MSCI Reports Financial Results for Fourth Quarter and Full-Year 2018
Financial and Operational Highlights for Fourth Quarter 2018 and Full-Year 2018
(Notes: Percentage and other changes refer to fourth quarter 2017 or full-year 2017 unless otherwise noted.)
- Organic subscription Run Rate growth as of
December 31, 2018 of 10.0% with Index up 11.4%, Analytics up 6.5% and All Other up 18.6%. - Full-year 2018 operating revenues up 12.5%; recurring subscription revenues up 9.6%; asset-based fees up 21.9%; non-recurring revenues up 23.3%.
- Fourth quarter 2018 operating revenues up 8.0%; recurring subscription revenues up 9.0%; asset-based fees up 3.8%; non-recurring revenues up 19.9%.
- Fourth quarter 2018 diluted EPS up 142.9%, and full-year 2018 diluted EPS up 71.0%; fourth quarter 2018 adjusted EPS of
$1.31 , up 13.9%, resulting in full-year 2018 adjusted EPS of$5.35 , up 34.4%. - Fourth quarter and full-year 2018 operating income growth of 10.2% and 18.5%, respectively; fourth quarter 2018 operating margin of 47.0%, and 47.9% for full-year 2018.
- Fourth quarter and full-year 2018 adjusted EBITDA growth of 9.2%, and 17.1%, respectively; fourth quarter 2018 adjusted EBITDA margin of 52.5%, and 53.9% for the full-year 2018.
- Continued strong retention with full-year 2018 total Retention Rate at 94.1%.
- During fourth quarter 2018 and through
January 25, 2019 , a total of 5.1 million shares were repurchased at an average price of$147.71 per share for a total value of$754.5 million .
Three Months Ended | Year Ended | |||||||||||||||||||||||||||
Dec. 31, | Dec. 31, | Sep. 30, | YoY % | Dec. 31, | Dec. 31, | YoY % | ||||||||||||||||||||||
In thousands, except per share data | 2018 | 2017 | 2018 | Change | 2018 | 2017 | Change | |||||||||||||||||||||
Operating revenues | $ | 361,688 | $ | 334,779 | $ | 357,934 | 8.0 | % | $ | 1,433,984 | $ | 1,274,172 | 12.5 | % | ||||||||||||||
Operating income | $ | 169,818 | $ | 154,139 | $ | 176,403 | 10.2 | % | $ | 686,898 | $ | 579,770 | 18.5 | % | ||||||||||||||
Operating margin % | 47.0 | % | 46.0 | % | 49.3 | % | 47.9 | % | 45.5 | % | ||||||||||||||||||
Net income | $ | 152,132 | $ | 64,602 | $ | 123,832 | 135.5 | % | $ | 507,885 | $ | 303,972 | 67.1 | % | ||||||||||||||
Diluted EPS | $ | 1.70 | $ | 0.70 | $ | 1.36 | 142.9 | % | $ | 5.66 | $ | 3.31 | 71.0 | % | ||||||||||||||
Adjusted EPS | $ | 1.31 | $ | 1.15 | $ | 1.35 | 13.9 | % | $ | 5.35 | $ | 3.98 | 34.4 | % | ||||||||||||||
Adjusted EBITDA | $ | 189,762 | $ | 173,817 | $ | 195,537 | 9.2 | % | $ | 772,433 | $ | 659,757 | 17.1 | % | ||||||||||||||
Adjusted EBITDA margin % | 52.5 | % | 51.9 | % | 54.6 | % | 53.9 | % | 51.8 | % | ||||||||||||||||||
“During a year of volatility in international markets and a heightened level of uncertainty in the U.S. market over the last several months, the remarkable financial and operating successes achieved in the fourth quarter and the full year 2018 highlight the resiliency of our franchise, the mission-critical nature of our differentiated content and capabilities, as well as the strong secular tailwinds fueling our business. We have shown that we have the ability to take advantage of opportunities even in times of volatility and uncertainty in the markets,” commented
“While we are witnessing a rapid pace of change across the investment industry, coupled with a volatile market environment, the continued double-digit organic growth in our core subscription business together with the robust demand for equity ETFs linked to our indexes reflect our increasing ability to provide tools that help clients adapt for the future. As we head into 2019, we are well-positioned to continue to capitalize on the tremendous opportunities in front of us and drive increasingly attractive subscription growth,” added Mr. Fernandez.
Fourth Quarter and Full-Year 2018 Consolidated Results
Revenues: Operating revenues for fourth quarter 2018 increased
For full-year 2018, operating revenues increased
Run Rate: Total Run Rate at
Expenses: Total operating expenses for fourth quarter 2018 increased
For full-year 2018, total operating expenses increased
Headcount: As of
Amortization and Depreciation Expenses: Amortization and depreciation expenses of
For full-year 2018, amortization and depreciation expenses of
Other Expense (Income), Net: Other expense (income), net reflected an income amount of
For full-year 2018, other expense (income), net was
Tax Rate: Income tax expense was
Income tax expense was
The benefit of
The final cumulative charge recognized related to Tax Reform was
Net Income: Net income increased 135.5% 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
Net cash provided by operating activities was
Share Count and Capital Return: The weighted average diluted shares outstanding in fourth quarter 2018 declined 3.2% to 89.5 million, compared to 92.5 million in fourth quarter 2017. In fourth quarter 2018 and through
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 | |||||||||||||||||||||
Q4'18 | $ | 210,433 | $ | 149,930 | 71.2 | % | $ | 121,935 | $ | 36,679 | 30.1 | % | $ | 29,320 | $ | 3,153 | 10.8 | % | ||||||||||||
Q4'17 | $ | 193,774 | $ | 142,702 | 73.6 | % | $ | 117,510 | $ | 31,141 | 26.5 | % | $ | 23,495 | $ | (26 | ) | (0.1 | %) | |||||||||||
Q3'18 | $ | 210,194 | $ | 154,477 | 73.5 | % | $ | 119,898 | $ | 37,046 | 30.9 | % | $ | 27,842 | $ | 4,014 | 14.4 | % | ||||||||||||
YoY % change | 8.6 | % | 5.1 | % | 3.8 | % | 17.8 | % | 24.8 | % | nm | |||||||||||||||||||
FY 2018 | $ | 835,475 | $ | 607,853 | 72.8 | % | $ | 479,939 | $ | 143,645 | 29.9 | % | $ | 118,570 | $ | 20,935 | 17.7 | % | ||||||||||||
FY 2017 | $ | 718,959 | $ | 522,241 | 72.6 | % | $ | 458,269 | $ | 125,624 | 27.4 | % | $ | 96,944 | $ | 11,892 | 12.3 | % | ||||||||||||
YoY % change | 16.2 | % | 16.4 | % | 4.7 | % | 14.3 | % | 22.3 | % | 76.0 | % | ||||||||||||||||||
nm: not meaningful |
||||||||||||||||||||||||||||||
Index Segment:Operating revenues for fourth quarter 2018 increased
The increase in recurring subscriptions was driven by strong growth in core products, custom and specialized index products and factor and ESG index products.
The increase in asset-based fees was driven by growth in revenue from non-exchange traded funds (“ETFs”) passive funds linked to
The increase in non-recurring revenues was primarily driven by growth in license fees associated with use of our indexes for over-the-counter derivatives.
Operating revenues for full-year 2018 increased
Index Run Rate at
Analytics Segment:Operating revenues for fourth quarter 2018 increased
Operating revenues for full-year 2018 increased
Analytics Run Rate at
All Other Segment:Operating revenues for fourth quarter 2018 increased
Operating revenues for full-year 2018 increased
All Other Run Rate at
Full-Year 2019 Guidance
MSCI’s guidance for full-year 2019 is as follows:
- Total operating expenses are expected to be in the range of
$772 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 expected to be in the range of 11.5 to 14.5 percentage points.
1Excludes the estimated payroll tax impact from the vesting in the three months ending
2Includes the estimated income tax windfall benefit related to the vesting of the Multi-Year PSUs which is expected to reduce the 2019 effective tax rate by 8.5 to 9.5 percentage points.
New Revenue Standard Effective
Effective
Compared to the revenue recognition method used prior to 2018, the new revenue standard has resulted in more revenue being recognized up-front or earlier in the life of new contracts for certain products and services, including fees related to the licensing of desktop applications, implementation and set-up services and multi-year deals. The lost future period revenue from existing contracts as a result of the cumulative adjustment to retained earnings is expected to be largely offset by the acceleration of revenue from certain new contracts. As a result, the overall impact of adopting the new revenue standard is not expected to have a material impact on MSCI’s consolidated financial statements or the annual trend of revenue. It is possible that some increased quarterly revenue variability may exist by segment depending on the timing of the execution of new license contracts and renewals.
As a result of the adoption of the new revenue standard,
In addition, as a result of the adoption of the new revenue standard, the amount of accounts receivable and deferred revenue reported on the Company’s balance sheet as of
There are no changes to how we calculate our operating metrics.
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
For more than 45 years,
Our line of products and services includes indexes, analytical models, data, real estate benchmarks and ESG research.
For more information, visit us at 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
Notes Regarding the Use of Operating Metrics
Retention Rate for a 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 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 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 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 reporting purposes, 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.
This definition of Retention Rate was revised and was previously provided beginning with our earnings release, dated
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 elsewhere in our Public Filings. 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
“Operating revenues ex-FX and ex-divestitures” is defined as operating revenues excluding the impact of foreign currency exchange and the operating revenues attributable to divested businesses for the comparable prior year period.
“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.
“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.
“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 Tax Reform adjustments (except for amounts associated with active tax planning implemented as a result of Tax Reform) and, at times, certain other transactions or adjustments.
“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).
“Capex” is defined as capital expenditures plus capitalized software development costs.
“Free cash flow” is defined as net cash provided by operating activities, less
We believe operating revenues ex-FX and ex-divestitures are meaningful measures of the operating performance of
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 free cash flow is useful to investors because it relates the operating cash flow 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.
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.
Operating revenues ex-FX and ex-divestitures, 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.
Table 2: Condensed Consolidated Statements of Income (unaudited) |
||||||||||||||||||||||||||||
Three Months Ended | Year Ended | |||||||||||||||||||||||||||
Dec. 31, | Dec. 31, | Sep. 30, | YoY % | Dec. 31, | Dec. 31, | YoY % | ||||||||||||||||||||||
In thousands, except per share data | 2018 | 2017(2) | 2018 | Change | 2018 | 2017(2) | Change | |||||||||||||||||||||
Operating revenues | $ | 361,688 | $ | 334,779 | $ | 357,934 | 8.0 | % | $ | 1,433,984 | $ | 1,274,172 | 12.5 | % | ||||||||||||||
Operating expenses: | ||||||||||||||||||||||||||||
Cost of revenues | 73,757 | 69,247 | 70,906 | 6.5 | % | 287,335 | 273,681 | 5.0 | % | |||||||||||||||||||
Selling and marketing | 52,949 | 47,726 | 46,149 | 10.9 | % | 192,923 | 177,121 | 8.9 | % | |||||||||||||||||||
Research and development | 20,312 | 20,709 | 20,591 | (1.9 | %) | 81,411 | 75,849 | 7.3 | % | |||||||||||||||||||
General and administrative | 24,908 | 23,280 | 24,751 | 7.0 | % | 99,882 | 87,764 | 13.8 | % | |||||||||||||||||||
Amortization of intangible assets | 11,633 | 11,560 | 11,681 | 0.6 | % | 54,189 | 44,547 | 21.6 | % | |||||||||||||||||||
Depreciation and amortization of property, | ||||||||||||||||||||||||||||
equipment and leasehold improvements | 8,311 | 8,118 | 7,453 | 2.4 | % | 31,346 | 35,440 | (11.6 | %) | |||||||||||||||||||
Total operating expenses(1) | 191,870 | 180,640 | 181,531 | 6.2 | % | 747,086 | 694,402 | 7.6 | % | |||||||||||||||||||
Operating income | 169,818 | 154,139 | 176,403 | 10.2 | % | 686,898 | 579,770 | 18.5 | % | |||||||||||||||||||
Interest income | (6,096 | ) | (2,237 | ) | (6,522 | ) | 172.5 | % | (19,669 | ) | (6,314 | ) | 211.5 | % | ||||||||||||||
Interest expense | 35,891 | 29,027 | 35,902 | 23.6 | % | 133,114 | 116,098 | 14.7 | % | |||||||||||||||||||
Other expense (income) | (47,266 | ) | 389 | 177 | nm | (56,443 | ) | 3,087 | nm | |||||||||||||||||||
Other expenses (income), net | (17,471 | ) | 27,179 | 29,557 | (164.3 | %) | 57,002 | 112,871 | (49.5 | %) | ||||||||||||||||||
Income before provision for income taxes | 187,289 | 126,960 | 146,846 | 47.5 | % | 629,896 | 466,899 | 34.9 | % | |||||||||||||||||||
Provision for income taxes | 35,157 | 62,358 | 23,014 | (43.6 | %) | 122,011 | 162,927 | (25.1 | %) | |||||||||||||||||||
Net income | 152,132 | 64,602 | 123,832 | 135.5 | % | 507,885 | 303,972 | 67.1 | % | |||||||||||||||||||
Earnings per basic common share | $ | 1.75 | $ | 0.72 | $ | 1.39 | 143.1 | % | $ | 5.83 | $ | 3.36 | 73.5 | % | ||||||||||||||
Earnings per diluted common share | $ | 1.70 | $ | 0.70 | $ | 1.36 | 142.9 | % | $ | 5.66 | $ | 3.31 | 71.0 | % | ||||||||||||||
Weighted average shares outstanding used | ||||||||||||||||||||||||||||
in computing earnings per share: | ||||||||||||||||||||||||||||
Basic | 86,968 | 90,130 | 88,796 | (3.5 | %) | 87,179 | 90,336 | (3.5 | %) | |||||||||||||||||||
Diluted | 89,495 | 92,467 | 91,372 | (3.2 | %) | 89,701 | 91,914 | (2.4 | %) |
(1) Includes stock-based compensation expense of
(2) As a result of the adoption of recent accounting guidance, the Company has restated its Condensed Consolidated Statements of Income by reclassifying
nm: not meaningful
Table 3: Selected Balance Sheet Items (unaudited) |
||||||
As of | ||||||
Dec. 31, | Dec. 31, | Sep. 30, | ||||
In thousands | 2018 | 2017 | 2018 | |||
Cash and cash equivalents | $904,176 | $889,502 | $1,398,398 | |||
Accounts receivable, net of allowances(1) | $473,433 | $327,597 | $378,705 | |||
Deferred revenue(2) | $537,977 | $374,365 | $441,884 | |||
Long-term debt(3) | $2,575,502 | $2,078,093 | $2,574,616 |
(1) Accounts receivable, net of allowances would have been
(2) Deferred revenue would have been
(3) Consists of gross long-term debt, net of deferred financing fees. Gross long-term debt at
Table 4: Selected Cash Flow Items (unaudited) |
||||||||||||||||||||||||||||
Three Months Ended | Year Ended | |||||||||||||||||||||||||||
Dec. 31, | Dec. 31, | Sep. 30, | YoY % | Dec. 31, | Dec. 31, | YoY % | ||||||||||||||||||||||
In thousands | 2018 | 2017 | 2018 | Change | 2018 | 2017 | Change | |||||||||||||||||||||
Net cash provided by operating activities | $ | 173,175 | $ | 143,153 | $ | 143,825 | 21.0 | % | $ | 612,762 | $ | 404,158 | 51.6 | % | ||||||||||||||
Net cash provided by (used in) investing activities | 40,038 | (20,600 | ) | (13,097 | ) | (294.4 | %) | 34,874 | (48,046 | ) | (172.6 | %) | ||||||||||||||||
Net cash used in financing activities | (707,083 | ) | (33,668 | ) | (97,758 | ) | nm | (626,483 | ) | (267,543 | ) | 134.2 | % | |||||||||||||||
Effect of exchange rate changes | (352 | ) | 1,602 | (2,168 | ) | (122.0 | %) | (6,479 | ) | 9,099 | (171.2 | %) | ||||||||||||||||
Net increase (decrease) in cash and cash | ||||||||||||||||||||||||||||
equivalents | $ | (494,222 | ) | $ | 90,487 | $ | 30,802 | (646.2 | %) | $ | 14,674 | $ | 97,668 | (85.0 | %) | |||||||||||||
nm: not meaningful |
||||||||||||||||||||||||||||
Table 5: Operating Results by Segment and Revenue Type (unaudited) |
||||||||||||||||||||||||||||
Index | Three Months Ended | Year Ended | ||||||||||||||||||||||||||
Dec. 31, | Dec. 31, | Sep. 30, | YoY % | Dec. 31, | Dec. 31, | YoY % | ||||||||||||||||||||||
In thousands | 2018 | 2017 | 2018 | Change | 2018 | 2017 | Change | |||||||||||||||||||||
Operating revenues: | ||||||||||||||||||||||||||||
Recurring subscriptions | $ | 123,496 | $ | 111,503 | $ | 121,285 | 10.8 | % | $ | 477,612 | $ | 427,289 | 11.8 | % | ||||||||||||||
Asset-based fees | 81,439 | 78,493 | 82,007 | 3.8 | % | 336,565 | 276,092 | 21.9 | % | |||||||||||||||||||
Non-recurring | 5,498 | 3,778 | 6,902 | 45.5 | % | 21,298 | 15,578 | 36.7 | % | |||||||||||||||||||
Total operating revenues | 210,433 | 193,774 | 210,194 | 8.6 | % | 835,475 | 718,959 | 16.2 | % | |||||||||||||||||||
Adjusted EBITDA expenses | 60,503 | 51,072 | 55,717 | 18.5 | % | 227,622 | 196,718 | 15.7 | % | |||||||||||||||||||
Adjusted EBITDA | $ | 149,930 | $ | 142,702 | $ | 154,477 | 5.1 | % | $ | 607,853 | $ | 522,241 | 16.4 | % | ||||||||||||||
Adjusted EBITDA margin % | 71.2 | % | 73.6 | % | 73.5 | % | 72.8 | % | 72.6 | % | ||||||||||||||||||
Analytics | Three Months Ended | Year Ended | ||||||||||||||||||||||||||
Dec. 31, | Dec. 31, | Sep. 30, | YoY % | Dec. 31, | Dec. 31, | YoY % | ||||||||||||||||||||||
In thousands | 2018 | 2017 | 2018 | Change | 2018 | 2017 | Change | |||||||||||||||||||||
Operating revenues: | ||||||||||||||||||||||||||||
Recurring subscriptions | $ | 119,705 | $ | 115,349 | $ | 118,857 | 3.8 | % | $ | 474,334 | $ | 452,253 | 4.9 | % | ||||||||||||||
Non-recurring | 2,230 | 2,161 | 1,041 | 3.2 | % | 5,605 | 6,016 | (6.8 | %) | |||||||||||||||||||
Total operating revenues | 121,935 | 117,510 | 119,898 | 3.8 | % | 479,939 | 458,269 | 4.7 | % | |||||||||||||||||||
Adjusted EBITDA expenses | 85,256 | 86,369 | 82,852 | (1.3 | %) | 336,294 | 332,645 | 1.1 | % | |||||||||||||||||||
Adjusted EBITDA | $ | 36,679 | $ | 31,141 | $ | 37,046 | 17.8 | % | $ | 143,645 | $ | 125,624 | 14.3 | % | ||||||||||||||
Adjusted EBITDA margin % | 30.1 | % | 26.5 | % | 30.9 | % | 29.9 | % | 27.4 | % | ||||||||||||||||||
All Other | Three Months Ended | Year Ended | ||||||||||||||||||||||||||
Dec. 31, | Dec. 31, | Sep. 30, | YoY % | Dec. 31, | Dec. 31, | YoY % | ||||||||||||||||||||||
In thousands | 2018 | 2017 | 2018 | Change | 2018 | 2017 | Change | |||||||||||||||||||||
Operating revenues: | ||||||||||||||||||||||||||||
Recurring subscriptions | $ | 28,405 | $ | 22,225 | $ | 27,234 | 27.8 | % | $ | 114,590 | $ | 93,481 | 22.6 | % | ||||||||||||||
Non-recurring | 915 | 1,270 | 608 | (28.0 | %) | 3,980 | 3,463 | 14.9 | % | |||||||||||||||||||
Total operating revenues | 29,320 | 23,495 | 27,842 | 24.8 | % | 118,570 | 96,944 | 22.3 | % | |||||||||||||||||||
Adjusted EBITDA expenses | 26,167 | 23,521 | 23,828 | 11.2 | % | 97,635 | 85,052 | 14.8 | % | |||||||||||||||||||
Adjusted EBITDA | $ | 3,153 | $ | (26 | ) | $ | 4,014 | nm | $ | 20,935 | $ | 11,892 | 76.0 | % | ||||||||||||||
Adjusted EBITDA margin % | 10.8 | % | (0.1 | %) | 14.4 | % | 17.7 | % | 12.3 | % | ||||||||||||||||||
Consolidated | Three Months Ended | Year Ended | ||||||||||||||||||||||||||
Dec. 31, | Dec. 31, | Sep. 30, | YoY % | Dec. 31, | Dec. 31, | YoY % | ||||||||||||||||||||||
In thousands | 2018 | 2017 | 2018 | Change | 2018 | 2017 | Change | |||||||||||||||||||||
Operating revenues: | ||||||||||||||||||||||||||||
Recurring subscriptions | $ | 271,606 | $ | 249,077 | $ | 267,376 | 9.0 | % | $ | 1,066,536 | $ | 973,023 | 9.6 | % | ||||||||||||||
Asset-based fees | 81,439 | 78,493 | 82,007 | 3.8 | % | 336,565 | 276,092 | 21.9 | % | |||||||||||||||||||
Non-recurring | 8,643 | 7,209 | 8,551 | 19.9 | % | 30,883 | 25,057 | 23.3 | % | |||||||||||||||||||
Operating revenues total | 361,688 | 334,779 | 357,934 | 8.0 | % | 1,433,984 | 1,274,172 | 12.5 | % | |||||||||||||||||||
Adjusted EBITDA expenses | 171,926 | 160,962 | 162,397 | 6.8 | % | 661,551 | 614,415 | 7.7 | % | |||||||||||||||||||
Adjusted EBITDA | $ | 189,762 | $ | 173,817 | $ | 195,537 | 9.2 | % | $ | 772,433 | $ | 659,757 | 17.1 | % | ||||||||||||||
Adjusted EBITDA margin % | 52.5 | % | 51.9 | % | 54.6 | % | 53.9 | % | 51.8 | % | ||||||||||||||||||
Operating margin % | 47.0 | % | 46.0 | % | 49.3 | % | 47.9 | % | 45.5 | % | ||||||||||||||||||
nm: not meaningful |
||||||||||||||||||||||||||||
Table 6: Sales and Retention Rate by Segment (unaudited) |
||||||||||||||||||||||||||||
Three Months Ended | Year Ended | |||||||||||||||||||||||||||
Dec. 31, | Sep. 30, | June 30, | Mar. 31, | Dec. 31, | Dec. 31, | Dec. 31, | ||||||||||||||||||||||
In thousands | 2018 | 2018 | 2018 | 2018 | 2017 | 2018 | 2017 | |||||||||||||||||||||
Index | ||||||||||||||||||||||||||||
New recurring subscription sales | $ | 21,013 | $ | 15,546 | $ | 20,906 | $ | 15,195 | $ | 17,980 | $ | 72,660 | $ | 61,308 | ||||||||||||||
Subscription cancellations | (7,699 | ) | (4,428 | ) | (4,577 | ) | (4,115 | ) | (6,180 | ) | (20,819 | ) | (16,995 | ) | ||||||||||||||
Net new recurring subscription sales | $ | 13,314 | $ | 11,118 | $ | 16,329 | $ | 11,080 | $ | 11,800 | $ | 51,841 | $ | 44,313 | ||||||||||||||
Non-recurring sales | $ | 6,845 | $ | 7,097 | $ | 5,328 | $ | 3,459 | $ | 3,677 | $ | 22,729 | $ | 16,310 | ||||||||||||||
Total gross sales(1) | $ | 27,858 | $ | 22,643 | $ | 26,234 | $ | 18,654 | $ | 21,657 | $ | 95,389 | $ | 77,618 | ||||||||||||||
Total Index net sales | $ | 20,159 | $ | 18,215 | $ | 21,657 | $ | 14,539 | $ | 15,477 | $ | 74,570 | $ | 60,623 | ||||||||||||||
Index Retention Rate(2) | 93.2 | % | 96.1 | % | 95.9 | % | 96.4 | % | 93.9 | % | 95.4 | % | 95.8 | % | ||||||||||||||
Analytics | ||||||||||||||||||||||||||||
New recurring subscription sales | $ | 19,438 | $ | 16,797 | $ | 17,395 | $ | 11,356 | $ | 25,217 | $ | 64,986 | $ | 64,177 | ||||||||||||||
Subscription cancellations | (8,524 | ) | (7,117 | ) | (9,452 | ) | (8,578 | ) | (11,679 | ) | (33,671 | ) | (33,674 | ) | ||||||||||||||
Net new recurring subscription sales | $ | 10,914 | $ | 9,680 | $ | 7,943 | $ | 2,778 | $ | 13,538 | $ | 31,315 | $ | 30,503 | ||||||||||||||
Non-recurring sales | $ | 3,249 | $ | 3,189 | $ | 2,425 | $ | 1,346 | $ | 3,742 | $ | 10,209 | $ | 10,306 | ||||||||||||||
Total gross sales(1) | $ | 22,687 | $ | 19,986 | $ | 19,820 | $ | 12,702 | $ | 28,959 | $ | 75,195 | $ | 74,483 | ||||||||||||||
Total Analytics net sales | $ | 14,163 | $ | 12,869 | $ | 10,368 | $ | 4,124 | $ | 17,280 | $ | 41,524 | $ | 40,809 | ||||||||||||||
Analytics Retention Rate(2) | 92.7 | % | 94.1 | % | 92.1 | % | 93.0 | % | 89.7 | % | 93.0 | % | 92.5 | % | ||||||||||||||
All Other | ||||||||||||||||||||||||||||
New recurring subscription sales | $ | 7,596 | $ | 6,459 | $ | 6,678 | $ | 5,468 | $ | 8,391 | $ | 26,201 | $ | 22,544 | ||||||||||||||
Subscription cancellations | (1,959 | ) | (1,547 | ) | (1,384 | ) | (1,531 | ) | (1,954 | ) | (6,421 | ) | (7,717 | ) | ||||||||||||||
Net new recurring subscription sales | $ | 5,637 | $ | 4,912 | $ | 5,294 | $ | 3,937 | $ | 6,437 | $ | 19,780 | $ | 14,827 | ||||||||||||||
Non-recurring sales | $ | 1,194 | $ | 641 | $ | 909 | $ | 694 | $ | 1,479 | $ | 3,438 | $ | 3,875 | ||||||||||||||
Total gross sales(1) | $ | 8,790 | $ | 7,100 | $ | 7,587 | $ | 6,162 | $ | 9,870 | $ | 29,639 | $ | 26,419 | ||||||||||||||
Total All Other net sales | $ | 6,831 | $ | 5,553 | $ | 6,203 | $ | 4,631 | $ | 7,916 | $ | 23,218 | $ | 18,702 | ||||||||||||||
All Other Estate Retention Rate(2) | 92.8 | % | 94.3 | % | 94.9 | % | 94.4 | % | 91.1 | % | 94.1 | % | 91.2 | % | ||||||||||||||
Consolidated | ||||||||||||||||||||||||||||
New recurring subscription sales | $ | 48,047 | $ | 38,802 | $ | 44,979 | $ | 32,019 | $ | 51,588 | $ | 163,847 | $ | 148,029 | ||||||||||||||
Subscription cancellations | (18,182 | ) | (13,092 | ) | (15,413 | ) | (14,224 | ) | (19,813 | ) | (60,911 | ) | (58,386 | ) | ||||||||||||||
Net new recurring subscription sales | $ | 29,865 | $ | 25,710 | $ | 29,566 | $ | 17,795 | $ | 31,775 | $ | 102,936 | $ | 89,643 | ||||||||||||||
Non-recurring sales | $ | 11,288 | $ | 10,927 | $ | 8,662 | $ | 5,499 | $ | 8,898 | $ | 36,376 | $ | 30,491 | ||||||||||||||
Total gross sales(1) | $ | 59,335 | $ | 49,729 | $ | 53,641 | $ | 37,518 | $ | 60,486 | $ | 200,223 | $ | 178,520 | ||||||||||||||
Total net sales | $ | 41,153 | $ | 36,637 | $ | 38,228 | $ | 23,294 | $ | 40,673 | $ | 139,312 | $ | 120,134 | ||||||||||||||
Total Retention Rate(2) | 92.9 | % | 95.0 | % | 94.1 | % | 94.6 | % | 91.6 | % | 94.1 | % | 93.8 | % |
(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 | Year Ended | ||||||||||||||||||||||||||
Dec. 31, | Sep. 30, | June 30, | Mar. 31, | Dec. 31, | Dec. 31, | Dec. 31, | |||||||||||||||||||||
In billions | 2018 | 2018 | 2018 | 2018 | 2017 | 2018 | 2017 | ||||||||||||||||||||
Beginning Period AUM in ETFs linked to | |||||||||||||||||||||||||||
MSCI Indexes | $ | 765.5 | $ | 744.7 | $ | 764.9 | $ | 744.3 | $ | 674.3 | $ | 744.3 | $ | 481.4 | |||||||||||||
Market Appreciation/(Depreciation) | (94.7 | ) | 15.6 | (19.4 | ) | (11.7 | ) | 32.0 | (110.2 | ) | 123.6 | ||||||||||||||||
Cash Inflows | 24.8 | 5.2 | (0.8 | ) | 32.3 | 38.0 | 61.5 | 139.3 | |||||||||||||||||||
Period-End AUM in ETFs linked to | |||||||||||||||||||||||||||
MSCI Indexes | $ | 695.6 | $ | 765.5 | $ | 744.7 | $ | 764.9 | $ | 744.3 | $ | 695.6 | $ | 744.3 | |||||||||||||
Period Average AUM in ETFs linked to | |||||||||||||||||||||||||||
MSCI Indexes | $ | 717.1 | $ | 755.8 | $ | 776.5 | $ | 779.5 | $ | 712.3 | $ | 757.2 | $ | 621.4 | |||||||||||||
Avg. Basis Point Fee(3) | 2.92 | 2.90 | 2.96 | 3.02 | 3.04 | 2.92 | 3.04 |
Source:
(1) ETF assets under management calculation methodology is ETF net asset value multiplied by shares outstanding.
(2) The AUM in ETFs numbers also include 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
AUM: assets under management.
Table 8: Run Rate by Segment and Type (unaudited)(1) |
||||||||||||||||
As of | ||||||||||||||||
Dec. 31, | Dec. 31, | Sep. 30, | YoY % | |||||||||||||
In thousands | 2018 | 2017 | 2018 | Change | ||||||||||||
Index | ||||||||||||||||
Recurring subscriptions | $ | 502,665 | $ | 451,048 | $ | 489,515 | 11.4 | % | ||||||||
Asset-based fees | 311,908 | 316,812 | 326,148 | (1.5 | %) | |||||||||||
Index Run Rate | 814,573 | 767,860 | 815,663 | 6.1 | % | |||||||||||
Analytics Run Rate | 491,861 | 489,451 | 499,219 | 0.5 | % | |||||||||||
All Other Run Rate | 124,886 | 108,413 | 120,419 | 15.2 | % | |||||||||||
Total Run Rate | $ | 1,431,320 | $ | 1,365,724 | $ | 1,435,301 | 4.8 | % | ||||||||
Total recurring subscriptions | $ | 1,119,412 | $ | 1,048,912 | $ | 1,109,153 | 6.7 | % | ||||||||
Total asset-based fees | 311,908 | 316,812 | 326,148 | (1.5 | %) | |||||||||||
Total Run Rate | $ | 1,431,320 | $ | 1,365,724 | $ | 1,435,301 | 4.8 | % |
(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 | Year Ended | ||||||||||||||||||
Dec. 31, | Dec. 31, | Sep. 30, | Dec. 31, | Dec. 31, | |||||||||||||||
In thousands | 2018 | 2017(1) | 2018 | 2018 | 2017(1) | ||||||||||||||
Index adjusted EBITDA | $ | 149,930 | $ | 142,702 | $ | 154,477 | $ | 607,853 | $ | 522,241 | |||||||||
Analytics adjusted EBITDA | 36,679 | 31,141 | 37,046 | 143,645 | 125,624 | ||||||||||||||
All Other adjusted EBITDA | 3,153 | (26 | ) | 4,014 | 20,935 | 11,892 | |||||||||||||
Consolidated adjusted EBITDA | 189,762 | 173,817 | 195,537 | 772,433 | 659,757 | ||||||||||||||
Amortization of intangible assets | 11,633 | 11,560 | 11,681 | 54,189 | 44,547 | ||||||||||||||
Depreciation and amortization of property, | |||||||||||||||||||
equipment and leasehold improvements | 8,311 | 8,118 | 7,453 | 31,346 | 35,440 | ||||||||||||||
Operating income | 169,818 | 154,139 | 176,403 | 686,898 | 579,770 | ||||||||||||||
Other expense (income), net | (17,471 | ) | 27,179 | 29,557 | 57,002 | 112,871 | |||||||||||||
Provision for income taxes | 35,157 | 62,358 | 23,014 | 122,011 | 162,927 | ||||||||||||||
Net income | $ | 152,132 | $ | 64,602 | $ | 123,832 | $ | 507,885 | $ | 303,972 |
(1) As a result of the adoption of recent accounting guidance, the Company has restated its adjusted EBITDA by excluding
Table 10: Reconciliation of Net Income and Diluted EPS to Adjusted Net Income and Adjusted EPS (unaudited) |
||||||||||||||||||||
Three Months Ended | Year Ended | |||||||||||||||||||
Dec. 31, | Dec. 31, | Sep. 30, | Dec. 31, | Dec. 31, | ||||||||||||||||
In thousands, except per share data | 2018 | 2017 | 2018 | 2018 | 2017 | |||||||||||||||
Net income | $ | 152,132 | $ | 64,602 | $ | 123,832 | $ | 507,885 | $ | 303,972 | ||||||||||
Plus: Amortization of acquired intangible assets | 8,746 | 9,238 | 8,999 | 43,981 | 39,157 | |||||||||||||||
Less: Gain on sale of Alacra (not tax-effected) |
— | — | — | — | (771 | ) | ||||||||||||||
Less: Gain on sale of FEA (not tax-effected) |
— | — | (10 | ) | (10,646 | ) | — | |||||||||||||
Less: Gain on sale of InvestorForce | (46,595 | ) | — | — | (46,595 | ) | — | |||||||||||||
Less: Valuation allowance released related to | ||||||||||||||||||||
InvestorForce disposition | — | — | (7,758 | ) | (7,758 | ) | — | |||||||||||||
Less: Tax Reform adjustments | (6,671 | ) | 34,500 | — | (8,272 | ) | 34,500 | |||||||||||||
Less: Income tax effect | 9,390 | (1,922 | ) | (1,884 | ) | 1,678 | (10,772 | ) | ||||||||||||
Adjusted net income | $ | 117,002 | $ | 106,418 | $ | 123,179 | $ | 480,273 | $ | 366,086 | ||||||||||
Diluted EPS | $ | 1.70 | $ | 0.70 | $ | 1.36 | $ | 5.66 | $ | 3.31 | ||||||||||
Plus: Amortization of acquired intangible assets | 0.10 | 0.10 | 0.10 | 0.49 | 0.43 | |||||||||||||||
Less: Gain on sale of Alacra (not tax-effected) |
- | - | - | - | (0.01 | ) | ||||||||||||||
Less: Gain on sale of FEA (not tax-effected) |
- | - | - | (0.12 | ) | - | ||||||||||||||
Less: Gain on sale of InvestorForce | (0.52 | ) | - | - | (0.52 | ) | - | |||||||||||||
Less: Valuation allowance released related to | ||||||||||||||||||||
InvestorForce disposition | - | - | (0.08 | ) | (0.09 | ) | - | |||||||||||||
Plus: Tax Reform adjustments | (0.07 | ) | 0.37 | - | (0.09 | ) | 0.38 | |||||||||||||
Less: Income tax effect | 0.10 | (0.02 | ) | (0.03 | ) | 0.02 | (0.13 | ) | ||||||||||||
Adjusted EPS | $ | 1.31 | $ | 1.15 | $ | 1.35 | $ | 5.35 | $ | 3.98 | ||||||||||
Table 11: Reconciliation of Adjusted EBITDA Expenses to Operating Expenses (unaudited) |
||||||||||||||||||||||
Three Months Ended | Year Ended | Full-Year | ||||||||||||||||||||
Dec. 31, | Dec. 31, | Sep. 30, | Dec. 31, | Dec. 31, | 2019 | |||||||||||||||||
In thousands | 2018 | 2017(1) | 2018 | 2018 | 2017(1) | Outlook(2) | ||||||||||||||||
Index adjusted EBITDA expenses | $ | 60,503 | $ | 51,072 | $ | 55,717 | $ | 227,622 | $ | 196,718 | ||||||||||||
Analytics adjusted EBITDA expenses | 85,256 | 86,369 | 82,852 | 336,294 | 332,645 | |||||||||||||||||
All Other adjusted EBITDA expenses | 26,167 | 23,521 | 23,828 | 97,635 | 85,052 | |||||||||||||||||
Consolidated adjusted EBITDA expenses | 171,926 | 160,962 | 162,397 | 661,551 | 614,415 | $685,000 - $705,000 | ||||||||||||||||
Payroll taxes from vesting of Multi-Year PSUs | - | - | - | - | - | 12,000 - 15,000 | ||||||||||||||||
Amortization of intangible assets | 11,633 | 11,560 | 11,681 | 54,189 | 44,547 | |||||||||||||||||
Depreciation and amortization of property, | 75,000 - 80,000 | |||||||||||||||||||||
equipment and leasehold improvements | 8,311 | 8,118 | 7,453 | 31,346 | 35,440 | |||||||||||||||||
Total operating expenses | $ | 191,870 | $ | 180,640 | $ | 181,531 | $ | 747,086 | $ | 694,402 | $772,000 - $800,000 |
(1) As a result of the adoption of recent accounting guidance, the Company has restated its adjusted EBITDA by excluding
(2) 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 | Year Ended | Full-Year | ||||||||||||||||||||
Dec. 31, | Dec. 31, | Sep. 30, | Dec. 31, | Dec. 31, | 2019 | |||||||||||||||||
In thousands | 2018 | 2017 | 2018 | 2018 | 2017 | Outlook(1) | ||||||||||||||||
Net cash provided by operating activities | $ | 173,175 | $ | 143,153 | $ | 143,825 | $ | 612,762 | $ | 404,158 | $600,000 - $630,000 | |||||||||||
Capital expenditures | (17,188 | ) | (15,736 | ) | (8,590 | ) | (30,257 | ) | (33,177 | ) | ||||||||||||
Capitalized software development costs | (5,589 | ) | (4,863 | ) | (4,517 | ) | (18,704 | ) | (15,640 | ) | ||||||||||||
Capex | (22,777 | ) | (20,599 | ) | (13,107 | ) | (48,961 | ) | (48,817 | ) | (55,000 - 45,000) | |||||||||||
Free cash flow | $ | 150,398 | $ | 122,554 | $ | 130,718 | $ | 563,801 | $ | 355,341 | $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 | Year Ended | |||||||||||
Dec. 31, | Dec. 31, | Sep. 30, | Dec. 31, | Dec. 31, | ||||||||
2018 | 2017 | 2018 | 2018 | 2017 | ||||||||
Effective tax rate | 18.77% | 49.12% | 15.67% | 19.37% | 34.90% | |||||||
Tax Reform impact on effective tax rate | 3.56% | (27.18%) | —% | 1.31% | (7.39%) | |||||||
Adjusted tax rate | 22.33% | 21.94% | 15.67% | 20.68% | 27.51% | |||||||
View source version on businesswire.com: https://www.businesswire.com/news/home/20190131005433/en/
Source:
MSCI Inc.
Investors
Andrew Wiechmann andrew.wiechmann@msci.com + 1 212 804 3986
Media
Samuel Wang samuel.wang@msci.com + 1 212 804 5244