UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
DC 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date
of Report (Date of earliest event reported):
July 31, 2014
MSCI
Inc.
(Exact
name of registrant as specified in its charter)
Delaware
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001-33812
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13-4038723
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(State or other jurisdiction
of incorporation)
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(Commission File Number)
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(IRS Employer
Identification No.)
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7
World Trade Center, 250 Greenwich St, 49th
Floor, New York, NY 10007
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(Address
of principal executive offices)
(Zip Code)
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(212)
804-3900
(Registrant’s
telephone number, including area code)
NOT
APPLICABLE
(Former
name or former address, if changed since last report)
Check the
appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any
of the following provisions (see General Instruction A.2. below):
⃞
Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
⃞
Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
⃞
Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
⃞
Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
Item 2.02 Results of Operations and Financial Condition.
On July 31, 2014, MSCI Inc. (the “Registrant”) released financial
information with respect to its second quarter ended June 30, 2014. A
copy of the press release containing this information is furnished as
Exhibit 99.1 and the related investor presentation, which will be
presented by the Registrant’s management during its conference call on
Thursday, July 31, 2014 at 11:00 a.m. Eastern Time, is furnished as
Exhibit 99.2 to this Current Report on Form 8-K (the “Report”).
The Registrant’s press release and the related investor presentation
contain certain non-GAAP financial measures. Reconciliations of these
non-GAAP financial measures to the comparable GAAP financial measures
are also contained in Exhibits 99.1 and 99.2.
The information furnished under Item 2.02 of this Report, including
Exhibits 99.1 and 99.2, shall not be deemed “filed” for purposes of
Section 18 of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), or otherwise subject to the liabilities of that
section, nor shall it be deemed incorporated by reference into any
filing under the Securities Act of 1933, as amended, or the Exchange
Act, except as shall be expressly set forth by specific reference in
such filing.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
Exhibit No.
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Description
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Exhibit 99.1
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Press Release of the Registrant, dated July 31, 2014, containing
financial information for the second quarter ended June 30, 2014.
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Exhibit 99.2
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Second Quarter 2014 Earnings Presentation, dated July 31, 2014.
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SIGNATURE
Pursuant to
the requirements of the Exchange Act, the Registrant has duly caused
this report to be signed on its behalf by the undersigned hereunto duly
authorized.
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MSCI Inc.
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Date: July 31, 2014
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By:
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/s/ Henry A. Fernandez
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Name:
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Henry A. Fernandez
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Title:
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Chief Executive Officer, President and Chairman
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Exhibit Index
Exhibit No.
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Description
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99.1
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Press Release of the Registrant, dated July 31, 2014, containing
financial information for the second quarter ended June 30, 2014.
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99.2
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Second Quarter Earnings Presentation, dated July 31, 2014.
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Exhibit 99.1
MSCI Inc.
Reports Financial Results for the Second Quarter and First Six Months of
2014
NEW YORK--(BUSINESS WIRE)--July 31, 2014--MSCI Inc. (NYSE:MSCI), a
leading global provider of investment decision support tools, including
indexes and portfolio risk and performance analytics products and
services, today announced results for the second quarter and six months
ended June 30, 2014. As a result of the sale of Institutional
Shareholder Services Inc. (“ISS”), results of MSCI’s former Governance
business are reflected as discontinued operations in its financial
statements. Financial results and operating metrics presented below and
in the accompanying tables have been restated to reflect this
classification.
(Note: Percentage changes are referenced to the comparable period in
2013, unless otherwise noted.)
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Operating revenues increased 11.3% to $254.2 million for second
quarter 2014 and 10.3% to $493.9 million for six months 2014.
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Income from continuing operations increased 1.2% to $56.8 million
for second quarter 2014. For six months 2014, income from continuing
operations decreased 4.7% to $103.9 million.
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Diluted EPS from continuing operations for second quarter 2014
increased 4.3% to $0.48. Diluted EPS from continuing operations for
six months 2014 declined 1.1% to $0.88.
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Net income rose 76.3% to $107.7 million for second quarter 2014.
For six months 2014, net income rose 56.7% to $188.1 million and
included a net gain of $78.7 million related to the sale of ISS.
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Adjusted EBITDA1 was $105.9 million for second quarter
2014, essentially unchanged from second quarter 2013. For six months
2014, Adjusted EBITDA declined 0.8% to $202.5 million.
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Adjusted EPS2 increased 5.8% to $0.55 for second quarter
2014. Adjusted EPS for six months 2014 decreased 1.0% to $1.01.
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Run Rate grew 12.0% to $986.5 million for second quarter
2014, driven by asset-based fee growth of 34.0% and subscription
growth of 8.1%.
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Adjusted EBITDA expense for the full year 2014 is now expected to
be in the range of $595 million to $605 million and includes the
impact of the acquisition of GMI Ratings.
“MSCI reported another strong quarter. I am pleased that the investments
we are making in new products are having a direct effect on our growth.
Our Run Rate grew by 12%, driven by strong growth in asset-based fees
and a modest acceleration in subscription Run Rate,” said Henry A.
Fernandez, Chairman and CEO.
“All of our clients – asset owners, managers and traders – are demanding
tools that help them build better portfolios and manage the risks in
those portfolios. In response to clients’ needs, we have stepped up our
investments in new product development and client service and are
broadening our distribution channels. We intend to increase our level of
investment in both 2014 and 2015. Among other priorities, we will extend
our ESG offering through the acquisition of GMI, strengthen our market
leadership in factor indexes, deepen our relationships with our largest
clients, and enhance our technology platforms,” Mr. Fernandez concluded.
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Table 1: MSCI Inc. Selected Financial Information (unaudited)
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Three Months Ended
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Change from
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Six Months Ended
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Change From
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In thousands, except per share data
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June 30, 2014
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June 30, 2013
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June 30, 2013
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June 30, 2014
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June 30, 2013
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June 30, 2013
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Operating revenues
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$
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254,226
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$
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228,423
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11.3
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%
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$
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493,914
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$
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447,892
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10.3
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%
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Operating expenses
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165,695
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138,534
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19.6
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%
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325,878
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275,112
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18.5
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%
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Income from continuing operations
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56,803
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56,141
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1.2
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%
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103,949
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109,099
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(4.7
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%)
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% Margin from continuing operations
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22.3
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%
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24.6
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%
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21.0
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%
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24.4
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%
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Net Income
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107,660
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61,053
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76.3
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%
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188,059
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119,990
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56.7
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%
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Diluted EPS from continuing operations
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$
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0.48
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$
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0.46
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4.3
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%
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$
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0.88
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$
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0.89
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(1.1
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%)
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Diluted EPS
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$
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0.91
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$
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0.50
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82.0
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%
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$
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1.59
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$
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0.98
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62.2
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%
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Adjusted EPS2
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$
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0.55
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$
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0.52
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5.8
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%
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$
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1.01
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$
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1.02
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(1.0
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%)
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Adjusted EBITDA1
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$
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105,894
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$
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105,520
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0.4
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%
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$
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202,497
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$
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204,174
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(0.8
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%)
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% Margin
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41.7
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%
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46.2
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%
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41.0
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%
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45.6
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%
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1
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Net Income before income from discontinued operations, net of
income taxes, provision for income taxes, other expense (income),
net, depreciation and amortization and the lease exit charge. See
Table 11 titled "Reconciliation of Adjusted EBITDA to Net Income
(unaudited)" and information about the use of non-GAAP financial
information provided under "Notes Regarding the Use of Non-GAAP
Financial Measures."
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2
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Per share net income before income from discontinued operations,
net of income taxes, and the after-tax impact of the amortization
of intangible assets and the lease exit charge. See Table 12
titled "Reconciliation of Adjusted Net Income and Adjusted EPS to
Net Income and EPS (unaudited)" and information about the use of
non-GAAP financial information provided under "Notes Regarding the
Use of Non-GAAP Financial Measures."
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Summary of Results for Second Quarter 2014 Compared to Second Quarter
2013
Operating Revenues – See Table 4
Operating revenues for the three months ended June 30, 2014 (“second
quarter 2014”) increased $25.8 million, or 11.3%, to $254.2 million
compared to $228.4 million for the three months ended June 30, 2013
(“second quarter 2013”). Second quarter 2014 recurring subscription
revenues rose $18.9 million, or 10.2%, to $205.3 million, asset-based
fees increased $7.1 million, or 19.3%, to $44.1 million and
non-recurring revenues fell $0.3 million to $4.9 million.
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Index and ESG products: Index and ESG product revenues
increased $18.1 million, or 13.7%, to $150.3 million. Subscription
revenues grew by $11.0 million, or 11.5%, to $106.2 million, driven by
growth in revenues from equity index benchmark, real estate and ESG
products. Relative to first quarter 2014, Index and ESG products
revenues benefited from the seasonal strength in revenues from real
estate products, which rose $5.4 million sequentially. Revenues from
real estate products are expected to decline sequentially in both the
third and fourth quarters as part of the same seasonal trend.
Revenues
attributable to equity index asset-based fees rose $7.1 million, or
19.3%, to $44.1 million. The increase was primarily driven by an
increase of $35.5 billion, or 11.0%, in average assets under
management (“AUM”) in ETFs linked to MSCI indexes and a growth in
assets from non-ETF passive funds. The growth rate of asset-based fee
revenues relative to the growth in AUM also benefited from a shift in
the product mix toward higher fee products that resulted from the
transition of certain Vanguard ETFs away from MSCI benchmarks during
second quarter 2013.
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Risk management analytics: Revenues related to risk management
analytics products increased $7.5 million, or 10.7%, to $77.7 million,
driven by higher revenues from RiskManager and BarraOne products and
the timing of client implementations. Also contributing to the
increase were higher revenues from hedge fund transparency products
and InvestorForce.
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Portfolio management analytics: Revenues related to portfolio
management analytics products rose by $0.2 million, or 0.8%, to $26.3
million.
Operating Expenses – See Table 6
Total operating expenses from continuing operations rose $27.2 million,
or 19.6%, to $165.7 million from second quarter 2013. Much of the
increase in MSCI’s operating expenses was the result of its ongoing
investment program.
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Compensation costs: Total compensation costs rose $15.1
million, or 17.2%, to $102.7 million for second quarter 2014, driven
by an increase in overall headcount of 17.7%. Employees located in
emerging market centers represent 49% of the workforce, up from 43% at
the end of second quarter 2013.
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Non-compensation costs excluding depreciation and amortization: Non-compensation
costs rose $10.7 million, or 30.7%, to $45.6 million for second
quarter 2014 primarily reflecting increases in information technology,
professional services, occupancy and recruiting costs, among other
items.
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Depreciation and amortization: Amortization of intangible
assets totaled $11.4 million for second quarter 2014, an increase of
2.0% compared to second quarter 2013. Depreciation and amortization of
property, equipment and leasehold improvements rose $1.1 million, or
24.0%, to $5.9 million, primarily reflecting higher depreciation
associated with investment in information technology infrastructure.
Other Expense (Income), Net
Other expense (income), net for second quarter 2014 was $4.4 million, a
decline of $1.5 million from second quarter 2013, driven primarily by
lower interest expense associated with lower interest rates and
indebtedness.
Provision for Income Taxes – Continuing Operations
The provision for income tax expense was $27.3 million for second
quarter 2014, compared with $27.8 million for second quarter 2013. The
effective tax rate for second quarter 2014 was 32.4% versus 33.1% a year
ago.
Income and Earnings per Share from Continuing Operations – See Table
12
Income from continuing operations increased $0.7 million, or 1.2%, to
$56.8 million for second quarter 2014. Diluted EPS from continuing
operations was $0.48, up $0.02, or 4.3%, primarily as the result of a
3.6% decline in weighted average shares outstanding.
Adjusted Net Income, which excludes the after-tax impact of discontinued
operations, amortization of intangible assets and the lease exit charge,
increased $1.2 million, or 1.9%, to $64.6 million. Adjusted EPS, which
excludes the after-tax, per diluted share impact of discontinued
operations, the amortization of intangible assets and the lease exit
charge, increased $0.03, or 5.8%, to $0.55.
See Table 12 titled “Reconciliation of Adjusted Net Income and Adjusted
EPS to Net Income and EPS (unaudited)” and “Notes Regarding the Use of
Non-GAAP Financial Measures” below.
Adjusted EBITDA – See Table 11
Adjusted EBITDA, which excludes income from discontinued operations, net
of income taxes, provision for income taxes, other expense (income),
net, depreciation and amortization, and the lease exit charge was $105.9
million, essentially unchanged from second quarter 2013. The Adjusted
EBITDA margin declined to 41.7% from 46.2%.
See Table 11 titled “Reconciliation of Adjusted EBITDA to Net Income
(unaudited)” and “Notes Regarding the Use of Non-GAAP Financial
Measures” below.
Sale of ISS and Discontinued Operations
On April 30, 2014, MSCI completed the sale of ISS to Vestar Capital
Partners for cash consideration of $367.4 million. The ISS business,
previously referred to as the Governance segment but excluding the
impact of allocated costs remaining with MSCI, is reflected as
discontinued operations in MSCI’s financial statements. Prior periods
have been updated to reflect this categorization. Income from
discontinued operations, net of income taxes, was $50.9 million for
second quarter 2014. This compares with income from discontinued
operations, net of income taxes of $4.9 million for second quarter 2013.
Second quarter 2014 income included a net gain of $48.1 million
resulting from the sale of ISS.
Net Income and Earnings per Share
Net income was $107.7 million for second quarter 2014, up 76.3% from
$61.1 million for second quarter 2013. Diluted EPS was $0.91 for second
quarter 2014, up from $0.50 for second quarter 2013. The increase was
driven by the net gain from the sale of ISS of $48.1 million in second
quarter 2014.
Share Repurchase Activity
During second quarter 2014, MSCI took delivery of 0.6 million of its
shares, settling the $100.0 million accelerated share repurchase ("ASR")
agreement into which it had entered on February 6, 2014. MSCI
repurchased a total of 2.3 million shares as part of the February 2014
ASR and 7.7 million shares as part of the three ASRs it has completed
since December 2012.
Key Operating Metrics – See Tables 8, 9, 10
Total
Run Rate grew by $105.6 million, or 12.0%, to $986.5 million as of June
30, 2014 compared to June 30, 2013. Total subscription Run Rate grew by
$60.8 million, or 8.1%, to $810.0 million as of June 30, 2014 compared
to June 30, 2013. Changes in foreign currency rates increased Run Rate
by $7.2 million versus June 30, 2013.
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Index and ESG products: Total Index and ESG Run Rate grew by
$87.9 million, or 18.2%, to $570.4 million. Index and ESG subscription
Run Rate grew by $43.0 million, or 12.3%, to $393.8 million, driven
primarily by growth in equity index benchmark and data products and
aided by strong growth in real estate and ESG products. Changes in
foreign currency benefited Run Rate by $3.8 million versus June 30,
2013.
Run Rate attributable to asset-based fees rose $44.8
million, or 34.0%, to $176.6 million. The increase was primarily
driven by higher inflows into ETFs linked to MSCI indexes and, to a
lesser extent, higher market performance.
As of June 30, 2014,
AUM in ETFs linked to MSCI indexes were $378.7 billion, an increase of
$109.0 billion, or 40.4%, from June 30, 2013 and up $37.9 billion, or
11.1%, from March 31, 2014. Of that $37.9 billion sequential increase,
net inflows added $22.7 billion and market gains accounted for $15.2
billion.
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Risk management analytics: Risk management analytics Run Rate
increased $15.8 million, or 5.4%, to $309.6 million, driven by strong
growth from RiskManager products. Changes in foreign currency
positively benefited Run Rate by $3.2 million versus June 30, 2013.
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Portfolio management analytics: Run Rate related to portfolio
management analytics products increased $2.0 million, or 1.9%, to
$106.5 million, driven by an increase in sales of equity analytics
products and higher retention rates. Changes in foreign currency rates
had only a modest impact on Run Rate versus the prior year.
Summary of Results for Six Months Ended June 30, 2014
Compared
to Six Months Ended June 30, 2013
Operating Revenues – See Table 5
Operating revenues for the six months ended June 30, 2014 (“six months
2014”) increased $46.0 million, or 10.3%, to $493.9 million compared to
$447.9 million for the six months ended June 30, 2013 (“six months
2013”). Recurring subscription revenues for six months 2014 rose $34.2
million, or 9.4%, to $400.2 million, asset-based fees increased $11.5
million, or 15.7%, to $85.0 million and non-recurring revenues rose $0.3
million to $8.7 million.
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Index and ESG products: Index and ESG product revenues
increased $34.9 million, or 13.8%, to $288.5 million. Subscription
revenues grew by $23.4 million, or 13.0%, to $203.5 million, driven
primarily by growth in revenues from equity index benchmark products.
Index and ESG product revenues also benefited from the strong growth
of asset-based fee revenues, which increased by $11.5 million, or
15.7%, to $85.0 million.
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Risk management analytics: Revenues related to risk management
analytics products, increased $12.7 million, or 9.0%, to $153.2
million, primarily driven by higher revenues from RiskManager and
BarraOne products.
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Portfolio management analytics: Revenues related to portfolio
management analytics products declined $1.6 million, or 2.9%, to $52.2
million as a result of lower sales of equity analytics products in
prior periods and lower fixed income analytics revenues.
Operating Expenses – See Table 7
Total operating expenses from continuing operations rose $50.8 million,
or 18.5%, to $325.9 million from six months 2013.
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Compensation costs: Total compensation costs rose $27.7
million, or 15.6%, to $205.1 million for six months 2014, driven by an
increase in overall headcount of 17.7%.
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Non-compensation costs excluding depreciation and amortization: Non-compensation
costs rose $20.3 million, or 30.8%, to $86.3 million for six months
2014 primarily reflecting increases in professional services,
information technology, occupancy, recruiting, marketing and market
data fees.
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Depreciation and amortization: Amortization of intangible
assets totaled $22.7 million for six months 2014, an increase of 1.4%
compared to six months 2013. Depreciation and amortization of
property, equipment and leasehold improvements rose $2.4 million to
$11.7 million, primarily reflecting higher depreciation associated
with investments in our information technology infrastructure.
Other Expense (Income), Net
Other expense (income), net for six months 2014 was $10.4 million, a
decline of $4.3 million from six months 2013, driven primarily by lower
interest expense associated with lower interest rates and indebtedness.
Provision for Income Taxes – Continuing Operations
The provision for income tax expense was $53.7 million for six months
2014, compared with $49.0 million for six months 2013. The effective tax
rate for six months 2014 was 34.0% versus 31.0% a year ago.
Income and Earnings per Share from Continuing Operations – See Table
12
Income from continuing operations fell $5.2 million, or 4.7%, to $103.9
million for six months 2014. Diluted EPS from continuing operations was
$0.88, down $0.01, or 1.1%, primarily as the result of a 3.1% decline in
weighted average shares outstanding.
Adjusted Net Income, which excludes the after-tax impact of discontinued
operations, amortization of intangible assets and the lease exit charge,
fell $5.4 million, or 4.3%, to $118.9 million. Adjusted EPS, which
excludes the after-tax, per diluted share impact of discontinued
operations, the amortization of intangible assets and the lease exit
charge, fell $0.01, or 1.0%, to $1.01.
See Table 12 titled “Reconciliation of Adjusted Net Income and Adjusted
EPS to Net Income and EPS (unaudited)” and “Notes Regarding the Use of
Non-GAAP Financial Measures” below.
Adjusted EBITDA – See Table 11
Adjusted EBITDA, which excludes income from discontinued operations, net
of income taxes, provision for income taxes, other expense (income),
net, depreciation and amortization and the lease exit charge, was $202.5
million, down $1.7 million from six months 2013. The Adjusted EBITDA
margin declined to 41.0% from 45.6%.
See Table 11 titled “Reconciliation of Adjusted EBITDA to Net Income
(unaudited)” and “Notes Regarding the Use of Non-GAAP Financial
Measures” below.
Sale of ISS and Discontinued Operations
Income from discontinued operations, net of income taxes, was $84.1
million for six months 2014. This compares with income from discontinued
operations, net of income taxes of $10.9 million for six months 2013.
Six months 2014 income included a net gain of $78.7 million associated
with the sale of ISS.
Net Income and Earnings per Share
Net income was $188.1 million for six months 2014, up 56.7% from $120.0
million for six months 2013. Diluted EPS was $1.59 for six months 2014,
up from $0.98 for six months 2013. The increase was driven by the net
gain on the sale of ISS, partially offset by the decline in income from
continuing operations.
Acquisition of GMI Ratings
On June 27, 2014, MSCI announced that it planned to acquire GMI Ratings,
a provider of ESG ratings and research to institutional investors, for a
total cash consideration of $15 million. The deal is expected to close
during the third quarter of 2014, subject to customary closing
conditions.
Business Outlook
The following forward-looking statements reflect MSCI's expectations as
of today's date. Given the number of risk factors, uncertainties and
assumptions discussed below, actual results may differ materially from
those presented. The Company does not intend to update its
forward-looking statements until its next quarterly results
announcement, other than in publicly available statements.
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Full year 2014 Adjusted EBITDA expenses, which include all operating
expenses except amortization of intangible assets and depreciation and
amortization of property, equipment and leasehold improvements, are
expected to be in the range of $595 million to $605 million. The prior
guidance was for 2014 Adjusted EBITDA expenses to be in the range of
$569 million to $582 million. The revised guidance includes the impact
of the acquisition of GMI Ratings, as well as higher spending in other
areas. (See Table 13 titled “Reconciliation of Adjusted EBITDA
Expenses to Operating Expenses (unaudited)” and “Notes Regarding the
Use of Non-GAAP Financial Measures”.)
-
The effective tax rate for full year 2014 is expected to be
approximately 36%.
-
Full year 2014 capital expenditures, including software
capitalization, are expected to be in the range of $50 million to $55
million. The previous range was $45 million to $55 million.
-
Full year 2014 cash flow from operations is expected to be in the
range of $275 million to $325 million.
Conference Call Information
Investors will have the opportunity to listen to MSCI Inc.'s senior
management review second quarter 2014 results on Thursday, July 31, 2014
at 11:00 am Eastern Time. To listen to 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 August 2, 2014. To listen to the
recording, visit http://ir.msci.com/events.cfm, or dial
1-800-585-8367 (passcode: 73815772) within the United States.
International callers dial 1-404-537-3406 (passcode: 73815772).
About MSCI
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 and portfolio
risk and performance analytics.
For equity investors, MSCI’s flagship performance and risk tools
include: the MSCI indexes with over $9 trillion estimated to be
benchmarked to them on a worldwide basis1; Barra factor
models, portfolio risk and performance analytics; and ESG
(environmental, social and governance) Research screening, analysis and
ratings. MSCI is also a leading provider of multi-asset class risk
management tools including RiskMetrics multi-asset class market and
credit risk analytics and Barra multi-asset class factor models,
portfolio risk and performance analytics to investors in multi-asset
class portfolios. MSCI also provides IPD real estate information,
indexes and analytics for investors in and managers of commercial real
estate. MSCI also offers FEA valuation models and risk management
software for the energy and commodities markets. MSCI is headquartered
in New York, with research and commercial offices around the world.
MSCI#IR
1As of March 31, 2014, as reported on June 25, 2014
by eVestment, Lipper and Bloomberg
For further information on MSCI, please visit our website at www.msci.com
Forward-Looking Statements
This earnings release may contain forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. 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 December 31, 2013 filed
with the Securities and Exchange Commission (“SEC”) on February 28,
2014, 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 MSCI projected. Any
forward-looking statement in this 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 website and corporate Twitter account (@MSCI_Inc) as
channels of distribution of company information. The information we post
through these channels may be deemed material. Accordingly, investors
should monitor these channels, in addition to following our 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 Alert Subscription” section at http://ir.msci.com/alerts.cfm.
The contents of MSCI’s website and social media channels are not,
however, incorporated by reference into this earnings release.
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 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 income from discontinued
operations, net of income taxes, provision for income taxes, other
expense (income), net, depreciation and amortization and the lease exit
charge.
Adjusted Net Income and Adjusted EPS are defined as net income and EPS,
respectively, before income from discontinued operations, net of income
taxes, and the after-tax impact of the amortization of intangible assets
and the lease exit charge.
Adjusted EBITDA expenses represent operating expenses, less depreciation
and amortization and the lease exit charge.
We believe that adjusting for depreciation and amortization 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
these items. Additionally, we believe that adjusting for income from
discontinued operations, net of income tax, provides investors with a
meaningful trend of results for our continuing operations. Finally, we
believe that adjusting for one time and non-recurring expenses such as
the lease exit charge is useful to management and investors because it
allows for an evaluation of MSCI’s underlying operating performance. 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 EBITDA expenses, 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. Condensed Consolidated Statements of Income
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
In thousands, except per share data
|
|
|
June 30, 2014
|
|
|
June 30, 2013
|
|
|
March 31, 2014
|
|
|
June 30, 2014
|
|
|
June 30, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenues
|
|
|
$
|
254,226
|
|
|
|
$
|
228,423
|
|
|
|
$
|
239,688
|
|
|
|
$
|
493,914
|
|
|
|
$
|
447,892
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of services
|
|
|
|
76,816
|
|
|
|
|
69,696
|
|
|
|
|
75,427
|
|
|
|
|
152,243
|
|
|
|
|
134,996
|
|
Selling, general and administrative
|
|
|
|
71,516
|
|
|
|
|
52,842
|
|
|
|
|
67,658
|
|
|
|
|
139,174
|
|
|
|
|
108,357
|
|
Amortization of intangible assets
|
|
|
|
11,442
|
|
|
|
|
11,222
|
|
|
|
|
11,270
|
|
|
|
|
22,712
|
|
|
|
|
22,388
|
|
Depreciation and amortization of property,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
equipment and leasehold improvements
|
|
|
|
5,921
|
|
|
|
|
4,774
|
|
|
|
|
5,828
|
|
|
|
|
11,749
|
|
|
|
|
9,371
|
|
Total operating expenses
|
|
|
$
|
165,695
|
|
|
|
$
|
138,534
|
|
|
|
$
|
160,183
|
|
|
|
$
|
325,878
|
|
|
|
$
|
275,112
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
$
|
88,531
|
|
|
|
$
|
89,889
|
|
|
|
$
|
79,505
|
|
|
|
$
|
168,036
|
|
|
|
$
|
172,780
|
|
Operating margin
|
|
|
|
34.8
|
%
|
|
|
|
39.4
|
%
|
|
|
|
33.2
|
%
|
|
|
|
34.0
|
%
|
|
|
|
38.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
|
(192
|
)
|
|
|
|
(186
|
)
|
|
|
|
(156
|
)
|
|
|
|
(348
|
)
|
|
|
|
(423
|
)
|
Interest expense
|
|
|
|
5,366
|
|
|
|
|
6,499
|
|
|
|
|
5,059
|
|
|
|
|
10,425
|
|
|
|
|
13,515
|
|
Other expense (income)
|
|
|
|
(726
|
)
|
|
|
|
(328
|
)
|
|
|
|
1,071
|
|
|
|
|
345
|
|
|
|
|
1,594
|
|
Other expenses (income), net
|
|
|
$
|
4,448
|
|
|
|
$
|
5,985
|
|
|
|
$
|
5,974
|
|
|
|
$
|
10,422
|
|
|
|
$
|
14,686
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
provision for income taxes
|
|
|
|
84,083
|
|
|
|
|
83,904
|
|
|
|
|
73,531
|
|
|
|
|
157,614
|
|
|
|
|
158,094
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes
|
|
|
|
27,280
|
|
|
|
|
27,763
|
|
|
|
|
26,385
|
|
|
|
|
53,665
|
|
|
|
|
48,995
|
|
Income from continuing operations
|
|
|
$
|
56,803
|
|
|
|
$
|
56,141
|
|
|
|
$
|
47,146
|
|
|
|
$
|
103,949
|
|
|
|
$
|
109,099
|
|
Income from continuing operations margin
|
|
|
|
22.3
|
%
|
|
|
|
24.6
|
%
|
|
|
|
19.7
|
%
|
|
|
|
21.0
|
%
|
|
|
|
24.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations, net of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
income taxes
|
|
|
$
|
50,857
|
|
|
|
$
|
4,912
|
|
|
|
$
|
33,253
|
|
|
|
$
|
84,110
|
|
|
|
$
|
10,891
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
|
$
|
107,660
|
|
|
|
$
|
61,053
|
|
|
|
$
|
80,399
|
|
|
|
$
|
188,059
|
|
|
|
$
|
119,990
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per basic common share from:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
|
$
|
0.48
|
|
|
|
$
|
0.46
|
|
|
|
$
|
0.40
|
|
|
|
$
|
0.89
|
|
|
|
$
|
0.90
|
|
Discontinued operations
|
|
|
|
0.44
|
|
|
|
|
0.04
|
|
|
|
|
0.28
|
|
|
|
|
0.71
|
|
|
|
|
0.09
|
|
Earnings per basic common share
|
|
|
$
|
0.92
|
|
|
|
$
|
0.50
|
|
|
|
$
|
0.68
|
|
|
|
$
|
1.60
|
|
|
|
$
|
0.99
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per diluted common share from:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
|
$
|
0.48
|
|
|
|
$
|
0.46
|
|
|
|
$
|
0.40
|
|
|
|
$
|
0.88
|
|
|
|
$
|
0.89
|
|
Discontinued operations
|
|
|
|
0.43
|
|
|
|
|
0.04
|
|
|
|
|
0.28
|
|
|
|
|
0.71
|
|
|
|
|
0.09
|
|
Earnings per diluted common share
|
|
|
$
|
0.91
|
|
|
|
$
|
0.50
|
|
|
|
$
|
0.68
|
|
|
|
$
|
1.59
|
|
|
|
$
|
0.98
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding used
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
in computing earnings per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
116,702
|
|
|
|
|
121,149
|
|
|
|
|
117,582
|
|
|
|
|
117,140
|
|
|
|
|
120,949
|
|
Diluted
|
|
|
|
117,664
|
|
|
|
|
122,069
|
|
|
|
|
118,597
|
|
|
|
|
118,128
|
|
|
|
|
121,887
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Table 3: MSCI Inc. Selected Balance Sheet Items (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
In thousands
|
|
|
|
|
June 30, 2014
|
|
|
March 31, 2014
|
|
|
June 30, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
|
|
$
|
683,239
|
|
|
$
|
260,450
|
|
|
$
|
334,701
|
Accounts receivable, net of allowances
|
|
|
|
|
|
213,432
|
|
|
|
191,905
|
|
|
|
160,101
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred revenue
|
|
|
|
|
$
|
323,963
|
|
|
$
|
314,247
|
|
|
$
|
347,470
|
Current maturities of long-term debt
|
|
|
|
|
|
19,778
|
|
|
|
19,775
|
|
|
|
43,118
|
Long-term debt, net of current maturities
|
|
|
|
|
|
778,119
|
|
|
|
783,065
|
|
|
|
775,072
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Table 4: Quarterly Operating Revenues by Product Category and
Revenue Type (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
% Change from
|
In thousands
|
|
|
|
June 30, 2014
|
|
|
June 30, 2013
|
|
|
March 31, 2014
|
|
|
June 30, 2013
|
|
|
March 31, 2014
|
Index and ESG products
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subscriptions
|
|
|
|
$
|
106,162
|
|
|
$
|
95,200
|
|
|
$
|
97,343
|
|
|
11.5
|
%
|
|
|
9.1
|
%
|
Asset-based fees
|
|
|
|
|
44,095
|
|
|
|
36,970
|
|
|
|
40,900
|
|
|
19.3
|
%
|
|
|
7.8
|
%
|
Index and ESG products total
|
|
|
|
|
150,257
|
|
|
|
132,170
|
|
|
|
138,243
|
|
|
13.7
|
%
|
|
|
8.7
|
%
|
Risk management analytics
|
|
|
|
|
77,666
|
|
|
|
70,164
|
|
|
|
75,580
|
|
|
10.7
|
%
|
|
|
2.8
|
%
|
Portfolio management analytics
|
|
|
|
|
26,303
|
|
|
|
26,089
|
|
|
|
25,865
|
|
|
0.8
|
%
|
|
|
1.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating revenues
|
|
|
|
$
|
254,226
|
|
|
$
|
228,423
|
|
|
$
|
239,688
|
|
|
11.3
|
%
|
|
|
6.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recurring subscriptions
|
|
|
|
$
|
205,265
|
|
|
$
|
186,333
|
|
|
$
|
194,972
|
|
|
10.2
|
%
|
|
|
5.3
|
%
|
Asset-based fees
|
|
|
|
|
44,095
|
|
|
|
36,970
|
|
|
|
40,900
|
|
|
19.3
|
%
|
|
|
7.8
|
%
|
Non-recurring revenue
|
|
|
|
|
4,866
|
|
|
|
5,120
|
|
|
|
3,816
|
|
|
(5.0
|
%)
|
|
|
27.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating revenues
|
|
|
|
$
|
254,226
|
|
|
$
|
228,423
|
|
|
$
|
239,688
|
|
|
11.3
|
%
|
|
|
6.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Table 5: Six Months Operating Revenues by Product Category and
Revenue Type (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
% Change from
|
In thousands
|
|
|
|
June 30, 2014
|
|
|
June 30, 2013
|
|
|
June 30, 2013
|
Index and ESG products
|
|
|
|
|
|
|
|
|
|
|
Subscriptions
|
|
|
|
$
|
203,505
|
|
|
$
|
180,088
|
|
|
13.0
|
%
|
Asset-based fees
|
|
|
|
|
84,995
|
|
|
|
73,485
|
|
|
15.7
|
%
|
Index and ESG products total
|
|
|
|
|
288,500
|
|
|
|
253,573
|
|
|
13.8
|
%
|
Risk management analytics
|
|
|
|
|
153,246
|
|
|
|
140,584
|
|
|
9.0
|
%
|
Portfolio management analytics
|
|
|
|
|
52,168
|
|
|
|
53,735
|
|
|
(2.9
|
%)
|
|
|
|
|
|
|
|
|
|
|
|
Total operating revenues
|
|
|
|
$
|
493,914
|
|
|
$
|
447,892
|
|
|
10.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Recurring subscriptions
|
|
|
|
|
400,237
|
|
|
|
365,996
|
|
|
9.4
|
%
|
Asset-based fees
|
|
|
|
|
84,995
|
|
|
|
73,485
|
|
|
15.7
|
%
|
Non-recurring revenue
|
|
|
|
|
8,682
|
|
|
|
8,411
|
|
|
3.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Total operating revenues
|
|
|
|
$
|
493,914
|
|
|
$
|
447,892
|
|
|
10.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Table 6: Quarterly Operating Expense Detail (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
% Change from
|
In thousands
|
|
|
|
June 30, 2014
|
|
|
June 30, 2013
|
|
|
March 31, 2014
|
|
|
June 30, 2013
|
|
|
March 31, 2014
|
Cost of services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation
|
|
|
|
$
|
56,668
|
|
|
$
|
51,669
|
|
|
|
$
|
56,282
|
|
|
9.7
|
%
|
|
|
0.7
|
%
|
Non-Compensation
|
|
|
|
|
20,148
|
|
|
|
18,170
|
|
|
|
|
19,145
|
|
|
10.9
|
%
|
|
|
5.2
|
%
|
Lease exit charge1
|
|
|
|
|
-
|
|
|
|
(143
|
)
|
|
|
|
-
|
|
|
n/m
|
|
|
|
n/m
|
|
Total non-compensation
|
|
|
|
|
20,148
|
|
|
|
18,027
|
|
|
|
|
19,145
|
|
|
11.8
|
%
|
|
|
5.2
|
%
|
Total cost of services
|
|
|
|
$
|
76,816
|
|
|
$
|
69,696
|
|
|
|
$
|
75,427
|
|
|
10.2
|
%
|
|
|
1.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation
|
|
|
|
$
|
46,015
|
|
|
$
|
35,951
|
|
|
|
$
|
46,133
|
|
|
28.0
|
%
|
|
|
(0.3
|
%)
|
Non-Compensation
|
|
|
|
|
25,501
|
|
|
|
17,113
|
|
|
|
|
21,525
|
|
|
49.0
|
%
|
|
|
18.5
|
%
|
Lease exit charge1
|
|
|
|
|
-
|
|
|
|
(222
|
)
|
|
|
|
-
|
|
|
n/m
|
|
|
|
n/m
|
|
Total non-compensation
|
|
|
|
|
25,501
|
|
|
|
16,891
|
|
|
|
|
21,525
|
|
|
51.0
|
%
|
|
|
18.5
|
%
|
Total selling, general and administrative
|
|
|
|
$
|
71,516
|
|
|
$
|
52,842
|
|
|
|
$
|
67,658
|
|
|
35.3
|
%
|
|
|
5.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of intangible assets
|
|
|
|
|
11,442
|
|
|
|
11,222
|
|
|
|
|
11,270
|
|
|
2.0
|
%
|
|
|
1.5
|
%
|
Depreciation and amortization of property,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
equipment and leasehold improvements
|
|
|
|
|
5,921
|
|
|
|
4,774
|
|
|
|
|
5,828
|
|
|
24.0
|
%
|
|
|
1.6
|
%
|
Total operating expenses
|
|
|
|
$
|
165,695
|
|
|
$
|
138,534
|
|
|
|
$
|
160,183
|
|
|
19.6
|
%
|
|
|
3.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation
|
|
|
|
$
|
102,683
|
|
|
$
|
87,620
|
|
|
|
$
|
102,415
|
|
|
17.2
|
%
|
|
|
0.3
|
%
|
Non-Compensation
|
|
|
|
|
45,649
|
|
|
|
35,283
|
|
|
|
|
40,670
|
|
|
29.4
|
%
|
|
|
12.2
|
%
|
Lease exit charge1
|
|
|
|
|
-
|
|
|
|
(365
|
)
|
|
|
|
-
|
|
|
|
|
|
|
Amortization of intangible assets
|
|
|
|
|
11,442
|
|
|
|
11,222
|
|
|
|
|
11,270
|
|
|
2.0
|
%
|
|
|
1.5
|
%
|
Depreciation and amortization of property,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
equipment and leasehold improvements
|
|
|
|
|
5,921
|
|
|
|
4,774
|
|
|
|
|
5,828
|
|
|
24.0
|
%
|
|
|
1.6
|
%
|
Total operation expenses
|
|
|
|
$
|
165,695
|
|
|
$
|
138,534
|
|
|
|
$
|
160,183
|
|
|
19.6
|
%
|
|
|
3.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
n/m = not meaningful
|
1
|
|
Second quarter 2013 included a benefit of $0.4 million associated
with an occupancy lease exit charge resulting from the
consolidation of MSCI's New York offices.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Table 7: Six Months Operating Expense Detail (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
% Change from
|
In thousands
|
|
|
|
|
June 30, 2014
|
|
|
June 30, 2013
|
|
|
June 30, 2014
|
Cost of services
|
|
|
|
|
|
|
|
|
|
|
|
Compensation
|
|
|
|
|
$
|
112,950
|
|
|
$
|
101,073
|
|
|
|
11.8
|
%
|
Non-compensation
|
|
|
|
|
|
39,293
|
|
|
|
34,066
|
|
|
|
15.3
|
%
|
Lease exit charge1
|
|
|
|
|
|
-
|
|
|
|
(143
|
)
|
|
|
n/m
|
|
Total non-compensation
|
|
|
|
|
|
39,293
|
|
|
|
33,923
|
|
|
|
15.8
|
%
|
Total cost of services
|
|
|
|
|
$
|
152,243
|
|
|
$
|
134,996
|
|
|
|
12.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative
|
|
|
|
|
|
|
|
|
|
|
|
Compensation
|
|
|
|
|
$
|
92,148
|
|
|
$
|
76,301
|
|
|
|
20.8
|
%
|
Non-compensation
|
|
|
|
|
|
47,026
|
|
|
|
32,278
|
|
|
|
45.7
|
%
|
Lease exit charge1
|
|
|
|
|
|
-
|
|
|
|
(222
|
)
|
|
|
n/m
|
|
Total non-compensation
|
|
|
|
|
|
47,026
|
|
|
|
32,056
|
|
|
|
46.7
|
%
|
Total selling, general and administrative
|
|
|
|
|
$
|
139,174
|
|
|
$
|
108,357
|
|
|
|
28.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of intangible assets
|
|
|
|
|
|
22,712
|
|
|
|
22,388
|
|
|
|
1.4
|
%
|
Depreciation and amortization of property, equipment and leasehold
improvements
|
|
|
|
|
|
11,749
|
|
|
|
9,371
|
|
|
|
25.4
|
%
|
Total operating expenses
|
|
|
|
|
$
|
325,878
|
|
|
$
|
275,112
|
|
|
|
18.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation
|
|
|
|
|
$
|
205,098
|
|
|
$
|
177,374
|
|
|
|
15.6
|
%
|
Non-compensation expenses
|
|
|
|
|
|
86,319
|
|
|
|
66,344
|
|
|
|
30.1
|
%
|
Lease exit charge1
|
|
|
|
|
|
-
|
|
|
|
(365
|
)
|
|
|
n/m
|
|
Amortization of intangible assets
|
|
|
|
|
|
22,712
|
|
|
|
22,388
|
|
|
|
1.4
|
%
|
Depreciation and amortization of property, equipment and leasehold
improvements
|
|
|
|
|
|
11,749
|
|
|
|
9,371
|
|
|
|
25.4
|
%
|
Total operation expenses
|
|
|
|
|
$
|
325,878
|
|
|
$
|
275,112
|
|
|
|
18.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
n/m = not meaningful
|
1
|
|
Six months 2013 included a benefit of $0.4 million associated with
an occupancy lease exit charge resulting from the consolidation of
MSCI's New York offices.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Table 8: Key Operating Metrics (unaudited)1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
% Change from
|
Dollars in thousands
|
|
|
June 30, 2014
|
|
|
June 30, 2013
|
|
|
March 31, 2014
|
|
|
June 30, 2013
|
|
|
March 31, 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Run Rates2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Index and ESG products
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subscription
|
|
|
$
|
393,848
|
|
|
|
$
|
350,833
|
|
|
|
$
|
382,383
|
|
|
|
12.3
|
%
|
|
|
3.0
|
%
|
Asset-based fees
|
|
|
|
176,554
|
|
|
|
|
131,716
|
|
|
|
|
161,882
|
|
|
|
34.0
|
%
|
|
|
9.1
|
%
|
Index and ESG products total
|
|
|
|
570,402
|
|
|
|
|
482,549
|
|
|
|
|
544,265
|
|
|
|
18.2
|
%
|
|
|
4.8
|
%
|
Risk management analytics
|
|
|
|
309,619
|
|
|
|
|
293,816
|
|
|
|
|
307,460
|
|
|
|
5.4
|
%
|
|
|
0.7
|
%
|
Portfolio management analytics
|
|
|
|
106,486
|
|
|
|
|
104,524
|
|
|
|
|
103,531
|
|
|
|
1.9
|
%
|
|
|
2.9
|
%
|
Total
|
|
|
|
986,507
|
|
|
|
|
880,889
|
|
|
|
|
955,256
|
|
|
|
12.0
|
%
|
|
|
3.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subscription total
|
|
|
$
|
809,953
|
|
|
|
$
|
749,173
|
|
|
|
$
|
793,374
|
|
|
|
8.1
|
%
|
|
|
2.1
|
%
|
Asset-based fees total
|
|
|
|
176,554
|
|
|
|
|
131,716
|
|
|
|
|
161,882
|
|
|
|
34.0
|
%
|
|
|
9.1
|
%
|
Total Run Rate
|
|
|
$
|
986,507
|
|
|
|
$
|
880,889
|
|
|
|
$
|
955,256
|
|
|
|
12.0
|
%
|
|
|
3.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New Recurring Subscription Sales
|
|
|
$
|
29,078
|
|
|
|
$
|
27,526
|
|
|
|
$
|
30,422
|
|
|
|
5.6
|
%
|
|
|
(4.4
|
%)
|
Subscription Cancellations
|
|
|
|
(13,173
|
)
|
|
|
|
(14,154
|
)
|
|
|
|
(13,978
|
)
|
|
|
(6.9
|
%)
|
|
|
(5.8
|
%)
|
Net New Recurring Subscription Sales
|
|
|
$
|
15,905
|
|
|
|
$
|
13,372
|
|
|
|
$
|
16,444
|
|
|
|
18.9
|
%
|
|
|
(3.3
|
%)
|
Non-recurring sales
|
|
|
$
|
5,671
|
|
|
|
$
|
5,714
|
|
|
|
$
|
4,798
|
|
|
|
(0.8
|
%)
|
|
|
18.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employees
|
|
|
|
2,762
|
|
|
|
|
2,346
|
|
|
|
|
2,623
|
|
|
|
17.7
|
%
|
|
|
5.3
|
%
|
% Employees by location
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Developed Market Centers
|
|
|
|
51
|
%
|
|
|
|
57
|
%
|
|
|
|
53
|
%
|
|
|
|
|
|
|
Emerging Market Centers
|
|
|
|
49
|
%
|
|
|
|
43
|
%
|
|
|
|
47
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
Operating metrics have been restated for previous periods to solely
reflect continuing operations.
|
2
|
|
The Run Rate at a particular point in time represents the
forward-looking revenues for the next 12 months from all
subscriptions and investment product licenses we currently provide
to our clients under renewable contracts or agreements assuming
all contracts or agreements that come up for renewal are renewed
and assuming then-current currency exchange rates. For any license
where fees are linked to an investment product’s assets or trading
volume, the Run Rate calculation reflects, for ETF fees, the
market value on the last trading day of the period, and for
non-ETF funds and futures and options, 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
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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Table 9: ETF Assets Linked to MSCI Indexes1 (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended 2013
|
|
|
Three Months Ended 2014
|
|
|
Six Months Ended
|
In Billions
|
|
|
March
|
|
June
|
|
September
|
|
December
|
|
|
March
|
|
June
|
|
|
June 2013
|
|
June 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning Period AUM in ETFs linked to MSCI Indexes
|
|
|
$
|
402.3
|
|
|
$
|
357.3
|
|
|
$
|
269.7
|
|
$
|
302.6
|
|
|
$
|
332.9
|
|
$
|
340.8
|
|
|
$
|
402.3
|
|
|
$
|
332.9
|
Cash Inflow/Outflow2
|
|
|
|
(61.0
|
)
|
|
|
(74.4
|
)
|
|
|
12.7
|
|
|
19.4
|
|
|
|
6.6
|
|
|
22.7
|
|
|
|
(135.4
|
)
|
|
|
29.3
|
Appreciation/Depreciation
|
|
|
|
16.0
|
|
|
|
(13.2
|
)
|
|
|
20.2
|
|
|
10.9
|
|
|
|
1.3
|
|
|
15.2
|
|
|
|
2.8
|
|
|
|
16.5
|
Period End AUM in ETFs linked to MSCI Indexes
|
|
|
$
|
357.3
|
|
|
$
|
269.7
|
|
|
$
|
302.6
|
|
$
|
332.9
|
|
|
$
|
340.8
|
|
$
|
378.7
|
|
|
$
|
269.7
|
|
|
$
|
378.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period Average AUM in ETFs linked to MSCI Indexes
|
|
|
$
|
369.0
|
|
|
$
|
324.1
|
|
|
$
|
286.2
|
|
$
|
321.5
|
|
|
$
|
330.8
|
|
$
|
359.6
|
|
|
$
|
346.6
|
|
|
$
|
345.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
ETF assets under management calculation methodology is ETF net asset
value multiplied by shares outstanding. Source: Bloomberg and MSCI
|
2
|
|
Cash Inflow/Outflow for the first and second quarter of 2013
includes the migration of $82.8 billion of AUM in 9 Vanguard ETFs
and $74.8 billion of AUM in 13 Vanguard ETFs, respectively, that
transitioned to other indexes during each quarter.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Table 10: Supplemental Operating Metrics (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales & Cancellations
|
|
|
|
Three Months Ended 2013
|
|
|
Three Months Ended 2014
|
|
|
Six Months Ended
|
In thousands
|
|
|
March
|
|
June
|
|
September
|
|
December
|
|
|
March
|
|
June
|
|
|
June 2013
|
|
June 2014
|
New Recurring Subscription Sales
|
|
|
$
|
25,676
|
|
|
$
|
27,526
|
|
|
$
|
26,697
|
|
|
$
|
31,082
|
|
|
|
$
|
30,422
|
|
|
$
|
29,078
|
|
|
|
$
|
53,202
|
|
|
$
|
59,500
|
|
Subscription Cancellations
|
|
|
|
(13,995
|
)
|
|
|
(14,154
|
)
|
|
|
(13,345
|
)
|
|
|
(21,077
|
)
|
|
|
|
(13,978
|
)
|
|
|
(13,173
|
)
|
|
|
|
(28,149
|
)
|
|
|
(27,151
|
)
|
Net New Recurring Subscription Sales
|
|
|
$
|
11,681
|
|
|
$
|
13,372
|
|
|
$
|
13,352
|
|
|
$
|
10,005
|
|
|
|
$
|
16,444
|
|
|
$
|
15,905
|
|
|
|
$
|
25,053
|
|
|
$
|
32,349
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-recurring sales
|
|
|
|
5,117
|
|
|
|
5,714
|
|
|
|
2,970
|
|
|
|
4,107
|
|
|
|
|
4,798
|
|
|
|
5,671
|
|
|
|
|
10,831
|
|
|
|
10,469
|
|
Total Sales
|
|
|
$
|
30,793
|
|
|
$
|
33,240
|
|
|
$
|
29,667
|
|
|
$
|
35,189
|
|
|
|
$
|
35,220
|
|
|
$
|
34,749
|
|
|
|
$
|
64,033
|
|
|
$
|
69,969
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate & Core Retention Rates
|
|
|
|
Three Months Ended 2013
|
|
|
Three Months Ended 2014
|
|
|
Six Months Ended
|
|
|
|
March
|
|
June
|
|
September
|
|
December
|
|
|
March
|
|
June
|
|
|
June 2013
|
|
June 2014
|
Aggregate Retention Rate1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Index and ESG products
|
|
|
|
95.0
|
%
|
|
|
94.0
|
%
|
|
|
94.7
|
%
|
|
|
90.7
|
%
|
|
|
|
94.9
|
%
|
|
|
94.1
|
%
|
|
|
|
94.5
|
%
|
|
|
94.5
|
%
|
Risk management analytics
|
|
|
|
93.4
|
%
|
|
|
92.2
|
%
|
|
|
91.7
|
%
|
|
|
85.7
|
%
|
|
|
|
91.0
|
%
|
|
|
91.6
|
%
|
|
|
|
92.8
|
%
|
|
|
91.3
|
%
|
Portfolio management analytics
|
|
|
|
81.7
|
%
|
|
|
87.0
|
%
|
|
|
89.1
|
%
|
|
|
88.9
|
%
|
|
|
|
90.6
|
%
|
|
|
94.8
|
%
|
|
|
|
84.3
|
%
|
|
|
92.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Aggregate Retention Rate
|
|
|
|
92.4
|
%
|
|
|
92.3
|
%
|
|
|
92.7
|
%
|
|
|
88.5
|
%
|
|
|
|
92.8
|
%
|
|
|
93.2
|
%
|
|
|
|
92.3
|
%
|
|
|
93.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Core Retention Rate1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Index and ESG products
|
|
|
|
95.0
|
%
|
|
|
94.1
|
%
|
|
|
94.8
|
%
|
|
|
90.9
|
%
|
|
|
|
94.9
|
%
|
|
|
94.1
|
%
|
|
|
|
94.6
|
%
|
|
|
94.5
|
%
|
Risk management analytics
|
|
|
|
93.7
|
%
|
|
|
92.8
|
%
|
|
|
91.7
|
%
|
|
|
85.8
|
%
|
|
|
|
91.0
|
%
|
|
|
91.6
|
%
|
|
|
|
93.3
|
%
|
|
|
91.3
|
%
|
Portfolio management analytics
|
|
|
|
82.8
|
%
|
|
|
87.5
|
%
|
|
|
90.3
|
%
|
|
|
90.1
|
%
|
|
|
|
93.4
|
%
|
|
|
95.8
|
%
|
|
|
|
85.1
|
%
|
|
|
94.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Core Retention Rate
|
|
|
|
92.7
|
%
|
|
|
92.6
|
%
|
|
|
92.9
|
%
|
|
|
88.8
|
%
|
|
|
|
93.2
|
%
|
|
|
93.3
|
%
|
|
|
|
92.6
|
%
|
|
|
93.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
The Aggregate Retention Rates for a period are calculated by
annualizing the cancellations for which we have received a notice of
termination or we believe there is an intention to not renew during
the 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 year to calculate a
cancellation rate. This cancellation rate is then subtracted from
100% to derive the annualized Aggregate Retention Rate for the
period. 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. For the calculation
of the Core Retention Rate, the same methodology is used except the
cancellations in the period are reduced by the amount of product
swaps.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Table 11: Reconciliation of Adjusted EBITDA to Net Income
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
In thousands
|
|
|
June 30, 2014
|
|
|
June 30, 2013
|
|
|
March 31, 2014
|
|
|
June 30, 2014
|
|
|
June 30, 2013
|
Net Income
|
|
|
$
|
107,660
|
|
|
|
$
|
61,053
|
|
|
|
$
|
80,399
|
|
|
|
$
|
188,059
|
|
|
|
$
|
119,990
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Income from discontinued operations, net of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
income taxes
|
|
|
$
|
(50,857
|
)
|
|
|
$
|
(4,912
|
)
|
|
|
$
|
(33,253
|
)
|
|
|
$
|
(84,110
|
)
|
|
|
$
|
(10,891
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
|
$
|
56,803
|
|
|
|
$
|
56,141
|
|
|
|
$
|
47,146
|
|
|
|
$
|
103,949
|
|
|
|
$
|
109,099
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plus: Provision for income taxes
|
|
|
|
27,280
|
|
|
|
|
27,763
|
|
|
|
|
26,385
|
|
|
|
|
53,665
|
|
|
|
|
48,995
|
|
Plus: Other expense (income), net
|
|
|
|
4,448
|
|
|
|
|
5,985
|
|
|
|
|
5,974
|
|
|
|
|
10,422
|
|
|
|
|
14,686
|
|
Operating income
|
|
|
$
|
88,531
|
|
|
|
$
|
89,889
|
|
|
|
$
|
79,505
|
|
|
|
$
|
168,036
|
|
|
|
$
|
172,780
|
|
Plus: Depreciation and amortization of property,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
equipment and leasehold improvements
|
|
|
|
5,921
|
|
|
|
|
4,774
|
|
|
|
|
5,828
|
|
|
|
|
11,749
|
|
|
|
|
9,371
|
|
Plus: Amortization of intangible assets
|
|
|
|
11,442
|
|
|
|
|
11,222
|
|
|
|
|
11,270
|
|
|
|
|
22,712
|
|
|
|
|
22,388
|
|
Plus: Lease exit charge
|
|
|
|
-
|
|
|
|
|
(365
|
)
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
(365
|
)
|
Adjusted EBITDA
|
|
|
$
|
105,894
|
|
|
|
$
|
105,520
|
|
|
|
$
|
96,603
|
|
|
|
$
|
202,497
|
|
|
|
$
|
204,174
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Table 12: Reconciliation of Adjusted Net Income and Adjusted
EPS to Net Income and EPS (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
In thousands, except per share data
|
|
|
June 30, 2014
|
|
|
June 30, 2013
|
|
|
March 31, 2014
|
|
|
June 30, 2014
|
|
|
June 30, 2013
|
Net Income
|
|
|
$
|
107,660
|
|
|
|
$
|
61,053
|
|
|
|
$
|
80,399
|
|
|
|
$
|
188,059
|
|
|
|
$
|
119,990
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Income from discontinued operations, net of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
income taxes
|
|
|
$
|
(50,857
|
)
|
|
|
$
|
(4,912
|
)
|
|
|
$
|
(33,253
|
)
|
|
|
$
|
(84,110
|
)
|
|
|
$
|
(10,891
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
|
$
|
56,803
|
|
|
|
$
|
56,141
|
|
|
|
$
|
47,146
|
|
|
|
$
|
103,949
|
|
|
|
$
|
109,099
|
|
Plus: Amortization of intangible assets
|
|
|
|
11,442
|
|
|
|
|
11,222
|
|
|
|
|
11,270
|
|
|
|
|
22,712
|
|
|
|
|
22,388
|
|
Plus: Lease exit charge
|
|
|
|
-
|
|
|
|
|
(365
|
)
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
(365
|
)
|
Less: Income tax effect
|
|
|
|
(3,689
|
)
|
|
|
|
(3,629
|
)
|
|
|
|
(4,044
|
)
|
|
|
|
(7,733
|
)
|
|
|
|
(6,825
|
)
|
Adjusted net income
|
|
|
$
|
64,556
|
|
|
|
$
|
63,369
|
|
|
|
$
|
54,372
|
|
|
|
$
|
118,928
|
|
|
|
$
|
124,297
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS
|
|
|
$
|
0.91
|
|
|
|
$
|
0.50
|
|
|
|
$
|
0.68
|
|
|
|
$
|
1.59
|
|
|
|
$
|
0.98
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Earnings per diluted common share from
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
discontinued operations
|
|
|
|
(0.43
|
)
|
|
|
|
(0.04
|
)
|
|
|
|
(0.28
|
)
|
|
|
|
(0.71
|
)
|
|
|
|
(0.09
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per diluted common share from
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
continuing operations
|
|
|
|
0.48
|
|
|
|
|
0.46
|
|
|
|
|
0.40
|
|
|
|
|
0.88
|
|
|
|
|
0.89
|
|
Plus: Amortization of intangible assets
|
|
|
|
0.10
|
|
|
|
|
0.09
|
|
|
|
|
0.09
|
|
|
|
|
0.19
|
|
|
|
|
0.18
|
|
Plus: Lease exit charge
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
Less: Income tax effect
|
|
|
|
(0.03
|
)
|
|
|
|
(0.03
|
)
|
|
|
|
(0.03
|
)
|
|
|
|
(0.06
|
)
|
|
|
|
(0.05
|
)
|
Adjusted EPS
|
|
|
$
|
0.55
|
|
|
|
$
|
0.52
|
|
|
|
$
|
0.46
|
|
|
|
$
|
1.01
|
|
|
|
$
|
1.02
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Table 13: Reconciliation of Adjusted EBITDA Expenses to
Operating Expenses (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
Full Year
|
In thousands
|
|
|
June 30, 2014
|
|
|
June 30, 2013
|
|
|
March 31, 2014
|
|
|
June 30, 2014
|
|
|
June 30, 2013
|
|
|
2014 Outlook
|
Total operating expenses
|
|
|
$
|
165,695
|
|
|
$
|
138,534
|
|
|
|
$
|
160,183
|
|
|
$
|
325,878
|
|
|
$
|
275,112
|
|
|
|
$
|
665,000 - $677,000
|
Less: Depreciation and amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of property, equipment and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
leasehold improvements, and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of intangible assets
|
|
|
|
17,363
|
|
|
|
15,996
|
|
|
|
|
17,098
|
|
|
|
34,461
|
|
|
|
31,759
|
|
|
|
|
70,000 - 72,000
|
Less: Lease exit charge
|
|
|
|
-
|
|
|
|
(365
|
)
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(365
|
)
|
|
|
|
-
|
Adjusted EBITDA expenses
|
|
|
$
|
148,332
|
|
|
$
|
122,903
|
|
|
|
$
|
143,085
|
|
|
$
|
291,417
|
|
|
$
|
243,718
|
|
|
|
$
|
595,000 - $605,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONTACT:
MSCI Inc.:
MSCI, New York
W. Edings Thibault, +
1-212-804-5273
or
Media Inquiries:
MSCI, London
Jo Morgan, +
44-20-7618-2224
or
MSCI, New York
Kristin Meza, + 1-212-804-5330
or
MHP
Communications, London
Sally Todd | Christian Pickel
+
44-20-3128-8100
Exhibit 99.2
2014 MSCI Inc. All rights
reserved. msci.com msci.com Second Quarter 2014 Earnings Presentation
July 31, 2014
2014 MSCI Inc. All rights
reserved. msci.com 2 msci.com Forward-Looking Statements and Other
Information Forward-Looking Statements – Safe Harbor Statements This
presentation may contain forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995. You should not
place undue reliance on forwardlooking 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. For a
discussion of risks and uncertainties that could materially affect
actual results, levels of activity, performance or achievements, please
see the Company’s Annual Report on Form 10-K for the fiscal year ended
December 31, 2013 and its other reports filed with the SEC. Any
forward-looking statements included in this presentation reflect the
Company’s view as of the date of the presentation. The Company 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. Other
Information Percentage changes and totals in this presentation may not
sum due to rounding. Percentage changes are referenced to the comparable
period in 2013, unless otherwise noted. Total sales include recurring
subscription sales and non-recurring sales. Definitions of Run Rate and
Retention Rate provided on page 15. Due to the Institutional Shareholder
Services Inc. sale, results of our former Governance business are now
reflected as discontinued operations in the financial statements of MSCI
in the current quarter and for prior periods. The operating metrics for
prior periods have also been updated to exclude the Governance
business.We have historically reported the financial results and
operating metrics for Energy an Commodity products on a standalone
basis. Beginning with Q1’14, these results and metrics have been
included in the risk management and analytics products. Prior periods
have been updated accordingly.2
2014 MSCI Inc. All rights
reserved. msci.com Summary of Second Quarter 2014 Financial Results
Summary Financial Results Operating revenues increased 11% to $254
million Income from continuing operations increased 1% to $57 million
Net Income rose 76% to $108 million Adjusted EBITDA1 was essentially
unchanged from first quarter at $106 million Diluted EPS from continuing
operations increased $0.02 to $0.48 and Adjusted EPS2 increased $0.03 to
$0.55 Strong Operating Results Run Rate grew 12% to $987 million –
subscription Run Rate grew 8% Retention rates rose to 93% Positive Run
Rate growth in all three product lines Investment Plan Well Underway
Total Adjusted EBITDA expenses3 rose 21% to $148 million Additional
investments planned for 2014 and 2015 Completed sale of ISS for net cash
proceeds of $363 million Net gain of $79 million in H1’14, of which $48
million was recorded in Q2’14 1 Net income before income from
discontinued operations, net of income taxes, provision for income
taxes, other expense (income), net, depreciation and amortization, and
the lease exit charge. Please see page 17 for reconciliation. 2 Adjusted
EPS is calculated as diluted EPS before income from discontinued
operations, net of income taxes, and the after-tax impact of the
amortization of intangible assets and the lease exit charge. Please see
page 16 for reconciliation. 3 Adjusted EBITDA expenses represent
operating expenses, less depreciation and amortization and the lease
exit charge. Please see page 18 for a reconciliation. 3
2014 MSCI Inc. All rights
reserved. msci.com 4 Breakdown of Q2’13 vs Q2’14 Revenue Growth (Dollars
in millions) Year-over-Year Change in Revenues by Type Year-over-Year
Change in Revenues by Product $228.4 $254.2 $18.9 $7.1 ($0.3 ) $200 $210
$220 $230 $240 $250 $260 Q2'13 revenue Subscription revenue Asset-based
fees Non-recurring revenue Q2'14 revenue $228.4 $254.2 $18.1 $7.5 $0.2
$200 $210 $220 $230 $240 $250 $260 Q2'13 revenue Index & ESG Risk
Management Analytics Portfolio Management Analytics Q2'14 revenue 4
2014 MSCI Inc. All rights
reserved. msci.com 5 Summary of Second Quarter 2014 Operating Metrics
MSCI Total Run Rate Total Sales and Retention Run Rate grew YoY by 12%
to $987 million Subscription Run Rate grew by 8% Asset-based fee Run
Rate growth of 34% $7 million currency benefit YoY but minimal
sequential impact Total sales of $35 million, up 5% Sales growth in
Index and ESG and PMA offset decline in RMA Recurring subscription sales
up 6% from Q2’13 Aggregate retention rate improved to 93% in Q2’14 Gains
in PMA retention rate drove the increase (Dollars in millions) $749 $810
$132 $177 $881 $987 $500 $600 $700 $800 $900 $1,000 Q2'13 Q2'14
Subscription ABF Subscription RR Growth: + 8 % ABF RR Growth: + 34 %
Q2'13 Q2'14 % Chg H1'13 H1'14 % Chg Recurring Subscription Sales 28 $ 29
$ 6% 53 $ 60 $ 12% Non-Recurring Sales 6 6 -1% 11 10 -3% Total Sales 33
$ 35 $ 5% 64 $ 70 $ 9% Aggregate Retention 92% 93% 1% 92% 93% 1% 5
2014 MSCI Inc. All rights
reserved. msci.com 6 Index and ESG Run Rate and Revenues Second Quarter
Highlights: Revenues grew 14% to $150 million Subscription revenues grew
by 12% Seasonally strong revenues from realestate products – expected to
decline in Q3’14 Run Rate grew by 18% YoY to $570 million Subscription
Run Rate grew by 12% Asset-based fee Run Rate rose 34% ESG growth
continues to be strong Growth consistent across regions Total sales
growth of 14% Driven by index benchmark products Aggregate Retention
Rate strong at 94% in Q2’14 Index and ESG Sales and Retention (Dollars
in millions) Index and ESG Products Q2'13 Q2'14 % Chg H1'13 H1'14 % Chg
Total Sales $18 $21 14% $35 $40 14% Aggregate Retention 94% 94% 0% 95%
95% 0% $351 $394 $132 $177 $483 $570 $- $100 $200 $300 $400 $500 $600
$700 Q2'13 Q2'14 Run Rate $95 $106 $37 $44 $132 $150 $- $20 $40 $60 $80
$100 $120 $140 $160 Q2'13 Q2'14 Revenue 6
2014 MSCI Inc. All rights
reserved. msci.com 7 Asset-Based Fees ABF Revenues versus ETF AUM
MSCI-Linked ETF AUM by Market Exposure Second Quarter Highlights:
Revenues grew 19% to $44 million Benefited from strong inflows into ETFs
and increases in non-ETF passive funds Asset-based fee Run Rate rose 34%
to $177 million, and rose 9% from Q1’14 3.5 average basis point fee at
quarter-end Total ETF AUM increased by 40% to $379 billion at the end of
Q2’14 $109 billion change comprised of inflows of $61 billion and market
appreciation of $48 billion 75 ETFs1 based on MSCI indexes launched in
H1’14 Greater than one third of total industry launches 31 new launches
in Q2’14 AUM of $379 billion as of June 30, 2014 Source: Bloomberg $270
$379 $100 $150 $200 $250 $300 $350 $400 $450 ETF AUM M M BN $37 $44 $15
$20 $25 $30 $35 $40 $45 $50 ABF Revenues Q2'13 Q2'14 BN (in millions)
(in billions) M 1 Defined as each share class of an exchange traded
fund, as identified by a separate Bloomberg ticker. Only primary
listings, and not crosslistings are counted. 7
2014 MSCI Inc. All rights
reserved. msci.com 8 Risk Management Analytics Risk Management Analytics
Run Rate and Revenues Second Quarter Highlights: Revenues grew by 11% to
$78 million Revenue growth aided by timing of newcontract
implementations Run Rate grew by 5% YoY to $310 million Growth strongest
with asset owners and asset managers Total sales of $10 million in
Q2’14, down 18% from Q2’13 Total sales up slightly for H1’14 Aggregate
Retention Rate remained strong at 92% for Q2’14 Risk Management
Analytics Sales and Retention (Dollars in millions) $294 $70 $310 $78 $-
$50 $100 $150 $200 $250 $300 $350 Run Rate Revenues Q2'13 Q2'14 Q2'13
Q2'14 % Chg H1'13 H1'14 % Chg Total Sales $12 $10 -18% $23 $23 1%
Aggregate Retention 92% 92% 0% 93% 91% -2% 8
2014 MSCI Inc. All rights
reserved. msci.com $105 $26 $106 $26 $- $20 $40 $60 $80 $100 $120 $140
Run Rate Revenues Q2'13 Q2'14 9 Portfolio Management Analytics Portfolio
Management Analytics Run Rate and Revenues Second Quarter Highlights:
Revenues grew 1% to $26 million Run Rate grew by 2% YoY to $106 million
Total sales of $4 million, up 44% from prior year Strongest sales
quarter since 2011 New products driving sales growth Aggregate Retention
Rate improved to 95% in Q2’14 from 87% Highest quarterly retention rate
on record Driven by enhancements to legacy products, increasing pipeline
of new products and increased focus on service Portfolio Management
Analytics Sales and Retention (Dollars in millions) Q2'13 Q2'14 % Chg
H1'13 H1'14 % Chg Total Sales $3 $4 44% $6 $7 15% Aggregate Retention
87% 95% 9% 84% 93% 11% Core Retention 88% 96% 9% 85% 95% 12% 9
2014 MSCI Inc. All rights
reserved. msci.com 10 Compensation Expense (Dollars in millions) Higher
compensation expense driven by higher headcount Headcount rose 18%
versus Q2’13 to 2,762 Headcount rose 5% versus Q1’14 Continued growth in
number of employees in lower cost emerging markets EMC % rose to 49%
from 43% in Q2’13 Additional hiring planned for second half 2014 and
2015 88 90 94 102 103 2,346 2,480 2,580 2,623 2,762 2,000 2,200 2,400
2,600 2,800 3,000 $65 $75 $85 $95 $105 Q2'13 Q3'13 Q4'13 Q1'14 Q2'14
Employees Total Compensation Expense (in millions) Compensation
Headcount Quarterly Compensation Expense and Headcount 10
2014 MSCI Inc. All rights
reserved. msci.com 11 Non-Compensation Expense (Dollars in millions)
Non-Compensation expense rose 31% YoY Increase in IT expenses linked to
investment program IT costs increased to support additional
functionality and storage capacity Higher occupancy costs driven by
additional headcount Professional services and recruiting costs also
contributed to the increase Quarterly Non-Compensation Expense +31% 11
2014 MSCI Inc. All rights
reserved. msci.com 12 Income from continuing operations increased 1%
Diluted EPS from continuing operations increased 4% to $0.48 Net Income
rose 76% to $108 million Adjusted EBITDA1 remainedconstant at $106
million Adjusted EPS2 increased 6% to $0.55 Q2’14 tax rate from
continuing operations of 32.4% 4% decrease in diluted weighted average
shares outstanding Summary of Profitability Metrics from Continuing
Operations (1) Net income before income from discontinued operations,
net of income taxes, provision for income taxes, other expense (income),
net, depreciation and amortization, and the lease exit charge. Please
see page 17 for reconciliation. (2) Adjusted EPS is calculated as
diluted EPS before income from discontinued operations, net of income
taxes, and the after-tax impact of the provision for amortization of
intangible assets, and the lease exit charge. Please see page 16 for
reconciliation. $ per share +4 +6% Diluted EPS from Continuing Ops and
Adjusted EPS2 Income from Continuing Operations and Adj. EBITDA1 0% $ in
millions +1% 12
2014 MSCI Inc. All rights
reserved. msci.com (Dollars in millions) June 30, 2014 December 31, 2013
Total cash and cash equivalents $683 $358 Current maturities of
long-term debt $20 $20 Long-term debt, net of current maturities $778
$788 Total $798 $808 Q2'14 H1'14 Net Cash from Operations $69 $94 Select
Non-Operating Cash Out-Flows Proceeds from ISS sale, net of $5 million
of cash provided $363 $363 Capital expenditures (including software
development costs) $12 $22 Debt repayment $5 $10 As of 13 Select Balance
Sheet and Cash Flow Items 13
2014 MSCI Inc. All rights
reserved. msci.com Key Guidance Updated 14 2014 Adjusted EBITDA
expenses1 projected to be in the range of $595- $605 million Cash Flow
from Operations projected to be $275-$325 million in 2014 2014 Capital
expenditures projected to be $50-$55 million Full Year 2014 tax rate
expected to be in the range of 36%1 Adjusted EBITDA expenses represent
operating expenses, less depreciation and amortization and the lease
exit charge. Please see page 18 for a reconciliation.
2014 MSCI Inc. All rights
reserved. msci.com 15 Use of Non-GAAP Financial Measures and Operating
Metrics MSCI has presented supplemental non-GAAP financial measures as
part of this presentation. A reconciliation is provided 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
income from discontinued operations, net of income taxes, provision for
income taxes, other expense (income), net, depreciation and amortization
and the lease exit charge. Adjusted Net Income and Adjusted EPS are
defined as net income and EPS, respectively, before income from
discontinued operations, net of income taxes, and the after-tax impact
of the provision for amortization of intangible assets and the lease
exit charge. Adjusted EBITDA expenses represent operating expenses, less
depreciation and amortization and the lease exit charge. We believe that
adjusting for depreciation and amortization 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 these items.
Additionally, we believe that adjusting for income from discontinued
operations, net of income tax, provides investors with a meaningful
trend of results for our continuing operations. Finally, we believe that
adjusting for one time and non-recurring expenses such as the lease exit
charge is useful to management and investors because it allows for an
evaluation of MSCI’s underlying operating performance. We believe that
the non-GAAP financial measures presented in this earnings presentation
facilitate meaningful period-to-period comparisons and provide a
baseline for the evaluation of future results. Adjusted EBITDA, Adjusted
EBITDA expenses, 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. The Run Rate at a
particular point in time represents the forward-looking revenues for the
next 12 months from all subscriptions and investment product licenses we
currently provide to our clients under renewable contracts or agreements
assuming all contracts or agreements that come up for renewal are
renewed and assuming then-current currency exchange rates. For any
license where fees are linked to an investment product’s assets or
trading volume, the Run Rate calculation reflects for ETF fees, the
market value on the last trading day of the period, and for non-ETF
funds and futures and options, 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 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.
The Aggregate Retention Rates for a period are calculated by annualizing
the cancellations for which we have received a notice of termination or
we believe there is an intention to not renew during the 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 year to calculate a cancellation rate. This
cancellation rate is then subtracted from 100% to derive the annualized
Aggregate Retention Rate for the period. 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. For the
calculation of the Core Retention Rate, the same methodology is used
except the cancellations in the period are reduced by the amount of
product swaps. 15
2014 MSCI Inc. All rights
reserved. msci.com 16 Reconciliation to Adjusted Net Income and Adjusted
EPS Three Months Ended Six Months Ended June 30, June 30, March 31, June
30, June 30, In thousands, except per share data 2014 2013 2014 2014
2013 Net Income 107,660 $ 61,053 $ 80,399 $ 188,059 $ 119,990 $ Less:
Income from discontinued operations, net of income taxes (50,857) $
(4,912) $ (33,253) $ (84,110) $ (10,891) $ Income from continuing
operations 56,803 $ 56,141 $ 47,146 $ 103,949 $ 109,099 $ Plus:
Amortization of intangible assets 11,442 11,222 11,270 22,712 22,388
Plus: Lease exit charge - (365) - - (365) Less: Income tax effect
(3,689) (3,629) (4,044) (7,733) (6,825) Adjusted net income 64,556 $
63,369 $ 54,372 $ 118,928 $ 124,297 $ Diluted EPS 0.91 $ 0.50 $ 0.68 $
1.59 $ 0.98 $ Less: Earnings per diluted common share from discontinued
operations (0.43) (0.04) (0.28) (0.71) (0.09) Earnings per diluted
common share from continuing operations 0.48 0.46 0.40 0.88 0.89 Plus:
Amortization of intangible assets 0.10 0.09 0.09 0.19 0.18 Plus: Lease
exit charge Less: Income tax effect (0.03) (0.03) (0.03) (0.06) (0.05)
Adjusted EPS 0.55 $ 0.52 $ 0.46 $ 1.01 $ 1.02 $ 16
2014 MSCI Inc. All rights
reserved. msci.com 17 Reconciliation to Adjusted EBITDA June 30, June
30, March 31, June 30, June 30, In thousands 2014 2013 2014 2014 2013
Net Income 107,660 $ 61,053 $ 80,399 $ 188,059 $ 119,990 $ Less: Income
from discontinued operations, net of income taxes (50,857) $ (4,912) $
(33,253) $ (84,110) $ (10,891) $ Income from continuing operations
56,803 $ 56,141 $ 47,146 $ 103,949 $ 109,099 $ Plus: Provision for
income taxes 27,280 27,763 26,385 53,665 48,995 Plus: Other expense
(income), net 4,448 5,985 5,974 10,422 14,686 Operating income 88,531 $
89,889 $ 79,505 $ 168,036 $ 172,780 $ Plus: Depreciation and
amortization of property, equipment and leasehold improvements 5,921
4,774 5,828 11,749 9,371 Plus: Amortization of intangible assets 11,442
11,222 11,270 22,712 22,388 Plus: Lease exit charge - (365) - - (365)
Adjusted EBITDA 105,894 $ 105,520 $ 96,603 $ 202,497 $ 204,174 $ Three
Months Ended Six Months Ended 17
2014 MSCI Inc. All rights
reserved. msci.com 18 Reconciliation to Adjusted EBITDA Expenses Full
Year June 30, June 30, March 31, June 30, June 30, 2014 In thousands
2014 2013 2014 2014 2013 Outlook Total operating expenses 165,695 $
138,534 $ 160,183 $ 325,878 $ 275,112 $ $665,000 - $677,000 Less:
Depreciation and amortization of property, equipment and leasehold
improvements, and Amortization of intangible assets 17,363 15,996 17,098
34,461 31,759 70,000 - 72,000 Less: Lease exit charge - (365) (365) -
Adjusted EBITDA expenses 148,332 $ 122,903 $ 143,085 $ 291,417 $ 243,718
$ $595,000 - $605,000 Three Months Ended Six Months Ended 18
MSCI (NYSE:MSCI)
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