MSCI Inc. (“MSCI” or the “Company”) (NYSE: MSCI), a leading
provider of critical decision support tools and services for the
global investment community, today announced its financial results
for the three months ended March 31, 2023 (“first quarter
2023”).
Financial and Operational Highlights for First Quarter
2023 (Note: Unless otherwise noted, percentage and other
changes are relative to the three months ended March 31, 2022
(“first quarter 2022”) and Run Rate percentage changes are relative
to March 31, 2022).
- Operating revenues of $592.2 million, up 5.8%; Organic
operating revenue growth of 7.2%
- Recurring subscription revenues up 11.4%; Asset-based fees
down 8.2%
- Operating margin of 53.1%; Adjusted EBITDA margin of
58.2%
- Diluted EPS of $2.97, up 6.8%; Adjusted EPS of $3.14, up
5.4%
- Organic recurring subscription Run Rate growth of 12.1%;
Retention Rate of 95.2%
- Approximately $110.5 million in dividends were paid to
shareholders in first quarter 2023; Cash dividend of $1.38 per
share declared by MSCI Board of Directors for second quarter
2023
Three Months Ended
Mar. 31,
Mar. 31,
In thousands, except per share data
(unaudited)
2023
2022
% Change
Operating revenues
$
592,218
$
559,945
5.8
%
Operating income
$
314,602
$
288,978
8.9
%
Operating margin %
53.1
%
51.6
%
Net income
$
238,728
$
228,423
4.5
%
Diluted EPS
$
2.97
$
2.78
6.8
%
Adjusted EPS
$
3.14
$
2.98
5.4
%
Adjusted EBITDA
$
344,729
$
318,544
8.2
%
Adjusted EBITDA margin %
58.2
%
56.9
%
“MSCI delivered solid first-quarter results in a tough
environment, confirming the underlying strengths of our franchise.
We posted 13.3% organic recurring subscription revenue growth as
well as our 37th consecutive quarter of double-digit Index
recurring subscription Run Rate growth and 67.8% Run Rate growth
from Climate across our product lines,” said Henry A. Fernandez,
Chairman and CEO of MSCI.
“We have not been immune to the market turmoil, which impacted
sales in areas such as ESG and Real Estate, but our resilience and
leadership in the industry continue to stand out. MSCI has a
globally diversified franchise that provides mission-critical
investment solutions for a diverse and growing range of clients and
use cases. This helps to stabilize demand for our solutions across
business cycles. Moreover, difficult environments highlight our
competitive advantages and thus create new opportunities for us to
outdistance our competitors,” added Mr. Fernandez.
First Quarter Consolidated
Results
Operating Revenues:
Operating revenues were $592.2 million, up 5.8%. Organic operating
revenue growth was 7.2%. The $32.3 million increase was the result
of $45.5 million in higher recurring subscription revenues offset
by an $11.9 million decrease in asset-based fees and a $1.3 million
decrease in non-recurring revenues.
Run Rate and Retention Rate:
Total Run Rate at March 31, 2023 was $2,379.1 million, up 6.7%.
Recurring subscription Run Rate increased by $191.3 million, and
asset-based fees Run Rate decreased by $41.7 million. Organic
recurring subscription Run Rate growth was 12.1%. Retention Rate in
first quarter 2023 was 95.2%, compared to 95.9% in first quarter
2022.
Expenses: Total operating
expenses were $277.6 million, up 2.5%. Adjusted EBITDA expenses
were $247.5 million, up 2.5%, primarily reflecting higher
non-compensation costs including information technology and market
data costs. The increase also reflected higher compensation and
benefits costs related to continued investments to support growth.
Total operating expenses excluding the impact of foreign currency
exchange rate fluctuations (“ex-FX”) and adjusted EBITDA expenses
ex-FX increased 5.4% and 5.9%, respectively.
Operating Income: Operating
income was $314.6 million, up 8.9%. Operating income margin in
first quarter 2023 was 53.1%, compared to 51.6% in first quarter
2022.
Headcount: As of March 31,
2023, we had 4,846 employees reflecting an 11.1% increase.
Approximately 35% and 65% of employees are located in developed
market and emerging market locations, respectively.
Other Expense (Income), Net:
Other expense (income), net was $38.2 million, down 4.5% primarily
driven by higher interest income reflecting higher yields and
higher cash balance, partially offset by higher interest expense
associated with higher average outstanding debt balances and the
impact of foreign currency exchange rate fluctuations.
Income Taxes: The effective
tax rate was 13.6% in first quarter 2023 compared to 8.2% in first
quarter 2022. The higher rate in the current period reflected lower
net favorable discrete items, primarily driven by lower excess tax
benefits recognized on share-based compensation vested during the
period, partially offset by higher tax benefits related to the
resolution of prior year items.
Net Income: As a result of
the factors described above, net income was $238.7 million, up
4.5%.
Adjusted EBITDA: Adjusted
EBITDA was $344.7 million, up 8.2%. Adjusted EBITDA margin in first
quarter 2023 was 58.2%, compared to 56.9% in first quarter
2022.
Index Segment:
Table 1A: Results (unaudited)
Three Months Ended
Mar. 31,
Mar. 31,
In thousands
2023
2022
% Change
Operating revenues:
Recurring subscriptions
$
196,678
$
174,498
12.7
%
Asset-based fees
133,126
145,053
(8.2
)%
Non-recurring
9,578
11,208
(14.5
)%
Total operating revenues
339,382
330,759
2.6
%
Adjusted EBITDA expenses
85,700
84,884
1.0
%
Adjusted EBITDA
$
253,682
$
245,875
3.2
%
Adjusted EBITDA margin %
74.7
%
74.3
%
Index operating revenues were $339.4 million, up 2.6%. The $8.6
million increase was driven by $22.2 million in higher recurring
subscription revenues offset by $11.9 million in lower asset-based
fees and $1.7 million in lower non-recurring revenues.
Growth in recurring subscription revenues was primarily driven
by strong growth from market-cap weighted and factor, ESG and
climate Index products.
The decrease in revenues attributable to asset-based fees
primarily reflected a decline in revenues from non-ETF indexed
funds linked to MSCI indexes, primarily driven by decrease in
average AUM. The decrease in revenues attributable to asset-based
fees also reflected a decline in revenues from ETFs linked to MSCI
equity indexes, primarily driven by a decrease in average AUM,
partially offset by an increase in average basis point fees.
Index Run Rate as of March 31, 2023, was $1.3 billion, up 3.3%.
The $42.8 million increase was comprised of an $84.5 million
increase in recurring subscription Run Rate offset by a $41.7
million decrease in asset-based fees Run Rate. The increase in
recurring subscription Run Rate was primarily driven by strong
growth from market cap-weighted products, custom Index products and
special packages, and factor, ESG and climate products. The
increase reflected growth across all regions and client segments.
The decline in asset-based fees Run Rate primarily reflected lower
AUM in non-ETF indexed funds linked to MSCI indexes and ETFs linked
to MSCI equity indexes.
Analytics Segment:
Table 1B: Results (unaudited)
Three Months Ended
Mar. 31,
Mar. 31,
In thousands
2023
2022
% Change
Operating revenues:
Recurring subscriptions
$
144,503
$
137,799
4.9
%
Non-recurring
2,567
1,998
28.5
%
Total operating revenues
147,070
139,797
5.2
%
Adjusted EBITDA expenses
86,290
88,908
(2.9
)%
Adjusted EBITDA
$
60,780
$
50,889
19.4
%
Adjusted EBITDA margin %
41.3
%
36.4
%
Analytics operating revenues were $147.1 million, up 5.2%. The
$7.3 million increase was primarily driven by growth from recurring
subscriptions related to both Equity Analytics and Multi-Asset
Class products. Excluding the impact of foreign currency exchange
rate fluctuations, Analytics operating revenue growth was 5.9%.
Analytics Run Rate as of March 31, 2023, was $621.6 million, up
5.6%. The increase of $33.2 million was driven by strong growth in
Equity Analytics products as well as growth in Multi-Asset Class
products, and reflected growth across all regions. Excluding the
impact of foreign currency exchange rate fluctuations, Analytics
Run Rate growth was 6.3%.
ESG and Climate Segment:
Table 1C: Results (unaudited)
Three Months Ended
Mar. 31,
Mar. 31,
In thousands
2023
2022
% Change
Operating revenues:
Recurring subscriptions
$
65,732
$
50,572
30.0
%
Non-recurring
1,326
1,457
(9.0
)%
Total operating revenues
67,058
52,029
28.9
%
Adjusted EBITDA expenses
49,182
39,937
23.1
%
Adjusted EBITDA
$
17,876
$
12,092
47.8
%
Adjusted EBITDA margin %
26.7
%
23.2
%
ESG and Climate operating revenues were $67.1 million, up 28.9%.
The $15.0 million increase was primarily driven by strong growth
from recurring subscriptions related to Ratings, Climate and
Screening products. Excluding the impact of foreign currency
exchange rate fluctuations, ESG and Climate operating revenue
growth was 37.6%.
ESG and Climate Run Rate as of March 31, 2023, was $278.9
million, up 29.0%. The $62.8 million increase primarily reflects
strong growth from Ratings, Climate and Screening products with
contributions across all regions and client segments. Excluding the
impact of foreign currency exchange rate fluctuations, ESG and
Climate Run Rate growth was 29.9%.
All Other – Private Assets
Segment:
Table 1D: Results (unaudited)
Three Months Ended
Mar. 31,
Mar. 31,
In thousands
2023
2022
% Change
Operating revenues:
Recurring subscriptions
$
38,334
$
36,891
3.9
%
Non-recurring
374
469
(20.3
)%
Total operating revenues
38,708
37,360
3.6
%
Adjusted EBITDA expenses
26,317
27,672
(4.9
)%
Adjusted EBITDA
$
12,391
$
9,688
27.9
%
Adjusted EBITDA margin %
32.0
%
25.9
%
All Other – Private Assets operating revenues, which reflect the
Real Assets operating segment, were $38.7 million, up 3.6%,
primarily driven by growth from recurring subscriptions related to
growth from RCA, Datscha, Global Intel and Climate Value-at-Risk
products, partially offset by unfavorable foreign currency exchange
rate fluctuations. All Other – Private Assets operating revenues
also include contributions from Enterprise Analytics and Income
& Risk products, which typically have higher deliveries in the
first half of the year. All Other – Private Assets organic
operating revenues increased by 8.0%.
All Other – Private Assets Run Rate, which reflects the Real
Assets operating segment, was $148.4 million as of March 31, 2023,
up 7.9%, driven by the growth in RCA, Global Intel, Enterprise
Analytics, Datscha and Climate Value-at-Risk products, partially
offset by unfavorable foreign currency exchange rate fluctuations.
Excluding the impact of foreign currency exchange rate
fluctuations, All Other – Private Assets Run Rate growth was
10.4%.
Select Balance Sheet Items and Capital
Allocation
Cash Balances and Outstanding
Debt: Cash and cash equivalents was $1,080.6 million as
of March 31, 2023, including $3.9 million of restricted cash. MSCI
typically seeks to maintain minimum cash balances globally of
approximately $225.0 million to $275.0 million for general
operating purposes.
Total principal amounts of debt outstanding as of March 31,
2023, were $4.5 billion. The total debt to net income ratio (based
on trailing twelve months net income) was 5.1x. The total debt to
adjusted EBITDA ratio (based on trailing twelve months adjusted
EBITDA) was 3.3x.
MSCI seeks to maintain total debt to adjusted EBITDA in a target
range of 3.0x to 3.5x.
Capex and Cash Flow: Capex
was $21.6 million, and net cash provided by operating activities
increased by 8.2% to $264.1 million, primarily reflecting lower
cash expenses paid in the quarter and higher cash collections from
customers, partially offset by higher payments for interest
expense. Free cash flow for first quarter 2023 was up 6.0% to
$242.6 million.
Share Count and Share
Repurchases: Weighted average diluted shares outstanding
were 80.5 million in first quarter 2023, down 2.2% year-over-year.
Total shares outstanding as of March 31, 2023 were 80.1 million. As
of April 24, 2023 trade date, a total of approximately $1.3 billion
remains available on the outstanding share repurchase
authorization.
Dividends: Approximately
$110.5 million in dividends were paid to shareholders in first
quarter 2023. On April 24, 2023, the MSCI Board of Directors
declared a cash dividend of $1.38 per share for second quarter
2023, payable on May 31, 2023 to shareholders of record as of the
close of trading on May 12, 2023.
Full-Year 2023 Guidance
MSCI’s guidance for the year ending December 31, 2023
(“Full-Year 2023”) is based on assumptions about a number of
factors, in particular related to macroeconomic factors and the
capital markets. These assumptions are subject to uncertainty, and
actual results for the year could differ materially from our
current guidance, including as a result of the uncertainties, risks
and assumptions discussed in the “Risk Factors” and “Management’s
Discussion and Analysis of Financial Condition and Results of
Operations” sections of our Annual Report on Form 10-K, as updated
in quarterly reports on Form 10-Q and current reports on Form 8-K
filed or furnished with the SEC. See “Forward-Looking Statements”
below.
Guidance Item
Current Guidance for Full-Year
2023
Operating Expense
$1,090 to $1,130 million
Adjusted EBITDA Expense
$965 to $995 million
Interest Expense
(including amortization of financing
fees)
$184 to $187 million
Depreciation & Amortization
Expense
$125 to $135 million
Effective Tax Rate
17.0% to 20.0%
Capital Expenditures
$75 to $85 million
Net Cash Provided by Operating
Activities
$1,145 to $1,195 million
Free Cash Flow
$1,060 to $1,120 million
The guidance provided above assumes, among other things, that
MSCI maintains its current debt levels.
Conference Call Information
MSCI’s senior management will review the first quarter 2023
results on Tuesday, April 25, 2023 at 11:00 AM Eastern Time. To
listen to the live event via webcast, visit the events and
presentations section of MSCI’s Investor Relations website,
https://ir.msci.com/events-and-presentations, or via telephone,
dial 1-833-630-1956 within the United States. International callers
may dial 1-412-317-1837. Participants should ask the operator to be
joined into the MSCI call. The teleconference will also be webcast
with an accompanying slide presentation that can be accessed
through MSCI’s Investor Relations website.
About MSCI Inc.
MSCI is a leading provider of critical decision support tools
and services for the global investment community. With over 50
years of expertise in research, data and technology, we power
better investment decisions by enabling clients to understand and
analyze key drivers of risk and return and confidently build more
effective portfolios. We create industry-leading research-enhanced
solutions that clients use to gain insight into and improve
transparency across the investment process. To learn more, please
visit www.msci.com. MSCI#IR
Forward-Looking Statements
This earnings release contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of
1995, including without limitation, MSCI’s Full-Year 2023 guidance.
These forward-looking statements relate to future events or to
future financial performance and involve known and unknown risks,
uncertainties and other factors that may cause our actual results,
levels of activity, performance or achievements to be materially
different from any future results, levels of activity, performance
or achievements expressed or implied by these statements. In some
cases, you can identify forward-looking statements by the use of
words such as “may,” “could,” “expect,” “intend,” “plan,” “seek,”
“anticipate,” “believe,” “estimate,” “predict,” “potential” or
“continue,” or the negative of these terms or other comparable
terminology. You should not place undue reliance on forward-looking
statements because they involve known and unknown risks,
uncertainties and other factors that are, in some cases, beyond
MSCI’s control and that could materially affect actual results,
levels of activity, performance or achievements.
Other factors that could materially affect actual results,
levels of activity, performance or achievements can be found in
MSCI’s Annual Report on Form 10-K for the fiscal year ended
December 31, 2022 filed with the Securities and Exchange Commission
(“SEC”) on February 10, 2023 and in quarterly reports on Form 10-Q
and current reports on Form 8-K filed or furnished with the SEC. If
any of these risks or uncertainties materialize, or if MSCI’s
underlying assumptions prove to be incorrect, actual results may
vary significantly from what MSCI projected. Any forward-looking
statement in this earnings release reflects MSCI’s current views
with respect to future events and is subject to these and other
risks, uncertainties and assumptions relating to MSCI’s operations,
results of operations, growth strategy and liquidity. MSCI assumes
no obligation to publicly update or revise these forward-looking
statements for any reason, whether as a result of new information,
future events, or otherwise, except as required by law.
Website and Social Media Disclosure
MSCI uses its Investor Relations homepage, Corporate
Responsibility homepage and corporate Twitter account (@MSCI_Inc)
as channels of distribution of company information. The information
MSCI posts through these channels may be deemed material.
Accordingly, investors should monitor these channels, in addition
to following MSCI’s press releases, SEC filings and public
conference calls and webcasts. In addition, you may automatically
receive email alerts and other information about MSCI when you
enroll your email address by visiting the “Email Alerts” section of
MSCI’s Investor Relations homepage at
http://ir.msci.com/email-alerts. The contents of MSCI’s website,
including its quarterly updates, blog, podcasts and social media
channels are not, however, incorporated by reference into this
earnings release.
Notes Regarding the Use of Operating Metrics
MSCI has presented supplemental key operating metrics as part of
this earnings release, including Retention Rate, Run Rate,
subscription sales, subscription cancellations and non-recurring
sales.
Retention Rate is an important metric because subscription
cancellations decrease our Run Rate and ultimately our future
operating revenues over time. The annual Retention Rate represents
the retained subscription Run Rate (subscription Run Rate at the
beginning of the fiscal year less actual cancels during the year)
as a percentage of the subscription Run Rate at the beginning of
the fiscal year.
The Retention Rate for a non-annual period is calculated by
annualizing the cancellations for which we have received a notice
of termination or for which we believe there is an intention not to
renew or discontinue the subscription during the non-annual period,
and we believe that such notice or intention evidences the client’s
final decision to terminate or not renew the applicable agreement,
even though such notice is not effective until a later date. This
annualized cancellation figure is then divided by the subscription
Run Rate at the beginning of the fiscal year to calculate a
cancellation rate. This cancellation rate is then subtracted from
100% to derive the annualized Retention Rate for the period.
Retention Rate is computed by operating segment on a
product/service-by-product/service basis. In general, if a client
reduces the number of products or services to which it subscribes
within a segment, or switches between products or services within a
segment, we treat it as a cancellation for purposes of calculating
our Retention Rate except in the case of a product or service
switch that management considers to be a replacement product or
service. In those replacement cases, only the net change to the
client subscription, if a decrease, is reported as a cancel. In the
Analytics and the ESG and Climate operating segments, substantially
all product or service switches are treated as replacement products
or services and netted in this manner, while in our Index and Real
Assets operating segments, product or service switches that are
treated as replacement products or services and receive netting
treatment occur only in certain limited instances. In addition, we
treat any reduction in fees resulting from a down-sell of the same
product or service as a cancellation to the extent of the
reduction. We do not calculate Retention Rate for that portion of
our Run Rate attributable to assets in index-linked investment
products or futures and options contracts, in each case, linked to
our indexes.
Run Rate estimates at a particular point in time the annualized
value of the recurring revenues under our client license agreements
(“Client Contracts”) for the next 12 months, assuming all Client
Contracts that come up for renewal, or reach the end of the
committed subscription period, are renewed and assuming
then-current currency exchange rates, subject to the adjustments
and exclusions described below. For any Client Contract where fees
are linked to an investment product’s assets or trading
volume/fees, the Run Rate calculation reflects, for ETFs, the
market value on the last trading day of the period, for futures and
options, the most recent quarterly volumes and/or reported exchange
fees, and for other non-ETF products, the most recent
client-reported assets. Run Rate does not include fees associated
with “one-time” and other non-recurring transactions. In addition,
we add to Run Rate the annualized fee value of recurring new sales,
whether to existing or new clients, when we execute Client
Contracts, even though the license start date, and associated
revenue recognition, may not be effective until a later date. We
remove from Run Rate the annualized fee value associated with
products or services under any Client Contract with respect to
which we have received a notice of termination, non-renewal or an
indication the client does not intend to continue their
subscription during the period and have determined that such notice
evidences the client’s final decision to terminate or not renew the
applicable products or services, even though such notice is not
effective until a later date.
“Organic recurring subscription Run Rate growth” is defined as
the period over period Run Rate growth, excluding the impact of
changes in foreign currency and the first year impact of any
acquisitions. It is also adjusted for divestitures. Changes in
foreign currency are calculated by applying the currency exchange
rate from the comparable prior period to current period foreign
currency denominated Run Rate.
Sales represents the annualized value of products and services
clients commit to purchase from MSCI and will result in additional
operating revenues. Non-recurring sales represent the actual value
of the customer agreements entered into during the period and are
not a component of Run Rate. New recurring subscription sales
represent additional selling activities, such as new customer
agreements, additions to existing agreements or increases in price
that occurred during the period and are additions to Run Rate.
Subscription cancellations reflect client activities during the
period, such as discontinuing products and services and/or
reductions in price, resulting in reductions to Run Rate. Net new
recurring subscription sales represent the amount of new recurring
subscription sales net of subscription cancellations during the
period, which reflects the net impact to Run Rate during the
period.
Total gross sales represent the sum of new recurring
subscription sales and non-recurring sales. Total net sales
represent the total gross sales net of the impact from subscription
cancellations.
Notes Regarding the Use of Non-GAAP Financial
Measures
MSCI has presented supplemental non-GAAP financial measures as
part of this earnings release. Reconciliations are provided in
Tables 9 through 13 below that reconcile each non-GAAP financial
measure with the most comparable GAAP measure. The non-GAAP
financial measures presented in this earnings release should not be
considered as alternative measures for the most directly comparable
GAAP financial measures. The non-GAAP financial measures presented
in this earnings release are used by management to monitor the
financial performance of the business, inform business
decision-making and forecast future results.
“Adjusted EBITDA” is defined as net income before (1) provision
for income taxes, (2) other expense (income), net, (3) depreciation
and amortization of property, equipment and leasehold improvements,
(4) amortization of intangible assets and, at times, (5) certain
other transactions or adjustments, including, when applicable,
certain non-recurring acquisition-related integration and
transaction costs.
“Adjusted EBITDA expenses” is defined as operating expenses less
depreciation and amortization of property, equipment and leasehold
improvements and amortization of intangible assets and, at times,
certain other transactions or adjustments, including, when
applicable, certain non-recurring acquisition-related integration
and transaction costs.
“Adjusted EBITDA margin” is defined as adjusted EBITDA divided
by operating revenues.
“Adjusted net income” and “adjusted EPS” are defined as net
income and diluted EPS, respectively, before the after-tax impact
of: the amortization of acquired intangible assets, including the
amortization of the basis difference between the cost of the equity
method investment and MSCI’s share of the net assets of the
investee at historical carrying value and, at times, certain other
transactions or adjustments, including, when applicable, the impact
related to certain non-recurring acquisition-related integration
and transaction costs and the impact related to gain from changes
in ownership interest of investees.
“Capex” is defined as capital expenditures plus capitalized
software development costs.
“Free cash flow” is defined as net cash provided by operating
activities, less Capex.
“Organic operating revenue growth” is defined as operating
revenue growth compared to the prior year period excluding the
impact of acquired businesses, divested businesses and foreign
currency exchange rate fluctuations.
Asset-based fees ex-FX does not adjust for the impact from
foreign currency exchange rate fluctuations on the underlying
assets under management (“AUM”).
We believe adjusted EBITDA, adjusted EBITDA margin and adjusted
EBITDA expenses are meaningful measures of the operating
performance of MSCI because they adjust for significant one-time,
unusual or non-recurring items as well as eliminate the accounting
effects of certain capital spending and acquisitions that do not
directly affect what management considers to be our ongoing
operating performance in the period.
We believe adjusted net income and adjusted EPS are meaningful
measures of the performance of MSCI because they adjust for the
after-tax impact of significant one-time, unusual or non-recurring
items as well as eliminate the impact of any transactions that do
not directly affect what management considers to be our ongoing
operating performance in the period. We also exclude the after-tax
impact of the amortization of acquired intangible assets and
amortization of the basis difference between the cost of the equity
method investment and MSCI’s share of the net assets of the
investee at historical carrying value, as these non-cash amounts
are significantly impacted by the timing and size of each
acquisition and therefore not meaningful to the ongoing operating
performance in the period.
We believe that free cash flow is useful to investors because it
relates the operating cash flow of MSCI to the capital that is
spent to continue and improve business operations, such as
investment in MSCI’s existing products. Further, free cash flow
indicates our ability to strengthen MSCI’s balance sheet, repay our
debt obligations, pay cash dividends and repurchase shares of our
common stock.
We believe organic operating revenue growth is a meaningful
measure of the operating performance of MSCI because it adjusts for
the impact of foreign currency exchange rate fluctuations and
excludes the impact of operating revenues attributable to acquired
and divested businesses for the comparable prior year period,
providing insight into our ongoing operating performance for the
period(s) presented.
We believe that the non-GAAP financial measures presented in
this earnings release facilitate meaningful period-to-period
comparisons and provide a baseline for the evaluation of future
results.
Adjusted EBITDA expenses, adjusted EBITDA margin, adjusted
EBITDA, adjusted net income, adjusted EPS, Capex, free cash flow
and organic operating revenue growth are not defined in the same
manner by all companies and may not be comparable to
similarly-titled non-GAAP financial measures of other companies.
These measures can differ significantly from company to company
depending on, among other things, long-term strategic decisions
regarding capital structure, the tax jurisdictions in which
companies operate and capital investments. Accordingly, the
Company’s computation of these measures may not be comparable to
similarly-titled measures computed by other companies.
Notes Regarding Adjusting for the Impact of Foreign Currency
Exchange Rate Fluctuations
Foreign currency exchange rate fluctuations reflect the
difference between the current period results as reported compared
to the current period results recalculated using the foreign
currency exchange rates in effect for the comparable prior period.
While operating revenues adjusted for the impact of foreign
currency fluctuations includes asset-based fees that have been
adjusted for the impact of foreign currency fluctuations, the
underlying AUM, which is the primary component of asset-based fees,
is not adjusted for foreign currency fluctuations. Approximately
three-fifths of the AUM is invested in securities denominated in
currencies other than the U.S. dollar, and accordingly, any such
impact is excluded from the disclosed foreign currency-adjusted
variances.
Table 2: Condensed Consolidated Statements of Income
(unaudited)
Three Months Ended
Mar. 31,
Mar. 31,
%
In thousands, except per share
data
2023
2022
Change
Operating revenues
$
592,218
$
559,945
5.8
%
Operating expenses:
Cost of revenues (exclusive of
depreciation and amortization)
108,647
102,771
5.7
%
Selling and marketing
66,475
66,053
0.6
%
Research and development
31,323
28,322
10.6
%
General and administrative
41,044
45,567
(9.9
)%
Amortization of intangible assets
24,667
21,720
13.6
%
Depreciation and amortization of
property,
equipment and leasehold improvements
5,460
6,534
(16.4
)%
Total operating expenses(1)
277,616
270,967
2.5
%
Operating income
314,602
288,978
8.9
%
Interest income
(10,362
)
(298
)
n/m
Interest expense
46,206
40,714
13.5
%
Other expense (income)
2,386
(381
)
n/m
Other expense (income), net
38,230
40,035
(4.5
)%
Income before provision for income
taxes
276,372
248,943
11.0
%
Provision for income taxes
37,644
20,520
83.5
%
Net income
$
238,728
$
228,423
4.5
%
Earnings per basic common share
$
2.98
$
2.80
6.4
%
Earnings per diluted common share
$
2.97
$
2.78
6.8
%
Weighted average shares outstanding
used
in computing earnings per share:
Basic
80,041
81,591
(1.9
)%
Diluted
80,482
82,286
(2.2
)%
n/m: not meaningful.
(1) Includes stock-based compensation
expense of $21.6 million and $22.2 million for the three months
ended Mar. 31, 2023 and Mar. 31, 2022, respectively.
Table 3: Selected Balance Sheet Items (unaudited)
As of
Mar. 31,
Dec. 31,
In thousands
2023
2022
Cash and cash equivalents (1)
$1,080,608
$993,564
Accounts receivable, net of allowances
$641,584
$663,236
Current deferred revenue
$920,255
$882,886
Current portion of long-term debt (2)
$8,715
$8,713
Long-term debt (3)
$4,502,176
$4,503,233
(1) Includes restricted cash of $3.9
million at Mar. 31, 2023 and $0.4 million at Dec. 31, 2022.
(2) Consists of gross current portion of
long-term debt, net of deferred financing fees. Gross current
portion of long-term debt was $8.8 million at Mar. 31, 2023 and
$8.8 million at Dec. 31, 2022.
(3) Consists of gross long-term debt, net
of deferred financing fees. Gross long-term debt was $4,536.9
million at Mar. 31, 2023 and $4,539.1 million at Dec. 31, 2022.
Table 4: Selected Cash Flow Items (unaudited)
Three Months Ended
Mar. 31,
Mar. 31,
%
In thousands
2023
2022
Change
Net cash provided by operating
activities
$
264,141
$
244,184
8.2
%
Net cash used in investing activities
(21,762
)
(15,310
)
(42.1
)%
Net cash (used in) provided by financing
activities
(158,293
)
(966,117
)
83.6
%
Effect of exchange rate changes
2,958
(4,891
)
160.5
%
Net (decrease) increase in cash, cash
equivalents and restricted cash
$
87,044
$
(742,134
)
111.7
%
Table 5: Operating Results by Segment and Revenue Type
(unaudited)
Index
Three Months Ended
Mar. 31,
Mar. 31,
%
In thousands
2023
2022
Change
Operating revenues:
Recurring subscriptions
$
196,678
$
174,498
12.7
%
Asset-based fees
133,126
145,053
(8.2
)%
Non-recurring
9,578
11,208
(14.5
)%
Total operating revenues
339,382
330,759
2.6
%
Adjusted EBITDA expenses
85,700
84,884
1.0
%
Adjusted EBITDA
$
253,682
$
245,875
3.2
%
Adjusted EBITDA margin %
74.7
%
74.3
%
Analytics
Three Months Ended
Mar. 31,
Mar. 31,
%
In thousands
2023
2022
Change
Operating revenues:
Recurring subscriptions
$
144,503
$
137,799
4.9
%
Non-recurring
2,567
1,998
28.5
%
Total operating revenues
147,070
139,797
5.2
%
Adjusted EBITDA expenses
86,290
88,908
(2.9
)%
Adjusted EBITDA
$
60,780
$
50,889
19.4
%
Adjusted EBITDA margin %
41.3
%
36.4
%
ESG and Climate
Three Months Ended
Mar. 31,
Mar. 31,
%
In thousands
2023
2022
Change
Operating revenues:
Recurring subscriptions
$
65,732
$
50,572
30.0
%
Non-recurring
1,326
1,457
(9.0
)%
Total operating revenues
67,058
52,029
28.9
%
Adjusted EBITDA expenses
49,182
39,937
23.1
%
Adjusted EBITDA
$
17,876
$
12,092
47.8
%
Adjusted EBITDA margin %
26.7
%
23.2
%
All Other - Private Assets
Three Months Ended
Mar. 31,
Mar. 31,
%
In thousands
2023
2022
Change
Operating revenues:
Recurring subscriptions
$
38,334
$
36,891
3.9
%
Non-recurring
374
469
(20.3
)%
Total operating revenues
38,708
37,360
3.6
%
Adjusted EBITDA expenses
26,317
27,672
(4.9
)%
Adjusted EBITDA
$
12,391
$
9,688
27.9
%
Adjusted EBITDA margin %
32.0
%
25.9
%
Consolidated
Three Months Ended
Mar. 31,
Mar. 31,
%
In thousands
2023
2022
Change
Operating revenues:
Recurring subscriptions
$
445,247
$
399,760
11.4
%
Asset-based fees
133,126
145,053
(8.2
)%
Non-recurring
13,845
15,132
(8.5
)%
Operating revenues total
592,218
559,945
5.8
%
Adjusted EBITDA expenses
247,489
241,401
2.5
%
Adjusted EBITDA
$
344,729
$
318,544
8.2
%
Operating margin %
53.1
%
51.6
%
Adjusted EBITDA margin %
58.2
%
56.9
%
Table 6: Sales and Retention Rate by Segment
(unaudited)(1)
Three Months Ended
Mar. 31,
Mar. 31,
In thousands
2023
2022
Index
New recurring subscription sales
$
25,090
$
22,417
Subscription cancellations
(7,082
)
(5,920
)
Net new recurring subscription sales
$
18,008
$
16,497
Non-recurring sales
$
12,782
$
13,715
Total gross sales
$
37,872
$
36,132
Total Index net sales
$
30,790
$
30,212
Index Retention Rate
96.4
%
96.6
%
Analytics
New recurring subscription sales
$
13,674
$
14,069
Subscription cancellations
(9,183
)
(8,128
)
Net new recurring subscription sales
$
4,491
$
5,941
Non-recurring sales
$
1,370
$
3,489
Total gross sales
$
15,044
$
17,558
Total Analytics net sales
$
5,861
$
9,430
Analytics Retention Rate
94.0
%
94.4
%
ESG and Climate
New recurring subscription sales
$
12,486
$
19,142
Subscription cancellations
(2,635
)
(643
)
Net new recurring subscription sales
$
9,851
$
18,499
Non-recurring sales
$
1,219
$
1,308
Total gross sales
$
13,705
$
20,450
Total ESG and Climate net sales
$
11,070
$
19,807
ESG and Climate Retention Rate
96.1
%
98.7
%
All Other - Private Assets
New recurring subscription sales
$
5,143
$
5,559
Subscription cancellations
(2,856
)
(1,978
)
Net new recurring subscription sales
$
2,287
$
3,581
Non-recurring sales
$
213
$
152
Total gross sales
$
5,356
$
5,711
Total All Other - Private Assets net
sales
$
2,500
$
3,733
All Other - Private Assets Retention
Rate
92.1
%
94.1
%
Consolidated
New recurring subscription sales
$
56,393
$
61,187
Subscription cancellations
(21,756
)
(16,669
)
Net new recurring subscription sales
$
34,637
$
44,518
Non-recurring sales
$
15,584
$
18,664
Total gross sales
$
71,977
$
79,851
Total net sales
$
50,221
$
63,182
Total Retention Rate
95.2
%
95.9
%
(1) See "Notes Regarding the Use of
Operating Metrics" for details regarding the definition of new
recurring subscription sales, subscription cancellations, net new
recurring subscription sales, non-recurring sales, total gross
sales, total net sales and Retention Rate.
Table 7: AUM in ETFs Linked to MSCI Equity Indexes
(unaudited)(1)(2)
Three Months Ended
Mar. 31
June 30
Sep. 30
Dec. 31
Mar. 31
In billions
2022
2022
2022
2022
2023
Beginning Period AUM in ETFs linked to
MSCI equity indexes
$
1,451.6
$
1,389.3
$
1,189.5
$
1,081.2
$
1,222.9
Market Appreciation/(Depreciation)
(89.7
)
(207.3
)
(105.7
)
118.8
75.1
Cash Inflows
27.4
7.5
(2.6
)
22.9
7.4
Period-End AUM in ETFs linked to
MSCI equity indexes
$
1,389.3
$
1,189.5
$
1,081.2
$
1,222.9
$
1,305.4
Period Average AUM in ETFs linked to
MSCI equity indexes
$
1,392.5
$
1,285.4
$
1,208.9
$
1,182.1
$
1,287.5
Period-End Basis Point Fee(3)
2.51
2.52
2.52
2.54
2.53
(1) The historical values of the AUM in
ETFs linked to our equity indexes as of the last day of the month
and the monthly average balance can be found under the link “AUM in
ETFs Linked to MSCI Equity Indexes” on our Investor Relations
homepage at http://ir.msci.com. Information contained on our
website is not incorporated by reference into this Press Release or
any other report filed with the SEC. The AUM in ETFs also includes
AUM in Exchange Traded Notes, the value of which is less than 1% of
the AUM amounts presented.
(2) The value of AUM in ETFs linked to
MSCI equity indexes is calculated by multiplying the equity ETFs
net asset value by the number of shares outstanding.
(3) Based on period-end Run Rate for ETFs
linked to MSCI equity indexes using period-end AUM.
Table 8: Run Rate by Segment and Type (unaudited)(1)
As of
Mar. 31,
Mar. 31,
%
In thousands
2023
2022
Change
Index
Recurring subscriptions
$
795,621
$
711,113
11.9
%
Asset-based fees
534,491
576,234
(7.2
)%
Index Run Rate
1,330,112
1,287,347
3.3
%
Analytics Run Rate
621,611
588,447
5.6
%
ESG and Climate Run Rate
278,947
216,197
29.0
%
All Other - Private Assets Run
Rate
148,440
137,532
7.9
%
Total Run Rate
$
2,379,110
$
2,229,523
6.7
%
Total recurring subscriptions
$
1,844,619
$
1,653,289
11.6
%
Total asset-based fees
534,491
576,234
(7.2
)%
Total Run Rate
$
2,379,110
$
2,229,523
6.7
%
(1) See "Notes Regarding the Use of
Operating Metrics" for details regarding the definition of Run
Rate.
Table 9: Reconciliation of Net Income to Adjusted EBITDA
(unaudited)
Three Months Ended
Mar. 31,
Mar. 31,
In thousands
2023
2022
Net income
$
238,728
$
228,423
Provision for income taxes
37,644
20,520
Other expense (income), net
38,230
40,035
Operating income
314,602
288,978
Amortization of intangible assets
24,667
21,720
Depreciation and amortization of
property,
equipment and leasehold improvements
5,460
6,534
Acquisition-related integration and
transaction costs(1)
—
1,312
Consolidated adjusted EBITDA
$
344,729
$
318,544
Index adjusted EBITDA
$
253,682
$
245,875
Analytics adjusted EBITDA
60,780
50,889
ESG and Climate adjusted EBITDA
17,876
12,092
All Other - Private Assets adjusted
EBITDA
12,391
9,688
Consolidated adjusted EBITDA
$
344,729
$
318,544
(1) Incremental and non-recurring costs
attributable to acquisitions directly related to the execution of
the transaction and integration of the acquired business that have
occurred no later than 12 months after the close of the
transaction.
Table 10: Reconciliation of Net Income and Diluted EPS to
Adjusted Net Income and Adjusted EPS (unaudited)
Three Months Ended
Mar. 31,
Mar. 31,
In thousands, except per share
data
2023
2022
Net income
$
238,728
$
228,423
Plus: Amortization of acquired intangible
assets and
equity method investment basis
difference
16,809
16,899
Plus: Acquisition-related integration and
transaction costs(1)
—
1,385
Less: Gain from changes in ownership
interest of investees
(447
)
—
Less: Income tax effect
(2,196
)
(1,507
)
Adjusted net income
$
252,894
$
245,200
Diluted EPS
$
2.97
$
2.78
Plus: Amortization of acquired intangible
assets and
equity method investment basis
difference
0.21
0.21
Plus: Acquisition-related integration and
transaction costs(1)
—
0.02
Less: Gain from changes in ownership
interest of investees
(0.01
)
—
Less: Income tax effect
(0.03
)
(0.03
)
Adjusted EPS
$
3.14
$
2.98
(1) Incremental and non-recurring costs
attributable to acquisitions directly related to the execution of
the transaction and integration of the acquired business that have
occurred no later than 12 months after the close of the
transaction.
Table 11: Reconciliation of Operating Expenses to Adjusted
EBITDA Expenses (unaudited)
Three Months Ended
Full-Year
Mar. 31,
Mar. 31,
2023
In thousands
2023
2022
Guidance(1)
Total operating expenses
$
277,616
$
270,967
$1,090,000 - $1,130,000
Amortization of intangible assets
24,667
21,720
Depreciation and amortization of
property,
equipment and leasehold improvements
5,460
6,534
$125,000 - $135,000
Acquisition-related integration
and transaction costs(2)
—
1,312
Consolidated adjusted EBITDA
expenses
$
247,489
$
241,401
$965,000 - $995,000
Index adjusted EBITDA expenses
$
85,700
$
84,884
Analytics adjusted EBITDA expenses
86,290
88,908
ESG and Climate adjusted EBITDA
expenses
49,182
39,937
All Other - Private Assets adjusted EBITDA
expenses
26,317
27,672
Consolidated adjusted EBITDA
expenses
$
247,489
$
241,401
$965,000 - $995,000
(1) We have not provided a full line-item
reconciliation for total operating expenses to adjusted EBITDA
expenses for this future period because we believe such a
reconciliation would imply a degree of precision and certainty that
could be confusing to investors and we are unable to reasonably
predict certain items contained in the GAAP measure without
unreasonable efforts. This is due to the inherent difficulty of
forecasting the timing or amount of various items that have not yet
occurred and are out of the Company's control or cannot be
reasonably predicted. For the same reasons, the Company is unable
to address the probable significance of the unavailable
information. Forward-looking non-GAAP financial measures provided
without the most directly comparable GAAP financial measures may
vary materially from the corresponding GAAP financial measures. See
“Forward-Looking Statements” above.
(2) Incremental and non-recurring costs
attributable to acquisitions directly related to the execution of
the transaction and integration of the acquired business that have
occurred no later than 12 months after the close of the
transaction.
Table 12: Reconciliation of Net Cash Provided by Operating
Activities to Free Cash Flow (unaudited)
Three Months Ended
Full-Year
Mar. 31,
Mar. 31,
2023
In thousands
2023
2022
Guidance(1)
Net cash provided by operating
activities
$
264,141
$
244,184
$1,145,000 -
$1,195,000
Capital expenditures
(6,225
)
(1,254
)
Capitalized software development costs
(15,351
)
(14,084
)
Capex
(21,576
)
(15,338
)
($75,000 - $85,000)
Free cash flow
$
242,565
$
228,846
$1,060,000 -
$1,120,000
(1) We have not provided a line-item
reconciliation for free cash flow to net cash provided by operating
activities for this future period because we believe such a
reconciliation would imply a degree of precision and certainty that
could be confusing to investors and we are unable to reasonably
predict certain items contained in the GAAP measure without
unreasonable efforts. This is due to the inherent difficulty of
forecasting the timing or amount of various items that have not yet
occurred and are out of the Company's control or cannot be
reasonably predicted. For the same reasons, the Company is unable
to address the probable significance of the unavailable
information. Forward-looking non-GAAP financial measures provided
without the most directly comparable GAAP financial measures may
vary materially from the corresponding GAAP financial measures. See
“Forward-Looking Statements” above.
Table 13: First Quarter 2023 Reconciliation of Operating
Revenue Growth to Organic Operating Revenue Growth
(unaudited)
Comparison of the Three Months
Ended March 31, 2023 and 2022
Total
Recurring Subscription
Asset-Based Fees
Non-Recurring Revenues
Index
Change Percentage
Change Percentage
Change Percentage
Change Percentage
Operating revenue growth
2.6 %
12.7 %
(8.2) %
(14.5) %
Impact of acquisitions and
divestitures
— %
— %
— %
— %
Impact of foreign currency exchange rate
fluctuations
0.3 %
0.4 %
0.1 %
— %
Organic operating revenue growth
2.9 %
13.1 %
(8.1) %
(14.5) %
Total
Recurring Subscription
Asset-Based Fees
Non-Recurring Revenues
Analytics
Change Percentage
Change Percentage
Change Percentage
Change Percentage
Operating revenue growth
5.2 %
4.9 %
— %
28.5 %
Impact of acquisitions and
divestitures
— %
— %
— %
— %
Impact of foreign currency exchange rate
fluctuations
0.7 %
0.6 %
— %
2.8 %
Organic operating revenue growth
5.9 %
5.5 %
— %
31.3 %
Total
Recurring Subscription
Asset-Based Fees
Non-Recurring Revenues
ESG and Climate
Change Percentage
Change Percentage
Change Percentage
Change Percentage
Operating revenue growth
28.9 %
30.0 %
— %
(9.0) %
Impact of acquisitions and
divestitures
— %
— %
— %
— %
Impact of foreign currency exchange rate
fluctuations
8.7 %
8.9 %
— %
2.4 %
Organic operating revenue growth
37.6 %
38.9 %
— %
(6.6) %
Total
Recurring Subscription
Asset-Based Fees
Non-Recurring Revenues
All Other - Private Assets
Change Percentage
Change Percentage
Change Percentage
Change Percentage
Operating revenue growth
3.6 %
3.9 %
— %
(20.3) %
Impact of acquisitions and
divestitures
— %
— %
— %
— %
Impact of foreign currency exchange rate
fluctuations
4.4 %
4.4 %
— %
1.3 %
Organic operating revenue growth
8.0 %
8.3 %
— %
(19.0) %
Total
Recurring Subscription
Asset-Based Fees
Non-Recurring Revenues
Consolidated
Change Percentage
Change Percentage
Change Percentage
Change Percentage
Operating revenue growth
5.8 %
11.4 %
(8.2) %
(8.5) %
Impact of acquisitions and
divestitures
— %
— %
— %
— %
Impact of foreign currency exchange rate
fluctuations
1.4 %
1.9 %
0.1 %
0.7 %
Organic operating revenue growth
7.2 %
13.3 %
(8.1) %
(7.8) %
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230425005147/en/
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