Management's Discussion and Analysis of Financial Condition and Results of Operations ("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

• Results of Operations

• Use of Non-GAAP Financial Measures

• Foreign Currency

• Liquidity

• Capital Resources

• Off-Balance Sheet Arrangements

• Contractual Obligations

• Share Repurchase Program

• Dividends

• Significant Accounting Policies and Critical Accounting Estimates

• New Accounting Pronouncements

• Market Trends

• Forward-Looking Factors

Executive Overview

FactSet is a provider of integrated financial information and analytical applications to the global investment community. We combine content regarding tens of thousands of companies and securities from major markets all over the globe into a single online platform of information and analytics. By consolidating content from hundreds of databases with powerful analytics, FactSet supports the investment process from initial research to published results for buy and sell-side professionals. These professionals include portfolio managers, research and performance analysts, risk managers, marketing professionals, sell-side equity research professionals, investment bankers and fixed income professionals. Our applications provide users access to company analysis, multicompany comparisons, industry analysis, company screening, portfolio analysis, predictive risk measurements, alphatesting, portfolio optimization and simulation, real-time news and quotes and tools to value and analyze fixed income securities and portfolios. With Microsoft Office integration, wireless access and customizable options, we offer a complete financial workflow solution. Our revenues are derived from month-to-month subscriptions to services, databases and financial applications. We generate 80% of our revenues from investment management clients and the remainder is from investment banking firms who perform M&A advisory work and equity research.

As of May 31, 2012, we employed 5,455 employees, up 14% or 650 employees from a year ago. Of these employees, 1,742 were located in the U.S., 594 in Europe and 3,119 in Asia Pacific. Approximately 54% of employees are involved with content collection, 24% work in product development, software and systems engineering, another 19% conduct sales and consulting services and the remaining 3% provide administrative support.

While the economy continues to remain volatile in 2012, all of our key metrics continued to tick upwards as diluted EPS, ASV, revenues, users and net client count all increased during the third quarter of fiscal 2012. In just the past three months we generated over $70 million in free cash flow, which was 46% higher than our net income. Our just completed third quarter results marked yet another milestone for FactSet as we surpassed $200 million in quarterly revenues. Our company culture is such that we're dedicated to our clients and client service, not just on a daily basis in dealing with their immediate needs, but also on a long-term basis. We continue to release new applications and data on our system and whether from our own or from another source, such as the new bank loan data from Markit for our fixed income in Portfolio Analysis ("PA") product as well as acquiring the StreetAccount business to complement our news offering with distilled company news and market summaries. This acquisition resulted in FactSet becoming the sole distributor of SA news and our users gained immediate, integrated access to SA through the FactSet workstation and iPad application. Also, on May 10, 2012, The Wall Street Journal released its results of the annual Best on the Street Analysts, which marked our fourth consecutive year as the data provider.

Results of Operations

For an understanding of the significant factors that influenced our performance
during the three and nine months ended May 31, 2012 and 2011, respectively, the
following discussion should be read in conjunction with the Consolidated
Financial Statements and the Notes to Consolidated Financial Statements
presented in this Quarterly Report on Form 10-Q.

                                  Three Months Ended                         Nine Months Ended
                                       May 31,                                    May 31,
(in thousands, except
per share data)              2012          2011         Change          2012          2011         Change
Revenues                $ 202,311     $ 183,647           10.2 %   $ 598,130     $ 534,571           11.9 %
Cost of services           68,878        62,224           10.7 %     203,243       179,146           13.5 %
Selling, general and
administrative             64,939        59,600            9.0 %     192,524       176,080            9.3 %
Operating income           68,494        61,823           10.8 %     202,363       179,345           12.8 %
Net income              $  47,980     $  43,311           10.8 %   $ 140,270     $ 130,166            7.8 %
Diluted earnings per
common share            $    1.05     $    0.92           14.1 %   $    3.05     $    2.75           10.9 %
Diluted weighted
average common shares      45,736        47,154                       45,971        47,418

Revenues

Revenues for the three months ended May 31, 2012 were $202.3 million, up 10.2% compared to the prior year. For the first nine months of fiscal 2012, revenues increased 11.9% to $598.1 million. During the third quarter of fiscal 2012, users increased by 1,100 to 48,400, we added 11 net new clients and annual subscriptions rose by $8 million. Our revenue growth drivers during fiscal 2012 were broad-based growth across all geographies, continued use of our advanced applications such as Portfolio Analysis expanded deployment of our proprietary data, growth in the number of clients and users, increased usage of FactSet in Excel by both buy and sell-side users and an annual price increase which impacted the majority of our non-U.S. investment management clients. These revenue drivers were partially offset by a cancellation of an earnings estimates feed to TheMarkets.com as a result of its acquisition by Standard & Poor's Capital IQ.

Broad-based growth across all geographies Our sales and consulting staff continued to sell our broad range of products across each geographic region. We gained new clients at traditional money managers, regional broker dealers and among research and sales departments both in the U.S. and internationally. Revenues generated by each of our segments experienced double-digit growth compared to the year ago quarter, as U.S. revenues were up 10%, European revenues advanced 10% and Asia Pacific revenues grew 15%. Our investment management clients represented 80% of our total ASV as of May 31, 2012 consistent with a year ago.

Clients continue to license our advanced applications Our Portfolio Analytics suite of products, including our Fixed Income in PA product, continued to be a source of revenue growth in the past three months. Equity portfolio analysis, SPAR, Fixed Income in PA and quantitative tools have been among the many value-added applications that continue to be in demand by existing clients as well as an attractive selling point for new clients. In the last 12 months, both PA users and clients have increased by double digits as this suite is comprehensive and includes the applications for portfolio attribution, risk, quantitative analysis, portfolio publishing and returns based, style analysis. Portfolio Publisher was successful in the third quarter of fiscal 2012 as quantitative analysis groups have found value from this suite of risk models and portfolio optimizers fully integrated and offered by FactSet.

Expanded deployment of our proprietary data FactSet proprietary content has been a solid contributor to our total revenue growth in fiscal 2012. We have been successful in licensing proprietary FactSet data and in particular, FactSet Fundamentals and FactSet Estimates. The types of data licensed in feed form includes Ownership, Transcripts, M&A and Corporate Hierarchy data, among others. Data feeds are consumed by a range of clients, including existing large FactSet clients and some who do not manage money or provide sell-side services.

Growth in the number of clients and users of FactSet For the tenth consecutive quarter, we experienced net new client growth. The total number of FactSet clients as of May 31, 2012 was 2,335, a net increase of 11 clients during the past three months and brings the net new client growth total to 98 since the beginning of the fiscal 2012 year. It is rewarding to see net new client growth for ten consecutive quarters against a backdrop of economic volatility where we have seen uncertain economic times stifle new firm creation and extend the timeframes clients take to make large spending decisions. The addition of new clients is important to FactSet as we anticipate that it lays the groundwork for future additional services, consistent with our strategy of increasing sales of workstations, applications and content at existing clients.

At May 31, 2012, there were 48,400 professionals using FactSet, an increase of 1,100 users in the last three months and up 2,800 users from a year ago. Our user count growth of 1,100 users during the third quarter of fiscal 2012 was driven by replacing a competitor at a global sell-side banking firm. This win helped grow our total user count by 2,800 or 6% over the past 12 months, which was comprised of approximately 2,000 new users at investment management clients who utilize advanced FactSet applications including real-time news and quotes and our vast array of proprietary data and 800 new users from global investment banking firms.

Increased usage of FactSet in Excel by both buy and sell-side users We've been pleased by the increased usage of FactSet in Excel by both buy and sell-side users. This increased client engagement level was brought about by the release of Sidebar a year ago, which is new FactSet for Excel. Sidebar enhances the workflow of the user by making it simple and easy to customize and derive great value straight from Excel, one of the most widely-used software platforms in our industry.

Annual Price Increase
As FactSet has done for the past couple years, we issued our annual price increase for non-U.S. investment management clients during March 2012. This price increase resulted in ASV growth during the third quarter of fiscal 2012 of $3 million, as compared to the prior year price increase of $2 million. The annual price increase in March 2012 grew revenues by $0.7 million during the third quarter of fiscal 2012.

In addition, we issued our annual price increase for our U.S. investment management clients during the second quarter of fiscal 2012, which grew revenues by $2.5 million during the third quarter of fiscal 2012.

Partially offsetting the positive revenue drivers discussed above was a cancellation of an earnings estimates feed to TheMarkets.com as a result of its acquisition by S&P Capital IQ. In late 2010, Capital IQ, a Standard & Poor's business and a subsidiary of The McGraw-Hill Companies, acquired the research and estimates business of TheMarkets.com. FactSet had previously negotiated an agreement to provide TheMarkets.com with an earnings estimates feed, and this agreement was subsequently cancelled in the third quarter of fiscal 2012, reducing ASV by $4.1 million. However, total user count was not impacted as a result of the cancellation because the agreement provided an earnings estimates feed without any workstations.

Revenues by Geographic Region

                         Three Months Ended                       Nine Months Ended
                               May 31,                                 May 31,
(in thousands)        2012          2011      Change          2012          2011      Change
U.S.             $ 138,213     $ 125,963         9.7 %   $ 409,105     $ 365,737        11.9 %
% of revenues         68.3 %        68.6 %                    68.4 %        68.4 %
Europe           $  49,451     $  44,944        10.0 %   $ 146,380     $ 132,000        10.9 %
Asia Pacific        14,647        12,740        15.0 %      42,645        36,834        15.8 %
International    $  64,098     $  57,684        11.1 %   $ 189,025     $ 168,834        12.0 %
% of revenues         31.7 %        31.4 %                    31.6 %        31.6 %
Consolidated     $ 202,311     $ 183,647        10.2 %   $ 598,130     $ 534,571        11.9 %

Three months ended May 31, 2012 (Quarter-to-date)

Revenues from our U.S. segment increased 9.7% to $138.2 million during the three months ended May 31, 2012 compared to the same period a year ago. Our revenue growth rates in the U.S. reflect client and user count growth, annual price increases, the expanded deployment of our proprietary content and an increase in the number of PA users. Over the past 12 months, we increased prices which impacted the majority of our U.S. investment management clients and a smaller percentage of our U.S. banking and brokerage clients. These annual price increases resulted in revenue growth during the third quarter of fiscal 2012 of $2.5 million.

International revenues in the third quarter of fiscal 2012 were $64.1 million, an increase of 11.1% from $57.7 million in the prior year period. Foreign currency had no material impact on international revenues year over year. European revenues advanced 10.0% to $49.5 million due to offering a broader selection of global proprietary content, an annual price increase for the majority of our non-U.S. investment management clients in March 2012, increases in user and client counts and clients licensing our advanced applications. Asia Pacific revenues grew to $14.6 million, up 15.0% from the same period a year ago, largely due to growth in our global content offering, the expansion of our real-time news and quotes that services the needs of a global investor, our ability to sell additional services to existing clients and new client and user growth over the last 12 months. In March 2012, we issued our annual price increase for the majority of our non-U.S. investment management clients resulting in incremental revenue of $0.7 million during the third quarter of fiscal 2012. Revenues from international operations accounted for 31.7% of our consolidated revenues during the third quarter of fiscal 2012, up from 31.4% in the year ago quarter.

Nine months ended May 31, 2012 (Year-to-date)

Our U.S. segment revenue increased 11.9% to $409.1 million during the first nine months of fiscal 2012 as compared to $365.7 million in the same period a year ago. International revenues increased 12.0% to $189.0 million during the nine months ended May 31, 2012 compared to $168.8 million in the prior year period. The impact from foreign currency increased international revenues by $0.5 million year over year. European revenues advanced 10.9% to $146.4 million due to offering a broader selection of global proprietary content coupled with user and client growth. Asia Pacific revenues grew to $42.6 million, up 15.8% from the same period a year ago. Excluding the impact of foreign currency, Asia Pacific revenue growth was 14.3% year over year. The annual price increases in March 2012 and 2011 increased revenues by $1.7 million during fiscal 2012 as compared to the first nine months of fiscal 2011.

Annual Subscription Value ("ASV")

ASV at a given point in time represents the forward-looking revenues for the next 12 months from all subscription services being supplied to our clients. With proper notice to us, our clients are able to add to, delete portions of, or terminate service at any time. At May 31, 2012, ASV was $811 million, up 9% over the prior year. ASV from our U.S. operations was $549 million, up $42 million from a year ago. ASV from international operations increased from $234 million at May 31, 2011 to $262 million at May 31, 2012, representing 32% of our Company-wide total.

ASV advanced $8 million during the third quarter of fiscal 2012, driven by increased sales of our PA suite of products, additional users and an annual price increase in March 2012, which impacted the majority of our non-U.S. investment management clients and grew total ASV by $3 million, as compared to the prior year price increase of $2 million. The percentage of our total ASV derived from buy-side clients decreased from 81% at February 29, 2012 to 80% at May 31, 2012 due to replacing a competitor at a global sell-side banking firm. Our percentage of 80% at May 31, 2012 is consistent with a year ago.

Users and Clients

Client count was 2,335 as of May 31, 2012, a net increase of 11 clients during the quarter as compared to 26 net new clients added in the third quarter of fiscal 2011. At May 31, 2012, our largest individual client accounted for 2% of total subscriptions and annual subscriptions from the ten largest clients did not surpass 16% of total client subscriptions, consistent with August 31, 2011 and May 31, 2011. Professionals using FactSet was 48,400 at May 31, 2012, an increase of 1,100 over the past three months and was primarily from additions at sell-side firms. The user growth illustrates our opportunity to sell more at both investment management and investment banking firms. Although users increased among both sell-side and buy-side clients, the overall user count growth of 1,100 was driven by replacing a competitor at a global sell-side banking firm. Our clients continue to be cautious in fiscal 2012 as they closely review and scrutinize their user populations based on how they perceive market opportunities. Many of them have experienced headcount reductions, which lowers user count.

Consistent with past quarters and with last year, our annual client retention was greater than 95% of ASV at May 31, 2012. As a percentage of actual clients, the annual retention rate was 92% at May 31, 2012, also consistent with the year ago quarter. We believe these statistics, which have remained consistent since last year despite concerns over the global economy, demonstrate to us that our clients continue to be engaged with our services and derive value from them.

Operating Expenses

                                  Three Months Ended                         Nine Months Ended
                                       May 31,                                    May 31,
(in thousands)               2012          2011         Change          2012          2011         Change
Cost of services        $  68,878     $  62,224           10.7 %   $ 203,243     $ 179,146           13.5 %
Selling, general and
administrative
("SG&A")                   64,939        59,600            9.0 %     192,524       176,080            9.3 %
Total operating
expenses*               $ 133,817     $ 121,824            9.8 %   $ 395,767     $ 355,226           11.4 %
Operating income        $  68,494     $  61,823           10.8 %   $ 202,363     $ 179,345           12.8 %

* Included in operating expenses for the nine months ended May 31, 2011 was an incremental $2.5 million of stock-based compensation from a change in the expected outcome of performance-based stock options. During the second quarter of fiscal 2011, we estimated that it was probable that the Company would achieve ASV and diluted earnings per share growth of at least 8% on a compounded annual basis for the two years ended August 31, 2011 due to our accelerating ASV and diluted EPS growth rates. This revised estimate reflects a higher performance level than previously estimated and accordingly, increased the number of performance-based options that are estimated to vest at the end of fiscal 2011. The charge related to stock-based compensation reduced GAAP operating margin by 50 basis points from 34.0% to 33.5% for the nine months ended May 31, 2011.

Cost of Services

Three months ended May 31, 2012 (Quarter-to-date)

For the three months ended May 31, 2012, cost of services increased 10.7% to $68.9 million as compared to $62.2 million in the same period a year ago. Cost of services expressed as a percentage of revenues was 34.0% during the third quarter of fiscal 2012, an increase of 16 basis points over the prior year due higher compensation expense associated with new hires in consulting, engineering and content as well as an uptick in data costs offset by lower depreciation and a decline in intangible assets amortization expense.

Employee compensation, including stock-based compensation, expressed as a percentage of revenues, increased 65 basis points for the three months ended May 31, 2012 compared to the same period a year ago due to the hiring of new classes of engineers and consultants in the past 12 months, continued expansion of our proprietary content collection operations in India and the Philippines, salary increases year over year and increased variable compensation. Over the last 12 months we have increased our content collection headcount by approximately 335 employees, primarily at our facilities in India and the Philippines. At May 31, 2012, approximately 54% of our employees were involved with content collection. In addition to the hiring of employees for our content collection operations, we grew by approximately 200 net new engineering and product development employees and 90 net new consultants in the past year, as we continue to improve our applications and service our existing client base. Data costs, expressed as a percentage of revenues, increased 45 basis points in the third quarter of fiscal 2012 compared to the same period a year ago due to our growing user base, the continued expansion of our third party data set offerings and incremental Market Metrics data collection costs. As the result of us adding 148 clients and more than 2,800 users in the past 12 months, we incurred incremental variable fees payable to data vendors based on deployment of their content over the FactSet platform.

Lower computer depreciation and amortization of intangible assets expense offset higher compensation and data costs during the third quarter of fiscal 2012 compared to the same period a year ago. Computer-related expenses, including depreciation and computer maintenance costs, decreased 75 basis points in the third quarter of fiscal 2012 as compared to a year ago due to the continued use of fully depreciated servers and the transition to more efficient and cost-effective servers in our data centers. The cost per server and related maintenance continues to decline as we have become more efficient in our data centers. Amortization of intangible assets declined 25 basis points from a year ago as we did not acquire any new intangible assets during the past 12 months, while revenues increased over the same period by 10%.

Nine months ended May 31, 2012 (Year-to-date)

Cost of services increased 13.5% to $203.2 million for the nine months ended May 31, 2012, as compared to $179.1 million in the same period a year ago. Expressed as a percentage of revenues, cost of services was 34.0% during fiscal 2012, an increase of 50 basis points from fiscal 2011. The increase was driven by higher employee compensation partially offset by lower levels of computer depreciation and amortization of intangible assets.

During fiscal 2012, employee compensation increased 130 basis points, expressed as a percentage of revenues, as we continued to increase employee headcount and incurred higher variable compensation. Since June 1, 2011, we have hired approximately 335 employees for our content collection operations, 200 net new software engineers and 90 net new consultants as we continue to improve our applications and service our existing client base.

Partially offsetting the growth in cost of services during fiscal 2012 were declines in computer depreciation and amortization of intangible assets. Computer depreciation expenses decreased 70 basis points in fiscal 2012 as compared to a year ago due to the transition to more efficient and cost-effective servers in our data centers over the past 12 months. Amortization of intangible assets declined 25 basis points as previously acquired assets became fully amortized during the past 12 months.

Selling, General and Administrative

Three months ended May 31, 2012 (Quarter-to-date)

For the three months ended May 31, 2012, SG&A expenses increased 9.0% to $64.9 million from $59.6 million in the same period a year ago. SG&A expenses, expressed as a percentage of revenues, decreased 35 basis points to 32.1% during the third quarter of fiscal 2012 due to lower travel and entertainment ("T&E") expenses and occupancy costs partially offset by foreign currency hedging losses.

T&E costs, expressed as a percentage of revenues, decreased 130 basis points in the third quarter of fiscal 2012 compared to the same period in fiscal 2011 primarily due to lower interoffice travel and a prior year internal sales conference that did not reoccur in fiscal 2012. Occupancy costs, including rent and depreciation of furniture and fixtures, expressed as a percentage of revenues, decreased 60 basis points due to more efficient use of existing leased office space as we did not enter into any new agreements to lease office space during the past three months. However, lower occupancy costs are temporary and are being driven by the timing of acquiring new space to support a growing employee base and favorable currency rates.

Partially offsetting the decrease in SG&A expenses were realized losses recorded in the third quarter of fiscal 2012 from our hedges. During the first quarter of fiscal 2012, we entered into foreign currency forward contracts to hedge approximately 90% of our Indian Rupee exposure through the end of the first quarter of fiscal 2013. Since the date the forward contracts were entered into, the U.S. dollar has strengthened against the Indian Rupee, and as a result, we recorded a loss on derivatives of $0.4 million in SG&A during the third quarter of fiscal 2012. This loss compares to a gain of $1.9 million recorded in SG&A during the year ago quarter as a result of previously entered into foreign currency forward contracts to hedge our Euro and British Pound Sterling currency risk.

Nine months ended May 31, 2012 (Year-to-date)

SG&A expenses were $192.5 million for the nine months ended May 31, 2012, up 9.3% from $176.1 million in the same period a year ago. Expressed as a percentage of revenues, SG&A expenses decreased 75 basis points to 32.2% during fiscal 2012 and were driven by lower employee compensation, T&E spending and occupancy costs partially offset by foreign currency hedging losses.

Expressed as a percentage of revenues, employee compensation declined 30 basis points in fiscal 2012 due to 12% ASV growth in the past 12 months. T&E costs, expressed as a percentage of revenues, decreased 60 basis points in the third quarter of fiscal 2012 compared to the same period in fiscal 2011 primarily due to lower interoffice travel and a prior year internal sales conference that did not reoccur in fiscal 2012. Occupancy costs, expressed as a percentage of revenues, decreased 35 basis points due to more efficient use of existing leased office space. Partially offsetting the decrease in SG&A expenses were $0.3 million in realized losses recorded in fiscal 2012 from our hedges. As a result of forward contracts to hedge our foreign currency exposure, we recorded $0.3 . . .