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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 Item 8. Financial Statements and Supplementary Data, of this Annual Report on Form 10-K. For a similar detailed discussion comparing fiscal 2020 and 2019, refer to Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations within our Annual Report on Form 10-K for the year ended August 31, 2020. 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 Item 1A. Risk Factors of this Annual Report on Form 10-K.

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

•Critical Accounting Estimates

•New Accounting Pronouncements

Executive Overview

FactSet Research Systems Inc. and its wholly-owned subsidiaries (collectively, "we," "our," "us," the "Company" or "FactSet") is a global financial data and analytics company with open and flexible technology and a purpose to drive the investment community to see more, think bigger, and do their best work. Our strategy is to become the leading open content and financial analytics platform in the industry that delivers differentiated advantage for our clients’ success.

For over 40 years, the FactSet platform has delivered expansive data, sophisticated analytics, and flexible technology that global financial professionals need to power their critical investment workflows. Over 160,000 asset managers and owners, bankers, wealth managers, corporate firms, including private equity and venture capital firms, and others use our personalized solutions to identify opportunities, explore ideas, and gain a competitive advantage, in areas spanning investment research, portfolio construction and analysis, trade execution, performance measurement, risk management, and reporting across the investment lifecycle.

We provide financial data and market intelligence on securities, companies and industries to enable our clients to research investment ideas, as well as offering them the capabilities to analyze, monitor and manage their portfolios. We combine dedicated client service with open and flexible technology offerings, such as a configurable desktop and mobile platform, comprehensive data feeds, cloud-based digital solutions, and application programming interfaces ("APIs"). Our revenue is primarily derived from subscriptions to our products and services such as workstations, portfolio analytics, and market data.

We advance our industry by comprehensively understanding our clients’ workflows, solving their most complex challenges, and helping them achieve their goals. By providing them with the leading open content and analytics platform, an expansive universe of concorded data they can trust, next-generation workflow support designed to help them grow and see their next best action, and the industry’s most committed service specialists, FactSet puts our clients in a position to outperform.

We are focused on growing our business through three reportable segments ("segments"): the Americas, EMEA and Asia Pacific. Refer to Note 19, Segment Information, 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. Within each of our segments, we primarily deliver insight and information through our three workflow solutions: Research & Advisory; Analytics & Trading; and Content & Technology ("CTS").

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Business Strategy

Client needs and market dynamics continue to evolve at an accelerated pace with an increasing demand for differentiated, personalized, and connected data, an ongoing shift to multi-asset class investing, and cost rationalization as the shift from active to passive investing continues. Clients are seeking new cloud-based solutions that enable self-service and automation, open and flexible systems, and increased efficiencies when integrating and managing data as part of their own broader digital transformations.

FactSet’s strategy focuses on building the leading open content and analytics platform that delivers differentiated advantages for our clients’ success – in keeping with our purpose of enabling the investment community to see more, think bigger and do their best work. We want to be the trusted partner of choice for clients, to anticipate their needs and provide them with the most innovative solutions to make them more efficient. This includes transforming the way our clients discover, decide, and act on an opportunity using our digital platform; purposefully increasing our pace and speed to market by streamlining how we work; and investing in our future workforce. To execute on our strategy, we plan on the following:

•Growing our digital platform: Scaling up our Content Refinery by providing the most comprehensive and connected inventory of industry, proprietary, and third-party data for the financial community, including granular data for key industry verticals, private companies, wealth, and environmental social and governance ("ESG"). Driving next-generation workflow solutions by creating personalized and integrated solutions to streamline workflows which includes solutions for asset managers, asset owners, sell side, wealth and corporate clients. Our goal is to deliver tangible efficiencies to our clients by connecting data and analytics with a cloud based eco-system, enabling them to manage work more effectively through an integrated investment lifecycle.

•Delivering execution excellence: Building a more agile and digital first-minded organization that increases the speed of our product creation and go-to-market strategy. To capitalize on market trends and give our clients innovative tools, we plan to release new products built on a cloud-based digital foundation as well as migrating our existing data and applications to the cloud. Additionally, we expect to rationalize our existing product portfolio to reinvest in higher return products.

•Driving a growth mindset: Recruiting, training and empowering a diverse and operationally efficient workforce to drive sustainable growth. To drive a more performance-based culture, we are investing in talent who can create leading technological solutions, efficiently execute our go-to-market strategy and achieve our growth targets.

At the center of our strategy is the relentless focus on our clients and their FactSet experience. We want to be a trusted partner and service provider, offering hyper-personalized digital products for clients to research ideas, uncover relevant insights, and leverage cognitive computing to help get the most out of their data and analytics. Additionally, we continually evaluate business opportunities such as acquisitions and partnerships to help us expand our capabilities and competitive differentiators across the investment portfolio lifecycle.

We are focused on growing our global business in three segments: the Americas, EMEA and Asia Pacific. We believe this geographical strategic alignment helps us better manage our resources, target our solutions and interact with our clients. We further execute on our growth strategy by offering data, products, and analytical applications within our three workflow solutions: Research & Advisory; Analytics & Trading; and CTS.

Fiscal 2021 Year in Review

Revenue for the fiscal year 2021 was $1.6 billion, an increase of 6.5% from the prior year. Revenue increased across our operating segments, primarily in the Americas, followed by EMEA and Asia Pacific, supported by increased revenue from each of our workflow solutions, mainly in Analytics & Trading, followed by CTS and Wealth. Revenue also grew due to the benefit from our annual price increase. The revenue growth of 6.5% was primarily attributed to organic revenue growth, which excludes the effects of acquisitions and dispositions completed in the last 12 months, changes in foreign currency rates in all periods presented and the deferred revenue fair value adjustments from purchase accounting (Refer to Results of Operations, Non-GAAP Financial Measures in this MD&A for further discussion on organic revenue).

Operating income increased 7.8% and diluted earnings per share ("EPS") increased 7.4% compared with the prior year. This increase in operating income and EPS was primarily driven by revenue growth of 6.5%, a decrease in non-compensatory employee related expenses, an impairment of an investment that occurred in fiscal 2020 and a decrease in professional fees. This increase was partially offset by higher spend in employee compensation, including stock-based compensation and

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increased computer-related expenses. Additionally, EPS benefited from a reduction in interest expense and diluted weighted average shares outstanding compared with the prior year period.

Our clients and users reached new highs of 6,453 and 160,932, respectively, in fiscal 2021. Over the last 12 months, we returned $382.6 million to stockholders in the form of share repurchases and dividends.

As of August 31, 2021, our employee count was 10,892, up 3.9% in the past 12 months, due primarily to an increase in net new employees of 6.6% in Asia Pacific and 0.7% in EMEA, partially offset by a decrease of 1.5% in the Americas. Of our total employees, as of August 31, 2021, 7,080 were located in Asia Pacific, 2,439 were located in the Americas and 1,373 were located in EMEA. Our centers of excellence, located in India, the Philippines, and Latvia, primarily focus on content collection that benefits all our segments.

We garnered multiple awards during fiscal 2021, with honors spanning multiple workflows, including research, risk, performance, trading, and wealth management. Our expanding suite of datasets stood out, most notably in the ESG and alternative categories, for its depth and innovation in delivery mechanisms. We were recognized by over thirty industry awards and rankings reports, including winning three categories in WatersTechnology’s 2021 Inside Market Data & Inside Reference Data awards: best alternative data provider, best ESG data provider, and best overall data or service provider for 2021.

Client Service / Customer Success

Our client service teams are a critical component of our comprehensive value proposition, and include a versatile group of financial data and modeling experts, with extensive knowledge of financial markets and FactSet solutions. Our client service teams take a consultative approach to understand our clients’ challenges and objectives to strategically leverage our workflow solutions and deliver support of the highest standard. Our clients have continuous access to our support desk, trained to respond to both project and technical support questions. A client-centric approach is foundational to our ongoing achievements, therefore client satisfaction is critical to how we measure our success. According to our global client satisfaction survey, greater than 94% of respondents were satisfied or very satisfied with our support. We believe that these strong relationships help ensure continued high rates of retention and account expansion.

COVID-19 Update

A novel strain of coronavirus, now known as COVID-19 ("COVID-19"), was first reported in December 2019, and it has since extensively impacted the global health and economic environment, with the World Health Organization characterizing COVID-19 as a pandemic on March 11, 2020. In response to the COVID-19 pandemic, we implemented a business continuity plan with a dedicated incident management team to respond quickly and provide ongoing guidance so that we could continue offering our clients uninterrupted products, services and support while also protecting our employees. We believe these actions have been successful and that the pandemic, and our responses, have not significantly affected the financial results for our 2021 fiscal year.

At the outset of the pandemic, we required the vast majority of our employees at our offices across the globe (including our corporate headquarters) to work remotely and implemented global travel restrictions for our employees. Since that time, we have begun to re-open many of our offices globally, utilizing a three-phased approach to provide flexibility for employees wishing to work from our offices with a focus on social distancing and safety while acting consistently with applicable local regulations. We anticipate that the ability to open offices will vary significantly from region to region based on a number of factors, including the availability of COVID-19 vaccines and the spread of COVID-19 variants. We have worked with local organizations to procure vaccines for our employees and encouraged them to get vaccinated. Our offices will not re-open fully until local authorities permit us to do so and our own criteria and conditions to ensure employee health and safety are satisfied.

As of August 31, 2021, there have been minimal interruptions in our ability to provide our products, services and support to our clients. Working remotely has had relatively little impact on the productivity of our employees, including our ability to gather content. We continue to work closely with our clients to provide consistent access to our products and services and have remained flexible to achieve client priorities.

Based on our success in working in a remote environment during the COVID-19 pandemic, we expect to implement a new work standard under which employees in many of our locations, where permitted by local laws and regulations, and where the role permits, will have the opportunity to choose between different work arrangements. These include working either in a hybrid arrangement, where an employee can split time between working from the office and working from a pre-approved remote location, or a fully remote arrangement, where an employee can work entirely from a pre-approved remote location.

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Our revenue, earnings, and ASV are relatively stable and predictable as a result of our subscription-based business model. To date, the COVID-19 pandemic has not had a material negative impact on our revenue, earnings or ASV. We incurred additional expenses at the start of the COVID-19 pandemic, particularly relating to equipment to enable our employees to support our clients while working remotely, which were not material to our fiscal 2021 results. As we have continued to work in remote and hybrid environments, reductions in discretionary spending, particularly travel and entertainment, have more than offset any related increased expenses. Given our transition to our new work standard, we anticipate that many of these expense reductions will continue going forward, as we incur less travel and entertainment spending than we did pre-pandemic and seek to reduce our spending on office space that is no longer necessary in our new work environment.

Refer to Item 1A. Risk Factors of this Annual Report on Form 10-K for further discussion of the potential impact of the COVID-19 pandemic on our business.

Annual Subscription Value ("ASV")

As of August 31, 2021, organic annual subscription value ("organic ASV") plus Professional Services totaled $1.7 billion, an increase of 7.2% over August 31, 2020. Organic ASV increased across all our geographic segments with the majority of the increase related to the Americas, followed by EMEA and Asia Pacific.

We believe ASV reflects our ability to grow recurring revenue and generate positive cash flow and is the key indicator of the successful execution of our business strategy.

–"ASV" at any point in time represents our forward-looking revenue for the next 12 months from all subscription services currently being supplied to client, excluding revenues from Professional Services.

–"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 on the current year period.

–"Professional Services" are revenues derived from project-based consulting and implementation.

–"Organic ASV plus Professional Services" at any point in time equals the sum of Organic ASV and Professional Services.

Organic ASV plus Professional Service

The following table presents the calculation the calculation of Organic ASV plus Professional Services as of August 31, 2021. With proper notice provided as contractually required, our clients can add to, delete portions of, or terminate service, subject to certain limitations.

(in millions) As of August 31, 2021

As reported ASV plus Professional Services(1) $ 1,688.3

Currency impact(2) 1.6

Acquisition ASV(3) (11.4)

Organic ASV plus Professional Services $ 1,678.5

Organic ASV plus Professional Services growth rate 7.2 %

(1)Includes $24.1 million in Professional Services fees as of August 31, 2021.

(2)The impact from foreign currency movements.

(3)Acquired ASV from acquisitions completed within the last 12 months.

As of August 31, 2021, Organic ASV plus Professional Services was $1.7 billion, an increase of 7.2% compared with August 31, 2020. The increase in year-over-year Organic ASV was largely attributed to existing clients, followed by new client sales and existing client price increases, partially offset by existing client cancellations.

Organic ASV increased across all our geographic segments with the majority of the increase related to the Americas, followed by EMEA and Asia Pacific. This increase was driven by additional sales in our workflow solutions, primarily in Research, followed by Analytics & Trading and CTS. Sales increased in Research mainly due to higher demand for our workstations. Sales increased in Analytics & Trading mainly from our portfolio analytics, portfolio reporting, performance and reporting, front office, and risk and quantitative solutions. CTS sales increased primarily due to core and premium content sets, specifically related to company financial data and data management solutions.

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Segment ASV

As of August 31, 2021, ASV from the Americas was $1,039.4 million, an increase from $956.6 million as of August 31, 2020. Americas organic ASV increased to $1029.2 million as of August 31, 2021, a 7.4% increase compared with August 31, 2020.

As of August 31, 2021, ASV from EMEA was $450.0 million, an increase from $426.0 million as of August 31, 2020. EMEA organic ASV increased to $451.3 million as of August 31, 2021, a 5.6% increase compared with August 31, 2020.

As of August 31, 2021, Asia Pacific ASV was $174.7 million, an increase from $156.5 million as of August 31, 2020. Asia Pacific organic ASV increased to $174.6 million as of August 31, 2021, a 12.3% increase compared with August 31, 2020.

The increase in organic ASV across all our geographic segments was largely attributed to increased sales to existing clients, followed by new client sales and existing client price increases, partially offset by existing client cancellations. The increased organic ASV in the Americas was primarily driven by increased sales for Research, followed by higher sales of Analytics & Trading and CTS. The EMEA organic ASV increase was mainly driven by higher sales of CTS followed by Analytics & Trading. The Asia Pacific organic ASV increase was primarily due to increased sales of Research, Analytics & Trading, and CTS.

Buy-side and Sell-side Organic ASV Growth

Buy-side and sell-side Organic ASV growth rates at August 31, 2021, compared with August 31, 2020, were 6.5% and 12.0%, respectively. Buy-side clients account for approximately 83% of our Organic ASV, consistent with the prior year period, and primarily include asset managers, asset owners, wealth managers, hedge funds and corporate firms. The remainder of our Organic ASV is derived from sell-side firms and primarily include broker-dealers, banking and advisory, private equity and venture capital firms.

Client and User Additions

As of and for theYear Ended August 31,

(1)The client count includes clients with ASV of $10,000 and above.

(2)In the second quarter of fiscal 2021, we revised our user count methodology to include users across all our products, including workstations, StreetAccount and other workflow solutions. The prior year user count was adjusted to reflect this change for comparison purposes.

Our client count includes clients with ASV of $10,000 and above. Our total client count was 6,453 as of August 31, 2021, a net increase of 9.8%, or 578 clients in the last 12 months, mainly due to an increase in corporate and wealth management clients and third-party data providers. The client count increase was mainly driven by demand for our integrated content and workflow solutions, which are further enhanced by our continued investment in product innovation. As part of our long-term growth strategy, we continue to focus on expanding and cultivating relationships with our existing client base through sales of workstations, applications, services and content.

As of August 31, 2021, there were 160,932 professionals using FactSet, representing a net increase of 14.0%, or 19,796 users, in the last 12 months, primarily driven by an increase in wealth advisory professionals from our wealth management clients, as well as an increase in sell-side users from our banking clients. The increase in users was mainly due to a new wealth management client, improvement in our client retention and increased new hiring at our banking clients.

Annual ASV retention was greater than 95% of ASV for the period ended August 31, 2021 and August 31, 2020. When expressed as a percentage of clients, annual retention was approximately 91.0% for the period ended August 31, 2021, an improvement from approximately 90% for the period ended August 31, 2020.

Employee Headcount

As of August 31, 2021, our employee headcount was 10,892, up 3.9% in the past 12 months, due primarily to an increase in net new employees of 6.6% in Asia Pacific and 0.7% in EMEA, partially offset by a decrease of 1.5% in the Americas. Of our total

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employee headcount at August 31, 2021, 7,080 were located in Asia Pacific, 2,439 were located in the Americas and 1,373 were located in EMEA.

Results of Operations

For an understanding of the significant factors that influenced our performance during fiscal 2021 and 2020, the following discussion should be read in conjunction with the Consolidated Financial Statements and related Notes included in Item 8. of this Annual Report on Form 10-K.

The following table summarizes the results of operations for the periods described:

Years ended August 31,

(in thousands, except per share data) 2021 2020 $ Change % Change

Diluted earnings per common share $ 10.36 $ 9.65 $ 0.71 7.4 %

Diluted weighted average common shares 38,570 38,646

Revenue

Revenue increased 6.5% to $1.6 billion in fiscal 2021, compared with $1.5 billion from the same period in the prior year. The increase in revenue was largely attributed to increased sales to existing clients, followed by new client sales and existing client price increases, partially offset by existing client cancellations. Revenue increased across all our segments, primarily from the Americas, followed by EMEA and Asia Pacific, driven by increased revenue in all our workflow solutions, mainly in Analytics & Trading, CTS, and Research, compared with the prior year. Organic revenue increased to $1.6 billion for the fiscal year ended 2021, a 6.3% increase over the prior year period. (Refer to Item 7. Results of Operations, Non-GAAP Financial Measures in the MD&A of this Annual Report on Form 10-K for further discussion on organic revenue).

The revenue growth of 6.5% was composed of organic revenue growth of 6.3%, a 30 basis point increase from foreign currency exchange rate fluctuations, partially offset by a 10 basis point decrease from deferred revenue fair value adjustments from purchase accounting and acquisition-related revenue.

Revenue by Segment

Years ended August 31,

(in thousands) 2021 2020 $ Change % Change

% of revenue 9.8 % 9.6 %

Americas revenue increased 6.8% to $1,008.0 million in fiscal 2021, compared with $943.6 million from the same period in the prior year. The increase in revenue was largely attributed to increased sales to existing clients, followed by new client sales and existing client price increases, partially offset by existing client cancellations. This revenue growth was mainly due to increased sales in all of our workflow solutions, primarily in Analytics & Trading and CTS. The revenue growth of 6.8% was due to

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organic revenue growth of 6.3% and a 50 basis point increase in acquisition-related revenue and deferred revenue fair value adjustments from purchase accounting.

EMEA revenue increased 5.2% to $427.7 million in fiscal 2021, compared with $406.5 million from the same period in the prior year. The increase in revenue was largely attributed to increased sales to existing clients, followed by new client sales and existing client price increases, partially offset by existing client cancellations. This revenue growth was mainly due to increased sales in all of our workflow solutions, primarily in CTS and Analytics & Trading. The revenue growth of 5.2% was driven by organic revenue growth of 3.7%, a 110 basis point increase from foreign currency exchange rate fluctuations and a 40 basis point increase from deferred revenue fair value adjustments from purchase accounting.

Asia Pacific revenue increased 8.2% to $155.7 million in fiscal 2021, compared with $144.0 million from the same period in the prior year. The increase in revenue was largely attributed to increased sales to existing clients, followed by new client sales and existing client price increases, partially offset by existing client cancellations. The revenue growth was mainly due to increased sales in all of our workflow solutions, primarily in Analytics & Trading. The revenue growth of 8.2% was due mainly to organic revenue growth of 8.0% and a 20 basis point increase from foreign currency exchange rate fluctuations.

Revenue by Workflow Solution

Revenue increased 6.5% for fiscal 2021, compared with the same period in the prior, primarily driven by Analytics & Trading and CTS. The increase in Analytics & Trading was mainly driven by increased sales in our portfolio reporting, portfolio analytics, risk and quantitative solutions and performance and reporting. CTS sales increased primarily due to core and premium content sets, specifically related to company financial data and data management solutions.

Operating Expenses

(in thousands) Years ended August 31,

Cost of Services

Cost of services increased 13.1% to $786.4 million in fiscal 2021 compared with $695.4 from the same period in the prior year. Cost of services, expressed as a percentage of revenue, was 49.4% during fiscal 2021, an increase of 290 basis points over the prior year period. This increase was primarily due to an increase in employee compensation costs, including stock-based compensation, and computer-related expenses.

Employee compensation costs increased 150 basis points mainly due to higher annual base salaries and a net increase in employee headcount of 408 employees, with the majority of the compensation from new employee headcount included in cost of services, an increase in year-over-year variable compensation, and an increase in stock based compensation expense. Computer-related expenses increased by 150 basis points, primarily due to increased technology investments related to our migration to cloud-based hosting services, licensed software arrangements, and a 30 basis point increase in the amortization of intangibles, due to a higher investment in capitalized software that has been placed into service. This increase was partially offset by increased capitalization of compensation costs related to development of our internal-use software projects, as well as a shift in headcount to lower cost locations.

Selling, General and Administrative

Selling, general and administrative ("SG&A") expenses decreased 7.8% to $331.0 million during fiscal 2021, compared with $359.0 million from the same period in the prior year. SG&A expenses, expressed as a percentage of revenue, were 20.8% in fiscal 2021, a decrease of 320 basis points over the prior year period. This decrease was primarily due to a decrease in non-

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compensatory employee related expenses, an impairment on an investment in a company in fiscal 2020, and a decrease in professional fees, partially offset by increased compensations costs.

Non-compensatory employee-related expenses, inclusive of travel, entertainment and office expenses, decreased 150 basis points, mainly due to restrictions and impacts related to the COVID-19 pandemic, as most employees continued to work from home. The prior year investment impairment resulted in a 110 basis point decrease in the current year. Professional fees decreased 50 basis points, primarily due to the completion of certain projects to support our technology plan and business transformation activities and lower tax consulting and accounting fees, compared with the prior year period. The decrease was partially offset by an increase in employee compensation costs of 70 basis points, primarily driven by higher annual base salaries and a net increase in employee headcount, as well as higher variable compensation expense.

Operating Income and Operating Margin

Operating income increased 7.8% to $474.0 million in fiscal 2021 compared with $439.7 million in the prior year. Operating income increased primarily due to revenue growth, inclusive of our annual price increase, a reduction in non-compensatory employee related expenses, a prior year investment impairment, decreased professional fees and occupancy costs, partially offset by an increase in employee compensation costs, including stock-based compensation, and computer-related expenses. Operating income was negatively impacted by movements in foreign currency exchange rates on a year-over-year basis. Our operating margin increased in fiscal 2021 to 29.8%, compared with 29.4% for fiscal 2020. Operating margin increased primarily due to a decrease in non-compensatory employee related expenses, a prior year investment impairment, decreased professional fees and occupancy costs, partially offset by higher employee compensation costs and computer-related expenses.

Operating Income by Segment

Our internal financial reporting structure is based on three reportable segments, the Americas, EMEA and Asia Pacific. Refer to Note 19, Segment Information, for further discussion regarding our segments.

Years ended August 31,

(in thousands) 2021 2020 $ Change % Change

Americas

Americas operating income increased 19.9% to $218.2 million during fiscal 2021, compared with $182.0 million from the prior year. The increase was primarily due to revenue growth of 6.8%, inclusive of our annual price increase, a reduction in non-compensatory employee related expenses, a prior year investment impairment and lower professional fees, partially offset by an increase in employee compensation expense and computer-related expenses.

Non-compensatory employee related expenses, inclusive of travel, entertainment and office expenses, decreased mainly due to restrictions and impacts related to the COVID-19 pandemic. Professional fees decreased, primarily due to the completion of certain projects to support our technology plan and business transformation activities, as well as lower tax consulting fees, compared with the prior year period. The expense decreases were partially offset by higher employee compensation expense, mainly due to increased annual base salaries, an increase in year-over-year variable compensation, partially offset by higher capitalization of compensation costs related to development of our internal-use software projects, and increases in computer-related expenses, due to increased technology investments, including costs from cloud-based hosting and licensed software arrangements. Additionally, amortization of intangible assets increased, primarily due to a higher investment in capitalized software that has been placed into service.

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EMEA

EMEA operating income decreased 3.4% to $159.7 million during fiscal 2021, compared with $165.3 million from the prior year. The decrease in EMEA operating income was primarily due to an increase in employee compensation costs, bad debt expense, and amortization of intangibles, partially offset by revenue growth of 5.2%, inclusive of our annual price increase and a reduction in non-compensatory employee related expenses. Operating income was negatively impacted by movements in foreign currency exchange rates on a year-over-year basis. Employee compensation increased primarily due to a net increase in employee headcount over the past 12 months, increased annual base salaries, higher variable compensation and higher vacation expense. Non-compensatory employee related expenses, inclusive of travel, entertainment and office expenses, decreased, mainly due to restrictions and impacts related to the COVID-19 pandemic, partially offset by investment in technology to allow employees to work from home.

Asia Pacific

Asia Pacific operating income increased 4.2% to $96.2 million during fiscal 2021, compared with $92.3 million from the prior year. The increase in Asia Pacific operating income was mainly due to revenue growth of 8.2%, inclusive of our annual price increase, and a reduction in non-compensatory employee related expenses, partially offset by an increase in employee compensation costs. Operating income was favorably impacted by movements in foreign currency exchange rates on a year-over-year basis. Non-compensatory employee related expenses, inclusive of travel, entertainment and office expenses, decreased, mainly due to restrictions and impacts related to the COVID-19 pandemic, partially offset by investments in technology to allow employees to work from home. Employee compensation increased mainly due to a 6.6% increase in our Asia Pacific workforce in the last 12 months and increased annual base salaries.

Income Taxes, Net Income and Diluted Earnings per Share

Years ended August 31,

(in thousands) 2021 2020 $ Change % Change

Diluted earnings per common share $ 10.36 $ 9.65 $ 0.71 7.4 %

Income Taxes

The fiscal 2021 provision for income taxes was $68.0 million, compared with $54.2 million in fiscal 2020, an increase of 25.5%. The increase was primarily due to net changes in jurisdictional pre-tax book income in fiscal 2021, compared with the prior year. Additionally, the increase was driven by a $4.4 million lower windfall tax benefit from stock-based compensation for fiscal 2021, compared with fiscal 2020, changes in tax rates in certain jurisdictions, and a lower benefit from finalizing prior year tax returns of $1.2 million. The increase was partially offset by the impact of the true-up of certain foreign deferred tax balances, and higher research and development tax credits.

Net Income and Diluted Earnings per Share

Net income increased 7.1% to $399.6 million during fiscal 2021 compared with $372.9 million in fiscal 2020. Diluted earnings per share increased 7.4% to $10.36 in fiscal 2021 compared with $9.65 in fiscal 2020. Net income and diluted EPS increased primarily due to increased operating income and a reduction in interest expense, partially offset by an increase in the provision for income taxes. Interest expense decreased as a result of a decrease in LIBOR compared with the prior year, which reduced the interest rate under our 2019 Revolving Credit Facility. Refer to Note 13, Debt of the Notes to the Consolidated Financial Statements included in Item 8. of this Annual Report on Form 10-K for more information on LIBOR and the 2019 Revolving Credit Facility.

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 revenue, adjusted operating margin, adjusted net income and adjusted diluted earnings per share. The reconciliations of these non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP are show in the tables below. 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

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all the items associated with the operations of the business as determined in accordance with GAAP. Other companies may calculate similarly titled non-GAAP financial measures differently that 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.

The table below provides an unaudited reconciliation of revenue to adjusted revenue and organic revenue.

Twelve Months EndedAugust 31,

(In thousands) 2021 2020 $ Change % Change

(1)The amortization effect of the purchase accounting adjustment on the fair value of acquired deferred revenue.

(2)Revenues from acquisitions completed within the last 12 months.

(3)The impact from foreign currency movements over the past 12 months.

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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 and adjusted diluted EPS.

Twelve Months Ended

(In thousands, except per share data) 2021 2020 Change

Deferred revenue fair value adjustment 539 4,192

Impairment of Investment — 16,500

Restructuring / severance 5,028 51

Adjusted operating margin(2) 32.5 % 33.6 %

Deferred revenue fair value adjustment 456 3,385

Impairment of Investment — 16,500

Restructuring / severance 4,253 41

Diluted earnings per common share $ 10.36 $ 9.65 7.4 %

Deferred revenue fair value adjustment 0.01 0.10

Intangible asset amortization 0.51 0.46

Impairment of Investment — 0.42

Restructuring / severance 0.11 —

Adjusted diluted earnings per common share(4) $ 11.20 $ 10.87 3.0 %

Weighted average common shares (Diluted) 38,570 38,646

(1)Costs primarily related to professional fees associated with the ongoing multi-year investment plan.

(2)Adjusted operating margin is calculated as adjusted operating income divided by adjusted revenue as shown in the organic revenue table above.

(3)Income tax items for the year ended August 31, 2021 reflects tax expenses primarily related to a reduction in the estimated foreign pre-tax book income as well as an increase in estimated U.S. pre-tax book income. This was partially offset by a benefit from the finalization of the prior year tax return. Income tax items for the year ended August 31, 2020 includes income tax expenses primarily due to finalization of the prior year tax return.

(4)For purposes of calculating adjusted net income and adjusted diluted earnings per share, deferred revenue fair value adjustments and intangible asset amortization were taxed at the annual effective tax rates of 17.8% for fiscal 2021 and 17.7% for fiscal 2020.

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Liquidity and Capital Resources

Our primary sources of liquidity have been our cash flows generated from our operations, existing cash and cash equivalents and, when needed, our credit capacity under our existing credit facility. We use these sources of liquidity to, among other things, service our existing and future debt obligations, fund our working capital requirements, capital expenditures, investments, acquisitions, dividend payments and repurchases of our common stock. Based on past performance and current expectations, we believe our liquidity, along with 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.

Sources of Liquidity

Long-Term Debt

On March 29, 2019, we entered into a credit agreement with PNC Bank, National Association ("PNC") (the "2019 Credit Agreement"), which provides for a $750.0 million revolving credit facility (the "2019 Revolving Credit Facility"). We may request borrowings under the 2019 Revolving Credit Facility until its maturity date of March 29, 2024. The 2019 Credit Agreement also allows us, subject to certain requirements, to arrange for additional borrowings with PNC for an aggregate amount up to $500.0 million, provided that any such request for additional borrowings must be in a minimum amount of $25.0 million.

As of August 31, 2021, we have borrowed $575.0 million of the available $750.0 million provided by the 2019 Revolving Credit Facility, resulting in $175.0 million available to be withdrawn. We are required to pay a commitment fee using a pricing grid which was 0.10% as of August 31, 2021. This fee is based on the daily amount by which the available balance in the 2019 Revolving Credit Facility exceeds the borrowed amount. All outstanding loan amounts are reported as Long-term debt within the Consolidated Balance Sheets at August 31, 2021 and August 31, 2020. The principal balance is payable in full on the maturity date.

Borrowings under the loan bear interest on the outstanding principal amount at a rate equal to LIBOR plus a spread using a debt leverage pricing grid, which was 0.875% as of August 31, 2021. The variable rate of interest on the 2019 Revolving Credit Facility can expose us to interest rate volatility due to changes in LIBOR. To mitigate this exposure, on March 5, 2020, we entered into an interest rate swap agreement with a notional amount of $287.5 million to hedge the variable interest rate obligation on a portion of our outstanding balance under the 2019 Revolving Credit Facility. Under the terms of the interest rate swap agreement, we will pay interest at a fixed rate of 0.7995% and receive variable interest payments based on the same one-month LIBOR utilized to calculate the interest expense from the 2019 Revolving Credit Facility. The interest rate swap agreement matures on March 29, 2024. There is currently a global transition, known as reference rate reform, away from referencing the LIBOR, and other interbank offered rates, and toward new reference rates. As a result of the reference rate reform initiative, these interbank offered rates, including LIBOR are expected to be discontinued. Refer to Note 3, Summary of Significant Accounting Policies of the Notes to the Consolidated Financial Statements included in Item 8. of this Annual Report on Form 10-K for more information on our evaluation of reference rate reform on our Consolidated Financial Statements.

Including the effects of the interest rate swap agreement, the weighted average interest rate on amounts outstanding under our 2019 Revolving Credit Facility was 1.38% and 2.20% for the twelve months ended August 31, 2021 and August 31, 2020, respectively. Interest on the outstanding balance under the 2019 Revolving Credit Facility is payable quarterly, in arrears, and on the maturity date.

The 2019 Credit Agreement contains covenants and requirements restricting certain of our activities, which are usual and customary for this type of loan. In addition, the 2019 Credit Agreement requires that we maintain a consolidated net leverage ratio, as measured by total net funded debt/EBITDA (as defined in the 2019 Credit Agreement) below a specified level as of the end of each fiscal quarter. We were in compliance with all the covenants and requirements within the 2019 Credit Agreement as of August 31, 2021.

Letters of Credit

From time to time, we are required to obtain letters of credit in the ordinary course of business. Approximately $2.8 million of standby letters of credit have been issued in connection with our leased office spaces as of August 31, 2021. These standby letters of credit utilize the same covenants included in the 2019 Credit Agreement. Refer to Note 13, Debt of the Notes to the Consolidated Financial Statements included in Item 8. of this Annual Report on Form 10-K for more information on these covenants.

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Uses of Liquidity

Returning Value to Shareholders

For the year ended August 31, 2021, we returned $382.6 million to stockholders in the form of share repurchases and dividends.

Share Repurchase Program

Under our share repurchase program, we may repurchase shares of our common stock from time to time in the open market and privately negotiated transactions, subject to market conditions. In fiscal 2021, we repurchased 0.8 million shares for $264.7 million under our existing share repurchase program compared with 0.7 million shares for $199.6 million in fiscal 2020. A total of $199.9 million remains authorized for future share repurchases as of August 31, 2021. There is no defined number of shares to be repurchased over a specified timeframe through the life of the share repurchase program. It is expected that share repurchases will be paid using existing and future cash generated by operations.

Capital Expenditures

For the year ended August 31, 2021, capital expenditures were $61.3 million, compared with $77.6 million during the same period a year ago, a decrease of $16.3 million. Capital expenditures decreased as the cost related to the build-out of our office space in the Philippines during the year ended August 31, 2021 was less than the cost related to the build-out of our new corporate headquarters in Norwalk, Connecticut and office space in India during the prior year period. This decrease was partially offset by higher expenditures related to the development of capitalized internal-use software during the year ended August 31, 2021 compared with the prior year.

Dividends

On August 9, 2021, our Board of Directors approved a regular quarterly dividend of $0.82 which was paid on September 16, 2021. During fiscal 2021, the quarterly dividend increased $0.05 per share or 6.5%, which marked the 22nd consecutive year we have increased dividends, highlighting our continued commitment to returning value to stockholders. Over the last 12 months, we have paid 117.9 million in cash dividends. Future cash dividends will depend on our earnings, capital requirements, financial condition and other factors considered relevant by us and is subject to final determination by our Board of Directors.

Acquisitions

During fiscal 2021, we completed acquisitions of businesses, with the most significant cash flows related to the acquisition of Truvalue Labs, Inc. ("TVL") on November 2, 2020. We acquired all of the outstanding shares of TVL for a purchase price of $41.9 million, subject to working capital and other adjustments. TVL is a leading provider of ESG information. TVL applies artificial intelligence driven technology to over 100,000 unstructured text sources in multiple languages, including news, trade journals, and non-governmental organizations and industry reports, to provide daily signals that identify positive and negative ESG behavior. The acquisition of TVL further enhances our commitment to providing industry leading access to ESG data across our platforms. Refer to Note 7, Acquisition, in the Notes to the Consolidated Financial Statements included in Item 8. of this Annual Report on Form 10-Kfor further discussion of the TVL acquisition.

Contractual Obligations

Purchase obligations represent committed payments due in future periods to our various data vendors and for other goods and services. These purchase commitments are agreements that are enforceable and legally binding on us, and they specify all significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction. As of August 31, 2021 and 2020, we had total purchase commitments with suppliers of $191.9 million and $226.0 million, respectively. We also have contractual obligations related to our lease liabilities and outstanding debt. Refer to Note 12, Leases and Note 13, Debt for information regarding lease commitments and outstanding debt obligations, respectively.

Our purchase obligations consist of two primary arrangements, data content and hosting services. Data content is an integral component of the value we provide to our clients. Hosting services support our technology investments related to our migration to cloud-based hosting services, the majority of which rely on third-party hosting providers. Of the $191.9 million in purchase commitments, $84.0 million relates to hosting services and $78.7 million relates to data content. Additional commitments relate primarily to third-party software providers.

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Summary of Cash Flows

The table below, for the periods indicated, provides selected cash flow information:

Years ended August 31,

(in thousands) 2021 2020 $ Change % Change

Cash and cash equivalents aggregated to $681.9 million as of August 31, 2021, compared with $585.6 million as of August 31, 2020. Our cash and cash equivalents increased $96.3 million during the twelve months ended August 31, 2021, primarily due to inflows of $555.2 million from net cash provided by operating activities and $64.2 million in proceeds from the exercise of employee stock options, partially offset by cash outflows of $264.7 million in share repurchases, $117.9 million in dividend payments, $58.1 million for the acquisition of businesses and $61.3 million of capital expenditures.

Our cash and cash equivalents are held in numerous locations throughout the world, with $266.9 million within the Americas, $369.3 million within EMEA (predominantly within the UK, Germany, and France) and the remaining $45.8 million within Asia Pacific (predominantly within the Philippines and India) as of August 31, 2021. We intend to reinvest substantially all of our accumulated undistributed foreign earnings, except in instances where repatriation would result in minimal additional tax. As a result of the U.S. Tax Cuts and Jobs Act ("TCJA"), we believe that the income tax impact if such earnings were repatriated would be minimal.

Operating

For fiscal 2021, net cash provided by operating activities was $555.2 million compared with $505.8 million for fiscal 2020, an increase of $49.4 million. This increase was primarily driven by higher net income and the timing of tax payments in certain jurisdictions, partially offset by certain working capital changes, inclusive of increases in variable compensation accruals.

Investing

For fiscal 2021, net cash used in investing activities was $136.0 million, representing a $62.4 million increase from the prior year. This increase was mainly due to the acquisition of businesses, primarily related to the acquisition of TVL for approximately $41.9 million in cash, net of cash acquired, and a $16.3 million decrease in capital expenditures.

Financing

For fiscal 2021, net cash used by financing activities was $322.7 million, representing a $104.6 million increase in cash outflows compared with the prior year. Financing activities were impacted by a $65.1 million increase in share repurchases, a $31.3 million decrease in proceeds from employee stock plans, and an increase of $7.5 million in dividend payments.

Free Cash Flow

We define free cash flow, a non-GAAP financial measure, as cash provided by operating activities less purchases of property, equipment, leasehold improvements and capitalized internal use software. We present free cash flow solely as a supplemental disclosure to provide useful information to investors about the amount of cash generated by the business after necessary capital expenditures. We consider free cash flow to be a liquidity measure that provides useful information to management and investors about the amount of cash generated by the business after necessary capital expenditures. The following table reconciles our net cash provided by operating activities to free cash flow:

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Years ended August 31,

Net cash provided by operating activities $ 555,226 $ 505,840

(1)Capital expenditures are included in net cash used in investing activities during each fiscal period reported and include property, equipment, leasehold improvements and internal-use software.

For fiscal 2021, we generated free cash flow of $493.9 million compared with $428.2 million in fiscal 2020, an increase of $65.7 million. This increase reflects an increase of $49.4 million in cash provided by operating activities and decreases in capital expenditures of $16.3 million.

Off-Balance Sheet Arrangements

At August 31, 2021 and 2020, we had no off-balance sheet financing or 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

Foreign Currency Exposure

Certain wholly-owned subsidiaries, primarily within the EMEA and Asia Pacific segments, where approximately 78% of our employees are located, are exposed to volatility in currency exchange rates through translation of the foreign subsidiaries' net assets or liabilities from their respective functional currencies into U.S. dollars, using an end of period exchange rate. The net translation gains and losses are recorded in accumulated other comprehensive loss as a component of stockholders’ equity.

During fiscal 2021, foreign currency movements decreased operating income by $5.4 million, compared with a $5.0 million increaseto operating income in the prior year. To mitigate the foreign currency exposure, we entered into a series of forward contracts to hedge a portion of our British Pound Sterling, Euro, Indian Rupee, and Philippine Peso exposures ranging from 25% to 75% over their respective hedged periods as of August 31, 2021. The current foreign currency forward contracts are set to mature at various points between the first quarter of fiscal 2022 through the fourth quarter of fiscal 2022.

As of August 31, 2021, the gross notional value of foreign currency forward contracts to purchase Philippine Pesos and Indian Rupees with U.S. dollars was ₱1.4 billion and Rs2.6 billion, respectively. The gross notional value of foreign currency forward contracts to purchase U.S. dollars with Euros and British Pound Sterling was €33.8 million and £37.7 million, respectively.

A loss on foreign currency forward contracts of $5.0 million was recorded into operating income during fiscal 2021, compared with a loss of $1.6 million in fiscal 2020.

Critical Accounting Estimates

We prepare the Consolidated Financial Statements in conformity with GAAP, which requires us to make certain estimates and apply judgements 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 Note 3, Summary of Significant Accounting Policies in the Notes to the Consolidated Financial Statements included in Item 8. of this Annual Report on Form 10-K. Management has discussed the development and selection of these critical accounting estimates with the Audit Committee of our Board of Directors. 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 income taxes in the U.S. and numerous foreign jurisdictions. Our tax provision is an estimate based on our understanding of laws in Federal, state and foreign tax jurisdictions. These laws can be complicated and are difficult to apply to

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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 effective tax rates differ from the statutory rate primarily due to the impact of state taxes, foreign operations, research and development ("R&D") and other tax credits, tax audit settlements, incentive-stock options and the foreign derived intangible income ("FDII") deduction. Our annual effective tax rate was 14.5%, 12.7% and 16.4% in fiscal 2021, 2020 and 2019, respectively.

Our provision for income taxes is subject to volatility and could be adversely impacted by numerous factors such as changes in tax laws, regulations, or accounting principles, including accounting for uncertain tax positions or interpretations of them. Significant judgment is required to determine recognition and measurement. 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 and in some cases is wholly exempt from tax. Our failure to meet these 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 have an adverse impact on our operating results and financial condition.

To account for unrecognized tax benefits, we first determine whether it is more-likely-than-not (defined as a likelihood of more than fifty percent) that a tax position will be sustained based on its technical merits as of the reporting date. A tax position that meets this more-likely-than-not threshold is then measured and recognized at the largest amount of benefit that is greater than fifty percent likely to be realized upon effective settlement with a taxing authority. The determination of liabilities related to unrecognized tax benefits, including associated interest and penalties, requires significant estimates. There can be no assurance that we will accurately predict the outcomes of these audits, however, 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. 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 do not currently anticipate that the total amounts of unrecognized tax benefits will significantly change within the next 12 months.

We classify the liability for unrecognized tax benefits as Taxes Payable (non-current) and to the extent that we anticipate payment of cash within one year, the benefit will be classified as Taxes Payable (current). Additionally, we accrue interest on all tax exposures for which reserves have been established consistent with jurisdictional tax laws. This interest is classified as income tax expense in the financial statements. As of August 31, 2021, we had gross unrecognized tax benefits totaling $14.9 million, including $1.3 million of accrued interest, recorded as Taxes Payable (non-current) within the Consolidated Balance Sheets. Refer to Note 11, Income Taxes in the Notes to the Consolidated Financial Statements included in Item 8. of this Annual Report on Form 10-K for further information.

Performance-based Equity Awards

Performance-based equity awards require management to make assumptions regarding the likelihood of achieving performance targets. The number of performance-based awards that vest will be predicated on achieving performance levels during the measurement period subsequent to the date of grant. Dependent on the financial performance levels attained, a percentage of the performance-based awards will vest to the grantees. However, there is no current guarantee that such awards will vest in whole or in part. Refer to Note 17, Stock-Based Compensation in the Notes to the Consolidated Financial Statements included in Item 8. of this Annual Report on Form 10-K for further information.

Goodwill and Intangible Assets

Goodwill is assigned to one or more reporting units on the date of acquisition. Our reporting units are the same as our reportable segments. Goodwill is not amortized as it is estimated to have an indefinite life. We review our goodwill for impairment annually during the fourth quarter of each fiscal year and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of any one of our reporting units below its respective carrying amount.

We may elect to perform a qualitative analysis for the reporting units to determine whether it is more likely than not the fair value of the reporting unit is greater 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 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

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carrying amount 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 fair value of a reporting unit with its carrying amount using an income approach, along with other relevant market information, derived from a discounted cash flow model to estimate the fair value of our reporting units. An impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value, if any, would be recognized. The loss recognized would not exceed total amount of goodwill allocated to that reporting unit.

We completed our annual goodwill impairment test during the fourth quarter of fiscal 2021. We determined, after performing a qualitative review of each reporting unit, that it is more likely than not that the fair value of each reporting unit substantially exceeds their respective carrying amounts. Accordingly, there was no indication of impairment and a quantitative goodwill impairment test was not performed.

Our identifiable intangible assets consist of acquired content databases, client relationships, software technology, and trade names resulting from acquisitions, which have been fully integrated into our operations, as well as internal-use software. We amortize intangible assets over their estimated useful lives, which are evaluated quarterly to determine whether events and circumstances warrant a revision to the remaining period of amortization. The weighted average useful life of our identifiable intangible assets at August 31, 2021 was 9.1 years. If the estimate of the remaining useful life is changed, the remaining carrying amount of the intangible asset is amortized prospectively over that revised remaining useful life. There were no material adjustments to the useful lives of intangible assets subject to amortization during any of the periods presented. These intangible assets had no assigned residual values as of August 31, 2021 and 2020.

Intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Determination of recoverability is based on an estimate of undiscounted future cash flows resulting from the use of the asset and its eventual disposition. Measurement of any impairment loss for intangible assets that management expects to hold, and use is based on the amount the carrying value exceeds the fair value of the asset, which may be based on estimated future cash flows (discounted). No indicators of impairment of intangible assets has been identified during any of the periods presented. Our ongoing consideration of recoverability could result in impairment charges in the future, which could adversely affect our results of operations. The carrying value of intangible assets as of August 31, 2021 and 2020 was $135.0 million and $121.1 million, respectively. Refer to Note 9, Goodwill and Note 10, Intangible Assets in the Notes to the Consolidated Financial Statements included in Item 8. of this Annual Report on Form 10-K for further details.

Long-lived Assets

Long-lived assets, comprised of property, equipment and leasehold improvements and lease right-of-use ("ROU") assets are evaluated for impairment whenever events or changes in circumstances indicate the carrying value of the assets may not be recoverable. In evaluating long-lived assets for recoverability, we use our best estimate of future cash flows (undiscounted and excluding interest charges). If the estimated future cash flows are less than the carrying value of the asset, an impairment loss is recognized to the extent that such asset's carrying value exceeds its fair value, based on the most appropriate valuation technique, including discounted cash flows.

In determining indicators for impairment, we take various factors into account, including, but not limited to, a significant decline in our expected future cash flows; changes in expected useful life; unanticipated competition; slower growth rates, ongoing maintenance and improvements of the assets, or changes in the usage or operating performance. A significant amount of judgment is involved in determining if an indicator of impairment has occurred and in calculating the inputs to the impairment calculation such as estimates related to future cash flows and asset fair values, forecasting asset useful lives and selecting the discount rate that reflects the risk inherent in future cash flows. If actual results are not consistent with our estimates and assumptions included in our impairment assessment, we may be exposed to losses that could be material.

There have been no long-lived asset impairment charges and no change to our impairment assessment methodology for each of the last three years. The carrying value of long-lived assets was $131.4 million as of August 31, 2021 and $133.1 million as of August 31, 2020. Refer to Note 8, Property, Equipment and Leasehold Improvements in the Notes to the Consolidated Financial Statements included in Item 8. of 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 including, but not limited to, employment matters, and commercial and intellectual property litigation. Assessing the probability of loss for such contingencies and determining how to accrue the appropriate liabilities

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requires judgment. If actual results differ from our assessments, our financial position, results of operations, or cash flows would be affected.

Business Combinations

We account for business combinations using the purchase method of accounting. The acquisition purchase price is allocated to the underlying identified, tangible and intangible assets and liabilities assumed, based on their respective estimated fair values on the acquisition date. The excess of the purchase consideration over the fair values of the identified assets and liabilities is recorded as goodwill and assigned to one or more reporting units. The amounts and useful lives 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.

New Accounting Pronouncements

Refer to Note 3, Summary of Significant Accounting Policies in the Notes to the Consolidated Financial Statements included in Item 8. of this Annual Report on Form 10-K for a full description of recent accounting pronouncements, including the expected dates of adoption, which we include here by reference.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Foreign Currency Exchange Risk

In the normal course of business, we are exposed to foreign currency exchange risk as we conduct business outside the U.S. in several currencies including the British Pound Sterling, Euro, Indian Rupee, and Philippine Peso. Changes in the exchange rates for such currencies into U.S. dollars can affect our revenues, earnings, and the carrying values of our assets and liabilities in our consolidated balance sheet, either positively or negatively.

To manage the exposures related to the effects of foreign exchange rate fluctuations, we utilize derivative instruments (foreign currency forward contracts). The changes in fair value for these foreign currency forward contracts are initially reported as a component of Accumulated other comprehensive loss ("AOCL") and subsequently reclassified into operating expenses when the hedged exposure affects earnings.

A sensitivity analysis was performed based on the estimated fair value of all foreign currency forward contracts outstanding at August 31, 2021. If the U.S. dollar had been 10% weaker, the fair value of outstanding foreign currency forward contracts would have increased by $15.3 million, which would have had an immaterial impact on our Consolidated Balance Sheet. Such a change in fair value of our financial instruments would be substantially offset by changes in our expense base. If we had no hedges in place as of August 31, 2021, a hypothetical 10% weaker U.S. dollar against all foreign currencies from the quoted foreign currency exchange rates at August 31, 2021, with operating results held constant in local currencies, would result in a decrease in operating income of $38.2 million over the next 12 months. A hypothetical 10% weaker U.S. dollar against all foreign currencies at August 31, 2021 would have increased the fair value of total assets by $71.4 million and equity by $46.7 million.

Refer to Note 6, Derivative Instruments in the Notes to the Consolidated Financial Statements included in Item 8. of this Annual Report on Form 10-K for more information on our foreign currency exposures and our foreign currency forward contracts.

Interest Rate Risk

Cash and Cash Equivalents and Investments

The fair market value of our cash and cash equivalents and investments at August 31, 2021 was $717.8 million. Our cash and cash equivalents consist of demand deposits and money market funds with original maturities of three months or less and are reported at fair value. We are exposed to interest rate risk through fluctuations of interest rates on our investments. As we have a restrictive investment policy, our financial exposure to fluctuations in interest rates is expected to remain low. Refer to Note 3, Summary of Significant Accounting Policies in the Notes to the Consolidated Financial Statements included in Item 8. of this Annual Report on Form 10-K for more information on our cash and cash equivalents.

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Debt

As of August 31, 2021, we had long term debt outstanding under the 2019 Revolving Credit Facility with a principal balance of $575.0 million. The debt bears interest on the outstanding principle at a rate equal to LIBOR plus a spread, using a debt leverage pricing grid. The variable rate of interest on our long-term debt can expose us to interest rate volatility due to changes in LIBOR. To mitigate this exposure, on March 5, 2020, we entered into an interest rate swap agreement with a notional amount of $287.5 million to hedge the variable interest rate obligation, effectively converting the floating interest rate to fixed for the hedged portion. Thus, we are only exposed to base interest rate risk on floating rate borrowings in excess of any amounts that are not hedged, or $287.5 million of our outstanding principal balance. Assuming all terms of our outstanding long-term debt remained the same, a hypothetical 25 basis point change (up or down) in the one-month LIBOR would result in a $0.7 million change to our annual interest expense for the portion of the long-term debt not hedged by the interest rate swap agreement. Refer to Note 13, Debt in the Notes to the Consolidated Financial Statements included in Item 8. of this Annual Report on Form 10-K for additional information regarding our outstanding debt obligations.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Index to Consolidated Financial Statements Page

Management’s Statement of Responsibility for Financial Statements 50

Management’s Report on Internal Control over Financial Reporting 50

Reports of Independent Registered Public Accounting Firm 51

Consolidated Financial Statements:

Notes to the Consolidated Financial Statements 59

Financial Statement Schedule:

Schedule II – Valuation and Qualifying Accounts 94

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Management’s Statement of Responsibility for Financial Statements

FactSet’s Consolidated Financial Statements are prepared by management, which is responsible for their fairness, integrity and objectivity. The accompanying Consolidated Financial Statements have been prepared in conformity with accounting principles generally accepted in the United States of America and include amounts based on management’s estimates and judgments. All financial information in this Report on Form 10-K has been presented on a basis consistent with the information included in the accompanying financial statements.

FactSet’s policies and practices reflect corporate governance initiatives that are compliant with the listing requirements of the New York Stock Exchange, the NASDAQ Stock Market and the corporate governance requirements of the Sarbanes-Oxley Act of 2002. Management, with oversight by our Board of Directors, has established and maintains a strong ethical climate so that our affairs are conducted to the highest standards of personal and corporate conduct.

FactSet maintains accounting systems, including internal accounting controls, designed to provide reasonable assurance of the reliability of financial records and the protection of assets. The concept of reasonable assurance is based on recognition that the cost of a system should not exceed the related benefits. The effectiveness of those systems depends primarily upon the careful selection of financial and other managers, clear delegation of authority and assignment of accountability, inculcation of high business ethics and conflict-of-interest standards, policies and procedures for coordinating the management of corporate resources, and the leadership and commitment of top management. In compliance with the Sarbanes-Oxley Act of 2002, FactSet assessed its internal control over financial reporting as of August 31, 2021 and issued a report (see below).

Management’s Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting for FactSet. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of FactSet; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that receipts and expenditures of FactSet are being made only in accordance with authorizations of management and directors of FactSet; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

Management (with the participation of the Chief Executive Officer and Chief Financial Officer) conducted an evaluation of the effectiveness of FactSet’s internal control over financial reporting based on the framework in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management concluded that FactSet’s internal control over financial reporting was effective as of August 31, 2021. Ernst & Young LLP, an independent registered public accounting firm, has audited the effectiveness of FactSet’s internal control over financial reporting and has issued a report on FactSet’s internal control over financial reporting, which is included in their report on the subsequent page.

/s/ F. PHILIP SNOW /s/ LINDA S. HUBER

F. Philip Snow Linda S. Huber

Chief Executive Officer Executive Vice President, Chief Financial Officer

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Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of FactSet Research Systems Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of FactSet Research Systems Inc. (the Company) as of August 31, 2021 and 2020, and the related consolidated statements of income, comprehensive income, stockholders’ equity and cash flows for each of the three years in the period ended August 31, 2021, and the related notes and financial statement schedule listed in the Index at Item 8 (collectively referred to as the “Consolidated Financial Statements”). In our opinion, the Consolidated Financial Statements present fairly, in all material respects, the financial position of the Company at August 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended August 31, 2021, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of August 31, 2021, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated October 22, 2021 expressed an unqualified opinion thereon.

Adoption of Accounting Standards Update (ASU) No. 2016-02

As discussed in Note 3, Summary of Significant Accounting Policies, to the Consolidated Financial Statements, the Company changed its method of accounting for leases in 2020 due to the adoption of ASU No. 2016-02, Leases (Topic 842).

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the Consolidated Financial Statements, taken as a whole, and we are not, by communicating the critical audit matter below providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

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Measurement of income tax provision

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2013.

Stamford, CT

October 22, 2021

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Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of FactSet Research Systems Inc.

Opinion on Internal Control over Financial Reporting

We have audited FactSet Research System Inc.’s (the Company) internal control over financial reporting as of August 31, 2021, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of August 31, 2021, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the 2021 Consolidated Financial Statements of the Company and our report dated October 22, 2021, expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Ernst & Young LLP

Stamford, CT

October 22, 2021

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FactSet Research Systems Inc.

Consolidated Statements of Income

(in thousands, except per share data) For the years ended August 31,

Operating expenses

Other income (expense)

Basic earnings per common share $ 10.56 $ 9.83 $ 9.25

Diluted earnings per common share $ 10.36 $ 9.65 $ 9.08

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

(in thousands) For the years ended August 31,

Other comprehensive income, net of tax:

Net unrealized (loss) gain on cash flow hedges* (504) 674 504

*For the fiscal years ended August 31, 2021, 2020 and 2019, the net unrealized (loss) gain on cash flow hedges disclosed above were net of a tax benefit of $162 thousand, tax expense of $251 thousand, and a tax expense of $387 thousand, respectively.

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

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FactSet Research Systems Inc.

Consolidated Balance Sheets

(in thousands, except share data) August 31,

ASSETS

Prepaid expenses and other current assets 50,625 43,675

Property, equipment and leasehold improvements, net 131,377 133,102

Deferred taxes 2,250 —

LIABILITIES

Accounts payable and accrued expenses $ 85,777 $ 82,094

Deferred revenue, non-current 8,394 9,319

Commitments and contingencies (see Note 14)

STOCKHOLDERS’ EQUITY

Accumulated other comprehensive loss (38,962) (39,293)

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

(in thousands) Years ended August 31,

CASH FLOWS FROM OPERATING ACTIVITIES

Adjustments to reconcile net income to net cash provided by operating activities

Amortization of lease right-of-use assets 42,846 43,185 —

Impairment Charge — 16,500 —

Changes in assets and liabilities, net of effects of acquisitions

CASH FLOWS FROM INVESTING ACTIVITIES

CASH FLOWS FROM FINANCING ACTIVITIES

Repayment of debt — — (575,000)

Supplemental Disclosure of Cash Flow Information

Supplemental Disclosure of Non-Cash Transactions

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

Shares Par Value Shares Amount

Cumulative effect of adoption of accounting standards* 1,302 716 2,018

Other comprehensive income 331 331

*Includes the cumulative effect of adoption of accounting standards primarily due to both the adoption of the new revenue recognition standard (ASC 606) resulting in a cumulative increase to retained earnings related to certain fulfillment costs and the accounting standard update related to the U.S. Tax Cuts and Jobs Act ("TCJA") providing for the reclassification from accumulated other comprehensive loss to retained earnings for stranded tax effects.

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

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Notes to the Consolidated Financial Statements

Page

Note 1 Description of Business 59

Note 2 Basis of Presentation 60

Note 3 Summary of Significant Accounting Policies 60

Note 4 Revenue Recognition 66

Note 5 Fair Value Measures 67

Note 6 Derivative Instruments 69

Note 7 Acquisition 71

Note 8 Property, Equipment and Leasehold Improvements 71

Note 9 Goodwill 72

Note 10 Intangible Assets 72

Note 11 Income Taxes 73

Note 14 Commitments and Contingencies 78

Note 15 Stockholders' Equity 80

Note 16 Earnings Per Share 81

Note 17 Stock Based Compensation 82

Note 18 Employee Benefit Plans 86

Note 19 Segment Information 86

Note 20 Risks and Concentrations of Credit Risk 88

Note 21 Subsequent Events 90

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 data and analytics company with open and flexible technology and a purpose to drive the investment community to see more, think bigger, and do their best work. Our strategy is to become the leading open content and financial analytics platform in the industry that delivers differentiated advantage for our clients’ success.

For over 40 years, the FactSet platform has delivered expansive data, sophisticated analytics, and flexible technology that global financial professionals need to power their critical investment workflows. Over 160,000 asset managers and owners, bankers, wealth managers, corporate firms, including private equity and venture capital firms, and others, use our personalized solutions to identify opportunities, explore ideas, and gain a competitive advantage, in areas spanning investment research, portfolio construction and analysis, trade execution, performance measurement, risk management, and reporting across the investment lifecycle.

We provide financial data and market intelligence on securities, companies and industries to enable our clients to research investment ideas, as well as offering them the capabilities to analyze, monitor and manage their portfolios. We combine dedicated client service with open and flexible technology offerings, such as a configurable desktop and mobile platform, comprehensive data feeds, cloud-based digital solutions, and application programming interfaces ("APIs"). Our revenue is primarily derived from subscriptions to our products and services such as workstations, portfolio analytics, and market data.

We advance our industry by comprehensively understanding our clients’ workflows, solving their most complex challenges, and helping them achieve their goals. By providing them with the leading open content and analytics platform, an expansive universe of concorded data they can trust, next-generation workflow support designed to help them grow and see their next best action, and the industry’s most committed service specialists, FactSet puts our clients in a position to outperform.

We are focused on growing our business through three reportable segments ("segments"): the Americas, EMEA and Asia Pacific. Refer to Note 19, Segment Information, 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. Within each of our segments, we primarily deliver insight and

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information through our three workflow solutions: Research & Advisory; Analytics & Trading; and Content & Technology ("CTS").

2. BASIS OF PRESENTATION

We conduct business globally and manage our business on a geographic basis. The accompanying Consolidated Financial Statements and Notes to the Consolidated Financial Statements included in this Annual Report on Form 10-K are prepared in accordance with generally accepted accounting principles in the United States ("GAAP") for annual financial information and the instructions to Form 10-K and Article 10 of Regulation S-X. The accompanying Consolidated Financial Statements include our accounts and those of our wholly-owned subsidiaries; all intercompany activity and balances have been eliminated.

Use of Estimates

The preparation of our Consolidated Financial Statements and related disclosures in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Significant estimates may have been made in areas that include income taxes, stock-based compensation, the valuation of goodwill and allocation of purchase price to acquired assets and liabilities, useful lives and impairments of long-lived tangible and intangible assets and reserves for litigation and other contingencies. 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.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Our significant accounting policies are summarized below.

Revenue Recognition

The majority of our revenue is derived from client access to our hosted proprietary data and analytics platform, which can include various combinations of products and services available over the contractual term. The hosted platform is a subscription-based service that consists primarily of providing access to products and services including workstations, analytics, enterprise data, research management, and trade execution. We determined that the subscription-based service 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. Based on the nature of the services and products offered by us, we apply an output time-based measure of progress as the client is simultaneously receiving and consuming the benefits of the platform. We record revenue for our contracts using the over-time revenue recognition model as a client is invoiced or performance is satisfied. A provision for billing adjustments and current expected credit losses is estimated and accounted for as a reduction to revenue, with a corresponding reduction to accounts receivable.

Cost of Services

Cost of services is comprised of compensation for our employees within the content collection, consulting, product development, software and systems engineering groups in addition to data costs, computer maintenance and depreciation expenses, amortization of identifiable intangible assets, and client-related communication costs.

Selling, General and Administrative

Selling, general and administrative expenses include compensation for the sales and various other support and administrative departments in addition to travel and entertainment expenses, rent, professional fees, depreciation of furniture and fixtures, amortization of lease right-of-use ("ROU") assets and leasehold improvements, as well as marketing costs, office expenses,, travel and entertainment expenses, and other miscellaneous expenses.

Stock-Based Compensation

Accounting guidance requires the measurement and recognition of compensation expense for all share-based payment awards made to employees and directors including stock options, restricted stock units, performance share units, and common shares acquired under employee stock purchases based on estimated fair values of the share awards that are scheduled to vest during the period. We use the straight-line attribution method for all awards with graded vesting features and service conditions only. Under this method, the amount of compensation expense that is recognized on any date is at least equal to the vested portion of the award on that date. For all stock-based awards with performance conditions, the graded vesting attribution method is used by us to determine the monthly stock-based compensation expense over the applicable vesting periods.

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As stock-based compensation expense recognized is based on awards ultimately expected to vest, it has been reduced for estimated forfeitures. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Forfeitures are estimated based primarily on historical experience. Windfall tax benefits, defined as tax deductions that exceed recorded stock-based compensation, are classified as cash inflows from operations.

Performance-based equity awards require management to make assumptions regarding the likelihood of achieving company performance targets on a quarterly basis. The number of performance share units that vest will be predicated on us achieving certain performance levels. A change in the financial performance levels we achieve could result in changes to our current estimate of the vesting percentage and related stock-based compensation.

Research and Product Development Costs

Research and product development ("R&D") costs are expensed as incurred, unless they qualify as internal-use software development costs and are then capitalized and amortized over the estimated useful life. These costs primarily consist of personnel-related expenses, such as salaries and related benefits for our product development, software engineering and technical support departments and, if not capitalized, are included in employee compensation (found within of Cost of services expense and SG&A in the Consolidated Statements of Income). We also utilize certain third parties to develop internal-use software. These costs are capitalized and amortized over the estimated useful life. If not capitalized, these costs are included in SG&A in the Consolidated Statements of Income. We do not have a separate research and product development department, but rather rely on these departments to work closely with our strategists, product managers, sales and other client-facing specialists to develop new products and process innovations and enhance existing products. We incurred research and product development costs of $250.1 million and $224.0 million during fiscal years 2021 and 2020, respectively.

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 tax bases of assets and liabilities using current enacted tax rates. We recognize the financial effect of an income tax position only if it is more likely than not (greater than 50%) that the tax position will prevail upon tax examination, based solely on the technical merits of the tax position as of the reporting date. Otherwise, no benefit or expense can be recognized in the Consolidated Financial Statements. The tax benefits recognized are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. Additionally, we accrue interest on all tax exposures for which reserves have been established consistent with jurisdictional tax laws. Interest is classified as income tax expense in the financial statements. As of August 31, 2021, we had gross unrecognized tax benefits totaling $14.9 million, including $1.3 million of accrued interest, recorded as Taxes payable (non-current) on the Consolidated Balance Sheets.

Earnings per Share

Basic earnings per share ("EPS") is computed by dividing net income by the number of weighted average common shares outstanding during the period. Diluted EPS is computed, using the treasury stock method, by dividing net income by the number of weighted average common shares outstanding and issuable upon the exercise of outstanding share-based compensation awards (including stock options and awards of restricted stock units) during the period. Performance-based awards are omitted from the calculation of diluted EPS until it is determined that the performance criteria has been met at the end of the reporting period.

Comprehensive Income

We disclose comprehensive income in accordance with applicable standards for the reporting and display of comprehensive income in a set of financial statements. Comprehensive income is defined as the change in net assets of a business enterprise during a period from transactions generated from non-owner sources. It includes all changes in equity during a period except those resulting from investments by owners and distributions to owners.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash and highly liquid investments with original maturities of three months or less. Our cash equivalents consist of money market funds that are available for withdrawal without restriction and are carried at cost, which approximates fair value.

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Accounts Receivable and Deferred Fees

Amounts that have been earned but not yet paid are reflected on the Consolidated Balance Sheets as Accounts receivable, net of reserves. Amounts invoiced in advance of client payments that are in excess of earned subscription revenue are reflected on the Consolidated Balance Sheets as Deferred fees. As of August 31, 2021, the amount of accounts receivable that was unbilled totaled $18.3 million, which will be billed in fiscal 2022. As of August 31, 2020, the amount of accounts receivable that was unbilled totaled $17.1 million, which were billed in fiscal 2021.

Accounts receivable are recorded net of an allowance for credit losses based on a variety of factors, including our historical write-off activity, current economic environment, customer-specific information and expectations of future economic conditions. We write-off account balances against our reserve when we have exhausted our collection efforts. In accordance with this policy, our receivable reserves were $6.4 million and $8.0 million as of August 31, 2021 and 2020, respectively, recorded as a reduction to Accounts receivable, within the Consolidated Balance Sheets.

Property, Equipment and Leasehold Improvements

Property, equipment and leasehold improvements are stated at cost, less accumulated depreciation and amortization. Property and equipment is depreciated based on the straight-line method over the estimated useful lives of the assets, ranging from three to five years for computers and related equipment and seven years for furniture and fixtures. Leasehold improvements are amortized on a straight-line basis over the shorter of their respective useful lives or the related lease term. Repairs and maintenance expenditures, which are not considered leasehold improvements and do not extend the useful life of the property and equipment, are expensed as incurred.

We perform a test for impairment whenever events or changes in circumstances indicate that the carrying amount of an individual asset or asset group may not be recoverable. Should projected undiscounted future cash flows be less than the carrying amount of the asset or asset group, an impairment charge reducing the carrying amount to fair value is required. Fair value is determined based on the most appropriate valuation technique, including discounted cash flows. If we recognize an impairment loss, the adjusted carrying amount of the asset becomes its new cost basis. The new cost basis will be depreciated (amortized) over the remaining useful life of that asset.

Goodwill

Goodwill at the reporting unit level is reviewed for impairment annually, and more frequently if impairment indicators exist. Goodwill is deemed to be impaired and written-down in the period in which the carrying value of the reporting unit exceeds its fair value. We have three reporting units, Americas, EMEA and Asia Pacific, which are consistent with the operating segments reported, as discrete financial information is not available for subsidiaries within the operating segments.

We may elect to perform a qualitative analysis for the reporting units to determine whether it is more likely than not the fair value of the reporting unit is greater 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 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 amount 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 fair value of a reporting unit with its carrying amount using an income approach, along with other relevant market information, derived from a discounted cash flow model to estimate the fair value of our reporting units. The annual review of carrying value of goodwill requires us to develop estimates of future business performance. These estimates are used to derive expected cash flows and include assumptions regarding future sales levels and the level of working capital needed to support a given business. The discounted cash flow model also includes a determination of our weighted average cost of capital by reporting unit. Cost of capital is based on assumptions about interest rates, as well as a risk-adjusted rate of return required by our equity investors. Changes in these estimates can impact present value of expected cash flows used in determining fair value of a reporting unit. An impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value, if any, would be recognized. The loss recognized would not exceed total amount of goodwill allocated to that reporting unit.

We performed our annual goodwill impairment test during the fourth quarter of fiscal 2021 utilizing a qualitative analysis and concluded it was more likely than not the fair value of each reporting unit was greater than its respective carrying value and no impairment charge was required.

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Intangible Assets

Acquired Intangible Assets

Our identifiable intangible assets consist of acquired content databases, client relationships, software technology, non-compete agreements and trade names resulting from previous acquisitions, which have been fully integrated into our operations. We amortize intangible assets over their estimated useful lives, which are evaluated quarterly to determine whether events and circumstances warrant a revision to the remaining period of amortization. If the estimate of the remaining useful life is changed, the remaining carrying amount of the intangible asset is amortized prospectively over that revised remaining useful life. Amortizable Intangible assets are tested for impairment, if indicators of impairment are present, based on undiscounted cash flows, and, if impaired, written down to fair value based on discounted cash flows. No impairment of intangible assets has been identified during any of the fiscal years presented. The intangible assets have no assigned residual values.

Internally Developed Software

We capitalize internal and external costs related to developing, modifying or obtaining software for internal use, incurred during the application development stage in accordance with ASC 350-40, Internal-Use Software. Costs related to software upgrades and enhancements are capitalized if it is determined that these upgrades or enhancements provide additional functionality to the software. The capitalized software is amortized using the straight-line method over the estimated useful life of the software, generally three to five years. These assets are subject to the impairment test guidance specified in the acquired intangible assets above.

Leases

We adopted the standard, ASC 842-10, Leases ("ASC 842") as of September 1, 2019, using a modified retrospective approach. Refer to Note 12, Leases, for further details.

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. If we determine that an arrangement qualifies as a lease, with a lease term of greater than one year, we assess whether the leased asset is an operating or financing lease. Our lease portfolio is primarily related to our office space, under various operating lease agreements.

We record a lease ROU asset and lease liability as the present value of the future minimum lease payments (including fixed lease payments and certain qualifying index-based variable payments) over the reasonably certain lease term, beginning at the lease commencement date. As there is no rate implicit in our operating lease arrangements, these balances are initially recorded using our incremental borrowing rate ("IBR") within the geography where the leased asset is located. As we do not have any outstanding public debt, we estimate the IBR based on our estimated credit rating and available market information. The IBR is determined at lease commencement and subsequently reassessed upon a modification to the lease arrangement. Certain adjustments to our lease ROU assets may be required for items such as initial direct costs paid or incentives received.

We elected to not record operating lease right-of-use assets or operating lease liabilities for leases with an initial term of 12 months or less. We elected the practical expedient not to separate lease components from non-lease components but, rather, to combine them into one 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).

As of August 31, 2021, our leases have remaining terms of less than one year to just over 14 years. The lease ROU assets and lease liabilities recognized did not include any renewal or termination options that were not yet reasonably certain to be exercised.

Accrued Liabilities

Accrued liabilities include estimates relating to employee compensation, operating expenses and tax liabilities. At the end of each fiscal year, we conduct a review of both the performance of the Company and individual performance within each department to determine the amount of discretionary employee compensation. We also review compensation throughout the year to determine how overall performance tracks against management’s expectations. Management takes these and other factors, including historical performance, into account in reviewing accrued compensation estimates quarterly and adjusting accrual rates as appropriate. The majority of variable employee compensation recorded within accrued compensation related to the annual performance bonus, which was $75.1 million and $54.4 million as of August 31, 2021 and 2020, respectively.

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Derivative Instruments

Foreign Currency Forward Contracts

We conduct business outside the U.S. in several currencies including the British Pound Sterling, Euro, Indian Rupee, and Philippine Peso. As such, we are exposed to movements in foreign currency exchange rates relative to the U.S. dollar. We utilize derivative instruments (foreign currency forward contracts) to manage the exposures related to the effects of foreign exchange rate fluctuations and reduce the volatility of earnings and cash flows associated with changes in foreign currency. We do not enter into foreign exchange forward contracts for trading or speculative purposes. In designing a specific hedging approach, we consider several factors, including offsetting exposures, significance of exposures, forecasting risk and potential effectiveness of the hedge. These transactions are designated and accounted for as cash flow hedges in accordance with applicable accounting guidance. The gains and losses on foreign currency forward contracts mitigate the variability in operating expenses associated with currency movements.

Interest Rate Swap Agreement

On March 29, 2019, we entered into a credit agreement with PNC Bank, National Association ("PNC") (the "2019 Credit Agreement"), which provides for a $750.0 million revolving credit facility (the "2019 Revolving Credit Facility"). The outstanding principal balance of $575.0 million bears interest at a rate equal to LIBOR plus a spread, using a debt leverage pricing grid. The variable rate of interest on our long-term debt can expose us to interest rate volatility due to changes in LIBOR. To mitigate this exposure, on March 5, 2020, we entered into an interest rate swap agreement with a notional amount of $287.5 million to hedge the variable interest rate obligation, effectively converting the floating interest rate to fixed for the hedged portion. Thus, we are only exposed to base interest rate risk on floating rate borrowings in excess of any amounts that are not hedged, or $287.5 million of the outstanding principal balance.

Derivative Instrument Classification

The changes in fair value for these cash flow hedges are initially reported as a component of accumulated other comprehensive loss ("AOCL") and subsequently reclassified into operating expenses when the hedged exposure affects earnings. All derivatives are assessed for effectiveness at each reporting period.

Treasury Stock

We account for repurchased common stock under the cost method and includes such treasury stock as a component of our Stockholders’ equity. We account for the formal retirement of treasury stock by deducting its par value from common stock, reducing additional paid-in capital ("APIC") by the average amount recorded in APIC when the stock was originally issued and any remaining excess of cost deducted from retained earnings.

Fair Value Measurements

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. 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 cash equivalents are classified as Level 1 while our derivative instruments (foreign exchange forward contracts and interest rate swap) and certificates of deposit are classified as Level 2. There were no Level 3 assets or liabilities held by us as of August 31, 2021 or 2020. Refer to Note 5, Fair Value Measures for the definition of the fair value hierarchy.

Foreign Currency Translation

Certain wholly-owned subsidiaries operate under a functional currency different from the U.S. dollar, such as the British Pound Sterling, Euro, Indian Rupee, and Philippine Peso. The financial statements of these foreign subsidiaries are translated into U.S. dollars using period-end rates of exchange for assets and liabilities, and average rates for the period for revenues and expenses. Translation gains and losses that arise from translating assets, liabilities, revenue and expenses of foreign operations are recorded in AOCL as a component of stockholders’ equity. The accumulated foreign currency translation loss totaled $36.9 million and $37.7 million at August 31, 2021 and 2020, respectively.

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Concentrations of Risk

Refer to Note 20, Risks and Concentrations of Credit Risk for areas that potentially subject us to a significant concentration of risk and credit risk.

New Accounting Standards or Updates Recently Adopted

As of the beginning of fiscal 2021, we implemented all applicable new accounting standards and updates issued by the Financial Accounting Standards Board ("FASB") that were in effect. There were no new standards or updates adopted during the last three fiscal years that had a material impact on our Consolidated Financial Statements other than the adoption of ASC 842.

Goodwill Impairment Test

In January 2017, the FASB issued ASU 2017-04, Intangibles—Goodwill and Other (Topic 350); Simplifying the Test for Goodwill Impairment, which removes the requirement for companies to compare the implied fair value of goodwill with its carrying amount as part of step 2 of the goodwill impairment test. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. We have adopted this standard effective September 1, 2020. The adoption of this accounting standard update had no impact on our Consolidated Financial Statements.

Credit Losses on Financial Instruments

In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326); Measurement of Credit Losses on Financial Instruments, which significantly changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The standard replaces the "incurred loss" approach with an "expected loss" model for instruments measured at amortized cost. Subsequent to the adoption, the allowance for doubtful accounts is made when the financial asset is first recorded to the balance sheet (and periodically thereafter) and is based on information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. We have adopted this standard effective September 1, 2020. The adoption of this accounting standard update did not have a material impact on our Consolidated Financial Statements.

Leases

In February 2016, the FASB issued an accounting standard update related to accounting for leases, ASC 842. The update requires the recognition of lease ROU assets and lease liabilities on the balance sheet and the disclosure of qualitative and quantitative information about leasing arrangements. The guidance also eliminates the requirement for an entity to use bright-line tests in determining lease classification. We adopted the new accounting standard effective September 1, 2019, using a modified retrospective approach to record the required cumulative effect adjustments to the opening balance sheet in the period of adoption. As such, our historical Consolidated Financial Statements were not restated and follow our previous policy under ASC 840, Leases. Refer to our Annual Report on Form 10-K for the fiscal year ended August 31, 2019 for further details of the Company’s policy prior to adoption of ASC 842.

We have elected the package of practical expedients permitted under the transition guidance, which permits us to not reassess the prior conclusions about lease identification, lease classification, and initial direct costs. We did not elect the use-of-hindsight practical expedient in determining the lease term and in assessing impairment. We elected the practical expedient not to separate lease components from non-lease components but, rather, to combine them into one single lease component. We have also elected to apply the short-term lease exception not to recognize lease ROU assets and lease liabilities for leases with a term of 12 months or less. We will recognize lease payments on a straight-line basis over the lease term.

As of November 30, 2019, the Company recognized Lease ROU assets, net of amortization of $217.0 million and corresponding Current and Long-term lease liabilities of $266.4 million, related primarily to the Company’s real estate leases. There was no material impact to the Company’s Consolidated Statements of Income, Consolidated Statements of Comprehensive Income, Consolidated Statements of Cash Flows and Consolidated Statement of Changes in Stockholders' Equity. Refer to Note 12, Leases for more information regarding the Company's lease accounting.

Hedge Accounting Simplification

During the first quarter of fiscal 2020, we adopted the accounting standard updated issued by the FASB in August 2017, which focused on reducing the complexity of and simplifying the application of hedge accounting. The guidance refines and expands hedge accounting for both financial and non-financial risk components, eliminates the need to separately measure and report

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hedge ineffectiveness, and aligns the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements. The adoption of this standard had no impact on our Consolidated Financial Statements.

Recent Accounting Standards or Updates Not Yet Effective

Facilitation of the Effects of Reference Rate Reform on Financial Reporting

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848); Facilitation of the Effects of Reference Rate Reform on Financial Reporting, to provide optional expedients and exceptions for applying GAAP to contract modifications, hedging relationships, and other transactions affected by the anticipated transition from LIBOR. As a result of the reference rate reform initiative, certain widely used reference rates such as LIBOR are expected to be discontinued. The guidance is designed to simplify how entities account for contracts, such as receivables, debt, leases, derivative instruments and hedging, that are modified to replace LIBOR or other benchmark interest rates with new rates. The guidance is effective upon issuance and may be applied through December 31, 2022. We are currently evaluating the impact of this accounting standard, but it is not expected to have a material impact on our Consolidated Financial Statements.

Income Tax Simplification

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740); Simplifying the Accounting for Income Taxes, to simplify various aspects related to accounting for income taxes, eliminating certain exceptions to the general principles in accounting for income taxes related to intraperiod tax allocation, simplifying when companies recognize deferred taxes in an interim period, and clarifying certain aspects of the current guidance to promote consistent application. The guidance will be effective for us in the first quarter of fiscal 2022, with early adoption permitted. Most amendments are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis. We have evaluated the impact of adopting this accounting standard and have determined that adoption will not have a material impact on our Consolidated Financial Statements.

No other new accounting pronouncements issued or effective as of August 31, 2021 have had or are expected to have a material impact on our Consolidated Financial Statements.

4. REVENUE RECOGNITION

We derive most of our revenue by providing client access to our hosted proprietary data and analytics platform which can include various combinations of products and services available over the contractual term. The hosted platform is a subscription-based service that consists primarily of providing access to products and services including workstations, portfolio analytics, enterprise data and research management. We determined that the subscription-based service 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 nature of the promise to the client is to provide daily access to one overall data and analytics platform. This platform provides integrated financial information, analytical applications and industry-leading service for the investment community. Based on the nature of the services and products offered by us, we apply an output time-based measure of progress as the client is simultaneously receiving and consuming the benefits of the platform. We record revenue for our contracts using the over-time revenue recognition model as a client is invoiced or performance is satisfied. 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 services and products, which are recoverable. In connection with the adoption of the revenue recognition standard, fulfillment costs are recognized as an asset, recorded in the Prepaid expenses and other current assets account for the current portion and Other assets for the non-current portion, based on the term of the license period, and amortized consistent with the associated revenue 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 less, 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 Revenue

We disaggregate revenue from contracts with clients by our reportable segments ("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 revenue and cash flows related to contracts with clients. Refer to Note 19, Segment Information for further information.

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The following table presents this disaggregation by segment:

5. 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 considers 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. These Level 1 assets and liabilities include our corporate money market funds that are classified as cash equivalents.

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. Our certificates of deposit, mutual funds and derivative instruments are classified as Level 2.

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. We held no Level 3 assets or liabilities as of August 31, 2021 or 2020.

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(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 at August 31, 2021 and 2020. We did not have any transfers between levels of fair value measurement during the periods presented.

(in thousands) Fair Value Measurements at August 31, 2021

Level 1 Level 2 Total

Assets

Liabilities

Total liabilities measured at fair value $ — $ 4,181 $ 4,181

(in thousands) Fair Value Measurements at August 31, 2020

Level 1 Level 2 Total

Assets

Liabilities

Total liabilities measured at fair value $ — $ 5,773 $ 5,773

(1)Our corporate money market fundsarereadily convertible into cashand 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 classified as Level 1 assets and are included in Cash and cash equivalents withinthe Consolidated BalanceSheets.

(2)Our mutual funds have a fair value 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 classified as Level 2 and are included inInvestments (short-term) within the Consolidated Balance Sheets.

(3)Our certificates of deposit held for investment are classified as Level 2 assets. These certificates of deposit have original maturities greater than three months but less than one year and are included in Investments (short-term) withintheConsolidated Balance Sheets.

(4)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 asspot, forward and interest rates,as well as credit default swap spreads, and are classified as Level 2 assets. To estimate fair value for the interest rate swap agreement, we utilize a present value of future cash flows, leveraging a model-derived valuation that uses Level 2 observable inputs such as interest rate yield curves. Refer to Note 6, Derivative Instruments for more information on our derivative instruments designed as cash flow hedges 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 nonrecurring basis relate primarily to our tangible fixed assets, operating lease right-of-use ("ROU") assets, goodwill and intangible assets. The fair values of these non-financial assets and

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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. We review goodwill and intangible assets for impairment annually, during the fourth quarter of each fiscal year, or as circumstances indicate the possibility for impairment. We monitor the carrying value of long-lived assets for impairment whenever events or changes in circumstances indicate the carrying amount may not be recoverable. During fiscal 2021 and 2020, no fair value adjustments or material fair value measurements were required for our non-financial assets or liabilities.

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

As of August 31, 2021 and 2020, the fair value of our 2019 Revolving Credit Facility (as defined below in Note 13, Debt), included in Long-term debt within the Consolidated Balance Sheets, was $575.0 million, which approximated its carrying amount given the application of a floating interest rate equal to LIBOR plus a spread using a debt leverage pricing grid. As the interest rate is a variable rate, adjusted based on market conditions, it approximates the current market-rate for similar instruments available to companies with comparable credit quality and maturity, and therefore, the long-term debt is categorized as Level 2 in the fair value hierarchy.

6. DERIVATIVE INSTRUMENTS

Cash Flow Hedges

Foreign Currency Forward Contracts

We conduct business outside the U.S. in several currencies including the British Pound Sterling, Euro, Indian Rupee, and Philippine Peso. As such, we are exposed to movements in foreign currency exchange rates compared with the U.S. dollar. We utilize derivative instruments (foreign currency forward contracts) to manage the exposures related to the effects of foreign exchange rate fluctuations and reduce the volatility of earnings and cash flows associated with changes in foreign currency. We do not enter into foreign currency forward contracts for trading or speculative purposes and limit counterparties to credit-worthy financial institutions. Refer to Note 20, Risks and Concentrations of Credit Risk, for further discussion on counterparty credit risk.

In designing a specific hedging approach, we considered several factors, including offsetting exposures, the significance of exposures, the forecasting of risk and the potential effectiveness of the hedge. The gains and losses on foreign currency forward contracts offset the variability in operating expenses associated with currency movements. The changes in fair value for these foreign currency forward contracts are initially reported as a component of Accumulated other comprehensive loss ("AOCL") and subsequently reclassified into Operating expenses when the hedge is settled. There was no discontinuance of cash flow hedges during fiscal 2021 or fiscal 2020, and as such, no corresponding gains or losses related to changes in the value of our contracts were reclassified into earnings prior to settlement.

As of August 31, 2021, we maintained foreign currency forward contracts to hedge a portion of our British Pound Sterling, Euro, Indian Rupee, and Philippine Peso exposures. We entered into a series of forward contracts to mitigate our currency exposure ranging from 25% to 75% over their respective hedged periods. The current foreign currency forward contracts are set to mature at various points between the first quarter of fiscal 2022 through the fourth quarter of fiscal 2022.

As of August 31, 2021, the gross notional value of foreign currency forward contracts to purchase Philippine Pesos and Indian Rupees with U.S. dollars was ₱1.4 billion and Rs2.6 billion, respectively. The gross notional value of foreign currency forward contracts to purchase U.S. dollars with Euros and British Pound Sterling was €33.8 million and £37.7 million, respectively.

Interest Rate Swap Agreement

On March 5, 2020, we entered into an interest rate swap agreement with a notional amount of $287.5 million to hedge the variable interest rate obligation on a portion of our outstanding debt under our 2019 Revolving Credit Facility (as defined below in Note 13, Debt). As of August 31, 2021, we have borrowed $575.0 million of the available $750.0 million under the 2019 Revolving Credit Facility, which bears interest on the outstanding principal amount at a rate equal to a contractual one month LIBOR plus a spread using a debt leverage pricing grid, which was 0.875% as of August 31, 2021. Refer to Note 13, Debt, for further discussion on the 2019 Revolving Credit Facility The variable interest rate on our long-term debt can expose us to interest rate volatility arising from changes in LIBOR. Under the terms of the interest rate swap agreement, we will pay interest at a fixed rate of 0.7995% and receive variable interest payments based on the same one-month LIBOR utilized to calculate the interest expense from the 2019 Revolving Credit Facility. The interest rate swap agreement matures on March 29, 2024.

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As the terms for the interest rate swap agreement align with the 2019 Revolving Credit Facility, we do not expect any hedge ineffectiveness. We have designated and accounted for this instrument as a cash flow hedge with the unrealized gains or losses on the interest rate swap agreement recorded in AOCL in the Consolidated Balance Sheets. Realized gains or losses are subsequently reclassified into Interest expense, net in the Consolidated Statement of Income when settled.

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

(in thousands, in U.S. dollars) Gross Notional Value

Fair Value of Derivative Instruments

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

Fair Value of Derivative Instruments

Derivative Assets Derivative Liabilities

Other assets — — Other liabilities 1,045 3,819

All derivatives were designated as hedging instruments as of August 31, 2021 and 2020, respectively.