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Market turbulence has thrown many stocks for a loop, but one company that some fear could face fundamental challenges in a down market is FactSet Research Systems (NYSE: FDS). FactSet relies on a healthy Wall Street, because many of the investment companies and professionals that use its data and information services are best able to remain loyal clients when times are good.
Coming into Tuesday's fiscal first-quarter financial report, FactSet shareholders were optimistic that the financial information specialist would be able to deliver solid results. FactSet made good on that promise, but even that wasn't enough to allay concerns completely about the uncertain future for the financial markets.
Image source: FactSet Research Systems.
FactSet starts fiscal 2019 looking strong
FactSet's fiscal first-quarter results were consistent with what the company's been able to accomplish in the recent past. Revenue of $351.6 million was up nearly 7% from year-earlier levels, inching slightly above what most of those following the stock had expected to see. Adjusted net income of $91.3 million was 13% higher than the year-earlier figure, and adjusted earnings of $2.35 per share compared favorably to the consensus forecast among investors for $2.29 per share.
Fundamentally, many of FactSet's numbers looked strong. Organic sales were up more than 6%, accelerating from the pace it set last quarter, as the company reported strong demand for wealth management solutions as well and content and technology solutions. Annual subscription value hit $1.42 billion when you include professional services, higher by roughly $80 million from year-earlier levels, or roughly 6%.
As we saw last quarter, the business that FactSet does with sell-side investment clients saw faster growth than corresponding buy-side clients, with sell-side growth coming in at close to 9% compared to less than 6% for buy-side. Even so, FactSet gets more than five-sixths of its annual subscription value from investment companies on the buy side of the business. FactSet's domestic business slightly outpaced its international segment, but nearly all of the disparity came from adverse foreign-currency impacts.
Client counts continued to rise, with FactSet combing just shy of the 5,300 mark, up roughly 3% just since its last quarterly report. Wealth management business has sent user counts soaring to more than 115,000, up more than 23,000 in the past three months. Retention rates stayed relatively constant in the 90% to 95% range depending on whether you measure by client counts or the annual subscription value they represent.