Exhibit 99.1
MSCI Inc. Reports Second Quarter 2013 Financial Results and Announces Additional $100 Million Accelerated Share Repurchase
NEW YORK--(BUSINESS WIRE)--August 1, 2013--MSCI Inc. (NYSE: MSCI), a leading global provider of investment decision support tools, including indices, portfolio risk and performance analytics and corporate governance services, today announced results for the second quarter and six months ended June 30, 2013.
(Note: Percentage changes are referenced to the comparable period in 2012, unless otherwise noted.)
- Operating revenues increased 8.1% to $257.9 million in second quarter 2013 and 9.0% to $509.8 million for six months 2013.
- Net income increased 62.6% to $61.1 million in second quarter 2013 and net income grew 47.2% to $120.0 million for six months 2013.
- Diluted EPS for second quarter 2013 rose 66.7% to $0.50 and six months 2013 Diluted EPS increased 48.5% to $0.98.
- Adjusted EBITDA1 grew by 8.0% to $116.6 million in second quarter 2013. For six months 2013, Adjusted EBITDA1 grew by 8.0% to $226.7 million. Second quarter 2013 Adjusted EBITDA margin was flat at 45.2% and six months 2013 Adjusted EBITDA margin fell slightly to 44.5% from 44.9%.
- Second quarter 2013 Adjusted EPS2 rose 16.0% to $0.58. Six months 2013 Adjusted EPS2 rose 21.3% to $1.14.
- MSCI’s Run Rate grew by 7.9% to $992.6 million in second quarter 2013, driven by organic3 subscription growth of 3.7%, organic asset-based fee growth of 2.1% and the acquisitions of IPD and InvestorForce.
- MSCI announced that it will enter into a $100.0 million accelerated share repurchase (“ASR”) agreement as of the market-close today. The prior agreement, which was announced in December 2012 and concluded in July 2013, resulted in the repurchase of 3.0 million shares.
| Table 1: MSCI Inc. Selected Financial Information (unaudited) |
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| | | Three Months Ended | | Change from | | Six Months Ended | | Change From |
| | | June 30, | | June 30, | | June 30, | | June 30, | | June 30, | | June 30, |
| In thousands, except per share data | | 2013 | | 2012 | | 2012 | | 2013 | | 2012 | | 2012 |
| Operating revenues | | $ | 257,898 | | | $ | 238,565 | | | 8.1 | % | | $ | 509,807 | | | $ | 467,617 | | | 9.0 | % |
| Operating expenses | | $ | 160,726 | | | $ | 151,444 | | | 6.1 | % | | $ | 322,108 | | | $ | 299,517 | | | 7.5 | % |
| Net income | | $ | 61,053 | | | $ | 37,546 | | | 62.6 | % | | $ | 119,990 | | | $ | 81,512 | | | 47.2 | % |
| % Margin | | | 23.7 | % | | | 15.7 | % | | | | | 23.5 | % | | | 17.4 | % | | |
| Diluted EPS | | $ | 0.50 | | | $ | 0.30 | | | 66.7 | % | | $ | 0.98 | | | $ | 0.66 | | | 48.5 | % |
| | | | | | | | | | | | | |
| Adjusted EPS2 | | $ | 0.58 | | | $ | 0.50 | | | 16.0 | % | | $ | 1.14 | | | $ | 0.94 | | | 21.3 | % |
| Adjusted EBITDA1 | | $ | 116,562 | | | $ | 107,912 | | | 8.0 | % | | $ | 226,655 | | | $ | 209,819 | | | 8.0 | % |
| % Margin | | | 45.2 | % | | | 45.2 | % | | | | | 44.5 | % | | | 44.9 | % | | |
1 Net Income before income taxes, other net expense and income, depreciation, amortization, non-recurring stock-based compensation, the lease exit charge and restructuring costs. See Table 13 titled "Reconciliation of Adjusted EBITDA to Net Income (unaudited)" and information about the use of non-GAAP financial information provided under "Notes Regarding the Use of Non-GAAP Financial Measures.” |
2 Per share net income before after-tax impact of amortization of intangibles, non-recurring stock-based compensation, restructuring costs, the lease exit charge and debt repayment and refinancing expenses. See Table 14 titled "Reconciliation of Adjusted Net Income and Adjusted EPS to Net Income and EPS (unaudited)" and information about the use of non-GAAP financial information provided under "Notes Regarding the Use of Non-GAAP Financial Measures.” |
3 For the purposes of analyzing revenue and Run Rate trends, organic growth comparisons exclude the impact of the acquisitions of IPD Group Limited (“IPD”) and Investor Force Holdings, Inc. (“InvestorForce”), as well as the sale of the CFRA product line. |
“MSCI’s revenues and run rate continued to grow in the second quarter of 2013, aided by the acquisitions of IPD and InvestorForce, continued strength in our retention rates and a modest increase in new sales. We are working hard to bring the full value of MSCI’s unique products and services to our clients and I am excited by the opportunities we see to add value to our clients’ investment processes. We will continue to make investments in our business over the second half of 2013 and beyond in order to realize that potential,” Henry A. Fernandez, Chairman and CEO, said.
“The new $100 million ASR agreement that we are announcing today confirms our commitment to return capital to our shareholders. MSCI’s strong cash flow has enabled us to return capital and make strategic acquisitions like IPD and InvestorForce while continuing to invest in our organic growth,” added Mr. Fernandez.
Summary of Results for Second Quarter 2013 Compared to Second Quarter 2012
Operating Revenues – See Table 4
Operating revenues for the three months ended June 30, 2013 (“second quarter 2013”) increased $19.3 million, or 8.1%, to $257.9 million compared to $238.6 million for the three months ended June 30, 2012 (“second quarter 2012”). For the purposes of analyzing revenue trends, organic growth comparisons exclude the impact of the acquisitions of IPD Group Limited (“IPD”) and Investor Force Holdings, Inc. (“InvestorForce”), acquired on November 30, 2012 and January 29, 2013, respectively, as well as the sale of the CFRA product line on March 31, 2013. On an organic basis, operating revenues grew by 1.0%.
Second quarter 2013 recurring subscription revenues rose $15.4 million, or 7.8%, to $213.5 million and 0.4% on an organic basis. Asset-based fees increased $2.9 million, or 8.4%, to $37.0 million and non-recurring revenues rose $1.1 million to $7.4 million.
Performance and Risk segment revenues rose $20.8 million to $228.4 million, an increase of 10.0% and 0.8% on an organic basis. The increase was primarily driven by increases in equity index and environmental, social and governance (“ESG”) products.
• | | Index and ESG products: Index and ESG product revenues increased $22.2 million, or 20.2%, to $132.2 million. Subscription revenues grew by $19.4 million, or 25.5%, to $95.2 million, driven mostly by the acquisition of IPD. On an organic basis, index and ESG subscription revenue growth was 3.1%, primarily attributable to growth in our benchmark products. |
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| | IPD contributed $17.0 million of revenues to second quarter 2013 index and ESG subscription revenues. The second quarter is expected to be the highest quarter for IPD revenues, reflecting when a substantial portion of its annual report products are delivered to clients. |
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| | Revenues attributable to equity index asset-based fees rose $2.9 million, or 8.4%, to $37.0 million, largely as a result of higher revenues from non-ETF passive funds and a change in the mix of ETFs linked to MSCI indices. Included in second quarter 2013 were revenues of $0.8 million related to Vanguard ETFs that have switched away from MSCI indices in 2013 (“the Vanguard ETFs”). That transition is now complete. |
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• | | Risk management analytics: Revenues related to risk management analytics products increased $2.6 million, or 4.0%, to $67.1 million, driven largely by the acquisition of InvestorForce. On an organic basis, revenues grew by 0.5%. |
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• | | Portfolio management analytics: Revenues related to portfolio management analytics products declined $3.2 million, or 11.0%, to $26.1 million as a result of lower sales and elevated cancellations of equity analytics products in prior periods. |
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• | | Energy and commodity analytics: Revenues from energy and commodity analytics products were $3.1 million, down $0.7 million from second quarter 2012, as a result of lower sales and elevated cancellations of energy and commodity analytics products in prior periods. |
Governance segment revenues fell $1.5 million, or 4.9%, to $29.5 million in second quarter 2013, as the loss of revenues resulting from the sale of the CFRA product line more than offset organic growth. On an organic basis, Governance revenues rose 3.0%, driven by higher revenues from advisory compensation data and analytics products.
Operating Expenses – See Table 6
Total operating expenses rose $9.3 million, or 6.1%, to $160.7 million, substantially driven by higher costs from recent acquisitions.
• | | Compensation costs: Total compensation costs rose $7.9 million, or 8.5%, to $101.7 million in second quarter 2013, driven primarily by the acquisitions of IPD and InvestorForce, offset by the sale of the CFRA product line and a decline in other compensation expenses. |
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• | | Non-compensation costs excluding depreciation and amortization, the lease exit charge and restructuring costs: Non-compensation costs rose $2.5 million, or 6.8%, to $39.7 million in second quarter 2013. The increase in non-compensation costs was driven by the acquisitions of IPD and InvestorForce as well as higher marketing, travel and entertainment expenses, offset by declines in occupancy, information technology costs and professional fees. |
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• | | Depreciation and amortization: Amortization of intangibles expense totaled $14.5 million compared to $16.0 million in second quarter 2012, a decline of 9.1%, primarily due to certain intangibles becoming fully amortized since the prior period, partially offset by additional amortization related to the IPD and InvestorForce acquisitions. Depreciation and amortization of property, equipment and leasehold improvements rose $0.6 million, or 12.5%, to $5.2 million. |
Other Expense (Income), Net
Other expense (income), net for second quarter 2013 was $5.9 million, a decline of $23.9 million from second quarter 2012. Interest expense fell by $23.1 million to $6.5 million. Second quarter 2012 interest expense included an expense of $20.6 million resulting from MSCI refinancing its indebtedness. Excluding the impact of the $20.6 million charge in the prior period, other expense (income), net declined $3.3 million as a result of lower indebtedness and lower interest rates.
Provision for Income Taxes
Income tax expense was $30.2 million in second quarter 2013, up 53.2% from second quarter 2012. The effective tax rate in second quarter 2013 fell to 33.1% from 34.4% a year ago.
Net Income and Earnings per Share – See Table 14
Net income rose $23.5 million, or 62.6%, to $61.1 million for second quarter 2013. The net income margin increased to 23.7% from 15.7% as a result of the higher operating profit margin and lower interest costs. Diluted EPS rose by $0.20, or 66.7%, to $0.50, driven by higher net income and a 1.0% decline in the weighted average of diluted shares outstanding in second quarter 2013. Adjusted net income, which excludes the after-tax impact of amortization of intangibles, non-recurring stock-based compensation expense, debt repayment and refinancing expenses, the lease exit charge and restructuring costs, rose $8.9 million, or 14.5%, to $70.5 million. Adjusted EPS, which excludes the after-tax, per share impact of amortization of intangibles, non-recurring stock-based compensation expense, debt repayment and refinancing expenses, the lease exit charge and restructuring costs totaling $0.08, rose $0.08, or 16.0%, to $0.58.
See Table 14 titled “Reconciliation of Adjusted Net Income and Adjusted EPS to Net Income and EPS (unaudited)” and “Notes Regarding the Use of Non-GAAP Financial Measures” below.
Adjusted EBITDA – See Table 13
Adjusted EBITDA, which excludes income taxes, other net expense and income, depreciation, amortization, non-recurring stock-based compensation, the lease exit charge and restructuring costs, was $116.6 million, up $8.7 million, or 8.0%, from second quarter 2012. The Adjusted EBITDA margin remained 45.2%. Second quarter 2013 Adjusted EBITDA and Adjusted EBITDA margin benefited from the seasonal strength in IPD revenues.
By segment, Adjusted EBITDA for the Performance and Risk segment increased $6.2 million, or 6.1%, to $108.8 million in second quarter 2013. The Adjusted EBITDA margin for this segment fell to 47.6% from 49.4%. Adjusted EBITDA for the Governance segment increased $2.4 million, or 45.7%, to $7.7 million and the Adjusted EBITDA margin rose to 26.3% from 17.2%. The increase in Governance segment Adjusted EBITDA was driven by a reduction in severance, occupancy and information technology costs compared to second quarter 2012.
See Table 13 titled “Reconciliation of Adjusted EBITDA to Net Income (unaudited)” and “Notes Regarding the Use of Non-GAAP Financial Measures” below.
Summary of Results for Six Months Ended June 30, 2013 compared to Six Months Ended June 30, 2012
Operating Revenues – See Table 5
Total operating revenues for the six months ended June 30, 2013 (“six months 2013”) increased $42.2 million, or 9.0%, to $509.8 million compared to $467.6 million for the six months ended June 30, 2012 (“six months 2012”). Total subscription revenues rose $37.4 million, or 9.7%, to $422.1 million, while asset-based fees rose $4.8 million, or 7.0%, to $73.5 million. Total non-recurring revenues were unchanged at $14.2 million. On an organic basis, total operating revenues grew by 3.4%.
Performance and Risk segment revenues rose $42.2 million, or 10.4%, to $447.9 million for six months 2013, and 3.3% on an organic basis. Index and ESG products and risk management analytics revenues grew 17.3% and 4.5%, respectively, in six months 2013, or organically by 5.7% and 1.5%, respectively. Portfolio management analytics revenues fell 8.0%. Energy and other commodity analytics revenues increased $3.7 million, or 150.3%, primarily as a result of a $5.2 million non-cash cumulative revenue reduction to correct an error that was recorded in first quarter 2012. Excluding the impact of that error, energy and commodity analytics revenues declined 19.2%.
Governance revenues were $61.9 million, essentially flat versus six months 2012. On an organic basis, revenue grew by 4.0%.
Operating Expenses – See Table 7
Total operating expenses increased $22.6 million, or 7.5%, to $322.1 million in six months 2013 compared to six months 2012 driven primarily by the acquisitions of IPD and InvestorForce. The increase largely reflects increases of $22.1 million, or 11.9%, in total compensation expenses and $2.4 million, or 3.4%, in non-compensation expenses offset by a decline of $1.7 million, or 4.1%, in total depreciation and amortization expenses.
Other Expense (Income), Net
Other expense (income), net for six months 2013 was $12.9 million, a decline of $29.7 million from six months 2012. Other expense (income), net includes debt repayment and refinancing expenses of $20.6 million in six months 2012. Excluding the change in debt repayment and refinancing expenses, other expense (income), net declined by $9.1 million in six months 2013 primarily as a result of a combination of lower levels of indebtedness and a lower cost of debt.
Provision for Income Taxes
The provision for income tax expense was $54.8 million in six months 2013, up $10.8 million from six months 2012. Year to date 2013 income tax expense benefited from discrete items of $3.9 million primarily related to a reduction in state taxes and the 2012 reinstatement of the research and development tax credit. The effective tax rate was 31.4% in six months 2013, versus 35.1% a year ago.
Net Income and Earnings per Share – See Table 14
Net income increased $38.5 million, or 47.2%, to $120.0 million and the net income margin increased to 23.5% from 17.4%. Diluted EPS rose 48.5% to $0.98 from $0.66.
Adjusted net income, which excludes the after-tax impact of amortization of intangibles, non-recurring stock-based compensation expense, debt repayment and refinancing expenses, the lease exit charge and restructuring costs totaling $19.7 million, rose $23.5 million, or 20.2%, to $139.6 million. Adjusted EPS, which excludes the after-tax, per share impact of amortization of intangibles, non-recurring stock-based compensation expense, debt repayment and refinancing expenses, the lease exit charge and restructuring costs totaling $0.16, rose 21.3% to $1.14 in six months 2013.
See Table 14 titled “Reconciliation of Adjusted Net Income and Adjusted EPS to Net Income and EPS (unaudited)” and “Notes Regarding the Use of Non-GAAP Financial Measures” below.
Adjusted EBITDA – See Table 13
Adjusted EBITDA was $226.7 million, an increase of $16.8 million, or 8.0%, from six months 2012. Adjusted EBITDA margin fell slightly to 44.5% from 44.9%.
By segment, Adjusted EBITDA for the Performance and Risk segment increased $14.0 million, or 7.1%, to $210.8 million from six months 2012. Adjusted EBITDA margin declined to 47.1% in six months 2013 from 48.5% in six months 2012. Adjusted EBITDA for the Governance segment rose $2.8 million, or 21.8%, to $15.9 million in six months 2013. The Adjusted EBITDA Margin for the Governance segment was 25.7%, up from 21.0% in six months 2012.
See Table 13 titled “Reconciliation of Adjusted EBITDA to Net Income (unaudited)” and “Notes Regarding the Use of Non-GAAP Financial Measures” below.
Key Operating Metrics – See Tables 10, 11, 12
Total Run Rate grew by $73.0 million, or 7.9%, to $992.6 million as of June 30, 2013 compared to June 30, 2012. For the purposes of analyzing changes in Run Rate, organic growth comparisons exclude the impact of the acquisitions of IPD and InvestorForce, as well as the sale of the CFRA product line, which was sold on March 31, 2013. On an organic basis, total subscription Run Rate grew by 3.7%. Changes in foreign currency rates over the past twelve months negatively impacted Run Rate by $6.0 million, including $1.3 million relative to first quarter 2013.
Performance and Risk segment Run Rate grew by $75.3 million, or 9.3%, to $880.9 million. On an organic basis, Performance and Risk Run Rate grew by 3.1%.
• | | Index and ESG products: Index and ESG subscription Run Rate grew by $65.2 million, or 22.8%, to $350.8 million. On an organic basis, Run Rate grew by 8.7%, driven by growth in equity index benchmark and data products. Changes in foreign currency rates lowered Run Rate growth by $2.5 million from the beginning of 2013, with most of that impact coming in the first quarter. |
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| | Run Rate attributable to asset-based fees rose $2.7 million, or 2.1%, to $131.7 million. The increase was primarily driven by higher market performance and inflows into ETFs linked to MSCI indices, offset, in part, by the impact of the index switch of the Vanguard ETFs. Excluding the Run Rate attributable to the Vanguard ETFs at June 30, 2012, asset-based fee Run Rate grew by $24.3 million, or 22.6%. |
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| | As of June 30, 2013, AUM in ETFs linked to MSCI indices were $269.7 billion, down $57.7 billion, or 17.6%, from June 30, 2012 and down $87.6 billion, or 24.5%, from March 31, 2013. Excluding the Vanguard ETFs which completed their transition during the second quarter 2013, AUM in MSCI-linked ETFs rose $59.6 billion, or 28.4%, from June 30, 2012 and decreased $15.7 billion, or 5.5%, from March 31, 2013. |
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| | During second quarter 2013, MSCI-linked ETFs were impacted by market declines of $13.2 billion and net inflows of $0.4 billion. The transitioning of the last of the Vanguard ETFs resulted in a loss of $74.8 billion of AUM in the quarter. |
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• | | Risk management analytics: Run Rate related to risk management analytics products increased $22.0 million, or 8.5%, to $281.0 million. On an organic basis, risk management analytics Run Rate grew by 4.6%. MSCI benefited from solid growth in Run Rate associated with its RiskManager and BarraOne products. |
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• | | Portfolio management analytics: Run Rate related to portfolio management analytics products declined $12.6 million, or 10.8%, to $104.5 million. Year-over-year Run Rate was negatively impacted by product swaps totaling $2.6 million and by changes in foreign currency rates which lowered Run Rate by an additional $3.3 million, including $0.7 million relative to first quarter 2013. |
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• | | Energy and commodity analytics: Run Rate from energy and commodity analytics products declined to $12.8 million, down $2.0 million, or 13.8%, from second quarter 2012. |
Governance Run Rate declined by $2.3 million, or 2.0%, to $111.7 million. On an organic basis, Run Rate grew by 6.0%, reflecting strong growth in the Run Rate of corporate compensation data and analytics products and services and modest growth in the Run Rate of proxy research and voting services.
Accelerated Share Repurchase Agreements
On July 31, 2013, MSCI settled the $100.0 million ASR agreement entered into with Morgan Stanley & Co. LLC (“Morgan Stanley”) on December 14, 2012 in accordance with its terms. Pursuant to the ASR agreement, MSCI repurchased a total of 2,988,117 shares of its common stock, which included an initial delivery of 2,226,028 shares in December 2012 and 762,089 shares delivered at settlement. The average purchase price for the shares was $33.47 per share. The repurchased shares will be held in treasury.
MSCI intends to enter into another $100.0 million ASR agreement with Morgan Stanley, following the close of today’s market, which will begin immediately. Under this new ASR agreement, MSCI will pay Morgan Stanley $100.0 million in cash and receive from Morgan Stanley an initial delivery of shares of its common stock on August 2, 2013 and may receive from Morgan Stanley additional shares at or prior to maturity of the ASR agreement, which MSCI anticipates will be no later than December 2013.
Both of the ASR agreements were authorized pursuant to a $300.0 million share repurchase program approved by MSCI’s Board of Directors in 2012. The remaining $100.0 million balance of the authorization will be available for utilization from time to time through 2014 at management’s discretion.
Conference Call Information
Investors will have the opportunity to listen to MSCI Inc.'s senior management review second quarter 2013 results on Thursday, August 1, 2013 at 11:00 am Eastern Time. To listen to the live event, visit the investor relations section of MSCI's website, http://ir.msci.com/events.cfm, or dial 1-877-312-9206 within the United States. International callers dial 1-408-774-4001.
An audio recording of the conference call will be available on our website approximately two hours after the conclusion of the live event and will be accessible through August 3, 2013. To listen to the recording, visit http://ir.msci.com/events.cfm, or dial 1-855-859-2056 (passcode: 17528956) within the United States. International callers dial 1-404-537-3406 (passcode: 17528956).
About MSCI
MSCI Inc. is a leading provider of investment decision support tools to investors globally, including asset managers, banks, hedge funds and pension funds. MSCI products and services include indices, portfolio risk and performance analytics, and governance tools.
The company’s flagship product offerings are: the MSCI indices with approximately USD 7 trillion estimated to be benchmarked to them on a worldwide basis1; Barra multi-asset class factor models, portfolio risk and performance analytics; RiskMetrics multi-asset class market and credit risk analytics; IPD real estate information, indices and analytics; MSCI ESG (environmental, social and governance) Research screening, analysis and ratings; ISS governance research and outsourced proxy voting and reporting services; and FEA valuation models and risk management software for the energy and commodities markets. MSCI is headquartered in New York, with research and commercial offices around the world. MSCI#IR
1As of September 30, 2012, as reported by eVestment, Lipper and Bloomberg on January 31, 2013
For further information on MSCI, please visit our website at www.msci.com
Forward-Looking Statements
This earnings release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These 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 forward-looking statements. In some cases, you can identify forward-looking statements by the use of words such as "may," "could," "expect," "intend," "plan," "seek," "anticipate," "believe," "estimate," "predict," "potential," or "continue," or the negative of these terms or other comparable terminology. You should not place undue reliance on forward-looking statements because they involve known and unknown risks, uncertainties and other factors that are, in some cases, beyond our control and that could materially affect 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, 2012 filed with the Securities and Exchange Commission ("SEC") on March 1, 2013, and in quarterly reports on Form 10-Q and current reports on Form 8-K filed with the SEC. If any of these risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may vary significantly from what MSCI projected. Any forward-looking statement in this release reflects MSCI's current views with respect to future events and is subject to these and other risks, uncertainties and assumptions relating to MSCI's operations, results of operations, growth strategy and liquidity. MSCI assumes no obligation to publicly update or revise these forward-looking statements for any reason, whether as a result of new information, future events, or otherwise, except as required by law.
Website and Social Media Disclosure
MSCI uses its website and corporate Twitter account (@MSCI_Inc) as channels of distribution of company information. The information we post through these channels may be deemed material. Accordingly, investors should monitor these channels, in addition to following our press releases, SEC filings and public conference calls and webcasts. In addition, you may automatically receive email alerts and other information about MSCI when you enroll your email address by visiting the “Email Alert Subscription” section at http://ir.msci.com/alerts.cfm?. The contents of MSCI's website and social media channels are not, however, incorporated by reference into this earnings release.
Notes Regarding the Use of Non-GAAP Financial Measures
MSCI has presented supplemental non-GAAP financial measures as part of this earnings release. A reconciliation is provided that reconciles each non-GAAP financial measure with the most comparable GAAP measure. The presentation of non-GAAP financial measures should not be considered as alternative measures for the most directly comparable GAAP financial measures. These measures are used by management to monitor the financial performance of the business, inform business decision making and forecast future results.
Adjusted EBITDA is defined as net income before provision for income taxes, other net expense and income, depreciation and amortization, non-recurring stock-based compensation expense, the lease exit charge and restructuring costs.
Adjusted net income and Adjusted EPS are defined as net income and EPS, respectively, before provision for non-recurring stock-based compensation expenses, amortization of intangible assets, restructuring costs, the lease exit charge and the accelerated amortization or write-off of deferred financing and debt discount costs as a result of debt repayment (debt repayment and refinancing expenses), as well as for any related tax effects.
We believe that adjustments related to the lease exit charge, restructuring costs and debt repayment and refinancing expenses are useful to management and investors because it allows for an evaluation of MSCI’s underlying operating performance. Additionally, we believe that adjusting for non-recurring stock-based compensation expenses, debt repayment and refinancing expenses and depreciation and amortization may help investors compare our performance to that of other companies in our industry as we do not believe that other companies in our industry have as significant a portion of their operating expenses represented by these items. 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, Adjusted net income and Adjusted EPS are not defined in the same manner by all companies and may not be comparable to other similarly titled measures of other companies.
Table 2: MSCI Inc. Condensed Consolidated Statement of Income (unaudited) |
| | | | | | | | | | |
| | Three Months Ended | | Six Months Ended |
| | June 30, | | June 30, | | March 31, | | June 30, | | June 30, |
| In thousands, except per share data | | 2013 | | 2012 | | 2013 | | 2013 | | 2012 |
| | | | | | | | | | |
| Operating revenues | | $ | 257,898 | | | $ | 238,565 | | | $ | 251,909 | | | $ | 509,807 | | | $ | 467,617 | |
| | | | | | | | | | |
| Operating expenses | | | | | | | | | | |
| Cost of services | | | 83,359 | | | | 73,243 | | | | 80,185 | | | | 163,544 | | | | 145,534 | |
| Selling, general and administrative | | | 57,612 | | | | 57,602 | | | | 61,631 | | | | 119,243 | | | | 113,038 | |
| Restructuring costs | | | - | | | | (22 | ) | | | - | | | | - | | | | (51 | ) |
| Amortization of intangible assets | | | 14,509 | | | | 15,959 | | | | 14,486 | | | | 28,995 | | | | 31,918 | |
| Depreciation and amortization of property, | | | | | | | | |
| equipment and leasehold improvements | | | 5,246 | | | | 4,662 | | | | 5,080 | | | | 10,326 | | | | 9,078 | |
| Total operating expenses | | $ | 160,726 | | | $ | 151,444 | | | $ | 161,382 | | | $ | 322,108 | | | $ | 299,517 | |
| | | | | | | | | | |
| Operating income | | $ | 97,172 | | | $ | 87,121 | | | $ | 90,527 | | | $ | 187,699 | | | $ | 168,100 | |
| Operating margin | | | 37.7 | % | | | 36.5 | % | | | 35.9 | % | | | 36.8 | % | | | 35.9 | % |
| | | | | | | | | | |
| Interest income | | | (237 | ) | | | (237 | ) | | | (268 | ) | | | (505 | ) | | | (460 | ) |
| Interest expense | | | 6,504 | | | | 29,581 | | | | 7,020 | | | | 13,524 | | | | 41,936 | |
| Other expense (income) | | | (354 | ) | | | 516 | | | | 224 | | | | (130 | ) | | | 1,124 | |
| Other expenses (income), net | | $ | 5,913 | | | $ | 29,860 | | | $ | 6,976 | | | $ | 12,889 | | | $ | 42,600 | |
| | | | | | | | | | |
| Income before taxes | | | 91,259 | | | | 57,261 | | | | 83,551 | | | | 174,810 | | | | 125,500 | |
| | | | | | | | | | |
| Provision for income taxes | | | 30,206 | | | | 19,715 | | | | 24,614 | | | | 54,820 | | | | 43,988 | |
| Net income | | $ | 61,053 | | | $ | 37,546 | | | $ | 58,937 | | | $ | 119,990 | | | $ | 81,512 | |
| Net income margin | | | 23.7 | % | | | 15.7 | % | | | 23.4 | % | | | 23.5 | % | | | 17.4 | % |
| | | | | | | | | | |
| Earnings per basic common share | | $ | 0.50 | | | $ | 0.31 | | | $ | 0.49 | | | $ | 0.99 | | | $ | 0.66 | |
| Earnings per diluted common share | | $ | 0.50 | | | $ | 0.30 | | | $ | 0.48 | | | $ | 0.98 | | | $ | 0.66 | |
| | | | | | | | | | |
| Weighted average shares outstanding used | | | | | | | | |
| in computing earnings per share | | | | | | | | | | |
| | | | | | | | | | |
| Basic | | | 121,149 | | | | 122,030 | | | | 120,746 | | | | 120,949 | | | | 121,892 | |
| Diluted | | | 122,069 | | | | 123,295 | | | | 121,702 | | | | 121,887 | | | | 123,204 | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Table 3: MSCI Inc. Selected Balance Sheet Items (unaudited) |
| | | | | | |
| | | | | | As of |
| | | | | | June 30, | | March 31, | | December 31, |
| In thousands | | | | | | 2013 | | 2013 | | 2012 |
| Cash and cash equivalents | | | | | | $ | 334,701 | | | $ | 263,029 | | | $ | 183,309 | |
| Short-term investments | | | | | | | - | | | | - | | | | 70,898 | |
| Accounts receivable, net of allowances | | | | | | | 160,101 | | | | 166,915 | | | | 153,557 | |
| | | | | | | | | | |
| Deferred revenue | | | | | | $ | 347,470 | | | $ | 350,470 | | | $ | 308,022 | |
| Current maturities of long-term debt | | | | | | | 43,118 | | | | 43,106 | | | | 43,093 | |
| Long-term debt, net of current maturities | | | | | | 775,072 | | | | 785,856 | | | | 811,623 | |
Table 4: Quarterly Operating Revenues by Product Category and Revenue Type (unaudited) |
| | | | | | | | | | | | |
| | | Three Months Ended | | % Change from |
| | | June 30, | | June 30, | | March 31, | | June 30, | | March 31, |
| In thousands | | 2013 | | 2012 | | 2013 | | 2012 | | 2013 |
| Index and ESG products | | | | | | | | | | |
| Subscriptions | | $ | 95,200 | | $ | 75,829 | | $ | 84,888 | | | 25.5 | % | | 12.1 | % |
| Asset-based fees | | | 36,970 | | | 34,094 | | | 36,515 | | | 8.4 | % | | 1.2 | % |
| Index and ESG products total | | | 132,170 | | | 109,923 | | | 121,403 | | | 20.2 | % | | 8.9 | % |
| Risk management analytics | | | 67,099 | | | 64,547 | | | 67,274 | | | 4.0 | % | | (0.3 | %) |
| Portfolio management analytics | | | 26,089 | | | 29,326 | | | 27,646 | | | (11.0 | %) | | (5.6 | %) |
| Energy and commodity analytics | | | 3,065 | | | 3,780 | | | 3,146 | | | (18.9 | %) | | (2.6 | %) |
| | | | | | | | | | | |
| Total Performance and Risk revenues | | $ | 228,423 | | $ | 207,576 | | $ | 219,469 | | | 10.0 | % | | 4.1 | % |
| | | | | | | | | | | |
| Total Governance revenues | | | 29,475 | | | 30,989 | | | 32,440 | | | (4.9 | %) | | (9.1 | %) |
| | | | | | | | | | | |
| Total operating revenues | | $ | 257,898 | | $ | 238,565 | | $ | 251,909 | | | 8.1 | % | | 2.4 | % |
| | | | | | | | | | | |
| Recurring subscriptions | | $ | 213,502 | | $ | 198,104 | | $ | 208,625 | | | 7.8 | % | | 2.3 | % |
| Asset-based fees | | | 36,970 | | | 34,094 | | | 36,515 | | | 8.4 | % | | 1.2 | % |
| Non-recurring revenue | | | 7,426 | | | 6,367 | | | 6,769 | | | 16.6 | % | | 9.7 | % |
| Total operating revenues | | $ | 257,898 | | $ | 238,565 | | $ | 251,909 | | | 8.1 | % | | 2.4 | % |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Table 5: Six Months Operating Revenues by Product Category and Revenue Type (unaudited) |
| | | | | | | | | | | |
| | | | | | | Six Months Ended | | % Change from |
| | | | | | | June 30, | | June 30, | | June 30, |
| In thousands | | | | | | 2013 | | 2012 | | 2012 |
| Index and ESG products | | | | | | | | | | |
| Subscriptions | | | | | | $ | 180,088 | | $ | 147,468 | | | 22.1 | % |
| Asset-based fees | | | | | | | 73,485 | | | 68,703 | | | 7.0 | % |
| Index and ESG products total | | | | | | | 253,573 | | | 216,171 | | | 17.3 | % |
| Risk management analytics | | | | | | | 134,373 | | | 128,624 | | | 4.5 | % |
| Portfolio management analytics | | | | | | | 53,735 | | | 58,389 | | | (8.0 | %) |
| Energy and commodity analytics | | | | | | | | | | |
| Recurring Energy and commodity analytics | | | | | | | 6,211 | | | 7,684 | | | (19.2 | %) |
| Correction1 | | | | | | | - | | | (5,203 | ) | | (100.0 | %) |
| Net energy and commodity analytics | | | | | | | 6,211 | | | 2,481 | | | 150.3 | % |
| | | | | | | | | | | |
| Total Performance and Risk revenues | | | | | | $ | 447,892 | | $ | 405,665 | | | 10.4 | % |
| | | | | | | | | | | |
| Total Governance revenues | | | | | | | 61,915 | | | 61,952 | | | (0.1 | %) |
| | | | | | | | | | | |
| Total operating revenues | | | | | | $ | 509,807 | | $ | 467,617 | | | 9.0 | % |
| | | | | | | | | | | |
| Recurring subscriptions | | | | | | $ | 422,127 | | $ | 384,740 | | | 9.7 | % |
| Asset-based fees | | | | | | | 73,485 | | | 68,703 | | | 7.0 | % |
| Non-recurring revenue | | | | | | | 14,195 | | | 14,174 | | | 0.1 | % |
| Total operating revenues | | | | | | $ | 509,807 | | $ | 467,617 | | | 9.0 | % |
| 1 In first quarter 2012, MSCI recorded a non-cash $5.2 million cumulative revenue reduction to correct an error related to energy and commodity analytics revenues previously reported prior to January 1, 2012. MSCI’s previous policy had resulted in the immediate recognition of a substantial portion of the revenue related to a majority of its contracts rather than amortizing that revenue over the life of that contract, which is now the method of recognition. n/m = not meaningful |
Table 6: Quarterly Operating Expense Detail (unaudited) |
| | | | | | | | | | |
| | Three Months Ended | | % Change from |
| | June 30, | | June 30, | | March 31, | | June 30, | | March 31, |
| In thousands | | 2013 | | 2012 | | 2013 | | 2012 | | 2013 |
| Cost of services | | | | | | | | | | |
| Compensation | | $ | 61,768 | | | $ | 55,492 | | | $ | 61,149 | | 11.3 | % | | 1.0 | % |
| Non-recurring stock based compensation | | - | | | | 94 | | | | - | | (100.0 | %) | | n/m | |
| Total compensation | | $ | 61,768 | | | $ | 55,586 | | | $ | 61,149 | | 11.1 | % | | 1.0 | % |
| Non-compensation | | | 21,734 | | | | 17,657 | | | | 19,036 | | 23.1 | % | | 14.2 | % |
| Lease exit charge1 | | | (143 | ) | | | - | | | | - | | n/m | | | n/m | |
| Total non-compensation | | | 21,591 | | | | 17,657 | | | | 19,036 | | 22.3 | % | | 13.4 | % |
| Total cost of services | | $ | 83,359 | | | $ | 73,243 | | | $ | 80,185 | | 13.8 | % | | 4.0 | % |
| | | | | | | | | | |
| Selling, general and administrative | | | | | | | | | | |
| Compensation | | $ | 39,890 | | | $ | 38,025 | | | $ | 45,656 | | 4.9 | % | | (12.6 | %) |
| Non-recurring stock based compensation | | - | | | | 98 | | | | - | | (100.0 | %) | | n/m | |
| Total compensation | | $ | 39,890 | | | $ | 38,123 | | | $ | 45,656 | | 4.6 | % | | (12.6 | %) |
| Non-compensation | | | 17,944 | | | | 19,479 | | | | 15,975 | | (7.9 | %) | | 12.3 | % |
| Lease exit charge1 | | | (222 | ) | | | - | | | | - | | n/m | | | n/m | |
| Total non-compensation | | | 17,722 | | | | 19,479 | | | | 15,975 | | (9.0 | %) | | 10.9 | % |
| Total selling, general and administrative | | $ | 57,612 | | | $ | 57,602 | | | $ | 61,631 | | 0.0 | % | | (6.5 | %) |
| | | | | | | | | | |
| Restructuring costs | | | - | | | | (22 | ) | | | - | | (100.0 | %) | | n/m | |
| Amortization of intangible assets | | | 14,509 | | | | 15,959 | | | | 14,486 | | (9.1 | %) | | 0.2 | % |
| Depreciation and amortization of property, | | | | | | | | | |
| equipment and leasehold improvements | | | 5,246 | | | | 4,662 | | | | 5,080 | | 12.5 | % | | 3.3 | % |
| Total operating expenses | | $ | 160,726 | | | $ | 151,444 | | | $ | 161,382 | | 6.1 | % | | (0.4 | %) |
| | | | | | | | | | |
| | | | | | | | | | | |
| Compensation | | $ | 101,658 | | | $ | 93,517 | | | $ | 106,805 | | 8.7 | % | | (4.8 | %) |
| Non-recurring stock-based compensation | | - | | | | 192 | | | | - | | (100.0 | %) | | n/m | |
| Non-compensation expenses | | | 39,678 | | | | 37,136 | | | | 35,011 | | 6.8 | % | | 13.3 | % |
| Lease exit charge1 | | | (365 | ) | | | - | | | | - | | n/m | | | n/m | |
| Restructuring costs | | | - | | | | (22 | ) | | | - | | (100.0 | %) | | n/m | |
| Amortization of intangible assets | | | 14,509 | | | | 15,959 | | | | 14,486 | | (9.1 | %) | | 0.2 | % |
| Depreciation and amortization of property, | | | | | | | | | |
| equipment and leasehold improvements | | | 5,246 | | | | 4,662 | | | | 5,080 | | 12.5 | % | | 3.3 | % |
| Total operating expenses | | $ | 160,726 | | | $ | 151,444 | | | $ | 161,382 | | 6.1 | % | | (0.4 | %) |
| 1Second quarter 2013 included a benefit of $0.4 million associated with an occupancy lease exit charge resulting from the consolidation of our New York offices. n/m = not meaningful |
Table 7: Six Months Operating Expense Detail (unaudited) |
| | | | | | |
| | Six Months Ended | | % Change from |
| | June 30, | | June 30, | | June 30, |
| In thousands | | 2013 | | 2012 | | 2012 |
| Cost of services | | | | | | |
| Compensation | | $ | 122,917 | | | $ | 109,041 | | | 12.7 | % |
| Non-recurring stock based compensation | | | - | | | | 362 | | | (100.0 | %) |
| Total compensation | | $ | 122,917 | | | $ | 109,403 | | | 12.4 | % |
| Non-compensation | | | 40,770 | | | | 36,131 | | | 12.8 | % |
| Lease exit charge1 | | | (143 | ) | | | - | | | n/m | |
| Total non-compensation | | | 40,627 | | | | 36,131 | | | 12.4 | % |
| Total cost of services | | $ | 163,544 | | | $ | 145,534 | | | 12.4 | % |
| | | | | | |
| Selling, general and administrative | | | | | | |
| Compensation | | $ | 85,546 | | | $ | 76,517 | | | 11.8 | % |
| Non-recurring stock based compensation | | | - | | | | 412 | | | (100.0 | %) |
| Total compensation | | $ | 85,546 | | | $ | 76,929 | | | 11.2 | % |
| Non-compensation | | | 33,919 | | | | 36,109 | | | (6.1 | %) |
| Lease exit charge1 | | | (222 | ) | | | - | | | n/m | |
| Total non-compensation | | | 33,697 | | | | 36,109 | | | (6.7 | %) |
| Total selling, general and administrative | | $ | 119,243 | | | $ | 113,038 | | | 5.5 | % |
| | | | | | |
| Restructuring costs | | | - | | | | (51 | ) | | (100.0 | %) |
| Amortization of intangible assets | | | 28,995 | | | | 31,918 | | | (9.2 | %) |
| Depreciation and amortization of property, | | | | | | |
| equipment and leasehold improvements | | | 10,326 | | | | 9,078 | | | 13.7 | % |
| Total operating expenses | | $ | 322,108 | | | $ | 299,517 | | | 7.5 | % |
| | | | | | |
| | | | | | | |
| Compensation | | $ | 208,463 | | | $ | 185,558 | | | 12.3 | % |
| Non-recurring stock-based compensation | | | - | | | | 774 | | | (100.0 | %) |
| Non-compensation expenses | | | 74,689 | | | | 72,240 | | | 3.4 | % |
| Lease exit charge1 | | | (365 | ) | | | - | | | n/m | |
| Restructuring costs | | | - | | | | (51 | ) | | (100.0 | %) |
| Amortization of intangible assets | | | 28,995 | | | | 31,918 | | | (9.2 | %) |
| Depreciation and amortization of property, | | | | | | |
| equipment and leasehold improvements | | | 10,326 | | | | 9,078 | | | 13.7 | % |
| Total operating expenses | | $ | 322,108 | | | $ | 299,517 | | | 7.5 | % |
| 1Six months ended 2013 included a benefit of $0.4 million associated with an occupancy lease exit charge resulting from the consolidation of our New York offices. n/m = not meaningful |
Table 8: Summary Quarterly Segment Information (unaudited) |
| | | | | | | | | | | | |
| | | | | | | | | | | |
| | | Three Months Ended | | % Change from |
| | | June 30, | | June 30, | | March 31, | | June 30, | | March 31, |
| In thousands | | 2013 | | 2012 | | 2013 | | 2012 | | 2013 |
| | | | | | | | | | | |
| Revenues: | | | | | | | | | | |
| Performance and Risk | | $ | 228,423 | | $ | 207,576 | | $ | 219,469 | | | 10.0% | | 4.1% |
| Governance | | | 29,475 | | | 30,989 | | | 32,440 | | | (4.9%) | | (9.1%) |
| Total Operating revenues | | $ | 257,898 | | $ | 238,565 | | $ | 251,909 | | | 8.1% | | 2.4% |
| | | | | | | | | | | |
| Operating Income: | | | | | | | | | | |
| Performance and Risk | | | 93,574 | | | 85,980 | | | 86,699 | | | 8.8% | | 7.9% |
| Margin | | | 41.0% | | | 41.4% | | | 39.5% | | | | |
| Governance | | | 3,598 | | | 1,141 | | | 3,828 | | | 215.3% | | (6.0%) |
| Margin | | | 12.2% | | | 3.7% | | | 11.8% | | | | |
| Total Operating Income | | $ | 97,172 | | $ | 87,121 | | $ | 90,527 | | | 11.5% | | 7.3% |
| Margin | | | 37.7% | | | 36.5% | | | 35.9% | | | | |
| | | | | | | | | | | |
| Adjusted EBITDA: | | | | | | | | | | |
| Performance and Risk | | | 108,816 | | | 102,595 | | | 101,954 | | | 6.1% | | 6.7% |
| Margin | | | 47.6% | | | 49.4% | | | 46.5% | | | | |
| Governance | | | 7,746 | | | 5,317 | | | 8,139 | | | 45.7% | | (4.8%) |
| Margin | | | 26.3% | | | 17.2% | | | 25.1% | | | | |
| Total Adjusted EBITDA | | $ | 116,562 | | $ | 107,912 | | $ | 110,093 | | | 8.0% | | 5.9% |
| Margin | | | 45.2% | | | 45.2% | | | 43.7% | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Table 9: Summary Six Months Segment Information (unaudited) |
| | | | | | | Six Months Ended | | % Change from |
| | | | | | | June 30, | | June 30, | | June 30, |
| In thousands | | | | | | 2013 | | 2012 | | 2012 |
| | | | | | | | | | | |
| Revenues: | | | | | | | | | | |
| Performance and Risk | | | | | | $ | 447,892 | | $ | 405,665 | | 10.4% |
| Governance | | | | | | | 61,915 | | | 61,952 | | (0.1%) |
| Total Operating revenues | | | | | | $ | 509,807 | | $ | 467,617 | | 9.0% |
| | | | | | | | | | | |
| Operating Income: | | | | | | | | | | |
| Performance and Risk | | | | | | | 180,273 | | | 163,455 | | 10.3% |
| Margin | | | | | | | 40.2% | | | 40.3% | | |
| Governance | | | | | | | 7,426 | | | 4,645 | | 59.9% |
| Margin | | | | | | | 12.0% | | | 7.5% | | |
| Total Operating Income | | | | | | $ | 187,699 | | $ | 168,100 | | 11.7% |
| Margin | | | | | | | 36.8% | | | 35.9% | | |
| | | | | | | | | | | |
| Adjusted EBITDA: | | | | | | | | | | |
| Performance and Risk | | | | | | | 210,770 | | | 196,779 | | 7.1% |
| Margin | | | | | | | 47.1% | | | 48.5% | | |
| Governance | | | | | | | 15,885 | | | 13,040 | | 21.8% |
| Margin | | | | | | | 25.7% | | | 21.0% | | |
| Total Adjusted EBITDA | | | | | | $ | 226,655 | | $ | 209,819 | | 8.0% |
| Margin | | | | | | | 44.5% | | | 44.9% | | |
Table 10: Key Operating Metrics1 (unaudited) |
| | | | | | | | | | | | |
| | | | | | | | | | | |
| | | As of | | % Change from |
| | | June 30, | | June 30, | | March 31, | | June 30, | | March 31, |
| Dollars in thousands | | 2013 | | 2012 | | 2013 | | 2012 | | 2013 |
| | | | | | | | | | | |
| Run Rates1 | | | | | | | | | | |
| Index and ESG products | | | | | | | | | | |
| Subscription | | $ | 350,833 | | | $ | 285,604 | | | $ | 344,267 | | | 22.8 | % | | 1.9 | % |
| Asset-based fees | | | 131,716 | | | | 129,045 | | | | 134,186 | | | 2.1 | % | | (1.8 | %) |
| Index and ESG products total | | | 482,549 | | | | 414,649 | | | | 478,453 | | | 16.4 | % | | 0.9 | % |
| Risk management analytics | | | 281,022 | | | | 258,995 | | | | 274,524 | | | 8.5 | % | | 2.4 | % |
| Portfolio management analytics | | | 104,524 | | | | 117,153 | | | | 106,091 | | | (10.8 | %) | | (1.5 | %) |
| Energy and commodity analytics | | | 12,794 | | | | 14,839 | | | | 13,030 | | | (13.8 | %) | | (1.8 | %) |
| Total Performance and Risk | | | 880,889 | | | | 805,636 | | | | 872,098 | | | 9.3 | % | | 1.0 | % |
| | | | | | | | | | | |
| Governance | | | 111,686 | | | | 113,976 | | | | 110,174 | | | (2.0 | %) | | 1.4 | % |
| Total Run Rate | | $ | 992,575 | | | $ | 919,612 | | | $ | 982,272 | | | 7.9 | % | | 1.0 | % |
| | | | | | | | | | | |
| Subscription total | | $ | 860,859 | | | $ | 790,567 | | | $ | 848,086 | | | 8.9 | % | | 1.5 | % |
| Asset-based fees total | | | 131,716 | | | | 129,045 | | | | 134,186 | | | 2.1 | % | | (1.8 | %) |
| Total Run Rate | | $ | 992,575 | | | $ | 919,612 | | | $ | 982,272 | | | 7.9 | % | | 1.0 | % |
| | | | | | | | | | | |
| New Recurring Subscription Sales | | $ | 31,133 | | | $ | 28,453 | | | $ | 30,928 | | | 9.4 | % | | 0.7 | % |
| Subscription Cancellations | | | (16,082 | ) | | | (17,229 | ) | | | (16,691 | ) | | (6.7 | %) | | (3.6 | %) |
| Net New Recurring Subscription Sales | | $ | 15,051 | | | $ | 11,224 | | | $ | 14,237 | | | 34.1 | % | | 5.7 | % |
| Non-recurring sales | | $ | 6,664 | | | $ | 5,099 | | | $ | 8,935 | | | 30.7 | % | | (25.4 | %) |
| | | | | | | | | | | |
| Employees | | | 2,957 | | | | 2,384 | | | | 2,844 | | | 24.0 | % | | 4.0 | % |
| % Employees by location | | | | | | | | | | |
| Developed Market Centers | | | 56 | % | | | 58 | % | | | 59 | % | | | | |
| Emerging Market Centers | | | 44 | % | | | 42 | % | | | 41 | % | | | | |
| 1 The Run Rate at a particular point in time represents the forward-looking revenues for the next 12 months from all subscriptions and investment product licenses we currently provide to our clients under renewable contracts or agreements assuming all contracts or agreements that come up for renewal are renewed and assuming then-current currency exchange rates. For any license where fees are linked to an investment product’s assets or trading volume, the Run Rate calculation reflects an annualization of the most recent periodic fee earned under such license or subscription. The Run Rate for IPD products was approximated using the trailing 12 months of revenues primarily adjusted for estimates for non-recurring sales, new sales and cancellations. The Run Rate does not include fees associated with “one-time” and other non-recurring transactions. In addition, we remove from the Run Rate the fees associated with any subscription or investment product license agreement with respect to which we have received a notice of termination or non-renewal during the period and determined that such notice evidences the client’s final decision to terminate or not renew the applicable subscription or agreement, even though such notice is not effective until a later date. |
Table 11: ETF Assets Linked to MSCI Indices1 (unaudited) | |
| | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended 2012 | | Three Months Ended 2013 | | Six Months Ended |
In Billions | | March | | June | | September | | December | | March | | June | | June 2012 | | June 2013 |
| | | | | | | | | | | | | | | | | | |
| Beginning Period AUM in ETFs linked to MSCI Indices | | $ | 301.6 | | $ | 354.7 | | | $ | 327.4 | | $ | 363.7 | | | $ | 402.3 | | | $ | 357.3 | | | $ | 301.6 | | $ | 402.3 | |
| Cash Inflow/Outflow2 | | | 15.2 | | | 0.3 | | | | 15.2 | | | 25.9 | | | | (61.0 | ) | | | (74.4 | ) | | | 15.5 | | | (135.4 | ) |
| Appreciation/Depreciation | | | 37.9 | | | (27.6 | ) | | | 21.1 | | | 12.7 | | | | 16.0 | | | | (13.2 | ) | | | 10.3 | | | 2.8 | |
Period End AUM in ETFs linked to
MSCI Indices | | $ | 354.7 | | $ | 327.4 | | | $ | 363.7 | | $ | 402.3 | | | $ | 357.3 | | | $ | 269.7 | | | $ | 327.4 | | $ | 269.7 | |
| | | | | | | | | | | | | | | | | | |
Period Average AUM in ETFs linked to
MSCI Indices | | $ | 341.0 | | $ | 331.6 | | | $ | 344.7 | | $ | 376.6 | | | $ | 369.0 | | | $ | 324.1 | | | $ | 336.4 | | $ | 346.6 | |
| 1 ETF assets under management calculation methodology is ETF net asset value multiplied by shares outstanding. Source: Bloomberg and MSCI |
| 2 Cash Inflow/Outflow for the first and second quarter of 2013 includes the migration of $82.8 billion of AUM in 9 Vanguard ETFs and $74.8 billion of AUM in 13 Vanguard ETFs, respectively, that transitioned to other indices during each quarter. |
Table 12: Supplemental Operating Metrics (unaudited) |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| Sales & Cancellations |
| | | | Three Months Ended 2012 | | Three Months Ended 2013 | | | Six Months Ended |
| In thousands | | | March | | June | | September | | December | | March | | June | | | June 2012 | | June 2013 |
| New Recurring Subscription Sales | | $33,506 | | | $28,453 | | | $27,164 | | | $29,742 | | | | $30,928 | | | $31,133 | | | | $61,959 | | | $62,061 | |
| Subscription Cancellations | | | (13,498 | ) | | (17,229 | ) | | (19,134 | ) | | (28,725 | ) | | | (16,691 | ) | | (16,082 | ) | | | (30,727 | ) | | (32,773 | ) |
| Net New Recurring Subscription Sales | | $20,008 | | | $11,224 | | | $8,030 | | | $1,017 | | | | $14,237 | | | $15,051 | | | | $31,232 | | | $29,288 | |
| | | | | | | | | | | | | | | | | | | | |
| Non-recurring sales | | | 9,338 | | | 5,099 | | | 3,878 | | | 7,443 | | | | 8,935 | | | 6,664 | | | | 14,437 | | | 15,599 | |
| Total Sales | | | $42,844 | | | $33,552 | | | $31,042 | | | $37,185 | | | | $39,863 | | | $37,797 | | | | $76,396 | | | $77,660 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| Aggregate & Core Retention Rates | |
| | | | Three Months Ended 2012 | | Three Months Ended 2013 | | | Six Months Ended |
| | | | | March | | June | | September | | December | | March | | June | | | June 2012 | | June 2013 |
| Aggregate Retention Rate 1 | | | | | | | | | | | | | | | | | | | |
| Index and ESG products | | | 94.5 | % | | 94.9 | % | | 94.0 | % | | 90.4 | % | | | 95.0 | % | | 94.0 | % | | | 94.7 | % | | 94.5 | % |
| Risk management analytics | | | 93.9 | % | | 90.0 | % | | 88.5 | % | | 84.4 | % | | | 93.5 | % | | 92.5 | % | | | 91.9 | % | | 93.0 | % |
| Portfolio management analytics | | 91.9 | % | | 84.2 | % | | 84.9 | % | | 78.0 | % | | | 81.7 | % | | 87.0 | % | | | 88.0 | % | | 84.3 | % |
| Energy & commodity analytics | | | 90.2 | % | | 85.5 | % | | 76.6 | % | | 60.4 | % | | | 90.1 | % | | 86.0 | % | | | 87.8 | % | | 88.0 | % |
| | | | | | | | | | | | | | | | | | | | |
| Total Performance and Risk | | | 93.7 | % | | 90.9 | % | | 89.8 | % | | 85.2 | % | | | 92.4 | % | | 92.3 | % | | | 92.2 | % | | 92.3 | % |
| | | | | | | | | | | | | | | | | | | | |
| Total Governance | | | 88.7 | % | | 92.1 | % | | 91.1 | % | | 83.6 | % | | | 90.0 | % | | 92.9 | % | | | 90.4 | % | | 91.5 | % |
| | | | | | | | | | | | | | | | | | | | |
| Total Aggregate Retention Rate | | 93.0 | % | | 91.0 | % | | 90.0 | % | | 84.9 | % | | | 92.1 | % | | 92.3 | % | | | 92.0 | % | | 92.2 | % |
| | | | | | | | | | | | | | | | | | | | |
| Core Retention Rate 1 | | | | | | | | | | | | | | | | | | | |
| Index and ESG products | | | 94.6 | % | | 95.0 | % | | 94.0 | % | | 90.5 | % | | | 95.0 | % | | 94.1 | % | | | 94.8 | % | | 94.6 | % |
| Risk management analytics | | | 94.0 | % | | 92.0 | % | | 89.3 | % | | 84.4 | % | | | 93.9 | % | | 93.1 | % | | | 92.9 | % | | 93.5 | % |
| Portfolio management analytics | | 92.2 | % | | 87.0 | % | | 86.5 | % | | 83.6 | % | | | 82.8 | % | | 87.5 | % | | | 89.6 | % | | 85.1 | % |
| Energy & commodity analytics | | | 90.7 | % | | 85.5 | % | | 77.1 | % | | 60.4 | % | | | 90.1 | % | | 86.0 | % | | | 88.1 | % | | 88.0 | % |
| | | | | | | | | | | | | | | | | | | | |
| Total Performance and Risk | | | 93.8 | % | | 92.2 | % | | 90.5 | % | | 86.2 | % | | | 92.7 | % | | 92.6 | % | | | 93.0 | % | | 92.6 | % |
| | | | | | | | | | | | | | | | | | | | |
| Total Governance | | | 88.7 | % | | 92.2 | % | | 91.2 | % | | 83.8 | % | | | 90.2 | % | | 92.9 | % | | | 90.4 | % | | 91.6 | % |
| | | | | | | | | | | | | | | | | | | | |
| Total Core Retention Rate | | | 93.1 | % | | 92.2 | % | | 90.6 | % | | 85.9 | % | | | 92.4 | % | | 92.6 | % | | | 92.6 | % | | 92.5 | % |
| 1The Aggregate Retention Rates are calculated by annualizing the cancellations for which we have received a notice of termination or non-renewal during the applicable period and have determined that such notice evidences the client’s final decision to terminate or not renew the applicable subscription or agreement, even though such notice is not effective until a later date. This annualized cancellation figure is then divided by the subscription Run Rate at the beginning of the year to calculate a cancellation rate. This cancellation rate is then subtracted from 100% to derive the annualized Aggregate Retention Rate for the applicable period. The Aggregate Retention Rate is computed on a product-by-product basis. Therefore, if a client reduces the number of products to which it subscribes or switches between our products, we treat it as a cancellation. In addition, we treat any reduction in fees resulting from renegotiated contracts as a cancellation in the calculation to the extent of the reduction. For the calculation of the Core Retention Rate, the same methodology is used except the cancellations in the applicable period are reduced by the amount of product swaps. |
Table 13: Reconciliation of Adjusted EBITDA to Net Income (unaudited) |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | Three Months Ended June 30, 2013 | | Three Months Ended June 30, 2012 |
| In thousands | | Performance
and Risk | | Governance | | Total | | Performance
and Risk | | Governance | | Total |
| Net Income | | | | | | $ | 61,053 | | | | | | | $ | 37,546 | |
| Plus: | Provision for income taxes | | | | | | | 30,206 | | | | | | | | 19,715 | |
| Plus: | Other expense (income), net | | | | | | | 5,913 | | | | | | | | 29,860 | |
| Operating income | | $ | 93,574 | | | $ | 3,598 | | | $ | 97,172 | | | $ | 85,980 | | | $ | 1,141 | | | $ | 87,121 | |
| Plus: | Non-recurring stock-based compensation | | | - | | | | - | | | | - | | | | 172 | | | | 20 | | | | 192 | |
| Plus: | Depreciation and amortization of property, | | | | | | | | | | | |
| equipment and leasehold improvements | | | 4,329 | | | | 917 | | | | 5,246 | | | | 3,817 | | | | 845 | | | | 4,662 | |
| Plus: | Amortization of intangible assets | | | 11,221 | | | | 3,288 | | | | 14,509 | | | | 12,639 | | | | 3,320 | | | | 15,959 | |
| Plus: | Lease exit charge | | | (308 | ) | | | (57 | ) | | | (365 | ) | | | - | | | | - | | | | - | |
| Plus: | Restructuring costs | | | - | | | | - | | | | - | | | | (13 | ) | | | (9 | ) | | | (22 | ) |
| Adjusted EBITDA | | $ | 108,816 | | | $ | 7,746 | | | $ | 116,562 | | | $ | 102,595 | | | $ | 5,317 | | | $ | 107,912 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | Six Months Ended June 30, 2013 | | Six Months Ended June 30, 2012 |
| In thousands | | Performance and Risk | | Governance | | Total | | Performance and Risk | | Governance | | Total |
| Net Income | | | | | | $ | 119,990 | | | | | | | $ | 81,512 | |
| Plus: | Provision for income taxes | | | | | | | 54,820 | | | | | | | | 43,988 | |
| Plus: | Other expense (income), net | | | | | | | 12,889 | | | | | | | | 42,600 | |
| Operating income | | $ | 180,273 | | | $ | 7,426 | | | $ | 187,699 | | | $ | 163,455 | | | $ | 4,645 | | | $ | 168,100 | |
| Plus: | Non-recurring stock-based compensation | | | - | | | | - | | | | - | | | | 696 | | | | 78 | | | | 774 | |
| Plus: | Depreciation and amortization of property, | | | | | | | | | | | |
| equipment and leasehold improvements | | | 8,418 | | | | 1,908 | | | | 10,326 | | | | 7,382 | | | | 1,696 | | | | 9,078 | |
| Plus: | Amortization of intangible assets | | | 22,387 | | | | 6,608 | | | | 28,995 | | | | 25,278 | | | | 6,640 | | | | 31,918 | |
| Plus: | Lease exit charge | | | (308 | ) | | | (57 | ) | | | (365 | ) | | | - | | | | - | | | | - | |
| Plus: | Restructuring costs | | | - | | | | - | | | | - | | | | (32 | ) | | | (19 | ) | | | (51 | ) |
| Adjusted EBITDA | | $ | 210,770 | | | $ | 15,885 | | | $ | 226,655 | | | $ | 196,779 | | | $ | 13,040 | | | $ | 209,819 | |
Table 14: Reconciliation of Adjusted Net Income and Adjusted EPS to Net Income and EPS (unaudited) |
| | | | | | | | | | | |
| | | Three Months Ended | | Six Months Ended |
| | | June 30, | | June 30, | | March 31, | | June 30, | | June 30, |
| In thousands, except per share data | | 2013 | | 2012 | | 2013 | | 2013 | | 2012 |
| Net Income | | $ | 61,053 | | | $ | 37,546 | | | $ | 58,937 | | | $ | 119,990 | | | $ | 81,512 | |
| Plus: | Non-recurring stock-based compensation | | | - | | | | 192 | | | | - | | | | - | | | | 774 | |
| Plus: | Amortization of intangible assets | | | 14,509 | | | | 15,959 | | | | 14,486 | | | | 28,995 | | | | 31,918 | |
| Plus: | Debt repayment and refinancing expenses | | | - | | | | 20,639 | | | | - | | | | - | | | | 20,639 | |
| Plus: | Lease exit charge | | | (365 | ) | | | - | | | | - | | | | (365 | ) | | | - | |
| Plus: | Restructuring costs | | | - | | | | (22 | ) | | | - | | | | - | | | | (51 | ) |
| Less: | Income tax effect | | | (4,711 | ) | | | (12,775 | ) | | | (4,268 | ) | | | (8,979 | ) | | | (18,648 | ) |
| | | | | | | | | | | |
| Adjusted net income | | $ | 70,486 | | | $ | 61,539 | | | $ | 69,155 | | | $ | 139,641 | | | $ | 116,144 | |
| | | | | | | | | | | |
| Diluted EPS | | $ | 0.50 | | | $ | 0.30 | | | $ | 0.48 | | | $ | 0.98 | | | $ | 0.66 | |
| Plus: | Non-recurring stock-based compensation | | | - | | | | - | | | | - | | | | - | | | | 0.01 | |
| Plus: | Amortization of intangible assets | | | 0.12 | | | | 0.13 | | | | 0.12 | | | | 0.24 | | | | 0.26 | |
| Plus: | Debt repayment and refinancing expenses | | | - | | | | 0.17 | | | | - | | | | - | | | | 0.17 | |
| Plus: | Lease exit charge | | | - | | | | - | | | | - | | | | - | | | | - | |
| Plus: | Restructuring costs | | | - | | | | - | | | | - | | | | - | | | | (0.01 | ) |
| Less: | Income tax effect | | | (0.04 | ) | | | (0.10 | ) | | | (0.03 | ) | | | (0.08 | ) | | | (0.15 | ) |
| Adjusted EPS | | $ | 0.58 | | | $ | 0.50 | | | $ | 0.57 | | | $ | 1.14 | | | $ | 0.94 | |
CONTACT:
MSCI Inc. Contact:
W. Edings Thibault, MSCI, New York + 1.212.804.5273
Media Inquiries:
Jo Morgan, MSCI, London + 44.20.7618.2224
Kristin Meza, MSCI, New York + 1.212.804.5330
Sally Todd | Christian Pickel, MHP Communications, London + 44.20.3128.8100
