UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
DC 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report
(Date of earliest event reported): April 9, 2008
MSCI
Inc.
(Exact name of
registrant as specified in its charter)
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Delaware
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001-33812
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13-4038723
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(State
or other jurisdiction
of
incorporation)
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(Commission
File Number)
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(IRS
Employer
Identification
No.)
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88
Pine Street, New York, NY 10005
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10005
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(Address
of principal executive offices)
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(Zip
Code)
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(212)
804-3900
(Registrant’s
telephone number, including area code)
NOT
APPLICABLE
(Former name or
former address, if changed since last report)
Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (see General Instruction A.2. below):
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¨
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Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
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¨
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
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¨
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
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¨
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
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Item 2.02
Results of Operations and Financial Condition.
On April
9, 2008, MSCI Inc. (the “Registrant”) released financial information with
respect to its first quarter ended February 29, 2008. A copy of the
press release containing this information is annexed as Exhibit 99.1 to this
Report.
The
Registrant’s press release contains certain non-GAAP financial measures. A
reconciliation of these non-GAAP financial measures to the comparable GAAP
financial measures is also contained in Exhibit 99.1.
The
information furnished under Item 2.02 of this Report, including Exhibit 99.1
shall not be deemed “filed” for purposes of Section 18 of the Securities
Exchange Act of 1934 (the “Exchange Act”), as amended, or otherwise subject to
the liabilities of that section, nor shall it be deemed incorporated by
reference into any filing under the Securities Act of 1933, as amended, or the
Exchange Act, except as shall be expressly set forth by specific reference in
such filing.
On April
9, 2008, the Registrant announced that it intends to file shortly a Registration
Statement on Form S-1 for the sale of up to 28 million shares of MSCI class A
common stock, par value $0.01 per share, by Morgan Stanley. A copy of
the press release containing this information is annexed as Exhibit 99.2 to this
Report.
Item 9.01
Financial Statements and Exhibits.
(d)
Exhibits.
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Exhibit No.
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Description
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Exhibit 99.1
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Press
release of the Registrant dated April 9, 2008 containing financial
information for the first quarter ended February 29,
2008.
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Exhibit
99.2
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Press
release of the Registrant dated April 9,
2008
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Pursuant
to the requirements of the Exchange Act, the Registrant has duly caused this
report to be signed on its behalf by the undersigned hereunto duly
authorized.
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MSCI
Inc.
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|||||
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Date:
April 9, 2008
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By:
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/s/ Henry A.
Fernandez
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Name:
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Henry
A. Fernandez
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Title:
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Chief
Executive Officer, President and Chairman
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Exhibit
99.1
 |
www.mscibarra.com
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MSCI
Inc. Reports Record Revenues for First Quarter 2008
New York – April 9, 2008 –
MSCI Inc. (NYSE: MXB), a leading global
provider of investment decision support tools, including indices and portfolio
risk and performance analytics, today announced results for first quarter ended
February 29, 2008.
(Note: Percentage
changes are referenced to the comparable period in fiscal year 2007, unless
otherwise noted.)
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·
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Operating
revenues increased 20.5% to $105.0 million in first quarter
2008.
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·
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Adjusted
EBITDA increased to $47.1 million in first quarter 2008 for an adjusted
EBITDA margin of 44.9%. See Table 8 "Reconciliation of Adjusted EBITDA to
Net Income."
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·
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Net income
decreased 17.1% to $17.9 million ($0.18 per diluted share) in first
quarter 2008 for a net income margin of
17.1%.
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Henry A. Fernandez,
Chairman and CEO, said “The strength of our business model was demonstrated by
the 29.4% increase in adjusted EBITDA and the 44.9% adjusted EBITDA margin
reported for our first quarter. Our first quarter performance highlights
continued strong demand for our performance measurement and portfolio risk
management tools among new and existing clients worldwide. This demand is
evident in the year-over-year growth of 22.0% for the run rate of our
subscription based fees. We also experienced 29.9% growth in the run rate of our
asset based fees, and while this run rate declined compared to the run rate at
the end of fiscal 2007, we remain very excited about the secular growth
prospects for revenues from licensing our indices for use as the basis for
exchange traded funds (ETFs) globally.”
Factors
Impacting Comparability of Our Financial Results
Net income and
earnings per share (EPS) for first quarter 2008 are not comparable with first
quarter 2007 primarily because of founders grant expense, changes in our capital
structure and our initial public offering (IPO). See disclosures below for
additional details.
Selected
Financial Information
Table
1
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Three Months
Ended
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|||
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February
29,
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February
28,
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Amounts in
thousands, except per share data
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2008
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2007
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Change
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Operating
revenues
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$104,951
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$87,069
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20.5%
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Operating
expenses
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$70,261
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$57,496
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22.2%
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Net
income
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$17,934
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$21,642
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(17.1%)
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%
Margin
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17.1%
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24.9%
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Diluted
EPS
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$0.18
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$0.26
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(31.0%)
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Operating
expenses excluding founders grant1
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$65,465
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$57,496
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13.9%
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Adjusted
EBITDA2
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$47,095
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$36,403
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29.4%
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%
Margin
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44.9%
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41.8%
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1
Excludes certain equity-based compensation (“founders grant”)
expenses of $4.8 million for the three months ended February 29, 2008 and
$0 for the three months ended February 28, 2007.
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2
See Table 8 "Reconciliation of Adjusted EBITDA to Net Income"
and information about the use of non-GAAP financial information provided
under “Notes Regarding the Use of Non-GAAP Financial
Measures.”
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www.mscibarra.com
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Summary
of Results for Fiscal First Quarter 2008
Operating
Revenues
Total operating
revenues for the three months ended February 29, 2008 (first quarter 2008)
increased 20.5% to a record $105.0 million compared to $87.1 million for the
three months ended February 28, 2007 (first quarter 2007). The growth was driven
by an increase in our revenues related to index and analytics subscriptions and
to equity index asset based fees, which were up 15.3% and 50.1%, respectively,
in first quarter 2008. The growth was across all client types and geographic
regions as it was for the three months ended November 30, 2007 (fourth quarter
2007). While we experienced strong growth in first quarter 2008 compared to
first quarter 2007, we were negatively impacted by lower growth in revenues from
ETF fees, which resulted in operating revenues increasing 3.2% in first quarter
2008 compared to fourth quarter 2007.
Our aggregate
retention rate increased to 97% for first quarter 2008 from 95% for first
quarter 2007 with retention rate increases in most product categories. The
retention rate for first quarter 2007 was negatively impacted by the
cancellation of a large fixed income index subscription. Excluding this
cancellation, the retention rate was 96%. Retention rates are generally higher
during the first three fiscal quarters and lower in the fourth quarter. In
recent years, on average, approximately 40% of our subscription cancellations
for the year have occurred in the fourth quarter.
In first quarter
2008, we added 54 net new clients. At February 29, 2008, we had a total of 2,980
clients, excluding asset based fee clients.
Equity Indices: Revenues
related to Equity Indices increased 26.4% to $58.4 million in first quarter 2008
compared to the same period in 2007, and increased 4.2% compared to fourth
quarter 2007. Revenues from equity index subscriptions were up 17.1% to $38.8
million in first quarter 2008. The increase reflects growth in subscriptions to
our MSCI Global Investable Market Indices with notable growth in our global
small cap indices. In addition, we are experiencing increased demand for our
equity index subscription products as our clients continue to expand their
operations globally.
Revenues
attributable to equity index asset based fees increased 50.1% to $19.6 million
in first quarter 2008. The growth in the value of assets in ETFs linked to MSCI
equity indices increased $43.8 billion, or 32.4%, to $179.2 billion as of
February 29, 2008 from $135.4 billion as of February 28, 2007. This growth in
assets was primarily the result of net asset inflows and, to a lesser extent,
net asset appreciation.
Revenue growth from
ETF fees, while strong, only increased 4.9% in first quarter 2008 compared to
fourth quarter 2007 as a result of the declines in equity markets worldwide and
increased volatility. While new ETFs linked to MSCI equity indices continue to
be introduced into the market, the asset values linked to existing ETFs have
been negatively impacted by declines in a number of equity markets. Compared to
fourth quarter 2007, the value of assets in ETFs linked to MSCI equity indices
decreased approximately $12.5 billion, or 6.5%, from $191.7 billion as of
November 30, 2007 to $179.2 billion as of February 29, 2008. The $12.5 billion
decrease from November 30, 2007 was attributable to asset depreciation of
approximately $15.2 billion which was partially offset by an increase of
approximately $2.7 billion in the total of such assets as a result of asset
inflows. A majority of the $2.7 billion increase was due to ETFs introduced over
the last twelve months.
The three MSCI
indices with the largest amount of ETF assets linked to them as of February 29,
2008 were the MSCI EAFE, Emerging Markets and Japan Indices with $47.1 billion,
$36.2 billion and $10.0 billion in assets, respectively.
Equity Portfolio
Analytics: Revenues related to Equity Portfolio Analytics products
increased 10.1% to $32.3 million in first quarter 2008 compared to the same
period in 2007. This growth reflects an increase in client demand for our tools
used in managing equity portfolio risk, developing quantitative equity
investment processes, and
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enhancing their
equity trading strategies. Growth was particularly strong in subscriptions to
our proprietary equity risk data accessed through our Equity Models Direct and
Barra on Vendors products. New subscriptions to Barra Aegis also contributed to
revenue growth, although to a lesser extent than Equity Models Direct and Barra
on Vendors products. Revenues related to Equity Portfolio Analytics
increased 2.3% in first quarter 2008 compared to fourth quarter
2007.
Multi-Asset Class Portfolio
Analytics: Revenues related to Multi-Asset Class Portfolio Analytics
increased 84.3% to $7.9 million in first quarter 2008 compared to the same
period in 2007. The increase is largely attributable to revenue growth from
BarraOne. Note that new subscriptions for BarraOne tend to be uneven throughout
the year resulting in variability in revenue growth. Revenues related to
Multi-Asset Class Portfolio Analytics increased 2.5% in first quarter 2008
compared to fourth quarter 2007.
We continue to see
strong demand from asset owners and asset managers for BarraOne, and we expect
this trend to continue as we expand the analytical functionality and asset class
coverage. In first quarter 2008, we launched historical value at risk and
performance attribution tools within BarraOne which should contribute to
revenues in the coming quarters.
Other Products: Revenues from
Other Products decreased 12.5% to $6.3 million in first quarter 2008 compared to
the same period in 2007. The decline reflects decreased asset based fees from
investment products linked to MSCI hedge fund indices and the cancellation of a
large fixed income index subscription at the end of February 2007. Strong growth
in our energy and commodity analytics products under the FEA brand partially
offset this decline.
Operating
Expenses
Operating expenses
increased 22.2% to $70.3 million in first quarter 2008 compared to first quarter
2007. Excluding expenses related to the founders grant (as described below),
operating expenses increased 13.9% to $65.5 million in first quarter 2008, with
increases in compensation and non-compensation expenses of 2.8% and 38.6%,
respectively. The compensation expense increase reflects higher compensation
costs for existing staff, offset, in part, by a movement of personnel to lower
cost locations. The non-compensation expense increase reflects expenses
associated with being a public company and expenses related to replacing
services provided by Morgan Stanley. In addition, higher marketing and product
development costs contributed to the increase. In first quarter 2007, operating
expenses included severance and a bad debt provision reversal.
Cost of services
decreased 2.1% to $31.6 million in first quarter 2008 compared to first quarter
2007. Excluding the founders grant, cost of services expenses decreased 6.1% to
$30.3 million in first quarter 2008, largely due to a decrease in compensation
expenses. Compensation expenses excluding the founders grant declined 10.3%
reflecting lower headcount and the movement of personnel to lower cost
centers. A 1.8% increase in non-compensation expenses partially offset the
decrease in compensation expenses. The increase is primarily due to higher
information processing costs and occupancy costs.
Selling, general and
administrative expenses increased 66.4% to $31.6 million in first quarter 2008
compared to $19.0 million in first quarter 2007. Excluding the founders grant,
selling, general and administrative expenses increased 47.9% to $28.0 million in
first quarter 2008. Compensation expenses excluding the founders grant increased
22.1%, to $17.4 million, which was attributable to higher compensation costs for
existing staff, increased staffing levels related to the preparation for the
replacement of current Morgan Stanley services and higher bonus accruals.
Non-compensation expenses increased 126.1% to $10.6 million. Of the $5.9 million
increase in non-compensation expense, $2.5 million is due to increased expenses
related to our transition to a public company and costs incurred to replace the
services currently provided by Morgan Stanley and $1.0 million is due to higher
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information
technology and marketing and development costs. In addition, the comparison was
unfavorable because of a $2.1 million benefit to the bad debt provision recorded
in first quarter 2007.
We expect operating
expense increases from initial set-up costs and overlaps with the cost of Morgan
Stanley services to continue until we have replaced services currently provided
by Morgan Stanley.
Expenses related to
the founders grant of $4.8 million in first quarter 2008 reflected the
amortization of share based compensation expense associated with restricted
stock units and options awarded to employees as a one-time grant which became
effective in connection with our IPO completed during November 2007. In first
quarter 2007, there were no amortized expenses associated with the founders
grant.
The number of
full-time employees decreased by five to 652 on February 29, 2008 from 657 on
February 28, 2007 but increased by 15 from 637 on November 30, 2007. The decline
in full-time employees of five from February 28, 2007 was composed of a decline
of 55 in our offices in Berkeley, London and New York in aggregate, an increase
of 39 in our offices in Budapest and Mumbai in aggregate, and an increase of 11
across our other locations.
Interest
Income (Expense) and Other, Net
Interest income
(expense) and other, net was an expense of $6.0 million in first quarter 2008
compared to income of $5.0 million in first quarter 2007. The $10.9 million
decrease was the result of an increase in interest expense and a reduction of
interest income. Interest income decreased as a result of holding substantially
lower cash balances. We experienced higher interest expense as a result of
interest due on term loan borrowings of $425 million under our credit
facility.
Provision
for Income Taxes
The provision for
income taxes decreased 16.4% to $10.8 million in first quarter 2008 as a result
of lower pre-tax income. The effective tax rate for first quarter 2008 was 37.6%
compared to 37.4% in first quarter 2007. The increase is largely due to higher
state and local income taxes.
Net
Income
Net income decreased
17.1% to $17.9 million in first quarter 2008 from first quarter 2007 and the net
income margin decreased to 17.1% from 24.9%. The decline in net income primarily
reflects founders grant expense, higher interest expense and lower interest
income, which were offset, in part, by the increase in operating income. On a
diluted per share basis, the decline was 31.0% which, in addition to the items
cited above, also reflects a higher number of diluted shares outstanding in
first quarter 2008 compared to first quarter 2007 due to the additional common
shares issued in conjunction with our November 2007 IPO.
Adjusted
EBITDA
Adjusted EBITDA
increased 29.4% to $47.1 million for first quarter 2008 from Adjusted EBITDA of
$36.4 million for first quarter 2007. See Table 8 “Reconciliation of Adjusted
EBITDA to Net Income.” The adjusted EBITDA margin increased to 44.9% in first
quarter 2008 from 41.8% in first quarter 2007. The increase reflects the
operating leverage in the business as a result of the strong revenue growth
across most product categories, including the high margin ETF licensing model,
and disciplined cost management. Adjusted EBITDA for first quarter 2008 declined
$1.6 million or 3.3% compared to fourth quarter 2007.
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Table
2a
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Run Rates and
Other Key Metrics
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||||
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(Year-over-Year
Comparison)
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||||
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As
of
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||||
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February
29,
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February
28,
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%
Change
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||
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2008
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2007
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Year-over-Year
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||
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Run Rates1 ($
thousands)
|
||||
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Subscription
based fees
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||||
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Equity
indices
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$154,103
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$124,135
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24.1%
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Equity
portfolio analytics
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131,349
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111,604
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17.7%
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Multi-asset
class analytics
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31,739
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23,441
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35.4%
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Other
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18,400
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15,896
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15.8%
|
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Subscription
based fees total
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335,591
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275,076
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22.0%
|
|
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Asset based
fees
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||||
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Equity
indices2
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73,358
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52,956
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38.5%
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Hedge fund
indices
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4,371
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6,880
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(36.5%)
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Asset based
fees total
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77,729
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59,836
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29.9%
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Total Run
Rate
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$413,320
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$334,912
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23.4%
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Subscription
based fees - % Americas
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44%
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43%
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||
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Subscription
based fees - % non-Americas
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56%
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57%
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||
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Retention
Rate3
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97%
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95%
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||
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Client
Count4
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2,980
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2,769
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||
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ETF Assets
linked to MSCI indices ($ billions)
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$179.2
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$135.4
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||
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Full-time
employees
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652
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657
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||
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1The
run rate at a particular point in time represents the forward-looking fees
for the next 12 months from all subscriptions and investment product
licenses we currently provide to our clients under renewable contracts
assuming all contracts that come up for renewal are renewed and assuming
then-current exchange rates. For any license whose 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. 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 at the time we receive such notice, even if
the notice is not effective until a later date.
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||||
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2Includes
transaction volume-based products, principally futures and options traded
on certain MSCI indices.
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3Our
retention rate for any period represents the percentage of the
subscription run rate as of the beginning of the period that is not
cancelled during the period. The 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. Retention rates are generally higher
during the first three fiscal quarters and lower in the fourth quarter.
The retention rate is for the three month periods ended February 29, 2008
and February 28, 2007, respectively.
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4The
client count excludes asset based fee clients. Our client count includes
affiliates, cities and certain business units within a single organization
as separate clients when they separately subscribe to our
products.
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Table
2b
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Run Rates and
Other Key Metrics
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||||
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(Sequential
Comparison)
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||||
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As
of
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||||
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February
29,
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November
30,
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%
Change
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||
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2008
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2007
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Quarterly
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||
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Run Rates1 ($
thousands)
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||||
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Subscription
based fees
|
||||
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Equity
indices
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$154,103
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$143,717
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7.2%
|
|
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Equity
portfolio analytics
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131,349
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123,561
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6.3%
|
|
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Multi-asset
class analytics
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31,739
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30,638
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3.6%
|
|
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Other
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18,400
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17,728
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3.8%
|
|
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Subscription
based fees total
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335,591
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315,644
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6.3%
|
|
|
Asset based
fees
|
||||
|
Equity
indices2
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73,358
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76,898
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(4.6%)
|
|
|
Hedge fund
indices
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4,371
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4,963
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(11.9%)
|
|
|
Asset based
fees total
|
77,729
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81,861
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(5.0%)
|
|
|
Total Run
Rate
|
$413,320
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$397,505
|
4.0%
|
|
|
Subscription
based fees - % Americas
|
44%
|
43%
|
||
|
Subscription
based fees - % non-Americas
|
56%
|
57%
|
||
|
Retention
Rate3
|
97%
|
92%
|
||
|
Client
Count4
|
2,980
|
2,926
|
||
|
ETF Assets
linked to MSCI indices ($ billions)
|
$179.2
|
$191.7
|
||
|
Full-time
employees
|
652
|
637
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||
|
1The
run rate at a particular point in time represents the forward-looking fees
for the next 12 months from all subscriptions and investment product
licenses we currently provide to our clients under renewable contracts
assuming all contracts that come up for renewal are renewed and assuming
then-current exchange rates. For any license whose 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. 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 at the time we receive such notice, even if
the notice is not effective until a later date.
|
||||
|
2Includes
transaction volume-based products, principally futures and options traded
on certain MSCI indices.
|
||||
|
3Our
retention rate for any period represents the percentage of the
subscription run rate as of the beginning of the period that is not
cancelled during the period. The 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. Retention rates are generally higher
during the first three fiscal quarters and lower in the fourth quarter.
The retention rate is for the three month and twelve month periods ended
February 29, 2008 and November 30, 2007, respectively.
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||||
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4The
client count excludes asset based fee clients. Our client count includes
affiliates, cities and certain business units within a single organization
as separate clients when they separately subscribe to our
products.
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Table
3
|
ETF Assets
Linked to MSCI Indices
|
||||||
|
(Quarter-Ended)
|
||||||
|
2007
|
2008
|
|||||
|
$ in
Billions
|
February
|
May
|
August
|
November
|
February
|
|
|
AUM in ETFs
linked to MSCI Indices
|
$135.4
|
$150.2
|
$ 156.5
|
$191.7
|
$179.2
|
|
|
Sequential
Change ($ Growth in Billions)
|
||||||
|
Appreciation/Depreciation
|
$9.8
|
$5.9
|
$(0.8)
|
$11.2
|
$(15.2)
|
|
|
Cash
Inflow/Outflow
|
13.3
|
8.9
|
7.1
|
24.0
|
2.7
|
|
|
Total
Change
|
$23.1
|
$14.8
|
$6.3
|
$35.2
|
$(12.5)
|
|
|
Source:
Bloomberg
|
||||||
|
Note: The AUM
(assets under management) are as of
quarter-end.
|
||||||
Conference
Call Information
Investors will have
the opportunity to listen to MSCI Inc.'s senior management review first quarter
2008 results on Wednesday, April 9, 2008 at 11:00 am Eastern time. To hear the
live event, visit the investor relations section of MSCI Inc.'s website,
www.mscibarra.com, 1-877-627-6580 within the United States. International
callers dial 1-719-325-4935.
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 April 23,
2008. To listen to the recording, visit the investor relations section of
www.mscibarra.com, or dial 1-888-203-1112 (passcode: 7441851) within the United
States. International callers dial 1-719-457-0820 (passcode:
7441851).
About
MSCI Inc.
MSCI Inc. is a
leading provider of investment decision support tools to investment institutions
worldwide. MSCI Inc. products include indices and portfolio risk and performance
analytics for use in managing equity, fixed income and multi-asset class
portfolios.
The company’s
flagship products are the MSCI International Equity Indices, which are estimated
to have over US $3 trillion benchmarked to them, and the Barra risk models and
portfolio analytics, which cover 56 equity and 46 fixed income markets. MSCI
Inc. is headquartered in New York, with research and commercial offices around
the world. Morgan Stanley, a global financial services firm, is the majority
shareholder of MSCI Inc. MXB#IR
For
further information on MSCI Inc. or our products please visit
www.mscibarra.com.
MSCI Inc. Contact:
MSCI Inc. Investor
Relations
+
1.866.447.7874
For media enquiries please
contact:
7 of 12
|
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|
Steve Bruce | Pen
Pendleton | Ann Taylor Reed, Abernathy MacGregor, New York
+ 1.212.371.5999
Sally Todd | Clare
Milton, Penrose Financial,
London
+ 44.20.7786.4888
Forward-Looking
Statements
This release
contains forward-looking statements. 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 November 30, 2007 and filed with the Securities and Exchange
Commission on February 28, 2008. If any of these risks or uncertainties
materialize, or if our underlying assumptions prove to be incorrect, actual
results may vary significantly from what we projected. Any forward-looking
statement in this release reflects our current views with respect to future
events and is subject to these and other risks, uncertainties and assumptions
relating to our operations, results of operations, growth strategy and
liquidity. We assume 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.
Factors
Impacting Comparability of Our Financial Results
Net income and EPS
for first quarter 2008 are not comparable with first quarter 2007 because of our
initial public offering, changes in our capital structure, and founders grant
expense.
Weighted Shares
Outstanding
In November 2007, we
completed our initial public offering in which we issued 16.1 million shares. As
such, weighted average common shares outstanding for first quarter 2008 includes
these additional shares while first quarter 2007 does not.
Credit
Facility
As of February 29,
2008, we had borrowings of $419.4 million outstanding under our credit
facility. As of February 28, 2007, there was no debt
outstanding. Consequently, interest and other income (expense), net was an
expense of $6.0 million in first quarter 2008 compared to income of $5.0 million
in first quarter 2007.
Founders
Grant
On November 6, 2007,
our Board of Directors approved the award of founders grants to our employees in
the form of restricted stock units and/or options. The aggregate value of the
grants, which were made on November 14, 2007, was approximately $68.0 million of
restricted stock units and options. The restricted stock units and options vest
over a four-year period, with 50% vesting on the second anniversary of the grant
date and 25% vesting on the third and fourth anniversary of the grant date. The
options have an exercise price per share of $18.00 and have a term of ten years
subject to earlier cancellation in certain circumstances. The aggregate value of
the options is calculated using the Black-Scholes valuation method consistent
with SFAS No. 123R. As a result, operating expenses in first quarter 2008
included $4.8 million of founders grant expense compared to $0 for first quarter
2007.
8 of 12
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|
Table
4
|
MSCI
Inc.
|
|||
|
Consolidated
Statements of Income (unaudited)
|
|||
|
Three Months
Ended
|
|||
|
February
29,
|
February
28,
|
November,
30,
|
|
|
Amounts in
thousands, except per share data
|
2008
|
2007
|
2007
|
|
Operating
revenues
|
$104,951
|
$87,069
|
$101,658
|
|
Operating
expenses
|
|||
|
Cost of
services
|
31,586
|
32,266
|
29,678
|
|
Selling,
general and administrative
|
31,550
|
18,964
|
24,593
|
|
Amortization
of intangible assets
|
7,125
|
6,266
|
7,125
|
|
Total
operating expenses
|
70,261
|
57,496
|
61,396
|
|
Operating
income
|
34,690
|
29,573
|
40,262
|
|
Interest
income
|
2,372
|
5,062
|
1,432
|
|
Interest
expense
|
(8,463)
|
(95)
|
(7,730)
|
|
Other
income
|
136
|
27
|
137
|
|
Interest
income (expense) and other, net
|
(5,955)
|
4,994
|
(6,161)
|
|
Income before
income taxes
|
28,735
|
34,567
|
34,101
|
|
Provision for
income taxes
|
10,801
|
12,925
|
15,862
|
|
Net
income
|
$17,934
|
$21,642
|
$18,239
|
|
Earnings per
basic common share
|
$0.18
|
$0.26
|
$0.21
|
|
Earnings per
diluted common share
|
$0.18
|
$0.26
|
$0.21
|
|
Weighted
average shares outstanding used in computing earnings per
share
|
|||
|
Basic
|
100,011
|
83,900
|
86,733
|
|
Diluted
|
100,728
|
83,900
|
86,803
|
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Table
5
|
Operating
Revenues by Product Category
|
|||||
|
Three Months
Ended
|
Change
from
|
||||
|
February
29,
|
February
28,
|
November
30,
|
February
28,
|
November
30,
|
|
|
Amounts in
thousands
|
2008
|
2007
|
2007
|
2007
|
2007
|
|
Equity
indices
|
|||||
|
Equity index
subscriptions
|
$38,809
|
$33,154
|
$37,342
|
17.1%
|
3.9%
|
|
Equity index
asset based fees
|
19,588
|
13,047
|
18,680
|
50.1%
|
4.9%
|
|
Equity indices
total
|
58,397
|
46,201
|
56,022
|
26.4%
|
4.2%
|
|
Equity
portfolio analytics
|
32,342
|
29,364
|
31,625
|
10.1%
|
2.3%
|
|
Multi-asset
class portfolio analytics
|
7,892
|
4,283
|
7,701
|
84.3%
|
2.5%
|
|
Other
products
|
6,320
|
7,221
|
6,310
|
(12.5%)
|
0.2%
|
|
Total
operating revenues
|
$104,951
|
$87,069
|
$101,658
|
20.5%
|
3.2%
|
Table
6
|
Operating
Expenses by Category excluding Founders Grant
|
|||
|
Three Months
Ended
|
|||
|
February
29,
|
February
28,
|
||
|
Amounts in
thousands
|
2008
|
2007
|
Change
|
|
Cost of
services
|
|||
|
Compensation
|
$18,938
|
$21,106
|
(10.3%)
|
|
Non-compensation
|
11,359
|
11,160
|
1.8%
|
|
Total
|
30,297
|
32,266
|
(6.1%)
|
|
Selling,
general and administrative
|
|||
|
Compensation
|
17,429
|
14,269
|
22.1%
|
|
Non-compensation
|
10,614
|
4,695
|
126.1%
|
|
Total
|
28,043
|
18,964
|
47.9%
|
|
Amortization
of intangible assets
|
7,125
|
6,266
|
13.7%
|
|
Operating
expenses excluding founders grant
|
65,465
|
57,496
|
13.9%
|
|
Founders
grant
|
4,796
|
-
|
-
|
|
Operating
expenses including founders grant
|
$70,261
|
$57,496
|
22.2%
|
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Table
7
|
Operating
Expenses by Category including Founders Grant
|
|||
|
Three Months
Ended
|
|||
|
February
29,
|
February
28,
|
||
|
Amounts in
thousands
|
2008
|
2007
|
Change
|
|
Cost of
services
|
|||
|
Compensation
|
$18,938
|
$21,106
|
(10.3%)
|
|
Founders
grant
|
1,289
|
-
|
-
|
|
Total
|
20,227
|
21,106
|
(4.2%)
|
|
Non-compensation
|
11,359
|
11,160
|
1.8%
|
|
Total
|
31,586
|
32,266
|
(2.1%)
|
|
Selling,
general and administrative
|
|||
|
Compensation
|
17,429
|
14,269
|
22.1%
|
|
Founders
grant
|
3,507
|
-
|
-
|
|
Total
|
20,936
|
14,269
|
46.7%
|
|
Non-compensation
|
10,614
|
4,695
|
126.1%
|
|
Total
|
31,550
|
18,964
|
66.4%
|
|
Amortization
of intangible assets
|
7,125
|
6,266
|
13.7%
|
|
Operating
expenses including founders grant
|
$70,261
|
$57,496
|
22.2%
|
Table
8
|
Reconciliation
of Adjusted EBITDA to Net Income
|
|||
|
Three Months
Ended
|
|||
|
February
29,
|
February
28,
|
November
30,
|
|
|
Amounts in
thousands
|
2008
|
2007
|
2007
|
|
Adjusted
EBITDA
|
$47,095
|
$36,403
|
$48,682
|
|
Less: Founders
Grant expense
|
4,796
|
-
|
828
|
|
Less: Depreciation
and amortization
|
484
|
564
|
467
|
|
Less: Amortization
of intangible assets
|
7,125
|
6,266
|
7,125
|
|
Add: Interest
and other income (expense), net
|
(5,955)
|
4,994
|
(6,161)
|
|
Less: Provision
for income taxes
|
10,801
|
12,925
|
15,862
|
|
Net
income
|
$17,934
|
$21,642
|
$18,239
|
11 of 12
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|
Notes
Regarding the Use of Non-GAAP Financial Measures
Adjusted
EBITDA
Adjusted EBITDA is
defined as income before interest income, interest expense, other income,
provision for income taxes, depreciation, amortization and founders grant
expense. Adjusted EBITDA is not presented as an alternative measure of operating
results, as determined in accordance with accounting principles generally
accepted in the U.S. Rather, we believe adjusted EBITDA is one additional
measure that investors use to evaluate companies, like our company, that have
substantial amortization of intangible assets included in their statement of
income. This is particularly relevant to a company in our industry because we do
not believe other companies in our industry have as significant a proportion of
their operating expenses represented by amortization of intangible assets and
one-time founders grant as we do. As stated above, adjusted EBITDA excludes
expense for the one-time $68 million founders grant which is being amortized
through 2011. Management believes that it is useful to exclude the founders
grant expense in order to focus on what is deemed to be a more reliable
indicator of ongoing operating performance. Amortization expense for the
one-time $68 million founders grant, representing restricted stock units and
options awarded to employees effective with the IPO, is expected to be amortized
through 2011.
Additionally, our
management uses adjusted EBITDA to compare us to other companies in the same
industry when evaluating relative performance and industry development. Adjusted
EBITDA as presented herein, however, may not be comparable to similarly titled
measures reported by other companies. Adjusted EBITDA is a non-GAAP measure that
should not be considered as an alternative to net income, as an indication of
financial performance or as an alternative to cash flow from operations as a
measure of liquidity.
Operating Expenses
excluding Founders Grant
Operating expenses
excluding founders grant (described above), cost of services expenses excluding
founders grant, and selling, general, and administrative expenses excluding
founders grant are deemed to be a more reliable indicator of ongoing expense
trends. Management believes that it is useful to exclude founders grant expenses
from operating expenses because the founders grant was a one-time event.
Although the founders grant was a one time event, the amortization of the award
will be recognized over four years.
12 of 12
Exhibit
99.2
|
www.mscibarra.com
|
Morgan
Stanley to Sell up to 28 Million Shares of MSCI Class A Common
Stock
New York – April 9, 2008 –
MSCI Inc. (NYSE:MXB) announced today that it intends to file shortly a
Registration Statement on Form S-1 for the sale by Morgan Stanley of up to 28
million shares of MSCI class A common stock, par value $0.01 per share.
The proposed offering is consistent with Morgan Stanley’s previous indication
that it might sell a portion of its ownership interest in MSCI and that it may
ultimately divest its entire interest in MSCI.
This announcement is
neither an offer to sell nor a solicitation of an offer to buy shares of class A
common stock. Any offering of these securities will be made only by
means of a prospectus and a related prospectus supplement.
MSCI
Inc. Contact:
MSCI Inc. Investor
Relations
+
1.866.447.7874