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): January 9, 2009
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 January
9, 2009, MSCI Inc. (the “Registrant”) released financial information with
respect to its fiscal year and fourth quarter ended
November 30, 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.
Item 9.01 Financial Statements and
Exhibits.
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(d)
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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 January 9, 2009 containing financial information for the fiscal year
and fourth quarter ended November 30,
2008.
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SIGNATURE
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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Date: January 9,
2009
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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
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www.mscibarra.com
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MSCI
Inc. Reports Record Revenues for Fiscal Year 2008
New York – January 9, 2009 –
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 the fourth quarter
and full year ended November 30, 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 5.7% to $107.4 million in fourth quarter 2008 and 16.5%
to $431.0 million in fiscal year
2008.
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·
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Adjusted
EBITDA decreased 1.4% to $48.6 million in fourth quarter 2008 for an
adjusted EBITDA margin of 45.2% and increased 22.4% to $194.8 million for
an adjusted EBITDA margin of 45.2% in fiscal year 2008. See Tables 9 and
14 each titled "Reconciliation of Adjusted EBITDA to Net
Income."
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·
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Net income
decreased 29.7% to $12.8 million ($0.13 per diluted share) in fourth
quarter 2008 for a net income margin of 11.9% and decreased 15.8% to $68.3
million in fiscal year 2008 for a net income margin of
15.8%. Please see “Factors Impacting Comparability of Our
Financial Results” on page 2.
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Henry A. Fernandez,
Chairman and CEO, said “We had a very successful first year as a public company.
We delivered record revenues and adjusted EBITDA in fiscal 2008 with growth of
16.5% and 22.4%, respectively. In the fourth quarter, our rate of revenue
growth slowed to 5.7% compared to fourth quarter 2007 reflecting the impact of
the challenging financial markets across several of our product categories, most
notably on equity index asset based fees. Despite the difficult operating
environment and higher expenses related to the separation from Morgan Stanley,
we were able to generate a 45.2% adjusted EBITDA margin.”
“We
experienced slower growth in new subscriptions and lower retention rates in the
fourth quarter reflecting the adverse impact on our clients from the turmoil in
the financial markets. Consequently, our subscription run rate at the end of the
fourth quarter experienced minimal growth and our asset based fees run rate
declined 27.0% compared to the end of the third quarter. The impact of this
weakness will be reflected in our financial results during 2009. While
volatility in the financial markets persists, we remain encouraged by the level
of interest in our products from clients and our ability to capitalize on
opportunities in a turbulent market,” added Mr. Fernandez.
Selected
Financial Information
Table
1a
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MSCI
Inc.
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Selected
Income Statement Items
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|||||||
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Three Months
Ended
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Fiscal Year
Ended
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November
30,
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November
30,
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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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Chg
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2008
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2007
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Chg
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Operating
revenues
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$107,416
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$101,658
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5.7%
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$430,961
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$369,886
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16.5%
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Operating
expenses
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$77,214
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$60,791
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27.0%
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$295,171
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$239,927
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23.0%
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Net
income
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$12,825
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$18,239
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(29.7%)
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$68,268
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$81,111
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(15.8%)
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%
Margin
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11.9%
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17.9%
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15.8%
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21.9%
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Diluted
EPS
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$0.13
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$0.21
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(38.1%)
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$0.67
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$0.96
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(30.2%)
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Operating
expenses excluding founders grant 1
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$68,647
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$59,972
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14.5%
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$269,586
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$239,108
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12.7%
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Adjusted
EBITDA 2
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$48,590
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$49,278
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(1.4%)
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$194,845
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$159,128
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22.4%
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%
Margin
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45.2%
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48.5%
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45.2%
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43.0%
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1
Excludes certain equity-based compensation (founders grant)
expenses of $8.6 million and $25.6 million for the three months and fiscal
year ended November 30, 2008 and $0.8 million for the three months and
fiscal year ended November 30, 2007.
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2
See Tables 9 and 14 each titled "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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Table 1b
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MSCI
Inc.
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Selected
Balance Sheet Items
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As
of
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November
30,
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August
31,
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Amounts in
thousands
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2008
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2007
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2008
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Cash and cash
deposited with related parties
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$268,077
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$171,443
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$246,452
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Accounts
receivable
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$85,723
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$77,748
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$85,108
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Total
debt
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$401,795
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$425,000
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$407,317
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Factors
Impacting Comparability of Our Financial Results
Net
income and earnings per share (EPS) for fourth quarter and fiscal year 2008 are
not comparable with fourth quarter and fiscal year 2007 primarily because of
founders grant expense, changes in our capital structure and our initial public
offering (IPO). See disclosures below for additional details.
Summary
of Results for Fiscal Fourth Quarter 2008
Operating
Revenues
Total operating
revenues for the three months ended November 30, 2008 (fourth quarter 2008)
increased 5.7% to $107.4 million compared to $101.7 million for the three months
ended November 30, 2007 (fourth quarter 2007). The growth was driven by an
increase in our revenues related to equity index data subscriptions and
multi-asset class portfolio analytics, which were up 22.0% and 21.9%,
respectively, in fourth quarter 2008. Within our subscription product
categories, we experienced growth in all geographic regions. The impact on
revenues from the change in foreign exchange rates in fourth quarter 2008
compared to fourth quarter 2007 was insignificant.
Our Aggregate
Retention Rate (as defined in Table 2) declined to 80.6% for fourth quarter 2008
from 89.9% for fourth quarter 2007, partially due to increased product swaps
between Equity Portfolio Analytics and Multi-Asset Class Portfolio Analytics.
Our Core Retention Rate (as defined in Table 2) was 85.3% for fourth quarter
2008 compared to 90.6% for fourth quarter 2007.
At
November 30, 2008, we had a total of 3,091 clients, excluding clients that pay
only asset based fees, as compared to 2,926 at November 30, 2007 and 3,097 at
August 31, 2008. The sequential decline in the client count largely reflects a
decline in the number of hedge fund clients offset, in part, by an increase in
the number of asset manager and asset owner clients.
Equity
Indices: Revenues related to Equity Indices increased 5.3% to
$59.0 million in fourth quarter 2008 compared to the same period in 2007.
Revenues from equity index data subscriptions were up 22.0% to $45.5 million in
fourth quarter 2008 reflecting growth in subscriptions across all of our MSCI
Global Investable Market Indices products, including developed market, emerging
market and small cap indices and user fees.
Revenues
attributable to equity index asset based fees decreased 27.9% to $13.5 million
in fourth quarter 2008 compared to fourth quarter 2007 reflecting a decrease in
our ETF asset based fee revenues. The average value of assets in ETFs linked to
MSCI equity indices was $134.9 billion for fourth quarter 2008 compared to
$176.9 billion for fourth quarter 2007. As of November 30, 2008, the value of
assets in ETFs linked to MSCI equity indices was $119.0 billion, representing a
decrease of $72.7 billion, or 37.9%, from $191.7 billion as of November 30,
2007. The $72.7 billion year-over-year decline in value of assets in ETFs linked
to MSCI equity indices was attributable to $27.0 billion of net asset inflows,
offset by $99.7 billion of net asset depreciation.
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Compared to third
quarter 2008, equity index asset based fee revenues decreased 26.4%, largely
reflecting declines in asset based revenues for ETFs and asset based fees for
institutional indexed funds. The average value of assets in ETFs linked to MSCI
equity indices declined 24.4% to $134.9 billion from $178.3 billion in the third
quarter. The decline in the value of assets in ETFs linked to MSCI equity
indices at the end of the fourth quarter compared to the third quarter was
28.4%, or $47.3 billion. The $47.3 billion decrease from August 31, 2008 was
attributable to asset inflows of $15.9 billion and asset depreciation of $63.2
billion. The $15.9 billion of asset inflows was comprised of $14.5 billion of
asset inflows into established ETFs supplemented by $1.4 billion of asset
inflows into ETFs launched over the last twelve months.
The three MSCI
indices with the largest amount of ETF assets linked to them as of November 30,
2008 were the MSCI EAFE, Emerging Markets and US Broad Market Indices. The
assets linked to these indices were $29.6 billion, $22.6 billion and $8.2
billion, respectively.
Equity Portfolio
Analytics: Revenues related to Equity Portfolio Analytics
products increased 2.8% to $32.5 million in fourth quarter 2008 compared to the
same period in 2007. The year-over-year increase reflects new subscriptions to
our proprietary equity risk data accessed directly and bundled with
Aegis.
Multi-Asset Class Portfolio
Analytics: Revenues related to Multi-Asset Class Portfolio
Analytics increased 21.9% to $9.4 million in fourth quarter 2008 compared to the
same period in 2007. This increase reflects an increase of 31.9% to $7.1 million
for BarraOne and a decrease of 1.3% to $2.3 million for Total Risk, which is a
product that is in the process of being decommissioned. BarraOne revenue growth
remained strong due to new client additions as well as sales to existing clients
with notable strength among asset managers and asset owners in the
Americas.
Other Products: Revenues from
Other Products increased 3.4% to $6.5 million in fourth quarter 2008 compared to
the same period in 2007. The increase reflects an increase of 15.3% to $4.5
million for our energy and commodity analytics products offset, in part, by a
decrease of 4.5% to $1.6 million for fixed income analytics and a decrease of
40.1% to $0.4 million in asset based fees from investment products linked to
MSCI investable hedge fund indices. The hedge fund indices revenues largely
reflects lower asset based fees from investment products linked to these
indices, caused by market depreciation and net asset outflows.
Operating
Expenses
Operating expenses
increased 27.0% to $77.2 million in fourth quarter 2008 compared to fourth
quarter 2007. Excluding founders grant expenses (as described below), operating
expenses increased 14.5% to $68.6 million in fourth quarter 2008. Excluding both
founders grant expenses and allocation and replacement expenses related to
Morgan Stanley services, operating expenses increased 4.6% to $54.4 million. The
change in foreign exchange rates in fourth quarter 2008 compared to fourth
quarter 2007 lowered operating expenses by $2.8 million.
In
total, allocation and replacement expenses related to Morgan Stanley
services were $14.2 million ($3.7 million of compensation and $10.5 million
of non-compensation) in fourth quarter 2008 compared to $7.9 million ($0.5
million of compensation and $7.4 million of non-compensation) in fourth quarter
2007. Replacement expenses associated with services previously provided by
Morgan Stanley were $11.9 million (including $1.9 million of depreciation
expense and $4.1 million of non-recurring expenses) in fourth quarter 2008
compared to $1.3 million in fourth quarter 2007. The expense allocation from
Morgan Stanley was $2.3 million in fourth quarter 2008 compared to $3.9 million
in third quarter 2008 and $6.6 million in fourth quarter 2007. Please see tables
8a and 8b for details.
Compensation expense
increased 24.1% to $42.5 million in fourth quarter 2008. Excluding founders
grant expenses, compensation expense increased 1.5% to $33.9 million. The
increase reflects higher compensation cost for new hires which was offset, in
part, by a lower bonus accrual in fourth quarter 2008 and favorable foreign
exchange rates which lowered compensation expense for staff located outside the
United States. The number of full-time employees increased by 129 to 766 on
November 30, 2008 from 637 on November 30, 2007 and by 42 from 724 on August 31,
2008. In fourth quarter 2008, we continued to increase our staff in emerging
market centers. As of November 30, 2008, 28% of employees were located in
emerging market centers compared to 18% as of November 30, 2007. On
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November 30, 2008,
141 full-time employees were located in Mumbai and Budapest compared to 67 on
November 30, 2007 and 120 on August 31, 2008. During fourth quarter 2008, we
made the decision to establish an office in Monterrey, Mexico to service clients
in the Americas.
Non-compensation
expenses increased 42.0% to $27.6 million reflecting an increase in expenses
related to replacing services previously provided by Morgan Stanley, $0.9
million of public company expenses, and higher occupancy and professional
services expenses offset, in part, by the reduction in the expense allocation
from Morgan Stanley.
Cost of services
increased 19.0% to $35.4 million in fourth quarter 2008 compared to $29.8
million in fourth quarter 2007. Excluding the founders grant, cost of services
expenses increased 9.4% to $32.3 million in fourth quarter 2008. Compensation
expenses excluding the founders grant increased 13.6% reflecting higher
headcount offset, in part, by favorable foreign exchange rates which lowered
compensation expense for staff outside the United States. Non-compensation
expenses increased 2.5% reflecting an increase in information technology
expenses offset, in part, by a lower expense allocation from Morgan Stanley and
reduced professional services expenses.
Selling, general and
administrative expenses increased 45.0% to $34.6 million in fourth quarter 2008
compared to $23.9 million in fourth quarter 2007. Excluding the founders grant,
selling, general and administrative expenses increased 25.3% to $29.2 million in
fourth quarter 2008. Compensation expenses excluding the founders grant
decreased $2.0 million, or 13.2%, to $13.1 million. The decline was attributable
to a lower bonus accrual and favorable foreign exchange rates offset, in part,
by higher compensation costs for increased staffing levels. Non-compensation
expenses increased 95.8% to $16.1 million reflecting an increase in expenses
related to replacing services previously provided by Morgan Stanley, $0.9
million associated with being a public company, and higher occupancy and
professional services expenses offset, in part, by a reduction in the expense
allocation from Morgan Stanley. Selling expenses increased
11.4% to $14.1 million in fourth quarter 2008 and general and administrative
expenses increased 83.0% to $20.5 million.
Expenses related to
the founders grant of $8.6 million in fourth quarter 2008 reflected the
amortization of share based compensation expenses associated with restricted
stock units and options awarded to employees as a one-time grant which became
effective in connection with our IPO completed in November 2007. Founders grant
expenses in fourth quarter 2007 were only $0.8 million reflecting amortization
from the IPO on November 14, 2007 through November 30, 2007. Of the $8.6 million
of founders grant expenses in fourth quarter 2008, $3.1 million was recorded in
cost of services and $5.5 million was recorded in selling, general and
administrative. Founders grant expenses increased from the $5.3 million recorded
in third quarter 2008 due to lower attrition of employees with founders grant
awards.
Interest
Expense (Income) and Other, Net
Interest expense
(income) and other, net was an expense of $9.8 million in fourth quarter 2008
compared to an expense of $6.8 million in fourth quarter 2007. The $3.0 million
increase reflects a $3.0 million write-off for the company’s 17% interest in
Alacra, a $0.7 million increase in foreign currency losses, and $1.0 million of
lower interest income offset by lower interest expense of $1.9
million.
During the fourth
quarter 2008, the Company determined that the $3.0 million carrying value of its
17% interest in Alacra was other than temporarily impaired and, as a result, has
written off the full investment. The $3.0 million write-off represents $0.02 per
share after-tax. The foreign currency exchange loss was $1.3 million in fourth
quarter 2008 compared to a loss of $0.6 million in fourth quarter 2007, which
primarily reflects the negative impact of the appreciation of the US dollar on
the value of our monetary assets and liabilities held in currencies other than
the US dollar.
Provision
for Income Taxes
The provision for
income taxes decreased 52.4% to $7.6 million in fourth quarter 2008 as a result
of lower pre-tax income. The effective tax rate for fourth quarter 2008 was
37.1% compared to 46.5% in fourth quarter 2007. Certain tax items were recorded
in fourth quarter 2007 which increased the tax rate. These items include $3.7
million for a settlement with New York State and City authorities for the period
1999-2007 and $1.7 million for the establishment of
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additional tax
reserves related to the potential disallowance of certain Research and
Experimental tax credits previously allocated to MSCI.
Net
Income
Net income decreased
29.7% to $12.8 million in fourth quarter 2008 from fourth quarter 2007 and the
net income margin decreased to 11.9% from 17.9%. The decline in net income
primarily reflects the impact of higher allocation and replacement expenses
related to services provided by Morgan Stanley ($14.2 million in fourth quarter
2008 vs. $7.9 million in fourth quarter 2007), higher founders grant expense
($8.6 million vs. $0.8 million) and the Alacra write-off ($3.0 million), which
were offset, in part, by lower income taxes ($7.6 million vs. $15.9
million).
Adjusted
EBITDA
Adjusted EBITDA
decreased 1.4% to $48.6 million for fourth quarter 2008 from $49.3 million for
fourth quarter 2007. See Table 9 titled “Reconciliation of Adjusted EBITDA to
Net Income.” The adjusted EBITDA margin decreased to 45.2% in fourth quarter
2008 from 48.5% in fourth quarter 2007. The decrease primarily reflects the
decline in our equity index asset based fees revenues and the increase in
replacement expenses related to services previously provided by Morgan
Stanley.
Summary
of Results for Fiscal 2008
Operating
Revenues
Total operating
revenues for fiscal year ended November 30, 2008 (fiscal year 2008) increased
16.5% to $431.0 million compared to $369.9 million for the fiscal year ended
November 30, 2007 (fiscal year 2007). Revenue gains were reported in three of
our four product categories. The largest contributor to revenue growth in terms
of dollars amount was our Equity Indices business which increased $39.5 million
or 19.8% in fiscal year 2008 compared to fiscal year 2007. The 19.8% gain was
comprised of a 23.9% gain in revenues from Equity Index subscriptions and a
10.8% gain in revenues from Equity Index asset based fees compared to fiscal
year 2007. The change in foreign exchange rates in fiscal year 2008 compared to
fiscal year 2007 increased revenues by $4.1 million.
Revenues from our
subscription products grew 17.7% in the aggregate for fiscal year 2008 to $361.3
million reflecting increased subscriptions from existing clients as well as new
clients. Approximately 81% of our new subscriptions during fiscal year 2008 came
from existing clients. On a percentage basis, revenue growth was led by our
Multi-Asset Class Analytics products which increased 50.8% to $34.8 million and
was primarily driven by new subscriptions to BarraOne. Revenues related to
Equity Index subscriptions increased 23.9% to $169.8 million for fiscal year
2008 compared to fiscal year 2007 and Equity Portfolio Analytics increased 9.7%
to $132.4 million for fiscal year 2008.
Revenues from Other
Products decreased 7.3% to $24.3 million for the fiscal year 2008 compared to
the same period in 2007. The decline reflects a decrease of 49.3% in asset based
fees from investment products linked to MSCI investable hedge fund indices
products and a decrease of 18.8% for fixed income analytics offset by a 20.9%
increase for our energy and commodity analytics products.
Our Aggregate
Retention Rate was 89.9% for the fiscal year 2008 compared to 91.9% for fiscal
year 2007. Our Core Retention Rate was 92.1% for the fiscal year 2008 compared
to 93.4% for fiscal year 2007.
In fiscal year 2008,
we added 165 net new clients. At November 30, 2008, we had a total of 3,091
clients, excluding clients that pay only asset based fees.
Operating
Expenses
Operating expenses
for fiscal year 2008 increased 23.0% to $295.2 million compared to fiscal year
2007. Excluding the founders grant, operating expenses increased 12.7% to $269.6
million for fiscal year 2008 with compensation expenses increasing 8.4% to
$144.5 million and non-compensation expenses increasing 21.6% to $96.6 million.
Excluding both founders grant expenses and allocation and replacement expenses
related to Morgan Stanley
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services, operating
expenses increased 5.9% to $223.8 million. The impact from foreign currency on
expenses for full year 2008 when compared to fiscal year 2007 was
insignificant.
In
total, allocation and replacement expenses related to Morgan Stanley
services were $45.8 million ($9.1 million of compensation and $36.6.million of
non-compensation) for fiscal year 2008 compared to $27.7 million ($0.5 million
of compensation and $27.2 million of non-compensation) in fiscal year 2007.
Expenses associated with replacing services previously provided by Morgan
Stanley were $27.5 million in fiscal year 2008 compared to $1.3 million for
fiscal year 2007. The expense allocation from Morgan Stanley was $18.3 million
for fiscal year 2008 compared to $26.4 million for fiscal year
2007.
Compensation expense
increased 26.8% to $170.0 million in fiscal year 2008. Excluding founders grant
expenses, compensation expense increased 8.4% to $144.5 million excluding.
Compensation expense includes $9.1 million of expenses attributable to employees
hired in connection with the replacement of services previously provided by
Morgan Stanley. In addition, the increase compared to fiscal year 2007 reflects
higher compensation costs for existing staff and new hires. The 21.6% increase
in non-compensation expense reflects $18.4 million (including $2.5 million of
depreciation expense and $8.8 million of non-recurring expenses) of expenses
related to replacing Morgan Stanley services, $3.8 million of public company
expenses, and $1.5 million of expenses associated with the May and July 2008
secondary equity offerings, partially offset by the $8.1 million decline in the
expense allocation from Morgan Stanley.
Interest
Expense (Income) and Other, Net
Interest expense
(income) and other, net was an expense of $26.1 million for fiscal year 2008
compared to income of $3.3 million for fiscal year 2007. The $29.4 million
difference reflects an increase in interest expense due to interest paid on term
loan borrowings under our credit facility, reduction of interest income
resulting from lower average cash balances, foreign currency losses, and the
write-off of our Alacra investment. The foreign currency loss was $4.3 million
for fiscal year 2008 compared to a $0.6 million loss for fiscal year 2007. The
foreign currency loss for fiscal year 2008 primarily reflects the negative
impact of the appreciation of the US dollar on our monetary assets and
liabilities held in currencies other than the US dollar. The write-off for
fiscal year 2008 was $3.0 million reflecting our 17% interest in
Alacra.
Provision
for Income Taxes
The provision for
income taxes decreased 20.7% to $41.4 million for fiscal year 2008 compared to
fiscal year 2007 as a result of lower pre-tax income. The effective tax rate for
fiscal year 2008 was 37.7% compared to 39.1% for fiscal year 2007. Certain tax
items were recorded in fiscal year 2007 which increased the tax rate. These
items include $3.7 million for a settlement with New York State and City
authorities for the period 1999-2007 and $1.7 million for the establishment of
additional tax reserves related to the potential disallowance of certain
Research and Experimental tax credits previously allocated to MSCI.
Net
Income
Net income decreased
15.8% to $68.3 million for fiscal year 2008 from fiscal year 2007 and the net
income margin decreased to 15.8% from 21.9%. The decline in net income primarily
reflects higher founders grant expense ($25.6 million vs. $0.8 million), higher
interest expense ($26.9 million vs. $9.6 million), lower interest income ($8.1
million vs. $13.1 million), higher foreign currency losses ($4.3 million vs.
$0.6 million), and the Alacra write-off ($3.0 million), which were offset, in
part, by the increase in operating revenues.
Adjusted
EBITDA
Adjusted EBITDA
increased 22.4% to $194.8 million for fiscal year 2008 from $159.1 million for
the comparable period in 2007. See Table 14 titled “Reconciliation of Adjusted
EBITDA to Net Income.” The adjusted EBITDA margin increased to 45.2% for fiscal
year 2008 from 43.0% for fiscal year 2007. The increase reflects the operating
leverage in the business and disciplined cost management.
6 of 17
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Table
2
Key
Metrics
|
As
of
|
Change
from
|
||||||
|
November 30,
|
August
31,
|
November
30,
|
August
31,
|
||||
|
2008
|
2007
|
2008
|
2007
|
2008
|
|||
|
Run Rates 1,2 ($
thousands)
|
|||||||
|
Equity
indices
|
|||||||
|
Subscription
|
$170,992
|
$141,560
|
$167,126
|
20.8%
|
2.3%
|
||
|
Asset based fees 3
|
51,596
|
76,467
|
69,741
|
(32.5%)
|
(26.0%)
|
||
|
Equity Indices
total
|
$222,588
|
$218,027
|
$236,867
|
2.1%
|
(6.0%)
|
||
|
Equity
portfolio analytics
|
129,168
|
124,668
|
135,280
|
3.6%
|
(4.5%)
|
||
|
Multi-asset
class analytics
|
35,105
|
29,243
|
32,681
|
20.0%
|
7.4%
|
||
|
Other
|
|||||||
|
Subscription
|
19,699
|
17,958
|
19,472
|
9.7%
|
1.2%
|
||
|
Hedge fund
indices
|
1,380
|
5,063
|
2,781
|
(72.7%)
|
(50.4%)
|
||
|
Other
total
|
$21,079
|
$23,021
|
$22,253
|
(8.4%)
|
(5.3%)
|
||
|
Total Run
Rate
|
$407,941
|
$394,959
|
$427,081
|
3.3%
|
(4.5%)
|
||
|
Subscription
total
|
$354,965
|
$313,429
|
$354,559
|
13.3%
|
0.1%
|
||
|
Asset based
fees total
|
$52,976
|
$81,530
|
$72,522
|
(35.0%)
|
(27.0%)
|
||
|
Subscription
based fees by region
|
|||||||
|
%
Americas
|
45%
|
43%
|
44%
|
||||
|
%
non-Americas
|
55%
|
57%
|
56%
|
||||
|
Subscription
based fees by client type
|
|||||||
|
% Asset
Managers
|
61.6%
|
63.0%
|
61.8%
|
||||
|
% Broker
Dealers
|
12.1%
|
11.9%
|
12.3%
|
||||
|
% Hedge
Funds
|
6.1%
|
5.9%
|
6.2%
|
||||
|
% Asset
Owners
|
6.0%
|
5.8%
|
5.8%
|
||||
|
%
Others
|
14.3%
|
13.4%
|
14.0%
|
||||
|
Aggregate
Retention Rate 4
|
80.6%
|
89.9%
|
91.6%
|
||||
|
Core Retention
Rate 5
|
85.3%
|
90.6%
|
94.1%
|
||||
|
Client Count
6
|
3,091
|
2,926
|
3,097
|
||||
|
ETF Assets
linked to MSCI indices ($ billions)
|
|||||||
|
Quarter
end
|
$119.0
|
$191.7
|
$166.3
|
(37.9%)
|
(28.4%)
|
||
|
Quarterly
average
|
$134.9
|
$176.9
|
$178.3
|
(23.8%)
|
(24.4%)
|
||
|
Full-time
employees
|
766
|
637
|
724
|
||||
|
1
The 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.
|
|
2
The run rate at the end of each period has been lowered by $2.5
million to remove contracts that were determined to be
non-recurring.
|
|
3
Includes asset based fees for ETFs, institutional indexed funds,
transaction volume-based fees for futures and options traded on certain
MSCI indices and other structured products.
|
|
4
Our Aggregate Retention Rate represents the percentage of the
subscription run rate as of the beginning of the period that is not
cancelled during the period. The Aggregate Retention Rate is computed on a
product-by-product basis. Therefore, if a client reduces the number of
products to which it subscribes or switches between our products, we treat
it as a cancellation. In addition, we treat any reduction in fees
resulting from renegotiated contracts as a cancellation in the calculation
to the extent of the reduction. The Aggregate Retention Rates for
non-annual periods are annualized. Aggregate Retention Rates are generally
higher during the first three fiscal quarters and lower in the fourth
fiscal quarter. The Aggregate Retention Rate is for the three month
periods ended November 30, 2008, November 30, 2007, and August 31, 2008,
respectively.
|
|
5
Our Core Retention Rate is calculated similarly to our Aggregate
Retention Rate except that the Core Retention Rate does not treat switches
between our products as a cancellation.
|
|
6
The client count excludes clients that pay only asset based fees.
Our client count includes affiliates, cities and certain business units
within a single organization as distinct clients when they separately
subscribe to our products.
|
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Table
3a
|
ETF Assets
linked to MSCI Indices
|
|||||||||
|
(Quarter-End)
|
|||||||||
|
2007
|
2008
|
||||||||
|
$ in
Billions
|
February
|
May
|
August
|
November
|
February
|
May
|
August
|
November
|
|
|
AUM in ETFs
linked to MSCI Indices
|
$135.4
|
$150.2
|
$156.5
|
$191.7
|
$179.2
|
$199.6
|
$166.3
|
$119.0
|
|
|
Sequential
Change ($ Growth in Billions)
|
|||||||||
|
Appreciation/Depreciation
|
$9.8
|
$5.9
|
($0.8)
|
$11.2
|
($15.2)
|
$9.9
|
($31.2)
|
($63.2)
|
|
|
Cash Inflow/
Outflow
|
13.3
|
8.9
|
7.1
|
24.0
|
2.7
|
10.5
|
(2.1)
|
15.9
|
|
|
Total
Change
|
$23.1
|
$14.8
|
$6.3
|
$35.2
|
($12.5)
|
$20.4
|
($33.3)
|
($47.3)
|
|
|
Source:
Bloomberg and MSCI
|
|||||||||
Table
3b
|
ETF Assets
linked to MSCI Indices
|
|||||||||
|
(Quarterly
Average)
|
|||||||||
|
2007
|
2008
|
||||||||
|
$ in
Billions
|
February
|
May
|
August
|
November
|
February
|
May
|
August
|
November
|
|
|
AUM in ETFs
linked to MSCI Indices
|
$123.8
|
$140.8
|
$155.7
|
$176.9
|
$183.2
|
$184.4
|
$178.3
|
$134.9
|
|
|
Source:
Bloomberg and MSCI
|
|||||||||
Conference
Call Information
Investors will have
the opportunity to listen to MSCI Inc.'s senior management review fourth quarter
2008 results on Friday, January 9, 2009 at 11:00 am Eastern time. To hear the
live event, visit the investor relations section of MSCI's website,
www.mscibarra.com, or dial 1- 888-220-8639 within the United States.
International callers dial 1- 913-905-3180.
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 January 16, 2009. To listen to the recording, visit the
investor relations section of www.mscibarra.com, or dial 1-888-203-1112
(passcode: 1248144) within the United States. International callers
dial 1-719-457-0820 (passcode: 1248144).
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 USD 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 controlling shareholder of MSCI Inc. MXB#IR
8 of 17
|
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|
For
further information on MSCI Inc. or our products please visit
www.mscibarra.com.
MSCI Inc. Contact:
|
Lisa Monaco,
MSCI, New York
|
+
1.866.447.7874
|
|
For media inquiries please
contact:
|
|
|
Sally Todd |
Clare Milton, Penrose Financial, London
|
+
44.20.7786.4888
|
|
Pen Pendleton
| Patrick Clifford, Abernathy MacGregor, New York
|
+
1.212.371.5999
|
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 and in quarterly reports on form 10-Q and
current reports on form 8-K. 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 fourth quarter and fiscal year 2008 are not comparable with fourth quarter
and fiscal year 2007 because of our IPO, 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 class A
common shares. As such, weighted average common shares outstanding for fourth
quarter 2008 and fiscal year 2008 include these additional shares while these
shares were only outstanding for partial periods in fourth quarter 2007 and
fiscal year 2007.
Credit
Facility
As of November 30,
2008, we had borrowings of $401.8 million outstanding under our credit
facility, comprised of
$180.0 million under our term loan A facility and $221.8 million, net of
discount, under our term loan B facility. As of November 30, 2007, we had
borrowings of $425.0 million under our credit facility. Prior to entering into
our credit facility, we had a $625.9 million demand note which was outstanding
only for a portion of 2007. Consequently, interest expense (income) and other,
net was an expense for fiscal year ended November 30, 2008 compared to income
for the comparable period in 2007.
9 of 17
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|
The
term loan A facility and the term loan B facility will mature on November 20,
2012 and November 20, 2014, respectively. Our required principal payments in
2009 and 2010 are $22.3 million and $42.3 million, respectively.
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 fourth quarter
and fiscal year 2008 included $8.6 million and $25.6 million of founders grant
expense, respectively, compared to $0.8 million for fourth quarter and fiscal
year 2007.
Table
4
|
MSCI
Inc.
|
|||
|
Consolidated
Statements of Income (unaudited)
|
|||
|
Three Months
Ended
|
|||
|
November
30,
|
August
31,
|
||
|
Amounts in
thousands, except per share data
|
2008
|
2007
|
2008
|
|
Operating
revenues
|
$107,416
|
$101,658
|
$110,399
|
|
Operating
expenses
|
|||
|
Cost
of services
|
35,449
|
29,784
|
28,131
|
|
Selling,
general and administrative
|
34,640
|
23,882
|
37,624
|
|
Amortization
of intangible assets
|
7,125
|
7,125
|
7,125
|
|
Total
operating expenses
|
77,214
|
60,791
|
72,880
|
|
Operating
income
|
30,202
|
40,867
|
37,519
|
|
Interest
income
|
(419)
|
(1,432)
|
(1,843)
|
|
Interest
expense
|
5,810
|
7,730
|
5,991
|
|
Other
expense
|
4,435
|
468
|
3,224
|
|
Interest
expense (income) and other, net
|
9,826
|
6,766
|
7,372
|
|
Income before
income taxes
|
20,376
|
34,101
|
30,147
|
|
Provision for
income taxes
|
7,551
|
15,862
|
11,269
|
|
Net
income
|
$12,825
|
$18,239
|
$18,878
|
|
Earnings per
basic common share
|
$0.13
|
$0.21
|
$0.19
|
|
Earnings per
diluted common share
|
$0.13
|
$0.21
|
$0.19
|
|
Weighted
average shares outstanding used in computing earnings per
share
|
|||
|
Basic
|
100,060
|
86,733
|
100,052
|
|
Diluted
|
101,067
|
86,803
|
101,698
|
10 of
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|
Table
5
|
Operating
Revenues by Product Category
|
|||||
|
Three Months
Ended
|
Change
from
|
||||
|
November
30,
|
August
31,
|
November
30,
|
August
31,
|
||
|
Amounts in
thousands
|
2008
|
2007
|
2008
|
2007
|
2008
|
|
Equity
indices
|
|||||
|
Equity
index subscriptions
|
$45,538
|
$37,341
|
$43,666
|
22.0%
|
4.3%
|
|
Equity
index asset based fees
|
13,472
|
18,681
|
18,312
|
(27.9%)
|
(26.4%)
|
|
Equity indices
total
|
59,010
|
56,022
|
61,978
|
5.3%
|
(4.8%)
|
|
Equity
portfolio analytics
|
32,495
|
31,625
|
33,659
|
2.8%
|
(3.5%)
|
|
Multi-asset
class portfolio analytics
|
9,384
|
7,700
|
8,923
|
21.9%
|
5.2%
|
|
Other
products
|
6,527
|
6,311
|
5,839
|
3.4%
|
11.8%
|
|
Total
operating revenues
|
$107,416
|
$101,658
|
$110,399
|
5.7%
|
(2.7%)
|
Table
6
|
Operating
Expenses by Category excluding founders grant
|
|||
|
(Compensation
vs. Non-compensation)
|
|||
|
Three Months
Ended
|
|||
|
November
30,
|
|||
|
Amounts in
thousands
|
2008
|
2007
|
Change
|
|
Compensation
|
$33,935
|
$33,424
|
1.5%
|
|
Non-compensation
|
27,587
|
19,423
|
42.0%
|
|
Total
|
61,522
|
52,847
|
16.4%
|
|
Amortization
of intangible assets
|
7,125
|
7,125
|
0.0%
|
|
Operating
expenses excluding founders grant
|
68,647
|
59,972
|
14.5%
|
|
Founders
grant
|
8,567
|
819
|
nm
|
|
Operating
expenses including founders grant
|
$77,214
|
$60,791
|
27.0%
|
All
nm figures are not meaningful
Table
7a
|
Operating
Expenses by Category excluding founders grant
|
|||
|
(Cost of
Services vs. Selling, General and Administrative)
|
|||
|
Three Months
Ended
|
|||
|
November
30,
|
|||
|
Amounts in
thousands
|
2008
|
2007
|
Change
|
|
Cost of
services
|
|||
|
Compensation
|
$20,877
|
$18,373
|
13.6%
|
|
Non-compensation
|
11,465
|
11,189
|
2.5%
|
|
Total
|
32,342
|
29,562
|
9.4%
|
|
Selling,
general and administrative
|
|||
|
Compensation
|
13,058
|
15,051
|
(13.2%)
|
|
Non-compensation
|
16,122
|
8,234
|
95.8%
|
|
Total
|
29,180
|
23,285
|
25.3%
|
|
Amortization
of intangible assets
|
7,125
|
7,125
|
0.0%
|
|
Operating
expenses excluding founders grant
|
68,647
|
59,972
|
14.5%
|
|
Founders
grant
|
8,567
|
819
|
nm
|
|
Operating
expenses including founders grant
|
$77,214
|
$60,791
|
27.0%
|
All nm figures are not
meaningful
11 of
17
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|
Table
7b
|
Operating
Expenses by Category including founders grant
|
|||
|
(Cost of
Services vs. Selling, General and Administrative)
|
|||
|
Three Months
Ended
|
|||
|
November
30,
|
|||
|
Amounts in
thousands
|
2008
|
2007
|
Change
|
|
Cost of
services
|
|||
|
Compensation
|
$20,877
|
$18,373
|
13.6%
|
|
Founders
grant
|
3,107
|
222
|
-
|
|
Total
|
23,984
|
18,595
|
29.0%
|
|
Non-compensation
|
11,465
|
11,189
|
2.5%
|
|
Total
|
35,449
|
29,784
|
19.0%
|
|
Selling,
general and administrative
|
|||
|
Compensation
|
13,058
|
15,051
|
(13.2%)
|
|
Founders
grant
|
5,460
|
597
|
nm
|
|
Total
|
18,518
|
15,648
|
18.3%
|
|
Non-compensation
|
16,122
|
8,234
|
95.8%
|
|
Total
|
34,640
|
23,882
|
45.0%
|
|
Amortization
of intangible assets
|
7,125
|
7,125
|
0.0%
|
|
Operating
expenses including founders grant
|
$77,214
|
$60,791
|
27.0%
|
All
nm figures are not meaningful
|
Table
8a
|
Allocation and
Replacement Expenses Related to Morgan Stanley Services
|
Three Months
Ended
|
Fiscal Year Ended
|
|||||
|
November
30,
|
November 30,
|
|||||
|
Amounts in
thousands
|
2008
|
2007
|
2008
|
2007
|
||
|
Allocation
Expenses
|
$2,272
|
$6,609
|
$18,280
|
$26,415
|
||
|
Replacement
Expenses
|
||||||
|
Compensation
|
3,659
|
481
|
9,132
|
481
|
||
|
Non-compensation
|
||||||
|
Recurring
|
2,320
|
-
|
7,012
|
-
|
||
|
Non-recurring
|
4,071
|
821
|
8,814
|
821
|
||
|
Depreciation
|
1,889
|
-
|
2,527
|
-
|
||
|
Non-compensation
total
|
8,280
|
821
|
18,353
|
821
|
||
|
Replacement
Expenses - Total
|
11,939
|
1,302
|
27,485
|
1,302
|
||
|
Total
Allocation and Replacement Expenses
|
$14,211
|
$7,911
|
$45,765
|
$27,717
|
||
|
Compensation
Total
|
3,659
|
481
|
9,132
|
481
|
||
|
Non-Compensation
Total
|
10,552
|
7,430
|
36,633
|
27,236
|
||
|
Total
Allocation and Replacement Expenses
|
$14,211
|
$7,911
|
$45,765
|
$27,717
|
||
12 of
17
|
www.mscibarra.com
|
Table
8b
|
Allocation
and Replacement Expenses Related to Morgan Stanley
Services
|
|||||
|
(Cost
of Services vs. Selling, General & Administrative)
|
|||||
|
Three
Months Ended
|
Fiscal
Year Ended
|
||||
|
November
30,
|
November
30,
|
||||
|
Amounts
in thousands
|
2008
|
2007
|
2008
|
2007
|
|
|
Cost
of services
|
|||||
|
Replacement
Compensation
|
-
|
-
|
-
|
-
|
|
|
Allocation
|
$1,162
|
$3,398
|
$8,740
|
$14,956
|
|
|
Cost
of services total
|
1,162
|
3,398
|
8,740
|
14,956
|
|
|
Selling,
general & administrative
|
|||||
|
Replacement
Compensation
|
3,659
|
481
|
9,132
|
481
|
|
|
Non-Compensation
|
|||||
|
Allocation
|
1,110
|
3,211
|
9,540
|
11,459
|
|
|
Replacement
|
|||||
|
Recurring
|
2,320
|
-
|
7,012
|
-
|
|
|
Non-Recurring
|
4,071
|
821
|
8,814
|
821
|
|
|
Depreciation
|
1,889
|
-
|
2,527
|
-
|
|
|
Non-compensation
total
|
9,389
|
4,032
|
27,893
|
12,280
|
|
|
Selling,
general & administrative total
|
13,049
|
4,513
|
37,025
|
12,761
|
|
|
Total
Allocation and Replacement Expenses
|
$14,211
|
$7,911
|
$45,765
|
$27,717
|
|
Table
9
|
Reconciliation
of Adjusted EBITDA to Net Income
|
|||
|
Three Months
Ended
|
|||
|
November
30,
|
August
31,
|
||
|
Amounts in
thousands
|
2008
|
2007
|
2008
|
|
Adjusted
EBITDA
|
$48,590
|
$49,278
|
$51,268
|
|
Less: Founders
grant expense
|
8,567
|
819
|
5,346
|
|
Less: Depreciation
and amortization
|
2,696
|
467
|
1,278
|
|
Less: Amortization
of intangible assets
|
7,125
|
7,125
|
7,125
|
|
Less: Interest
expense (income) and other, net
|
9,826
|
6,766
|
7,372
|
|
Less: Provision
for income taxes
|
7,551
|
15,862
|
11,269
|
|
Net
income
|
$12,825
|
$18,239
|
$18,878
|
13 of
17
|
www.mscibarra.com
|
Table
10
|
MSCI
Inc.
|
||
|
Consolidated
Statements of Income (unaudited)
|
||
|
Fiscal Year
Ended
|
||
|
November
30,
|
||
|
Amounts in
thousands, except per share data
|
2008
|
2007
|
|
Operating
revenues
|
$430,961
|
$369,886
|
|
Operating
expenses
|
||
|
Cost
of services
|
124,671
|
121,752
|
|
Selling,
general and administrative
|
142,000
|
91,822
|
|
Amortization
of intangible assets
|
28,500
|
26,353
|
|
Total
operating expenses
|
295,171
|
239,927
|
|
Operating
income
|
135,790
|
129,959
|
|
Interest
income
|
(8,142)
|
(13,143)
|
|
Interest
expense
|
26,932
|
9,586
|
|
Other
expense
|
7,357
|
224
|
|
Interest
expense (income) and other, net
|
26,147
|
(3,333)
|
|
Income before
income taxes
|
109,643
|
133,292
|
|
Provision for
income taxes
|
41,375
|
52,181
|
|
Net
income
|
$68,268
|
$81,111
|
|
Earnings per
basic common share
|
$0.68
|
$0.96
|
|
Earnings per
diluted common share
|
$0.67
|
$0.96
|
|
Weighted
average shares outstanding used in computing earnings per
share
|
||
|
Basic
|
100,037
|
84,608
|
|
Diluted
|
101,194
|
84,624
|
14 of
17
|
www.mscibarra.com
|
Table
11
|
Operating
Revenues by Product Category
|
|||
|
Fiscal Year
Ended
|
|||
|
November
30,
|
|||
|
Amounts in
thousands
|
2008
|
2007
|
Change
|
|
Equity
indices
|
|||
|
Equity
index subscriptions
|
$169,817
|
$137,089
|
23.9%
|
|
Equity
index asset based fees
|
69,679
|
62,903
|
10.8%
|
|
Equity indices
total
|
239,496
|
199,992
|
19.8%
|
|
Equity
portfolio analytics
|
132,398
|
120,648
|
9.7%
|
|
Multi-asset
class portfolio analytics
|
34,797
|
23,070
|
50.8%
|
|
Other
products
|
24,270
|
26,176
|
(7.3%)
|
|
Total
operating revenues
|
$430,961
|
$369,886
|
16.5%
|
Table
12
|
Operating
Expenses by Category excluding founders grant
|
|||
|
(Compensation
vs. Non-compensation)
|
|||
|
Fiscal Year
Ended
|
|||
|
November
30,
|
|||
|
Amounts in
thousands
|
2008
|
2007
|
Change
|
|
Compensation
|
$144,451
|
$133,290
|
8.4%
|
|
Non-compensation
|
96,635
|
79,465
|
21.6%
|
|
Total
|
241,086
|
212,755
|
13.3%
|
|
Amortization
of intangible assets
|
28,500
|
26,353
|
8.1%
|
|
Operating
expenses excluding founders grant
|
269,586
|
239,108
|
12.7%
|
|
Founders
grant
|
25,585
|
819
|
nm
|
|
Operating
expenses including founders grant
|
$295,171
|
$239,927
|
23.0%
|
All nm figures
are not meaningful
15 of
17
|
www.mscibarra.com
|
Table
13a
|
Operating
Expenses by Category excluding founders grant
|
|||
|
(Cost of
Services vs. Selling, General and Administrative)
|
|||
|
Fiscal Year
Ended
|
|||
|
November
30,
|
|||
|
Amounts in
thousands
|
2008
|
2007
|
Change
|
|
Cost of
services
|
|||
|
Compensation
|
$75,622
|
$76,121
|
(0.7%)
|
|
Non-compensation
|
41,191
|
45,409
|
(9.3%)
|
|
Total
|
116,813
|
121,530
|
(3.9%)
|
|
Selling,
general and administrative
|
|||
|
Compensation
|
68,829
|
57,169
|
20.4%
|
|
Non-compensation
|
55,444
|
34,056
|
62.8%
|
|
Total
|
124,273
|
91,225
|
36.2%
|
|
Amortization
of intangible assets
|
28,500
|
26,353
|
8.1%
|
|
Operating
expenses excluding founders grant
|
269,586
|
239,108
|
12.7%
|
|
Founders
grant
|
25,585
|
819
|
nm
|
|
Operating
expenses including founders grant
|
$295,171
|
$239,927
|
23.0%
|
All
nm figures are not meaningful
Table
13b
|
Operating
Expenses by Category including founders grant
|
|||
|
(Cost
of Services vs. Selling, General and Administrative)
|
|||
|
Fiscal
Year Ended
|
|||
|
November
30,
|
|||
|
Amounts
in thousands
|
2008
|
2007
|
Change
|
|
Cost
of services
|
|||
|
Compensation
|
$75,622
|
$76,121
|
(0.7%)
|
|
founders
grant
|
7,858
|
222
|
nm
|
|
Total
|
83,480
|
76,343
|
9.3%
|
|
Non-compensation
|
41,191
|
45,409
|
(9.3%)
|
|
Total
|
124,671
|
121,752
|
2.4%
|
|
Selling,
general and administrative
|
|||
|
Compensation
|
68,829
|
57,169
|
20.4%
|
|
Founders
grant
|
17,727
|
597
|
nm
|
|
Total
|
86,556
|
57,766
|
49.8%
|
|
Non-compensation
|
55,444
|
34,056
|
62.8%
|
|
Total
|
142,000
|
91,822
|
54.6%
|
|
Amortization
of intangible assets
|
28,500
|
26,353
|
8.1%
|
|
Operating
expenses including founders grant
|
$295,171
|
$239,927
|
23.0%
|
All
nm figures are not meaningful
16 of
17
|
www.mscibarra.com
|
Table
14
|
Reconciliation
of Adjusted EBITDA to Net Income
|
||
|
Fiscal Year
Ended
|
||
|
November
30,
|
||
|
Amounts in
thousands
|
2008
|
2007
|
|
Adjusted
EBITDA
|
$194,845
|
$159,128
|
|
Less: Founders
grant expense
|
25,585
|
819
|
|
Less: Depreciation
and amortization
|
4,970
|
1,997
|
|
Less: Amortization
of intangible assets
|
28,500
|
26,353
|
|
Less: Interest
expense (income) and other, net
|
26,147
|
(3,333)
|
|
Less: Provision
for income taxes
|
41,375
|
52,181
|
|
Net
income
|
$68,268
|
$81,111
|
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 $68.0 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 $68.0 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 MSCI 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 amortization expense of the award will be recognized over four
years.
17 of 17