MSCI Reports Financial Results for First Quarter 2019
Financial and Operational Highlights for First Quarter 2019
(Note: Percentage and other changes refer to first quarter 2018 unless otherwise noted.)
- Organic subscription Run Rate growth of 10.4%; Index up 11.6%, Analytics up 7.0% and All Other up 19.3%.
- Operating revenues up 5.7% with recurring subscription revenues up 8.3%, asset-based fees down 4.3% and non-recurring revenues up 43.7%.
- Organic operating revenue growth was 8.6% with organic recurring subscription revenues up 12.2%.
- Diluted EPS of
$2.08 , up 67.7%; Adjusted EPS of$1.55 , up 18.3%. - Record quarterly Retention Rate at 95.2%. New recurring subscription sales up 16.5%, total net new up 34.3%.
- During first quarter 2019 a total of 0.7 million shares were
repurchased at an average price of
$147.97 per share for a total value of$102.1 million .
| Three Months Ended | ||||||||||||||||
| Mar. 31, | Mar. 31, | Dec. 31, | YoY % | |||||||||||||
| In thousands, except per share data | 2019 | 2018 | 2018 | Change | ||||||||||||
| Operating revenues | $ | 371,381 | $ | 351,316 | $ | 361,688 | 5.7 | % | ||||||||
| Operating income | $ | 162,675 | $ | 167,166 | $ | 169,818 | (2.7 | %) | ||||||||
| Operating margin % | 43.8 | % | 47.6 | % | 47.0 | % | ||||||||||
| Net income | $ | 178,192 | $ | 115,092 | $ | 152,132 | 54.8 | % | ||||||||
| Diluted EPS | $ | 2.08 | $ | 1.24 | $ | 1.70 | 67.7 | % | ||||||||
| Adjusted EPS | $ | 1.55 | $ | 1.31 | $ | 1.31 | 18.3 | % | ||||||||
| Adjusted EBITDA | $ | 197,707 | $ | 186,709 | $ | 189,762 | 5.9 | % | ||||||||
| Adjusted EBITDA margin % | 53.2 | % | 53.1 | % | 52.5 | % | ||||||||||
“We continue to deliver strong results quarter after quarter, including
our sixth consecutive quarter of approximately 10% organic subscription
run rate growth. We are off to a great start in 2019 as we continue to
execute on the key pillars of our growth strategy. Our consistent and
reliable operating and financial performance, amid volatile market
conditions and a rapidly transforming industry, demonstrates the
strength of our franchise and power of our value proposition. Our
ingrained position at the center of the investment process, coupled with
our flexible technology, differentiated content and actionable
solutions, allows us to provide must-have mission critical tools
enabling global investors to build better portfolios for a better
world,” commented
“We see enormous opportunities within our core areas of differentiated content such as equity indexes, factors and ESG, to build stronger strategic relationships with our clients globally. We also continue to execute our in-flight opportunities and are well-positioned to capitalize on the wide range of attractive investment opportunities we see to help drive top-line growth,” added Mr. Fernandez.
First Quarter 2019 Consolidated Results
Revenues:
Operating revenues for first quarter 2019 increased
Run Rate: Total
Run Rate at
Expenses: Total
operating expenses for first quarter 2019 increased
The Multi-Year PSUs granted in 2016 covered three years of the annual performance stock unit (“PSU”) component of long-term incentive compensation for certain senior executives and, therefore, such executives did not receive any PSU grants in 2017 or 2018. While the award is accrued over the vesting period (i.e., between first quarter 2016 and first quarter 2019), there was a related payroll tax upon vesting in first quarter 2019. Given the one-time and non-recurring nature of the Multi-Year PSU grant, we have excluded the related payroll tax expense from our adjusted figures.
Adjusted EBITDA expenses for first quarter 2019 increased
Headcount: As
of
Amortization and Depreciation Expenses:
Amortization and depreciation expenses increased
Other Expense (Income), Net:
Other expense (income), net increased
Tax Rate: The
first quarter 2019 effective tax rate was a negative 38.9%, compared to
an effective tax rate of 17.5% for first quarter 2018. First quarter
2019 had an income tax benefit of
Net Income: Net
income increased 54.8% to
Adjusted EBITDA:
Adjusted EBITDA was
Cash Balances and Outstanding Debt:
Total cash and cash equivalents as of
Total outstanding debt as of
Cash Flow and
The decrease in net cash provided by operating activities, compared to
first quarter 2018, was driven primarily by higher payments of cash
expenses and income taxes, partially offset by higher cash collections.
The decrease in free cash flow, compared to first quarter 2018, was
driven primarily by higher
Share Count and Capital Return:
The weighted average diluted shares outstanding in first quarter 2019
declined 7.5% to 85.6 million, compared to 92.6 million in first quarter
2018. In first quarter 2019, a total of 0.7 million shares were
repurchased at an average price of
On
|
Table 1: Results by Segment (unaudited) |
||||||||||||||||||||||||||||||
| Index | Analytics | All Other | ||||||||||||||||||||||||||||
| Adjusted | Adjusted | Adjusted | ||||||||||||||||||||||||||||
| Operating | Adjusted | EBITDA | Operating | Adjusted | EBITDA | Operating | Adjusted | EBITDA | ||||||||||||||||||||||
| In thousands | Revenues | EBITDA | Margin | Revenues | EBITDA | Margin | Revenues | EBITDA | Margin | |||||||||||||||||||||
| 1Q'19 | $ | 214,773 | $ | 152,211 | 70.9 | % | $ | 121,435 | $ | 36,398 | 30.0 | % | $ | 35,173 | $ | 9,098 | 25.9 | % | ||||||||||||
| 1Q'18 | $ | 201,914 | $ | 145,930 | 72.3 | % | $ | 118,987 | $ | 33,593 | 28.2 | % | $ | 30,415 | $ | 7,186 | 23.6 | % | ||||||||||||
| % change | 6.4 | % | 4.3 | % | 2.1 | % | 8.3 | % | 15.6 | % | 26.6 | % | ||||||||||||||||||
| 4Q'18 | $ | 210,433 | $ | 149,930 | 71.2 | % | $ | 121,935 | $ | 36,679 | 30.1 | % | $ | 29,320 | $ | 3,153 | 10.8 | % | ||||||||||||
| % change | 2.1 | % | 1.5 | % | (0.4 | %) | (0.8 | %) | 20.0 | % | 188.6 | % | ||||||||||||||||||
Index Segment:Operating revenues for first quarter 2019 increased
The increase in recurring subscriptions was driven by strong growth in core products, factor and ESG index products and custom and specialized index products.
The decrease in asset-based fees was driven by a
The increase in non-recurring revenues was primarily driven by higher volume of deep historical content deals. The adjusted EBITDA margin for Index was 70.9% for first quarter 2019, compared to 72.3% for first quarter 2018.
Index Run Rate at
Analytics Segment:Operating revenues for first quarter 2019 increased
Analytics Run Rate at
All Other Segment:Operating revenues for first quarter 2019 increased
All Other Run Rate at
Full-Year 2019 Guidance
MSCI’s guidance for full-year 2019 is as follows:
-
Total operating expenses are now expected to be in the range of
$775 million to $800 million . -
Adjusted EBITDA expenses1 are expected to be in the range
of
$685 million to $705 million . -
Interest expense, including the amortization of financing fees, is
expected to be approximately
$144 million , assuming no additional financings. Capex is expected to be in the range of$45 million to $55 million .-
Net cash provided by operating activities and free cash flow are
expected to be in the ranges of
$600 million to $630 million and$545 million to $585 million , respectively. - The effective tax rate2 is now expected to be in the range of 9.0% to 12.0%.
| 1Excludes the payroll tax impact from the vesting in first quarter 2019 of the Multi-Year PSUs. |
| 2Includes the PSU windfall benefit which is expected to reduce the 2019 effective tax rate by ~11 percentage points. The previous effective tax rate guidance was expected to be in the range of 11.5% to 14.5%. |
Conference Call Information
An audio recording of the conference call will be available on our
Investor Relations website, http://ir.msci.com/events.cfm,
beginning approximately two hours after the conclusion of the live
event. Through
About
To learn more, please visit www.msci.com. MSCI#IR
Forward-Looking Statements
This earnings release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including without limitation, our full-year 2019 guidance. These forward-looking statements relate to future events or to future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these statements. In some cases, you can identify forward-looking statements by the use of words such as “may,” “could,” “expect,” “intend,” “plan,” “seek,” “anticipate,” “believe,” “estimate,” “predict,” “potential” or “continue,” or the negative of these terms or other comparable terminology. You should not place undue reliance on forward-looking statements because they involve known and unknown risks, uncertainties and other factors that are, in some cases, beyond our control and that could materially affect our 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
Website and Social Media Disclosure
The historical values of the AUM in ETFs linked to our indexes as of the
last day of and the monthly average for
Notes Regarding the Use of Operating Metrics
Retention Rate is an important metric because subscription cancellations decrease our Run Rate and ultimately our operating revenues over time. The annual Retention Rate represents the retained subscription Run Rate (subscription Run Rate at the beginning of the fiscal year less actual cancels during the year) as a percentage of the subscription Run Rate at the beginning of the fiscal year.
The Retention Rate for a non-annual period is calculated by annualizing the cancellations for which we have received a notice of termination or for which we believe there is an intention not to renew during the non-annual period, and we believe that such notice or intention evidences the client’s final decision to terminate or not renew the applicable agreement, even though such notice is not effective until a later date. This annualized cancellation figure is then divided by the subscription Run Rate at the beginning of the fiscal year to calculate a cancellation rate. This cancellation rate is then subtracted from 100% to derive the annualized Retention Rate for the period.
Retention Rate is computed by operating segment on a product/service-by-product/service basis. In general, if a client reduces the number of products or services to which it subscribes within a segment, or switches between products or services within a segment, we treat it as a cancellation for purposes of calculating our Retention Rate except in the case of a product or service switch that management considers to be a replacement product or service. In those replacement cases, only the net change to the client subscription, if a decrease, is reported as a cancel. In the Analytics and the ESG segments, substantially all product or service switches are treated as replacement products or services and netted in this manner, while in our Index and Real Estate segments, product or service switches that are treated as replacement products or services and receive netting treatment occur only in certain limited instances. In addition, we treat any reduction in fees resulting from a down-sale of the same product or service as a cancellation to the extent of the reduction. We do not calculate Retention Rate for that portion of our Run Rate attributable to assets in index-linked investment products or futures and options contracts, in each case, linked to our indexes.
Run Rate estimates at a particular point in time the annualized value of the recurring revenues under our client license agreements (“Client Contracts”) for the next 12 months, assuming all Client Contracts that come up for renewal are renewed and assuming then-current currency exchange rates, subject to the adjustments and exclusions described below. For any Client Contract where fees are linked to an investment product’s assets or trading volume/fees, the Run Rate calculation reflects, for ETFs, the market value on the last trading day of the period, for futures and options, the most recent quarterly volumes and/or reported exchange fees, and for other non-ETF products, the most recent client-reported assets. Run Rate does not include fees associated with “one-time” and other non-recurring transactions. In addition, we add to Run Rate the annualized fee value of recurring new sales, whether to existing or new clients, when we execute Client Contracts, even though the license start date, and associated revenue recognition, may not be effective until a later date. We remove from Run Rate the annualized fee value associated with products or services under any Client Contract with respect to which we have received a notice of termination or non-renewal during the period and have determined that such notice evidences the client’s final decision to terminate or not renew the applicable products or services, even though such notice is not effective until a later date.
“Organic subscription Run Rate growth” is defined as the period over period Run Rate growth, excluding the impact of changes in foreign currency and the first year impact of any acquisitions. It is also adjusted for divestitures. Changes in foreign currency are calculated by applying the currency exchange rate from the comparable prior period to current period foreign currency denominated Run Rate.
Notes Regarding the Use of Non-GAAP Financial Measures
“Adjusted EBITDA” is defined as net income before (1) provision for income taxes, (2) other expense (income), net, (3) depreciation and amortization of property, equipment and leasehold improvements, (4) amortization of intangible assets and, at times, (5) certain other transactions or adjustments, including the impact related to the vesting of the Multi-Year PSUs.
“Adjusted EBITDA expenses” is defined as operating expenses less depreciation and amortization of property, equipment and leasehold improvements and amortization of intangible assets and, at times, certain other transactions or adjustments, including the impact related to the vesting of the Multi-Year PSUs.
“Adjusted net income” and “adjusted EPS” are defined as net income and
diluted EPS, respectively, before the after-tax impact of the
amortization of acquired intangible assets, the impact of divestitures,
the impact of adjustments for the Tax Cuts and Jobs Act that was enacted
on
“Adjusted tax rate” is defined as the effective tax rate excluding the impact of Tax Reform adjustments (except for amounts associated with active tax planning implemented as a result of Tax Reform) and the impact related to the vesting of the Multi-Year PSUs.
“Capex” is defined as capital expenditures plus capitalized software development costs.
“Free cash flow” is defined as net cash provided by operating
activities, less
“Organic operating revenue growth” is defined as operating revenue growth compared to the prior year period excluding the impact of acquired businesses, divested businesses and foreign currency exchange rate fluctuations.
Asset-based fees ex-FX does not adjust for the impact from foreign currency exchange rate fluctuations on the underlying AUM.
We believe adjusted EBITDA and adjusted EBITDA expenses are meaningful
measures of the operating performance of
We believe adjusted net income and adjusted EPS are meaningful measures
of the performance of
We believe that adjusted tax rate is useful to investors because it increases the comparability of period-to-period results by adjusting for the estimated net impact of Tax Reform and the impact related to the vesting of the Multi-Year PSUs.
We believe that free cash flow is useful to investors because it relates
the operating cash flow of
We believe organic operating revenue growth is a meaningful measure of
the operating performance of
We believe that the non-GAAP financial measures presented in this earnings release facilitate meaningful period-to-period comparisons and provide a baseline for the evaluation of future results.
Adjusted EBITDA expenses, adjusted EBITDA, adjusted net income, adjusted
EPS, adjusted tax rate,
Notes Regarding Adjusting for the Impact of Foreign Currency Exchange Rate Fluctuations
Foreign currency exchange rate fluctuations reflect the difference between the current period results as reported compared to the current period results recalculated using the foreign currency exchange rates in effect for the comparable prior period. While operating revenues adjusted for the impact of foreign currency fluctuations includes asset-based fees that have been adjusted for the impact of foreign currency fluctuations, the underlying AUM, which is the primary component of asset-based fees, is not adjusted for foreign currency fluctuations. Approximately two-thirds of the AUM are invested in securities denominated in currencies other than the U.S. dollar, and accordingly, any such impact is excluded from the disclosed foreign currency adjusted variances.
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Table 2: Condensed Consolidated Statements of Income (unaudited) |
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| Three Months Ended | |||||||||||||||
| Mar. 31, | Mar. 31, | Dec. 31, | YoY % | ||||||||||||
| In thousands, except per share data | 2019 | 2018 | 2018 | Change | |||||||||||
| Operating revenues | $ | 371,381 | $ | 351,316 | $ | 361,688 | 5.7 | % | |||||||
| Operating expenses: | |||||||||||||||
| Cost of revenues | 82,346 | 71,304 | 73,757 | 15.5 | % | ||||||||||
| Selling and marketing | 56,048 | 46,409 | 52,949 | 20.8 | % | ||||||||||
| Research and development | 23,172 | 20,707 | 20,312 | 11.9 | % | ||||||||||
| General and administrative | 27,497 | 26,187 | 24,908 | 5.0 | % | ||||||||||
| Amortization of intangible assets | 11,793 | 11,338 | 11,633 | 4.0 | % | ||||||||||
| Depreciation and amortization of property, | |||||||||||||||
| equipment and leasehold improvements | 7,850 | 8,205 | 8,311 | (4.3 | %) | ||||||||||
| Total operating expenses(1) | 208,706 | 184,150 | 191,870 | 13.3 | % | ||||||||||
| Operating income | 162,675 | 167,166 | 169,818 | (2.7 | %) | ||||||||||
| Interest income | (4,086 | ) | (2,770 | ) | (6,096 | ) | 47.5 | % | |||||||
| Interest expense | 35,915 | 29,560 | 35,891 | 21.5 | % | ||||||||||
| Other expense (income) | 2,554 | 938 | (47,266 | ) | 172.3 | % | |||||||||
| Other expense (income), net | 34,383 | 27,728 | (17,471 | ) | 24.0 | % | |||||||||
| Income before provision for income taxes | 128,292 | 139,438 | 187,289 | (8.0 | %) | ||||||||||
| Provision for income taxes | (49,900 | ) | 24,346 | 35,157 | n/m | ||||||||||
| Net income | $ | 178,192 | $ | 115,092 | $ | 152,132 | 54.8 | % | |||||||
| Earnings per basic common share | $ | 2.11 | $ | 1.28 | $ | 1.75 | 64.8 | % | |||||||
| Earnings per diluted common share | $ | 2.08 | $ | 1.24 | $ | 1.70 | 67.7 | % | |||||||
| Weighted average shares outstanding used | |||||||||||||||
| in computing earnings per share: | |||||||||||||||
| Basic | 84,253 | 90,075 | 86,968 | (6.5 | %) | ||||||||||
| Diluted | 85,649 | 92,587 | 89,495 | (7.5 | %) | ||||||||||
|
n/m: not meaningful |
||
| (1) | Includes stock-based compensation expense of $10.5 million, $9.8 million and $10.5 million for the three months ended Mar. 31, 2019, Mar. 31, 2018 and Dec. 31, 2018, respectively. | |
|
Table 3: Selected Balance Sheet Items (unaudited) |
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| As of | ||||
| Mar. 31, | Dec. 31, | |||
| In thousands | 2019 | 2018 | ||
| Cash and cash equivalents | $642,781 | $904,176 | ||
| Accounts receivable, net of allowances | $427,099 | $473,433 | ||
| Deferred revenue | $524,988 | $537,977 | ||
| Long-term debt(1) | $2,576,388 | $2,575,502 | ||
| (1) | Consists of gross long-term debt, net of deferred financing fees. Gross long-term debt at both Mar. 31, 2019 and Dec. 31, 2018 was $2.6 billion. |
|
Table 4: Selected Cash Flow Items (unaudited) |
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| Three Months Ended | ||||||||||||
| Mar. 31, | Mar. 31, | Dec. 31, | ||||||||||
| In thousands | 2019 | 2018 | 2018 | |||||||||
| Net cash provided by operating activities | $ | 87,875 | $ | 88,597 | $ | 173,175 | ||||||
| Net cash (used in) provided by investing activities | (8,136 | ) | (5,872 | ) | 40,038 | |||||||
| Net cash used in financing activities | (341,635 | ) | (126,058 | ) | (707,083 | ) | ||||||
| Effect of exchange rate changes | 501 | 3,659 | (352 | ) | ||||||||
| Net increase (decrease) in cash and cash equivalents | $ | (261,395 | ) | $ | (39,674 | ) | $ | (494,222 | ) | |||
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Table 5: Operating Results by Segment and Revenue Type (unaudited) |
||||||||||||||||
| Index | Three Months Ended | |||||||||||||||
| Mar. 31, | Mar. 31, | Dec. 31, | YoY % | |||||||||||||
| In thousands | 2019 | 2018 | 2018 | Change | ||||||||||||
| Operating revenues: | ||||||||||||||||
| Recurring subscriptions | $ | 127,674 | $ | 113,205 | $ | 123,496 | 12.8 | % | ||||||||
| Asset-based fees | 81,808 | 85,483 | 81,439 | (4.3 | %) | |||||||||||
| Non-recurring | 5,291 | 3,226 | 5,498 | 64.0 | % | |||||||||||
| Total operating revenues | 214,773 | 201,914 | 210,433 | 6.4 | % | |||||||||||
| Adjusted EBITDA expenses | 62,562 | 55,984 | 60,503 | 11.7 | % | |||||||||||
| Adjusted EBITDA | $ | 152,211 | $ | 145,930 | $ | 149,930 | 4.3 | % | ||||||||
| Adjusted EBITDA margin % | 70.9 | % | 72.3 | % | 71.2 | % | ||||||||||
| Analytics | Three Months Ended | |||||||||||||||
| Mar. 31, | Mar. 31, | Dec. 31, | YoY % | |||||||||||||
| In thousands | 2019 | 2018 | 2018 | Change | ||||||||||||
| Operating revenues: | ||||||||||||||||
| Recurring subscriptions | $ | 120,110 | $ | 118,244 | $ | 119,705 | 1.6 | % | ||||||||
| Non-recurring | 1,325 | 743 | 2,230 | 78.3 | % | |||||||||||
| Total operating revenues | 121,435 | 118,987 | 121,935 | 2.1 | % | |||||||||||
| Adjusted EBITDA expenses | 85,037 | 85,394 | 85,256 | (0.4 | %) | |||||||||||
| Adjusted EBITDA | $ | 36,398 | $ | 33,593 | $ | 36,679 | 8.3 | % | ||||||||
| Adjusted EBITDA margin % | 30.0 | % | 28.2 | % | 30.1 | % | ||||||||||
| All Other | Three Months Ended | |||||||||||||||
| Mar. 31, | Mar. 31, | Dec. 31, | YoY % | |||||||||||||
| In thousands | 2019 | 2018 | 2018 | Change | ||||||||||||
| Operating revenues: | ||||||||||||||||
| Recurring subscriptions | $ | 34,580 | $ | 29,367 | $ | 28,405 | 17.8 | % | ||||||||
| Non-recurring | 593 | 1,048 | 915 | (43.4 | %) | |||||||||||
| Total operating revenues | 35,173 | 30,415 | 29,320 | 15.6 | % | |||||||||||
| Adjusted EBITDA expenses | 26,075 | 23,229 | 26,167 | 12.3 | % | |||||||||||
| Adjusted EBITDA | $ | 9,098 | $ | 7,186 | $ | 3,153 | 26.6 | % | ||||||||
| Adjusted EBITDA margin % | 25.9 | % | 23.6 | % | 10.8 | % | ||||||||||
| Consolidated | Three Months Ended | |||||||||||||||
| Mar. 31, | Mar. 31, | Dec. 31, | YoY % | |||||||||||||
| In thousands | 2019 | 2018 | 2018 | Change | ||||||||||||
| Operating revenues: | ||||||||||||||||
| Recurring subscriptions | $ | 282,364 | $ | 260,816 | $ | 271,606 | 8.3 | % | ||||||||
| Asset-based fees | 81,808 | 85,483 | 81,439 | (4.3 | %) | |||||||||||
| Non-recurring | 7,209 | 5,017 | 8,643 | 43.7 | % | |||||||||||
| Operating revenues total | 371,381 | 351,316 | 361,688 | 5.7 | % | |||||||||||
| Adjusted EBITDA expenses | 173,674 | 164,607 | 171,926 | 5.5 | % | |||||||||||
| Adjusted EBITDA | $ | 197,707 | $ | 186,709 | $ | 189,762 | 5.9 | % | ||||||||
| Adjusted EBITDA margin % | 53.2 | % | 53.1 | % | 52.5 | % | ||||||||||
| Operating margin % | 43.8 | % | 47.6 | % | 47.0 | % | ||||||||||
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Table 6: Sales and Retention Rate by Segment (unaudited) |
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| Three Months Ended | ||||||||||||||||||||
| Mar. 31, | Dec. 31, | Sep. 30, | June 30, | Mar. 31, | ||||||||||||||||
| In thousands | 2019 | 2018 | 2018 | 2018 | 2018 | |||||||||||||||
| Index | ||||||||||||||||||||
| New recurring subscription sales | $ | 17,329 | $ | 21,013 | $ | 15,546 | $ | 20,906 | $ | 15,195 | ||||||||||
| Subscription cancellations | (4,366 | ) | (7,699 | ) | (4,428 | ) | (4,577 | ) | (4,115 | ) | ||||||||||
| Net new recurring subscription sales | $ | 12,963 | $ | 13,314 | $ | 11,118 | $ | 16,329 | $ | 11,080 | ||||||||||
| Non-recurring sales | $ | 5,081 | $ | 6,845 | $ | 7,097 | $ | 5,328 | $ | 3,459 | ||||||||||
| Total gross sales(1) | $ | 22,410 | $ | 27,858 | $ | 22,643 | $ | 26,234 | $ | 18,654 | ||||||||||
| Total Index net sales | $ | 18,044 | $ | 20,159 | $ | 18,215 | $ | 21,657 | $ | 14,539 | ||||||||||
| Index Retention Rate(2) | 96.5 | % | 93.2 | % | 96.1 | % | 95.9 | % | 96.4 | % | ||||||||||
| Analytics | ||||||||||||||||||||
| New recurring subscription sales | $ | 12,751 | $ | 19,438 | $ | 16,797 | $ | 17,395 | $ | 11,356 | ||||||||||
| Subscription cancellations | (7,764 | ) | (8,524 | ) | (7,117 | ) | (9,452 | ) | (8,578 | ) | ||||||||||
| Net new recurring subscription sales | $ | 4,987 | $ | 10,914 | $ | 9,680 | $ | 7,943 | $ | 2,778 | ||||||||||
| Non-recurring sales | $ | 2,577 | $ | 3,249 | $ | 3,189 | $ | 2,425 | $ | 1,346 | ||||||||||
| Total gross sales(1) | $ | 15,328 | $ | 22,687 | $ | 19,986 | $ | 19,820 | $ | 12,702 | ||||||||||
| Total Analytics net sales | $ | 7,564 | $ | 14,163 | $ | 12,869 | $ | 10,368 | $ | 4,124 | ||||||||||
| Analytics Retention Rate(2) | 93.7 | % | 92.7 | % | 94.1 | % | 92.1 | % | 93.0 | % | ||||||||||
| All Other | ||||||||||||||||||||
| New recurring subscription sales | $ | 7,215 | $ | 7,596 | $ | 6,459 | $ | 6,678 | $ | 5,468 | ||||||||||
| Subscription cancellations | (1,275 | ) | (1,959 | ) | (1,547 | ) | (1,384 | ) | (1,531 | ) | ||||||||||
| Net new recurring subscription sales | $ | 5,940 | $ | 5,637 | $ | 4,912 | $ | 5,294 | $ | 3,937 | ||||||||||
| Non-recurring sales | $ | 454 | $ | 1,194 | $ | 641 | $ | 909 | $ | 694 | ||||||||||
| Total gross sales(1) | $ | 7,669 | $ | 8,790 | $ | 7,100 | $ | 7,587 | $ | 6,162 | ||||||||||
| Total All Other net sales | $ | 6,394 | $ | 6,831 | $ | 5,553 | $ | 6,203 | $ | 4,631 | ||||||||||
| All Other Retention Rate(2) | 95.9 | % | 92.8 | % | 94.3 | % | 94.9 | % | 94.4 | % | ||||||||||
| Consolidated | ||||||||||||||||||||
| New recurring subscription sales | $ | 37,295 | $ | 48,047 | $ | 38,802 | $ | 44,979 | $ | 32,019 | ||||||||||
| Subscription cancellations | (13,405 | ) | (18,182 | ) | (13,092 | ) | (15,413 | ) | (14,224 | ) | ||||||||||
| Net new recurring subscription sales | $ | 23,890 | $ | 29,865 | $ | 25,710 | $ | 29,566 | $ | 17,795 | ||||||||||
| Non-recurring sales | $ | 8,112 | $ | 11,288 | $ | 10,927 | $ | 8,662 | $ | 5,499 | ||||||||||
| Total gross sales(1) | $ | 45,407 | $ | 59,335 | $ | 49,729 | $ | 53,641 | $ | 37,518 | ||||||||||
| Total net sales | $ | 32,002 | $ | 41,153 | $ | 36,637 | $ | 38,228 | $ | 23,294 | ||||||||||
| Total Retention Rate(2) | 95.2 | % | 92.9 | % | 95.0 | % | 94.1 | % | 94.6 | % | ||||||||||
| (1) | Total gross sales equal new recurring subscription sales plus non-recurring sales. | |
| (2) | See "Notes Regarding the Use of Operating Metrics" for details regarding the definition of Retention Rate. |
|
Table 7: AUM in ETFs Linked to MSCI Indexes (unaudited)(1)(2) |
||||||||||||||||||||
| Three Months Ended | ||||||||||||||||||||
| Mar. 31, | Dec. 31, | Sep. 30, | June 30, | Mar. 31, | ||||||||||||||||
| In billions | 2019 | 2018 | 2018 | 2018 | 2018 | |||||||||||||||
| Beginning Period AUM in ETFs linked to | ||||||||||||||||||||
| MSCI indexes | $ | 695.6 | $ | 765.5 | $ | 744.7 | $ | 764.9 | $ | 744.3 | ||||||||||
| Market Appreciation/(Depreciation) | 78.3 | (94.7 | ) | 15.6 | (19.4 | ) | (11.7 | ) | ||||||||||||
| Cash Inflows | 28.3 | 24.8 | 5.2 | (0.8 | ) | 32.3 | ||||||||||||||
| Period-End AUM in ETFs linked to | ||||||||||||||||||||
| MSCI indexes | $ | 802.2 | $ | 695.6 | $ | 765.5 | $ | 744.7 | $ | 764.9 | ||||||||||
| Period Average AUM in ETFs linked to | ||||||||||||||||||||
| MSCI indexes | $ | 766.0 | $ | 717.1 | $ | 755.8 | $ | 776.5 | $ | 779.5 | ||||||||||
| Avg. Basis Point Fee(3) | 2.88 | 2.92 | 2.90 | 2.96 | 3.02 | |||||||||||||||
| Source: Bloomberg and MSCI (estimated based on data available as of March 31, 2019) | ||
| (1) | ETF assets under management calculation methodology is ETF net asset value multiplied by shares outstanding. | |
| (2) | The AUM in ETFs includes AUM in Exchange Traded Notes, the value of which is less than 1.0% of the AUM amounts presented. | |
| (3) | Based on period-end Run Rate for ETFs linked to MSCI indexes using period-end AUM. | |
|
Table 8: Run Rate by Segment and Type (unaudited)(1) |
|||||||||||||||
| As of | |||||||||||||||
| Mar. 31, | Mar. 31, | Dec. 31, | YoY % | ||||||||||||
| In thousands | 2019 | 2018 | 2018 | Change | |||||||||||
| Index | |||||||||||||||
| Recurring subscriptions | $ | 515,667 | $ | 462,097 | $ | 502,665 | 11.6 | % | |||||||
| Asset-based fees | 335,261 | 332,240 | 311,908 | 0.9 | % | ||||||||||
| Index Run Rate | 850,928 | 794,337 | 814,573 | 7.1 | % | ||||||||||
| Analytics Run Rate | 496,183 | 494,779 | 491,861 | 0.3 | % | ||||||||||
| All Other Run Rate | 130,979 | 114,015 | 124,886 | 14.9 | % | ||||||||||
| Total Run Rate | $ | 1,478,090 | $ | 1,403,131 | $ | 1,431,320 | 5.3 | % | |||||||
| Total recurring subscriptions | $ | 1,142,829 | $ | 1,070,891 | $ | 1,119,412 | 6.7 | % | |||||||
| Total asset-based fees | 335,261 | 332,240 | 311,908 | 0.9 | % | ||||||||||
| Total Run Rate | $ | 1,478,090 | $ | 1,403,131 | $ | 1,431,320 | 5.3 | % | |||||||
| (1) | See "Notes Regarding the Use of Operating Metrics" for details regarding the definition of Run Rate. |
|
Table 9: Reconciliation of Adjusted EBITDA to Net Income (unaudited) |
||||||||||||
| Three Months Ended | ||||||||||||
| Mar. 31, | Mar. 31, | Dec. 31, | ||||||||||
| In thousands | 2019 | 2018 | 2018 | |||||||||
| Index adjusted EBITDA | $ | 152,211 | $ | 145,930 | $ | 149,930 | ||||||
| Analytics adjusted EBITDA | 36,398 | 33,593 | 36,679 | |||||||||
| All Other adjusted EBITDA | 9,098 | 7,186 | 3,153 | |||||||||
| Consolidated adjusted EBITDA | 197,707 | 186,709 | 189,762 | |||||||||
|
Multi-Year PSU payroll tax expense |
15,389 | — | — | |||||||||
| Amortization of intangible assets | 11,793 | 11,338 | 11,633 | |||||||||
| Depreciation and amortization of property, | ||||||||||||
| equipment and leasehold improvements | 7,850 | 8,205 | 8,311 | |||||||||
| Operating income | 162,675 | 167,166 | 169,818 | |||||||||
| Other expense (income), net | 34,383 | 27,728 | (17,471 | ) | ||||||||
| Provision for income taxes | (49,900 | ) | 24,346 | 35,157 | ||||||||
| Net income | $ | 178,192 | $ | 115,092 | $ | 152,132 | ||||||
|
Table 10: Reconciliation of Net Income and Diluted EPS to Adjusted Net Income and Adjusted EPS (unaudited) |
||||||||||||
| Three Months Ended | ||||||||||||
| Mar. 31, | Mar. 31, | Dec. 31, | ||||||||||
| In thousands, except per share data | 2019 | 2018 | 2018 | |||||||||
| Net income | $ | 178,192 | $ | 115,092 | $ | 152,132 | ||||||
| Plus: Amortization of acquired intangible assets | 8,716 | 9,207 | 8,746 | |||||||||
|
Plus: Multi-Year PSU payroll tax expense |
15,389 | — | — | |||||||||
| Less: Discrete excess tax benefit related | ||||||||||||
|
to Multi-Year PSU vesting |
(66,581 | ) | — | — | ||||||||
| Less: Gain on sale of InvestorForce | — | — | (46,595 | ) | ||||||||
| Less: Tax Reform adjustments | — | (1,601 | ) | (6,671 | ) | |||||||
| Less: Income tax effect | (3,134 | ) | (1,608 | ) | 9,390 | |||||||
| Adjusted net income | $ | 132,582 | $ | 121,090 | $ | 117,002 | ||||||
| Diluted EPS | $ | 2.08 | $ | 1.24 | $ | 1.70 | ||||||
| Plus: Amortization of acquired intangible assets | 0.10 | 0.10 | 0.10 | |||||||||
|
Plus: Multi-Year PSU payroll tax expense |
0.18 | |||||||||||
| Less: Discrete excess tax benefit related | ||||||||||||
|
to Multi-Year PSU vesting |
(0.78 | ) | ||||||||||
| Less: Gain on sale of InvestorForce | — | — | (0.52 | ) | ||||||||
| Less: Tax Reform adjustments | — | (0.02 | ) | (0.07 | ) | |||||||
| Less: Income tax effect | (0.03 | ) | (0.01 | ) | 0.10 | |||||||
| Adjusted EPS | $ | 1.55 | $ | 1.31 | $ | 1.31 | ||||||
|
Table 11: Reconciliation of Adjusted EBITDA Expenses to Operating Expenses (unaudited) |
||||||||||||||
| Three Months Ended | Full-Year | |||||||||||||
| Mar. 31, | Mar. 31, | Dec. 31, | 2019 | |||||||||||
| In thousands | 2019 | 2018 | 2018 | Outlook(1) | ||||||||||
| Index adjusted EBITDA expenses | $ | 62,562 | $ | 55,984 | $ | 60,503 | ||||||||
| Analytics adjusted EBITDA expenses | 85,037 | 85,394 | 85,256 | |||||||||||
| All Other adjusted EBITDA expenses | 26,075 | 23,229 | 26,167 | |||||||||||
| Consolidated adjusted EBITDA expenses | 173,674 | 164,607 | 171,926 | $685,000 - $705,000 | ||||||||||
|
Multi-Year PSU payroll tax expense |
15,389 | — | — | 15,389 | ||||||||||
| Amortization of intangible assets | 11,793 | 11,338 | 11,633 | |||||||||||
| Depreciation and amortization of property, | 75,000 - 80,000 | |||||||||||||
| equipment and leasehold improvements | 7,850 | 8,205 | 8,311 | |||||||||||
| Total operating expenses | $ | 208,706 | $ | 184,150 | $ | 191,870 | $775,389 - $800,389 | |||||||
| (1) | We have not provided a line-item reconciliation for adjusted EBITDA expenses to total operating expenses for this future period because we do not provide guidance on the individual reconciling items between total operating expenses and adjusted EBITDA expenses. |
|
Table 12: Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow (unaudited) |
||||||||||||||
| Three Months Ended | Full-Year | |||||||||||||
| Mar. 31, | Mar. 31, | Dec. 31, | 2019 | |||||||||||
| In thousands | 2019 | 2018 | 2018 | Outlook(1) | ||||||||||
| Net cash provided by operating activities | $ | 87,875 | $ | 88,597 | $ | 173,175 | $600,000 - $630,000 | |||||||
| Capital expenditures | (3,156 | ) | (1,512 | ) | (17,188 | ) | ||||||||
| Capitalized software development costs | (4,990 | ) | (4,360 | ) | (5,589 | ) | ||||||||
| Capex | (8,146 | ) | (5,872 | ) | (22,777 | ) | (55,000 - 45,000) | |||||||
| Free cash flow | $ | 79,729 | $ | 82,725 | $ | 150,398 | $545,000 - $585,000 | |||||||
| (1) | We have not provided a line-item reconciliation for free cash flow to net cash from operating activities for this future period because we do not provide guidance on the individual reconciling items between net cash from operating activities and free cash flow. |
|
Table 13: Reconciliation of Effective Tax Rate to Adjusted Tax Rate (unaudited) |
||||||
| Three Months Ended | ||||||
| Mar. 31, | Mar. 31, | Dec. 31, | ||||
| 2019 | 2018 | 2018 | ||||
| Effective tax rate | (38.90%) | 17.46% | 18.77% | |||
| Tax Reform impact on effective tax rate | —% | 1.15% | 3.56% | |||
| Multi-Year PSU impact on effective tax rate | 51.90% | —% | —% | |||
| Adjusted tax rate | 13.00% | 18.61% | 22.33% | |||
|
Table 14: Reconciliation of Operating Revenue Growth to Organic Operating Revenue Growth (unaudited) |
||||||||
| Comparison of the Three Months Ended March 31, 2019 and 2018 | ||||||||
| Total |
Recurring |
Asset-Based Fees |
Non-Recurring |
|||||
| Index | Change Percentage | Change Percentage | Change Percentage | Change Percentage | ||||
| Operating revenue growth | 6.4% | 12.8% | (4.3%) | 64.0% | ||||
| Impact of acquisitions and divestures | —% | —% | —% | —% | ||||
| Impact of foreign currency exchange rate fluctuations | 0.1% | —% | 0.1% | 0.2% | ||||
| Organic operating revenue growth | 6.5% | 12.8% | (4.2%) | 64.2% | ||||
| Total |
Recurring |
Asset-Based Fees |
Non-Recurring |
|||||
| Analytics | Change Percentage | Change Percentage | Change Percentage | Change Percentage | ||||
| Operating revenue growth | 2.1% | 1.6% | —% | 78.3% | ||||
| Impact of acquisitions and divestures | 7.0% | 6.9% | —% | 41.4% | ||||
| Impact of foreign currency exchange rate fluctuations | 0.1% | 0.1% | —% | 2.5% | ||||
| Organic operating revenue growth | 9.2% | 8.6% | —% | 122.2% | ||||
| Total |
Recurring |
Asset-Based Fees |
Non-Recurring |
|||||
| All Other | Change Percentage | Change Percentage | Change Percentage | Change Percentage | ||||
| Operating revenue growth | 15.6% | 17.8% | —% | (43.4%) | ||||
| Impact of acquisitions and divestures | —% | —% | —% | —% | ||||
| Impact of foreign currency exchange rate fluctuations | 5.3% | 5.3% | —% | 3.6% | ||||
| Organic operating revenue growth | 20.9% | 23.1% | —% | (39.8%) | ||||
| Total |
Recurring |
Asset-Based Fees |
Non-Recurring |
|||||
| Consolidated | Change Percentage | Change Percentage | Change Percentage | Change Percentage | ||||
| Operating revenue growth | 5.7% | 8.3% | (4.3%) | 43.7% | ||||
| Impact of acquisitions and divestures | 2.4% | 3.2% | —% | 4.1% | ||||
| Impact of foreign currency exchange rate fluctuations | 0.5% | 0.7% | 0.1% | 1.2% | ||||
| Organic operating revenue growth | 8.6% | 12.2% | (4.2%) | 49.0% | ||||
View source version on businesswire.com: https://www.businesswire.com/news/home/20190502005389/en/
Source:
MSCI Inc.
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