MSCI Inc. (“MSCI” or the “Company”) (NYSE: MSCI), a leading
provider of critical decision support tools and services for the
global investment community, today announced its financial results
for the three months ended March 31, 2024 (“first quarter
2024”).
Financial and Operational Highlights for First Quarter
2024 (Note: Unless otherwise noted, percentage and other
changes are relative to the three months ended March 31, 2023
(“first quarter 2023”) and Run Rate percentage changes are relative
to March 31, 2023).
- Operating revenues of $680.0 million, up 14.8%; Organic
operating revenue growth of 10.3%
- Recurring subscription revenues up 15.2%; Asset-based fees
up 12.9%
- Operating margin of 49.9%; Adjusted EBITDA margin of
56.4%
- Diluted EPS of $3.22, up 8.4%; Adjusted EPS of $3.52, up
12.1%
- Organic recurring subscription Run Rate growth of 8.7%;
Retention Rate of 92.8%
- Approximately $126.8 million in dividends were paid to
shareholders in first quarter 2024; Cash dividend of $1.60 per
share declared by MSCI Board of Directors for second quarter
2024
Three Months Ended
Mar. 31,
Mar. 31,
In thousands, except per share data
(unaudited)
2024
2023
% Change
Operating revenues
$
679,965
$
592,218
14.8
%
Operating income
$
339,382
$
314,602
7.9
%
Operating margin %
49.9
%
53.1
%
Net income
$
255,954
$
238,728
7.2
%
Diluted EPS
$
3.22
$
2.97
8.4
%
Adjusted EPS
$
3.52
$
3.14
12.1
%
Adjusted EBITDA
$
383,573
$
344,729
11.3
%
Adjusted EBITDA margin %
56.4
%
58.2
%
“MSCI’s first-quarter financial results affirm that we can
deliver solid earnings amid continued operating environment
challenges. Record AUM balances in MSCI-linked index products drove
strong revenue growth from asset-based fees, which helped offset
lower subscription revenue. This highlights the underlying strength
and stability of our all-weather franchise,” said Henry A.
Fernandez, Chairman and CEO of MSCI.
“Our operating metrics showed resilience in our new recurring
sales, especially in Analytics, which was our highest first quarter
in a decade. Elevated cancels reflected a concentration of unusual
client events, including a large merger among our banking clients.
We are managing through these pressures and do not expect this
level of cancels to continue,” Fernandez added.
“We are encouraged by our deep client engagement across
segments, which is enabling us to accelerate product innovation.
Our long-term strategy and recent acquisitions have positioned us
well to benefit from secular trends that are reshaping our
industry, such as portfolio indexation and customization, the
growth of private assets and the global sustainability revolution.
All of this supports our conviction that we can maintain attractive
profitability and growth in 2024 and beyond.”
First Quarter Consolidated
Results
Operating Revenues:
Operating revenues were $680.0 million, up 14.8%. Organic operating
revenue growth was 10.3%. The $87.7 million increase was the result
of a $67.8 million increase in recurring subscription revenues; a
$17.1 million increase in asset-based fees and a $2.8 million
increase in non-recurring revenues.
Run Rate and Retention Rate:
Total Run Rate at March 31, 2024 was $2,726.5 million, up 14.6%.
Recurring subscription Run Rate increased by $262.4 million, and
asset-based fees Run Rate increased by $84.9 million. Organic
recurring subscription Run Rate growth was 8.7%. Retention Rate in
first quarter 2024 was 92.8%, compared to 95.2% in first quarter
2023. Approximately $7.0 million of the cancels related to one
client event related to the merger of our banking clients, which
impacted Index, ESG and Climate, and Analytics. The majority of
first quarter 2024 cancels were due to corporate events including
organizations closing, shutting funds, restructuring or downsizing.
Approximately 85% of MSCI’s subscription Run Rate as of March 31,
2024 was with clients subscribing to multiple products, and these
clients had a 93.1% or higher Retention Rate in first quarter
2024.
Expenses: Total operating
expenses were $340.6 million, up 22.7%, including $35.1 million
associated with Private Capital Solutions; formerly known as The
Burgiss Group, LLC ("Burgiss")), Carbon Markets (formerly known as
Trove Research Ltd ("Trove")) and Fabric RQ Inc. ("Fabric").
Adjusted EBITDA expenses were $296.4 million, up 19.8%,
primarily reflecting higher compensation and benefits costs related
to higher headcount as a result of business growth and the recent
acquisitions. Adjusted EBITDA expense includes $23.9 million of
expenses associated with Private Capital Solutions, Carbon Markets
and Fabric. Approximately $1.5 million in integration costs related
to the acquisition of the remaining interest in Burgiss and $9.7
million of acquired intangible asset amortization expenses related
to Private Capital Solutions, Carbon Markets and Fabric were
excluded from Adjusted EBITDA expenses.
Total operating expenses excluding the impact of foreign
currency exchange rate fluctuations (“ex-FX”) and adjusted EBITDA
expenses ex-FX increased 21.9% and 18.9%, respectively.
Operating Income: Operating
income was $339.4 million, up 7.9%. Operating income margin in
first quarter 2024 was 49.9%, compared to 53.1% in first quarter
2023.
Headcount: As of March 31,
2024, we had 5,858 employees reflecting a 20.9% increase, which was
primarily driven by our recent acquisitions. Approximately 32.8%
and 67.2% of employees are located in developed market and emerging
market locations, respectively.
Other Expense (Income), Net:
Other expense (income), net was $43.5 million, up 13.8% primarily
driven by lower interest income reflecting lower average cash
balances as well as loss on extinguishment related to unamortized
debt issuance costs associated with the prepayment of the Tranche A
Term Loans and the entry into the amended and restated credit
agreement (the "Credit Amendment"), partially offset by the impact
of favorable foreign currency exchange rate fluctuations.
Income Taxes: The effective
tax rate was 13.5% in first quarter 2024 compared to 13.6% in first
quarter 2023. A higher operating tax rate in the current period was
offset by favorable discrete items related to prior years, as well
as higher excess tax benefits recognized on share-based
compensation vested during the period.
Net Income: As a result of
the factors described above, net income was $256.0 million, up
7.2%.
Adjusted EBITDA: Adjusted
EBITDA was $383.6 million, up 11.3%. Adjusted EBITDA margin in
first quarter 2024 was 56.4%, compared to 58.2% in first quarter
2023.
Index Segment:
Table 1A: Results (unaudited)
Three Months Ended
Mar. 31,
Mar. 31,
In thousands
2024
2023
% Change
Operating revenues:
Recurring subscriptions
$
212,952
$
196,678
8.3
%
Asset-based fees
150,259
133,126
12.9
%
Non-recurring
10,661
9,578
11.3
%
Total operating revenues
373,872
339,382
10.2
%
Adjusted EBITDA expenses
96,112
85,700
12.1
%
Adjusted EBITDA
$
277,760
$
253,682
9.5
%
Adjusted EBITDA margin %
74.3
%
74.7
%
Index operating revenues were $373.9 million, up 10.2%. The
$34.5 million increase was primarily driven by $17.1 million in
higher asset-based fees and $16.3 million in higher recurring
subscription revenues.
Revenues from ETFs linked to MSCI equity indexes, driven by an
increase in average AUM, drove more than 70% of the increase in
revenues attributable to asset-based fees. The revenue increase was
also impacted by non-ETF indexed funds linked to MSCI indexes,
driven by an increase in average AUM. The increase was partially
offset by a decrease in average basis point fees for both ETFs
linked to MSCI equity indexes as well as non-ETF indexed linked
funds linked to MSCI indexes and a decrease in revenue from futures
and options contracts linked to MSCI indexes.
More than 90% of the growth in recurring subscription revenues
was driven by strong growth from market-cap weighted and custom
Index products and special packages.
Index Run Rate as of March 31, 2024, was $1.5 billion, up 12.0%.
The $159.3 million increase was comprised of an $84.9 million
increase in asset-based fees Run Rate and a $74.3 million increase
in recurring subscription Run Rate. The increase in asset-based
fees Run Rate primarily reflected higher AUM in ETFs linked to MSCI
equity indexes and non-ETF indexed funds linked to MSCI indexes.
The increase in recurring subscription Run Rate was primarily
driven by growth from market cap-weighted and custom Index products
and special packages. The increase reflected growth across all
regions.
Analytics Segment:
Table 1B: Results (unaudited)
Three Months Ended
Mar. 31,
Mar. 31,
In thousands
2024
2023
% Change
Operating revenues:
Recurring subscriptions
$
160,551
$
144,503
11.1
%
Non-recurring
3,415
2,567
33.0
%
Total operating revenues
163,966
147,070
11.5
%
Adjusted EBITDA expenses
91,754
86,290
6.3
%
Adjusted EBITDA
$
72,212
$
60,780
18.8
%
Adjusted EBITDA margin %
44.0
%
41.3
%
Analytics operating revenues were $164.0 million, up 11.5%. The
$16.9 million increase was primarily driven by growth from
recurring subscriptions related to both Multi-Asset Class and
Equity Analytics products. Organic operating revenue growth for
Analytics was 11.9%.
Analytics Run Rate as of March 31, 2024, was $662.1 million, up
6.5%. The increase of $40.5 million was driven by growth in both
Multi-Asset Class and Equity Analytics products, and reflected
growth across all regions and client segments. Organic recurring
subscription Run Rate growth for Analytics was 7.0%.
ESG and Climate Segment:
Table 1C: Results (unaudited)
Three Months Ended
Mar. 31,
Mar. 31,
In thousands
2024
2023
% Change
Operating revenues:
Recurring subscriptions
$
76,418
$
65,732
16.3
%
Non-recurring
1,466
1,326
10.6
%
Total operating revenues
77,884
67,058
16.1
%
Adjusted EBITDA expenses
56,793
49,182
15.5
%
Adjusted EBITDA
$
21,091
$
17,876
18.0
%
Adjusted EBITDA margin %
27.1
%
26.7
%
ESG and Climate operating revenues were $77.9 million, up 16.1%.
The $10.8 million increase was driven by growth in Ratings, Climate
and Screening products. Organic operating revenue growth for ESG
and Climate was 11.0%.
ESG and Climate Run Rate as of March 31, 2024, was $320.6
million, up 14.9%. The $41.7 million increase primarily reflects
strong growth from Ratings, Climate and Screening products with
contributions across all regions and client segments. Organic
recurring subscription Run Rate growth for ESG and Climate was
13.3%.
All Other – Private Assets
Segment:
Table 1D: Results (unaudited)
Three Months Ended
Mar. 31,
Mar. 31,
In thousands
2024
2023
% Change
Operating revenues:
Recurring subscriptions
$
63,134
$
38,334
64.7
%
Non-recurring
1,109
374
196.5
%
Total operating revenues
64,243
38,708
66.0
%
Adjusted EBITDA expenses
51,733
26,317
96.6
%
Adjusted EBITDA
$
12,510
$
12,391
1.0
%
Adjusted EBITDA margin %
19.5
%
32.0
%
All Other – Private Assets operating revenues, which reflect the
Real Assets and Private Capital Solutions operating segments, were
$64.2 million, up 66.0% and included $24.2 million of revenue from
Private Capital Solutions. The remaining growth in revenue was
primarily driven by growth from recurring subscriptions related to
Index Intel products and favorable foreign currency exchange rate
fluctuations, partially offset by a decrease in recurring
subscriptions related to our Property Intel product. Organic
operating revenue growth for All Other – Private Assets was
2.6%.
All Other – Private Assets Run Rate, which reflects the Real
Assets and Private Capital Solutions operating segments, was $254.4
million as of March 31, 2024, up 71.4%, and included $101.0 million
associated with Private Capital Solutions. The remaining growth in
the run rate was primarily driven by Index Intel, RCA and
Performance Insights products, partially offset by a decline in
Property Intel product. Organic recurring subscription Run Rate
growth for All Other – Private Assets was 3.5%.
Select Balance Sheet Items and Capital
Allocation
Cash Balances and Outstanding
Debt: Cash and cash equivalents was $519.3 million as of
March 31, 2024, including $3.8 million of restricted cash. MSCI
typically seeks to maintain minimum cash balances globally of
approximately $225.0 million to $275.0 million for general
operating purposes.
Total principal amounts of debt outstanding as of March 31,
2024, were $4.5 billion. The total debt to net income ratio (based
on trailing twelve months net income) was 3.9x. The total debt to
adjusted EBITDA ratio (based on trailing twelve months adjusted
EBITDA) was 2.9x.
MSCI seeks to maintain total debt to adjusted EBITDA in a target
range of 3.0x to 3.5x.
During the quarter, we amended and restated the credit agreement
governing our credit facilities (the “Credit Agreement”) to provide
for a new revolving credit facility (the “Revolving Credit
Facility”) with an aggregate of $1.25 billion of revolving loan
commitments, which may be drawn until January 2029. On the closing
of the Credit Agreement, we drew down $336.9 million on the
Revolving Credit Facility in order to prepay the term loans
outstanding under the prior term loan A facility.
Capex and Cash Flow: Capex
was $24.2 million, and net cash provided by operating activities
increased by 13.6% to $300.1 million, primarily reflecting higher
cash collections from customers partially offset by higher cash
expenses. Free cash flow for first quarter 2024 was up 13.7% to
$275.9 million.
Share Count and Share
Repurchases: Weighted average diluted shares outstanding
were 79.5 million in first quarter 2024, down 1.2% year-over-year.
Total shares outstanding as of March 31, 2024 were 79.2 million. As
of April 22, 2024, a total of approximately $0.8 billion remains
available on the outstanding share repurchase authorization.
Dividends: Approximately
$126.8 million in dividends were paid to shareholders in first
quarter 2024. On April 22, 2024, the MSCI Board of Directors
declared a cash dividend of $1.60 per share for second quarter
2024, payable on May 31, 2024 to shareholders of record as of the
close of trading on May 17, 2024.
Full-Year 2024 Guidance
MSCI’s guidance for the year ending December 31, 2024
(“Full-Year 2024”) is based on assumptions about a number of
factors, in particular related to macroeconomic factors and the
capital markets. These assumptions are subject to uncertainty, and
actual results for the year could differ materially from our
current guidance, including as a result of the uncertainties, risks
and assumptions discussed in the “Risk Factors” and “Management’s
Discussion and Analysis of Financial Condition and Results of
Operations” sections of our Annual Report on Form 10-K, as updated
in quarterly reports on Form 10-Q and current reports on Form 8-K
filed or furnished with the SEC. See “Forward-Looking Statements”
below.
Guidance Item
Current Guidance for Full-Year
2024
Operating Expense
$1,300 to $1,340 million
Adjusted EBITDA Expense
$1,130 to $1,160 million
Interest Expense
(including amortization of financing
fees)(1)
$185 to $189 million
Depreciation & Amortization
Expense
$170 to $180 million
Effective Tax Rate
18% to 21%
Capital Expenditures
$95 to $105 million
Net Cash Provided by Operating
Activities
$1,330 to $1,380 million
Free Cash Flow
$1,225 to $1,285 million
(1) A portion of our annual interest expense is from our
variable rate indebtedness under our Revolving Credit Facility,
while the majority is from fixed rate senior unsecured notes.
Changes to the secured overnight funding rate (“SOFR”) and
indebtedness levels can cause our annual interest expense to
vary.
Conference Call Information
MSCI’s senior management will review the first quarter 2024
results on Tuesday, April 23, 2024 at 10:00 AM Eastern Time. To
listen to the live event via webcast, visit the events and
presentations section of MSCI’s Investor Relations website,
https://ir.msci.com/events-and-presentations, or via telephone,
dial 1-833-630-1956 within the United States. International callers
may dial 1-412-317-1837. Participants should ask the operator to be
joined into the MSCI call. The teleconference will also be webcast
with an accompanying slide presentation that can be accessed
through MSCI’s Investor Relations website.
About MSCI Inc.
MSCI is a leading provider of critical decision support tools
and services for the global investment community. With over 50
years of expertise in research, data and technology, we power
better investment decisions by enabling clients to understand and
analyze key drivers of risk and return and confidently build more
effective portfolios. We create industry-leading research-enhanced
solutions that clients use to gain insight into and improve
transparency across the investment process. To learn more, please
visit www.msci.com. MSCI#IR
Forward-Looking Statements
This earnings release contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of
1995, including without limitation, MSCI’s Full-Year 2024 guidance.
These forward-looking statements relate to future events or to
future financial performance and involve known and unknown risks,
uncertainties and other factors that may cause our actual results,
levels of activity, performance or achievements to be materially
different from any future results, levels of activity, performance
or achievements expressed or implied by these statements. In some
cases, you can identify forward-looking statements by the use of
words such as “may,” “could,” “expect,” “intend,” “plan,” “seek,”
“anticipate,” “believe,” “estimate,” “predict,” “potential” or
“continue,” or the negative of these terms or other comparable
terminology. You should not place undue reliance on forward-looking
statements because they involve known and unknown risks,
uncertainties and other factors that are, in some cases, beyond
MSCI’s control and that could materially affect actual results,
levels of activity, performance or achievements.
Other factors that could materially affect actual results,
levels of activity, performance or achievements can be found in
MSCI’s Annual Report on Form 10-K for the fiscal year ended
December 31, 2023 filed with the Securities and Exchange Commission
(“SEC”) on February 9, 2024 and in quarterly reports on Form 10-Q
and current reports on Form 8-K filed or furnished with the SEC. If
any of these risks or uncertainties materialize, or if MSCI’s
underlying assumptions prove to be incorrect, actual results may
vary significantly from what MSCI projected. Any forward-looking
statement in this earnings release reflects MSCI’s current views
with respect to future events and is subject to these and other
risks, uncertainties and assumptions relating to MSCI’s operations,
results of operations, growth strategy and liquidity. MSCI assumes
no obligation to publicly update or revise these forward-looking
statements for any reason, whether as a result of new information,
future events, or otherwise, except as required by law.
Website and Social Media Disclosure
MSCI uses its Investor Relations homepage and its Corporate
Responsibility homepage as channels of distribution of company
information. The information MSCI posts through these channels may
be deemed material. Accordingly, investors should monitor these
channels, in addition to following MSCI’s press releases, SEC
filings and public conference calls and webcasts. In addition, you
may automatically receive email alerts and other information about
MSCI when you enroll your email address by visiting the “Email
Alerts” section of MSCI’s Investor Relations homepage at
http://ir.msci.com/email-alerts. The contents of MSCI’s website,
including its quarterly updates, blog, podcasts and social media
channels are not, however, incorporated by reference into this
earnings release.
Notes Regarding the Use of Operating Metrics
MSCI has presented supplemental key operating metrics as part of
this earnings release, including Retention Rate, Run Rate,
subscription sales, subscription cancellations and non-recurring
sales.
Retention Rate is an important metric because subscription
cancellations decrease our Run Rate and ultimately our future
operating revenues over time. The annual Retention Rate represents
the retained subscription Run Rate (subscription Run Rate at the
beginning of the fiscal year less actual cancels during the year)
as a percentage of the subscription Run Rate at the beginning of
the fiscal year.
The Retention Rate for a non-annual period is calculated by
annualizing the cancellations for which we have received a notice
of termination or for which we believe there is an intention not to
renew or discontinue the subscription during the non-annual period,
and we believe that such notice or intention evidences the client’s
final decision to terminate or not renew the applicable agreement,
even though such notice is not effective until a later date. This
annualized cancellation figure is then divided by the subscription
Run Rate at the beginning of the fiscal year to calculate a
cancellation rate. This cancellation rate is then subtracted from
100% to derive the annualized Retention Rate for the period.
Retention Rate is computed by operating segment on a
product/service-by-product/service basis. In general, if a client
reduces the number of products or services to which it subscribes
within a segment, or switches between products or services within a
segment, we treat it as a cancellation for purposes of calculating
our Retention Rate except in the case of a product or service
switch that management considers to be a replacement product or
service. In those replacement cases, only the net change to the
client subscription, if a decrease, is reported as a cancel. In the
Analytics and the ESG and Climate operating segments, substantially
all product or service switches are treated as replacement products
or services and netted in this manner, while in our Index and Real
Assets operating segments, product or service switches that are
treated as replacement products or services and receive netting
treatment occur only in certain limited instances. In addition, we
treat any reduction in fees resulting from a down-sell of the same
product or service as a cancellation to the extent of the
reduction. We do not calculate Retention Rate for that portion of
our Run Rate attributable to assets in index-linked investment
products or futures and options contracts, in each case, linked to
our indexes.
Run Rate estimates at a particular point in time the annualized
value of the recurring revenues under our client license agreements
(“Client Contracts”) for the next 12 months, assuming all Client
Contracts that come up for renewal, or reach the end of the
committed subscription period, are renewed and assuming
then-current currency exchange rates, subject to the adjustments
and exclusions described below. For any Client Contract where fees
are linked to an investment product’s assets or trading
volume/fees, the Run Rate calculation reflects, for ETFs, the
market value on the last trading day of the period, for futures and
options, the most recent quarterly volumes and/or reported exchange
fees, and for other non-ETF products, the most recent
client-reported assets. Run Rate does not include fees associated
with “one-time” and other non-recurring transactions. In addition,
we add to Run Rate the annualized fee value of recurring new sales,
whether to existing or new clients, when we execute Client
Contracts, even though the license start date, and associated
revenue recognition, may not be effective until a later date. We
remove from Run Rate the annualized fee value associated with
products or services under any Client Contract with respect to
which we have received a notice of termination, non-renewal or an
indication the client does not intend to continue their
subscription during the period and have determined that such notice
evidences the client’s final decision to terminate or not renew the
applicable products or services, even though such notice is not
effective until a later date.
“Organic recurring subscription Run Rate growth” is defined as
the period over period Run Rate growth, excluding the impact of
changes in foreign currency and the first year impact of any
acquisitions. It is also adjusted for divestitures. Changes in
foreign currency are calculated by applying the currency exchange
rate from the comparable prior period to current period foreign
currency denominated Run Rate.
Sales represents the annualized value of products and services
clients commit to purchase from MSCI and will result in additional
operating revenues. Non-recurring sales represent the actual value
of the customer agreements entered into during the period and are
not a component of Run Rate. New recurring subscription sales
represent additional selling activities, such as new customer
agreements, additions to existing agreements or increases in price
that occurred during the period and are additions to Run Rate.
Subscription cancellations reflect client activities during the
period, such as discontinuing products and services and/or
reductions in price, resulting in reductions to Run Rate. Net new
recurring subscription sales represent the amount of new recurring
subscription sales net of subscription cancellations during the
period, which reflects the net impact to Run Rate during the
period.
Total gross sales represent the sum of new recurring
subscription sales and non-recurring sales. Total net sales
represent the total gross sales net of the impact from subscription
cancellations.
Notes Regarding the Use of Non-GAAP Financial
Measures
MSCI has presented supplemental non-GAAP financial measures as
part of this earnings release. Reconciliations are provided in
Tables 9 through 13 below that reconcile each non-GAAP financial
measure with the most comparable GAAP measure. The non-GAAP
financial measures presented in this earnings release should not be
considered as alternative measures for the most directly comparable
GAAP financial measures. The non-GAAP financial measures presented
in this earnings release are used by management to monitor the
financial performance of the business, inform business
decision-making and forecast future results.
“Adjusted EBITDA” is defined as net income before (1) provision
for income taxes, (2) other expense (income), net, (3) depreciation
and amortization of property, equipment and leasehold improvements,
(4) amortization of intangible assets and, at times, (5) certain
other transactions or adjustments, including, when applicable,
certain acquisition-related integration and transaction costs.
“Adjusted EBITDA expenses” is defined as operating expenses less
depreciation and amortization of property, equipment and leasehold
improvements and amortization of intangible assets and, at times,
certain other transactions or adjustments, including, when
applicable, certain acquisition-related integration and transaction
costs.
“Adjusted EBITDA margin” is defined as adjusted EBITDA divided
by operating revenues.
“Adjusted net income” and “adjusted EPS” are defined as net
income and diluted EPS, respectively, before the after-tax impact
of: the amortization of acquired intangible assets, including the
amortization of the basis difference between the cost of the equity
method investment and MSCI’s share of the net assets of the
investee at historical carrying value and, at times, certain other
transactions or adjustments, including, when applicable, the impact
related to certain acquisition-related integration and transaction
costs, the impact related to write-off of deferred fees on debt
extinguishment and the impact related to gain from changes in
ownership interest of investees.
“Capex” is defined as capital expenditures plus capitalized
software development costs.
“Free cash flow” is defined as net cash provided by operating
activities, less Capex.
“Organic operating revenue growth” is defined as operating
revenue growth compared to the prior year period excluding the
impact of acquired businesses, divested businesses and foreign
currency exchange rate fluctuations.
Asset-based fees ex-FX does not adjust for the impact from
foreign currency exchange rate fluctuations on the underlying
assets under management (“AUM”).
We believe adjusted EBITDA, adjusted EBITDA margin and adjusted
EBITDA expenses are meaningful measures of the operating
performance of MSCI because they adjust for significant one-time,
unusual or non-recurring items as well as eliminate the accounting
effects of certain capital spending and acquisitions that do not
directly affect what management considers to be our ongoing
operating performance in the period.
We believe adjusted net income and adjusted EPS are meaningful
measures of the performance of MSCI because they adjust for the
after-tax impact of significant one-time, unusual or non-recurring
items as well as eliminate the impact of any transactions that do
not directly affect what management considers to be our ongoing
operating performance in the period. We also exclude the after-tax
impact of the amortization of acquired intangible assets and
amortization of the basis difference between the cost of the equity
method investment and MSCI’s share of the net assets of the
investee at historical carrying value, as these non-cash amounts
are significantly impacted by the timing and size of each
acquisition and therefore not meaningful to the ongoing operating
performance in the period.
We believe that free cash flow is useful to investors because it
relates the operating cash flow of MSCI to the capital that is
spent to continue and improve business operations, such as
investment in MSCI’s existing products. Further, free cash flow
indicates our ability to strengthen MSCI’s balance sheet, repay our
debt obligations, pay cash dividends and repurchase shares of our
common stock.
We believe organic operating revenue growth is a meaningful
measure of the operating performance of MSCI because it adjusts for
the impact of foreign currency exchange rate fluctuations and
excludes the impact of operating revenues attributable to acquired
and divested businesses for the comparable prior year period,
providing insight into our ongoing operating performance for the
period(s) presented.
We believe that the non-GAAP financial measures presented in
this earnings release facilitate meaningful period-to-period
comparisons and provide a baseline for the evaluation of future
results.
Adjusted EBITDA expenses, adjusted EBITDA margin, adjusted
EBITDA, adjusted net income, adjusted EPS, Capex, free cash flow
and organic operating revenue growth are not defined in the same
manner by all companies and may not be comparable to
similarly-titled non-GAAP financial measures of other companies.
These measures can differ significantly from company to company
depending on, among other things, long-term strategic decisions
regarding capital structure, the tax jurisdictions in which
companies operate and capital investments. Accordingly, the
Company’s computation of these measures may not be comparable to
similarly-titled measures computed by other companies.
Notes Regarding Adjusting for the Impact of Foreign Currency
Exchange Rate Fluctuations
Foreign currency exchange rate fluctuations reflect the
difference between the current period results as reported compared
to the current period results recalculated using the foreign
currency exchange rates in effect for the comparable prior period.
While operating revenues adjusted for the impact of foreign
currency fluctuations includes asset-based fees that have been
adjusted for the impact of foreign currency fluctuations, the
underlying AUM, which is the primary component of asset-based fees,
is not adjusted for foreign currency fluctuations. Approximately
three-fifths of the AUM is invested in securities denominated in
currencies other than the U.S. dollar, and accordingly, any such
impact is excluded from the disclosed foreign currency-adjusted
variances.
Table 2: Condensed Consolidated Statements of Income
(unaudited)
Three Months Ended
Mar. 31,
Mar. 31,
%
In thousands, except per share
data
2024
2023
Change
Operating revenues
$
679,965
$
592,218
14.8
%
Operating expenses:
Cost of revenues (exclusive of
depreciation and amortization)
128,514
108,647
18.3
%
Selling and marketing
72,168
66,475
8.6
%
Research and development
40,525
31,323
29.4
%
General and administrative
56,691
41,044
38.1
%
Amortization of intangible assets
38,604
24,667
56.5
%
Depreciation and amortization of
property,
equipment and leasehold improvements
4,081
5,460
(25.3
)%
Total operating expenses(1)
340,583
277,616
22.7
%
Operating income
339,382
314,602
7.9
%
Interest income
(6,048
)
(10,362
)
(41.6
)%
Interest expense
46,674
46,206
1.0
%
Other expense (income)
2,863
2,386
20.0
%
Other expense (income), net
43,489
38,230
13.8
%
Income before provision for income
taxes
295,893
276,372
7.1
%
Provision for income taxes
39,939
37,644
6.1
%
Net income
$
255,954
$
238,728
7.2
%
Earnings per basic common share
$
3.23
$
2.98
8.4
%
Earnings per diluted common share
$
3.22
$
2.97
8.4
%
Weighted average shares outstanding used
in computing earnings per share:
Basic
79,195
80,041
(1.1
)%
Diluted
79,508
80,482
(1.2
)%
(1) Includes stock-based compensation
expense of $34.7 million and $21.6 million for the three months
ended Mar. 31, 2024 and 2023, respectively.
Table 3: Selected Balance Sheet Items (unaudited)
As of
Mar. 31,
Dec. 31,
In thousands
2024
2023
Cash and cash equivalents (1)
$519,315
$461,693
Accounts receivable, net of allowances
$745,611
$839,555
Current deferred revenue
$1,053,961
$1,083,864
Current portion of long-term debt (2)
$—
$10,902
Long-term debt (3)
$4,507,686
$4,496,826
(1) Includes restricted cash of $3.8
million at Mar. 31, 2024 and $3.9 million at Dec. 31, 2023.
(2) Consists of gross current portion of
long-term debt, net of deferred financing fees. Gross current
portion of long-term debt was $0.0 million at Mar. 31, 2024 and
$10.9 million at Dec. 31, 2023.
(3) Consists of gross long-term debt, net
of deferred financing fees. Gross long-term debt was $4,536.9
million at Mar. 31, 2024 and $4,528.1 million at Dec. 31, 2023.
Table 4: Selected Cash Flow Items (unaudited)
Three Months Ended
Mar. 31,
Mar. 31,
%
In thousands
2024
2023
Change
Net cash provided by operating
activities
$
300,137
$
264,141
13.6
%
Net cash used in investing activities
(32,333
)
(21,762
)
(48.6
)%
Net cash (used in) provided by financing
activities
(207,223
)
(158,293
)
(30.9
)%
Effect of exchange rate changes
(2,959
)
2,958
(200.0
)%
Net (decrease) increase in cash, cash
equivalents and restricted cash
$
57,622
$
87,044
(33.8
)%
Table 5: Operating Results by Segment and Revenue Type
(unaudited)
Index
Three Months Ended
Mar. 31,
Mar. 31,
%
In thousands
2024
2023
Change
Operating revenues:
Recurring subscriptions
$
212,952
$
196,678
8.3
%
Asset-based fees
150,259
133,126
12.9
%
Non-recurring
10,661
9,578
11.3
%
Total operating revenues
373,872
339,382
10.2
%
Adjusted EBITDA expenses
96,112
85,700
12.1
%
Adjusted EBITDA
$
277,760
$
253,682
9.5
%
Adjusted EBITDA margin %
74.3
%
74.7
%
Analytics
Three Months Ended
Mar. 31,
Mar. 31,
%
In thousands
2024
2023
Change
Operating revenues:
Recurring subscriptions
$
160,551
$
144,503
11.1
%
Non-recurring
3,415
2,567
33.0
%
Total operating revenues
163,966
147,070
11.5
%
Adjusted EBITDA expenses
91,754
86,290
6.3
%
Adjusted EBITDA
$
72,212
$
60,780
18.8
%
Adjusted EBITDA margin %
44.0
%
41.3
%
ESG and Climate
Three Months Ended
Mar. 31,
Mar. 31,
%
In thousands
2024
2023
Change
Operating revenues:
Recurring subscriptions
$
76,418
$
65,732
16.3
%
Non-recurring
1,466
1,326
10.6
%
Total operating revenues
77,884
67,058
16.1
%
Adjusted EBITDA expenses
56,793
49,182
15.5
%
Adjusted EBITDA
$
21,091
$
17,876
18.0
%
Adjusted EBITDA margin %
27.1
%
26.7
%
All Other - Private Assets
Three Months Ended
Mar. 31,
Mar. 31,
%
In thousands
2024
2023
Change
Operating revenues:
Recurring subscriptions
$
63,134
$
38,334
64.7
%
Non-recurring
1,109
374
196.5
%
Total operating revenues
64,243
38,708
66.0
%
Adjusted EBITDA expenses
51,733
26,317
96.6
%
Adjusted EBITDA
$
12,510
$
12,391
1.0
%
Adjusted EBITDA margin %
19.5
%
32.0
%
Consolidated
Three Months Ended
Mar. 31,
Mar. 31,
%
In thousands
2024
2023
Change
Operating revenues:
Recurring subscriptions
$
513,055
$
445,247
15.2
%
Asset-based fees
150,259
133,126
12.9
%
Non-recurring
16,651
13,845
20.3
%
Operating revenues total
679,965
592,218
14.8
%
Adjusted EBITDA expenses
296,392
247,489
19.8
%
Adjusted EBITDA
$
383,573
$
344,729
11.3
%
Operating margin %
49.9
%
53.1
%
Adjusted EBITDA margin %
56.4
%
58.2
%
Table 6: Sales and Retention Rate by Segment
(unaudited)(1)
Three Months Ended
Mar. 31,
Mar. 31,
In thousands
2024
2023
Index
New recurring subscription sales
$
23,513
$
25,090
Subscription cancellations
(14,702
)
(7,082
)
Net new recurring subscription sales
$
8,811
$
18,008
Non-recurring sales
$
12,811
$
12,782
Total gross sales
$
36,324
$
37,872
Total Index net sales
$
21,622
$
30,790
Index Retention Rate
93.2
%
96.4
%
Analytics
New recurring subscription sales
$
14,088
$
13,674
Subscription cancellations
(10,794
)
(9,183
)
Net new recurring subscription sales
$
3,294
$
4,491
Non-recurring sales
$
2,462
$
1,370
Total gross sales
$
16,550
$
15,044
Total Analytics net sales
$
5,756
$
5,861
Analytics Retention Rate(2)
93.5
%
94.0
%
ESG and Climate
New recurring subscription sales
$
11,471
$
12,486
Subscription cancellations
(7,351
)
(2,635
)
Net new recurring subscription sales
$
4,120
$
9,851
Non-recurring sales
$
1,672
$
1,219
Total gross sales
$
13,143
$
13,705
Total ESG and Climate net sales
$
5,792
$
11,070
ESG and Climate Retention Rate(3)
90.8
%
96.1
%
All Other - Private Assets
New recurring subscription sales
$
8,264
$
5,143
Subscription cancellations
(4,922
)
(2,856
)
Net new recurring subscription sales
$
3,342
$
2,287
Non-recurring sales
$
1,089
$
213
Total gross sales
$
9,353
$
5,356
Total All Other - Private Assets net
sales
$
4,431
$
2,500
All Other - Private Assets Retention
Rate(4)
92.2
%
92.1
%
Consolidated
New recurring subscription sales
$
57,336
$
56,393
Subscription cancellations
(37,769
)
(21,756
)
Net new recurring subscription sales
$
19,567
$
34,637
Non-recurring sales
$
18,034
$
15,584
Total gross sales
$
75,370
$
71,977
Total net sales
$
37,601
$
50,221
Total Retention Rate(5)
92.8
%
95.2
%
(1) See "Notes Regarding the Use of
Operating Metrics" for details regarding the definition of new
recurring subscription sales, subscription cancellations, net new
recurring subscription sales, non-recurring sales, total gross
sales, total net sales and Retention Rate.
(2) Retention rate for Analytics excluding
the impact of the acquisition of Fabric was 93.5% for the three
months ended Mar. 31, 2024.
(3) Retention rate for ESG and Climate
excluding the impact of the acquisition of Trove was 90.7% for the
three months ended Mar. 31, 2024.
(4) Retention rate for All Other – Private
Assets excluding the impact of the acquisition of Burgiss was 89.9%
for the three months ended Mar. 31, 2024.
(5) Total retention rate excluding the
impact of the acquisitions of Fabric, Trove and Burgiss was 92.6%
for the three months ended Mar. 31, 2024.
Table 7: AUM in ETFs Linked to MSCI Equity Indexes
(unaudited)(1)(2)
Three Months Ended
Mar. 31
Jun. 30
Sep. 30
Dec. 31
Mar. 31
In billions
2023
2023
2023
2023
2024
Beginning Period AUM in ETFs linked to
MSCI equity indexes
$
1,222.9
$
1,305.4
$
1,372.5
$
1,322.8
$
1,468.9
Market Appreciation/(Depreciation)
75.1
48.4
(56.1
)
130.5
92.8
Cash Inflows
7.4
18.7
6.4
15.6
20.9
Period-End AUM in ETFs linked to
MSCI equity indexes
$
1,305.4
$
1,372.5
$
1,322.8
$
1,468.9
$
1,582.6
Period Average AUM in ETFs linked to
MSCI equity indexes
$
1,287.5
$
1,333.8
$
1,376.5
$
1,364.9
$
1,508.8
Period-End Basis Point Fee(3)
2.53
2.52
2.51
2.50
2.48
(1) The historical values of the AUM in
ETFs linked to our equity indexes as of the last day of the month
and the monthly average balance can be found under the link “AUM in
ETFs Linked to MSCI Equity Indexes” on our Investor Relations
homepage at http://ir.msci.com. Information contained on our
website is not incorporated by reference into this Press Release or
any other report furnished or filed with the SEC. The AUM in ETFs
also includes AUM in Exchange Traded Notes, the value of which is
less than 1.0% of the AUM amounts presented.
(2) The value of AUM in ETFs linked to
MSCI equity indexes is calculated by multiplying the equity ETFs
net asset value by the number of shares outstanding.
(3) Based on period-end Run Rate for ETFs
linked to MSCI equity indexes using period-end AUM.
Table 8: Run Rate by Segment and Type (unaudited)(1)
As of
Mar. 31,
Mar. 31,
%
In thousands
2024
2023
Change
Index
Recurring subscriptions
$
869,931
$
795,621
9.3
%
Asset-based fees
619,431
534,491
15.9
%
Index Run Rate
1,489,362
1,330,112
12.0
%
Analytics Run Rate
662,079
621,611
6.5
%
ESG and Climate Run Rate
320,611
278,947
14.9
%
All Other - Private Assets Run
Rate
254,432
148,440
71.4
%
Total Run Rate
$
2,726,484
$
2,379,110
14.6
%
Total recurring subscriptions
$
2,107,053
$
1,844,619
14.2
%
Total asset-based fees
619,431
534,491
15.9
%
Total Run Rate
$
2,726,484
$
2,379,110
14.6
%
(1) See "Notes Regarding the Use of
Operating Metrics" for details regarding the definition of Run
Rate.
Table 9: Reconciliation of Net Income to Adjusted EBITDA
(unaudited)
Three Months Ended
Mar. 31,
Mar. 31,
In thousands
2024
2023
Net income
$
255,954
$
238,728
Provision for income taxes
39,939
37,644
Other expense (income), net
43,489
38,230
Operating income
339,382
314,602
Amortization of intangible assets
38,604
24,667
Depreciation and amortization of
property,
equipment and leasehold improvements
4,081
5,460
Acquisition-related integration and
transaction costs(1)
1,506
—
Consolidated adjusted EBITDA
$
383,573
$
344,729
Index adjusted EBITDA
$
277,760
$
253,682
Analytics adjusted EBITDA
72,212
60,780
ESG and Climate adjusted EBITDA
21,091
17,876
All Other - Private Assets adjusted
EBITDA
12,510
12,391
Consolidated adjusted EBITDA
$
383,573
$
344,729
(1) Represents transaction expenses and
other costs directly related to the acquisition and integration of
acquired businesses, including professional fees, severance
expenses, regulatory filing fees and other costs, in each case that
are incurred no later than 12 months after the close of the
relevant acquisition.
Table 10: Reconciliation of Net Income and Diluted EPS to
Adjusted Net Income and Adjusted EPS (unaudited)
Three Months Ended
Mar. 31,
Mar. 31,
In thousands, except per share
data
2024
2023
Net income
$
255,954
$
238,728
Plus: Amortization of acquired intangible
assets and
equity method investment basis
difference
25,267
16,809
Plus: Acquisition-related integration and
transaction costs(1)
1,506
—
Plus: Write-off of deferred fees on debt
extinguishment
1,510
—
Less: Gain from changes in ownership
interest of investees
—
(447
)
Less: Income tax effect(2)
(4,008
)
(2,196
)
Adjusted net income
$
280,229
$
252,894
Diluted EPS
$
3.22
$
2.97
Plus: Amortization of acquired intangible
assets and
equity method investment basis
difference
0.32
0.21
Plus: Acquisition-related integration and
transaction costs(1)
0.02
—
Plus: Write-off of deferred fees on debt
extinguishment
0.02
—
Less: Gain from changes in ownership
interest of investees
—
(0.01
)
Less: Income tax effect(2)
(0.06
)
(0.03
)
Adjusted EPS
$
3.52
$
3.14
Diluted weighted average common shares
outstanding
79,508
80,482
(1) Represents transaction expenses and
other costs directly related to the acquisition and integration of
acquired businesses, including professional fees, severance
expenses, regulatory filing fees and other costs, in each case that
are incurred no later than 12 months after the close of the
relevant acquisition.
(2) Adjustments relate to the tax effect
of non-GAAP adjustments, which were determined based on the nature
of the underlying non-GAAP adjustments and their relevant
jurisdictional tax rates.
Table 11: Reconciliation of Operating Expenses to Adjusted
EBITDA Expenses (unaudited)
Three Months Ended
Full-Year
Mar. 31,
Mar. 31,
2024
In thousands
2024
2023
Guidance(1)
Total operating expenses
$
340,583
$
277,616
$1,300,000 - $1,340,000
Amortization of intangible assets
38,604
24,667
Depreciation and amortization of
property,
equipment and leasehold improvements
4,081
5,460
$170,000 - $180,000
Acquisition-related integration and
transaction costs(2)
1,506
—
Consolidated adjusted EBITDA
expenses
$
296,392
$
247,489
$1,130,000 -
$1,160,000
Index adjusted EBITDA expenses
$
96,112
$
85,700
Analytics adjusted EBITDA expenses
91,754
86,290
ESG and Climate adjusted EBITDA
expenses
56,793
49,182
All Other - Private Assets adjusted EBITDA
expenses
51,733
26,317
Consolidated adjusted EBITDA
expenses
$
296,392
$
247,489
$1,130,000 -
$1,160,000
(1) We have not provided a full line-item
reconciliation for total operating expenses to adjusted EBITDA
expenses for this future period because we believe such a
reconciliation would imply a degree of precision and certainty that
could be confusing to investors and we are unable to reasonably
predict certain items contained in the GAAP measure without
unreasonable efforts. This is due to the inherent difficulty of
forecasting the timing or amount of various items that have not yet
occurred and are out of the Company's control or cannot be
reasonably predicted. For the same reasons, the Company is unable
to address the probable significance of the unavailable
information. Forward-looking non-GAAP financial measures provided
without the most directly comparable GAAP financial measures may
vary materially from the corresponding GAAP financial measures. See
“Forward-Looking Statements” above.
(2) Represents transaction expenses and
other costs directly related to the acquisition and integration of
acquired businesses, including professional fees, severance
expenses, regulatory filing fees and other costs, in each case that
are incurred no later than 12 months after the close of the
relevant acquisition.
Table 12: Reconciliation of Net Cash Provided by Operating
Activities to Free Cash Flow (unaudited)
Three Months Ended
Full-Year
Mar. 31,
Mar. 31,
2024
In thousands
2024
2023
Guidance(1)
Net cash provided by operating
activities
$
300,137
$
264,141
$1,330,000 -
$1,380,000
Capital expenditures
(4,271
)
(6,225
)
Capitalized software development costs
(19,966
)
(15,351
)
Capex
(24,237
)
(21,576
)
($95,000 - $105,000)
Free cash flow
$
275,900
$
242,565
$1,225,000 -
$1,285,000
(1) We have not provided a line-item
reconciliation for free cash flow to net cash provided by operating
activities for this future period because we believe such a
reconciliation would imply a degree of precision and certainty that
could be confusing to investors and we are unable to reasonably
predict certain items contained in the GAAP measure without
unreasonable efforts. This is due to the inherent difficulty of
forecasting the timing or amount of various items that have not yet
occurred and are out of the Company's control or cannot be
reasonably predicted. For the same reasons, the Company is unable
to address the probable significance of the unavailable
information. Forward-looking non-GAAP financial measures provided
without the most directly comparable GAAP financial measures may
vary materially from the corresponding GAAP financial measures. See
“Forward-Looking Statements” above.
Table 13: First Quarter 2024 Reconciliation of Operating
Revenue Growth to Organic Operating Revenue Growth
(unaudited)
Comparison of the Three Months
Ended March 31, 2024 and 2023
Total
Recurring Subscription
Asset-Based Fees
Non-Recurring Revenues
Index
Change Percentage
Change Percentage
Change Percentage
Change Percentage
Operating revenue growth
10.2
%
8.3
%
12.9
%
11.3
%
Impact of acquisitions and
divestitures
—
%
—
%
—
%
—
%
Impact of foreign currency exchange rate
fluctuations
0.2
%
0.3
%
0.1
%
—
%
Organic operating revenue growth
10.4
%
8.6
%
13.0
%
11.3
%
Total
Recurring Subscription
Asset-Based Fees
Non-Recurring Revenues
Analytics
Change Percentage
Change Percentage
Change Percentage
Change Percentage
Operating revenue growth
11.5
%
11.1
%
—
%
33.0
%
Impact of acquisitions and
divestitures
(0.1
)%
(0.1
)%
—
%
—
%
Impact of foreign currency exchange rate
fluctuations
0.5
%
0.5
%
—
%
1.7
%
Organic operating revenue growth
11.9
%
11.5
%
—
%
34.7
%
Total
Recurring Subscription
Asset-Based Fees
Non-Recurring Revenues
ESG and Climate
Change Percentage
Change Percentage
Change Percentage
Change Percentage
Operating revenue growth
16.1
%
16.3
%
—
%
10.6
%
Impact of acquisitions and
divestitures
(1.9
)%
(1.9
)%
—
%
(3.1
)%
Impact of foreign currency exchange rate
fluctuations
(3.2
)%
(3.3
)%
—
%
(0.3
)%
Organic operating revenue growth
11.0
%
11.1
%
—
%
7.2
%
Total
Recurring Subscription
Asset-Based Fees
Non-Recurring Revenues
All Other - Private Assets
Change Percentage
Change Percentage
Change Percentage
Change Percentage
Operating revenue growth
66.0
%
64.7
%
—
%
196.5
%
Impact of acquisitions and
divestitures
(62.6
)%
(62.6
)%
—
%
(67.6
)%
Impact of foreign currency exchange rate
fluctuations
(0.8
)%
(0.8
)%
—
%
(0.3
)%
Organic operating revenue growth
2.6
%
1.3
%
—
%
128.6
%
Total
Recurring Subscription
Asset-Based Fees
Non-Recurring Revenues
Consolidated
Change Percentage
Change Percentage
Change Percentage
Change Percentage
Operating revenue growth
14.8
%
15.2
%
12.9
%
20.3
%
Impact of acquisitions and
divestitures
(4.3
)%
(5.7
)%
—
%
(2.2
)%
Impact of foreign currency exchange rate
fluctuations
(0.2
)%
(0.2
)%
0.1
%
0.3
%
Organic operating revenue growth
10.3
%
9.3
%
13.0
%
18.4
%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240423155431/en/
MSCI Inc. Investor Inquiries jeremy.ulan@msci.com
Jeremy Ulan +1 646 778 4184
jisoo.suh@msci.com Jisoo Suh + 1 917 825 7111
Media Inquiries PR@msci.com Melanie Blanco +1 212 981
1049 Konstantinos Makrygiannis +44 (0)7768 930056 Tina Tan + 852
2844 9320
MSCI (NYSE:MSCI)
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MSCI (NYSE:MSCI)
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