MSCI Inc. (NYSE:MSCI), a leading provider of indexes and
portfolio construction and risk management tools and services for
global investors, today announced results for the three months
ended December 31, 2017 (“fourth quarter 2017”) and full-year ended
December 31, 2017 (“full-year 2017”).
Financial and Operational Highlights for Fourth Quarter 2017
and Full-Year 2017(Notes: Percentage and other changes refer to
fourth quarter 2016 or full-year 2016 unless otherwise noted.
References to “ex-FX” reflect amounts that have been adjusted for
the impact from foreign currency exchange rate fluctuations.)
- Record quarterly and full-year
recurring sales, up 22.2% and 13.4%, respectively; Analytics
recurring sales up 35.5% for fourth quarter 2017 and 16.1% for
full-year 2017.
- 14.3% increase in operating revenues
to $334.8 million for fourth quarter 2017.
- 21.8% increase in Index revenues
driven by a 40.7% increase in asset-based fees and an 11.6%
increase in recurring subscription revenues for fourth quarter
2017.
- Fourth quarter 2017 diluted EPS was
down 4.1% and full-year diluted EPS was up 22.6%, with both
including a net charge of $34.5 million related to the enactment of
Tax Reform.
- Adjusted EPS increased 42.0% and
31.4% in fourth quarter 2017 and full-year 2017, respectively, on
strong operating results.
- Record quarter-end AUM of $744.3
billion in ETFs linked to MSCI indexes, up 54.6% compared to a year
ago. AUM of $807.2 billion as of January 30, 2018.
- 17.4% increase in total Run Rate to
$1,365.7 million for fourth quarter 2017 driven by a 46.0% increase
in asset-based fees Run Rate and a 10.8% increase in subscription
Run Rate. Analytics Run Rate growth of 8.4%.
- Continued strong retention –
full‐year 2017 Aggregate Retention Rate of approximately
93.8%.
Three Months Ended
Year Ended Dec. 31, Dec.
31, Sep. 30, YoY % Dec. 31,
Dec. 31, YoY % In thousands, except per share
data 2017 2016 2017 Change
2017 2016 Change Operating revenues $ 334,779
$ 292,812 $ 322,097 14.3 % $ 1,274,172 $ 1,150,669 10.7 % Operating
income $ 153,955 $ 126,012 $ 148,663 22.2 % $ 579,188 $ 488,104
18.7 % Operating margin % 46.0 % 43.0 % 46.2 % 45.5 % 42.4 %
Net income $ 64,602 $ 68,250 $ 85,153 (5.3 %) $ 303,972 $ 260,855
16.5 % Diluted EPS $ 0.70 $ 0.73 $ 0.93 (4.1 %) $ 3.31 $
2.70 22.6 % Adjusted EPS $ 1.15 $ 0.81 $ 1.00 42.0 % $ 3.98 $ 3.03
31.4 % Adjusted EBITDA $ 173,633 $ 146,957 $ 168,602 18.2 %
$ 659,175 $ 569,457 15.8 % Adjusted EBITDA margin % 51.9 % 50.2 %
52.3 % 51.7 % 49.5 %
“The tremendous financial and operating successes achieved in
2017 highlight the increasingly important role of MSCI as a
strategic partner to our clients and, more broadly, within the
global investment community. The exceptional growth in AUM of ETFs
linked to our indexes, record level of new sales, strong financial
results and increasing levels of attention that we are receiving
across areas like global investing, multi-asset class risk
management, ESG and Factor investing highlight the growing power of
the integrated MSCI franchise. We are increasingly gaining unique
insights into emerging trends and developing industry needs through
providing mission critical tools to the investment community. This
has helped us deliver truly innovative content, applications and
services. Clients increasingly want seamless access to the full
range of tools and knowledge provided across the firm and we are
extremely excited by the opportunities we see to meet this demand
in 2018 and beyond,” commented Henry A. Fernandez, Chairman and CEO
of MSCI.
Fourth Quarter and Full-Year 2017
Consolidated Results
Revenues: Operating
revenues for fourth quarter 2017 increased $42.0 million, or 14.3%,
to $334.8 million, compared to $292.8 million for the three months
ended December 31, 2016 (“fourth quarter 2016”). The $42.0 million
increase in revenues was driven by a $22.7 million, or 40.7%,
increase in asset-based fees (driven primarily by higher revenue
from ETFs linked to MSCI indexes) and a $20.0 million, or 8.7%,
increase in recurring subscriptions (driven primarily by an $11.6
million, or 11.6%, increase in Index recurring subscriptions).
For full-year 2017, operating revenues increased $123.5 million,
or 10.7%, to $1,274.2 million, compared to $1,150.7 million for the
full-year ended December 31, 2016 (“full-year 2016”). The $123.5
million increase was driven by a $65.9 million, or 31.3%, increase
in asset-based fees and a $59.4 million, or 6.5%, increase in
recurring subscriptions, partially offset by a $1.7 million, or
6.4%, decrease in non-recurring revenues. Operating revenues ex-FX
increased 11.1% for full-year 2017.
Run Rate: Total Run
Rate at December 31, 2017 grew by $202.4 million, or 17.4%, to
$1,365.7 million, compared to December 31, 2016. The $202.4 million
increase was driven by a $102.6 million, or 10.8%, increase in
subscription Run Rate to $1,048.9 million, and a $99.8 million, or
46.0%, increase in asset-based fees Run Rate to $316.8 million.
Subscription Run Rate ex-FX increased 9.5% in fourth quarter
2017.
Expenses: Total
operating expenses for fourth quarter 2017 increased $14.0 million,
or 8.4%, to $180.8 million compared to fourth quarter 2016, driven
by a $13.4 million, or 13.2%, increase in compensation and benefits
expenses, primarily related to $6.9 million of higher severance
costs associated with certain efficiency initiatives that mainly
impacted the Analytics segment, and higher salaries and benefits,
as well as a $1.9 million, or 4.3%, increase in non-compensation
expenses, primarily reflecting an increase in marketing expenses.
Adjusted EBITDA expenses for fourth quarter 2017 increased $15.3
million, or 10.5%, to $161.1 million compared to fourth quarter
2016. Total operating expenses ex-FX and adjusted EBITDA expenses
ex-FX for fourth quarter 2017 increased 6.7% and 8.6%,
respectively, compared to fourth quarter 2016.
For full-year 2017, total operating expenses increased $32.4
million, or 4.9%, to $695.0 million. Adjusted EBITDA expenses
increased $33.8 million, or 5.8%, to $615.0 million compared to
full-year 2016. Total operating expenses ex-FX and adjusted EBITDA
expenses ex-FX for full-year 2017 increased 5.1% and 6.0%,
respectively, compared to full-year 2016.
Headcount: As of
December 31, 2017, there were 3,038 employees, up 6.1% from 2,862
as of December 31, 2016, and down slightly from 3,047 as of
September 30, 2017, reflecting net reductions in fourth quarter
2017, primarily associated with certain efficiency initiatives. The
6.1% year-over-year increase in employees was primarily driven by
increased headcount in areas related to data and content services,
technology and research. As of December 31, 2017, a total of 41.0%
and 59.0% of employees were located in developed market and
emerging market centers, respectively, compared to 43.8% in
developed market centers and 56.2% in emerging market centers as of
December 31, 2016.
Amortization and Depreciation
Expenses: Amortization and depreciation expenses
decreased by $1.3 million, or 6.0%, for fourth quarter 2017,
compared to fourth quarter 2016, primarily as a result of a $1.3
million, or 14.1%, decrease in depreciation expense reflecting
certain data center assets becoming fully depreciated. Amortization
expense was essentially flat in the quarter, reflecting higher
amortization on internal capitalized software projects of $1.7
million, largely offset by lower amortization of $1.6 million on
acquired intangibles as a result of certain assets becoming fully
amortized. For full-year 2017 amortization and depreciation
expenses decreased by $1.4 million, or 1.7%, compared to full-year
2016.
Other Expense (Income),
Net: Other expense (income), net decreased $1.9
million, or 6.6%, for fourth quarter 2017, compared to fourth
quarter 2016, as a result of higher interest income associated with
higher cash balances. For full-year 2017, other expense (income),
net increased $10.1 million, or 9.9%, compared to full-year 2016,
primarily driven by higher interest expense resulting from the
August 2016 private offering of $500.0 million aggregate principal
amount of 4.75% senior notes due 2026. Full-year 2016 results also
included a $3.7 million charge for estimated losses associated with
miscellaneous transactions.
Tax Rate: Income tax
expense was $62.4 million and $162.9 million for fourth quarter
2017 and full-year 2017, respectively, and included a net charge of
$34.5 million related to the Tax Cuts and Jobs Act that was enacted
on December 22, 2017 (“Tax Reform”). Tax Reform significantly
revises the U.S. corporate income tax by, among other things,
lowering corporate income tax rates, implementing a territorial tax
system and imposing a one-time tax on accumulated earnings of
foreign subsidiaries. The net charge of $34.5 million primarily
included an estimated tax charge of $47.5 million on the deemed
repatriated earnings of foreign subsidiaries and an estimated tax
charge of $16.0 million related to a change in assertion that those
profits were permanently reinvested overseas as of December 31,
2017, partially offset by an estimated tax benefit of $29.0 million
related to the revaluation of deferred taxes at the now lower
statutory corporate rate. The recorded net charge for Tax Reform is
a provisional amount that reflects our reasonable estimate at this
time, and is subject to adjustment during a measurement period not
to exceed one year from enactment in accordance with guidance from
the Securities and Exchange Commission.
The effective tax rate was 49.1% and 34.9% for fourth quarter
2017 and full-year 2017, respectively, of which 27.2 percentage
points and 7.4 percentage points, respectively, related to Tax
Reform. Excluding the impact of Tax Reform, the fourth quarter 2017
adjusted tax rate was 21.9%, a decrease compared to 29.7% for
fourth quarter 2016. Excluding the impact of Tax Reform, the
full-year 2017 adjusted tax rate was 27.5%, a decrease compared to
32.4% for full-year 2016. The decline in fourth quarter 2017 and
full-year 2017 adjusted tax rates primarily reflect the ongoing
efforts to better align our tax profile with our global operating
footprint, as well as the impact of stock-based compensation excess
tax benefits (the “windfall benefit”) resulting from the adoption
of new accounting guidance. The positive impact of the windfall
benefit totaled $0.9 million for fourth quarter 2017 and $5.7
million for full-year 2017. In addition, fourth quarter 2017
included the impact of various favorable discrete items.
The net tax charge of $34.5 million for Tax Reform was excluded
from Adjusted Net Income and Adjusted EPS as it is considered a
significant, non-recurring charge. We expect that any future
charges related to Tax Reform resulting from interpretations
related thereto, and further guidance from regulatory agencies will
continue to be excluded from Adjusted Net Income and Adjusted
EPS.
Net Income: Net
income declined 5.3% to $64.6 million, from $68.3 million in fourth
quarter 2016. For full-year 2017, net income increased 16.5% to
$304.0 million, compared to $260.9 million for full-year 2016.
Adjusted EBITDA:
Adjusted EBITDA was $173.6 million in fourth quarter 2017, up $26.7
million, or 18.2%, from fourth quarter 2016. Adjusted EBITDA margin
in fourth quarter 2017 was 51.9%, compared to 50.2% in fourth
quarter 2016. For full-year 2017, adjusted EBITDA was $659.2
million, up 15.8% from full-year 2016, and adjusted EBITDA margin
was 51.7% for full-year 2017, compared to 49.5% for full-year
2016.
Cash Balances & Outstanding
Debt: Total cash and cash equivalents as of
December 31, 2017 was $889.5 million, of which $503.0 million was
held outside of the United States. MSCI seeks to maintain minimum
cash balances globally of approximately $200.0 million to $250.0
million for general operating purposes. As a result of Tax Reform,
MSCI can now more efficiently access a significant portion of its
cash held outside of the United States in the short-term without
being subject to United States income taxes. Some portion of the
cash held outside the United States may be subject to certain
withholding taxes in local jurisdictions and other distribution
restrictions. In addition, the estimated $47.5 million one-time tax
on accumulated earnings of foreign subsidiaries will be paid out of
existing or future available cash balances over eight years, with
the first payment of approximately $4.0 million being due in March
2018. In connection with the estimated tax charge of $16.0 million
on previously permanently reinvested overseas earnings, tax
payments due to local jurisdictions will be due when cash is
brought back to the United States.
Total outstanding debt as of December 31, 2017 was $2,100.0
million, which excludes deferred financing fees of $21.9 million.
Net debt, defined as total outstanding debt less cash and cash
equivalents, was $1,210.5 million at December 31, 2017. The total
debt to operating income ratio (based on trailing twelve months
operating income) was 3.6x. The total debt to adjusted EBITDA ratio
(based on trailing twelve months adjusted EBITDA) was 3.2x.
Cash Flow &
Capex: Net cash provided by operating activities
increased to $143.2 million in fourth quarter 2017, compared to
$138.9 million in fourth quarter 2016 due to higher cash
collections, partially offset by higher payments for operating
expenses. Capex for fourth quarter 2017 was $20.6 million, compared
to $10.5 million in fourth quarter 2016. Free cash flow decreased
to $122.6 million in fourth quarter 2017, compared to $128.3
million in fourth quarter 2016 due to higher Capex, partially
offset by higher net cash provided by operating activities.
Net cash provided by operating activities was $404.2 million for
full-year 2017, compared to $442.4 million for full-year 2016.
Capex for full-year 2017 was $48.8 million, compared to $42.6
million for full-year 2016. Free cash flow was $355.3 million for
full-year 2017, compared to $399.7 million for full-year 2016. The
decrease in both net cash provided by operating activities and free
cash flow for full-year 2017 compared to full-year 2016 was driven
by higher payments for operating expenses, income taxes, including
the impact of refunds received in fourth quarter 2016, and
interest, partially offset by higher cash collections. Accounts
receivable as of December 31, 2017 increased $106.1 million or
47.9% from a year ago to $327.6 million, primarily reflecting
delays due to changes to our international billing practices
associated with re-aligning our tax profile with our global
operating footprint, a lengthening of client payment process
approval cycles and higher accruals of asset-based fees related to
the growth in AUM.
Share Count & Capital
Return: The weighted average diluted shares
outstanding in fourth quarter 2017 declined 1.5% to 92.5 million,
compared to 93.8 million in fourth quarter 2016. The lower share
count, which was driven by buybacks under the share repurchase
program and partially offset by increased dilution from employee
stock unit awards for which the ultimate payout is tied to a total
shareholder return measure, increased diluted and adjusted earnings
per share by $0.01 and $0.02, respectively, in fourth quarter 2017,
compared to fourth quarter 2016. In fourth quarter 2017, MSCI
repurchased a negligible number of its shares on the open market. A
total of $0.7 billion remains on the outstanding share repurchase
authorization as of January 26, 2018. Total shares outstanding as
of December 31, 2017 was 90.1 million.
On January 30, 2018, the Board of Directors of MSCI declared a
cash dividend of $0.38 per share for first quarter 2018. The first
quarter 2018 dividend is payable on March 15, 2018 to shareholders
of record as of the close of trading on February 16, 2018.
Table 1: Fourth Quarter 2017 Results by
Segment (unaudited)
Index
Analytics All Other Adjusted Adjusted
Adjusted Operating Adjusted EBITDA
Operating Adjusted EBITDA Operating
Adjusted EBITDA In thousands Revenues
EBITDA Margin Revenues EBITDA
Margin Revenues EBITDA Margin Q4'17 $
193,774 $ 142,631 73.6 % $ 117,510 $ 31,060 26.4 % $
23,495 $ (58 ) (0.2 %) Q4'16 $ 159,070 $ 113,161 71.1 % $
114,406 $ 33,344 29.1 % $ 19,336 $ 452 2.3 % Q3'17 $ 184,594 $
134,299 72.8 % $ 114,972 $ 33,013 28.7 % $ 22,531 $ 1,290 5.7 % YoY
% change 21.8 % 26.0 % 2.7 % (6.8 %) 21.5 % (112.8 %) FY
2017 $ 718,959 $ 522,043 72.6 % $ 458,269 $ 125,349 27.4 % $ 96,944
$ 11,783 12.2 % FY 2016 $ 613,551 $ 431,478 70.3 % $ 448,353 $
128,507 28.7 % $ 88,765 $ 9,472 10.7 % YoY % change 17.2 % 21.0 %
2.2 % (2.5 %) 9.2 % 24.4 %
Index Segment:
Operating revenues for fourth quarter 2017 increased $34.7 million,
or 21.8%, to $193.8 million, compared to $159.1 million for fourth
quarter 2016. The $34.7 million increase was driven by a $22.7
million, or 40.7%, increase in asset-based fees, an $11.6 million,
or 11.6%, increase in recurring subscriptions and a $0.4 million,
or 12.5%, increase in non-recurring revenues.
The $22.7 million increase in asset-based fees was driven by
strong growth across all types of index-linked investment products.
A $17.1 million, or 46.1%, increase in revenue from ETFs linked to
MSCI indexes was driven by a 51.2% increase in average AUM,
partially offset by the impact of a change in product mix. A $4.5
million, or 28.3%, increase in revenue from non-ETF passive
products was driven by higher AUM and an increased contribution
from higher fee products. In addition, revenues from exchange
traded futures and options contracts based on MSCI indexes grew
$1.1 million, or 41.4%, driven by a strong increase in total
trading volumes and a more favorable product mix.
The $11.6 million increase in recurring subscriptions was driven
by strong growth in core products, growth in new products,
including factor and ESG indexes, as well as growth in custom index
products. The adjusted EBITDA margin for Index was 73.6% for fourth
quarter 2017, compared to 71.1% for fourth quarter 2016.
Operating revenues for full-year 2017 increased $105.4 million,
or 17.2%, to $719.0 million, compared to $613.6 million for
full-year 2016. The $105.4 million increase was driven by a $65.9
million, or 31.3%, increase in asset-based fees, a $37.9 million,
or 9.7%, increase in recurring subscriptions, and a $1.6 million,
or 11.5%, increase in non-recurring revenues. The adjusted EBITDA
margin for Index was 72.6% for full-year 2017, compared to 70.3%
for full-year 2016.
Index Run Rate at December 31, 2017 grew by $144.1 million, or
23.1%, to $767.9 million, compared to December 31, 2016. The $144.1
million increase was driven by a $99.8 million, or 46.0%, increase
in asset-based fees Run Rate, and a $44.3 million, or 10.9%,
increase in recurring subscriptions Run Rate. The 10.9% increase in
Index recurring subscriptions Run Rate was driven by strong growth
in core products, growth in new products, including factor and ESG
indexes, as well as growth in custom index products.
Analytics Segment:
Operating revenues for fourth quarter 2017 increased $3.1 million,
or 2.7%, to $117.5 million, compared to $114.4 million for fourth
quarter 2016. The increase was driven by both Equity and
Multi-Asset Class Analytics products and strength within Asset
Manager, Asset Owner and Banking and Trading client segments. The
growth in revenues typically lags the growth in net sales,
reflecting differences in the timing of revenue recognition as
compared to the recognition of sales in Run Rate. Revenues are
recognized when a customer begins using our products and services,
which typically follows an onboarding or implementation period, and
sales are immediately recognized in Run Rate upon execution of the
sales contract. In recent quarters, onboarding and/or
implementation periods for some Analytics products and services
have increased, reflecting the growing complexity of clients’ needs
and resulting in a longer lag on average between the recognition of
sales in Run Rate and the corresponding revenue recognition.
The adjusted EBITDA margin for Analytics was 26.4% for fourth
quarter 2017, compared to 29.1% for fourth quarter 2016, primarily
due to elevated severance expenses associated with certain
efficiency initiatives, as well as investments in new products.
Operating revenues for full-year 2017 increased $9.9 million, or
2.2%, to $458.3 million, compared to $448.4 million for full-year
2016. Analytics operating revenues ex-FX for full-year 2017
increased 2.9%. The adjusted EBITDA margin for Analytics was 27.4%
for full-year 2017, compared to 28.7% for full-year 2016, with the
decline primarily driven by investments in products and
capabilities and elevated severance expenses associated with
certain efficiency initiatives.
Analytics Run Rate at December 31, 2017 grew by $37.9 million,
or 8.4%, to $489.5 million, compared to December 31, 2016,
primarily driven by growth in both Multi-Asset Class and Equity
Analytics products. Analytics Run Rate ex-FX increased 6.8%
compared to December 31, 2016.
All Other Segment:
Operating revenues for fourth quarter 2017 increased $4.2 million,
or 21.5%, to $23.5 million, compared to $19.3 million for fourth
quarter 2016. The increase in All Other revenues was driven by a
$2.9 million, or 24.2%, increase in ESG revenues to $14.7 million,
and a $1.3 million, or 17.3%, increase in Real Estate revenues to
$8.8 million. The increase in ESG revenues was driven by higher ESG
Ratings product revenues, which is benefiting from increased
investments. The increase in Real Estate revenues was primarily
driven by an increase in Market Information and Portfolio Analysis
Service product revenues. Fourth quarter 2017 Real Estate revenues
ex-FX increased 11.7% and All Other operating revenues ex-FX
increased 19.3%. The adjusted EBITDA margin for All Other was
negative 0.2% for fourth quarter 2017, compared to positive 2.3%
for fourth quarter 2016, as a result of increased compensation and
benefits expenses related to organizational changes within Real
Estate, continued investments into ESG and the impact of foreign
currency exchange rate fluctuations.
Operating revenues for full-year 2017 increased $8.2 million, or
9.2%, to $96.9 million, compared to $88.8 million for full-year
2016. The increase in All Other revenues was driven by a $9.8
million, or 21.8%, increase in ESG revenues to $54.8 million,
partially offset by a $1.6 million, or 3.8%, decrease in Real
Estate revenues to $42.1 million. Adjusting for the impact of
foreign currency exchange rate fluctuations and the divestiture of
the Real Estate occupiers business, full-year 2017 revenues for
Real Estate would have increased 0.3% and All Other operating
revenues would have increased 11.3%. The adjusted EBITDA margin for
All Other was 12.2% for full-year 2017, compared to 10.7% for
full-year 2016.
All Other Run Rate at December 31, 2017 grew by $20.3 million,
or 23.1%, to $108.4 million, compared to December 31, 2016. The
$20.3 million increase was primarily driven by a $15.5 million, or
31.5%, increase in ESG Run Rate to $64.6 million, and a $4.9
million, or 12.5%, increase in Real Estate Run Rate to $43.8
million. The increase in ESG Run Rate was primarily driven by
growth in ESG Ratings products. The increase in Real Estate Run
Rate was primarily driven by growth in Market Information and
Portfolio Analysis Service products. ESG Run Rate ex-FX increased
27.3%, Real Estate Run Rate ex-FX increased 3.8% and All Other Run
Rate ex-FX increased 16.9%, each compared to December 31, 2016.
Full-Year 2018 Guidance
MSCI’s guidance for full-year 2018 is as follows:
- Total operating expenses are expected
to be in the range of $725 million to $750 million.
- Adjusted EBITDA expenses are expected
to be in the range of $645 million to $665 million.
- Interest expense, including the
amortization of financing fees, is expected to be approximately
$116 million, assuming no additional financings.
- Capex is expected to be in the range of
$40 million to $50 million.
- Net cash provided by operating
activities and free cash flow is expected to be in the range of
$490 million to $540 million and $440 million to $500 million,
respectively.
- The effective tax rate is expected to
be in the range of 21% to 24%. This full-year effective tax rate
range includes an expected windfall tax benefit related to
stock-based compensation of approximately $7 million that we
primarily expect to receive in the first quarter of 2018. Further
information is expected to be released that may impact the
Company’s current interpretation and application of Tax Reform,
which may result in a change to our full-year guidance in
subsequent periods.
New Revenue Standard Effective January 1, 2018
Effective January 1, 2018, MSCI adopted the new revenue standard
using the modified retrospective transition method. This will
result in a cumulative adjustment to retained earnings on January
1, 2018 and the application of the provisions of the new standard
prospectively. The cumulative after-tax adjustment to retained
earnings is expected to be between $15 million and $20 million,
reflecting future period revenue from existing contracts under the
old revenue standard that would have been recognized in prior
periods under the new revenue standard.
Compared to the revenue recognition method used prior to 2018,
the new revenue standard will result in more revenue being
recognized up-front or earlier in the life of new contracts for
certain products and services, including fees related to the
licensing of desktop applications, implementation and set-up
services and multi-year deals. The lost future period revenue from
existing contracts as a result of the cumulative adjustment to
retained earnings is expected to be largely offset by the
acceleration of revenue from certain new contracts. As a result,
the overall impact of adopting the new revenue standard is not
expected to have a material impact on MSCI’s consolidated financial
statements or the annual trend of revenue. It is possible that some
increased quarterly revenue variability may exist by segment
depending on the timing of deal closings and renewals. There are no
changes to how we calculate our operating metrics.
Conference Call Information
MSCI's senior management will review fourth quarter 2017 and
full-year 2017 results on Thursday, February 1, 2018 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
earnings 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
our Investor Relations website, http://ir.msci.com/events.cfm,
beginning approximately two hours after the conclusion of the live
event. Through February 4, 2018, the recording will also be
available by dialing 1-800-585-8367 passcode: 4894633
within the United States or 1-404-537-3406 passcode:
4894633 for international callers. A replay of the conference call
will be archived in the events and presentations section of MSCI's
Investor Relations website for 12 months after the call.
About MSCI
For more than 45 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 99 of the top 100 largest money managers, according
to the most recent P&I ranking.
Total assets benchmarked to MSCI equity indexes is now over
$12.4 trillion globally as of September 30, 2017.
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 2018 guidance.
These forward-looking statements relate to future events or to
future financial performance and involve known and unknown risks,
uncertainties and other factors that may cause our actual results,
levels of activity, performance or achievements to be materially
different from any future results, levels of activity, performance
or achievements expressed or implied by these statements. In some
cases, you can identify forward-looking statements by the use of
words such as “may,” “could,” “expect,” “intend,” “plan,” “seek,”
“anticipate,” “believe,” “estimate,” “predict,” “potential” or
“continue,” or the negative of these terms or other comparable
terminology. You should not place undue reliance on forward-looking
statements because they involve known and unknown risks,
uncertainties and other factors that are, in some cases, beyond our
control and that could materially affect our 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, 2016 filed with the Securities and Exchange Commission
(“SEC”) on February 24, 2017 and in quarterly reports on Form 10-Q
and current reports on Form 8-K filed or furnished with the SEC
(herein, referred to as “Public Filings”). 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 enroll your email address
by visiting the “Email Alerts Subscription” section of MSCI’s
Investor Relations homepage 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 Operating Metrics
MSCI has presented supplemental key operating metrics as part of
this earnings release, including Run Rate, subscription sales and
cancellations, non-recurring sales and Aggregate Retention
Rate.
The Aggregate Retention Rate for a period is calculated by
annualizing the cancellations for which we have received a notice
of termination or for which we believe there is an intention not to
renew 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.
Run Rate estimates at a particular point in time the annualized
value of the recurring revenues under our client license agreements
(“Client Contracts”) for the next 12 months, assuming all Client
Contracts that come up for renewal are renewed and assuming
then-current currency exchange rates, subject to the adjustments
and exclusions described elsewhere in our Public Filings. For any
Client Contract where fees are linked to an investment product’s
assets or trading volume, the Run Rate calculation reflects, for
ETFs, the market value on the last trading day of the period, for
futures and options, the most recent quarterly volumes, and for
other non-ETF products, the most recent client reported assets. Run
Rate does not include fees associated with “one-time” and other
non-recurring transactions. In addition, we add to Run Rate the
annualized fee value of recurring new sales, whether to existing or
new clients, when we execute Client Contracts, even though the
license start date may not be effective until a later date. We
remove from Run Rate the annualized fee value associated with
products or services under any Client Contract with respect to
which we have received a notice of termination or non-renewal
during the period and determined that such notice evidences the
client’s final decision to terminate or not renew the applicable
products or services, even though such notice is not effective
until a later date.
Organic subscription Run Rate or revenue growth is defined as
the period over period Run Rate or revenue growth, excluding the
impact of changes in foreign currency and the first year impact of
any acquisitions. It is also adjusted for divestitures. Changes in
foreign currency are calculated by applying the end of period
currency exchange rate from the comparable prior period to current
period foreign currency denominated Run Rate or revenue.
Notes Regarding the Use of Non-GAAP Financial
Measures
MSCI has presented supplemental non-GAAP financial measures as
part of this earnings release. Reconciliations are provided in
Tables 9 – 13 below that reconcile each non-GAAP financial measure
with the most comparable GAAP measure. The non-GAAP financial
measures presented in this earnings release should not be
considered as alternative measures for the most directly comparable
GAAP financial measures. The non-GAAP financial measures presented
in this earnings release are used by management to monitor the
financial performance of the business, inform business
decision-making and forecast future results.
“Adjusted EBITDA” is defined as net income before provision for
income taxes, other expense (income), net, depreciation and
amortization of property, equipment and leasehold improvements,
amortization of intangible assets and, at times, certain other
transactions or adjustments.
“Adjusted EBITDA expenses” is defined as operating expenses less
depreciation and amortization of property, equipment and leasehold
improvements and amortization of intangible assets.
“Adjusted net income” and “adjusted EPS” are defined as net
income and diluted EPS, respectively, before the after-tax impact
of the amortization of acquired intangible assets, the impact of
Tax Reform adjustments and, at times, certain other transactions or
adjustments. For periods prior to first quarter 2017, the
amortization associated with capitalized software development costs
was included as an adjustment to adjusted net income and adjusted
EPS as it was not material.
“Adjusted tax rate” is defined as the effective tax rate
excluding the impact of Tax Reform.
“Capex” is defined as capital expenditures plus capitalized
software development costs.
“Free cash flow” is defined as net cash provided by operating
activities, less Capex.
We believe adjusted EBITDA and adjusted EBITDA expenses are
meaningful measures of the operating performance of MSCI because
they adjust for significant one-time, unusual or non-recurring
items as well as eliminate the accounting effects of capital
spending and acquisitions that do not directly affect what
management considers to be our core operating performance in the
period.
We believe adjusted net income and adjusted EPS are meaningful
measures of the performance of MSCI because they adjust for the
after-tax impact of significant one-time, unusual or non-recurring
items as well as eliminate the accounting effects of acquisitions
that do not directly affect what management considers to be our
core performance in the period.
We believe that free cash flow is useful to investors because it
relates the operating cash flow of MSCI to the capital that is
spent to continue and improve business operations, such as
investment in MSCI’s existing products. Further, free cash flow
indicates our ability to strengthen MSCI’s balance sheet, repay our
debt obligations, pay cash dividends and repurchase shares of our
common stock.
We believe that adjusted tax rate is useful to investors because
it increases the comparability of period-to-period results by
adjusting for the estimated net impact of Tax Reform.
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, adjusted tax rate, Capex 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.
Notes Regarding Adjusting for the Impact of Foreign Currency
Exchange Rate Fluctuations
Foreign currency exchange rate fluctuations are calculated to be
the difference between the current period results as reported
compared to the current period results recalculated using the
foreign currency exchange rates in effect for the comparable prior
period.
Table 2: Condensed Consolidated
Statements of Income (unaudited)
Three Months
Ended Year Ended Dec. 31, Dec. 31,
Sep. 30, YoY % Dec. 31, Dec.
31, YoY % In thousands, except per share data
2017 2016 2017 Change 2017
2016 Change Operating revenues $ 334,779 $ 292,812 $
322,097 14.3 % $ 1,274,172 $ 1,150,669 10.7 % Operating expenses:
Cost of revenues 69,306 63,819 68,491 8.6 % 273,913 252,107 8.6 %
Selling and marketing 47,771 41,609 44,918 14.8 % 177,297 166,666
6.4 % Research and development 20,721 18,960 17,983 9.3 % 75,884
75,204 0.9 % General and administrative 23,348 21,467 22,103 8.8 %
87,903 87,235 0.8 % Amortization of intangible assets 11,560 11,498
10,614 0.5 % 44,547 47,033 (5.3 %)
Depreciation and amortization of
property, equipment and leasehold improvements
8,118 9,447 9,325 (14.1 %) 35,440
34,320 3.3 % Total operating expenses(1) 180,824
166,800 173,434 8.4 % 694,984 662,565
4.9 % Operating income 153,955 126,012 148,663 22.2 %
579,188 488,104 18.7 % Interest income (2,237 ) (901 )
(1,835 ) 148.3 % (6,314 ) (2,906 ) 117.3 % Interest expense 29,027
29,039 29,020 (0.0 %) 116,098 101,651 14.2 % Other expense (income)
205 779 675 (73.7 %) 2,505 3,421
(26.8 %) Other expenses (income), net 26,995 28,917
27,860 (6.6 %) 112,289 102,166 9.9 %
Income before provision for income taxes 126,960 97,095 120,803
30.8 % 466,899 385,938 21.0 % Provision for income taxes
62,358 28,845 35,650 116.2 % 162,927
125,083 30.3 % Net income $ 64,602 $ 68,250 $ 85,153 (5.3 %)
$ 303,972 $ 260,855 16.5 %
Earnings per basic common share
$ 0.72 $ 0.73 $ 0.94 (1.4 %) $ 3.36 $ 2.72 23.5 %
Earnings
per diluted common share $ 0.70 $ 0.73 $ 0.93 (4.1 %) $ 3.31 $ 2.70
22.6 % Weighted average shares outstanding used in computing
earnings per share: Basic 90,130 93,327
90,112 (3.4 %) 90,336 95,986 (5.9 %) Diluted
92,467 93,845 91,868 (1.5 %) 91,914
96,540 (4.8 %) (1) Includes stock-based compensation expense
of $9.3 million, $8.5 million and $9.4 million for the three months
ended Dec. 31, 2017, Dec. 31, 2016 and Sep. 30, 2017, respectively.
Includes stock-based compensation expense of $37.9 million and
$32.5 million for the years ended Dec. 31, 2017 and Dec. 31, 2016,
respectively.
Table 3: Selected Balance Sheet Items
(unaudited)
As of Dec. 31, Dec.
31, Sep. 30, In thousands
2017 2016 2017 Cash and cash equivalents
$889,502 $791,834 $799,015 Accounts receivable, net of allowances
$327,597 $221,504 $309,196 Deferred revenue $374,365
$334,358 $374,730 Long-term debt(1) $2,078,093 $2,075,201
$2,077,370
(1) Consists of gross long-term debt, net
of deferred financing fees. Gross long-term debt at Dec. 31, 2017,
Dec. 31, 2016 and Sep. 30, 2017 was $2.1 billion.
Table 4: Selected Cash Flow Items
(unaudited)
Three Months Ended Year Ended Dec.
31, Dec. 31, Sep. 30, YoY %
Dec. 31, Dec. 31, YoY % In
thousands 2017 2016(1) 2017
Change 2017 2016(1) Change Net cash
provided by operating activities $ 143,153 $ 138,853 $ 101,773 3.1
% $ 404,158 $ 442,363 (8.6 %) Net cash used in investing activities
(20,600 ) (10,535 ) (11,553 ) 95.5 % (48,046 ) (42,031 ) 14.3 % Net
cash used in financing activities (33,668 ) (301,141 ) (43,251 )
(88.8 %) (267,543 ) (372,899 ) (28.3 %) Effect of exchange rate
changes 1,602 (9,405 ) 1,465 (117.0 %)
9,099 (13,305 ) (168.4 %)
Net increase (decrease) in cash and cash
equivalents
$ 90,487 $ (182,228 ) $ 48,434 (149.7 %) $ 97,668 $ 14,128 591.3 %
(1) Excess tax benefits related to share-based compensation
are now included in operating cash flows rather than financing cash
flows in accordance with the adoption of recent accounting
guidance. This change has been applied retrospectively and resulted
in increases of $1.1 million and $7.6 million in net cash provided
by operating activities with a matching decrease in net cash used
in financing activities in the same period for fourth quarter 2016
and full-year 2016, respectively.
Table 5: Operating Results by Segment
and Revenue Type (unaudited)
Index
Three Months Ended Year Ended Dec. 31,
Dec. 31, Sep. 30, YoY % Dec. 31,
Dec. 31, YoY % In thousands 2017
2016 2017 Change 2017 2016
Change Operating revenues: Recurring subscriptions $ 111,503
$ 99,939 $ 107,963 11.6 % $ 427,289 $ 389,348 9.7 % Asset-based
fees 78,493 55,774 72,861 40.7 % 276,092 210,229 31.3 %
Non-recurring 3,778 3,357 3,770 12.5 %
15,578 13,974 11.5 % Total operating revenues 193,774
159,070 184,594 21.8 % 718,959 613,551 17.2 % Adjusted EBITDA
expenses 51,143 45,909 50,295 11.4 %
196,916 182,073 8.2 % Adjusted EBITDA $ 142,631 $ 113,161 $
134,299 26.0 % $ 522,043 $ 431,478 21.0 % Adjusted EBITDA margin %
73.6 % 71.1 % 72.8 % 72.6 % 70.3 %
Analytics Three
Months Ended Year Ended Dec. 31, Dec. 31,
Sep. 30, YoY % Dec. 31, Dec. 31, YoY
% In thousands 2017 2016 2017
Change 2017 2016 Change Operating
revenues: Recurring subscriptions $ 115,349 $ 111,228 $ 113,574 3.7
% $ 452,253 $ 439,864 2.8 % Non-recurring 2,161 3,178
1,398 (32.0 %) 6,016 8,489 (29.1 %) Total
operating revenues 117,510 114,406 114,972 2.7 % 458,269 448,353
2.2 % Adjusted EBITDA expenses 86,450 81,062
81,959 6.6 % 332,920 319,846 4.1 % Adjusted EBITDA $
31,060 $ 33,344 $ 33,013 (6.8 %) $ 125,349 $ 128,507 (2.5 %)
Adjusted EBITDA margin % 26.4 % 29.1 % 28.7 % 27.4 % 28.7 %
All Other Three Months Ended Year Ended
Dec. 31, Dec. 31, Sep. 30, YoY %
Dec. 31, Dec. 31, YoY % In thousands
2017 2016 2017 Change 2017
2016 Change Operating revenues: Recurring
subscriptions $ 22,225 $ 17,924 $ 21,865 24.0 % $ 93,481 $ 84,457
10.7 % Non-recurring 1,270 1,412 666 (10.1 %)
3,463 4,308 (19.6 %) Total operating revenues 23,495
19,336 22,531 21.5 % 96,944 88,765 9.2 % Adjusted EBITDA expenses
23,553 18,884 21,241 24.7 % 85,161
79,293 7.4 % Adjusted EBITDA $ (58 ) $ 452 $ 1,290 (112.8 %)
$ 11,783 $ 9,472 24.4 % Adjusted EBITDA margin % (0.2 %) 2.3 % 5.7
% 12.2 % 10.7 %
Consolidated Three Months
Ended Year Ended Dec. 31, Dec. 31, Sep.
30, YoY % Dec. 31, Dec. 31, YoY %
In thousands 2017 2016 2017
Change 2017 2016 Change Operating
revenues: Recurring subscriptions $ 249,077 $ 229,091 $ 243,402 8.7
% $ 973,023 $ 913,669 6.5 % Asset-based fees 78,493 55,774 72,861
40.7 % 276,092 210,229 31.3 % Non-recurring 7,209
7,947 5,834 (9.3 %) 25,057 26,771 (6.4 %)
Operating revenues total 334,779 292,812 322,097 14.3 % 1,274,172
1,150,669 10.7 % Adjusted EBITDA expenses 161,146
145,855 153,495 10.5 % 614,997 581,212 5.8 %
Adjusted EBITDA $ 173,633 $ 146,957 $ 168,602 18.2 % $ 659,175 $
569,457 15.8 % Adjusted EBITDA margin % 51.9 % 50.2 % 52.3 % 51.7 %
49.5 % Operating margin % 46.0 % 43.0 % 46.2 % 45.5 % 42.4 %
Table 6: Sales and Aggregate Retention
Rate by Segment (unaudited)
Three Months Ended Year Ended
Dec. 31, Sep. 30, June 30,
Mar. 31, Dec. 31, Dec. 31,
Dec. 31, In thousands 2017 2017
2017 2017 2016 2017 2016
Index New recurring subscription sales $ 17,980 $ 15,499 $
13,636 $ 14,193 $ 17,220 $ 61,308 $ 55,279 Subscription
cancellations (6,180 ) (4,605 ) (3,045 )
(3,165 ) (6,071 ) (16,995 ) (17,417 )
Net new recurring subscription sales $ 11,800 $ 10,894 $ 10,591 $
11,028 $ 11,149 $ 44,313 $ 37,862 Non-recurring sales $ 3,677 $
3,704 $ 4,555 $ 4,374 $ 3,461 $ 16,310 $ 17,850 Total gross
sales(1) $ 21,657 $ 19,203 $ 18,191 $ 18,567 $ 20,681 $ 77,618 $
73,129 Total Index net sales $ 15,477 $ 14,598 $ 15,146 $ 15,402 $
14,610 $ 60,623 $ 55,712 Index Aggregate Retention Rate(2)
93.9 % 95.5 % 97.0 % 96.9 % 93.4 % 95.8 % 95.3 %
Analytics New recurring subscription sales $ 25,217 $ 15,036
$ 12,050 $ 11,874 $ 18,617 $ 64,177 $ 55,255 Subscription
cancellations (11,679 ) (7,444 ) (6,940 )
(7,611 ) (13,749 ) (33,674 ) (39,205 )
Net new recurring subscription sales $ 13,538 $ 7,592 $ 5,110 $
4,263 $ 4,868 $ 30,503 $ 16,050 Non-recurring sales $ 3,742 $ 2,792
$ 1,609 $ 2,163 $ 3,215 $ 10,306 $ 8,830 Total gross sales(1) $
28,959 $ 17,828 $ 13,659 $ 14,037 $ 21,832 $ 74,483 $ 64,085 Total
Analytics net sales $ 17,280 $ 10,384 $ 6,719 $ 6,426 $ 8,083 $
40,809 $ 24,880 Analytics Aggregate Retention Rate(2) 89.7 %
93.4 % 93.9 % 93.3 % 87.4 % 92.5 % 91.0 %
All Other
New recurring subscription sales $ 8,391 $ 4,576 $ 5,456 $ 4,121 $
6,364 $ 22,544 $ 19,978 Subscription cancellations (1,954 )
(2,050 ) (2,030 ) (1,683 ) (2,526 )
(7,717 ) (8,288 ) Net new recurring subscription
sales $ 6,437 $ 2,526 $ 3,426 $ 2,438 $ 3,838 $ 14,827 $ 11,690
Non-recurring sales $ 1,479 $ 829 $ 958 $ 609 $ 1,139 $ 3,875 $
4,247 Total gross sales(1) $ 9,870 $ 5,405 $ 6,414 $ 4,730 $ 7,503
$ 26,419 $ 24,225 Total All Other net sales $ 7,916 $ 3,355 $ 4,384
$ 3,047 $ 4,977 $ 18,702 $ 15,937 All Other Aggregate
Retention Rate(2) 91.1 % 90.7 % 90.8 % 92.4 % 87.8 % 91.2 % 90.0 %
Consolidated New recurring subscription sales $
51,588 $ 35,111 $ 31,142 $ 30,188 $ 42,201 $ 148,029 $ 130,512
Subscription cancellations (19,813 ) (14,099 )
(12,015 ) (12,459 ) (22,346 ) (58,386 )
(64,910 ) Net new recurring subscription sales $ 31,775 $ 21,012 $
19,127 $ 17,729 $ 19,855 $ 89,643 $ 65,602 Non-recurring sales $
8,898 $ 7,325 $ 7,122 $ 7,146 $ 7,815 $ 30,491 $ 30,927 Total gross
sales(1) $ 60,486 $ 42,436 $ 38,264 $ 37,334 $ 50,016 $ 178,520 $
161,439 Total net sales $ 40,673 $ 28,337 $ 26,249 $ 24,875 $
27,670 $ 120,134 $ 96,529 Total Aggregate Retention Rate(2)
91.6 % 94.0 % 94.9 % 94.7 % 89.9 % 93.8 % 92.7 % (1) Total
gross sales equal new recurring subscription sales plus
non-recurring sales. (2) See "Notes Regarding the Use of Operating
Metrics" for details regarding the definition of Aggregate
Retention Rate.
Table 7: AUM in ETFs Linked to MSCI
Indexes (unaudited)(1)(2)
Three Months Ended Year Ended
Dec. 31, Sep. 30, June
30, Mar. 31, Dec. 31,
Dec. 31, Dec. 31, In billions
2017 2017 2017 2017 2016
2017 2016
Beginning Period AUM in ETFs linked to
MSCI Indexes
$ 674.3 $ 624.3 $ 555.7 $ 481.4 $ 474.9 $ 481.4 $ 433.4 Market
Appreciation/(Depreciation) 32.0 32.2 23.6 35.8 (8.7 ) 123.6 10.8
Cash Inflows 38.0 17.8 45.0 38.5
15.2 139.3 37.2
Period-End AUM in ETFs linked to MSCI
Indexes
$ 744.3 $ 674.3 $ 624.3 $ 555.7 $ 481.4 $ 744.3 $ 481.4
Period Average AUM in ETFs linked to MSCI
Indexes
$ 712.3 $ 654.4 $ 595.0 $ 524.1 $ 471.1 $ 621.4 $ 446.4 Avg.
Basis Point Fee(3) 3.04 3.05 3.07 3.08 3.10 3.04 3.10
Source: Bloomberg and MSCI
(1) ETF assets under management calculation methodology is ETF net
asset value multiplied by shares outstanding. (2) The AUM in ETFs
numbers also include AUM in Exchange Traded Notes, the value of
which is less than 1.0% of the AUM amounts presented. (3) Based on
period-end Run Rate for ETFs linked to MSCI Indexes using
period-end AUM. AUM: Assets under management.
Table 8: Run Rate by Segment and Type
(unaudited)(1)
As of Dec. 31,
Dec. 31, Sep. 30, YoY %
In thousands 2017 2016 2017
Change Index Recurring subscriptions $ 451,048 $
406,729 $ 439,251 10.9 % Asset-based fees 316,812
216,982 289,812 46.0 %
Index Run Rate 767,860
623,711 729,063 23.1 %
Analytics Run
Rate 489,451 451,533 474,721 8.4 %
All Other Run Rate 108,413 88,074
101,253 23.1 %
Total Run Rate $
1,365,724 $ 1,163,318 $
1,305,037 17.4 % Total recurring
subscriptions $ 1,048,912 $ 946,336 $ 1,015,225 10.8 % Total
asset-based fees 316,812 216,982 289,812 46.0
%
Total Run Rate $ 1,365,724 $
1,163,318 $ 1,305,037 17.4 %
(1) See "Notes Regarding the Use of
Operating Metrics" for details regarding the definition of Run
Rate.
Table 9: Reconciliation of Adjusted
EBITDA to Net Income (unaudited)
Three Months Ended Year
Ended Dec. 31, Dec. 31,
Sep. 30, Dec. 31, Dec. 31, In
thousands 2017 2016 2017 2017
2016 Index adjusted EBITDA $ 142,631 $ 113,161 $ 134,299 $
522,043 $ 431,478 Analytics adjusted EBITDA 31,060 33,344 33,013
125,349 128,507 All Other adjusted EBITDA (58 ) 452
1,290 11,783 9,472
Consolidated adjusted
EBITDA 173,633 146,957
168,602 659,175 569,457
Amortization of intangible assets 11,560 11,498 10,614 44,547
47,033 Depreciation and amortization of property, equipment and
leasehold improvements 8,118 9,447 9,325
35,440 34,320
Operating income 153,955
126,012 148,663 579,188 488,104 Other
expense (income), net 26,995 28,917 27,860 112,289 102,166
Provision for income taxes 62,358 28,845
35,650 162,927 125,083
Net income $
64,602 $ 68,250 $ 85,153
$ 303,972 $ 260,855
Table 10: Reconciliation of Adjusted
Net Income and Adjusted EPS to Net Income and EPS
(unaudited)
Three Months Ended Year Ended
Dec. 31, Dec. 31, Sep. 30,
Dec. 31, Dec. 31, In thousands, except per
share data 2017 2016 2017 2017
2016 Net income $ 64,602 $ 68,250 $ 85,153 $ 303,972 $
260,855 Plus: Amortization of acquired intangible assets 9,238
11,498 9,270 39,157 47,033 Less: Gain on sale of investment — — —
(771 ) — Plus: Tax Reform adjustments 34,500 — — 34,500 — Less:
Income tax effect (1,922 ) (3,403 ) (2,732 )
(10,772 ) (15,243 )
Adjusted net income
$ 106,418 $ 76,345 $
91,691 $ 366,086 $ 292,645
Diluted EPS $ 0.70 $ 0.73 $ 0.93 $ 3.31 $ 2.70 Plus:
Amortization of acquired intangible assets 0.10 0.12 0.10 0.43 0.49
Less: Gain on sale of investment — — — (0.01 ) — Plus: Tax Reform
adjustments 0.37 — — 0.38 — Less: Income tax effect (0.02 )
(0.04 ) (0.03 ) (0.13 ) (0.16 )
Adjusted EPS $ 1.15 $ 0.81
$ 1.00 $ 3.98 $ 3.03
Table 11: Reconciliation of Adjusted
EBITDA Expenses to Operating Expenses (unaudited)
Three Months Ended
Year Ended Full-Year Dec. 31,
Dec. 31, Sep. 30, Dec. 31,
Dec. 31, 2018 In thousands
2017 2016 2017 2017 2016
Outlook(1) Index adjusted EBITDA expenses $ 51,143 $ 45,909
$ 50,295 $ 196,916 $ 182,073 Analytics adjusted EBITDA expenses
86,450 81,062 81,959 332,920 319,846 All Other adjusted EBITDA
expenses 23,553 18,884 21,241 85,161
79,293
Consolidated adjusted EBITDA expenses
161,146 145,855 153,495
614,997 581,212 $645,000 -
$665,000 Amortization of intangible assets 11,560 11,498 10,614
44,547 47,033 Depreciation and amortization of property, 82,000
equipment and leasehold improvements 8,118 9,447
9,325 35,440 34,320
Total operating
expenses $ 180,824 $ 166,800
$ 173,434 $ 694,984 $
662,565 $725,000 - $750,000 (1) We have not
provided a line-item reconciliation for adjusted EBITDA expenses to
total operating expenses for this future period because we do not
provide guidance on the individual reconciling items between total
operating expenses and adjusted EBITDA expenses.
Table 12: Reconciliation of Free Cash
Flow to Net Cash Provided by Operating Activities
(unaudited)
Three Months Ended Year
Ended Full-Year Dec. 31, Dec. 31,
Sep. 30, Dec. 31, Dec. 31,
2018 In thousands 2017 2016 2017
2017 2016 Outlook(1) Net cash provided by
operating activities $ 143,153 $ 138,853 $ 101,773 $ 404,158 $
442,363 $490,000 - $540,000 Capital expenditures (15,736 ) (8,140 )
(6,390 ) (33,177 ) (32,284 ) Capitalized software development costs
(4,863 ) (2,395 ) (5,164 ) (15,640 )
(10,344 ) Capex (20,599 ) (10,535 )
(11,554 ) (48,817 ) (42,628 ) (50,000 -
40,000)
Free cash flow $ 122,554 $
128,318 $ 90,219 $ 355,341
$ 399,735 $440,000 - $500,000 (1) We
have not provided a line-item reconciliation for free cash flow to
net cash from operating activities for this future period because
we do not provide guidance on the individual reconciling items
between net cash from operating activities and free cash flow.
Table 13: Reconciliation of Effective
Tax Rate to Adjusted Tax Rate (unaudited)
Three Months Ended Year Ended
Dec. 31, Dec. 31, Sep. 30,
Dec. 31, Dec. 31, 2017 2016
2017 2017 2016 Effective tax rate 49.12%
29.71% 29.51% 34.90% 32.41% Less: Tax Reform impact on effective
tax rate 27.18% —% —% 7.39% —% Adjusted tax rate 21.94% 29.71%
29.51% 27.51% 32.41%
View source
version on businesswire.com: http://www.businesswire.com/news/home/20180201005605/en/
MSCI Inc.InvestorsAndrew Wiechmann, +1
212-804-3986andrew.wiechmann@msci.comorMediaSamuel Wang, +1
212-804-5244samuel.wang@msci.com
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