ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Management’s Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") should be read in conjunction with the Consolidated Financial Statements and related Notes included in Part II, Item 8. Financial Statements and Supplementary Data , of this Annual Report on Form 10-K, our Current Reports on Form 8-K and our other filings with the Securities and Exchange Commission. For a similar detailed discussion comparing fiscal 2024 and 2023, refer to Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations within our Annual Report on Form 10-K for the fiscal year ended August 31, 2024. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed below. Factors that could cause such differences include, but are not limited to, those identified below and those discussed in Part I, Item 1A. Risk Factors of this Annual Report on Form 10-K.
Our MD&A is designed to provide a reader of our financial statements with a narrative from the perspective of our management on our financial condition, results of operations, liquidity and certain other factors that may affect our future results. Our MD&A is presented in the following sections:
• Executive Overview
• Annual Subscription Value ("ASV")
• Client and User Additions
• Employee Headcount
• Results of Operations
• Non-GAAP Financial Measures
• Liquidity and Capital Resources
• Off-Balance Sheet Arrangements
• Foreign Currency Exposure
• Critical Accounting Estimates
• New Accounting Pronouncements
Executive Overview
FactSet is a global financial digital platform and enterprise solutions provider with open and flexible technologies that deliver financial intelligence to investment professionals worldwide.
Our platform delivers expansive data, sophisticated analytics, and flexible, AI-powered technologies used by global financial professionals to power their critical investment workflows. As of August 31, 2025, we had approximately 9,000 clients comprised of over 237,000 investment professionals, including institutional asset managers, bankers, wealth managers, asset owners, partners, hedge funds, corporate users, and private equity and venture capital professionals. Our revenues are primarily derived from subscriptions to our multi-asset class data and solutions powered by our connected data and technology platform. Our products and services include workstations, portfolio analytics and enterprise data solutions. We also offer managed services that operate as an extension of our clients' internal teams to support data, performance, risk and reporting workflows.
We drive our business based on a detailed understanding of our clients’ workflows, which helps us to solve their most complex challenges. We provide financial data and market intelligence on securities, companies, industries and people to enable our clients to research investment ideas and analyze, monitor and manage their portfolios. Our solutions span the investment lifecycle of investment research, portfolio construction and analysis, trade execution, performance measurement, risk management and reporting. We provide open and flexible technology offerings, including a configurable desktop and mobile platform, comprehensive data feeds, cloud-based digital solutions, and APIs. AI is embedded across these offerings to enhance data discovery, automate routine workflows and improve the speed and accuracy of client insights. The CGS business supports security master files relied on by the investment industry for critical front, middle and back-office functions. All of our platforms and solutions are supported by our dedicated client service team.
We operate our business through three segments: the Americas, EMEA and Asia Pacific. Within each segment, we offer data, products and analytical applications by firm type: Institutional Buyside, Dealmakers, Wealth, and Partnerships and CGS.
Refer to Part I, Item 1. Business - Business Overview and Business Strategy and Part II, Item 8. Note 17, Segment Information , in the Notes to the Consolidated Financial Statements included in this Annual Report on Form 10-K for more information.
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Fiscal 2025 in Review
Revenues for fiscal 2025 were $2,321.7 million, an increase of 5.4% from the comparable prior year. The growth in revenues was driven by a 4.4% increase in organic revenues, a 0.9% increase from acquisition-related revenues and a net increase of 0.1% from foreign currency exchange rate fluctuations. Revenues increased in all our segments, primarily in the Americas. Revenues increased primarily from workstations and to a lesser extent, CGS and front office solutions. Refer to Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations, Non-GAAP Financial Measures, of this Annual Report on Form 10-K for a definition of organic revenues and a reconciliation between revenues and organic revenues.
As of August 31, 2025, organic annual subscription value ("Organic ASV") totaled $2,370.9 million, an increase of 5.7% over the prior year. Organic ASV increased in all our segments, with the majority of the increase in the Americas. Organic ASV growth was mainly driven by workstations, data solutions and, to a lesser extent, CGS. Refer to Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations, Annual Subscription Value, of this Annual Report on Form 10-K for the definition of Organic ASV.
Operating margin was 32.2% for fiscal 2025, compared with 31.8% for fiscal 2024. This increase in operating margin was mainly due to growth in revenues and, when expressed as a percentage of revenues, charges related to the Sales Tax Dispute that were recorded in the prior year, partially offset by higher amortization of intangible assets in the current year. Refer to Part II, Item 8. Note 12, Commitments and Contingencies in the Notes to the Consolidated Financial Statements of this Annual Report on Form 10-K for more information on the Sales Tax Dispute.
Net income for fiscal 2025 was $597.0 million, an increase of 11.2% from the prior year. Diluted earnings per common share ("Diluted EPS") for fiscal 2025 was $15.55, an increase of 11.8% compared with the prior year. The increase in Net income and Diluted EPS was primarily driven by higher operating income and a gain from the divestiture of a business.
We returned $460.4 million to our stockholders in the form of share repurchases and dividends during fiscal 2025.
As of August 31, 2025, our client and user counts were 8,996 and 237,324, respectively. Our employee headcount was 12,800 as of August 31, 2025, up 3.2% compared to the prior year. This increase was driven by net headcount growth of 6.0% in the Americas and 2.6% in each of EMEA and Asia Pacific.
Annual Subscription Value ("ASV")
We believe ASV reflects our ability to grow recurring revenues and generate positive cash flows, and thus serves as a key indicator of the successful execution of our business strategy.
– ASV at any point in time represents our forward-looking revenues for the next 12 months from all subscription services currently being supplied to clients.
– Organic ASV at any point in time equals our ASV excluding ASV from acquisitions and dispositions completed within the last 12 months and the effects of foreign currency movements.
Beginning in fiscal 2025, we are reporting Organic ASV, rather than Organic ASV plus professional services, to focus on the recurring nature of our revenues. This underscores the shift of our offerings toward providing more managed services and less project-based services.
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Organic ASV
The following table presents the calculation of Organic ASV as of August 31, 2025. With proper notice provided as contractually required, our clients can add to, delete portions of, or terminate service, subject to certain limitations.
(dollar amounts in millions)
As of August 31, 2025
ASV
Impact from foreign currency movements
Acquisition ASV (1 )
Organic ASV
Organic ASV annual growth rate (2)
(1) ASV from acquisitions completed within the last 12 months.
(2) For comparability purposes, in calculating the organic ASV annual growth rate, the prior year excludes ASV from dispositions completed in the last 12 months.
As of August 31, 2025, Organic ASV was $2,370.9 million, an increase of 5.7% compared with August 31, 2024. Organic ASV increased in all our segments, with the majority of the increase in the Americas. The increase in Organic ASV was primarily due to higher sales to existing clients and, to a lesser extent, sales to new clients and price increases to existing clients, all primarily attributable to workstations, data solutions and, to a lesser extent, CGS. This increase was partially offset by existing client cancellations.
Segment ASV
As of August 31, 2025, ASV from the Americas represented 65% of total ASV and was $1,570.1 million, an increase from $1,455.4 million as of August 31, 2024. Americas Organic ASV was $1,541.9 million as of August 31, 2025, a 6.0% increase from the prior year. The Organic ASV increase in the Americas was primarily driven by workstations and, to a lesser extent, data solutions.
As of August 31, 2025, ASV from EMEA represented 25% of total ASV and was $591.6 million, an increase from $569.7 million as of August 31, 2024. EMEA Organic ASV was $586.3 million as of August 31, 2025, a 4.2% increase from the prior year. The EMEA Organic ASV increase was mainly from data solutions.
As of August 31, 2025, ASV from Asia Pacific represented 10% of total ASV and was $243.9 million, an increase from $230.3 million as of August 31, 2024. Asia Pacific Organic ASV was $242.7 million as of August 31, 2025, a 7.2% increase from the prior year. The Asia Pacific Organic ASV increase was primarily driven by data solutions and workstations.
Buy-side and Sell-side Organic ASV Growth
The buy-side and sell-side Organic ASV annual growth rates as of August 31, 2025 were 5.5% and 4.3%, respectively. Buy-side clients account for approximately 82% of our Organic ASV, consistent with the prior year, and primarily include institutional asset managers, wealth managers, asset owners, partners, hedge funds and corporate clients. The remaining Organic ASV is derived from sell-side firms and primarily include broker-dealers, banking and advisory firms, and private equity and venture capital firms.
Client and User Additions
The table below presents our total clients and users:
As of August 31,
% Change
Clients (1)
Users (2)
(1) The client count includes clients with ASV of $10,000 and above.
(2) The user count does not reflect users associated with our fiscal 2025 acquisitions.
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Our total client count was 8,996 as of August 31, 2025, a net increase of 9.5% or 779 clients in the last 12 months, mainly due to an increase in corporate clients, primarily driven by clients from the Platform Group Limited ("Irwin") acquisition.
As of August 31, 2025, there were 237,324 professionals using FactSet, representing a net increase of 9.7% or 20,943 users in the last twelve months, primarily driven by an increase in wealth management users. The user count does not reflect our fiscal 2025 acquisitions.
Annual ASV retention was greater than 95% of ASV as of August 31, 2025 and August 31, 2024. When expressed as a percentage of clients, annual retention was 91% as of August 31, 2025, compared with 90% as of August 31, 2024.
Employee Headcount
As of August 31, 2025, our net employee headcount increased by 3.2% to 12,800, compared with 12,398 employees as of August 31, 2024. This net headcount increase was primarily in the technology and sales groups mainly driven by continued investment in our COEs, through an increase in employees based in the Philippines and India, and our Irwin and Liquid Holdings, LLC ("LiquidityBook") acquisitions.
As of August 31, 2025, compared to August 31, 2024, our net headcount growth was 6.0% in the Americas and 2.6% in each of EMEA and Asia Pacific. As of August 31, 2025, we had 8,854 employees located in Asia Pacific, 2,510 in the Americas and 1,436 in EMEA. Approximately 68% of our employees are located in our COEs.
Results of Operations
For an understanding of the significant factors that influenced our performance during fiscal 2025 and 2024, the following discussion should be read in conjunction with the Consolidated Financial Statements and related Notes presented in Part II, Item 8. in this Annual Report on Form 10-K.
The following table summarizes the results of operations for the years presented:
Years ended August 31,
(in thousands, except per share data)
% Change
Revenues
Cost of services
Selling, general and administrative
Operating income
Net income
Diluted weighted average common shares
Diluted EPS
Revenues
Revenues in fiscal 2025 were $2,321.7 million, an increase of 5.4%. This 5.4% growth in revenues was driven by a 4.4% increase in organic revenues which totaled $2,300.2 million for fiscal 2025, a 0.9% increase from acquisition-related revenues and a net increase of 0.1% from foreign currency exchange rate fluctuations. Revenues increased in all our geographic segments, primarily in the Americas. The increase in revenues was mainly from workstations and, to a lesser extent, CGS and front office solutions.
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Revenues by Segment
The following table summarizes our revenues by segment:
Years ended August 31,
(dollar amounts in thousands)
% Change
Americas
% of revenues
EMEA
% of revenues
Asia Pacific
% of revenues
Consolidated
Americas
Revenues from the Americas increased 6.1% to $1,506.1 million in fiscal 2025, compared with $1,419.9 million in fiscal 2024. This 6.1% growth in revenues was driven by a 4.9% increase in organic revenues and a 1.2% increase from acquisition-related revenues. The increase in revenues was mainly driven by workstations and, to a lesser extent, front office solutions.
EMEA
Revenues from EMEA increased 3.0% to $580.3 million in fiscal 2025, compared with $563.2 million in fiscal 2024. This 3.0% growth in revenues was driven by a 2.5% increase in organic revenues, a 0.4% increase from acquisition-related revenues and a 0.1% net increase from foreign currency exchange rate fluctuations. The increase in revenues was primarily from data solutions and middle office solutions.
Asia Pacific
Revenues from Asia Pacific increased 7.0% to $235.3 million in fiscal 2025, compared with $220.0 million in fiscal 2024. This 7.0% was driven by a 6.3% increase in organic revenues, a 0.5% increase from acquisition-related revenues and a 0.2% net increase from foreign currency exchange rate fluctuations. The increase in revenues was mainly driven by data solutions, workstations and, to a lesser extent, front office solutions.
Operating Expenses
Principal Operating Expenses
Cost of services is mainly comprised of employee compensation costs and also includes expenses related to data costs, computer-related expenses, amortization of intangible assets, royalty fees, telecommunication costs and computer depreciation.
Selling, general and administrative (" SG&A") consists primarily of employee compensation costs and also includes expenses related to occupancy costs, professional fees, depreciation of furniture and fixtures, amortization of leasehold improvements, travel and entertainment expenses, marketing costs, other employee-related expenses, internal communication costs, bad debt expense, the impact from our foreign currency forward contracts and asset impairments.
Employee compensation costs are a major component of both our Cost of services and SG&A. These expenses primarily include costs related to salaries, incentive compensation and sales commissions, stock-based compensation, benefits, employment taxes and restructuring costs.
We assign employee compensation costs between Cost of services and SG&A based on the roles and activities associated with each employee. We categorize employees within the content collection, consulting, product development, software and systems engineering groups as Cost of services personnel. Employees included in our sales department and those that serve in various other support departments, including marketing, finance, legal, human resources and administrative services, are classified as SG&A.
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The following table summarizes the components of our total operating expenses and operating margin:
(dollar amounts in thousands)
Years ended August 31,
% Change
Cost of services
Total operating expenses
Operating income
Operating margin
Cost of Services
Cost of services increased 8.5% to $1,097.8 million in fiscal 2025, compared with $1,011.9 million in fiscal 2024, primarily due to an increase in amortization of intangible assets, employee compensation costs and computer-related expenses.
Cost of services, when expressed as a percentage of revenues, was 47.3% for fiscal 2025, an increase of 130 basis points compared with fiscal 2024. This increase was primarily from higher amortization of intangible assets, mainly driven by a 100 basis point increase in amortization from our capitalized internal-use software development costs.
Selling, General and Administrative
SG&A expenses decreased 2.9% to $475.7 million during fiscal 2025, compared with $489.8 million in fiscal 2024. The decrease was primarily attributable to charges related to the Sales Tax Dispute recorded in the prior year, partially offset by higher employee compensation costs and professional fees in the current year.
SG&A expenses, when expressed as a percentage of revenues, were 20.5% for fiscal 2025, a decrease of 170 basis points compared with fiscal 2024. This decrease was primarily due to charges associated with the Sales Tax Dispute recorded in the prior year, partially offset by higher employee compensation costs and professional fees in the current year.
When expressed as a percentage of revenues:
• The charges related to the Sales Tax Dispute recorded in the prior year decreased SG&A by 240 basis points. Refer to Part II, Item 8. Note 12, Commitments and Contingencies in the Notes to the Consolidated Financial Statements of this Annual Report on Form 10-K for more information on the Sales Tax Dispute.
• Employee compensation costs increased by 80 basis points, mainly due to higher variable compensation costs driven by a lower bonus accrual during fiscal 2024.
• Professional fees increased by 60 basis points, mainly due to acquisition-related costs.
Operating Income and Operating Margin
Operating income increased 6.7% to $748.3 million in fiscal 2025, compared with $701.3 million in fiscal 2024. This increase was primarily driven by growth in revenues and charges associated with the Sales Tax Dispute recorded in the prior year, partially offset by higher employee compensation costs and amortization of intangible assets in the current year.
Operating margin increased to 32.2% in fiscal 2025, compared with 31.8% in the prior year. This increase was primarily driven by growth in revenues and, when expressed as a percentage of revenues, charges associated with the Sales Tax Dispute recorded in the prior year, partially offset by higher amortization of intangible assets in the current year.
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Operating Income by Segment
We operate our business through three segments: the Americas; EMEA; and Asia Pacific. Refer to Part II, Item 8. Note 17, Segment Information in the Notes to the Consolidated Financial Statements included in this Annual Report on Form 10-K for further discussion regarding our segments. The following table summarizes our operating income by segment:
Years ended August 31,
(dollar amounts in thousands)
% Change
Americas
EMEA
Asia Pacific
Total Operating Income
Americas
Americas operating income increased 16.9% to $306.0 million during fiscal 2025, compared with $261.8 million from the prior year. This increase was primarily due to growth in revenues of 6.1% and charges associated with the Sales Tax Dispute recorded in the prior year, partially offset by higher amortization of intangible assets and employee compensation costs in the current year.
• The charge related to the Sales Tax Dispute in the prior year is discussed in Part II, Item 8. Note 12, Commitments and Contingencies in the Notes to the Consolidated Financial Statements of this Annual Report on Form 10-K.
• Amortization of intangible assets increased mainly due to higher amortization from our capitalized internal-use software development costs.
• Employee compensation costs increased primarily due to higher variable compensation costs driven by a lower bonus accrual during fiscal 2024.
EMEA
EMEA operating income decreased 3.2% to $274.0 million during fiscal 2025, compared with $283.0 million from the prior year. This decrease was primarily due to higher employee compensation costs, partially offset by growth in revenues of 3.0%. Employee compensation costs increased primarily due to higher annual base salaries, driven by an increase in annual merit and net headcount growth of 37 employees, and, to a lesser extent, variable compensation costs mainly due to a lower bonus accrual during fiscal 2024.
Asia Pacific
Asia Pacific operating income increased 7.5% to $168.3 million during fiscal 2025, compared with $156.5 million from the prior year. This increase was mainly due to growth in revenues of 7.0%, partially offset by higher employee compensation costs. Employee compensation costs increased primarily due to higher annual base salaries, driven by annual merit increases and a net headcount increase of 222 employees, and higher variable compensation costs mainly due to a lower bonus accrual during fiscal 2024.
Income Taxes
The provision for income taxes and the effective tax rate are as follows:
Years ended August 31,
(dollar amounts in thousands)
% Change
Income before income taxes
Provision for income taxes
Effective tax rate
We are subject to taxation in the U.S. and various state, local and foreign jurisdictions in which we conduct our business. Our effective tax rate will vary based on, among other factors, changes in levels of foreign income, as well as other non-recurring events.
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Our effective tax rate for fiscal 2025 was 17.2% compared with 17.6% for fiscal 2024. This decrease was primarily due to a lower U.S. tax impact of foreign earnings. All local, federal and foreign taxes payable were paid in a timely manner, subject to normal audits of open years.
For the periods presented, our effective tax rates were lower than the applicable U.S. corporate income tax rate. This was primarily attributable to excess tax benefits from stock-based compensation, a lower U.S. tax impact of foreign earnings, research and development ("R&D") tax credits and a foreign derived intangible income ("FDII") tax deduction, partially offset by our state income taxes.
Net Income and Diluted EPS
Years ended August 31,
(in thousands, except per share data)
% Change
Net income
Diluted weighted average common shares
Diluted EPS
The increase in Net income and Diluted EPS for fiscal 2025, compared with fiscal 2024, was primarily driven by higher operating income and a gain from the divestiture of a business.
Non-GAAP Financial Measures
To supplement the financial measures prepared in accordance with generally accepted accounting principles in the United States ("GAAP"), we use non-GAAP financial measures including organic revenues, adjusted operating income, adjusted operating margin, adjusted net income, EBITDA, adjusted EBITDA, adjusted Diluted EPS and free cash flow. Reconciliations from our financial measures calculated and presented in accordance with GAAP to these non-GAAP financial measures are shown in the tables below, and the reconciliation of free cash flow is included in the Liquidity and Capital Resources section. These non-GAAP financial measures should not be considered in isolation from, as a substitute for, or superior to, financial measures reported in accordance with GAAP. Moreover, these non-GAAP financial measures have limitations in that they do not reflect all the items associated with the operations of our business as determined in accordance with GAAP. Other companies may calculate similarly titled non-GAAP financial measures differently than we do, limiting the usefulness of those measures for comparative purposes.
Despite the limitations of these non-GAAP financial measures, we believe these adjusted financial measures and the information they provide are useful in viewing our performance using the same tools that management uses to gauge progress in achieving our goals. Adjusted measures may also facilitate comparisons to our historical performance.
Organic revenues excludes the current year impact of revenues from acquisitions and dispositions completed within the past 12 months ("Acquisition revenues" and "Disposition revenues", respectively) and the current year impact from changes in foreign currency. In addition, for our year to date comparisons, organic revenues also excludes current year revenues that were incurred prior to the first anniversary date of an acquisition. The table below provides an unaudited reconciliation of revenues to organic revenues:
Years ended August 31,
(dollar amounts in thousands)
% Change
Revenues
Acquisition revenues
Currency impact
Organic revenues
The table below provides an unaudited reconciliation of Operating income, operating margin, Net income and Diluted EPS to adjusted operating income, adjusted operating margin, adjusted net income, EBITDA, adjusted EBITDA and adjusted Diluted EPS. Adjusted operating income and margin, adjusted net income, and adjusted Diluted EPS exclude the impact of acquisition-related intangible asset amortization and non-recurring items. EBITDA represents earnings before interest expense, provision for income taxes and depreciation and amortization, while adjusted EBITDA further excludes non-recurring non-cash expenses.
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Years ended August 31,
(in thousands, except per share data)
% Change
Operating income
Intangible asset amortization
Business divestiture, acquisitions and related costs
Sales Tax Dispute (1)
Executive search costs
Restructuring/severance
Asset impairment
Adjusted operating income
Operating margin
Adjusted operating margin (2)
Net income
Intangible asset amortization
Gain on business divestiture
Business divestiture, acquisitions and related costs
Sales Tax Dispute (1)
Executive search costs
Restructuring/severance
Asset impairment
Income tax items
Adjusted net income (3)
Net income
Interest expense
Income taxes
Depreciation and amortization expense
EBITDA
Non-recurring non-cash expenses
Adjusted EBITDA
Diluted EPS
Intangible asset amortization
Gain on business divestiture
Business divestiture, acquisitions and related costs
Sales Tax Dispute (1)
Executive search costs
Restructuring/severance
Asset impairment
Income tax items
Adjusted Diluted EPS (3)
Weighted average common shares (diluted)
(1) Related to a resolved matter with the Massachusetts Department of Revenue. Refer to Note 12, Commitments and Contingencies in the Notes to the Consolidated Financial Statements included in Part II, Item 8. of this Annual Report on Form 10-K, for further discussion on this matter.
(2) Adjusted operating margin is calculated as Adjusted operating income divided by Revenues.
(3) For purposes of calculating Adjusted net income and Adjusted Diluted EPS, all adjustments were taxed at an adjusted tax rate of 26.0% and 26.5% for fiscal 2025 and fiscal 2024, respectively.
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Liquidity and Capital Resources
As of August 31, 2025, Cash and cash equivalents were $337.7 million and restricted cash was $14.0 million, compared with Cash and cash equivalents of $423.0 million as of August 31, 2024. Refer to Summary of Cash Flows within this section below, for more information on cash flows during fiscal 2025 and 2024. Our Cash and cash equivalents as of August 31, 2025 are held in numerous locations throughout the world, with $169.8 million in EMEA (with the largest balance held in the UK), $106.1 million in the Americas and the remaining $61.8 million in Asia Pacific (with the largest balance held in the Philippines).
As of August 31, 2025 , we had $486.9 million of undistributed foreign earnings of which $69.1 million are permanently reinvested. It is our intent to permanently reinvest all foreign undistributed earnings, except in jurisdictions where earnings can be repatriated substantially free of tax. It is not practicable to determine the deferred tax liability that would be payable if these earnings were repatriated to the U.S.
Our cash flows provided by operating activities, existing cash and cash equivalents, supplemented with our debt borrowings, have been sufficient to fund our operations while allowing us to invest in activities that support the long-term growth of our operations. Generally, some or all of our remaining available cash flows have been used to, among other things, service our existing and future debt obligations, satisfy our working capital requirements and fund various activities, including our capital expenditures, acquisitions, investments, dividend payments and repurchases of our common stock. Based on past performance and current expectations, we believe our sources of liquidity, including the available capacity under our existing revolving credit facility and other financing alternatives, will provide us the necessary capital to fund these transactions and achieve our planned growth for the next 12 months and the foreseeable future. We are exposed to credit risk for our cash, cash equivalents and restricted cash held in financial institutions in the event of a default, to the extent that such amounts are in excess of applicable insurance limits; however, we do not believe our concentration of cash, cash equivalents and restricted cash presents a significant credit risk as the counterparties to the instruments consist of multiple high-quality, credit-worthy financial institutions.
Sources of Liquidity
Debt and Swap Agreements
2025 Credit Agreement
On April 8, 2025, we entered into a credit agreement (the "2025 Credit Agreement") and borrowed $500.0 million under a senior unsecured term loan credit facility (the "2025 Term Facility"). We used the proceeds from the 2025 Term Facility borrowing to repay the outstanding balance under the 2022 Revolving Facility (as defined below). The 2025 Credit Agreement also provides for a $1.0 billion senior unsecured revolving credit facility (the "2025 Revolving Facility"). The 2025 Revolving Facility, together with the 2025 Term Facility, are referred to as the "2025 Credit Facilities".
The 2025 Term Facility matures on April 8, 2028, and the 2025 Revolving Facility matures on April 8, 2030. The 2025 Revolving Facility provides for up to $100.0 million in the form of letters of credit and up to $100.0 million in the form of swingline loans. We may seek additional commitments of up to $1.0 billion under the 2025 Revolving Facility from lenders or other financial institutions.
The 2025 Term Facility is subject to scheduled quarterly principal payments, commencing on August 31, 2025, with each quarterly principal payment equal to 1.25% of the original principal amount of the 2025 Term Facility. The 2025 Credit Facilities are not otherwise subject to any other mandatory repayments. We may voluntarily prepay loans under the 2025 Credit Facilities at any time without premium or penalty. Prepayments of the 2025 Term Facility shall be applied to reduce the subsequent scheduled quarterly principal payments in direct order of maturity.
During fiscal 2025, we repaid $125.0 million under the 2025 Term Facility. This included $68.8 million to satisfy all scheduled quarterly principal payments from loan inception through maturity, eliminating any future mandatory quarterly principal payment requirements. The remaining $56.2 million was made as a voluntary prepayment. From the effective date of the 2025 Revolving Facility through August 31, 2025, we have had no borrowings under the 2025 Revolving Facility.
From the borrowing date through August 31, 2025, the outstanding borrowings under the 2025 Credit Facilities bore interest at a rate equal to the applicable one-month Term Secured Overnight Financing Rate ("SOFR") plus a 0.975% spread (comprised of a 0.875% interest rate margin, based on a pricing grid determined by reference to our senior unsecured non-credit enhanced long-term debt rating and our total leverage ratio, plus a 0.1% credit spread adjustment).
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We pay a commitment fee on the daily unused amount of the 2025 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 0.1% through August 31, 2025.
Debt issuance costs related to the 2025 Credit Facilities were $3.4 million. These debt issuance costs are presented in the Consolidated Balance Sheets as a direct deduction from the carrying amount of the debt liability for the 2025 Term Facility and within Other assets for the 2025 Revolving Facility. Debt issuance costs are amortized to Interest expense in the Consolidated Statements of Income on a straight-line basis over the contractual term of the debt (which approximates the effective interest method for the 2025 Term Facility).
The 2025 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 2025 Credit Agreement, the lenders may, among other things, terminate their commitments and declare all outstanding borrowings immediately due and payable.
The 2025 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 3.75 to 1.00 as of the last day of each fiscal quarter (subject to an increase to 4.25 to 1.00 for five consecutive fiscal quarters in connection with certain material acquisitions). We were in compliance with all covenants and requirements of the 2025 Credit Agreement as of August 31, 2025.
2022 Credit Agreement
On March 1, 2022, we entered into a credit agreement (the "2022 Credit Agreement") and borrowed $1.0 billion under a senior unsecured term loan credit facility (the "2022 Term Facility") and $250.0 million of the available $500.0 million under a senior unsecured revolving credit facility (the "2022 Revolving Facility"). The 2022 Revolving Facility, together with the 2022 Term Facility, are referred to as the "2022 Credit Facilities". On January 31, 2025, we entered into a joinder agreement to our 2022 Credit Agreement pursuant to which commitments under the 2022 Revolving Facility were increased by $100.0 million, to a total of $600.0 million. All other terms of the 2022 Credit Agreement remained unchanged.
The 2022 Term Facility, originally due to mature on March 1, 2025, was repaid in full following $125.0 million of repayments made during the six months ended February 28, 2025. During fiscal 2025, we borrowed $305.0 million and repaid $555.0 million under the 2022 Revolving Facility. The 2022 Credit Agreement was terminated on April 8, 2025, concurrent with entering into the 2025 Credit Agreement.
Borrowings previously outstanding under the 2022 Credit Facilities bore interest at a rate equal to the applicable one-month Term SOFR plus a spread, using a debt leverage pricing grid and a credit spread adjustment (with total spread ranging from 0.975% to 1.1% over the term of the debt).
Interest Rate Swap Agreements
We leverage interest rate swap agreements to manage our floating interest rate exposure with a fixed interest rate. Our interest rate swap agreements are designated as cash flow hedges at inception.
2025 Swap Agreement
On April 24, 2025, we entered into an interest rate swap agreement ("2025 Swap Agreement") with a notional amount of $200.0 million to hedge a portion of our outstanding floating SOFR debt with a fixed interest rate of 4.086%. The notional amount of the 2025 Swap Agreement declines by $50.0 million on a quarterly basis beginning May 31, 2025 and matures on February 28, 2026. As of August 31, 2025, the notional amount of the 2025 Swap Agreement was $100.0 million.
2024 Swap Agreement
On March 1, 2024, we entered into an interest rate swap agreement ("2024 Swap Agreement") with a notional amount of $200.0 million to hedge a portion of our outstanding floating SOFR debt with a fixed interest rate of 5.145%. The notional amount of the 2024 Swap Agreement declined by $50.0 million on a quarterly basis beginning May 31, 2024. The 2024 Swap Agreement matured on February 28, 2025.
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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 SOFR debt with a fixed interest rate of 1.162%. The notional amount of the 2022 Swap Agreement declined by $100.0 million on a quarterly basis beginning May 31, 2022. The 2022 Swap Agreement matured on February 28, 2024.
Refer to Part II, Item 7A. Quantitative and Qualitative Disclosures About Market Risk , in this Annual Report on Form 10-K, for further discussion of our exposure to interest rate risk on our outstanding floating rate debt.
Senior Notes
On March 1, 2022, we completed a public offering issuing $500.0 million of 2.900% Senior Notes due March 1, 2027 (the "2027 Notes") and $500.0 million 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 and we incurred approximately $9.1 million in debt issuance costs during fiscal 2022. 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 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.
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.
Uses of Liquidity
Returning Value to Stockholders
We returned $460.4 million and $385.9 million to our stockholders in the form of share repurchases and dividends during fiscal 2025 and 2024, respectively.
Share Repurchase Program
We may repurchase shares of our common stock under our share repurchase program from time-to-time in the open market or via privately negotiated transactions, subject to market conditions. During fiscal 2025 and 2024, we repurchased 684,960 shares for $300.5 million and 537,800 shares for $235.2 million, respectively.
There is no defined number of shares to be repurchased over a specified timeframe through the life of our share repurchase program. On September 17, 2024, our Board of Directors approved a new share repurchase authorization of up to $300 million in aggregate, which was available during fiscal 2025. This authorization expired upon the conclusion of fiscal 2025 and was not available for share repurchases after that date.
On June 17, 2025, our Board of Directors authorized up to $400 million for share repurchases on or after September 1, 2025 through September 30, 2026.
Refer to Part III, Item 12, Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters , of this Annual Report on Form 10-K for further discussion on our share repurchase program.
Dividends
During fiscal 2025 and 2024, we paid dividends of $160.0 million and $150.7 million, respectively. In the third quarter of fiscal 2025, our Board of Directors approved a 6% increase in the regular quarterly dividend from $1.04 to $1.10 per share. Fiscal 2025 marked the 26th consecutive fiscal year we have increased dividends on a stock split-adjusted basis, highlighting our continued commitment to returning value to our stockholders. Future cash dividend payments are subject to final determination by our Board of Directors and will depend on our earnings, capital requirements, financial condition and other relevant factors.
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Capital Expenditures
For the year ended August 31, 2025, capital expenditures increased by 27.0% to $108.8 million, compared with $85.7 million in fiscal 2024. This increase was primarily due to higher capitalized costs related to the development of our internal-use software.
Acquisitions
Our acquisitions with the most significant cash flows from fiscal 2023 through fiscal 2025 included Liquid Holdings, LLC ("LiquidityBook") and Platform Group Limited ("Irwin"). Refer to Part II, Item 8. Note 5, Acquisitions in the Notes to the Consolidated Financial Statements included in this Annual Report on Form 10-K for further discussion of these acquisitions.
LiquidityBook
On February 7, 2025 we completed the acquisition of LiquidityBook for a purchase price of $243.2 million, net of cash acquired, and inclusive of preliminary working capital adjustments. The purchase price includes contingent consideration of $11.9 million, which reflects the acquisition date fair value of potential future payments that are contingent upon the achievement of certain specified milestones.
LiquidityBook provides cloud-native trading solutions to hedge fund, asset and wealth management, outsourced trading, and sell-side middle office clients. LiquidityBook operates a proprietary FIX network that enables streamlined connectivity to over 200 brokers and order routing to more than 1,600 destinations across 80 markets globally. This acquisition adds technology-forward order management and investment book of record capabilities and enhances FactSet’s ability to serve the integrated workflow needs of clients across the portfolio life cycle.
Irwin
On November 5, 2024, we completed the acquisition of Irwin for a purchase price of $120.2 million, net of cash acquired, and inclusive of working capital adjustments. The purchase price includes contingent consideration of $9.6 million, which reflects the acquisition date fair value of potential future payments that are contingent upon the achievement of certain specified milestones. We finalized the purchase accounting for the Irwin acquisition during the third quarter of fiscal 2025.
Irwin is a leading investor relations and capital markets platform for public companies and their advisors. This acquisition builds on a recent successful partnership between FactSet and Irwin, and expands our ability to address the holistic workflow needs of investor relations professionals with an integrated, modern solution.
Contractual Obligations
Purchase obligations represent our legally-binding agreements to purchase fixed or minimum quantities at determinable prices. As of August 31, 2025 and 2024, we had total purchase obligations with suppliers and vendors of approximately $352 million and $383 million, respectively. Our total purchase obligations as of August 31, 2025 and 2024 primarily related to hosting services, acquisition of data and, to a lesser extent, third-party software providers.
We also have contractual obligations related to our lease liabilities and outstanding debt. Refer to Part II, Item 8. Note 10, Leases and Note 11, Debt in the Notes to the Consolidated Financial Statements included in this Annual Report on Form 10-K for information regarding our lease commitments and outstanding debt obligations, respectively.
Summary of Cash Flows
The following table provides a summary of our net cash flow activity for the fiscal years presented:
Years ended August 31,
(dollar amounts in thousands)
$ Change
Net cash provided by operating activities
Net cash provided by (used in) investing activities
Net cash provided by (used in) financing activities
Effect of exchange rate changes on cash, cash equivalents and restricted cash
Net increase (decrease) in cash, cash equivalents and restricted cash
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Operating
For fiscal 2025, net cash provided by operating activities was $726.3 million, which included net income of $597.0 million, non-cash charges of $235.0 million and a net cash outflow of $105.7 million to support our working capital requirements. The non-cash charges were primarily driven by depreciation and amortization. The change in our working capital was primarily driven by cash outflows related to payments to resolve the Sales Tax Dispute, timing of vendor payments and client collections, as well as lease payments.
For fiscal 2024, net cash provided by operating activities was $700.3 million, which included net income of $537.1 million, non-cash charges of $201.6 million and a net cash outflow of $38.4 million to support our working capital requirements. The non-cash charges were primarily driven by depreciation and amortization and, to a lesser extent, stock-based compensation expense. The change in our working capital was primarily driven by cash outflows related to lease payments and prepaid expenses, partially offset by the timing of payments to vendors.
Investing
For fiscal 2025, net cash used in investing activities was $392.8 million. The cash used in investing activities primarily consisted of $348.3 million of acquisition-related consideration related mainly to the Irwin and LiquidityBook transactions, $108.8 million of capital expenditures mainly driven by the capitalization of internal-use software development costs, partially offset by $58.2 million in proceeds from our investments in mutual funds.
For fiscal 2024, net cash used in investing activities was $144.3 million. The cash used in investing activities was primarily related to capital expenditures of $85.7 million, mainly driven by the capitalization of internal-use software development costs and $58.6 million in investments, primarily related to the purchase of mutual funds.
Financing
For fiscal 2025, net cash used in financing activities was $407.8 million, consisting mainly of $805.0 million related primarily to the repayment of the 2022 Credit Facilities, $300.5 million of share repurchases and $160.0 million of dividend payments, partially offset by $803.4 million of proceeds from borrowings under the 2025 Term Facility and the 2022 Revolving Facility, in periods prior to its termination, and $81.7 million of proceeds from employee stock plans.
For fiscal 2024, net cash used in financing activities was $560.9 million, consisting mainly of $250.0 million related to the partial repayment of the 2022 Term Facility, $235.2 million of share repurchases and $150.7 million of dividend payments, partially offset by $91.7 million of proceeds from employee stock plans.
Free Cash Flow
We define free cash flow, a non-GAAP financial measure, as cash provided by operating activities, less purchases of property, equipment and leasehold improvements ("PPE") and capitalized internal-use software. We believe free cash flow is a liquidity measure that provides useful information to management and investors about the amount of cash generated by the business that, after capital expenditures, can be used for strategic opportunities, including returning value to stockholders, investing in our business, making strategic acquisitions, and strengthening the balance sheet. Free cash flow should be considered in addition to consolidated net income and net cash provided by operating activities, but should not be used as a substitute for these key measures of our performance and liquidity.
The following table reconciles our net cash provided by operating activities to free cash flow:
Years ended August 31,
(dollar amounts in thousands)
$ Change
Net cash provided by operating activities
Less: purchases of property, equipment, leasehold improvements and capitalized internal-use software
Free cash flow
We generated free cash flow of $617.5 million during fiscal 2025, an increase of $2.8 million compared with fiscal 2024. This increase was driven by $25.9 million in cash provided by operating activities, partially offset by higher PPE mainly from capitalized costs related to the development of our internal-use software.
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Off-Balance Sheet Arrangements
As of August 31, 2025 and August 31, 2024, we had no off-balance sheet financing other than letters of credit incurred in the ordinary course of business. Refer to Part II, Item 8. Note 11, Debt and Note 12, Commitments and Contingencies in the Notes to the Consolidated Financial Statements included in this Annual Report on Form 10-K for more information on our letters of credit.
As of August 31, 2025 and August 31, 2024, we also had no other arrangements with unconsolidated entities or financial partnerships (such as entities often referred to as structured finance or special purpose entities) established for purposes of facilitating off-balance sheet financing, other debt arrangements, or other contractually limited purposes.
Foreign Currency Exposure
As we operate globally, we are exposed to the risk that our financial condition, results of operations and cash flows could be impacted by changes in foreign currency exchange rates. During fiscal 2025 and 2024, we maintained a series of foreign currency forward contracts to hedge a portion of our projected operating expenses in our primary currency exposures, namely the British Pound Sterling, Euro, Indian Rupee, and Philippine Peso. As of August 31, 2025, the hedge maturity periods of our outstanding foreign currency forward contracts range from the first quarter of fiscal 2026 through the fourth quarter of fiscal 2026.
Refer to Part II, Item 7A. Quantitative and Qualitative Disclosures About Market Risk in this Annual Report on Form 10-K for more information on our foreign currency exposures.
Critical Accounting Estimates
We prepare the Consolidated Financial Statements in conformity with GAAP, which requires us to make certain estimates and apply judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosures. We base our estimates on historical experience and other assumptions that we believe to be reasonable at the time the Consolidated Financial Statements are prepared and, as such, they may ultimately differ materially from actual results.
We describe our significant accounting policies in Part II, Item 8. Note 2, Summary of Significant Accounting Policies in the Notes to the Consolidated Financial Statements included in this Annual Report on Form 10-K.
The Audit Committee of our Board of Directors reviews the development and selection of our critical accounting estimates. The critical accounting estimates and judgments that we believe to have the most significant impacts to our Consolidated Financial Statements are described below.
Income Taxes
We are subject to taxation in the U.S. and various state, local and foreign jurisdictions in which we conduct our business. Our provision for income taxes is an estimate based on our understanding of laws in these federal, state, local and foreign tax jurisdictions. These laws can be complicated and are difficult to apply to any business. The tax laws also require us to allocate our taxable income to many jurisdictions based on subjective allocation methodologies and information collection processes.
Our provision for income taxes is subject to volatility and could be adversely impacted by numerous factors such as changes in earnings or tax laws, regulations, or accounting principles, including accounting for uncertain tax positions or interpretations of them. Significant judgment is required in determining our provision for income taxes, deferred tax assets and liabilities and unrecognized tax benefits.
Further, as a result of certain ongoing employment and capital investment actions and commitments, our income in certain countries is subject to reduced tax rates. Our failure to meet these employment and capital investment actions and commitments could adversely affect our provision for income taxes. In addition, we are subject to the continuous examination of our income tax returns by the Internal Revenue Service and other tax authorities. We regularly assess the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our provision for income taxes. There can be no assurance that the outcomes from these continuous examinations will not adversely impact our operating results and financial condition.
Significant judgment is required in determining our uncertain tax positions. We follow a two-step approach in recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not (defined as a likelihood of more than 50%) that a tax position will be sustained based on its technical merits as of the reporting date. The second step, for those positions that meet the recognition
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criteria, is to measure and recognize the largest amount of benefit that is greater than 50% likely of being realized upon effective settlement with a taxing authority. As the determination of liabilities related to uncertain tax positions and associated interest and penalties requires significant estimates and assumptions, there can be no assurance that we will accurately predict the outcomes of these audits. For this reason and due to ongoing audits by multiple tax authorities, we regularly engage in discussions and negotiations with tax authorities regarding tax matters in various jurisdictions. We adjust these reserves in light of changing facts and circumstances, such as the closing of a tax audit or the refinement of an estimate. To the extent that the final outcome of these matters is different than the amounts recorded, such differences will affect the provision for income taxes in the period in which such determination is made. We accrue interest on all tax exposures for which reserves have been established consistent with jurisdictional tax laws. The Provision for income taxes on our Consolidated Statements of Income includes the impact of changes to reserves and any related interest. We have no reason to believe that such audits will result in the payment of additional taxes and/or penalties that would have a material adverse effect on our results of operations or financial position, beyond current estimates.
Refer to Part II, Item 8. Note 9, Income Taxes in the Notes to the Consolidated Financial Statements included in this Annual Report on Form 10-K for further information.
Stock-based Compensation
We measure and recognize stock-based compensation expense for all stock-based awards and purchases of common stock under the employee stock purchase plan ("ESPP") based on their estimated grant date fair value.
We utilize a lattice-binomial option-pricing model ("binomial model") to estimate the grant date fair value for our employee stock options and the Black-Scholes model to estimate the grant date fair value for stock options granted to the members of the Board of Directors ("non-employee directors") and common stock purchased by eligible employees under our ESPP.
Both the binomial model and Black-Scholes model involve certain estimates and assumptions such as:
• Risk-free interest rate - based on the U.S. Treasury yield curve in effect at the time of grant with maturities equal to the expected terms of the stock-based awards granted.
• Expected life - the weighted average period the stock-based awards are expected to remain outstanding.
• Expected volatility - based on a blend of historical volatility of the stock-based award's useful life and the weighted average implied volatility for call option contracts traded in the 90 days preceding the stock-based award's valuation date.
• Dividend yield - the expectation of dividend payouts based on our history.
The binomial model also incorporates market conditions, vesting restrictions and exercise patterns.
For our performance share units ("PSUs"), management makes quarterly assessments of the probability of achieving specified performance criteria established at the time of grant. The ultimate number of common shares that may be earned from a PSU is determined pursuant to a payout range based on the achievement of specified performance levels.
We estimate expected forfeitures of equity awards at the date of grant and recognize compensation expense only for those awards expected to vest. The forfeiture assumption is revised if actual forfeitures differ from those estimates.
The assumptions we use to calculate and account for stock-based compensation awards represent management's best estimates, which involve inherent uncertainties. As a result, if we revise our assumptions and estimates, our stock-based compensation expense could differ from amounts recorded.
Refer to Part II, Item 8. Note 15, Stock-Based Compensation in the Notes to the Consolidated Financial Statements included in this Annual Report on Form 10-K for further information.
Goodwill
Goodwill represents the excess of the purchase price over the fair value of identifiable net assets acquired at the acquisition date. Goodwill is not amortized as it is estimated to have an indefinite life. We test goodwill annually for impairment during the fourth quarter of each fiscal year or more frequently if events and circumstances occur indicating that it is more likely than not that the fair value of any one of our reporting units is less than its respective carrying value. Impairment is tested at the reporting unit level and if the carrying value of the reporting unit exceeds the fair value, then the goodwill is considered impaired and written down to the reporting unit’s fair value. The impairment loss for the reporting unit cannot exceed the carrying value of the goodwill allocated to that reporting unit.
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We may elect to perform a qualitative analysis for the reporting units to determine whether it is more likely than not (a likelihood of more than 50%) that the fair value of the reporting unit is less than its carrying value. In performing a qualitative assessment, we consider such factors as macro-economic conditions, industry and market conditions in which we operate, including the competitive environment and significant changes in demand for our products or services. We also consider the share price both in absolute terms and in relation to peer companies. If the qualitative analysis indicates that it is more likely than not the fair value of a reporting unit is less than its carrying value or if we elect not to perform a qualitative analysis, a quantitative analysis is performed to determine whether a goodwill impairment exists.
The quantitative goodwill impairment analysis is used to identify potential impairment by comparing the carrying value of a reporting unit with its fair value. To perform this analysis, we apply the income approach which utilizes discounted cash flows and other relevant market information. Significant judgment is involved in determining the assumptions used in estimating future cash flows, such as: expected sales, working capital needs to support each reporting unit, capital expenditures and related depreciation and amortization, operating expenses, expected tax rates and the weighted average cost of capital for each reporting unit. Our cost of capital is based on assumptions about interest rates, as well as a risk-adjusted rate of return required by our equity investors. These estimates and judgments are critical, as they directly influence the calculated fair value of our reporting units and, consequently, the results of our goodwill impairment assessment.
Refer to Part II, Item 8. Note 7, Goodwill in the Notes to the Consolidated Financial Statements included in this Annual Report on Form 10-K for further details.
Business Combinations
We account for business combinations using the purchase method of accounting. Under this method, the acquisition purchase price is allocated to the underlying identified tangible and intangible assets acquired, and liabilities assumed, based on their respective estimated fair values on the acquisition date. The excess of the purchase consideration over the fair value of the identified assets and liabilities is recorded as goodwill and assigned to one or more reporting units. The value and useful life assigned to acquisition-related tangible and intangible assets impact the amount and timing of future amortization expense. Determining the fair value of assets acquired and liabilities assumed and the expected useful life requires management’s judgment and often involves the use of significant estimates and assumptions, including assumptions with respect to future cash inflows and outflows, discount rates, asset lives and market multiples, among other items. Acquisition-related expenses and restructuring costs, if any, are recognized separately from the business combination and are expensed as incurred.
Refer to Part II, Item 8. Note 5, Acquisitions in the Notes to the Consolidated Financial Statements included in this Annual Report on Form 10-K for further information.
PPE and Intangible Assets
We amortize our PPE and identifiable intangible assets over their estimated useful lives. Determining the useful life requires judgment and an understanding of our planned use of the asset, among other factors. If different useful lives had been used, the resulting amortization or depreciation expense recognized may be materially different. If the estimate of the remaining useful life is changed, the remaining carrying amount of the PPE and intangible asset is, respectively, amortized or depreciated, prospectively over that revised remaining useful life.
We review our PPE and intangible assets to determine if any indicators of impairment are present on a quarterly basis or whenever events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable. If indicators of impairment are present, the asset group is 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. In performing this assessment, significant judgment is involved in determining the assumptions used in estimating future cash flows and the discount rate.
Refer to Part II, Item 8. Note 6, Property, Equipment and Leasehold Improvements and Note 8, Intangible Assets in the Notes to the Consolidated Financial Statements included in this Annual Report on Form 10-K for further information.
Contingencies
We are subject to various legal proceedings, claims and litigation that have arisen in the ordinary course of business, which involve inherent uncertainties. We accrue for contingencies when we believe that a loss is probable and the amount can be reasonably estimated. Judgment is required to determine both the probability and the estimated amount of loss. If the reasonable estimate of a probable loss is a range, we record an accrual for 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 these 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. If actual results differ from our assessments, our financial position, results of operations, or cash flows would be
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affected. Refer to Part II, Item 8. Note 12, Commitments and Contingencies in the Notes to the Consolidated Financial Statements included in this Annual Report on Form 10-K for more information on our contingent matters.
For more information on the accounting of our income tax contingencies, refer to Part II, Item 8. Note 9, Income Taxes in the Notes to the Consolidated Financial Statements included in this Annual Report on Form 10-K.
New Accounting Pronouncements
For a discussion of accounting pronouncements recently adopted and those issued but not yet adopted, refer to Part II, Item 8. Note 2, Summary of Significant Accounting Policies in the Notes to the Consolidated Financial Statements included in this Annual Report on Form 10-K.
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