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 10,
2008
MSCI
Inc.
(Exact
name of registrant as specified in its charter)
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Delaware
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001-33812
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13-4038723
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(State
or other jurisdiction
of
incorporation)
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(Commission
File Number)
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(IRS
Employer
Identification
No.)
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88
Pine Street, New York, NY 10005
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10005
|
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(Address
of principal executive offices)
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(Zip
Code)
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(212)
804-3900
(Registrant’s
telephone number, including area code)
NOT
APPLICABLE
(Former
name or former address, if changed since last report)
Check
the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (see General Instruction A.2. below):
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¨
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Written
communications pursuant to Rule 425 under the Securities Act (17
CFR
230.425)
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¨
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
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¨
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17
CFR
240.14d-2(b))
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¨
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17
CFR
240.13e-4(c))
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On
January
10, 2008, MSCI Inc. (the “Registrant”) released financial information with
respect to its fiscal year and fourth quarter ended
November 30, 2007. 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.
(d)
Exhibits.
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Exhibit No.
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Description
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Exhibit 99.1
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Press
release of the Registrant dated January 10, 2008 containing financial
information for the fiscal year and fourth quarter ended November
30,
2007.
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Pursuant
to the requirements of the Exchange Act, the Registrant has duly caused this
report to be signed on its behalf by the undersigned hereunto duly
authorized.
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MSCI
Inc.
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||||||
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Date:
January 10, 2008
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By:
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/s/
M.K. Neborak
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||||
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Name:
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Michael
K. Neborak
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|||||
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Title:
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Chief
Financial Officer
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Exhibit
99.1
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www.mscibarra.com
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MSCI
Inc.
Reports Record Results for Fiscal Fourth Quarter and Full Year
2007
New
York –
January 10, 2008– MSCI Inc. (NYSE: MXB), a
leading provider of investment decision support tools including indices and
portfolio risk and performance analytics, today announced record results for
the
fourth quarter and full year ended November 30, 2007.
(Note: Percentage
changes are referenced to the comparable period in fiscal year
2006.)
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·
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Operating
revenues increased 24.6% to $101.7 million in fourth quarter 2007
and
19.1% to $369.9 million in fiscal year
2007.
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·
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Adjusted
EBITDA more than tripled to $48.7 million in fourth quarter 2007
and
increased 40.3% to $158.5 million in fiscal year 2007. See Table
6
"Reconciliation of Adjusted EBITDA to Net
Income."
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·
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Net
income
grew 54.6% to $24.2 million ($0.28 per diluted share) in fourth quarter
2007 and 21.9% to $87.1 million ($1.03 per diluted share) in fiscal
year
2007.
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Henry
A. Fernandez,
Chairman and CEO, said “We are very pleased with our fourth quarter and full
year results. This performance reflects the continued strength of our
subscription and asset based fee business models and the diversity of our
product mix and client base which spans over 60 countries. In addition, the
operating leverage inherent in our business and our disciplined cost management
are evident in our record results.”
“Our
adjusted EBITDA
margin reached 43% for the full year which is consistent with our target
adjusted EBITDA margin in the low 40%’s. In any given quarter, we estimate that
our level of profitability may fall within a range of 40% to 50% depending
on
the rate of revenue growth, particularly by our high margin exchange traded
fund
(ETF) fees, and the pace of investment in important initiatives for continued
growth,” added Mr. Fernandez.
Selected
Financial Information
Table
1
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Three
Months
Ended
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Year
Ended
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||||||
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November
30,
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November
30,
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||||||
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Amounts
in
thousands, except per share data
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2006
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2007
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Chg
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2006
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2007
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Chg
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Operating
revenues
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$81,586
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$101,658
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24.6%
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$310,698
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$369,886
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19.1%
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Operating
expenses
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$73,629
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$61,396
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(16.6%)
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$227,402
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$240,541
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5.8%
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Net
income
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$15,676
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$24,228
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54.6%
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$71,445
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$87,100
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21.9%
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%
Margin
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19.2%
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23.8%
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23.0%
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23.5%
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|||
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Diluted
EPS
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$0.19
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$0.28
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49.3%
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$0.85
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$1.03
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20.9%
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Operating
expenses excluding Founders Grant1
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$73,629
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$60,568
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(17.7%)
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$227,402
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$239,713
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5.4%
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Adjusted
EBITDA2
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$15,511
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$48,682
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213.9%
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$112,951
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$158,523
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40.3%
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%
Margin
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19.0%
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47.9%
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36.4%
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42.9%
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|||
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Actual
amounts
may differ due to rounding.
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|||||||
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1
Excludes certain equity grant (“Founders Grant”) stock compensation
expenses of $828,000 for the three months and year ended November
30, 2007
and $0 for the three months and year ended November 30,
2006.
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2
See Table 6 "Reconciliation of Adjusted EBITDA to Net Income" and
information about the use of non-GAAP financial information provided
under
“Notes Regarding the Use of Non-GAAP Financial
Measures.”
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www.mscibarra.com
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Summary
of
Results for Fourth Quarter 2007
Operating
Revenues
Total
operating
revenues for fourth quarter 2007 increased 24.6% to $101.7 million compared
to
$81.6 million in fourth quarter 2006. The growth was driven by an increase
in
our revenues related to both subscriptions and equity index asset based fees
which were up 18.1% and 64.9%, respectively, in fourth quarter 2007. Growth
was
broad based and extended across most product types, client categories and
regions throughout the world. We experienced an increase in subscriptions to
existing clients as well as the addition of 31 and 217 new clients during fourth
quarter 2007 and fiscal year 2007, respectively.
Revenue
growth
reflects increased revenues attributable to asset growth in ETFs linked to
MSCI
equity indices, the licensing of additional index and analytics products by
existing clients, further penetration into the European market and the addition
of new clients for equity and multi-asset class products.
Equity
Indices: Revenues related to Equity Indices increased 32.5%
to $56.0 million in fourth quarter 2007. Revenues from equity index
subscriptions accelerated in fourth quarter 2007 and were up 20.7% to $37.3
million. The increase reflects the favorable response of our clients to our
MSCI
Global Investable Market Indices, especially the small cap and emerging market
series.
Revenues
attributable to asset based fee products increased 64.9% to $18.7 million in
fourth quarter 2007, which was primarily driven by an increase in the asset
base
of ETFs linked to MSCI equity indices, mostly as a result of the addition of
new
assets and, to a lesser extent, asset appreciation.
Assets
in ETFs
linked to MSCI equity indices increased $79.5 billion, or 70.9%, to $191.7
billion as of November 30, 2007 from $112.2 billion as of November 30, 2006.
Such assets also increased $35.2 billion, or 22.5%, from $156.5 billion as
of
August 31, 2007. For fiscal year 2007, approximately $57 billion of the increase
in assets in ETFs linked to MSCI equity indices from fiscal 2006 was
attributable to cash inflows and $23 billion to asset appreciation. Although
our
revenues from asset based fees are growing rapidly, they may be subject to
market conditions.
The
three indices with the largest amount of ETF assets linked to them as of
November 30, 2007 were the MSCI EAFE, Emerging Markets and Japan Indices with
$51.5 billion, $36.4 billion and $13.1 billion in assets,
respectively.
Equity
Portfolio Analytics: Revenues related to Equity Portfolio
Analytics products increased 14.5% to $31.6 million in fourth quarter 2007.
The
increase reflects strong new subscription growth for our equity risk models
and
related analytics products. This growth was partially due to licensing our
proprietary equity risk data through a larger number of third-party software
applications as well as significantly higher retention rates for Barra
Aegis.
Multi-Asset
Class Portfolio Analytics: Revenues related to Multi-Asset
Class Portfolio Analytics increased 72.8% to $7.7 million in fourth quarter
2007. The increase primarily reflects additional subscriptions to BarraOne
by
asset owners and fund managers, particularly in Europe and North America. The
increase in BarraOne revenues was offset in part by a decline in revenues from
TotalRisk due to our decision at the end of 2006 to stop licensing subscriptions
to TotalRisk and gradually transition clients from TotalRisk to BarraOne.
Additional functionality, product features and data added to BarraOne over
the
last 12 to 18 months drove subscription growth.
Other
Products: Revenues from Other Products decreased 12.8% to $6.3 million
in fourth quarter 2007. The decrease reflects the cancellation by a client
of a
large fixed income index subscription at the end of first quarter 2007 and
decreased fees based on lower assets of investment products linked to MSCI
hedge
fund indices. This revenue decrease was offset partially by strong new
subscription growth for our energy and commodity analytics products marketed
under the FEA brand.
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Operating
Expenses
Operating
expenses
declined 16.6% to $61.4 million in fourth quarter 2007 compared to fourth
quarter 2006. Excluding expenses related to the Founders Grant (as described
below), operating expenses declined 17.7% to $60.6 million in fourth quarter
2007 with a decrease in compensation and non-compensation expenses of 12.5%
and
23.3%, respectively. The decrease reflects lower personnel hiring activity
in
fourth quarter 2007, more disciplined cost management and favorable comparisons
with fourth quarter 2006 which included several expense items not repeated
in
fourth quarter 2007. These non-recurring fourth quarter 2006 expenses totaled
$15.3 million and were comprised largely of full-year bonuses paid to certain
employees hired during the second half of 2006, the accrued stock based
compensation expense for equity awards issued to employees eligible for
retirement, recruitment fees associated with senior staff additions, acquisition
related costs and an increase in bonus accruals and market data costs. Excluding
expenses related to the Founders Grant and the $15.3 million of non-recurring
items in fourth quarter 2006, expenses in the quarter were up 4%.
Expenses
related to
the Founders Grant of $0.8 million in fourth quarter 2007 reflected expenses
for
restricted stock units and options awarded to employees as a one-time grant
which became effective in connection with the IPO discussed below.
The
number of full-time employees decreased by 24 to 637 on November 30, 2007 from
661 on November 30, 2006 but increased by nine from 628 on August 31,
2007.
Interest
and
Other Income, Net
Interest
and other
income, net decreased to an expense of $6.2 million in fourth quarter 2007
from
income of $5.9 million in fourth quarter 2006. The net decrease was the result
of an increase in gross interest expense and a reduction of gross interest
income. Gross interest income decreased as a result of holding substantially
lower cash balances. We experienced higher gross interest expense on account
of
interest due on the demand note issued to Morgan Stanley in July 2007 and,
following repayment of the demand note, on borrowings of $425.0 million under
a
new credit facility we entered into simultaneously with the completion of the
IPO discussed below.
Provision
for Income Taxes
The
provision for income taxes increased 85.3% to $9.9 million in fourth quarter
2007. The effective tax rate for fourth quarter 2007 decreased to 29.0% from
38.6% in fourth quarter 2006. The decrease reflects the impact of lower tax
rates applicable to non-U.S. earnings and higher domestic tax credits, as well
as reduction in the state and local tax liabilities.
Net
Income
Net
income increased 54.6% to $24.2 million in fourth quarter 2007 from fourth
quarter 2006 and the net income margin expanded to 23.8% from 19.2%. The
increase primarily reflects improvement in operating profitability and a lower
tax rate in fourth quarter 2007, partially offset by the decline in interest
and
other income.
Adjusted
EBITDA
Adjusted
EBITDA more
than tripled to $48.7 million for fourth quarter 2007 compared to fourth quarter
2006. See Table 6 “Reconciliation of Adjusted EBITDA to Net Income.” The
adjusted EBITDA margin expanded to 47.9% in fourth quarter 2007 from 19.0%
in
fourth quarter 2006. The increase reflects the operating leverage in the
business as a result of the strong revenue growth across most product
categories, including the high margin ETF licensing model, and more disciplined
cost management. The increase in our adjusted EBITDA margin also reflects a
favorable comparison with fourth quarter 2006.
Summary
of
Results for Fiscal 2007
Operating
Revenues
Total
operating
revenues for fiscal year 2007 grew 19.1% to $369.9 million with double-digit
percentage gains across three of our four major product categories. Growth
was
led by equity index asset based fees which increased 61.2% to $62.9 million
due
to asset inflows to ETFs linked to MSCI equity indices as well as
asset
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appreciation
in
those investment products. Revenues from our subscription products grew 13.0%
for the year to $307.0 million reflecting improvement in our retention rates
across most product categories, increased subscriptions from existing clients
and new client wins. Approximately 82% of our new subscriptions during fiscal
year 2007 came from existing clients.
The
rate of growth in our Equity Portfolio Analytics product category, in
particular, showed significant improvement, up 9.7% for fiscal year 2007
compared to 3.2% growth for fiscal 2006 reflecting strong sales for equity
risk
data products and higher retention rates for Barra Aegis.
Revenues
for
Multi-Asset Class Portfolio Analytics products increased 36.7% to $23.1 million
for fiscal 2007. The growth primarily reflects additional subscriptions to
BarraOne as a result of product enhancements. This was partially offset by
revenue declines from TotalRisk due to our decision at the end of 2006 to stop
licensing subscriptions to TotalRisk.
Revenues
from other
products declined 3.2% to $26.2 million for fiscal 2007.
OperatingExpenses
Operating
expenses
for fiscal year 2007 increased 5.8% to $240.5 million compared to fiscal 2006.
Excluding the Founders Grant, operating expenses increased 5.4% to $239.7
million for fiscal 2007 with compensation expense increasing 10.1% and
non-compensation expense remaining unchanged. Fiscal 2006 included a number
of
expense items not repeated in fiscal 2007 which totaled $9.7 million. These
non-recurring expenses included the accrued stock based compensation expense
for
equity awards issued to employees eligible for retirement, recruitment fees
associated with senior staff additions and acquisition related costs. Excluding
expenses related to the Founders Grant and the $9.7 million of non-recurring
items in 2006, expenses for fiscal 2007 increased 10%. The increase was driven
largely by higher personnel costs associated with senior management hires,
additional market data costs and rent increases from the expansion of the Hong
Kong office and new offices in Dubai, Chicago and Budapest.
Interest
and
Other Income, Net
Interest
and other
income, net decreased 75.6% to $3.9 million for fiscal year 2007. The net
decrease was the result of an increase in gross interest expense and a reduction
of gross interest income. Gross interest income decreased as a result of holding
substantially lower cash balances. We experienced higher gross interest expense
on account of interest due on the demand note issued to Morgan Stanley in July
2007 and, following repayment of the demand note, on borrowings of $425.0
million under a new credit facility we entered into simultaneously with the
completion of the IPO discussed below.
Provision
for Income Taxes
The
provision for income taxes increased 28.0% to $46.2 million for fiscal year
2007. The effective tax rate for fiscal year 2007 decreased to 34.7% from 36.3%
in fiscal year 2006. The decrease reflects the impact of lower tax rates
applicable to non-U.S. earnings and a reduction in the state and local tax
liabilities.
Net
Income
Net
income increased 21.9% to $87.1 million for fiscal year 2007, and the net income
margin expanded to 23.5% from 23.0%. The increase reflects improvement in
operating profitability and a lower tax rate in fiscal 2007, partially offset
by
the decline in interest and other income.
Adjusted
EBITDA
Adjusted
EBITDA
increased 40.3% to $158.5 million for fiscal year 2007 compared to fiscal year
2006. See Table 6 “Reconciliation of Adjusted EBITDA to Net Income.” The
adjusted EBITDA margin expanded to 42.9% for fiscal year 2007 from 36.4% for
fiscal year 2006 reflecting the operating leverage in our business as a result
of the strong revenue growth across most product categories, including the
high
margin ETF licensing model, and more disciplined cost management.
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Key
Metrics
Table
2
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Year
Ended
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|||
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November
30,
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|||
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2006
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2007
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Change
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Run
Rates1 ($ thousands)
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|||
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Equity
index
asset based fees2
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$43,800
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$76,898
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75.6%
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Hedge
fund
index asset based fees
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6,880
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4,963
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(27.9%)
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Asset
based
fees total
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50,680
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81,861
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61.5%
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Subscription
based fees
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264,317
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315,644
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19.4%
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Total
Run
Rate
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$314,996
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$397,505
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26.2%
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Subscription
based fees - % Americas
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43%
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44%
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Subscription
based fees - % non-Americas
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57%
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56%
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Retention
Rate3
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91%
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92%
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Client
Count4
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2,709
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2,926
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8.0%
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ETF
Assets
linked to MSCI indices ($ billions)
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$112.2
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$191.7
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70.9%
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Full-time
employees
|
661
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637
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(3.6%)
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1The
run rate at a particular point in time represents the forward-looking
fees
for the next 12 months from all subscriptions and investment product
licenses we currently provide to our clients under renewable contracts
assuming all contracts that come up for renewal are renewed and assuming
then-current exchange rates. For any license whose fees are linked
to an
investment product’s assets or trading volume, the run rate calculation
reflects an annualization of the most recent periodic fee earned
under
such license. The run rate does not include fees associated with
“one-time” and other non-recurring transactions. In addition, we remove
from the run rate the fees associated with any subscription or investment
product license agreement with respect to which we have received
a notice
of termination or non-renewal at the time we receive such notice,
even if
the notice is not effective until a later date.
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2Includes
transaction volume-based products, principally futures and options
traded
on certain MSCI indices.
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3Our
retention rate for any period represents the percentage of the
subscription run rate as of the beginning of the period that is not
cancelled during the period. The retention rate is computed on a
product-by-product basis. Therefore, if a client reduces the number
of
products to which it subscribes or switches between our products,
we treat
it as a cancellation. In addition, we treat any reduction in fees
resulting from renegotiated contracts as a cancellation in the calculation
to the extent of the reduction.
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4Our
client count includes affiliates, cities and certain business units
within
a single organization as separate clients when they separately subscribe
to our products.
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Recent
Developments
On
November 14, 2007, MSCI Inc. successfully priced its IPO of 14 million shares
of
its class A common stock at a price of $18 per share. The underwriters of the
IPO exercised the over-allotment option to purchase 2.1 million additional
shares of class A common stock from MSCI Inc. at the public offering price
of
$18 per share, less the underwriting discount. In total, 16.1 million shares
of
class A common stock were sold in connection with the IPO. The proceeds to
MSCI
Inc. from the IPO were $269.5 million after underwriting discounts and
commissions.
Total
basic shares
outstanding as of November 30, 2007 were 100.0 million.
On
November 20, 2007, MSCI Inc. closed on borrowings of $425.0 million under a
new
$500 million credit facility. The proceeds from the IPO and borrowings under
the
credit facility were used to repay fully the $625.9 million demand note to
Morgan Stanley.
Our
stock is listed on the New York Stock Exchange under the symbol
MXB.
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Conference
Call Information
Investors
will have
the opportunity to listen to MSCI Inc.'s senior management review fourth quarter
and full year 2007 results on Thursday, January 10, 2008 at 11:00 am Eastern
time. To hear the live event, visit the investor relations section of MSCI
Inc.'s website, www.mscibarra.com or www.msci.com, or dial 1-877-397-0298 within
the United States. International callers dial 1-719-325-4880.
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 24, 2008. To listen to the recording, visit the investor relations section of www.mscibarra.com www.msci.com, or dial 1-888-203-1112 (passcode: 4023476) within the United States. International callers dial 1-719-457-0820 (passcode: 4023476).
About
MSCI
Inc.
MSCI
Inc. is a
leading provider of investment decision support tools to investment institutions
worldwide. MSCI Inc. products include indices and portfolio risk and performance
analytics for use in managing equity, fixed income and multi-asset class
portfolios.
The
company’s flagship products are the MSCI International Equity Indices, which are
estimated to have over US $3 trillion benchmarked to them, and the Barra risk
models and portfolio analytics, which cover 56 equity and 46 fixed income
markets. MSCI Inc. is headquartered in New York, with research and commercial
offices around the world. Morgan Stanley, a global financial services firm,
is
the majority shareholder of MSCI Inc. MXB#IR
For
further
information on MSCI Inc. or our products please visit
www.mscibarra.com.
MSCI
Inc.
Contact:
|
Ken
O’Keeffe,
MSCI, New York
|
+
1.212.804.1583
|
|
For
media enquiries please contact:
|
|
|
Steve
Bruce |
Pen Pendleton | Ann Taylor Reed, Abernathy MacGregor, New
York
|
+
1.212.371.5999
|
|
Sally
Todd |
Clare Milton, Penrose Financial, London
|
+
44.20.7786.4888
|
Forward-Looking
Statements
This
release
contains forward-looking statements. These statements relate to future events
or
to future financial performance and involve known and unknown risks,
uncertainties and other factors that may cause our actual results, levels of
activity, performance, or achievements to be materially different from any
future results, levels of activity, performance, or achievements expressed
or
implied by these forward-looking statements. In some cases, you can identify
forward-looking statements by the use of words such as “may,” “could,” “expect,”
“intend,” “plan,” “seek,” “anticipate,” “believe,” “estimate,” “predict,”
“potential,” or “continue” or the negative of these terms or other comparable
terminology. You should not place undue reliance on forward-looking statements
because they involve known and unknown risks, uncertainties and other factors
that are, in some cases, beyond our control and that could materially affect
actual results, levels of activity, performance, or achievements.
Other
factors that
could materially affect actual results, levels of activity, performance or
achievements can be found in MSCI's Prospectus dated November 14, 2007 and
filed
with the Securities and Exchange Commission on November 15, 2007. 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
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obligation
to
publicly update or revise these forward-looking statements for any reason,
whether as a result of new information, future events, or
otherwise.
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Table
3
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MSCI
Inc.
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|||||
|
Consolidated
Statements of Income (unaudited)
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|||||
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Three
Months
Ended
|
Year
Ended
|
||||
|
November
30,
|
November
30,
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||||
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Amounts
in
thousands, except per share data
|
2006
|
2007
|
|
2006
|
2007
|
|
Revenues
|
$81,586
|
$101,658
|
$310,698
|
$369,886
|
|
|
Operating
expenses
|
|||||
|
Cost
of services
|
38,314
|
29,678
|
115,426
|
121,711
|
|
|
Selling,
general and administrative
|
28,776
|
24,593
|
85,820
|
92,477
|
|
|
Amortization
of intangible assets
|
6,539
|
7,125
|
26,156
|
26,353
|
|
|
Total
operating expenses
|
73,629
|
61,396
|
227,402
|
240,541
|
|
|
Operating
income
|
7,957
|
40,262
|
83,296
|
129,345
|
|
|
Interest
income
|
5,070
|
1,432
|
15,482
|
13,143
|
|
|
Interest
expense
|
68
|
7,730
|
352
|
9,586
|
|
|
Other
income
|
857
|
137
|
1,043
|
390
|
|
|
Interest
and
other income (expense), net
|
5,859
|
(6,161)
|
16,173
|
3,947
|
|
|
Income
before
discontinued operations and income taxes
|
13,816
|
34,101
|
99,469
|
133,292
|
|
|
Provision
for
income taxes
|
5,328
|
9,873
|
36,097
|
46,192
|
|
|
Income
before
discontinued operations
|
8,488
|
24,228
|
63,372
|
87,100
|
|
|
Income
from
discontinued operations, net of tax
|
7,188
|
-
|
8,073
|
-
|
|
|
Net
income
|
$
15,676
|
$
24,228
|
$
71,445
|
$
87,100
|
|
|
Earnings
per
basic common share:
|
|||||
|
Continuing
operations
|
$0.10
|
$0.28
|
$0.76
|
$1.03
|
|
|
Discontinued
operations
|
0.09
|
-
|
0.10
|
-
|
|
|
Earnings
per basic common share1
|
$0.19
|
$0.28
|
$0.85
|
$1.03
|
|
|
Earnings
per
diluted common share:
|
|||||
|
Continuing
operations
|
$0.10
|
$0.28
|
$0.76
|
$1.03
|
|
|
Discontinued
operations
|
0.09
|
-
|
0.10
|
-
|
|
|
Earnings
per diluted common share1
|
$0.19
|
$0.28
|
$0.85
|
$1.03
|
|
|
Weighted
average common shares (Basic)
|
83,900
|
86,733
|
83,900
|
84,608
|
|
|
Weighted
average common shares (Diluted)
|
83,900
|
86,856
|
83,900
|
84,637
|
|
|
1Numbers
may not add due to rounding.
|
|||||
8
of
10
|
www.mscibarra.com
|
Supplemental
Information
Table
4
|
Operating
Revenues by Product Category
|
|||||||
|
Three
Months
Ended
|
Year
Ended
|
||||||
|
November
30,
|
November
30,
|
||||||
|
Amounts
in
thousands
|
2006
|
2007
|
Change
|
|
2006
|
2007
|
Change
|
|
Equity
index subscriptions
|
$30,942
|
$37,342
|
20.7%
|
$117,752
|
$137,089
|
16.4%
|
|
|
Equity
index asset based fees
|
11,330
|
18,680
|
64.9%
|
39,020
|
62,903
|
61.2%
|
|
|
Equity
indices
total
|
42,272
|
56,022
|
32.5%
|
156,772
|
199,992
|
27.6%
|
|
|
Equity
portfolio analytics
|
27,623
|
31,625
|
14.5%
|
110,007
|
120,648
|
9.7%
|
|
|
Multi-asset
class portfolio analytics
|
4,456
|
7,701
|
72.8%
|
16,873
|
23,070
|
36.7%
|
|
|
Other
products
|
7,235
|
6,310
|
(12.8%)
|
27,046
|
26,176
|
(3.2%)
|
|
|
Total
operating revenues
|
$81,586
|
$101,658
|
24.6%
|
$310,698
|
$369,886
|
19.1%
|
|
Table
5
|
Operating
Expenses by Category
|
|||||||
|
Three
Months
Ended
|
Year
Ended
|
||||||
|
November
30,
|
November
30,
|
||||||
|
Amounts
in
thousands
|
2006
|
2007
|
Change
|
|
2006
|
2007
|
Change
|
|
Operating
expenses
|
|||||||
|
Cost
of services
|
38,314
|
29,457
|
(23.1%)
|
115,426
|
121,490
|
5.3%
|
|
|
Selling,
general and administrative
|
28,776
|
23,986
|
(16.6%)
|
85,820
|
91,870
|
7.0%
|
|
|
Amortization
of intangible assets
|
6,539
|
7,125
|
9.0%
|
26,156
|
26,353
|
0.8%
|
|
|
Operating
expenses excluding Founders Grant
|
$73,629
|
$60,568
|
(17.7%)
|
$227,402
|
$239,713
|
5.4%
|
|
|
Founders
Grant expense
|
-
|
828
|
-
|
-
|
828
|
-
|
|
|
Operating
expenses including Founders Grant
|
$73,629
|
$61,396
|
(16.6%)
|
$227,402
|
$240,541
|
5.8%
|
|
Table
6
|
Reconciliation
of Adjusted EBITDA to Net Income
|
|||||
|
Three
Months
Ended
|
Year
Ended
|
||||
|
November
30,
|
November
30,
|
||||
|
Amounts
in
thousands
|
2006
|
2007
|
|
2006
|
2007
|
|
Adjusted
EBITDA
|
$15,511
|
$48,682
|
$112,951
|
$158,523
|
|
|
Founders
Grant
expense
|
-
|
828
|
-
|
828
|
|
|
Depreciation
and amortization
|
1,015
|
467
|
3,499
|
1,997
|
|
|
Amortization
of intangible assets
|
6,539
|
7,125
|
26,156
|
26,353
|
|
|
Interest
and
other income (expense), net
|
5,859
|
(6,161)
|
16,173
|
3,947
|
|
|
Provision
for
income taxes
|
5,328
|
9,873
|
36,097
|
46,192
|
|
|
Income
before
discontinued operations
|
8,488
|
24,228
|
63,372
|
87,100
|
|
|
Income
from
discontinued operations, net of tax
|
7,188
|
-
|
8,073
|
-
|
|
|
Net
income
|
$15,676
|
$24,228
|
$71,445
|
$87,100
|
|
9
of
10
|
www.mscibarra.com
|
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 as
we
do. As stated above, adjusted EBITDA excludes expense for the one-time $68
million Founders Grant which is being amortized through 2011. Management
believes that it is useful to exclude the Founders Grant expense in order to
focus on what is deemed to be a more reliable indicator of ongoing operating
performance. Amortization expense for the one-time $68 million Founders Grant,
representing restricted stock units and options awarded to employees effective
with the IPO, is expected to be amortized through 2011.
Additionally,
our
management uses adjusted EBITDA to compare us to other companies in the same
industry when evaluating relative performance and industry development. Adjusted
EBITDA as presented herein, however, may not be comparable to similarly titled
measures reported by other companies. Adjusted EBITDA is a non-GAAP measure
that
should not be considered as an alternative to net income, as an indication
of
financial performance or as an alternative to cash flow from operations as
a
measure of liquidity.
Operating
Expenses
excluding Founders Grant
Operating
Expenses
excluding Founders Grant (described above) is 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.
10
of
10