MSCI Inc. (NYSE:MSCI), a leading provider of portfolio
construction and risk management tools and services for global
investors, today announced results for the three months ended
September 30, 2015 (“third quarter 2015”) and nine months ended
September 30, 2015 (“nine months 2015”). The Company also adopted
segment reporting and outlined its long-term Company and segment
targets for revenue growth and adjusted EBITDA margins.
Financial and Operational Highlights
(Note: Results exclude discontinued operations. Percentage and
other changes refer to third quarter 2014 unless otherwise
noted.)
- Diluted EPS of $0.59 vs. $0.44;
adjusted EPS of $0.60 vs. $0.50, excluding the after-tax impact of
discontinued operations, amortization of intangible assets and a
$6.3 million gain on sale of investment.
- Net income increased 24.5% to $64.4
million, operating expenses decreased 4.7% to $159.7 million and
net cash provided by operating activities increased 24.5% to $134.0
million.
- 6.8% increase in revenue combined
with 6.5% decline in adjusted EBITDA expenses drove a 26.4%
increase in adjusted EBITDA.
- 740 basis point increase in adjusted
EBITDA margin to 47.9%; highest margin level since fourth quarter
2012.
- Total Run Rate grew 6.1% to $1,062.3
million for third quarter 2015; subscription Run Rate up 7.8%
adjusting for FX impact.
- Repurchased 5.6 million shares for a
total value of $346.2 million in the quarter; additional 2.3
million shares repurchased after quarter-end for a total value of
$134.5 million.
- $935.5 million of capital returned
to shareholders through October 14, 2015 since the September 2014
announcement of the enhanced capital return plan targeting $1
billion in capital return by the end of 2016.
- Board approves new $1 billion share
repurchase authorization after completion of $850 million
authorization.
“We are very pleased with MSCI’s strong performance in the third
quarter. Solid revenue growth, coupled with very strong cost
discipline, resulted in a 740 basis point increase in our adjusted
EBITDA margin, the highest level since the fourth quarter of 2012.
In addition, we repurchased approximately 8 million shares in the
quarter, and through October,” commented Henry A. Fernandez,
Chairman and CEO of MSCI.
“We are introducing segment reporting this quarter, which
reflects the way we are managing the Company and provides investors
with increased transparency into MSCI’s results. This new level of
disclosure will provide investors with greater insights into the
drivers of MSCI’s performance, so they can fully value our
franchise as we continue to focus on creating an integrated set of
product lines.”
Mr. Fernandez added, “We are also providing investors with
long-term targets for the Company and each of its segments. These
targets were set as part of management’s and the Board’s recent
comprehensive strategic planning process and reflect our confidence
in the potential for continued strong growth in our Index segment,
improved profitability in our Analytics segment, and strong growth
and improved profitability in our All Other segment, which consists
of our ESG and Real Estate products. We believe we have built a
foundation for continued value creation for our shareholders in the
years to come.”
Table 1: Selected Consolidated Financial and Operating
Information (unaudited)
Three Months Ended
Nine Months Ended
Sep. 30, Sep. 30,
Sep. 30, Sep. 30,
$ in thousands, except per share and share data 2015 2014
% Change
2015 2014
% Change
Operating revenues $ 268,771 $ 251,661 6.8% $802,120 $ 745,575 7.6%
Operating income $ 109,102 $ 84,036 29.8% $296,355 $ 252,072 17.6%
% operating margin 40.6% 33.4% 36.9% 33.8% Income from continuing
operations $ 64,398 $ 51,724 24.5% $170,039 $ 155,673 9.2% Net
Income $ 64,398 $ 51,714 24.5% $164,242 $ 239,773 (31.5%)
Diluted EPS from continuing operations $ 0.59 $ 0.44 34.1% $1.52 $
1.32 15.2% Diluted EPS $ 0.59 $ 0.44 34.1% $1.47 $ 2.03 (27.6%)
Diluted weighted average common shares outstanding 109,440 117,163
(6.6%) 111,951 117,803 (5.0%) Adjusted net income1 $ 65,726
$ 59,208 11.0% $186,341 $ 178,136 4.6% Adjusted EPS1 $ 0.60 $ 0.50
20.0% $1.66 $ 1.51 9.9% Adjusted EBITDA2 $ 128,861 $ 101,952 26.4%
$354,783 $ 304,449 16.5% Adjusted EBITDA margin 47.9% 40.5% 44.2%
40.8% Net cash provided by operating activities $ 133,963 $ 107,567
24.5% $224,672 $ 201,619 11.4% Free cash flow3 $ 121,713 $ 87,294
39.4% $194,085 $ 159,382 21.8% Employees 2,743 2,876 (4.6%)
% Employees by location Developed Market Centers 48% 50% Emerging
Market Centers 52% 50%
1 Adjusted net income and adjusted EPS are
defined as net income and EPS, respectively, before income from
discontinued operations, net of income taxes, the after-tax impact
of the amortization of intangible assets and the impact from the
gain on sale of investment. See Table 10 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."
2 Net Income before income from discontinued operations, net
of income taxes, provision for income taxes, other expense
(income), net, depreciation and amortization. See Table 9 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."
3 Net cash provided by operating
activities, less capex. Capex is defined as capital expenditures
plus capitalized software development costs. See Table 12 titled
“Reconciliation of Free Cash Flow to Net Cash Provided by Operating
Activities (unaudited)” and information about the use of non-GAAP
financial information provided under "Notes Regarding the Use of
Non-GAAP Financial Measures."
Third Quarter 2015 Consolidated
Results
Revenues: Operating revenues
for third quarter 2015 increased $17.1 million, or 6.8%, to $268.8
million, compared to $251.7 million for the three months ended
September 30, 2014 (“third quarter 2014”). The $17.1 million
increase was primarily driven by a $13.9 million, or 7.0%, increase
in recurring subscription revenues and a $4.1 million, or 8.7%,
increase in asset-based fees, slightly offset by lower
non-recurring revenues in the quarter. Adjusting for the impact of
foreign currency exchange rate fluctuations, recurring subscription
revenues for third quarter 2015 would have increased 8.6%.
For nine months 2015, operating revenues increased $56.5
million, or 7.6%, to $802.1 million compared to $745.6 million for
the nine months ended September 30, 2014 (“nine months 2014”). The
$56.5 million increase was primarily driven by a $41.5 million, or
6.9%, increase in recurring subscription revenues and a $16.1
million, or 12.2%, increase in asset-based fees, slightly offset by
lower non-recurring revenues. Adjusting for the impact of foreign
currency exchange rate fluctuations, recurring subscription
revenues would have increased 9.0% for nine months 2015.
Run Rate: Total Run Rate at
the end of third quarter 2015 grew by $61.1 million, or 6.1%, to
$1,062.3 million, compared to September 30, 2014. The $61.1 million
increase was primarily driven by a $51.0 million, or 6.2%, increase
in subscription Run Rate and a $10.0 million, or 5.6%, increase in
asset-based fee Run Rate. Subscription Run Rate in third quarter
2015 would have increased 7.8%, adjusting for the impact of foreign
currency exchange rate fluctuations.
Expenses: Total operating
expenses from continuing operations decreased $8.0 million, or
4.7%, from third quarter 2014 to $159.7 million. The $8.0 million
decrease was primarily driven by lower compensation and benefits
costs and general cost discipline across most activities. See Table
15 titled “Historical Operating Results with Activity Costs
(unaudited)” for a re-casting of historical periods for activity
costs. Adjusting for the impact of foreign currency exchange rate
fluctuations, operating expenses for third quarter 2015 would have
decreased 0.4%.
For nine months 2015, total operating expenses from continuing
operations increased $12.3 million, or 2.5%, to $505.8 million and
included, among other things, the impact of a $3.4 million non-cash
charge for the termination of a technology project in first quarter
2015. Adjusting for the impact of foreign currency exchange rate
fluctuations, total operating expenses from continuing operations
for nine months 2015 would have increased 6.9%.
Adjusted EBITDA expenses, defined as operating expenses less
depreciation and amortization, were $139.9 million in third quarter
2015, a decrease of $9.8 million, or 6.5%, compared to third
quarter 2014. Adjusting for the impact of foreign currency exchange
rate fluctuations, adjusted EBITDA expenses for third quarter 2015
would have decreased 2.0%.
For nine months 2015, adjusted EBITDA expenses were $447.3
million, an increase of $6.2 million, or 1.4%, compared to the
prior year period. Adjusting for the impact of foreign currency
exchange rate fluctuations, adjusted EBITDA expenses for nine
months 2015 would have increased 6.1%. See Table 11 titled
“Reconciliation of Adjusted EBITDA Expenses to Operating Expenses
(unaudited)” and “Notes Regarding the Use of Non-GAAP Financial
Measures” below.
Headcount: Total
employees as of September 30, 2015 was 2,743, down 133 from the
prior year, and down 36 from the end of second quarter 2015. A
total of 48% and 52% of employees were located in developed market
and emerging market centers, respectively, compared to 50% for both
developed market and emerging market centers in the prior year,
reflecting the Company’s continuing efforts to locate employees in
emerging market centers.
Other Expense (Income),
Net: Other expense (income), net for third
quarter 2015 increased $6.0 million compared to third quarter 2014
driven by higher interest expense from the private offering of $800
million aggregate principal amount of 5.25% senior notes due 2024,
completed in November 2014, and the subsequent private offering of
$800 million aggregate principal amount of 5.75% senior notes due
2025, completed in August 2015. The higher interest expense was
partially offset by a $6.3 million gain on sale of investment in
third quarter 2015.
Tax Rate: The
effective tax rate was 35.0% for third quarter 2015, compared to
35.3% in third quarter 2014. The effective tax rate was 35.6% for
nine months 2015, versus 34.5% for nine months 2014.
Adjusted EBITDA:
Adjusted EBITDA, which excludes income (loss) from discontinued
operations, net of income taxes, provision for income taxes, other
expense (income), net, and depreciation and amortization, was
$128.9 million in third quarter 2015, up 26.4% from third quarter
2014. Adjusted EBITDA margin in third quarter 2015 was 47.9%,
compared to 40.5% in third quarter 2014.
For nine months 2015, adjusted EBITDA was $354.8 million, up
16.5% from nine months 2014, and adjusted EBITDA margin was 44.2%,
compared to 40.8% for nine months 2014. See Table 9 titled
“Reconciliation of Adjusted EBITDA to Net Income (unaudited)” and
“Notes Regarding the Use of Non-GAAP Financial Measures” below.
Cash Balances & Outstanding
Debt: Total cash and cash equivalents at the end
of third quarter 2015 was $993.5 million, of which $101.8 million
is held outside of the United States. Since the end of third
quarter 2015, a total of $134.5 million has been used to repurchase
shares. Total debt as of September 30, 2015 was $1,600.0 million,
which excludes deferred financing fees of $21.2 million. Net debt,
defined as total debt less cash and cash equivalents, was $606.5
million. Total debt to adjusted EBITDA ratio (based on trailing
twelve months adjusted EBITDA) was 3.5x, which is at the high end
of the previously stated financial policy of maintaining leverage
of 3.0x to 3.5x.
Cash Flow &
Capex: Net cash provided by operating activities
was $134.0 million in third quarter 2015, compared to $107.6
million in third quarter 2014, and $224.7 million for nine months
2015, compared to $201.6 million for nine months 2014. Free cash
flow, defined as net cash provided by operating activities, less
capex (defined as capital expenditures plus capitalized software
development costs) for third quarter 2015 increased $34.4 million,
or 39.4%, to $121.7 million, compared to $87.3 million in third
quarter 2014. The year-over-year increase reflects timing of
interest and tax payments as well as improved operating results.
For nine months 2015, free cash flow increased $34.7 million, or
21.8%, to $194.1 million, compared to $159.4 million for nine
months 2014.
Capex for third quarter 2015 was $12.3 million, compared to
$20.3 million in third quarter 2014. For nine months 2015, capex
was $30.6 million, compared to $42.2 million for nine months 2014.
See Table 12 titled “Reconciliation of Free Cash Flow to Net Cash
Provided by Operating Activities (unaudited)” and “Notes Regarding
the Use of Non-GAAP Financial Measures” below.
Share Count & Capital
Return: The weighted average diluted shares outstanding
in third quarter 2015 declined 6.6% to 109.4 million, compared to
117.2 million in third quarter 2014. The decrease was driven by
buybacks under the share repurchase program. Total shares
outstanding as of September 30, 2015 was 104.9 million.
In third quarter 2015, we repurchased 5.6 million shares for a
total of $346.2 million with an average price of $61.95 per share.
Since the end of third quarter 2015 and through October 14, 2015,
an additional 2.3 million shares were repurchased for a total value
of $134.5 million, exhausting the $850.0 million share repurchase
authorization. A total of 14.7 million shares were repurchased
under this authorization at an average price of $57.99 per
share. On October 28, 2015, the Board of Directors approved a
new share repurchase authorization of up to $1.0 billion.
Since the announcement of the enhanced capital return plan in
September 2014, whereby we committed to return $1.0 billion to
shareholders by the end of 2016, approximately $936.0 million has
been returned to date through share repurchases and cash
dividends.
On October 28, 2015, the Board of Directors declared a cash
dividend of $0.22 per share for fourth quarter 2015. The fourth
quarter 2015 dividend is payable on November 30, 2015 to
shareholders of record as of the close of trading on November 13,
2015.
Table 2: Third Quarter 2015 Operating Results by Segment
(unaudited)
Below is a summary of the segment results.
See Tables 5 and 13 for historical results by segment.
Index Analytics
All Other
Operating Adjusted Adjusted Operating
Adjusted Adjusted Operating Adjusted
Adjusted
In thousands
Revenues EBITDA EBITDA Margin Revenues
EBITDA EBITDA Margin Revenues EBITDA
EBITDA Margin QTD Q3'15 $141,577 $102,927 72.7% $108,341
$29,216 27.0% $18,853 ($3,282) -17.4% QTD Q3'14 $129,869 $91,031
70.1% $103,247 $16,788 16.3% $18,545 ($5,867) -31.6% % change 9.0%
13.1% 4.9% 74.0% 1.7% 44.1%
YTD Q3'15 $415,262 $293,997
70.8% $322,756 $64,560 20.0% $64,102 ($3,774) -5.9% YTD Q3'14
$374,429 $259,289 69.2% $308,661 $52,345 17.0% $62,485 ($7,185)
-11.5% % change 10.9% 13.4% 4.6% 23.3% 2.6% 47.5%
Index Segment:
Operating revenues for third quarter 2015 increased $11.7 million,
or 9.0%, to $141.6 million, compared to $129.9 million for third
quarter 2014. The $11.7 million increase was driven by a $7.8
million, or 9.6%, increase in recurring subscription revenue and a
$4.1 million, or 8.7%, increase in asset-based fees slightly offset
by lower non-recurring revenue. The $7.8 million increase in
recurring subscription revenue was primarily driven by higher
revenues from subscriptions to benchmark and data products.
Adjusting for the impact of foreign currency exchange rate
fluctuations, recurring subscription revenues for third quarter
2015 would have increased 10.5%. The increase in asset-based fees
was driven by an increase in revenues from both ETF and non-ETF
institutional passive funds. Average AUM in ETFs linked to MSCI
indexes increased $32.3 billion, or 8.4%. Higher trading volumes in
futures and options contracts based on MSCI indexes also
contributed to the increase. Asset-based fees declined slightly
from the second quarter 2015 level, however, due to the recent
spike in market volatility, driving a $23.2 billion, or 5.3%,
decrease in average AUM in ETFs linked to MSCI indexes. The decline
in average AUM compared to second quarter 2015 was due entirely to
market depreciation, partially offset by positive cash inflows in
the quarter.
The adjusted EBITDA margin for Index was 72.7% in third quarter
2015, compared to 70.1% in the prior year period. The increase was
primarily driven by higher revenues, as well as a 0.5% decline in
adjusted EBITDA expenses.
For nine months 2015, operating revenues increased $40.8
million, or 10.9%, to $415.3 million, compared to $374.4 million
for nine months 2014. The $40.8 million increase was driven by a
$24.2 million, or 10.2%, increase in recurring subscription revenue
and a $16.1 million, or 12.2%, increase in asset-based fees. The
$24.2 million increase in recurring subscription revenue was driven
primarily by growth in benchmark and data products. Adjusting for
the impact of foreign currency exchange rate fluctuations,
recurring subscription revenues for nine months 2015 would have
increased 11.1%. The increase in asset-based fees was driven by a
$58.5 billion, or 16.3%, increase in average AUM in ETFs linked to
MSCI indexes. Growth in non-ETF institutional passive assets and
higher trading volumes in futures and options contracts based on
MSCI indexes also contributed to the increase.
The adjusted EBITDA margin for Index for nine months 2015 was
70.8%, compared to 69.2% in the prior year period. The increase in
margin was due to higher revenues, offset by a 5.3% increase in
adjusted EBITDA expenses.
Total Index operating revenues represented 52.7% and 51.8% of
MSCI’s total operating revenues in third quarter and nine months
2015, respectively.
Index Run Rate at the end of third quarter 2015 grew by $45.2
million, or 9.0%, to $549.0 million, compared to September 30,
2014. The $45.2 million increase was primarily driven by a $35.2
million, or 10.8%, increase in recurring subscription Run Rate and
a $10.0 million, or 5.6%, increase in asset-based fee Run Rate. The
increase in recurring subscription Run Rate was driven by higher
revenues from subscriptions to benchmark and data products. The
increase in Run Rate attributable to asset-based fees was primarily
driven by growth in AUM in non-ETF institutional passive funds
linked to MSCI indexes. There was a negligible impact from foreign
currency exchange rate fluctuations on Index recurring subscription
Run Rate.
Analytics Segment: Operating
revenues for third quarter 2015 increased $5.1 million, or 4.9%, to
$108.3 million compared to $103.2 million in third quarter 2014.
The increase was primarily driven by higher RiskManager, BarraOne
and InvestorForce sales. Adjusting for the impact of foreign
currency exchange rate fluctuations, Analytics operating revenues
for third quarter 2015 would have increased 6.6%.
The adjusted EBITDA margin for Analytics was 27.0%, compared to
16.3% in the prior year. The increase was due to higher revenues,
as well as an 8.5% decline in adjusted EBITDA expenses. The
decrease in expenses was primarily attributable to lower
compensation and benefits costs from lower staffing levels, higher
capitalization related to the development of the new Analytics
architecture and interface, and lower non-compensation costs driven
by strong cost discipline.
For nine months 2015, operating revenues increased $14.1
million, or 4.6%, to $322.8 million, compared to $308.7 million for
nine months 2014. The $14.1 million increase was primarily driven
by higher RiskManager, HedgePlatform, BarraOne and InvestorForce
sales. Adjusting for the impact of foreign currency exchange rate
fluctuations, Analytics operating revenues for nine months 2015
would have increased 6.3%.
The adjusted EBITDA margin for Analytics was 20.0% for nine
months 2015, compared to 17.0% in the prior year. The increase was
driven by higher revenues, offset by a 0.7% increase in adjusted
EBITDA expenses.
Total Analytics operating revenues represented 40.3% and 40.2%
of MSCI’s total operating revenues in third quarter and nine months
2015, respectively.
Analytics Run Rate at the end of third quarter 2015 grew by
$12.4 million, or 3.0%, to $430.4 million, compared to September
30, 2014. The increase in Run Rate was primarily driven by an
increase in RiskManager sales. Analytics Run Rate at September 30,
2015 would have increased 4.9%, adjusting for the impact of foreign
currency exchange rate fluctuations.
All Other Segment (consisting of ESG
and Real Estate products lines): Operating revenues for
third quarter 2015 increased $0.3 million, or 1.7%, to $18.9
million, compared to $18.5 million in third quarter 2014. The
increase in All Other revenue was driven by a $2.1 million, or
28.4%, increase in ESG revenue, which was partially offset by a
$1.8 million decline in Real Estate revenue. Adjusting for the
impact of foreign currency exchange rate fluctuations, All Other
operating revenues for third quarter 2015 would have increased
6.6%.
The adjusted EBITDA margin for All Other was a negative 17.4%
for third quarter 2015, compared to a negative 31.6% in the prior
year period. The improvement in margin was primarily driven by a
9.3% decline in adjusted EBITDA expenses.
For nine months 2015, operating revenues increased $1.6 million,
or 2.6%, to $64.1 million compared to $62.5 million for nine months
2014. The increase in All Other revenue was driven by an $8.0
million, or 40.8%, increase in ESG revenue, partially offset by a
$6.4 million decline in Real Estate revenue. Adjusting for the
impact of foreign currency exchange rate fluctuations, All Other
operating revenues for nine months 2015 would have increased
10.9%.
The adjusted EBITDA margin for All Other was a negative 5.9% for
nine months 2015, compared to a negative 11.5% in the prior year
period. The improvement in margin was due to an increase in
revenues, as well as a 2.6% decline in adjusted EBITDA
expenses.
Total All Other operating revenues represented 7.0% and 8.0% of
MSCI total operating revenues in third quarter and nine months
2015, respectively.
All Other Run Rate at the end of third quarter 2015 grew by $3.5
million, or 4.3%, to $82.9 million, compared to September 30, 2014.
The $3.5 million increase was primarily driven by a $5.3 million
increase in ESG Run Rate, partially offset by a $1.9 million, or
4.1%, decline in Real Estate Run Rate primarily due to foreign
currency exchange rate fluctuations. Adjusting for the impact of
foreign currency exchange rate fluctuations, Real Estate Run Rate
at September 30, 2015 would have increased $2.2 million, or 4.8%,
and Run Rate for All Other would have increased 10.8%.
Updated Full-Year 2015 Guidance
MSCI’s guidance for full-year 2015 is as follows:
- Full-year 2015 adjusted EBITDA expenses
are now expected to be in the range of $595 million to $600
million. Based on the new full-year range, fourth quarter 2015
adjusted EBITDA expenses are now expected to be in the range of
$148 million to $153 million, which is expected to reduce adjusted
EBITDA margins from third quarter 2015 levels across all segments.
Previously, full-year 2015 adjusted EBITDA expenses were expected
at the low-end of the stated range of $620 million to $640
million.See Table 11 titled “Reconciliation of Adjusted EBITDA
Expenses to Operating Expenses (unaudited)” and “Notes Regarding
the Use of Non-GAAP Financial Measures” below.
- Full-year 2015 interest expense,
including the amortization of financing fees, is now expected to be
approximately $63 million, compared to the previous guidance of
approximately $45 million. The increase reflects the impact of the
private offering of $800 million 5.75% senior notes due 2025
completed in August 2015.
- Full-year 2015 free cash flow is now
expected to be in the range of $255 million to $270 million,
compared to the previous range of $245 million to $275
million.
- Full-year 2015 capex, which includes
capitalized software developments costs, is now expected to be in
the range of $45 million to $50 million, compared to the previous
range of $45 million to $55 million.See Table 12 titled
“Reconciliation of Free Cash Flow to Net Cash Provided by Operating
Activities (unaudited)” and “Notes Regarding the Use of Non-GAAP
Financial Measures” below.
- The effective tax rate expected for
full-year 2015 remains in the range of 35% to 36%.
Long-Term Targets
Following a recent comprehensive review of the Company’s
strategic objectives by management and the Board of Directors and
the adoption of segment reporting, MSCI is outlining its long-term
targets for revenue growth and adjusted EBITDA margins for its
three reportable segments: Index, Analytics and All Other.
- The long-term targets below assume a
constant business portfolio and stable market conditions in line
with current market conditions.
- The long-term targets below do not
include the impact of significant swings in assets under management
in ETFs linked to MSCI indexes or other forms of passive investment
products linked to MSCI indexes.
- The terms “high,” “medium” and “low”
refer to target levels of annual growth in revenue in percentage
terms and may fluctuate quarter-to-quarter. “High” revenue growth
is defined as low double-digit growth, “medium” revenue growth is
defined as upper single-digit growth and “low” revenue growth is
defined as low to mid single-digit growth.
- The long-term targets for MSCI and its
reportable segments are as follows:
% of Current
Revenue Growth Target Adj. EBITDA Margin
Segment Revenue (Q3'15) Current / Target Target Range Index 53%
High / High 68% - 72% Analytics 40% Low / Medium 30% - 35%
All Other 7% Medium / High 15% - 20% MSCI 100%
Medium / High ~ 50%
Reconciliations of adjusted EBITDA included in the long-term
targets identified above are not included in this earnings release
as we are unable to quantify certain amounts that would be required
to be included in the corresponding GAAP measure without
unreasonable efforts, and we believe such reconciliations would
imply a degree of precision that would be confusing or misleading
to investors. Additionally, the targets identified above are
long-term targets and are not necessarily indicative of the actual
or expected results or growth trajectory of any future quarter or
year. MSCI assumes no obligation to publicly update or revise these
long-term targets for any reason, whether as a result of new
information, future events, or otherwise, except as required by
law.
Conference Call Information
MSCI Inc.'s senior management will review third quarter 2015
results on Thursday, October 29, 2015 at 11:00 AM Eastern Time. To
listen to the live event, visit the events and presentations
section of MSCI's Investor Relations homepage,
http://ir.msci.com/events.cfm, or dial 1-877-312-9206 within the
United States. International callers dial 1-408-774-4001. This
press release and the related investor presentation used during the
conference call will be made available on MSCI's Investor Relations
homepage.
An audio recording of the conference call will be available on
MSCI’s Investor Relations homepage approximately two hours after
the conclusion of the live event and will be accessible through
October 31, 2015. To listen to the recording, visit
http://ir.msci.com/events.cfm, or dial 1-800-585-8367 (passcode:
57552776) within the United States. International callers dial
1-404-537-3406 (passcode: 57552776). A replay of the conference
call will be archived in the events and presentations section of
MSCI’s Investor Relations homepage for 12 months after the
call.
-Ends-
About MSCI
For more than 40 years, MSCI’s research-based indexes and
analytics have helped the world’s leading investors build and
manage better portfolios. Clients rely on our offerings for deeper
insights into the drivers of performance and risk in their
portfolios, broad asset class coverage and innovative research.
Our line of products and services includes indexes, analytical
models, data, real estate benchmarks and ESG research.
MSCI serves 97 of the top 100 largest money managers, according
to the most recent P&I ranking.
For more information, visit us at www.msci.com. MSCI#IR
Forward-Looking Statements
This earnings release contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of
1995, including without limitation, our full-year 2015 guidance and
our long-term targets. These forward-looking statements relate to
future events or to future financial performance and involve known
and unknown risks, uncertainties and other factors that may cause
our actual results, levels of activity, performance or achievements
to be materially different from any future results, levels of
activity, performance or achievements expressed or implied by these
statements. In some cases, you can identify forward-looking
statements by the use of words such as “may,” “could,” “expect,”
“intend,” “plan,” “seek,” “anticipate,” “believe,” “estimate,”
“predict,” “potential” or “continue,” or the negative of these
terms or other comparable terminology. You should not place undue
reliance on forward-looking statements because they involve known
and unknown risks, uncertainties and other factors that are, in
some cases, beyond our control and that could materially affect our
actual results, levels of activity, performance or
achievements.
Other factors that could materially affect our 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, 2014 filed with the Securities and Exchange Commission
(“SEC”) on February 27, 2015, as amended, and in quarterly reports
on Form 10-Q and current reports on Form 8-K filed or furnished
with the SEC. If any of these risks or uncertainties materialize,
or if our underlying assumptions prove to be incorrect, actual
results may vary significantly from what MSCI projected. Any
forward-looking statement in this earnings release reflects MSCI’s
current views with respect to future events and is subject to these
and other risks, uncertainties and assumptions relating to MSCI’s
operations, results of operations, growth strategy and liquidity.
MSCI assumes no obligation to publicly update or revise these
forward-looking statements for any reason, whether as a result of
new information, future events, or otherwise, except as required by
law.
Website and Social Media Disclosure
MSCI uses its 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 subscribe to the
notification service available through MSCI’s Investor Relations
homepage 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 non-GAAP financial measures presented in this
earnings release should not be considered as alternative measures
for the most directly comparable GAAP financial measures. The
non-GAAP financial measures presented in this earnings release are
used by management to monitor the financial performance of the
business, inform business decision making and forecast future
results.
“Adjusted EBITDA expenses” is defined as operating expenses,
less depreciation and amortization.
“Adjusted EBITDA” is defined as net income before income (loss)
from discontinued operations, net of income taxes, provision for
income taxes, other expense (income), net and depreciation and
amortization.
“Adjusted net income” and “adjusted EPS” are defined as net
income and EPS, respectively, before income from discontinued
operations, net of income taxes, the after-tax impact of the
amortization of intangible assets and the impact from the gain on
sale of investment.
“Free cash flow” is defined as net cash provided by operating
activities, less capex. “Capex” is defined as capital expenditures
plus capitalized software development costs.
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. We believe that free cash flow is useful to
investors because it relates the operating cash flow of the Company
to the capital that is spent to continue and improve business
operations, such as investment in the Company’s existing
businesses. Further, free cash flow indicates our ability to
strengthen the Company’s balance sheet, repay our debt obligations,
pay cash dividends and repurchase shares of our common stock.
Finally, we believe that adjusting for one-time, unusual or
non-recurring expenses 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 expenses, adjusted EBITDA, adjusted net income,
adjusted EPS and free cash flow are not defined in the same manner
by all companies and may not be comparable to similarly-titled
non-GAAP financial measures of other companies.
Table 3: Condensed Consolidated Statements of Income
(unaudited) Three Months
Ended Nine Months Ended Sep. 30, Sep. 30, Jun. 30, Sep. 30, Sep.
30, In thousands, except per share data 2015 2014 2015 2015 2014
Operating revenues $ 268,771 $ 251,661 $ 270,580 $ 802,120 $
745,575 Operating expenses Cost of revenues 65,593 69,770 67,394
202,891 206,784 Selling and marketing 38,809 41,402 42,028 122,485
123,034 Research and development 15,548 19,021 20,807 59,544 53,860
General and administrative 19,960 19,516 22,080 62,417 57,448
Amortization of intangible assets 11,710 11,574 11,695 35,107
34,286 Depreciation and amortization of property, equipment and
leasehold improvements 8,049 6,342
8,065 23,321 18,091 Total
operating expenses1 159,669 167,625
172,069 505,765 493,503
Operating income 109,102 84,036 98,511 296,355 252,072
Interest income (285 ) (277 ) (185 ) (674 ) (625 ) Interest
expense 17,267 5,604 11,116 39,491 16,029 Other expense (income)
(6,922 ) (1,287 ) 164 (6,580 )
(942 ) Other expenses (income), net 10,060
4,040 11,095 32,237
14,462
Income from continuing operations
before
provision for income taxes 99,042 79,996 87,416 264,118 237,610
Provision for income taxes 34,644
28,272 31,399 94,079
81,937 Income from continuing operations 64,398
51,724 56,017 170,039
155,673
Income (loss) from discontinued
operations, net of income taxes
-
(10 ) - (5,797 ) 84,100
Net Income
$ 64,398 $ 51,714 $ 56,017 $ 164,242 $
239,773 Earnings per basic common share from:
Continuing operations $ 0.59 $ 0.44 $ 0.50 $ 1.53 $ 1.33
Discontinued operations - - -
(0.05 ) 0.72 Earnings per basic common
share $ 0.59 $ 0.44 $ 0.50 $ 1.48 $
2.05 Earnings per diluted common share from:
Continuing operations $ 0.59 $ 0.44 $ 0.50 $ 1.52 $ 1.32
Discontinued operations - - -
(0.05 ) 0.71 Earnings per diluted
common share $ 0.59 $ 0.44 $ 0.50 $ 1.47
$ 2.03
Weighted average shares outstanding used
in computing earnings per share:
Basic 108,773 116,251 112,143
111,131 116,840 Diluted
109,440 117,163 112,931
111,951 117,803 1 Includes stock-based
compensation expense of $5.5 million, $7.3 million, and $6.8
million for the three months ended Sep. 30, 2015, Sep. 30, 2014,
and Jun. 30, 2015, respectively. Includes stock-based compensation
expense of $19.3 million and $17.8 million for the nine months
ended Sep. 30, 2015 and Sep. 30, 2014, respectively.
Table 4: Selected Balance Sheet Items
(unaudited)
As of Sep.
30, Jun. 30, Dec. 31, In thousands 2015 2015 2014 Cash and
cash equivalents $ 993,488 $ 455,021 $ 508,799 Accounts receivable,
net of allowances $ 208,239 $ 214,487 $ 178,717 Deferred
revenue $ 328,051 $ 338,763 $ 310,775 Long-term debt, net of
current maturities1 $ 1,578,849 $ 788,945 $ 788,358 1 Consists of
long-term debt of $1.6 billion, net of deferred financing fees of
$21.2 million, as of Sep. 30, 2015; long-term debt of $800 million,
net of deferred financing fees of $11.1 million, as of Jun. 30,
2015; and long-term debt of $800 million, net of deferred financing
fees of $11.6 million, as of Dec. 31, 2014.
Table 5: Operating Results by Segment
and Revenue Type (unaudited)
Three Months
Ended
Three Months
Ended
Three Months
Ended
Sep. 30,
2015
Sep. 30,
2014
Jun. 30,
2015
In thousands
Index Analytics All Other Consolidated
Index Analytics All Other Consolidated
Index Analytics All Other Consolidated
Operating Revenues Recurring subscription $ 89,139 $ 107,065 $
17,569 $ 213,773 $ 81,349 $ 102,237 $ 16,272 $ 199,858 $ 87,530 $
106,372 $ 21,664 $ 215,566 Asset-based fees 50,736 - - 50,736
46,657 - - 46,657 51,160 - - 51,160 Non-recurring 1,702
1,276 1,284 4,262
1,863 1,010 2,273
5,146 1,441 1,198 1,215
3,854 Total revenues $ 141,577 $
108,341 $ 18,853 $ 268,771 $ 129,869 $
103,247 $ 18,545 $ 251,661 $ 140,131 $
107,570 $ 22,879 $ 270,580 Adjusted EBITDA $
102,927 $ 29,216 $ (3,282 ) $ 128,861 $ 91,031 $ 16,788 $ (5,867 )
$ 101,952 $ 98,017 $ 21,264 $ (1,010 ) $ 118,271 Adjusted EBITDA
margin (%) 72.7 % 27.0 % (17.4 %) 47.9 % 70.1 % 16.3 % (31.6 %)
40.5 % 69.9 % 19.8 % (4.4 %) 43.7 % Operating margin (%) 40.6 %
33.4 % 36.4 %
Nine Months
Ended
Nine Months
Ended
Sep. 30,
2015
Sep. 30,
2014
In thousands
Index Analytics All Other Consolidated
Index Analytics All Other Consolidated
Operating Revenues Recurring subscription $ 261,729 $ 318,871 $
61,025 $ 641,625 $ 237,577 $ 305,702 $ 56,816 $ 600,095 Asset-based
fees 147,776 - - 147,776 131,652 - - 131,652 Non-recurring
5,757 3,885 3,077 12,719
5,200 2,959 5,669
13,828 Total revenues $ 415,262 $ 322,756
$ 64,102 $ 802,120 $ 374,429 $ 308,661
$ 62,485 $ 745,575 Adjusted EBITDA $ 293,997 $
64,560 $ (3,774 ) $ 354,783 $ 259,289 $ 52,345 $ (7,185 ) $ 304,449
Adjusted EBITDA margin (%)
70.8 % 20.0 % (5.9 %) 44.2 % 69.2 % 17.0 % (11.5 %) 40.8 %
Operating margin (%) 36.9 % 33.8 %
Table 6: ETF Assets Linked to
MSCI Indexes (unaudited)1
Three Months Ended Nine Months Ended In
billions Sep. 2015 Jun. 2015 Mar. 2015 Dec. 2014 Sep. 2014 Sep.
2015 Sep. 2014 Beginning Period AUM in ETFs
linked to MSCI Indexes
$ 435.4 $ 418.0 $ 373.3 $ 377.9 $ 378.7 $ 373.3 $ 332.9 Cash
Inflow/(Outflow) 3.0 24.3 31.7 3.7 16.4 59.0 45.7 Market
Appreciation/(Depreciation) (48.2 ) (6.9 )
13.0 (8.3 ) (17.2 ) (42.1 ) (0.7 )
Period End AUM in ETFs linked
to MSCI Indexes
$ 390.2 $ 435.4 $ 418.0 $ 373.3 $ 377.9 $ 390.2 $ 377.9
Period Average AUM in ETFs
linked to MSCI Indexes
$ 418.2 $ 441.4 $ 392.5 $ 373.6 $ 385.9 $ 417.4 $ 358.9 Avg.
Basis Point Fee2 3.40 3.43 3.38 3.39 3.51 3.40 3.51 Source:
Bloomberg and MSCI 1 ETF assets under management calculation
methodology is ETF net asset value multiplied by shares
outstanding. 2 Based on period-end Run Rate.
Table 7: Run Rate
by Segment and Run Rate Type (unaudited)
Three Months Ended % Change from Sep. 30, Sep.
30, Jun. 30, Sep. 30, Jun. 30, In thousands 2015 2014 2015 2014
2015
Index Recurring subscriptions $ 361,209
$ 326,010 $ 353,026 10.8% 2.3% Asset-based fees 187,818
177,774 201,221 5.6% (6.7%) Total Index Run Rate1 $
549,027 $ 503,784 $ 554,247 9.0% (0.9%)
Analytics Risk management analytics Recurring
subscriptions $ 319,637 $ 311,019 $ 315,901 2.8% 1.2% Portfolio
management analytics Recurring subscription 110,740
106,993 109,532 3.5% 1.1% Total Analytics Run Rate1 $
430,377 $ 418,012 $ 425,433 3.0% 1.2%
All Other ESG Recurring subscriptions $ 38,850
$ 33,522 $ 37,235 15.9% 4.3% Real Estate Recurring subscriptions
44,027 45,902 45,854 (4.1%) (4.0%)
Total All Other Run Rate1
$ 82,877 $ 79,424 $ 83,089 4.3% (0.3%)
Consolidated Total recurring subscription Run
Rate $ 874,463 $ 823,446 $ 861,548 6.2% 1.5% Total asset-based fees
Run Rate 187,818 177,774 201,221 5.6% (6.7%)
Total Run Rate1 $ 1,062,281 $ 1,001,220 $ 1,062,769 6.1% --
1 The Run Rate at a particular
point in time primarily represents the forward-looking revenues for
the next 12 months from all subscriptions and investment product
licenses we then 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 8: Sales and Aggregate Retention
Rate by Segment (unaudited)
Three Months Ended Nine Months Ended In thousands Sep. 2015
Jun. 2015 Mar. 2015 Dec. 2014 Sep. 2014 Sep. 2015 Sep. 2014
Index New recurring subscription sales $ 11,810 $ 12,459 $
11,550 $ 12,938 $ 9,239 $ 35,819 $ 31,609 Subscription
cancellations (3,852 ) (3,871 ) (2,384 )
(3,665 ) (3,588 ) (10,107 ) (10,644 )
Net new recurring subscription sales $ 7,958 $ 8,588
$ 9,166 $ 9,273 $ 5,651 $ 25,712 $
20,965 Non-recurring sales $ 1,719 $ 2,137 $
2,329 $ 2,217 $ 2,437 $ 6,185 $ 6,740
Total Index net sales $ 9,677 $ 10,725 $
11,495 $ 11,490 $ 8,088 $ 31,897 $
27,705 Index Aggregate Retention Rate1 95.4 % 95.4 %
97.2 % 95.2 % 95.3 % 96.0 % 95.3 %
Analytics Risk management
analytics New recurring subscription sales $ 8,133 $ 9,242 $ 9,980
$ 10,694 $ 10,550 $ 27,355 $ 31,515 Subscription cancellations
(3,668 ) (4,542 ) (5,325 ) (8,624 )
(4,218 ) (13,535 ) (17,380 ) Net new recurring
subscription sales $ 4,465 $ 4,700 $ 4,655 $
2,070 $ 6,332 $ 13,820 $ 14,135
Non-recurring sales $ 1,357 $ 2,194 $ 1,174 $
1,331 $ 818 $ 4,725 $ 3,291 Total risk
management analytics net sales $ 5,822 $ 6,894 $
5,829 $ 3,401 $ 7,150 $ 18,545 $ 17,426
Portfolio management analytics New recurring
subscription sales $ 2,257 $ 3,196 $ 3,530 $ 3,325 $ 3,393 $ 8,983
$ 10,054 Subscription cancellations (1,230 ) (1,905 )
(2,099 ) (1,766 ) (1,642 ) (5,234 )
(5,403 ) Net new recurring subscription sales $ 1,027
$ 1,291 $ 1,431 $ 1,559 $ 1,751 $ 3,749
$ 4,651 Non-recurring sales $ 24 $ 45 $
2 $ 90 $ 45 $ 71 $ 125 Total
portfolio management analytics net sales $ 1,051 $ 1,336
$ 1,433 $ 1,649 $ 1,796 $ 3,820
$ 4,776 Analytics New recurring subscription sales $
10,390 $ 12,438 $ 13,510 $ 14,019 $ 13,943 $ 36,338 $ 41,569
Subscription cancellations (4,898 ) (6,447 )
(7,424 ) (10,390 ) (5,860 ) (18,769 )
(22,783 ) Net new recurring subscription sales $ 5,492 $
5,991 $ 6,086 $ 3,629 $ 8,083 $ 17,569
$ 18,786 Non-recurring sales $ 1,381 $ 2,239
$ 1,176 $ 1,421 $ 863 $ 4,796 $
3,416 Total Analytics net sales $ 6,873 $ 8,230
$ 7,262 $ 5,050 $ 8,946 $ 22,365
$ 22,202 Analytics Aggregate Retention Rate1 95.3 %
93.8 % 92.9 % 89.7 % 94.2 % 94.0 % 92.5 %
All Other ESG New
recurring subscription sales $ 2,549 $ 2,043 $ 2,193 $ 2,260 $
1,837 $ 6,785 $ 4,667 Subscription cancellations (716 )
(531 ) (514 ) (917 ) (332 )
(1,761 ) (888 ) Net new recurring subscription sales $ 1,833
$ 1,512 $ 1,679 $ 1,343 $ 1,505
$ 5,024 $ 3,779 Non-recurring sales $ 146 $ 53
$ 122 $ 67 $ 167 $ 321 $ 423
Total ESG net sales $ 1,979 $ 1,565 $ 1,801
$ 1,410 $ 1,672 $ 5,345 $ 4,202
Real Estate New recurring subscription sales $ 759 $ 2,635 $
2,272 $ 2,715 $ 1,192 $ 5,666 $ 7,866 Subscription cancellations
(1,449 ) (1,321 ) (1,328 ) (2,052 )
(699 ) (4,098 ) (3,315 ) Net new recurring
subscription sales $ (690 ) $ 1,314 $ 944 $ 663
$ 493 $ 1,568 $ 4,551 Non-recurring
sales $ 908 $ 1,271 $ 788 $ 1,371 $
1,159 $ 2,967 $ 4,516 Total Real Estate net
sales $ 218 $ 2,585 $ 1,732 $ 2,034 $
1,652 $ 4,535 $ 9,067 All Other New
recurring subscription sales $ 3,308 $ 4,678 $ 4,465 $ 4,975 $
3,029 $ 12,451 $ 12,533 Subscription cancellations (2,165 )
(1,852 ) (1,842 ) (2,969 ) (1,031 )
(5,859 ) (4,203 ) Net new recurring subscription
sales $ 1,143 $ 2,826 $ 2,623 $ 2,006 $
1,998 $ 6,592 $ 8,330 Non-recurring sales $
1,054 $ 1,324 $ 910 $ 1,438 $ 1,326
$ 3,288 $ 4,939 Total All Other net sales $
2,197 $ 4,150 $ 3,533 $ 3,444 $ 3,324
$ 9,880 $ 13,269 All Other Aggregate
Retention Rate1 89.1 % 90.7 % 90.7 % 83.9 % 94.3 % 90.1 % 92.3 %
Consolidated New recurring subscription sales $ 25,508 $
29,575 $ 29,525 $ 31,932 $ 26,211 $ 84,608 $ 85,711 Subscription
cancellations (10,915 ) (12,170 ) (11,650 )
(17,024 ) (10,479 ) (34,735 ) (37,630 )
Net new recurring subscription sales $ 14,593 $ 17,405
$ 17,875 $ 14,908 $ 15,732 $ 49,873
$ 48,081 Non-recurring sales $ 4,154 $ 5,700
$ 4,415 $ 5,076 $ 4,626 $ 14,269
$ 15,095 Total net sales $ 18,747 $ 23,105 $
22,290 $ 19,984 $ 20,358 $ 64,142 $
63,176 Total Aggregate Retention Rate1 94.8 % 94.2 %
94.4 % 91.3 % 94.6 % 94.4 % 93.6 % 1 The Aggregate Retention Rates
for a period are calculated by annualizing the cancellations for
which we have received a notice of termination or for which 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.
Table 9: Reconciliation of Adjusted
EBITDA to Net Income (unaudited)
Three Months Ended Nine Months Ended Sep. 30, Sep. 30, Jun. 30,
Sep. 30, Sep. 30, In thousands 2015 2014 2015 2015 2014 Index
adjusted EBITDA $ 102,927 $ 91,031 $ 98,017 $ 293,997 $ 259,289
Analytics adjusted EBITDA 29,216 16,788 21,264 64,560 52,345 All
Other adjusted EBITDA (3,282 ) (5,867 ) (1,010
) (3,774 ) (7,185 )
Consolidated adjusted
EBITDA 128,861 101,952
118,271 354,783
304,449 Amortization of intangible assets
11,710 11,574 11,695 35,107 34,286 Depreciation and amortization of
property, equipment and leasehold improvements 8,049
6,342 8,065 23,321
18,091
Operating income 109,102 84,036
98,511 296,355 252,072 Other expense (income),
net 10,060 4,040 11,095 32,237 14,462 Provision for income taxes
34,644 28,272 31,399
94,079 81,937
Income from continuing
operations 64,398 51,724 56,017
170,039 155,673 Income (loss) from discontinued
operations, net of income taxes - (10 )
- (5,797 ) 84,100
Net income
$ 64,398 $ 51,714
$ 56,017 $ 164,242
$ 239,773 Table 10: Reconciliation of
Adjusted Net Income and Adjusted EPS to Net Income and EPS
(unaudited)
Three Months Ended Nine Months Ended Sep. 30, Sep. 30, Jun.
30, Sep. 30, Sep. 30, In thousands, except per share data 2015 2014
2015 2015 2014 Net Income $ 64,398 $ 51,714 $ 56,017 $ 164,242 $
239,773 Less: Income (loss) from discontinued operations,
net of income taxes - (10 ) -
(5,797 ) 84,100 Income from continuing
operations 64,398 51,724 56,017 170,039 155,673
Plus: Amortization of intangible
assets
11,710 11,574 11,695 35,107 34,286
Less: Gain on sale of investment
(6,300 ) - - (6,300 ) -
Less: Income tax effect
(4,082 ) (4,090 ) (4,201 ) (12,505 )
(11,823 )
Adjusted Net Income $ 65,726
$ 59,208 $ 63,511
$ 186,341 $ 178,136
Diluted EPS $ 0.59 $ 0.44 $ 0.50 $ 1.47 $ 2.03 Less:
Earnings per diluted common share from discontinued operations
- - - (0.05 )
0.71 Earnings per diluted common share from
continuing operations 0.59 0.44 0.50 1.52 1.32
Plus: Amortization of intangible
assets
0.11 0.10 0.10 0.31 0.29
Less: Gain on sale of investment
(0.06 ) - - (0.06 ) -
Less: Income tax effect
(0.04 ) (0.04 ) (0.04 ) (0.11 )
(0.10 )
Adjusted EPS $ 0.60 $
0.50 $ 0.56 $ 1.66
$ 1.51 Table 11: Reconciliation of
Adjusted EBITDA Expenses to Operating Expenses (unaudited)
Three Months Ended Nine
Months Ended Full Year Sep. 30, Sep. 30, Jun. 30, Sep. 30, Sep. 30,
2015 In thousands 2015 2014 2015 2015 2014 Outlook Index adjusted
EBITDA expenses $ 38,650 $ 38,838 $ 42,114 $ 121,265 $ 115,140
Analytics adjusted EBITDA expenses 79,125 86,459 86,306 258,196
256,316 All Other adjusted EBITDA expenses 22,135
24,412 23,889 67,876 69,670
Consolidated adjusted EBITDA expenses 139,910
149,709 152,309 447,337
441,126 $ 595,000 - $600,000
Amortization of intangible assets 11,710 11,574 11,695 35,107
34,286
77,000 to79,000
Depreciation and amortization of property, equipment and leasehold
improvements 8,049 6,342 8,065 23,321
18,091
Total operating expenses $
159,669 $ 167,625 $ 172,069
$ 505,765 $ 493,503 $ 672,000
- $679,000
Table 12: Reconciliation of Free Cash
Flow to Net Cash Provided by Operating Activities
(unaudited)
Three Months Ended
Nine Months Ended Full Year
Sep. 30, Sep. 30, Jun. 30, Sep. 30, Sep. 30, 2015
In thousands
2015 2014 2015 2015 2014 Outlook Net cash provided by operating
activities $ 133,963 $ 107,567 $ 24,026 $ 224,672 $ 201,619
$305,000 - $315,000 Capital expenditures (8,975 ) (17,688 ) (10,616
) (24,525 ) (36,174 ) Capitalized software development costs
(3,275 ) (2,585 ) (1,401 ) (6,062 )
(6,063 ) Capex (12,250 ) (20,273 ) (12,017 ) (30,587 )
(42,237 ) (50,000 - 45,000)
Free cash flow $ 121,713
$ 87,294 $ 12,009
$ 194,085 $ 159,382
$255,000 - $ 270,000 Table 13: Historical Results by
Segment (unaudited)
In thousands
Index
Analytics All Other
ConsolidatedResults
Three Months Ended Mar. 31, 2015 Operating revenue $ 133,554
$ 106,845 $ 22,370 $ 262,769 Adjusted EBITDA $ 93,053 $ 14,080 $
518 $ 107,651 Adjusted EBITDA margin 69.7% 13.2% 2.3% 41.0%
Operating margin 33.8%
Three
Months Ended Jun. 30, 2015 Operating revenue $ 140,131 $
107,570 $ 22,879 $ 270,580 Adjusted EBITDA $ 98,017 $ 21,264 $
(1,010) $ 118,271 Adjusted EBITDA margin 69.9% 19.8% -4.4% 43.7%
Operating margin 36.4%
Three
Months Ended Sep. 30, 2015 Operating revenue $ 141,577 $
108,341 $ 18,853 $ 268,771 Adjusted EBITDA $ 102,927 $ 29,216 $
(3,282) $ 128,861 Adjusted EBITDA margin 72.7% 27.0% -17.4% 47.9%
Operating margin 40.6%
Nine
Months Ended Sep. 30, 2015 Operating revenue $ 415,262 $
322,756 $ 64,102 $ 802,120 Adjusted EBITDA $ 293,997 $ 64,560 $
(3,774) $ 354,783 Adjusted EBITDA margin 70.8% 20.0% -5.9% 44.2%
Operating margin 36.9% In
thousands
Index Analytics All
Other
ConsolidatedResults
Three Months Ended Mar. 31, 2014 Operating revenue $ 119,107
$ 101,445 $ 19,136 $ 239,688 Adjusted EBITDA $ 82,089 $ 17,849 $
(3,335) $ 96,603 Adjusted EBITDA margin 68.9% 17.6% -17.4% 40.3%
Operating margin 33.2%
Three
Months Ended Jun. 30, 2014 Operating revenue $ 125,453 $
103,969 $ 24,804 $ 254,226 Adjusted EBITDA $ 86,169 $ 17,708 $
2,017 $ 105,894 Adjusted EBITDA margin 68.7% 17.0% 8.1% 41.7%
Operating margin 34.8%
Three
Months Ended Sep. 30, 2014 Operating revenue $ 129,869 $
103,247 $ 18,545 $ 251,661 Adjusted EBITDA $ 91,031 $ 16,788 $
(5,867) $ 101,952 Adjusted EBITDA margin 70.1% 16.3% -31.6% 40.5%
Operating margin 33.4%
Three
Months Ended Dec. 31, 2014 Operating revenue $ 129,463 $
105,425 $ 16,217 $ 251,105 Adjusted EBITDA $ 90,396 $ 19,829 $
(5,920) $ 104,305 Adjusted EBITDA margin 69.8% 18.8% -36.5% 41.5%
Operating margin 33.9%
Year
Ended Dec. 31, 2014 Operating revenue $ 503,892 $ 414,086 $
78,702 $ 996,680 Adjusted EBITDA $ 349,685 $ 72,174 $ (13,105) $
408,754 Adjusted EBITDA margin 69.4% 17.4% -16.7% 41.0% Operating
margin 33.8% In thousands
Index Analytics All Other
ConsolidatedResults
Three Months Ended Mar. 31, 2013 Operating revenue $ 108,410
$ 98,066 $ 12,993 $ 219,469 Adjusted EBITDA $ 78,084 $ 26,780 $
(6,210) $ 98,654 Adjusted EBITDA margin 72.0% 27.3% -47.8% 45.0%
Operating margin 37.8%
Three
Months Ended Jun. 30, 2013 Operating revenue $ 109,922 $ 96,253
$ 22,248 $ 228,423 Adjusted EBITDA $ 80,413 $ 23,279 $ 1,828 $
105,520 Adjusted EBITDA margin 73.2% 24.2% 8.2% 46.2% Operating
margin 39.4%
Three Months
Ended Sep. 30, 2013 Operating revenue $ 112,831 $ 98,991 $
16,786 $ 228,608 Adjusted EBITDA $ 80,604 $ 23,132 $ (3,196) $
100,540 Adjusted EBITDA margin 71.4% 23.4% -19.0% 44.0% Operating
margin 36.7%
Three Months
Ended Dec. 31, 2013 Operating revenue $ 117,251 $ 103,893 $
15,720 $ 236,864 Adjusted EBITDA $ 84,457 $ 24,615 $ (8,638) $
100,434 Adjusted EBITDA margin 72.0% 23.7% -54.9% 42.4% Operating
margin 35.3%
Year Ended
December 31, 2013 Operating revenue $ 448,414 $ 397,203 $
67,747 $ 913,364 Adjusted EBITDA $ 323,558 $ 97,806 $ (16,216) $
405,148 Adjusted EBITDA margin 72.2% 24.6% -23.9% 44.4% Operating
margin 37.3%
Table 14:
Reconciliation of Adjusted EBITDA to Net Income (unaudited)
Three Months Ended
Nine MonthsEnded
Mar. 31, Jun. 30, Sep. 30, Sep. 30,
In thousands
2015 2015 2015 2015
Net income $ 43,827
$ 56,017 $ 64,398 $
164,242 Income (loss) from discontinued operations, net of
income taxes (5,797 ) - -
(5,797 )
Income from continuing operations 49,624
56,017 64,398 170,039 Provision for income
taxes 28,036 31,399 34,644 94,079 Other expense (income), net
11,082 11,095 10,060
32,237
Operating income 88,742
98,511 109,102 296,355 Depreciation and
amortization of property, equipment and leasehold improvements
7,207 8,065 8,049 23,321 Amortization of intangible assets
11,702 11,695 11,710
35,107
Consolidated adjusted EBITDA $
107,651 $ 118,271 $
128,861 $ 354,783
Three Months Ended Year Ended
Mar. 31, Jun. 30, Sep. 30, Dec. 31, Dec. 31,
In thousands
2014 2014 2014 2014 2014
Net income $ 80,399
$ 107,660 $ 51,714 $
44,340 $ 284,113 Income (loss) from
discontinued operations, net of income taxes 33,253
50,857 (10 ) 1,071 85,171
Income from continuing operations 47,146
56,803 51,724 43,269 198,942 Provision
for income taxes 26,385 27,280 28,272 27,459 109,396 Other expense
(income), net 5,974 4,448 4,040
14,366 28,828
Operating
income 79,505 88,531 84,036 85,094
337,166 Depreciation and amortization of property, equipment
and leasehold improvements 5,828 5,921 6,342 7,620 25,711
Amortization of intangible assets 11,270
11,442 11,574 11,591
45,877
Consolidated adjusted EBITDA $
96,603 $ 105,894 $
101,952 $ 104,305 $
408,754 Three Months Ended Year Ended
Mar. 31, Jun. 30, Sep. 30, Dec. 31, Dec. 31,
In thousands
2013 2013 2013 2013 2013
Net income $ 58,937
$ 61,053 $ 55,310 $
47,257 $ 222,557 Income (loss) from
discontinued operations, net of income taxes 5,979
4,912 5,374 6,382
22,647
Income from continuing operations
52,958 56,141 49,936 40,875
199,910 Provision for income taxes 21,232 27,763 27,804
36,119 112,918 Other expense (income), net 8,701
5,985 6,164 6,653
27,503
Operating income 82,891 89,889
83,904 83,647 340,331 Depreciation and
amortization of property, equipment and leasehold improvements
4,597 4,774 5,443 5,570 20,384 Amortization of intangible assets
11,166 11,222 11,193 11,217 44,798 Lease exit charge -
(365 ) - - (365 )
Consolidated adjusted EBITDA $ 98,654
$ 105,520 $ 100,540
$ 100,434 $ 405,148
Table 15: Historical Operating Results
with Activity Costs (unaudited)
Year Ended Three Months Ended Year Ended Three Months Ended
Nine MonthsEnded
Dec. 31, Mar. 31, Jun. 30, Sep. 30, Dec. 31, Dec. 31, Mar. 31, Jun.
30, Sep. 30, Sep. 30,
In thousands
2013 2014 2014 2014 2014 2014 2015 2015 2015 2015
Operating
revenues $ 913,364 $ 239,688
$ 254,226 $ 251,661 $
251,105 $ 996,680 $ 262,769
$ 270,580 $ 268,771 $
802,120 Operating expenses: Cost of revenues 240,697
66,802 70,212 69,770 69,839 276,623 69,904 67,394 65,593 202,891
Selling and marketing 137,693 41,126 40,506 41,402 40,805 163,839
41,648 42,028 38,809 122,485 Research and development 61,003 17,465
17,374 19,021 17,235 71,095 23,189 20,807 15,548 59,544 General and
administrative 68,458 17,692 20,240 19,516 18,921 76,369 20,377
22,080 19,960 62,417 Amortization of intangible assets 44,798
11,270 11,442 11,574 11,591 45,877 11,702 11,695 11,710 35,107
Depreciation and amortization of property, equipment and leasehold
improvements 20,384 5,828 5,921
6,342 7,620 25,711
7,207 8,065 8,049
23,321
Total operating expenses 573,033
160,183 165,695
167,625 166,011
659,514 174,027
172,069 159,669
505,765 Operating income 340,331 79,505 88,531
84,036 85,094 337,166 88,742 98,511 109,102 296,355 Interest
income (889 ) (156 ) (192 ) (277 ) (226 ) (851 ) (204 ) (185 ) (285
) (674 ) Interest expense 26,256 5,059 5,366 5,604 15,791 31,820
11,108 11,116 17,267 39,491 Other expense (income) 2,136
1,071 (726 ) (1,287 )
(1,199 ) (2,141 ) 178 164
(6,922 ) (6,580 )
Other expense (income), net
27,503 5,974 4,448
4,040 14,366
28,828 11,082
11,095 10,060
32,237 Income from continuing operations before
provision for income taxes 312,828 73,531 84,083 79,996 70,728
308,338 77,660 87,416 99,042 264,118 Provision for income taxes
112,918 26,385 27,280 28,272 27,459 109,396 28,036 31,399 34,644
94,079
Income from continuing operations
199,910 47,146
56,803 51,724
43,269 198,942
49,624 56,017
64,398 170,039 Income (loss)
from discontinued operations, net of income taxes 22,647
33,253 50,857 (10 )
1,071 85,171 (5,797 ) -
- (5,797 )
Net income $
222,557 $ 80,399 $
107,660 $ 51,714 $
44,340 $ 284,113 $
43,827 $ 56,017 $
64,398 $ 164,242
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