NEW YORK–(BUSINESS WIRE)–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, 2024 (“first quarter 2024”).
Financial and Operational Highlights for First Quarter 2024
(Note: Unless otherwise noted, percentage and other changes are relative to the three months ended March 31, 2023 (“first quarter 2023”) and Run Rate percentage changes are relative to March 31, 2023).
- Operating revenues of $680.0 million, up 14.8%; Organic operating revenue growth of 10.3%
- Recurring subscription revenues up 15.2%; Asset-based fees up 12.9%
- Operating margin of 49.9%; Adjusted EBITDA margin of 56.4%
- Diluted EPS of $3.22, up 8.4%; Adjusted EPS of $3.52, up 12.1%
- Organic recurring subscription Run Rate growth of 8.7%; Retention Rate of 92.8%
- Approximately $126.8 million in dividends were paid to shareholders in first quarter 2024; Cash dividend of $1.60 per share declared by MSCI Board of Directors for second quarter 2024
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Three Months Ended |
|||||||||
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|
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Mar. 31, |
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Mar. 31, |
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|||||
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In thousands, except per share data (unaudited) |
|
2024 |
|
2023 |
|
% Change |
|||||
|
Operating revenues |
|
$ |
679,965 |
|
|
$ |
592,218 |
|
|
14.8 |
% |
|
Operating income |
|
$ |
339,382 |
|
|
$ |
314,602 |
|
|
7.9 |
% |
|
Operating margin % |
|
|
49.9 |
% |
|
|
53.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Net income |
|
$ |
255,954 |
|
|
$ |
238,728 |
|
|
7.2 |
% |
|
|
|
|
|
|
|
|
|||||
|
Diluted EPS |
|
$ |
3.22 |
|
|
$ |
2.97 |
|
|
8.4 |
% |
|
Adjusted EPS |
|
$ |
3.52 |
|
|
$ |
3.14 |
|
|
12.1 |
% |
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|
|
|
|
|
|
|
|||||
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Adjusted EBITDA |
|
$ |
383,573 |
|
|
$ |
344,729 |
|
|
11.3 |
% |
|
Adjusted EBITDA margin % |
|
|
56.4 |
% |
|
|
58.2 |
% |
|
|
|
“MSCI’s first-quarter financial results affirm that we can deliver solid earnings amid continued operating environment challenges. Record AUM balances in MSCI-linked index products drove strong revenue growth from asset-based fees, which helped offset lower subscription revenue. This highlights the underlying strength and stability of our all-weather franchise,” said Henry A. Fernandez, Chairman and CEO of MSCI.
“Our operating metrics showed resilience in our new recurring sales, especially in Analytics, which was our highest first quarter in a decade. Elevated cancels reflected a concentration of unusual client events, including a large merger among our banking clients. We are managing through these pressures and do not expect this level of cancels to continue,” Fernandez added.
“We are encouraged by our deep client engagement across segments, which is enabling us to accelerate product innovation. Our long-term strategy and recent acquisitions have positioned us well to benefit from secular trends that are reshaping our industry, such as portfolio indexation and customization, the growth of private assets and the global sustainability revolution. All of this supports our conviction that we can maintain attractive profitability and growth in 2024 and beyond.”
First Quarter Consolidated Results
Operating Revenues: Operating revenues were $680.0 million, up 14.8%. Organic operating revenue growth was 10.3%. The $87.7 million increase was the result of a $67.8 million increase in recurring subscription revenues; a $17.1 million increase in asset-based fees and a $2.8 million increase in non-recurring revenues.
Run Rate and Retention Rate: Total Run Rate at March 31, 2024 was $2,726.5 million, up 14.6%. Recurring subscription Run Rate increased by $262.4 million, and asset-based fees Run Rate increased by $84.9 million. Organic recurring subscription Run Rate growth was 8.7%. Retention Rate in first quarter 2024 was 92.8%, compared to 95.2% in first quarter 2023. Approximately $7.0 million of the cancels related to one client event related to the merger of our banking clients, which impacted Index, ESG and Climate, and Analytics. The majority of first quarter 2024 cancels were due to corporate events including organizations closing, shutting funds, restructuring or downsizing. Approximately 85% of MSCI’s subscription Run Rate as of March 31, 2024 was with clients subscribing to multiple products, and these clients had a 93.1% or higher Retention Rate in first quarter 2024.
Expenses: Total operating expenses were $340.6 million, up 22.7%, including $35.1 million associated with Private Capital Solutions; formerly known as The Burgiss Group, LLC («Burgiss»)), Carbon Markets (formerly known as Trove Research Ltd («Trove»)) and Fabric RQ Inc. («Fabric»).
Adjusted EBITDA expenses were $296.4 million, up 19.8%, primarily reflecting higher compensation and benefits costs related to higher headcount as a result of business growth and the recent acquisitions. Adjusted EBITDA expense includes $23.9 million of expenses associated with Private Capital Solutions, Carbon Markets and Fabric. Approximately $1.5 million in integration costs related to the acquisition of the remaining interest in Burgiss and $9.7 million of acquired intangible asset amortization expenses related to Private Capital Solutions, Carbon Markets and Fabric were excluded from Adjusted EBITDA expenses.
Total operating expenses excluding the impact of foreign currency exchange rate fluctuations (“ex-FX”) and adjusted EBITDA expenses ex-FX increased 21.9% and 18.9%, respectively.
Operating Income: Operating income was $339.4 million, up 7.9%. Operating income margin in first quarter 2024 was 49.9%, compared to 53.1% in first quarter 2023.
Headcount: As of March 31, 2024, we had 5,858 employees reflecting a 20.9% increase, which was primarily driven by our recent acquisitions. Approximately 32.8% and 67.2% of employees are located in developed market and emerging market locations, respectively.
Other Expense (Income), Net: Other expense (income), net was $43.5 million, up 13.8% primarily driven by lower interest income reflecting lower average cash balances as well as loss on extinguishment related to unamortized debt issuance costs associated with the prepayment of the Tranche A Term Loans and the entry into the amended and restated credit agreement (the «Credit Amendment»), partially offset by the impact of favorable foreign currency exchange rate fluctuations.
Income Taxes: The effective tax rate was 13.5% in first quarter 2024 compared to 13.6% in first quarter 2023. A higher operating tax rate in the current period was offset by favorable discrete items related to prior years, as well as higher excess tax benefits recognized on share-based compensation vested during the period.
Net Income: As a result of the factors described above, net income was $256.0 million, up 7.2%.
Adjusted EBITDA: Adjusted EBITDA was $383.6 million, up 11.3%. Adjusted EBITDA margin in first quarter 2024 was 56.4%, compared to 58.2% in first quarter 2023.
Index Segment:
Table 1A: Results (unaudited)
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Three Months Ended |
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Mar. 31, |
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Mar. 31, |
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In thousands |
|
2024 |
|
2023 |
|
% Change |
|||||
|
Operating revenues: |
|
|
|
|
|
|
|||||
|
Recurring subscriptions |
|
$ |
212,952 |
|
|
$ |
196,678 |
|
|
8.3 |
% |
|
Asset-based fees |
|
|
150,259 |
|
|
|
133,126 |
|
|
12.9 |
% |
|
Non-recurring |
|
|
10,661 |
|
|
|
9,578 |
|
|
11.3 |
% |
|
Total operating revenues |
|
|
373,872 |
|
|
|
339,382 |
|
|
10.2 |
% |
|
Adjusted EBITDA expenses |
|
|
96,112 |
|
|
|
85,700 |
|
|
12.1 |
% |
|
Adjusted EBITDA |
|
$ |
277,760 |
|
|
$ |
253,682 |
|
|
9.5 |
% |
|
Adjusted EBITDA margin % |
|
|
74.3 |
% |
|
|
74.7 |
% |
|
|
|
Index operating revenues were $373.9 million, up 10.2%. The $34.5 million increase was primarily driven by $17.1 million in higher asset-based fees and $16.3 million in higher recurring subscription revenues.
Revenues from ETFs linked to MSCI equity indexes, driven by an increase in average AUM, drove more than 70% of the increase in revenues attributable to asset-based fees. The revenue increase was also impacted by non-ETF indexed funds linked to MSCI indexes, driven by an increase in average AUM. The increase was partially offset by a decrease in average basis point fees for both ETFs linked to MSCI equity indexes as well as non-ETF indexed linked funds linked to MSCI indexes and a decrease in revenue from futures and options contracts linked to MSCI indexes.
More than 90% of the growth in recurring subscription revenues was driven by strong growth from market-cap weighted and custom Index products and special packages.
Index Run Rate as of March 31, 2024, was $1.5 billion, up 12.0%. The $159.3 million increase was comprised of an $84.9 million increase in asset-based fees Run Rate and a $74.3 million increase in recurring subscription Run Rate. The increase in asset-based fees Run Rate primarily reflected higher AUM in ETFs linked to MSCI equity indexes and non-ETF indexed funds linked to MSCI indexes. The increase in recurring subscription Run Rate was primarily driven by growth from market cap-weighted and custom Index products and special packages. The increase reflected growth across all regions.
Analytics Segment:
Table 1B: Results (unaudited)
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Three Months Ended |
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|
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Mar. 31, |
|
Mar. 31, |
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|
|||||
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In thousands |
|
2024 |
|
2023 |
|
% Change |
|||||
|
Operating revenues: |
|
|
|
|
|
|
|||||
|
Recurring subscriptions |
|
$ |
160,551 |
|
|
$ |
144,503 |
|
|
11.1 |
% |
|
Non-recurring |
|
|
3,415 |
|
|
|
2,567 |
|
|
33.0 |
% |
|
Total operating revenues |
|
|
163,966 |
|
|
|
147,070 |
|
|
11.5 |
% |
|
Adjusted EBITDA expenses |
|
|
91,754 |
|
|
|
86,290 |
|
|
6.3 |
% |
|
Adjusted EBITDA |
|
$ |
72,212 |
|
|
$ |
60,780 |
|
|
18.8 |
% |
|
Adjusted EBITDA margin % |
|
|
44.0 |
% |
|
|
41.3 |
% |
|
|
|
Analytics operating revenues were $164.0 million, up 11.5%. The $16.9 million increase was primarily driven by growth from recurring subscriptions related to both Multi-Asset Class and Equity Analytics products. Organic operating revenue growth for Analytics was 11.9%.
Analytics Run Rate as of March 31, 2024, was $662.1 million, up 6.5%. The increase of $40.5 million was driven by growth in both Multi-Asset Class and Equity Analytics products, and reflected growth across all regions and client segments. Organic recurring subscription Run Rate growth for Analytics was 7.0%.
ESG and Climate Segment:
Table 1C: Results (unaudited)
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|
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Three Months Ended |
|||||||||
|
|
|
Mar. 31, |
|
Mar. 31, |
|
|
|||||
|
In thousands |
|
2024 |
|
2023 |
|
% Change |
|||||
|
Operating revenues: |
|
|
|
|
|
|
|||||
|
Recurring subscriptions |
|
$ |
76,418 |
|
|
$ |
65,732 |
|
|
16.3 |
% |
|
Non-recurring |
|
|
1,466 |
|
|
|
1,326 |
|
|
10.6 |
% |
|
Total operating revenues |
|
|
77,884 |
|
|
|
67,058 |
|
|
16.1 |
% |
|
Adjusted EBITDA expenses |
|
|
56,793 |
|
|
|
49,182 |
|
|
15.5 |
% |
|
Adjusted EBITDA |
|
$ |
21,091 |
|
|
$ |
17,876 |
|
|
18.0 |
% |
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Adjusted EBITDA margin % |
|
|
27.1 |
% |
|
|
26.7 |
% |
|
|
|
ESG and Climate operating revenues were $77.9 million, up 16.1%. The $10.8 million increase was driven by growth in Ratings, Climate and Screening products. Organic operating revenue growth for ESG and Climate was 11.0%.
ESG and Climate Run Rate as of March 31, 2024, was $320.6 million, up 14.9%. The $41.7 million increase primarily reflects strong growth from Ratings, Climate and Screening products with contributions across all regions and client segments. Organic recurring subscription Run Rate growth for ESG and Climate was 13.3%.
All Other – Private Assets Segment:
Table 1D: Results (unaudited)
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|
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Three Months Ended |
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|
|
|
Mar. 31, |
|
Mar. 31, |
|
|
|||||
|
In thousands |
|
2024 |
|
2023 |
|
% Change |
|||||
|
Operating revenues: |
|
|
|
|
|
|
|||||
|
Recurring subscriptions |
|
$ |
63,134 |
|
|
$ |
38,334 |
|
|
64.7 |
% |
|
Non-recurring |
|
|
1,109 |
|
|
|
374 |
|
|
196.5 |
% |
|
Total operating revenues |
|
|
64,243 |
|
|
|
38,708 |
|
|
66.0 |
% |
|
Adjusted EBITDA expenses |
|
|
51,733 |
|
|
|
26,317 |
|
|
96.6 |
% |
|
Adjusted EBITDA |
|
$ |
12,510 |
|
|
$ |
12,391 |
|
|
1.0 |
% |
|
Adjusted EBITDA margin % |
|
|
19.5 |
% |
|
|
32.0 |
% |
|
|
|
All Other – Private Assets operating revenues, which reflect the Real Assets and Private Capital Solutions operating segments, were $64.2 million, up 66.0% and included $24.2 million of revenue from Private Capital Solutions. The remaining growth in revenue was primarily driven by growth from recurring subscriptions related to Index Intel products and favorable foreign currency exchange rate fluctuations, partially offset by a decrease in recurring subscriptions related to our Property Intel product. Organic operating revenue growth for All Other – Private Assets was 2.6%.
All Other – Private Assets Run Rate, which reflects the Real Assets and Private Capital Solutions operating segments, was $254.4 million as of March 31, 2024, up 71.4%, and included $101.0 million associated with Private Capital Solutions. The remaining growth in the run rate was primarily driven by Index Intel, RCA and Performance Insights products, partially offset by a decline in Property Intel product. Organic recurring subscription Run Rate growth for All Other – Private Assets was 3.5%.
Select Balance Sheet Items and Capital Allocation
Cash Balances and Outstanding Debt: Cash and cash equivalents was $519.3 million as of March 31, 2024, including $3.8 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, 2024, were $4.5 billion. The total debt to net income ratio (based on trailing twelve months net income) was 3.9x. The total debt to adjusted EBITDA ratio (based on trailing twelve months adjusted EBITDA) was 2.9x.
MSCI seeks to maintain total debt to adjusted EBITDA in a target range of 3.0x to 3.5x.
During the quarter, we amended and restated the credit agreement governing our credit facilities (the “Credit Agreement”) to provide for a new revolving credit facility (the “Revolving Credit Facility”) with an aggregate of $1.25 billion of revolving loan commitments, which may be drawn until January 2029. On the closing of the Credit Agreement, we drew down $336.9 million on the Revolving Credit Facility in order to prepay the term loans outstanding under the prior term loan A facility.
Capex and Cash Flow: Capex was $24.2 million, and net cash provided by operating activities increased by 13.6% to $300.1 million, primarily reflecting higher cash collections from customers partially offset by higher cash expenses. Free cash flow for first quarter 2024 was up 13.7% to $275.9 million.
Share Count and Share Repurchases: Weighted average diluted shares outstanding were 79.5 million in first quarter 2024, down 1.2% year-over-year. Total shares outstanding as of March 31, 2024 were 79.2 million. As of April 22, 2024, a total of approximately $0.8 billion remains available on the outstanding share repurchase authorization.
Dividends: Approximately $126.8 million in dividends were paid to shareholders in first quarter 2024. On April 22, 2024, the MSCI Board of Directors declared a cash dividend of $1.60 per share for second quarter 2024, payable on May 31, 2024 to shareholders of record as of the close of trading on May 17, 2024.
Full-Year 2024 Guidance
MSCI’s guidance for the year ending December 31, 2024 (“Full-Year 2024”) 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.
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Guidance Item |
Current Guidance for Full-Year 2024 |
|
Operating Expense |
$1,300 to $1,340 million |
|
Adjusted EBITDA Expense |
$1,130 to $1,160 million |
|
Interest Expense (including amortization of financing fees)(1) |
$185 to $189 million |
|
Depreciation & Amortization Expense |
$170 to $180 million |
|
Effective Tax Rate |
18% to 21% |
|
Capital Expenditures |
$95 to $105 million |
|
Net Cash Provided by Operating Activities |
$1,330 to $1,380 million |
|
Free Cash Flow |
$1,225 to $1,285 million |
(1) A portion of our annual interest expense is from our variable rate indebtedness under our Revolving Credit Facility, while the majority is from fixed rate senior unsecured notes. Changes to the secured overnight funding rate (“SOFR”) and indebtedness levels can cause our annual interest expense to vary.
Conference Call Information
MSCI’s senior management will review the first quarter 2024 results on Tuesday, April 23, 2024 at 10:00 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 2024 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, 2023 filed with the Securities and Exchange Commission (“SEC”) on February 9, 2024 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 and its Corporate Responsibility homepage 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.
Contacts
MSCI Inc.
Investor Inquiries
jeremy.ulan@msci.com
Jeremy Ulan +1 646 778 4184
jisoo.suh@msci.com
Jisoo Suh + 1 917 825 7111
Media Inquiries
PR@msci.com
Melanie Blanco +1 212 981 1049
Konstantinos Makrygiannis +44 (0)7768 930056
Tina Tan + 852 2844 9320
