MSCI Inc. (NYSE: MSCI), a leading global provider of investment
decision support tools, including indices, portfolio risk and
performance analytics and corporate governance services, today
announced results for the fourth quarter and fiscal year ended
November 30, 2010. For comparative purposes, selected results
excluding the impact of acquisitions are presented, as are pro
forma results as if MSCI had acquired RiskMetrics Group, Inc.
(“RiskMetrics”) on December 1, 2008.
(Note: Percentage changes are referenced to the comparable
period in fiscal year 2009, unless otherwise noted.)
- Operating revenues increased 79.6% to
$213.3 million in fourth quarter 2010 and 49.7% to $662.9 million
for fiscal year 2010.
- Compared to pro forma 2009, revenues
grew by 9.2% to $213.3 million in fourth quarter 2010. Pro forma
fiscal year 2010 revenues rose 9.4% to $816.4 million.
- Net income increased by 23.4% to $30.3
million in fourth quarter 2010. For fiscal year 2010, net income
increased by 12.7% to $92.2 million. Diluted EPS for fourth quarter
2010 rose 4.2% to $0.25. For fiscal year 2010, Diluted EPS rose
1.3% to $0.81.
- Adjusted EBITDA (defined below) grew by
66.7% to $98.9 million with an Adjusted EBITDA margin of 46.4% for
fourth quarter 2010 and for fiscal year 2010 grew by 43.0% to
$307.6 million with a margin of 46.4%.
- Compared to pro forma fourth quarter
2009, Adjusted EBITDA grew by 16.9% to $98.9 million and the
Adjusted EBITDA margin expanded to 46.4% from 43.3%. Pro forma
fiscal year 2010 Adjusted EBITDA rose 14.1% to $356.6 million and
the Adjusted EBITDA margin expanded to 43.7% from 41.9%.
- Fourth quarter 2010 Adjusted EPS
(defined below) rose 16.1% to $0.36 and 20.5% to $1.35 for fiscal
year 2010.
Henry A. Fernandez, Chairman and CEO, said, “We delivered a
strong fourth quarter 2010, aided by strong demand for our equity
indices and our risk management analytics products. Our pro forma
revenues grew by 9.2% and our pro forma Adjusted EBITDA grew by
16.9%. Our Adjusted EPS grew by 16.1%.
“Fiscal year 2010 was an important year for MSCI. By acquiring
RiskMetrics and Measurisk, we have enhanced our position as a
leading provider of risk management and reporting solutions for our
institutional investor clients. In addition, we continued to
strengthen MSCI’s standing as a leading provider of benchmark
equity indices to global active and passive investors. We are
focused on completing our integration process and continuing to
invest in our businesses. These investments should enable MSCI to
take advantage of the long-term trends driving our business and
contribute to our revenue growth over the next three to five
years,” added Mr. Fernandez.
Table 1: MSCI Inc. Selected Financial Information
(unaudited)
Three Months Ended Change from Fiscal Year
Ended Change from November 30, November 30, November 30,
November 30, In thousands, except per share data 2010 2009
2009 2010 2009 2009 Operating revenues $ 213,318 $ 118,790
79.6% $ 662,901 $ 442,948 49.7% Operating expenses 142,598 75,034
90.0% 456,778 291,956 56.5% Net income 30,266 24,535 23.4% 92,170
81,801 12.7% % Margin 14.2% 20.7% 13.9% 18.5% Diluted EPS $ 0.25 $
0.24 4.2% $ 0.81 $ 0.80 1.3% Adjusted EPS1 0.36 0.31 16.1%
1.35 1.12 20.5% Adjusted EBITDA2 $ 98,914 $ 59,343 66.7% $
307,603 $ 215,155 43.0% % Margin 46.4% 50.0% 46.4% 48.6% 1
Per share net income before after-tax impact of amortization of
intangibles, non-recurring stock-based compensation, third party
transaction expenses associated with the acquisition of RiskMetrics
and debt repayment expenses. See Table 17 titled "Reconciliation of
Adjusted Net Income and Adjusted EPS to Net Income and EPS" and
information about the use of non-GAAP financial information
provided under "Notes Regarding the Use of Non-GAAP Financial
Measures.” 2 Net Income before interest income, interest expense,
other expense (income), provision for income taxes, depreciation,
amortization, non-recurring stock-based compensation, and third
party transaction expenses associated with the acquisition of
RiskMetrics. See Table 15 titled "Reconciliation of Adjusted EBITDA
to Net Income" and information about the use of non-GAAP financial
information provided under "Notes Regarding the Use of Non-GAAP
Financial Measures.”
Summary of Results for Fiscal Fourth Quarter 2010 compared to
Fiscal Fourth Quarter 2009
Operating Revenues – See Table 4
Total operating revenues for the three months ended November 30,
2010 (fourth quarter 2010) increased $94.5 million, or 79.6%, to
$213.3 million compared to $118.8 million for the three months
ended November 30, 2009. The biggest drivers of revenue growth were
the acquisitions of RiskMetrics and Measurisk which took place on
June 1, 2010 and July 30, 2010, respectively, and which together
contributed revenues of $78.6 million to growth in the fourth
quarter. Total subscription revenues rose $83.0 million, or 88.5%,
to $176.8 million while asset-based fees increased $5.5 million, or
23.9%, to $28.3 million. Non-recurring revenues increased $6.1
million to $8.2 million.
Excluding the impact of the acquisitions of RiskMetrics and
Measurisk, total operating revenues grew by $15.9 million, or
13.4%, to $134.7 million, subscription revenues grew $7.9 million,
or 8.4%, to $101.7 million in fourth quarter 2010 and non-recurring
revenues increased $2.5 million to $4.7 million.
By segment, Performance and Risk revenues rose $66.2 million, or
55.8%, to $185.0 million. The Performance and Risk segment is
comprised of index and ESG (defined below) products, risk
management analytics, portfolio management analytics, and energy
and commodity analytics. Revenues for the Governance segment were
$28.3 million.
Index and ESG products: Our index and ESG products
primarily consist of index subscriptions, equity index asset based
fees products and environmental, social and governance (“ESG”)
products. Revenues related to Index and ESG products increased
$19.9 million, or 27.8%, to $91.2 million. Index and ESG
subscription revenue grew by $12.7 million, or 26.2%, to $61.1
million. The inclusion of ESG products contributed revenue growth
of $4.7 million. Non-recurring index and ESG products revenue rose
to $4.9 million from $2.1 million.
Excluding the impact of the RiskMetrics acquisition, index and
ESG subscription revenue grew by $8.1 million, or 16.7%, driven by
higher revenues from MSCI’s core benchmark indices and higher usage
fees. Non-recurring revenues were $4.5 million, up from $2.1
million in fourth quarter 2009.
Revenues attributable to equity index asset based fees rose $7.2
million, or 31.4%, to $30.0 million. The increase in equity index
asset-based fees was driven primarily by an increase in ETF
asset-based fees. The average value of assets in ETFs linked to
MSCI equity indices increased 38.7% to $300.7 billion for fourth
quarter 2010 compared to $216.8 billion for fourth quarter 2009. As
of November 30, 2010, the value of assets in ETFs linked to MSCI
equity indices was $311.0 billion, representing an increase of
$76.8 billion, or 32.8%, from $234.2 billion as of November 30,
2009 and $52.3 billion, or 20.2%, from $258.7 billion as of August
31, 2010. We estimate that the $52.3 billion sequential increase
was attributable to $28.2 billion of net asset appreciation and
cash inflows of $24.1 billion in fourth quarter 2010. The three
MSCI indices with the largest amount of ETF assets linked to them
as of November 30, 2010 were the MSCI Emerging Markets, EAFE (an
index of stocks in developed markets outside North America), and
U.S. Broad Market indices. The assets linked to these indices were
$102.7 billion, $39.4 billion, and $15.6 billion, respectively.
Asset-based fees also include $1.7 million of non-recurring revenue
in fourth quarter 2010.
Risk management analytics: Our risk management analytics
products offer a consistent risk assessment framework for managing
and monitoring investments in a variety of asset classes and are
based on our proprietary integrated fundamental multi-factor risk
models, value-at-risk methodologies and asset valuation models.
Revenues related to risk management analytics increased $47.3
million, or 444.9%, to $58.0 million. The acquisitions of
RiskMetrics and Measurisk added $45.8 million, or 430.1%, to growth
in the fourth quarter.
Excluding the impact of the acquisitions, risk management
analytics revenues grew by $1.6 million, or 14.8%. Increased
revenues from the BarraOne product were the biggest driver of this
growth.
Portfolio management analytics: Our portfolio management
analytics products consist of analytics tools for equity and fixed
income portfolio management. Revenues related to portfolio
management analytics decreased by $0.9 million, or 2.8%, to $31.0
million. Declines in software and analytics revenues more than
offset a modest increase in revenues from the licensing of
models.
Energy and commodity analytics: Our energy and commodity
analytics products consist of software applications which help
users value and model physical assets and derivatives across a
number of market segments including energy and commodity assets.
Revenues from energy and commodity analytics products declined
slightly by $0.1 million, or 1.4%, to $4.9 million. Growth in
options analytics was more than offset by a decline in portfolio
products revenues.
Governance: Our governance products consist of corporate
governance products and services, including proxy research,
recommendation and voting services for asset owners and asset
managers as well as governance advisory and compensation services
for corporations. It also includes forensic accounting research as
well as class action monitoring and claims filing services to aid
institutional investors in the recovery of funds from securities
litigation, all of which were acquired as part of our acquisition
of RiskMetrics. Governance revenues were $28.3 million in fourth
quarter 2010.
Operating Expenses – See Table 6
Total operating expense increased $67.6 million, or 90.0%, to
$142.6 million in fourth quarter 2010 compared to fourth quarter
2009. The acquisitions added $65.1 million to operating expenses.
Restructuring costs related to the ongoing integration of
RiskMetrics contributed $1.9 million to operating expenses.
Compensation costs: Total compensation costs rose $36.9
million, or 81.0%, to $82.4 million in fourth quarter 2010. The
increase in compensation largely reflects an increase in headcount,
most of which was due to the acquisition of RiskMetrics. Excluding
non-recurring stock-based compensation expense of $4.0 million,
total compensation costs rose $39.1 million, or 99.5%, to $78.4
million.
Non-recurring stock-based compensation expenses for fourth
quarter 2010 consisted of $1.9 million related to the founders
grants awarded to certain employees at the time of the Company’s
initial public offering (“IPO”) and $2.1 million related to the
performance awards granted to certain employees in connection with
the acquisition of RiskMetrics. The aggregate value of the
performance awards of approximately $15.9 million is being
amortized through 2012 and the aggregate value of the founders
grants of approximately $68.0 million is being amortized through
2011. As a result of the vesting of portions of the founders
grants, the related expense decreased $4.3 million, or 69.0%, to
$1.9 million. In fourth quarter 2010, $1.6 million and $2.4 million
of costs related to non-recurring stock-based compensation were
recorded in cost of services and selling, general and
administrative expense (“SG&A”), respectively.
Non-compensation costs excluding depreciation and
amortization: Total non-compensation operating expenses
excluding depreciation and amortization and restructuring costs
rose $15.9 million, or 78.7%, to $36.0 million in fourth quarter
2010. The acquisition of RiskMetrics was the biggest driver behind
the increase.
Cost of services: Total cost of services expenses rose by
$36.9 million, or 114.6%, to $69.1 million. Within costs of
services, compensation expenses increased by $27.6 million, or
120.3%, and non-compensation expenses increased by $9.4 million, or
100.5%. In both cases, the biggest driver behind the increase was
the acquisition of RiskMetrics.
Selling, general and administrative expense (SG&A):
Total SG&A expense rose $15.8 million, or 47.2%, to $49.3
million. Within SG&A, compensation expenses increased by $9.3
million, or 41.1%, and non-compensation expenses increased by $6.5
million, or 60.0%. In both cases, the biggest driver behind the
increase was the acquisition of RiskMetrics.
Amortization of intangibles: Amortization of intangibles
expense totaled $16.7 million compared to $6.3 million in fourth
quarter 2009. The $10.4 million increase consisted of $12.4 million
of increased amortization associated with the acquisitions of
RiskMetrics and Measurisk, partially offset by a $2.0 million
decline in amortization of intangible assets related to the
acquisition of Barra.
Adjusted EBITDA – See Table 15
Adjusted EBITDA, which excludes among other things the impact of
non-recurring stock-based compensation, was $98.9 million, an
increase of $39.6 million, or 66.7% from fourth quarter 2009.
Adjusted EBITDA margin declined to 46.4% from 50.0% as a result of
the dilutive impact of the acquisition of the lower margin
RiskMetrics.
By segment, Adjusted EBITDA for the Performance and Risk segment
increased $31.2 million, or 52.6%, to $90.6 million from fourth
quarter 2009. Adjusted EBITDA margin for this segment fell to 48.9%
from 50.0% in fourth quarter 2009. Adjusted EBITDA for the
Governance segment was $8.4 million and the Adjusted EBITDA margin
was 29.6%.
See Table 15 titled “Reconciliation of Adjusted EBITDA to Net
Income” and “Notes Regarding the Use of Non-GAAP Financial
Measures” below.
Other Expense (Income), Net
Other expense (income), net for fourth quarter 2010 was $19.6
million, an increase of $15.5 million from fourth quarter 2009.
Interest expense rose $13.0 million as a result of the increased
levels of indebtedness incurred in connection with the acquisition
of RiskMetrics. The remaining $2.5 million increase primarily
reflects $2.4 million of increased foreign exchange losses
recognized during fourth quarter 2010.
Provision for Income Taxes
The provision for income tax expense was $20.8 million for
fourth quarter 2010, an increase of $5.7 million, or 37.7%,
compared to $15.1 million for the same period in 2009. The
effective tax rate was 40.7% for fourth quarter 2010 compared to
38.1% for fourth quarter 2009. The fourth quarter 2010 effective
tax rate excluding the impact of transaction costs would have been
39.9%.
Net Income and Earnings per Share - See Table 17
Net income increased $5.7 million, or 23.4%, to $30.3 million
for fourth quarter 2010. The net income margin decreased to 14.2%
from 20.7% as a result of the impact of the acquisition of the
lower margin RiskMetrics business as well as the additional
amortization of intangibles, restructuring costs, and higher
interest expense related to the same acquisition. Diluted EPS
increased 4.2% to $0.25.
Adjusted net income, which excludes the after-tax impact of
amortization of intangibles, non-recurring stock-based compensation
expense, and restructuring costs totaling $14.1 million, rose $12.0
million, or 37.3%, to $44.3 million. Adjusted EPS, which excludes
the after-tax, per share impact of amortization of intangibles,
non-recurring stock-based compensation expense, and restructuring
costs totaling $0.11, rose 16.1% to $0.36.
See table 17 titled “Reconciliation of Adjusted Net Income and
Adjusted EPS to Net Income and EPS.”
Summary of Results for Fiscal Year 2010 compared to Fiscal
Year 2009
Operating Revenues – See Table 5
Total operating revenues for fiscal year 2010 increased $220.0
million, or 49.7%, to $662.9 million compared to $442.9 million for
fiscal year 2009. The acquisitions of RiskMetrics and Measurisk
added revenues of $156.7 million in fiscal year 2010. Total
subscription revenue rose $175.6 million, or 48.5%, to $537.8
million, while asset-based fees rose $32.1 million, or 44.6%, to
$104.1 million. Total non-recurring revenues increased $12.2
million, or 138.1%, to $21.0 million.
Excluding the impact of the acquisitions, total operating
revenues grew by $63.2 million, or 14.3%, subscription revenues
grew by $26.5 million, or 7.3%, and non-recurring revenues grew by
$4.6 million, or 52.2%, from fiscal year 2009. Excluding the impact
of the acquisitions, index and ESG products and risk management
analytics revenues grew 23.3% and 21.2%, respectively, in fiscal
year 2010. Portfolio management analytics revenues declined 4.7%
and Energy and other commodity analytics revenues rose 4.5%.
By segment, Performance and Risk revenues rose $161.4 million,
or 36.4%, to $604.3 million for fiscal year 2010. Governance
revenues were $58.6 million.
Operating Expenses – See Table 7
Total operating expenses increased $164.8 million, or 56.5%, to
$456.8 million in fiscal year 2010 compared to fiscal year 2009.
Operating expenses included third party transaction expenses
related to the acquisition of RiskMetrics of $21.2 million and
restructuring costs of $8.9 million. Excluding these expenses,
total operating expenses would have risen by $134.7 million, or
46.1%. The $134.7 million increase reflects increases of $80.0
million, or 67.4%, in cost of services and $33.3 million, or 24.5%,
in SG&A expense.
Adjusted EBITDA – See Table 15
Adjusted EBITDA was $307.6 million, an increase of $92.4
million, or 43.0%, from fiscal year 2009. Adjusted EBITDA margin
fell to 46.4% from 48.6%.
By segment, Adjusted EBITDA for the Performance and Risk segment
increased $76.5 million, or 35.5%, to $291.6 million from fiscal
year 2009. Adjusted EBITDA margin fell to 48.3% from 48.6% in
fiscal year 2009. Adjusted EBITDA for the Governance segment was
$16.0 million and the Adjusted EBITDA Margin was 27.2%.
See Table 15 titled “Reconciliation of Adjusted EBITDA to Net
Income” and “Notes Regarding the Use of Non-GAAP Financial
Measures” below.
Other Expense (Income), Net
Other expense (income), net for fiscal year 2010 was $52.6
million, an increase of $33.4 million from fiscal year 2009.
Approximately $31.7 million of increased interest expense resulted
from the $1,275.0 million term loan we assumed as part of our
acquisition of RiskMetrics and interest expense recognized during
fiscal year 2010 associated with the accelerated amortization of
deferred financing and debt discount costs as a result of our
termination of our former term loans. In addition, the increase in
other expense (income) reflects $2.6 million of increased foreign
exchange losses partially offset by $1.0 million of increased
miscellaneous non-operating income.
Provision for Income Taxes
The provision for income tax expense was $61.3 million for
fiscal year 2010, an increase of $11.4 million, or 22.8%, compared
to $49.9 million for fiscal year 2009. Our effective tax rate for
fiscal year 2010 was 40.0% compared to 37.9% for fiscal year 2009.
The fiscal year 2010 effective tax rate includes the impact of the
acquisition-related transaction costs, some of which were not tax
deductible, which increased our effective tax rate by 2.6%.
Net Income and Earnings per Share – See Table 17
Net income increased $10.4 million, or 12.7%, to $92.2 million
and the net income margin decreased to 13.9% from 18.5%. Diluted
EPS rose by 1.3% to $0.81 from $0.80.
Adjusted net income, which excludes the after-tax impact of
amortization of intangibles, non-recurring stock-based compensation
expense, transaction expenses, debt repayment expenses, and
restructuring costs totaling $62.2 million, rose $40.1 million, or
35.1%, to $154.3 million. Adjusted EPS, which excludes the
after-tax, per share impact of amortization of intangibles,
non-recurring stock-based compensation expense, transaction
expenses, debt repayment expenses, and restructuring costs totaling
$0.54, rose 20.5% to $1.35 in fiscal year 2010.
See table 17 titled “Reconciliation of Adjusted Net Income and
Adjusted EPS to Net Income and EPS.”
Summary of Results for Pro Forma Fourth Quarter 2010 compared
to Pro Forma Fourth Quarter 2009
Operating Revenues – See Table 9
Compared to pro forma fourth quarter 2009, total operating
revenues increased $18.1 million, or 9.2%, to $213.3 million. By
segment, Performance and Risk revenues rose $22.1 million, or
13.6%, to $185.0 million. Governance revenue trends are described
further below. Subscription revenues rose by $12.2 million, or
7.4%, to $176.8 million and non-recurring revenues increased $0.4
million to $8.2 million.
Index and ESG products: Compared to pro forma fourth
quarter 2009, total index and ESG revenues rose $15.4 million, or
20.2%, to $91.2 million. Index and ESG subscription revenues rose
by $8.2 million, or 15.5%, to $61.1 million from $53.0 million. The
strong growth was driven by higher revenues from MSCI’s core
benchmark indices and higher usage fees. Revenues from asset-based
fees increased $7.2 million, or 31.4%, to $30.0 million, compared
to pro forma fourth quarter 2009. Non-recurring Index and ESG
products revenues rose by $2.2 million to $4.9 million.
Risk management analytics: Compared to pro forma fourth
quarter 2009, risk management analytics revenues rose $7.8 million,
or 15.4% to $58.0 million, driven by growth in revenues from both
BarraOne and RiskManager products. The acquisition of Measurisk
contributed $3.3 million, or 6.6%, to growth in the fourth
quarter.
Governance: Compared to pro forma fourth quarter 2009,
governance revenues declined $4.1 million, or 12.6%, to $28.3
million. Because a higher proportion of non-recurring revenues in
this segment are recognized in December, which are included in the
pro forma fourth quarter 2009 figure but excluded from that of
2010, the pro forma comparison for the fourth quarter results in a
seasonal mismatch that impacted the comparison by $1.2 million.
Excluding this timing difference, revenues fell by $2.9 million, or
9.4%.
After adjusting for differences in seasonality, the 9.4% fall in
revenues was led by a decline of 12.3% in proxy research and voting
revenues offset, in part, by a 1.8% increase in revenues from our
corporate compensation advisory business. Revenues from forensic
accounting services also declined. Non-recurring revenues were $2.8
million in fourth quarter 2010 versus $4.4 million in the pro forma
fourth quarter 2009.
The acquisition of RiskMetrics did not impact the revenues
attributable to the asset-based fees sub-category of index and ESG
products, portfolio management analytics and energy and commodity
analytics and comparisons for these products are not presented.
Comparisons to fourth quarter 2009 revenues comparisons are
discussed in the Summary of Results for Fiscal Fourth Quarter 2010
compared to Fiscal Fourth Quarter 2009 above.
Operating Expenses – See Table 10
Compared to pro forma fourth quarter 2009, total operating
expenses excluding restructuring costs fell $0.1 million to $140.2
million.
Compensation costs: Compared to pro forma fourth quarter
2009, compensation costs excluding non-recurring stock-based
compensation expense rose $3.4 million, or 4.5%, to $78.4 million.
The increase in compensation costs reflects higher headcount and an
increase in overall compensation. Compensation costs benefited from
a reduction in the full year bonus accrual, which had a $1.5
million impact on fourth quarter 2010. Total non-recurring
stock-based compensation expense fell by $2.2 million, or 35.6%, to
$4.0 million.
Non-compensation costs excluding depreciation and
amortization: Compared to pro forma fourth quarter 2009, total
non-compensation costs excluding depreciation and amortization as
well as restructuring costs increased $0.3 million, or 0.9%, to
$36.0 million. Higher outside professional and travel and
entertainment expenses more than offset lower taxes and license
fees.
Cost of services: Compared to pro forma fourth quarter
2009, total cost of services rose $0.6 million, or 0.8%, to $69.1
million. Compensation expenses excluding non-recurring stock-based
compensation expense rose $1.6 million, or 3.3%, to $48.8 million.
Non-compensation expenses fell by $0.5 million, or 2.7%, to $18.7
million, driven by lower market data costs.
Selling, general and administrative expense (SG&A):
Compared to pro forma fourth quarter 2009, total SG&A expense
rose $0.9 million, or 1.9%, to $49.3 million. Within SG&A,
compensation expenses excluding non-recurring stock-based
compensation rose $1.8 million, or 6.6%, to $29.5 million.
Non-compensation expenses rose $0.8 million, or 5.1%, to $17.4
million. The increase in non-compensation expenses was driven
primarily by higher outside professional and travel and
entertainment expenses.
Adjusted EBITDA – See Table 16
Compared to pro forma fourth quarter 2009, Adjusted EBITDA
increased $14.3 million, or 16.9%, to $98.9 million and the margin
expanded to 46.4% from 43.3%. Performance and Risk segment Adjusted
EBITDA grew by $14.5 million, or 19.1%, to $90.6 million and the
margin increased to 48.9% from 46.7%. Governance Adjusted EBITDA
fell by $0.2 million, or 2.7%, to $8.4 million and the margin
increased to 29.6% from 26.5%.
See Table 16 titled “Reconciliation of Pro Forma Adjusted EBITDA
to Pro Forma Net Income” and “Notes Regarding the Use of Non-GAAP
Financial Measures” below.
Summary of Results for Pro Forma Fiscal Year 2010 compared to
Pro Forma Fiscal Year 2009
Operating Revenues – See Table 9
Total operating revenues for the pro forma fiscal year 2010
compared to pro forma fiscal year 2009 rose $70.1 million, or 9.4%,
to $816.4 million. Subscription revenue rose $35.7 million, or
5.6%, to $679.0 million, driven by growth in index and ESG
subscriptions and risk management analytics, which more than offset
declines from portfolio management analytics and governance.
Asset-based fees rose $32.1 million, or 44.6%, to $104.1 million.
Non-recurring revenues increased by $2.3 million, or 7.4%, to $33.4
million, as higher non-recurring index and ESG subscription
revenues offset declines in non-recurring governance and risk
management analytics revenues. The acquisition of Measurisk
contributed $4.4 million, or 0.6%, to growth for fiscal year
2010.
The acquisition of RiskMetrics did not impact the revenues
attributable to the asset-based fees sub-category of index and ESG
products, portfolio management analytics and energy and commodity
analytics and comparisons for these products are not presented.
Comparisons to fiscal year 2009 revenues are discussed in the
Summary of Results for Fiscal Year 2010 compared to Fiscal Year
2009 above.
By segment, Performance and Risk revenues rose $79.3 million, or
12.9%, to $693.2 million. Governance revenues declined $9.2
million, or 6.9%, to $123.2 million.
Operating Expenses – See Table 10
Compared to pro forma fiscal year 2009, total operating expense
for pro forma fiscal year 2010 increased $13.4 million, or 2.4%, to
$567.3 million.
Total compensation expense excluding non-recurring stock-based
compensation increased $20.8 million, or 7.0%, to $319.1 million.
Non-compensation costs excluding depreciation and amortization and
restructuring costs rose $5.3 million, or 3.9%, to $140.7
million.
Compared to pro forma fiscal year 2009, total cost of services
for pro forma fiscal year 2010 rose $14.0 million, or 5.4%, to
$272.9 million. The growth was driven by an increase of $12.9
million, or 7.0%, in compensation excluding non-recurring
stock-based compensation expense and a $5.8 million, or 8.9%,
increase in non-compensation expenses.
Total SG&A declined $2.1 million, or 1.1%, to $199.3 million
in fiscal year 2010. The decline was driven by a reduction of $9.6
million, or 55.3%, in non-recurring stock-based compensation and a
decrease of $0.5 million, or 0.7%, in non-compensation expenses
partially offset by an increase of $7.9 million, or 7.0%, in
compensation excluding non-recurring stock-based compensation
expense.
Adjusted EBITDA – See Table 16
Compared to pro forma fiscal year 2009, pro forma fiscal year
Adjusted EBITDA increased $44.0 million, or 14.1%, to $356.6
million and the margin expanded to 43.7% from 41.9%.
By segment, Performance and Risk Adjusted EBITDA rose $45.1
million, or 16.1%, to $324.3 million. The margin expanded to 46.8%
from 45.5%. Governance Adjusted EBITDA declined $1.1 million, or
3.2%, to $32.3 million and the margin rose to 26.2% from 25.2%.
See Table 16 titled “Reconciliation of Pro Forma Adjusted EBITDA
to Pro Forma Net Income” and “Notes Regarding the Use of Non-GAAP
Financial Measures” below.
Conference Call Information
Investors will have the opportunity to listen to MSCI Inc.'s
senior management review fourth quarter 2010 results on Thursday,
January 13, 2011 at 11:00 am Eastern Time. To hear the live event,
visit the investor relations section of MSCI's website,
http://ir.msci.com/events.cfm, or dial 1-877-312-9206 within the
United States. International callers dial 1-408-774-4001.
An audio recording of the conference call will be available on
our website approximately two hours after the conclusion of the
live event and will be accessible through January 20, 2011. To
listen to the recording, visit http://ir.msci.com/events.cfm, or
dial 1-800-642-1687 (passcode: 33768957) within the United States.
International callers dial 1-706-645-9291 (passcode: 33768957).
About MSCI Inc.
MSCI Inc. is a leading provider of investment decision support
tools to investors globally, including asset managers, banks, hedge
funds and pension funds. MSCI products and services include
indices, portfolio risk and performance analytics, and governance
tools.
The company’s flagship product offerings are: the MSCI indices
which include over 120,000 daily indices covering more than 70
countries; Barra portfolio risk and performance analytics covering
global equity and fixed income markets; RiskMetrics market and
credit risk analytics; ISS governance research and outsourced proxy
voting and reporting services; FEA valuation models and risk
management software for the energy and commodities markets; and
CFRA forensic accounting risk research, legal/regulatory risk
assessment, and due-diligence. MSCI is headquartered in New York,
with research and commercial offices around the world. MSCI#IR
For further information on MSCI Inc. or our products please
visit www.msci.com.
Forward-Looking Statements
This release contains forward-looking statements. These
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 forward-looking
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 our 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
November 30, 2009 and filed with the Securities and Exchange
Commission (SEC) on January 29, 2010, and in quarterly reports on
Form 10-Q and current reports on Form 8-K filed with the SEC. If
any of these risks or uncertainties materialize, or if our
underlying assumptions prove to be incorrect, actual results may
vary significantly from what we projected. Any forward-looking
statement in this release reflects our current views with respect
to future events and is subject to these and other risks,
uncertainties and assumptions relating to our operations, results
of operations, growth strategy and liquidity. We assume 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.
Notes Regarding the Use of Non-GAAP Financial
Measures
MSCI has presented supplemental non-GAAP financial measures as
part of this earnings release. A reconciliation is provided below
that reconciles each non-GAAP financial measure with the most
comparable GAAP measure. The presentation of non-GAAP financial
measures should not be considered as alternative measures for the
most directly comparable GAAP financial measures. These measures
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 provision for
income taxes, other net expense and income, depreciation and
amortization, non-recurring stock-based compensation expense,
restructuring costs, and third party transaction costs related to
the acquisition of RiskMetrics.
Adjusted net income and Adjusted EPS are defined as net income
and EPS, respectively, before provision for non-recurring
stock-based compensation expenses, amortization of intangible
assets, third party transaction costs related to the acquisition of
RiskMetrics, restructuring costs, and the accelerated interest
expense resulting from the termination of an interest rate swap and
the accelerated amortization of deferred financing and debt
discount costs (debt repayment expenses), as well as for any
related tax effects.
We believe that adjustments related to transaction costs and
debt repayment expenses are useful to management and investors
because it allows for an evaluation of MSCI’s underlying operating
performance by excluding the costs incurred in connection with the
acquisition of RiskMetrics. Additionally, we believe that adjusting
for non-recurring stock-based compensation expenses and the
amortization of intangible assets may help investors compare our
performance to that of other companies in our industry as we do not
believe that other companies in our industry have as significant a
portion of their operating expenses represented by one-time
non-recurring stock-based compensation expenses and amortization of
intangible assets. 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, Adjusted net income and Adjusted EPS are not
defined in the same manner by all companies and may not be
comparable to other similarly titled measures of other
companies.
Table 2: MSCI Inc. Consolidated Statement of Income
(unaudited)
Three Months Ended Fiscal Year Ended November
30, August 31, November 30, In thousands, except per share
data 2010 2009 2010
2010 2009 Operating
revenues $ 213,318 $ 118,790 $ 202,733 $ 662,901 $ 442,948
Operating expenses Cost of services 69,131 32,214 69,741 198,626
118,665 Selling, general and administrative 49,300 33,487 63,306
190,244 135,780 Restructuring costs 1,943 - 6,953 8,896 -
Amortization of intangible assets 16,694 6,268 16,350 41,599 25,554
Depreciation and amortization of property, 5,530 3,065 4,934 17,413
11,957 equipment, and leasehold improvements
Total operating expenses $ 142,598 $ 75,034
$ 161,284 $ 456,778 $ 291,956
Operating income 70,720 43,756 41,449 206,123 150,992
Interest income (128 ) (339 ) (114 ) (993 ) (1,053 ) Interest
expense 17,495 4,513 20,415 51,337 19,683 Other expense (income)
2,274 (71 ) 524 2,288
641 Other expense, net $ 19,641 $ 4,103
$ 20,825 $ 52,632 $ 19,271
Income before income taxes 51,079 39,653 20,624 153,491 131,721
Provision for income taxes 20,813 15,118 10,305 61,321
49,920 Net income $ 30,266
$ 24,535 $ 10,319 $ 92,170 $ 81,801
Earnings per basic common share $ 0.25 $ 0.24
$ 0.09 $ 0.82 $ 0.80 Earnings per
diluted common share $ 0.25 $ 0.24 $ 0.08 $
0.81 $ 0.80 Weighted average shares
outstanding used in computing earnings per share Basic
119,309 101,383 118,339
112,074 100,607 Diluted 121,172
101,952 120,341 113,357
100,860
Table 3: MSCI Inc. Selected Balance Sheet Items
(unaudited)
As of
November 30, November 30, In thousands
2010 2009 Cash and cash equivalents $ 226,575 $
176,024 Short-term investments 73,891 295,304 Trade receivables,
net of allowances 147,662 77,180 Deferred revenue $ 271,300
$ 152,944 Current maturities of long-term debt 54,916 42,088
Long-term debt, net of current maturities 1,207,881 337,622
Table 4: Fourth Quarter 2010 Operating Revenues by Product
Category
Three Months Ended Change from November
30, August 31, November 30, August 31, In thousands
2010 2009 2010 2009 2010 Index and ESG products
Subscriptions $ 61,143 $ 48,454 $ 58,984 26.2 % 3.7 % Asset-based
fees 30,045 22,874 25,134 31.4 % 19.5 % Index
and ESG products total 91,188 71,328 84,118 27.8 % 8.4 % Risk
management analytics 57,980 10,640 54,593 444.9 % 6.2 % Portfolio
management analytics 30,993 31,883 30,424 (2.8 %) 1.9 % Energy and
commodity analytics 4,871 4,939 3,290 (1.4 %)
48.0 % Total Performance and Risk revenues $ 185,032 $ 118,790 $
172,425 55.8 % 7.3 % Total Governance revenues 28,286 -
30,308 n/m (6.7 %) Total operating revenues $ 213,318 $ 118,790 $
202,733 79.6 % 5.2 % Subscriptions $ 176,791 $ 93,770 $
171,384 88.5 % 3.2 % Asset-based fees 28,330 22,874 25,134 23.9 %
12.7 % Non-recurring revenues 8,197 2,146
6,215 282.0 % 31.9 % Total operating revenues $ 213,318 $ 118,790 $
202,733 79.6 % 5.2 %
Table 5: Fiscal Year 2010 Operating Revenues by Product
Category
Fiscal Year Ended November 30,
In thousands 2010 2009 Change Index and
ESG products Subscriptions $ 224,600 $ 188,531 19.1 % Asset-based
fees 105,799 71,966 47.0 % Index and ESG products
total 330,399 260,497 26.8 % Risk management analytics 134,521
37,656 257.2 % Portfolio management analytics 123,159 129,270 (4.7
%) Energy and commodity analytics 16,228 15,525 4.5 %
Total Performance and Risk revenues $ 604,307 $ 442,948 36.4 %
Total Governance revenues 58,594 - n/m Total operating
revenues $ 662,901 $ 442,948 49.7 % Subscriptions $ 537,768
$ 362,140 48.5 % Asset-based fees 104,084 71,966 44.6 %
Non-recurring revenues 21,049 8,842 138.1 % Total
operating revenues $ 662,901 $ 442,948 49.7 %
Table 6: Additional Fourth Quarter 2010 Operating Expense
Detail
Three Months Ended Change from
November 30, August 31, November 30, August 31, In
thousands 2010 2009 2010 2009 2010 Cost of services
Compensation $ 48,849 $ 20,800 $ 50,313 134.8 % (2.9 %)
Non-Recurring Stock Based Comp 1,617 2,103
1,624 (23.1 %) (0.4 %) Total Compensation $ 50,466 $ 22,903 $
51,937 120.3 % (2.8 %) Non-Compensation 18,665 9,311
17,804 100.5 % 4.8 % Total cost of services $ 69,131 $
32,214 $ 69,741 114.6 % (0.9 %) Selling, general and administrative
Compensation 29,508 18,473 30,280 59.7 % (2.5 %) Non-Recurring
Stock Based Comp 2,410 4,151 2,603 (41.9 %)
(7.4 %) Total Compensation $ 31,918 $ 22,624 $ 32,883 41.1 % (2.9
%) Transaction expenses - - 13,692 - -
Non-compensation excl. transaction
expenses
17,382 10,863 16,731 60.0 % 3.9 % Total
selling, general and administrative $ 49,300 $ 33,487 $ 63,306 47.2
% (22.1 %) Restructuring costs 1,943 - 6,953 n/m (72.1 %)
Amortization of intangible assets 16,694 6,268 16,350 166.4 % 2.1 %
Depreciation and amortization 5,530 3,065
4,934 80.4 % 12.1 % Total operating expenses $ 142,598 $ 75,034 $
161,284 90.0 % (11.6 %) In thousands
Total non-recurring stock based comp $ 4,027 $ 6,254
$ 4,227 (35.6 %) (4.7 %) Compensation excluding non-recurring comp
78,357 39,273 80,593 99.5 % (2.8 %) Transaction expenses - - 13,692
- - Non-compensation excluding transaction expenses 36,047 20,174
34,535 78.7 % 4.4 % Restructuring charges 1,943 - 6,953 n/m (72.1
%) Amortization of intangible assets 16,694 6,268 16,350 166.4 %
2.1 % Depreciation and amortization 5,530 3,065
4,934 80.4 % 12.1 % Total operating expenses $
142,598 $ 75,034 $ 161,284 90.0 % (11.6 %)
Table 7: Additional Fiscal Year 2010 Operating Expense
Detail
Fiscal Year
Ended November 30, In thousands
2010 2009 $ Change % Change Cost of services
Compensation $ 142,485 $ 78,317 64,168 81.9 % Non-Recurring Stock
Based Comp 4,639 9,355 (4,716 ) (50.4 %) Total
Compensation $ 147,124 $ 87,672 59,452 67.8 % Non-compensation
51,502 30,993 20,508 66.2 % Total cost of services $
198,626 $ 118,665 79,961 67.4 % Selling, general and administrative
Compensation 102,144 75,501 26,643 35.3 % Non-Recurring Stock Based
Comp 7,727 17,297 (9,571 ) (55.3 %) Total
Compensation $ 109,871 $ 92,798 17,072 18.4 % Transaction expenses
21,206 - 21,206 n/m Non-compensation excl. transaction expenses
59,167 42,982 16,185 37.7 % Total selling, general
and administrative $ 190,244 $ 135,780 54,464 40.1 % Restructuring
costs 8,896 - 8,896 n/m Amortization of intangible assets 41,599
25,554 16,045 62.8 % Depreciation and amortization 17,413
11,957 5,456 45.6 % Total operating expenses $ 456,778 $
291,956 164,822 56.5 % In thousands $ Change
% Change Total non-recurring stock based comp $
12,366 $ 26,652 (14,287 ) (53.6 %) Compensation excluding
non-recurring comp 244,629 153,818 90,811 59.0 % Transaction
expenses 21,206 - 21,206 n/m Non-compensation excluding transaction
expenses 110,669 73,975 36,693 49.6 % Restructuring charges 8,896 -
8,896 n/m Amortization of intangible assets 41,599 25,554 16,045
62.8 % Depreciation and amortization 17,413 11,957
5,456 45.6 % Total operating expenses $ 456,778 $ 291,956
164,822 56.5 %
Table 8: Summary Fourth Quarter 2010 Segment
Information
Three Months Ended Fiscal Year Ended
Change from November 30, August 31, November 30, FYE
In thousands 2010 2009 2010 2010 2009 Q4 2009
11/30/2009
Revenues: Performance and Risk $ 185,032 $
118,790 $ 172,425 $ 604,307 $ 442,948 55.8% 36.4% Governance
28,286 - 30,308 58,594 - n/m n/m
Total Operating revenues $ 213,318 $
118,790 $ 202,733 $ 662,901
$ 442,948 79.6% 49.7%
Operating Income Performance and Risk 67,743 43,756 38,672
200,369 150,992 54.8% 32.7% Margin 36.6% 36.8% 22.4% 33.2% 34.1%
Governance 2,977 - 2,777 5,754 - n/m n/m Margin 10.5% 9.2% 9.8%
Total Operating Income $ 70,720 $
43,756 $ 41,449 $ 206,123
$ 150,992 61.6% 36.5% Margin 33.2%
36.8% 20.4% 31.1% 34.1%
Adjusted EBITDA Performance
and Risk 90,552 59,343 80,007 291,642 215,155 52.6% 35.5% Margin
48.9% 50.0% 46.4% 48.3% 48.6% Governance 8,362 - 7,599 15,961 - n/m
n/m Margin 29.6% 25.1% 27.2%
Total Adjusted EBITDA $
98,914 $ 59,343 $ 87,606
$ 307,603 $ 215,155 66.7%
43.0% Margin 46.4% 50.0% 43.2% 46.4% 48.6%
Table 9: Pro Forma Operating Revenues by Product
Category
Fiscal Year Ended
Change from Fourth Quarter November 30, Q4 Fiscal Year In thousands
2010
2009 1
2010 2
2009 3
2009 2009 Index and ESG products Subscriptions $ 61,143 $ 52,960 $
233,667 $ 200,781 15.5 % 16.4 % Asset-based fees 30,045
22,874 105,799 71,966
31.4 % 47.0 % Index and ESG products total 91,188 75,834 339,466
272,747 20.2 % 24.5 % Risk management analytics 57,980 50,230
214,327 196,348 15.4 % 9.2 % Portfolio management analytics 30,993
31,883 123,159 129,270 (2.8 %) (4.7 %) Energy and commodity
analytics 4,871 4,939 16,226
15,525 (1.4 %) 4.5 % Total Performance and Risk
revenues $ 185,032 $ 162,886 $ 693,178 $ 613,890 13.6 % 12.9 %
Total Governance revenues 28,286 32,376 123,241 132,419
(12.6 %) (6.9 %) Total operating revenues $ 213,318 $ 195,262
$ 816,419 $ 746,309 9.2 % 9.4 %
Subscriptions $ 176,791 $ 164,625 $ 678,968 $ 643,266 7.4 % 5.6 %
Asset-based fees 28,330 22,874 104,084 71,966 23.9 % 44.6 %
Non-recurring revenues 8,197 7,763
33,367 31,077 5.6 % 7.4 % Total operating
revenues $ 213,318 $ 195,262 $ 816,419 $ 746,309
9.2 % 9.4 % 1MSCI's fourth quarter ended November 30,
2009 and RiskMetrics' fourth quarter ended December 31, 2009
2Includes MSCI's results for the fiscal year ended November 30,
2010 and RiskMetrics' fourth quarter ended December 31, 2009 and
first quarter ended March 31, 2010. 3Includes MSCI's results for
the fiscal year ended November 30, 2009 and RiskMetrics' fiscal
year ended December 31, 2009.
Table 10: Pro Forma Operating Expense Detail
Fiscal Year Ended
Change from
Fourth Quarter November 30, Q4 Fiscal Year In thousands
2010
2009 1
2010 2
2009 3
2009 2009 Cost of services Compensation $ 48,849 $ 47,277 $ 197,417
$ 184,523 3.3 % 7.0 % Non-Recurring Stock Based Comp 1,617
2,103 4,639 9,355 (23.1
%) (50.4 %) Total Compensation $ 50,466 $ 49,380 $ 202,056 $
193,878 2.2 % 4.2 % Non-compensation 18,665 19,181
70,883 65,077 (2.7 %) 8.9 %
Total cost of services $ 69,131 $ 68,561 $ 272,939 $ 258,955 0.8 %
5.4 % Selling, general and administrative Compensation 29,508
27,675 121,722 113,805 6.6 % 7.0 % Non-Recurring Stock Based Comp
2,410 4,151 7,727 17,297
(41.9 %) (55.3 %) Total Compensation $ 31,918 $ 31,826 $
129,449 $ 131,102 0.3 % (1.3 %) Transaction expenses - - - - - -
Non-compensation excl. transaction expenses 17,382
16,535 69,841 70,323 5.1 % (0.7
%) Total selling, general and administrative $ 49,300 $ 48,361 $
199,290 $ 201,425 1.9 % (1.1 %) Restructuring costs 1,943 - 8,896 -
n/m n/m Amortization of intangible assets 16,230 18,171 64,477
73,164 (10.7 %) (11.9 %) Depreciation and amortization 5,530
5,161 21,660 20,306 7.2 %
6.7 % Total operating expenses $ 142,134 $ 140,254 $ 567,262
$ 553,850 1.3 % 2.4 % In thousands
Total non-recurring stock
based comp $ 4,027 $ 6,254 $ 12,366 $ 26,652 (35.6 %) (53.6 %)
Compensation excluding non-recurring comp 78,357 74,952 319,139
298,328 4.5 % 7.0 % Transaction expenses - - - - - -
Non-compensation excluding transaction expenses 36,047 35,716
140,724 135,400 0.9 % 3.9 % Restructuring charges 1,943 - 8,896 -
n/m n/m Amortization of intangible assets 16,230 18,171 64,477
73,164 (10.7 %) (11.9 %) Depreciation and amortization 5,530
5,161 21,660 20,306 7.2 %
6.7 % Total operating expenses $ 142,134 $ 140,254 $
567,262 $ 553,850 1.3 % 2.4 % 1MSCI's
fourth quarter ended November 30, 2009 and RiskMetrics' fourth
quarter ended December 31, 2009
2Includes MSCI's results for the fiscal
year ended November 30, 2010 and RiskMetrics' fourth quarter ended
December 31, 2009 and first quarter ended March 31, 2010.
3Includes MSCI's results for the fiscal year ended November 30,
2009 and RiskMetrics' fiscal year ended December 31, 2009.
Table 11: Pro Forma Summary Segment
Fiscal Year Ended Change from
Fourth Quarter1 November 30, Q4 Fiscal Year In thousands
2010
2009 1
2010 2
2009 3
2009 2009
Revenues: Performance and Risk $ 185,032 $
162,886 $ 693,178 $ 613,890 13.6 % 12.9 % Governance 28,286
32,376 123,241 132,419
(12.6 %) (6.9 %)
Total Operating revenues $
213,318 $ 195,262 $ 816,419
$ 746,309 9.2 % 9.4 %
Operating Income Performance and Risk 68,177 50,781
235,883 176,421 34.3 % 33.7 % Margin 36.8 % 31.2 % 34.0 % 28.7 %
Governance 3,007 4,227 13,274 16,038 (28.9 %) (17.2 %) Margin 10.6
% 2.2 % 10.8 % 2.1 %
Total Operating Income $
71,184 $ 55,008 $ 249,157
$ 192,459 29.4 % 29.5 %
Margin 33.4 % 28.2 % 30.5 % 25.8 %
Adjusted EBITDA
Performance and Risk 90,552 76,004 324,283 279,230 19.1 % 16.1 %
Margin 48.9 % 46.7 % 46.8 % 45.5 % Governance 8,362 8,590 32,273
33,351 (2.7 %) (3.2 %) Margin 29.6 % 26.5 % 26.2 % 25.2 %
Total
Adjusted EBITDA $ 98,914 $ 84,594
$ 356,556 $ 312,581 16.9
% 14.1 % Margin 46.4 % 43.3 % 43.7 % 41.9 %
1MSCI's fourth quarter ended November 30, 2009 and
RiskMetrics' fourth quarter ended December 31, 2009
2Includes MSCI's results for the fiscal
year ended November 30, 2010 and RiskMetrics' fourth quarter ended
December 31, 2009 and first quarter ended March 31, 2010.
3Includes MSCI's results for the fiscal year ended November 30,
2009 and RiskMetrics' fiscal year ended December 31, 2009.
Table 12: Key Operating Metrics1
As of or For the Quarter Ended Change from
November August November August Dollars in thousands
2010 2009 2010 2009 2010 Run Rates 2 Index and ESG products
Subscriptions $ 235,370 $ 202,785 $ 224,496 16.1 % 4.8 %
Asset-based fees 114,233 95,201
100,577 20.0 % 13.6 % Index and ESG products total 349,603
297,986 325,073 17.3 % 7.5 % Risk management analytics 235,422
197,997 224,581 18.9 % 4.8 % Portfolio management analytics 117,256
122,192 121,795 (4.0 %) (3.7 %) Energy and commodity analytics
15,330 15,365 15,254 (0.2
%) 0.5 % Total Performance and Risk Run Rate $ 717,611 $ 633,540 $
686,703 13.3 % 4.5 % Governance Run Rate 105,534
111,841 105,735 (5.6 %) (0.2 %)
Total Run Rate $ 823,145 $ 745,381 $ 792,438
10.4 % 3.9 % Subscription total 708,912 650,180 691,861 9.0
% 2.5 % Asset-based fees total 114,233 95,201
100,577 20.0 % 13.6 % Total Run Rate $ 823,145
$ 745,381 $ 792,438 10.4 % 3.9 %
Subscription Run Rate by region % Americas 53 % 51 % 53 % %
non-Americas 47 % 49 % 47 % Subscription Run Rate by client
type % Asset Management 56 % 57 % 57 % % Banking & Trading 16 %
16 % 15 % % Alternative Invt Mgmt 11 % 10 % 12 % % Asset Owners
& Consultants 9 % 9 % 9 % % Corporate 2 % 2 % 2 % % Others 5 %
5 % 5 % New Recurring Sales $ 37,284 $ 27,757 $ 34,556 34.3
% 7.9 % Subscription Cancellations (25,525 ) (28,640
) (19,113 ) (10.9 %) 33.5 % Net New Recurring Subscription
Sales $ 11,759 $ (883 ) $ 15,443 n/m (23.9 %) Non-recurring sales
11,147 8,500 6,575 31.1 % 69.5 % Employees 2,077 2,043 2,063
1.7 % 0.7 % % Employees by location High Cost Centers 70 %
77 % 72 % Low Cost Centers 30 % 23 % 28 % 1 MSCI Inc. in August and
November 2010 quarters and for combined legacy MSCI and RiskMetrics
results in prior periods. Includes addition of $13.2 million in
risk management analytics run rate as a result of Measurisk LLC
acquisition, which was completed on July 31, 2010. 2 The run rate
at a particular point in time represents the forward-looking fees
for the next 12 months from all subscriptions and investment
product licenses we currently provide to our clients under
renewable contracts assuming all contracts that come up for renewal
are renewed and assuming then-current exchange rates. For any
subscription or license whose fees are linked to an investment
product’s assets or trading volume, the run rate calculation
reflects an annualization of the most recent periodic fee earned
under such license or subscription. The run rate does not include
fees associated with “one-time” and other non-recurring
transactions. In addition, we remove from the run rate the fees
associated with any subscription or investment product license
agreement with respect to which we have received a notice of
termination or non-renewal during the period and we have determined
that such notice evidences the client's final decision to terminate
or not renew the applicable subscription or agreement, even though
the notice is not effective until a later date.
Table 13: Supplemental Operating Metrics
Recurring Subscription Sales &
Subscription Cancellations 2009 2010 February
May August November February May August
November FY 2009 FY 2010 New Recurring Subscription Sales
$24,711 $21,254 $23,469 $27,757 $30,273 $34,280 $34,556 $37,284
$97,191 $136,393 Subscription Cancellations (22,692 )
(23,712 ) (28,690 ) (28,640 ) (22,434 )
(17,495 ) (19,113 ) (25,525 ) (103,734 ) (84,567 )
Net New Recurring Subscription Sales $2,019 ($2,457 )
($5,221 ) ($883 ) $7,839 $16,785
$15,443 $11,759 ($6,543 ) $51,826
Aggregate & Core Retention Rates
2009 2010 February May August
November February May August November FY 2009
FY 2010 Aggregate Retention Rate 1 Index and ESG products 93.8 %
92.8 % 90.5 % 88.5 % 93.8 % 92.4 % 90.9 % 92.1 % 91.4 % 92.3 %
Risk management analytics 85.5 % 79.5 % 80.4 % 80.2 % 81.5 %
91.3 % 89.7 % 85.4 % 81.4 % 87.4 % Portfolio management
analytics 86.5 % 82.2 % 69.1 % 77.7 % 92.3 % 84.6 % 83.7 % 69.1 %
78.9 % 82.4 % Energy & commodity analytics 90.5 % 91.3 %
84.5 % 88.5 % 85.5 % 80.5 % 90.5 % 83.4 % 88.7 % 85.0 %
Total Performance and Risk 88.8 % 85.0
% 81.0 % 82.5 % 88.7
% 89.9 % 88.8 % 84.2
% 84.3 % 88.0 % Total
Governance 73.0 % 84.6 %
85.4 % 78.7 % 74.2 %
86.0 % 86.4 % 86.3 %
80.4 % 83.3 %
Total Aggregate Retention Rate
85.6 % 85.1 % 81.9
% 82.0 % 86.2 %
89.2 % 88.4 % 84.6
% 83.7 % 87.2 % Core
Retention Rate 2 Index and ESG products 94.0 % 93.1 % 91.2 % 89.1 %
94.5 % 92.9 % 91.2 % 92.4 % 91.9 % 92.7 % Risk management
analytics 85.5 % 81.4 % 81.0 % 81.2 % 82.9 % 92.3 % 92.0 % 85.4 %
82.3 % 88.5 % Portfolio management analytics 87.8 % 83.7 %
70.5 % 78.4 % 94.3 % 86.3 % 86.8 % 71.2 % 80.1 % 84.7 %
Energy & commodity analytics 90.6 % 91.3 % 84.5 % 89.9 % 85.5 %
80.5 % 90.5 % 83.4 % 89.1 % 85.0 %
Total Performance and
Risk 89.2 % 86.3 % 81.8
% 83.4 % 89.9 % 90.8
% 90.5 % 84.8 % 85.2
% 88.9 % Total Governance
73.0 % 84.6 % 85.4 %
78.7 % 74.2 % 86.0 %
86.4 % 86.3 % 80.4 %
83.3 %
Total Core Retention Rate
85.9 %
86.1 % 82.6 % 82.6
% 87.2 % 90.0 %
89.8 % 85.0 % 84.3
% 88.1 % 1The quarterly Aggregate
Retention Rates are calculated by annualizing the cancellations for
which we have received a notice of termination or non-renewal
during the quarter and we have determined that such notice
evidences the client’s final decision to terminate or not renew the
applicable subscription or 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 year to calculate a cancellation rate. This
cancellation rate is then subtracted from 100% to derive the
annualized Retention Rate for the quarter. The Aggregate Retention
Rate is computed on a product-by-product basis. Therefore, if a
client reduces the number of products to which it subscribes or
switches between our products, we treat it as a cancellation. In
addition, we treat any reduction in fees resulting from
renegotiated contracts as a cancellation in the calculation to the
extent of the reduction. Aggregate Retention Rates are generally
higher during the first three fiscal quarters and lower in the
fourth fiscal quarter. For the calculation of the Core Retention
Rate the same methodology is used except the amount of
cancellations in the quarter is reduced by the amount of product
swaps. 2Our Core Retention Rate is calculated similarly to our
Aggregate Retention Rate except that the Core Retention Rate does
not treat switches between our products as a cancellation.
Table 14: ETF Assets Linked to MSCI Indices1
2009 2010
In Billions February
May August November February May
August November FY 2009 FY 2010 Quarterly Average AUM
in ETFs linked to MSCI Indices $ 126.4 $ 134.7 $
180.3 $ 216.8 $ 239.3 $ 252.3 $ 252.0
$ 300.7 $ 164.5 $ 261.1 Quarter-End AUM in ETFs linked to
MSCI Indices 107.8 175.9 199.2 234.2 233.5 238.1 258.7 311.0 234.2
311.0
Sequential Change ($ Growth in Billions)
Appreciation/Depreciation $ (13.6 ) $ 42.2 $ 20.1 $ 18.0 $ (8.6 ) $
(4.4 ) $ 6.8 $ 28.2 $ 66.7 $ 22.0 Cash Inflow/ Outflow 2.4
25.9 3.2 17.0
8.3 9.0 13.8
24.1 48.5 55.2 Total Change
$
(11.2 ) $ 68.1 $
23.3 $ 35.0 $ (0.3
) $ 4.6 $
20.6 $ 52.3 $ 115.2
$ 77.2 1Our ETF assets under management
calculation methodology is ETF net asset value (NAV) multiplied by
shares outstanding. The numbers in the tables are presented on this
basis beginning with the February 2010 quarter. Periods prior to
the February 2010 quarter have not been restated and are therefore
not directly comparable. Source: Bloomberg and MSCI
Table 15: Reconciliation of Adjusted EBITDA to Net
Income
Three Months Ended November 30, 2010 Three Months
Ended November 30, 2009
Performance
and Risk
Governance Total
Performance
and Risk
Governance Total
Net Income $
30,266 $ 24,535 Plus: Other expense
(income), net 19,641 4,103 Plus: Provision for income taxes
20,813 15,118
Operating income $ 67,743 $ 2,977
$ 70,720 $ 43,756 $ -
$ 43,756 Plus: Non-recurring stock based comp 4,027 - 4,027
6,254 - 6,254 Plus: Transaction costs - - - - - - Plus:
Depreciation and amortization 4,797 733 5,530 3,065 - 3,065 Plus:
Amortization of intangible assets 13,344 3,350 16,694 6,268 - 6,268
Plus: Restructuring costs 641 1,302 1,943 - -
-
Adjusted EBITDA $ 90,552 $
8,362 $ 98,914 $ 59,343 $ -
$ 59,343 Fiscal Year
Ended November 30, 2010 Fiscal Year Ended November 30, 2009
Performance
and Risk
Governance Total
Performance
and Risk
Governance Total
Net Income $ 92,170
$ 81,801 Plus: Other expense (income), net 52,632 19,271
Plus: Provision for income taxes 61,321
49,920
Operating income $
200,369 $ 5,754 $ 206,123 $
150,992 $ - $ 150,992 Plus:
Non-recurring stock based comp 12,366 - 12,366 26,652 - 26,652
Plus: Transaction costs 21,206 - 21,206 - - - Plus: Depreciation
and amortization 16,129 1,284 17,413 11,957 - 11,957 Plus:
Amortization of intangible assets 34,899 6,700 41,599 25,554 -
25,554 Plus: Restructuring costs 6,673 2,223 8,896 -
- -
Adjusted EBITDA $ 291,642
$ 15,961 $ 307,603 $ 215,155
$ - $ 215,155
Table 16: Reconciliation of Pro Forma Adjusted EBITDA to Pro
Forma Net Income
Three Months Ended November 30, 2010 Three Months
Ended November 30, 2009
Performance
and Risk
Governance Total
Performance
and Risk
Governance Total
Net Income
$ 30,557 $ 23,703 Plus:
Other expense (income), net 19,340 17,553 Plus: Provision for
income taxes 21,287
13,752
Operating income $
68,177 $ 3,007 $
71,184 $ 50,781 $ 4,227
$ 55,008 Plus: Non-recurring stock based comp
4,027 - 4,027 6,254 - 6,254 Plus: Transaction costs - - - - - -
Plus: Depreciation and amortization 4,797 733 5,530 4,148 1,013
5,161 Plus: Amortization of intangible assets 12,910 3,320 16,230
14,821 3,350 18,171 Plus: Restructuring costs 641
1,302 1,943 - -
-
Adjusted EBITDA $ 90,552
$ 8,362 $ 98,914 $
76,004 $ 8,590 $
84,594 Fiscal Year Ended November 30, 2010
Fiscal Year Ended November 30, 2009
Performance
and Risk
Governance Total
Performance
and Risk
Governance Total
Net Income $
110,831 $ 79,852 Plus: Other expense (income),
net 71,430 67,744 Plus: Provision for income taxes
66,896
44,863
Operating income $ 235,883
$ 13,274 $ 249,157 $
176,421 $ 16,038 $
192,459 Plus: Non-recurring stock based comp 12,366 - 12,366
26,652 - 26,652 Plus: Transaction costs - - - - - - Plus:
Depreciation and amortization 18,224 3,436 21,660 16,393 3,913
20,306 Plus: Amortization of intangible assets 51,137 13,340 64,477
59,764 13,400 73,164 Plus: Restructuring costs 6,673
2,223 8,896 - -
-
Adjusted EBITDA $ 324,283
$ 32,273 $ 356,556 $
279,230 $ 33,351 $
312,581
Table 17: Reconciliation of Adjusted Net Income and Adjusted
EPS to Net Income and EPS
Three Months Ended
Fiscal Year Ended November 30, August 31, November 30, 2010
2009 2010 2010 2009 GAAP - Net income $ 30,266 $ 24,535 $ 10,319 $
92,170 $ 81,801 Plus: Non-recurring stock based comp 4,027 6,254
4,227 12,366 26,652 Plus: Amortization of intangible assets 16,694
6,268 16,350 41,599 25,554 Plus: Transaction costs1 - - 14,526
22,040 - Plus: Debt repayment expenses - - 1,994 8,274 - Plus:
Restructuring costs $ 1,943 - 6,953 $ 8,896 - Less: Income tax
effect2 (8,610 ) (4,771 ) (13,880 )
(31,015 ) (19,786 )
Adjusted net income $
44,320 $ 32,286 $
40,489 $ 154,330 $
114,221 GAAP - EPS $ 0.25 $ 0.24 $ 0.08 $ 0.81
$ 0.80 Plus: Non-recurring stock based comp 0.03 0.06 0.03 0.11
0.26 Plus: Amortization of intangible assets 0.14 0.06 0.13 0.36
0.25 Plus: Transaction costs1 0.00 0.00 0.12 0.19 0.00 Plus: Debt
repayment expenses 0.00 0.00 0.02 0.07 0.00 Plus: Restructuring
costs 0.02 0.00 0.06 0.08 0.00 Less: Income tax effect2
(0.08 ) (0.05 ) (0.11 ) (0.27 ) (0.19 )
Adjusted EPS $ 0.36 $
0.31
$
0.33 $ 1.35 $ 1.12
1For the third quarter of 2010, includes $13.7
million in third party transaction expense included in SG&A
expense and $0.8 million of expense included in interest expense.
For the fiscal year 2010, includes $21.2 million in third party
transaction expense included in SG&A expense and $0.8 million
of expense included in interest expense 2For the purposes of
calculating Adjusted EPS, non-recurring stock based compensation,
amortization of intangible assets, debt repayment expenses, and
restructuring costs are assumed to be taxed at the effective tax
rate excluding transaction costs. For the fourth quarter and fiscal
year 2010, the rates are 39.9% and 37.4%, respectively. For the
fourth quarter and fiscal year 2009, the rates are 38.1% and 37.9%,
respectively.
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