 28, 2023				August 31, 2022
(in thousands)	Local Currency		USD		Local Currency		USD
British Pound Sterling	£	46,000	$	55,491	£	44,200	$	55,567
Euro	€	37,500	39,877		€	37,500	40,679
Indian Rupee	Rs	2,987,143	36,200		Rs	2,667,928	33,600
Philippine Peso	₱	1,767,455	31,600		₱	1,462,060	27,000
Total			$	163,168			$	156,846

Refer to Foreign Currency Transaction Risk in Item 3. Quantitative and Qualitative Disclosures About Market Risk of this Quarterly Report on Form 10-Q for further discussion of our exposure to foreign exchange rate fluctuations.

Interest Rate Swap Agreements

2022 Swap Agreement

On March 1, 2022, we entered into an interest rate swap agreement ("2022 Swap Agreement") with a notional amount of $800.0 million to hedge a portion of our outstanding floating Secured Overnight Financing Rate ("SOFR") rate debt with a fixed interest rate of 1.162%. The notional amount of the 2022 Swap Agreement declines by $100.0 million on a quarterly basis as of May 31, 2022 and is maturing on February 28, 2024. Effective December 30, 2022, we partially novated our 2022 Swap Agreement to equally apportion the then outstanding notional amount of the interest rate swap between two counterparties. No other terms of the 2022 Swap Agreement were amended, terminated, or otherwise modified. As of February 28, 2023, the notional amount of the 2022 Swap Agreement was $400.0 million.

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2020 Swap Agreement

On March 5, 2020, we entered into an interest rate swap agreement ("2020 Swap Agreement") with a notional amount of $287.5 million. The 2020 Swap Agreement hedged a portion of our then outstanding floating LIBOR rate debt with a fixed interest rate of 0.7995% to mitigate our interest rate exposure. On March 1, 2022, we terminated the 2020 Swap Agreement, which resulted in a one-time benefit of $3.5 million recognized in Interest expense, net in the Consolidated Statements of Income during the third quarter of fiscal 2022, based on its fair market value.

Refer to Note 11, Debt, for further discussion of our outstanding floating SOFR rate debt. Refer to Interest Rate Risk in Part I, Item 3. Quantitative and Qualitative Disclosures About Market Risk of this Quarterly Report on Form 10-Q for further discussion of our exposure to interest rate risk on our long-term debt outstanding.

Gross Notional Value and Fair Value of Derivative Instruments

The following is a summary of the gross notional values of the derivative instruments:

(in thousands)	Gross Notional Value
	February 28, 2023		August 31, 2022
Foreign currency forward contracts	$	163,168	$	156,846
Interest rate swap agreement	400,000		600,000
Total cash flow hedges	$	563,168	$	756,846

The following is a summary of the fair values of our derivative instruments:

	Fair Value of Derivative Instruments
(in thousands)	Derivative Assets					Derivative Liabilities
Derivatives designated as hedging instruments	Balance Sheet Classification	February 28, 2023		August 31, 2022		Balance Sheet Classification	February 28, 2023		August 31, 2022
Foreign currency forward contracts	Prepaid expenses and other current assets	$	1,738	$	—	Accounts payable and accrued expenses	$	1,692	$	8,307
Interest rate swap agreement	Prepaid expenses and other current assets	9,845		10,621		Accounts payable and accrued expenses	—		—
	Other assets	—		1,791		Other liabilities	—		—
Total cash flow hedges		$	11,583	$	12,412		$	1,692	$	8,307

All derivatives were designated as hedging instruments as of February 28, 2023 and August 31, 2022.

Derivative Recognition

The following table provides the pre-tax effect of derivative instruments in cash flow hedging relationships for the three months ended February 28, 2023 and February 28, 2022, respectively:

	Gain (Loss) Recognized in AOCL on Derivatives				Location of Gain (Loss) Reclassified from AOCL into Income	Gain (Loss) Reclassified from AOCL into Income
(in thousands)	February 28,					February 28,
Derivatives in Cash Flow Hedging Relationships	2023		2022			2023		2022
Foreign currency forward contracts	$	(215)	$	(34)	SG&A	$	(279)	$	(1,014)
Interest rate swap agreement	848		3,795		Interest expense, net	3,945		(498)
Total cash flow hedges	$	633	$	3,761		$	3,666	$	(1,512)

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The following table provides the pre-tax effect of derivative instruments in cash flow hedging relationships for the six months ended February 28, 2023 and February 28, 2022, respectively:
	Gain (Loss) Reclassified in AOCL on Derivatives				Location of Gain (Loss) Reclassified from AOCL into Income	Gain (Loss) Reclassified from AOCL into Income
(in thousands)	February 28,					February 28,
Derivatives in Cash Flow Hedging Relationships	2023		2022			2023		2022
Foreign currency forward contracts	$	3,108	$	(3,576)	SG&A	$	(5,244)	$	(1,463)
Interest rate swap agreement	4,276		6,378		Interest expense, net	6,842		(1,014)
Total cash flow hedges	$	7,384	$	2,802		$	1,598	$	(2,477)

As of February 28, 2023, we estimate that net pre-tax derivative gains of $9.9 million included in AOCL will be reclassified into earnings within the next 12 months. As of February 28, 2023, our cash flow hedges were highly effective with no amount of ineffectiveness recorded in the Consolidated Statements of Income for these designated cash flow hedges and all components of each derivative’s gain or loss were included in the assessment of hedge effectiveness. There was no discontinuance of our cash flow hedges during the six months ended February 28, 2023 or February 28, 2022, and as such, no corresponding gains or losses related to changes in the value of our contracts were reclassified into earnings prior to settlement. 

Offsetting of Derivative Instruments

We enter into master netting arrangements designed to permit net settlement of derivative transactions among the respective counterparties, settled on the same date and in the same currency. As of February 28, 2023 and August 31, 2022, there were no material amounts recorded net on the Consolidated Balance Sheets.

6. ACQUISITIONS

During fiscal 2022, we completed acquisitions of CUSIP Global Services ("CGS") and Cobalt Software, Inc. ("Cobalt").

CUSIP Global Services

On March 1, 2022, we completed the acquisition of CGS for a cash purchase price of $1.932 billion, inclusive of working capital adjustments. 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, operating on behalf of the American Bankers Association ("ABA"), is the provider of Committee on Uniform Security Identification Procedures ("CUSIP") and CUSIP International Number System ("CINS") identifiers globally and also acts as the official numbering agency for International Securities Identification Number ("ISIN") identifiers in the United States and as a substitute number agency for more than 35 other countries. We believe that the CGS acquisition will significantly expand our critical role in the global capital markets. The CGS purchase price was in excess of the fair value of net assets acquired, resulting in the recognition of goodwill. We finalized the purchase accounting for the CGS acquisition during the fourth quarter of fiscal 2022 and did not record any material changes to the preliminary purchase price allocation.

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The acquisition date fair values of major classes of assets acquired and liabilities assumed are as follows:

	Acquisition Date Fair Value		Acquisition Date Useful Life	Amortization Method
	(in thousands)		(in years)
Current assets(1)	$	29,728
Amortizable intangible assets
ABA business process	1,583,000		36 years	Straight-line
Client relationships	164,000		26 years	Straight-line
Acquired databases	46,000		15 years	Straight-line
Goodwill	214,970
Current liabilities(2)	(104,691)
Deferred revenues, long-term	(1,481)
Total purchase price	$	1,931,526

(1) Includes an accounts receivable balance of $29.5 million.

(2) Includes a deferred revenues balance of $99.4 million. The CGS acquisition was accounted for in accordance with our adoption of ASU No. 2021-08; as such, the deferred revenues did not include a fair value adjustment. Refer to Note 2, Significant Accounting Policies in the Notes included in Item 8. of our Annual Report on Form 10-K for the fiscal year ended August 31, 2022 for more information on ASU No. 2021-08.

Goodwill totaling $215.0 million represents the excess of the CGS purchase price over the fair value of net assets acquired and considers future economic benefits that we expect to achieve as a result of the acquisition. The goodwill is included in the Americas segment and is deductible for income tax purposes. The majority of the net assets acquired relate to an ABA business process intangible which is a renewable license agreement with the ABA to manage the issuance, maintenance and access to the CUSIP numbering system and related database of CUSIP identifiers. This intangible asset's valuation and associated useful life considers the nature of the business relationship, multi-year term of the current agreement and the likelihood of long-term renewals. The useful life assigned to the Client relationships intangible asset considers the strong historical client retention and client renewals as a basis for expected future retention. The useful life assigned to Acquired databases considers the historical period of data collection and the limited changes to the data on an annual basis.

The results of CGS's operations have been included in our Consolidated Financial Statements, within the Americas, EMEA and Asia Pacific segments, beginning with the closing of the acquisition on March 1, 2022. CGS functions as part of CTS. Pro forma information has not been presented because the effect of the CGS acquisition was not material to our Consolidated Financial Statements.

Cobalt Software, Inc.

On October 12, 2021, we acquired all of the outstanding shares of Cobalt for a purchase price of $50.0 million, net of cash acquired, and inclusive of working capital adjustments. Cobalt is a leading portfolio monitoring solutions provider for the private capital industry. This acquisition aligned with 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. The Cobalt purchase price was in excess of the fair value of net assets acquired, resulting in the recognition of goodwill. We finalized the purchase accounting for the Cobalt acquisition during the fourth quarter of fiscal 2022 and did not record any material changes to the preliminary purchase price allocation.

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The acquisition date fair values of major classes of assets acquired and liabilities assumed are as follows:

	Acquisition Date Fair Value		Acquisition Date Useful Life	Amortization Method
	(in thousands)		(in years)
Current assets	$	540
Amortizable intangible assets
Software technology	7,750		5 years	Straight-line
Client relationships	4,800		11 years	Straight-line
Goodwill	41,338
Other assets	34
Current liabilities	(4,437)
Other liabilities	(7)
Total purchase price	$	50,018

Goodwill totaling $41.3 million represents the excess of the Cobalt purchase price over the fair value of net assets acquired and is included in the Americas and EMEA segments. Goodwill generated from the Cobalt acquisition is not deductible for income tax purposes. The useful life assigned to the Client relationships intangible asset considers the historical client retention as a basis for expected future retention. The useful life assigned to Software technology considers our historical experience and anticipated technological changes.

The results of Cobalt's operations have been included in our Consolidated Financial Statements, within the Americas and EMEA segments, beginning with its acquisition on October 12, 2021. Pro forma information has not been presented because the effect of the Cobalt acquisition was not material to our Consolidated Financial Statements.

7. GOODWILL

Changes in the carrying amount of goodwill by segment for the six months ended February 28, 2023 are as follows:

(in thousands)	Americas		EMEA		Asia Pacific		Total
Balance at August 31, 2022	$	686,412	$	277,087	$	2,349	$	965,848
Foreign currency translations	—		11,463		48		11,511
Balance at February 28, 2023	$	686,412	$	288,550	$	2,397	$	977,359

Goodwill is not amortized as it is estimated to have an indefinite life. At least annually, we are required to test goodwill at the reporting unit level, which is consistent with our segments, for potential impairment, and, if impaired, we write down our goodwill to fair value based on the present value of discounted cash flows. We performed our annual goodwill impairment test during the fourth quarter of fiscal 2022 utilizing a qualitative analysis, consistent with the timing and methodology of previous years. We concluded it was more likely than not that the fair value of each of our segments was not less than its respective carrying value and no impairment charge was required.

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8. INTANGIBLE ASSETS

We amortize intangible assets on a straight line basis over their estimated useful lives. The estimated useful life, gross carrying amounts and accumulated amortization totals related to our identifiable intangible assets are as follows:

		February 28, 2023						August 31, 2022
(in thousands, except useful lives)	Estimated Useful Life (years)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
ABA business process	36	$	1,583,000	$	43,972	$	1,539,028	$	1,583,000	$	21,986	$	1,561,014
Client relationships	11 to 26	263,825		62,102		201,723		263,163		55,405		207,758
Software technology	2 to 9	123,463		101,985		21,478		122,363		96,567		25,796
Developed technology	3 to 5	96,981		41,654		55,327		80,956		33,676		47,280
Acquired databases	15	46,000		3,067		42,933		46,000		1,533		44,467
Data content	7 to 20	33,625		26,704		6,921		32,305		24,973		7,332
Trade names	15	6,759		4,395		2,364		6,693		4,431		2,262
Total		$	2,153,653	$	283,879	$	1,869,774	$	2,134,480	$	238,571	$	1,895,909

The weighted average useful life of our intangible assets at February 28, 2023 was 32.8 years. As described in Note 6, Acquisitions, we acquired several intangible assets as part of the CGS acquisition. The weighted average useful life of our intangible assets at February 28, 2023, excluding those acquired from CGS, was 9.3 years. We assess intangible assets for indicators of impairment on a quarterly basis, including an evaluation of our useful lives to determine if events and circumstances warrant a revision to the remaining period of amortization. If indicators of impairment are present, amortizable intangible assets are tested for impairment by comparing the carrying value to undiscounted cash flows and, if impaired, written down to fair value based on discounted cash flows. We have not identified a material impairment nor a material change to the estimated remaining useful lives of our intangible assets for the six months ended February 28, 2023 and February 28, 2022. The intangible assets have no assigned residual values.

Amortization expense recorded for intangible assets for the three months ended February 28, 2023 and February 28, 2022 was $21.7 million and $9.1 million, respectively. Amortization expense for intangible assets for the six months ended February 28, 2023 and February 28, 2022 was $43.4 million and $19.2 million, respectively.

As of February 28, 2023, estimated intangible asset amortization expense for each of the next five years and thereafter are as follows:

(in thousands)	Estimated Amortization Expense
Fiscal Years Ended August 31,
2023 (remaining six months)	$	46,853
2024	85,169
2025	78,644
2026	70,020
2027	63,279
Thereafter	1,525,809
Total	$	1,869,774

9. INCOME TAXES

Income tax expense is based on taxable income determined in accordance with current enacted laws and tax rates. Deferred income taxes are recorded for the temporary differences between the financial statement and the tax bases of assets and liabilities using currently enacted tax rates.

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Income Tax Provision and Effective Tax Rate

The provision for income taxes and effective tax rate are as follows:

	Three Months Ended						Six Months Ended
	February 28,						February 28,
(in thousands)	2023			2022			2023			2022
Income before income taxes	$	156,762		$	121,956		$	314,647		$	241,886
Provision for income taxes	$	25,169		$	12,018		$	46,256		$	24,301
Effective tax rate	16.1		%	9.9		%	14.7		%	10.0		%

We are subject to taxation in the United States and various foreign jurisdictions in which we conduct our business. Our provision for income taxes for interim periods is calculated by applying an estimate of our annual effective tax rate to our quarter and year-to-date results, adjusted for discrete items recorded in the period. The computation of the annual estimated effective tax rate at each interim period requires certain estimates and assumptions including, but not limited to, the expected pretax income (or loss) for the year, projections of the proportion of income (or loss) earned and taxed in foreign jurisdictions, permanent and temporary differences and the likelihood of recovering deferred tax assets, then adjusted for any discrete items. On a quarterly basis, we update the estimate of our annual effective tax rate as new events occur, assumptions change, or additional information is obtained.

For the three months ended February 28, 2023, the effective tax rate was 16.1% compared to 9.9% for the same period a year ago. For the six months ended February 28, 2023, the effective tax rate was 14.7% compared to 10.0% for the same period a year ago. For all periods presented, our effective tax rate was lower than the applicable U.S. corporate income tax rate, mainly due to research and development ("R&D") tax credits, a foreign derived intangible income ("FDII") deduction, and a tax benefit from the exercise of stock options.

Our effective tax rate during the three and six months ended February 28, 2023 was higher than the rate during the respective prior year periods, due mainly to a decrease in the impact of tax attributes on the effective tax rate as a result of an increase in income, a lower tax benefit from the exercise of stock options and an increase in the U.K.'s enacted tax rates.

Inflation Reduction Act of 2022

On August 16, 2022, the Inflation Reduction Act ("IRA") was signed into law. The IRA contains several revisions to the Internal Revenue Code effective for taxable years beginning after December 31, 2022, including a 15% minimum income tax on certain large corporations. The IRA also includes a 1% excise tax on corporate stock repurchases made by publicly traded U.S. corporations after December 31, 2022. We do not expect the IRA to have a material impact on our Consolidated Financial Statements.

10. LEASES

Our lease portfolio is primarily related to our office space, under various operating lease agreements. We review new arrangements at inception to evaluate whether we obtain substantially all the economic benefits of and have the right to control the use of an asset. Our lease ROU assets and lease liabilities are recognized based on the present value of future minimum lease payments at lease commencement (which includes fixed lease payments and certain qualifying index-based variable payments) over the reasonably certain lease term, leveraging an estimated IBR. Certain adjustments to calculate our lease ROU assets may be required due to prepayments, lease incentives received and initial direct costs incurred. We account for the lease and non-lease components as a single lease component, which we recognize over the expected term on a straight-line expense basis in occupancy costs (a component of SG&A expense) in our Consolidated Statements of Income.

As of February 28, 2023, we recognized $150.2 million of Lease right-of-use assets, net and $225.2 million of combined Current lease liabilities and Long-term lease liabilities in the Consolidated Balance Sheets. Such leases have a remaining lease term ranging from less than one year to just under 13 years and did not include any renewal or termination options that were not yet reasonably certain to be exercised.

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The following table reconciles our future undiscounted cash flows related to our operating leases and the reconciliation to the combined Current lease liabilities and Long-term lease liabilities in the Consolidated Balance Sheets as of February 28, 2023:

(in thousands)	Minimum Lease Payments
Fiscal Years Ended August 31,
2023 (remaining six months)	$	19,171
2024	35,952
2025	33,864
2026	33,043
2027	31,777
Thereafter	114,427
Total	$	268,234
Less: Imputed interest	42,992
Present value	$	225,242

The following table includes the components of our occupancy costs in our Consolidated Statements of Income:

	Three Months Ended				Six Months Ended
	February 28,				February 28,
(in thousands)	2023		2022		2023		2022
Operating lease cost(1)	$	8,156	$	10,221	$	16,233	$	20,699
Variable lease cost(2)	$	3,834	$	2,858	$	8,054	$	5,748

(1)    Operating lease costs include costs associated with fixed lease payments and index-based variable payments that qualified for lease accounting under ASC 842, Leases and complied with the practical expedients and exceptions elected by us.

(2)    Variable lease costs include costs that were not fixed at the lease commencement date and are not dependent on an index or rate. These costs were not included in the measurement of lease liabilities and primarily include variable non-lease costs, such as utilities, real estate taxes, insurance and maintenance, as well as lease costs for those leases that qualified for the short-term lease exception.

The following table summarizes our lease term and discount rate assumptions related to the operating leases recorded on the Consolidated Balance Sheets:

	As of February 28, 2023		As of August 31, 2022
Weighted average remaining lease term (in years)	8.2		8.6
Weighted average discount rate (IBR)	4.4	%	4.4	%

The following table summarizes supplemental cash flow information related to our operating leases:

	Six Months Ended
	February 28,
(in thousands)	2023		2022
Cash paid for amounts included in the measurement of lease liabilities	$	19,596	$	22,172
Lease ROU assets obtained in exchange for lease liabilities(1)	$	1,379	$	2,680
Reductions to ROU assets resulting from reductions to lease liabilities(2)	$	—	$	(8,893)

(1)Primarily includes new lease arrangements entered into during the period and contract modifications that extend our lease terms and/or provide additional rights.

(2)Primarily relates to lease term reassessments based on contractual options to early terminate, resulting in a reduction to the lease liability and the corresponding lease ROU asset.

During the three and six months ended February 28, 2022, we incurred an impairment charge of $5.8 million and $7.2 million, respectively, related to our lease ROU assets associated with vacating certain leased office space. Refer to Note 4, Fair Value Measures for more information on the lease ROU assets impairment methodology. The were no similar lease ROU asset impairments recorded during the three and six months ended February 28, 2023.

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11. DEBT

We elected not to carry our Long-term debt at fair value. The carrying value of our debt is net of related unamortized discount and debt issuance costs. Our total debt obligations as of February 28, 2023 and August 31, 2022 consisted of the following:

(in thousands)	Issuance Date	Contractual Maturity Date	February 28, 2023		August 31, 2022
2022 Credit Agreement
2022 Term Facility	3/1/2022	3/1/2025	500,000		750,000
2022 Revolving Facility	3/1/2022	3/1/2027	250,000		250,000
Senior Notes
2027 Notes	3/1/2022	3/1/2027	500,000		500,000
2032 Notes	3/1/2022	3/1/2032	500,000		500,000
Total unamortized discounts and debt issuance costs			(14,391)		(17,576)
Total Long-term debt			$	1,735,609	$	1,982,424

As of February 28, 2023, annual maturities on our total debt obligations, based on contract maturity, were as follows:

(in thousands)	Maturities
Fiscal Years Ended August 31,
2023 (remaining six months)	$	—
2024	—
2025	500,000
2026	—
2027	750,000
Thereafter	500,000
Total	$	1,750,000

2022 Credit Agreement

On March 1, 2022, we entered into a credit agreement (the "2022 Credit Agreement") and borrowed an aggregate principal amount of $1.0 billion under its senior unsecured term loan credit facility (the "2022 Term Facility") and $250.0 million of the available $500.0 million under its senior unsecured revolving credit facility (the "2022 Revolving Facility" and, together with the 2022 Term Facility, the “2022 Credit Facilities”). The 2022 Term Facility matures on March 1, 2025, and the 2022 Revolving Facility matures on March 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.

We pay a commitment fee on the daily unused amount of the 2022 Revolving Facility using a pricing grid based on our senior unsecured non-credit enhanced long-term debt rating and our total leverage ratio. The commitment fee remained consistent at 0.125% from the borrowing date through February 28, 2023.

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 (as defined below) and to pay related transaction fees, costs and expenses.

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During fiscal 2022, we incurred approximately $9.5 million in debt issuance costs related to the 2022 Credit Facilities. Debt issuance costs are presented in the Consolidated Balance Sheets as a direct deduction from the carrying amount of the debt liability. Debt issuance costs are amortized to Interest expense, net in the Consolidated Statements of Income on a straight-line basis over the contractual term of the debt, which approximates the effective interest method.

We may voluntarily prepay loans under the 2022 Credit Facilities at any time without premium or penalty. During the three and six months ended February 28, 2023, we repaid $125.0 million and $250.0 million, respectively, under the 2022 Term Facility, inclusive of voluntary prepayments of $112.5 million and $225.0 million, respectively. Since loan inception on March 1, 2022, we have repaid $500.0 million under the 2022 Term Facility, inclusive of voluntary prepayments of $462.5 million.

As of February 28, 2023, the outstanding borrowings under the 2022 Credit Facilities bore interest at a rate equal to the applicable one-month Term SOFR rate plus a 1.1% spread (comprised of a 1.0% interest rate margin based on a debt leverage pricing grid plus a 0.1% credit spread adjustment). The spread remained consistent from the borrowing date through February 28, 2023. Interest on the 2022 Credit Facilities is currently payable on the last business day of each month, in arrears.

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.

The 2022 Credit Agreement contains usual and customary affirmative and negative covenants for facilities of this type, including a financial covenant requiring maintenance of a total leverage ratio of no greater than 4.00 to 1.00 as of February 28, 2023. We were in compliance with all covenants and requirements of the 2022 Credit Agreement as of February 28, 2023.

Swap Agreements

On March 5, 2020, we entered into the 2020 Swap Agreement to hedge a portion of our then outstanding floating LIBOR rate debt with a fixed interest rate of 0.7995%. On March 1, 2022, we terminated the 2020 Swap Agreement and concurrently 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%. Effective December 30, 2022, we apportioned the then outstanding notional amount of the 2022 Swap Agreement between two counterparties. Refer to Note 5, Derivative Instruments for further discussion of the 2020 Swap Agreement and 2022 Swap Agreement.

Senior Notes

On March 1, 2022 we completed a public offering of $500.0 million aggregate principal amount of 2.900% Senior Notes due March 1, 2027 (the “2027 Notes”) and $500.0 million aggregate principal amount of 3.450% Senior Notes due March 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 of March 1, 2022, by and between us and U.S. Bank Trust Company, National Association, as trustee (the "Trustee"), as supplemented by the supplemental indenture, dated as of March 1, 2022, between us and the Trustee (the "Supplemental Indenture").

The Senior Notes were issued at an aggregate discount of $2.8 million during fiscal 2022 and we incurred approximately $9.1 million in debt issuance costs. Debt discounts and debt issuance costs are presented in the Consolidated Balance Sheets as a net direct deduction from the carrying amount of the debt liability. The debt discounts and debt issuance costs are amortized to Interest expense, net in the Consolidated Statements of Income over the contractual term of the debt, leveraging the effective interest method.

Interest on the Senior Notes is payable semiannually in arrears on March 1 and September 1 of each year, with the first payment made on September 1, 2022.

We may redeem the Senior Notes, in whole or in part, at any time at specified redemption prices, plus any accrued and unpaid interest. 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 any accrued and unpaid interest.

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2019 Credit Agreement

On March 29, 2019, we entered into a credit agreement with PNC Bank, National Association (the "2019 Credit Agreement") and borrowed $575.0 million of the available $750.0 million provided by the revolving credit facility thereunder (the "2019 Revolving Credit Facility"). 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. We incurred approximately $0.9 million in debt issuance costs related to the 2019 Credit Agreement.

On March 1, 2022, we terminated the 2019 Credit Agreement and amortized the remaining related $0.4 million of capitalized debt issuance costs into Interest expense, net in the Consolidated Statements of Income.

Interest Expense

On March 1, 2022, the 2019 Revolving Credit Facility and 2020 Swap Agreement were both terminated and concurrently replaced with the 2022 Credit Facilities, Senior Notes and 2022 Swap Agreement.

The following table presents the interest expense on our outstanding debt which is included in Interest expense, net in our Consolidated Statements of Income:

	Three Months Ended				Six Months Ended
	February 28,				February 28,
(in thousands)	2023		2022		2023		2022
Interest expense on outstanding debt(1)	$	16,728	$	1,908	$	33,256	$	3,826

(1)    Interest expense on our outstanding debt includes the related amortization of debt issuance costs and debt discounts, net of the effects of the related interest rate swap agreements.

Including the related amortization of debt issuance costs and debt discounts, net of the effects of the related interest rate swap agreement, the year-to-date weighted average interest rate on amounts outstanding under our outstanding debt was 3.26% and 2.02% as of February 28, 2023 and August 31, 2022, respectively. Refer to Note 5, Derivative Instruments for further discussion of the 2020 Swap Agreement and 2022 Swap Agreement.

12. COMMITMENTS AND CONTINGENCIES

Commitments represent obligations, such as those for future purchases of goods or services, that are not yet recorded on the balance sheet as liabilities. We record liabilities for commitments when incurred (i.e., when the goods or services are received).

We accrue non-income-tax liabilities for contingencies when we believe that a loss is probable, and the amount can be reasonably estimated. Judgment is required to determine both probability and the estimated amount of loss. If the reasonable estimate of a probable loss is a range, we record the most probable estimate of the loss or the minimum amount when no amount within the range is a better estimate than any other amount. We review accruals on a quarterly basis and adjust, as necessary, to reflect the impact of negotiations, settlements, rulings, advice of legal counsel and other current information. Contingent gains are recognized only when realized.

Uncertain income tax positions are accounted for in accordance with applicable accounting guidance, refer to Note 9, Income Taxes in the Notes included in Item 8 of our Annual Report on Form 10-K for the fiscal year ended August 31, 2022 for further details.

Purchase Commitments with Suppliers and Vendors

Purchase obligations represent our legally-binding agreements to purchase fixed or minimum quantities at determinable prices. Our total purchase obligations as of August 31, 2022 primarily related to hosting services and acquisition of data, and, to a lesser extent, third-party software providers. Hosting services support our technology investments related to our transition to a hybrid cloud strategy, the majority of which rely on third-party hosting providers. Data is an integral component of the value we provide to our clients and our commitments to third-party software providers mainly include internal-use software licenses.

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As of August 31, 2022, we had total purchase obligations with suppliers of $373.9 million. During the second quarter of fiscal 2023, we amended a contract with a data supplier that resulted in an incremental commitment to purchase data of approximately $26 million.

We also have contractual obligations related to our lease liabilities and outstanding debt. Refer to Note 10, Leases and Note 11, Debt for information regarding lease commitments and outstanding debt obligations, respectively.

Capital Commitments

As of February 28, 2023 and August 31, 2022, we had outstanding capital commitments related to an investment of $0.8 million and $1.1 million, respectively.

Letters of Credit

From time to time, we are required to obtain letters of credit in the ordinary course of business. As of both February 28, 2023 and August 31, 2022, we had $0.5 million of standby letters of credit outstanding. No liabilities related to these arrangements are reflected in the Company's Consolidated Balance Sheets.

Contingencies

Legal Matters

We are engaged in various legal proceedings, claims and litigation that have arisen in the ordinary course of business. The outcome of all the matters against us are subject to future resolution, including the uncertainties of litigation. Based on information available at February 28, 2023, our management believes that the ultimate outcome of these unresolved matters against us, individually or in the aggregate, will not have a material adverse effect on our consolidated financial position, our results of operations or our cash flows.

Income Taxes

We are currently under audit by tax authorities and have reserved for potential adjustments to our provision for income taxes that may result from examinations by, or any negotiated settlements with, these tax authorities. We believe that the final outcome of these examinations or settlements will not have a material effect on our results of operations nor our cash flows. If events occur which indicate payment of these amounts is unnecessary, the reversal of the liabilities would result in the recognition of tax benefits in the period we determine the liabilities are no longer necessary. If our estimates of the federal, state and foreign income tax liabilities are less than the ultimate assessment, additional expense would result.

Sales Tax Matters

On August 8, 2019, we received a Notice of Intent to Assess (the "First Notice") additional sales taxes, interest and underpayment penalties (the “Sales Taxes”) from the Commonwealth of Massachusetts Department of Revenue (the "Commonwealth") relating to the tax periods from January 1, 2006 through December 31, 2013. On July 20, 2021, we received a Notice of Intent to Assess (the "Second Notice") additional Sales Taxes from the Commonwealth relating to the tax periods from January 1, 2014 through December 31, 2018. On December 29, 2022, we received a Notice of Intent to Assess (the “Third Notice"; cumulatively with the First and Second Notices, the “Notices”) additional Sales Taxes from the Commonwealth relating to the tax periods from January 1, 2019 through June 30, 2021. We have filed an appeal with respect to the Notices to contest all Sales Taxes that may be assessed. We continue to cooperate with the Commonwealth's inquiry with respect to the Notices.

We have concluded that a payment to the Commonwealth is probable. We have recorded an accrual which is not material to our consolidated financial statements. While we believe that the assumptions and estimates used to determine the accrual are reasonable, future developments could result in adjustments being made to this accrual. If we are presented with a formal assessment for any of these matters, we believe that we will ultimately prevail; however, if we do not prevail, the amount of any assessment could have a material impact on our consolidated financial position, results of operations and cash flows.

Indemnifications

As permitted or required under Delaware law and to the maximum extent allowable under that law, we have certain obligations to indemnify each of our current and former officers and directors for certain events or occurrences while the officer or director is, or was, serving at our request in such capacity. These indemnification obligations are valid as long as the director or officer acted in good faith and in a manner the person reasonably believed to be in, or not opposed to, the best interests of FactSet, and

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with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. It is not possible to determine the maximum potential amount for claims made under the indemnification obligations due to the unique set of facts and circumstances likely to be involved in each particular claim and indemnification provision; however, we have purchased a director and officer insurance policy that mitigates our exposure and may enable us to recover a portion of any future amounts paid. We do not believe, based on historical experience and information currently available, that it is probable that any material amounts will be required to be paid under such indemnification obligations.

13. STOCKHOLDERS' EQUITY

Share Repurchases

	Three Months Ended				Six Months Ended
	February 28,				February 28,
(in thousands, except share data)	2023		2022		2023		2022
Repurchases of common stock under the share repurchase program(1)	—		—		—		46,200
Total cost of shares repurchased(1)	$	—	$	—	$	—	$	18,639

(1) Amounts do not include 1,853 shares and 675 shares surrendered by grantees to satisfy withholding tax obligations due upon the vesting or exercise of stock-based awards valued at $0.8 million and $0.3 million during the three months ended February 28, 2023 and February 28, 2022, respectively. Amounts do not include 27,713 shares and 7,422 shares surrendered by grantees to satisfy withholding tax obligations due upon the vesting or exercise of stock-based awards valued at $11.8 million and $3.3 million during the six months ended February 28, 2023 and February 28, 2022, respectively.

We did not repurchase any shares of our common stock during the three months ended February 28, 2023 and February 28, 2022. We also did not repurchase any shares during the six months ended February 28, 2023 compared with 46,200 shares repurchased for $18.6 million during the same period in the prior fiscal year. Beginning in the second quarter of fiscal 2022, we suspended our share repurchase program until 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 allowed us to prioritize the repayment of debt under the 2022 Credit Facilities. We anticipate resuming the existing share repurchase program for the third and fourth quarters of fiscal 2023. Refer to Note 11, Debt for more information on the 2022 Credit Facilities.

As of February 28, 2023, a total of $181.3 million remained authorized for future share repurchases under this program. There is no defined number of shares to be repurchased over a specified timeframe through the life of the share repurchase program. We may repurchase shares of our common stock under the program from time-to-time in the open market and privately negotiated transactions, subject to market conditions.

Equity-based Awards

Refer to Note 15, Stock-Based Compensation for more information on equity awards issued during the three and six months ended February 28, 2023 and February 28, 2022.

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Dividends

Our Board of Directors declared dividends during the three and six months ended February 28, 2023 and February 28, 2022 as follows:

Year Ended	Dividends per Share of Common Stock		Record Date	Total $ Amount (in thousands)		Payment Date
Fiscal 2023
First Quarter	$	0.89	November 30, 2022	$	34,010	December 15, 2022