Employee and Non-employee Director Stock Option and Retirement Plans

9 Months Ended

May 31, 2020

Employee and Non-employee Director Stock Option and Retirement Plans

EMPLOYEE AND NON-EMPLOYEE DIRECTOR STOCK OPTION AND RETIREMENT PLANS

Stock Compensation Activity

Employee Stock Option Awards

During the nine months ended May 31, 2020, FactSet granted 422,346 stock options with a weighted average exercise price of $256.05 to existing employees of the Company. The majority of the stock options granted during the first nine months of fiscal 2020 related to the annual employee grant on November 1, 2019 under the FactSet Research Systems Inc. Stock Option and Award Plan, as Amended and Restated (the "LTIP"). On November 1, 2019, FactSet granted 412,098 non-performance-based employee stock options, using the lattice-binomial option-pricing model. These stock option awards vest 20% annually on the anniversary date of the grant and are fully vested after five years, expiring ten years from the date of grant.

The estimated fair value of employee stock options granted on November 1, 2019 was determined with the following assumptions:


November 1, 2019 Grant Details
Risk-free interest rate						1.59% - 1.79%

Expected life (years)						7.22

Expected volatility						23% - 26%

Dividend yield						1.09%

Estimated fair value						$60.19
Exercise price						$255.87
Fair value as a percentage of exercise price						23.5%

Non-Employee Director Stock Option Grant

The Non-Employee Directors' Stock Option and Award Plan, as Amended and Restated (the "Director Plan"), provides for the grant of share-based awards, including stock options, to non-employee directors of FactSet. As of May 31, 2020, shares available for future grant under the Director Plan were 247,876. The expiration date of the Director Plan is December 19, 2027.

On January 15, 2020, FactSet granted 16,080 stock options to the Company's non-employee directors. These stock options cliff vest on the third anniversary of the date of grant and expire seven years from the date of grant. The Company used the Black-Scholes option-pricing model with the following assumptions:



January 15, 2020 Grant Details
Risk-free interest rate	1.64%

Expected life (years)	5.4
Expected volatility	22.0%

Dividend yield	1.11%

Estimated Fair Value	$54.74
Exercise price	$271.51
Fair value as a percentage of exercise price		20.2%

Restricted Stock Units

During the first nine months of fiscal 2020, FactSet granted 30,766 non-performance based restricted stock units ("RSUs") and 36,909 performance-based restricted stock units ("PRSUs"). The majority of the RSUs and PRSUs granted were related to the annual employee grant on November 1, 2019. FactSet granted 29,817 RSUs and 36,501 PRSUs with a weighted average grant date fair value of $245.48 under the LTIP. The RSUs and PRSUs granted to employees entitle the holders to shares of common stock as the units vest over time or the performance period, but not to dividends declared on the underlying shares while the restricted stock is unvested. The grant date fair value of restricted stock units is measured by reducing the grant date price of FactSet's common stock by the present value of the dividends expected to be paid on the underlying stock during the requisite service period, discounted at the appropriate risk-free interest rate. The RSUs vest 20% annually on the anniversary date of grant and are fully vested after five years and the PRSUs cliff vest on the third anniversary of the grant date, subject to the achievement of certain performance metrics.

Employee Stock Purchase Plan

Shares of FactSet common stock may be purchased by eligible employees under the FactSet Research Systems Inc. Employee Stock Purchase Plan, as Amended and Restated (the "ESPP") in three-month intervals. The purchase price is equal to 85% of the lesser of the fair market value of the Company’s common stock on the first day or the last day of each three-month offering period. Employee purchases may not exceed 10% of their gross compensation and there is a $25,000 contribution limit per employee during an offering period. Dividends paid on shares held in the ESPP are used to purchase additional ESPP shares at the market price on the dividend payment date.

During the three months ended May 31, 2020, employees purchased 11,084 shares at a weighted average price of $238.81 compared to 13,350 shares at a weighted average price of $201.54 for the three months ended May 31, 2019. During the nine months ended May 31, 2020, employees purchased 33,735 shares at a weighted average price of $226.79 compared to 39,069 shares at a weighted average price of $199.43 for the nine months ended May 31, 2019. At May 31, 2020, the ESPP had 186,675 shares reserved for future issuance.

Stock-based Compensation

The Company recognized total stock-based compensation expense of $10.3 million and $8.0 million during the three months ended May 31, 2020 and May 31, 2019, respectively. During the nine months ended May 31, 2020 and May 31, 2019, the Company recognized total stock-based compensation expense of $28.4 million and $24.1 million, respectively. As of May 31, 2020, $89.1 million of total unrecognized compensation expense related to non-vested equity awards is expected to be recognized over a weighted average period of 3.1 years. Stock-based compensation expense related to the ESPP was $0.6 million for both the three months ended May 31, 2020 and May 31, 2019. Stock-based compensation expense related to the ESPP was $1.6 million for both the nine months ended May 31, 2020 and May 31, 2019.

As of May 31, 2020, FactSet had 5.6 million share-based awards available for grant under the LTIP and 0.2 million share-based awards available for grant under the Director Plan.