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 31 Marzo 2022 (“first quarter 2022”).
Financial and Operational Highlights for First Quarter 2022
(Note: Unless otherwise noted, percentage and other changes are relative to the three months ended 31 Marzo 2021 (“first quarter 2021”) and Run Rate percentage changes are relative to 31 Marzo 2021).
- Operating revenues of $559.9 million, up 17.0%; Organic operating revenue growth of 13.7%
- Recurring subscription revenues up 18.4%; Asset-based fees up 14.5%
- Operating margin of 51.6%; Adjusted EBITDA margin of 56.9%
- Diluted EPS of $2.78, up 17.8%; Adjusted EPS of $2.98, up 21.1%
- New recurring subscription sales growth of 31.9%; Organic recurring subscription Run Rate growth of 13.7%; Retention Rate of 95.9%
- In first quarter 2022 and through trade date of 25 Aprile 2022, a total of $794.8 million or 1,543,598 shares were repurchased at an average repurchase price of $514.88
- Approximately $84.7 million in dividends were paid to shareholders in first quarter 2022; Cash dividend of $1.04 per share declared by MSCI Board of Directors for second quarter 2022
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Three Months Ended |
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In thousands, |
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Mar. 31, |
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Mar. 31, |
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except per share data (unaudited) |
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2022 |
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2021 |
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% Change |
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Operating revenues |
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$ |
559,945 |
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$ |
478,423 |
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|
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17.0 |
% |
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Operating income |
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$ |
288,978 |
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$ |
254,375 |
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|
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13.6 |
% |
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Operating margin % |
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51.6 |
% |
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53.2 |
% |
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Net income |
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$ |
228,423 |
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$ |
196,819 |
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16.1 |
% |
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Diluted EPS |
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$ |
2.78 |
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$ |
2.36 |
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|
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17.8 |
% |
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Adjusted EPS |
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$ |
2.98 |
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$ |
2.46 |
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21.1 |
% |
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Adjusted EBITDA |
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$ |
318,544 |
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$ |
276,586 |
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15.2 |
% |
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Adjusted EBITDA margin % |
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56.9 |
% |
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57.8 |
% |
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“MSCI’s strong first-quarter performance demonstrates both the resilience and long-term potential of our all-weather franchise. Despite historic geopolitical and economic turmoil, we posted our best first quarter ever for new recurring subscription sales; our ESG and Climate retention rate hit an all-time high; and our Index business achieved its 33rd consecutive quarter of double-digit subscription growth,” said Henry A. Fernandez, Chairman and CEO of MSCI.
“Not only are we helping clients navigate market volatility and asset rotations, we are also helping them capitalize on structural changes in the global investment landscape, such as the low-carbon energy transition. This has made MSCI solutions increasingly valuable to clients beyond our traditional base, including wealth managers, hedge funds and insurance companies,” added Mr. Fernandez.
First Quarter Consolidated Results
Operating Revenues: Operating revenues were $559.9 million, up 17.0%. Organic operating revenue growth was 13.7%. The $81.5 million increase was comprised of $62.0 million in higher recurring subscription revenues and $18.4 million in higher asset-based fees, as well as $1.1 million in higher non-recurring revenues.
Run Rate and Retention Rate: Total Run Rate at 31 Marzo 2022 was $2,229.5 million, up 17.4%. Recurring subscriptions Run Rate increased by $257.5 million and asset-based fees Run Rate increased by $73.0 million. Organic recurring subscriptions Run Rate growth was 13.7%. Retention Rate in first quarter 2022 was 95.9%, compared to 96.3% in first quarter 2021.
Expenses: Total operating expenses were $271.0 million, up 20.9%. Adjusted EBITDA expenses were $241.4 million, up 19.6%, primarily reflecting higher compensation and benefits costs related to continued investments to support growth, including increased headcount in technology, research and client coverage. The increase also reflected higher non-compensation costs including in the areas of information technology costs, professional fees and market data costs. Total operating expenses excluding the impact of foreign currency exchange rate fluctuations (“ex-FX”) and adjusted EBITDA expenses ex-FX increased 23.0% and 21.8%, respectively.
Headcount: As of 31 Marzo 2022, headcount was 4,361 employees, with approximately 36% and approximately 64% of employees located in developed market and emerging market locations, respectively.
Other Expense (Income), Net: Other expense (income), net was $40.0 million, up 4.4% primarily reflecting higher interest expense due to higher average debt balances versus the same period last year, partially offset by favorable foreign currency exchange rate gains.
Income Taxes: The effective tax rate was 8.2% in first quarter 2022 compared to 8.9% in first quarter 2021. The effective tax rate in both periods was driven by the jurisdictional mix of earnings as well as significant income tax benefits, primarily related to the vesting of annual equity awards.
Net Income: As a result of the factors described above, net income was $228.4 million, up 16.1%.
Adjusted EBITDA: Adjusted EBITDA was $318.5 million, up 15.2%. Adjusted EBITDA margin in first quarter 2022 was 56.9%, compared to 57.8% in first quarter 2021.
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 |
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2022 |
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2021 |
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% Change |
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Operating revenues: |
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Recurring subscriptions |
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$174,498 |
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$155,117 |
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12.5% |
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Asset-based fees |
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145,053 |
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126,706 |
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14.5% |
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Non-recurring |
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11,208 |
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10,668 |
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5.1% |
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Total operating revenues |
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330,759 |
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292,491 |
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13.1% |
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Adjusted EBITDA expenses |
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84,884 |
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72,612 |
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16.9% |
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Adjusted EBITDA |
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$245,875 |
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$219,879 |
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11.8% |
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Adjusted EBITDA margin % |
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74.3% |
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75.2% |
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Index operating revenues were $330.8 million, up 13.1%. The $38.3 million increase was driven by $19.4 million in higher recurring subscription revenues, $18.4 million in higher asset-based fees and $0.5 million in higher non-recurring revenues.
Growth in asset-based fees primarily reflected an increase in revenues from ETFs linked to MSCI equity indexes as a result of higher average AUM in ETFs linked to MSCI equity indexes, partially offset by a decline in average basis point fees. Non-ETF indexed funds linked to MSCI indexes also contributed to the increase in revenues.
Growth in recurring subscription revenues was primarily driven by growth from market-cap weighted index products and strong growth from factor, ESG and climate index products.
Index Run Rate as of 31 Marzo 2022 was $1.3 billion, up 13.1%. The $149.6 million increase was comprised of a $76.6 million increase in recurring subscription Run Rate and a $73.0 million increase in asset-based fees Run Rate. The increase in asset-based fees Run Rate was primarily driven by higher AUM in non-ETF indexed funds linked to MSCI indexes and higher AUM in ETFs linked to MSCI equity indexes. The increase in recurring subscription Run Rate was primarily driven by growth from market cap-weighted index products and strong growth from factor, ESG and climate index products, and reflected growth across all regions and client segments.
Analytics Segment:
Table 1B: 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 |
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2022 |
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2021 |
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% Change |
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Operating revenues: |
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Recurring subscriptions |
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$137,799 |
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$131,672 |
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4.7% |
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Non-recurring |
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1,998 |
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2,345 |
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(14.8%) |
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Total operating revenues |
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139,797 |
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134,017 |
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4.3% |
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Adjusted EBITDA expenses |
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88,908 |
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88,286 |
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0.7% |
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Adjusted EBITDA |
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$50,889 |
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$45,731 |
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11.3% |
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Adjusted EBITDA margin % |
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36.4% |
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34.1% |
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Analytics operating revenues were $139.8 million, up 4.3%. The $5.8 million increase was primarily driven by higher recurring subscription revenues from both Multi-Asset Class and Equity Analytics products.
Analytics Run Rate as of 31 Marzo 2022 was $588.4 million, up 5.6%. The increase of $31.4 million was also driven by growth in both Multi-Asset Class and Equity Analytics products. Analytics organic Run Rate growth was 6.7%.
ESG and Climate Segment:
Table 1C: 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 |
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2022 |
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2021 |
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% Change |
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Operating revenues: |
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Recurring subscriptions |
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$50,572 |
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$34,140 |
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48.1% |
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Non-recurring |
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1,457 |
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610 |
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138.9% |
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Total operating revenues |
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52,029 |
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34,750 |
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49.7% |
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Adjusted EBITDA expenses |
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39,937 |
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29,705 |
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34.4% |
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Adjusted EBITDA |
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$12,092 |
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$5,045 |
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139.7% |
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Adjusted EBITDA margin % |
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23.2% |
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14.5% |
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ESG and Climate operating revenues were $52.0 million, up 49.7%. The $17.3 million increase was primarily driven by strong growth from recurring subscriptions related to Ratings, Climate and Screening products. Excluding foreign currency exchange rate fluctuations, ESG and Climate revenue growth was 52.5%.
ESG and Climate Run Rate as of 31 Marzo 2022 was $216.2 million, up 46.7%. The $68.9 million increase primarily reflects strong growth from Ratings, Climate and Screening products with contributions across all regions. ESG and Climate organic Run Rate growth was 49.6%.
All Other – Private Assets Segment:
Table 1D: 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 |
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2022 |
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2021 |
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% Change |
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Operating revenues: |
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|
|
|
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Recurring subscriptions |
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$36,891 |
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$16,803 |
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119.6% |
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Non-recurring |
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469 |
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362 |
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29.6% |
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Total operating revenues |
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37,360 |
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17,165 |
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117.7% |
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Adjusted EBITDA expenses |
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27,672 |
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11,234 |
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146.3% |
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Adjusted EBITDA |
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$9,688 |
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$5,931 |
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63.3% |
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Adjusted EBITDA margin % |
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25.9% |
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34.6% |
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All Other – Private Assets operating revenues, which reflects the Real Estate operating segment, were $37.4 million, up 117.7%, and included $19.2 million from RCA. Excluding the acquisition of RCA, All Other – Private Assets segment revenues increased 6.0%, primarily reflecting growth in Global Intel and Real Estate Climate Value-at-Risk products. Excluding foreign currency exchange rate fluctuations and contributions from RCA, All Other – Private Assets revenue growth was 11.6%.
All Other – Private Assets Run Rate, which reflects the Real Estate operating segment, was $137.5 million as of 31 Marzo 2022, up 141.7%, and included $78.0 million associated with the RCA business. Excluding the acquisition, All-Other Private Assets Run Rate increased 4.6%, primarily reflecting growth in Global Intel products and strong growth in Real Estate Climate Value-at-Risk products. All Other – Private Assets organic subscription Run Rate growth was 7.7%.
Select Balance Sheet Items and Capital Allocation
Cash Balances and Outstanding Debt: Cash and cash equivalents was $679.3 million as of 31 Marzo 2022. MSCI typically seeks to maintain minimum cash balances globally of approximately $200.0 million to $250.0 million for general operating purposes.
Total principal amounts of debt outstanding as of 31 Marzo 2022 was $4.2 billion. The total debt to net income ratio (based on trailing twelve months net income) was 5.5x. The total debt to adjusted EBITDA ratio (based on trailing twelve months adjusted EBITDA) was 3.4x.
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 $15.3 million, cash provided by operating activities increased by 13.3% to $244.2 million due to continued strong client cash collections and free cash flow was $228.9 million, up 11.6%.
Share Count and Share Repurchases: Weighted average diluted shares outstanding were 82.3 million in first quarter 2022, down 1.4% year-over-year. Total share repurchases during the quarter were $772.7 million or 1,498,143 shares at an average repurchase price of $515.74. Total shares outstanding as of 31 Marzo 2022 were 81.2 million. A total of $794.4 million remains on the outstanding share repurchase authorization as of trade date of 25 Aprile 2022.
Dividends: Approximately $84.7 million in dividends were paid to shareholders in first quarter 2022. On 25 Aprile 2022, the MSCI Board of Directors declared a cash dividend of $1.04 per share for second quarter 2022, payable on 31 Maggio 2022, to shareholders of record as of the close of trading on 13 Maggio 2022.
Full-Year 2022 Guidance
MSCI’s guidance for the year ending 31 Dicembre 2022 (“Full-Year 2022”) is based on assumptions about a number of macroeconomic and capital market factors, in particular related to equity 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 ongoing uncertainty related to the duration, magnitude and impact of the ongoing COVID-19 pandemic as well as the economic and market impacts of elevated inflation levels and Russia’s invasion of Ukraine.
There were no changes to MSCI’s previously published guidance on 27 Gennaio 2022.
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Guidance Item |
Current Guidance for Full-Year 2022 |
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Operating Expense |
$1,075 to $1,115 million |
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Adjusted EBITDA Expense |
$975 to $1,005 million |
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Interest Expense (including amortization of financing fees) |
~$162 million |
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Depreciation & Amortization Expense |
$100 to $110 million |
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Effective Tax Rate |
15.5% to 18.5% |
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Capital Expenditures |
$60 to $70 million |
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Net Cash Provided by Operating Activities |
$1,120 to $1,160 million |
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Free Cash Flow |
$1,050 to $1,100 million |
The guidance provided above assumes, among other things, that MSCI maintains its current debt levels. On 26 Gennaio 2022, the MSCI Board of Directors authorized management to opportunistically explore financing options that would increase the Company’s leverage ratio and interest expense. Any potential financing is subject to market and other conditions, and there can be no assurance as to the timing or certainty of a transaction.
Conference Call Information
MSCI’s senior management will review the first quarter 2022 results on Tuesday, 26 Aprile 2022 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 1-877-376-9931 conference ID: 4017539 within the United States. International callers may dial 1-720-405-2251 conference ID: 4017539. The teleconference will also be webcast with an accompanying slide presentation which 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 2022 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 31 Dicembre 2021 filed with the Securities and Exchange Commission (“SEC”) on 11 Febbraio 2022 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 website, including its quarterly updates, blog, podcasts and social media channels, including its 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, quarterly 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/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 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 Estate 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-sale 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 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, including the acquisition of RCA completed on 13 Settembre 2021. 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.
Contacts
MSCI Inc. Contacts
Investor Inquiries
jisoo.suh@msci.com
Jisoo Suh + 1 917 825 7111
Media Inquiries
PR@msci.com
Sam Wang +1 212 804 5244
Melanie Blanco +1 212 981 1049
Rachel Lai +852 2844 9315
