MSCI Reports Financial Results for Second Quarter and Six Months 2018
Financial and Operational Highlights for Second Quarter 2018
(Notes:
Percentage and other changes refer to second quarter 2017 unless
otherwise noted.)
- Operating revenues up 14.9%; recurring subscription revenues up 10.0%; asset-based fees up 30.4%.
-
Diluted EPS of
$1.28 , up 43.8%; Adjusted EPS of$1.30 , up 36.8%. -
Quarter‐end AUM of
$744.7 billion in ETFs linked toMSCI indexes; up 19.3% compared to prior year. AUM of$763.0 billion as ofJuly 31, 2018 . -
Total
Run Rate up 12.0% to$1,411.7 million , driven by asset-based feesRun Rate , up 21.4%, and subscriptionRun Rate , up 9.5%. Organic subscriptionRun Rate growth was 10.2%. - Continued strong retention with total Retention Rate at 94.1%.
-
Board of Directors ("Board") approved a 52.6% increase to quarterly
dividend to
$0.58 per share payable in the third quarter; payout ratio target increased to a range of 40% to 50% of Adjusted EPS. -
Issued
$500 million of senior unsecured notes due 2027, bringing total cash to$1.4 billion .
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||||||||
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YoY % |
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YoY % | |||||||||||||||||||||||||||
| In thousands, except per share data | 2018 | 2017 | 2018 | Change | 2018 | 2017 | Change | ||||||||||||||||||||||||||
| Operating revenues | $ | 363,046 | $ | 316,089 | $ | 351,316 | 14.9 | % | $ | 714,362 | $ | 617,296 | 15.7 | % | |||||||||||||||||||
| Operating income | $ | 173,511 | $ | 146,100 | $ | 167,166 | 18.8 | % | $ | 340,677 | $ | 276,832 | 23.1 | % | |||||||||||||||||||
| Operating margin % | 47.8 | % | 46.2 | % | 47.6 | % | 47.7 | % | 44.8 | % | |||||||||||||||||||||||
| Net income | $ | 116,829 | $ | 81,266 | $ | 115,092 | 43.8 | % | $ | 231,921 | $ | 154,217 | 50.4 | % | |||||||||||||||||||
| Diluted EPS | $ | 1.28 | $ | 0.89 | $ | 1.24 | 43.8 | % | $ | 2.52 | $ | 1.68 | 50.0 | % | |||||||||||||||||||
| Adjusted EPS | $ | 1.30 | $ | 0.95 | $ | 1.31 | 36.8 | % | $ | 2.61 | $ | 1.83 | 42.6 | % | |||||||||||||||||||
| Adjusted EBITDA | $ | 200,425 | $ | 166,381 | $ | 186,708 | 20.5 | % | $ | 387,134 | $ | 317,202 | 22.0 | % | |||||||||||||||||||
| Adjusted EBITDA margin % | 55.2 | % | 52.6 | % | 53.1 | % | 54.2 | % | 51.4 | % | |||||||||||||||||||||||
"In a dynamic and evolving investment industry, our value proposition to our clients and the strength of our franchise is as strong as ever. We are driving momentum in our key client segments such as asset owners, asset managers, wealth managers and broker dealers.
Our focus on enhancing our go-to-market strategy and more closely
engaging with our clients helped us deliver exceptional gross sales and
strong recurring net new sales for the first half of 2018. Our strong
second quarter results reinforce our conviction in the strategic bets we
have taken to deliver a more client-centric company," commented Henry A.
Fernandez, Chairman and CEO of
Second Quarter 2018 Consolidated Results
Revenues:
Operating revenues for second quarter 2018 increased
For six months 2018, operating revenues increased
Expenses: Total
operating expenses for second quarter 2018 increased
For six months 2018, total operating expenses increased
Headcount: As
of
Amortization and Depreciation Expenses:
Amortization and depreciation expenses of
Other Expense (Income), Net:
Other expense (income), net was
Tax Rate:
Income tax expense was
Income tax expense was
The recorded cumulative net charge of
Net Income: Net
income increased 43.8% to
Adjusted EBITDA:
Adjusted EBITDA was
Cash Balances & Outstanding Debt:
Total cash and cash equivalents as of
A private offering of
Cash Flow & Capex:
Net cash provided by operating activities was
Net cash provided by operating activities was
Share Count & Capital Return:
The weighted average diluted shares outstanding in second quarter 2018
declined 0.1% to 91.6 million, compared to 91.7 million in second
quarter 2017. In second quarter 2018
On
Table 1: Second Quarter 2018 Results by Segment (unaudited)
| Index | Analytics | All Other | |||||||||||||||||||||||||||||||||
| Adjusted | Adjusted | Adjusted | |||||||||||||||||||||||||||||||||
| Operating | Adjusted | EBITDA | Operating | Adjusted | EBITDA | Operating | Adjusted | EBITDA | |||||||||||||||||||||||||||
| In thousands | Revenues | EBITDA | Margin | Revenues | EBITDA | Margin | Revenues | EBITDA | Margin | ||||||||||||||||||||||||||
| Q2'18 | $ | 212,934 | $ | 157,516 | 74.0 | % | $ | 119,119 | $ | 36,327 | 30.5 | % | $ | 30,993 | $ | 6,582 | 21.2 | % | |||||||||||||||||
| Q2'17 | $ | 177,156 | $ | 129,519 | 73.1 | % | $ | 113,367 | $ | 31,805 | 28.1 | % | $ | 25,566 | $ | 5,057 | 19.8 | % | |||||||||||||||||
| Q1'18 | $ | 201,913 | $ | 145,929 | 72.3 | % | $ | 118,987 | $ | 33,593 | 28.2 | % | $ | 30,415 | $ | 7,187 | 23.6 | % | |||||||||||||||||
| YoY % change | 20.2 | % | 21.6 | % | 5.1 | % | 14.2 | % | 21.2 | % | 30.2 | % | |||||||||||||||||||||||
| YTD 2018 | $ | 414,848 | $ | 303,446 | 73.1 | % | $ | 238,106 | $ | 69,920 | 29.4 | % | $ | 61,408 | $ | 13,768 | 22.4 | % | |||||||||||||||||
| YTD 2017 | $ | 340,591 | $ | 245,196 | 72.0 | % | $ | 225,787 | $ | 61,405 | 27.2 | % | $ | 50,918 | $ | 10,601 | 20.8 | % | |||||||||||||||||
| % change | 21.8 | % | 23.8 | % | 5.5 | % | 13.9 | % | 20.6 | % | 29.9 | % | |||||||||||||||||||||||
Index Segment:
Operating revenues for second quarter 2018 increased
The
The
Operating revenues for six months 2018 increased
Index
Analytics Segment:
Operating revenues for second quarter 2018 increased
The adjusted EBITDA margin for Analytics was 30.5% for second quarter 2018, compared to 28.1% for second quarter 2017.
Operating revenues for six months 2018 increased
Analytics
All Other Segment:
Operating revenues for second quarter 2018 increased
Operating revenues for six months 2018 increased
All Other
Full-Year 2018 Guidance
MSCI's guidance for full-year 2018 remains as follows:
-
Total operating expenses are expected to be in the range of
$725 million to$750 million . -
Adjusted EBITDA expenses are expected to be in the range of
$645 million to$665 million . -
As previously disclosed in connection with the completion of the 2027
Notes Offering on
May 18, 2018 , interest expense, including the amortization of financing fees, is now expected to be approximately$133 million , assuming no additional financings. -
Capex is expected to be in the range of
$40 million to$50 million . -
Net cash provided by operating activities and free cash flow is
expected to be in the range of
$490 million to$540 million and$440 million to$500 million , respectively. -
The effective tax rate is expected to be in the range of 21% to 24%.
This full-year effective tax rate range includes an expected windfall
tax benefit related to stock-based compensation of approximately
$8.2 million , of which$7.5 million was realized in first quarter 2018. Further information is expected to be released that may impact the Company's current interpretation and application of Tax Reform, which may result in a change to our full-year guidance in subsequent periods.
The guidance provided above assumes, among other things, that
In addition, we are also increasing our dividend payout ratio target to a range of 40% to 50% percent of adjusted EPS, from a previous range of 30% to 40%.
New Revenue Standard Effective
Effective
Compared to the revenue recognition method used prior to 2018, the new revenue standard will result in more revenue being recognized up-front or earlier in the life of new contracts for certain products and services, including fees related to the licensing of desktop applications, implementation and set-up services and multi-year deals. The lost future period revenue from existing contracts as a result of the cumulative adjustment to retained earnings is expected to be largely offset by the acceleration of revenue from certain new contracts. As a result, the overall impact of adopting the new revenue standard is not expected to have a material impact on MSCI's consolidated financial statements or the annual trend of revenue. It is possible that some increased quarterly revenue variability may exist by segment depending on the timing of deal closings and renewals.
As a result of the adoption of the new revenue standard,
In addition, as a result of the adoption of the new revenue standard,
the amount of accounts receivable and deferred revenue reported on the
Company's balance sheet as of
There are no changes to how we calculate our operating metrics.
Conference Call Information
An audio recording of the conference call will be available on our
Investor Relations website, http://ir.msci.com/events.cfm,
beginning approximately two hours after the conclusion of the live
event. Through August 5, 2018, the recording will also be available by
dialing 1-855-859-2056 passcode: 9645878 within the United States or
1-404-537-3406 passcode: 9645878 for international callers. A replay of
the conference call will be archived in the events and presentations
section of
About
For more than 45 years,
Our line of products and services includes indexes, analytical models, data, real estate benchmarks and ESG research.
Total assets benchmarked to
For more information, visit us at www.msci.com. MSCI#IR
Forward-Looking Statements
This earnings release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including without limitation, our full-year 2018 guidance. These forward-looking statements relate to future events or to future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these statements. In some cases, you can identify forward-looking statements by the use of words such as "may," "could," "expect," "intend," "plan," "seek," "anticipate," "believe," "estimate," "predict," "potential" or "continue," or the negative of these terms or other comparable terminology. You should not place undue reliance on forward-looking statements because they involve known and unknown risks, uncertainties and other factors that are, in some cases, beyond our control and that could materially affect our actual results, levels of activity, performance or achievements.
Other factors that could materially affect actual results, levels of
activity, performance or achievements can be found in MSCI's Annual
Report on Form 10-K for the fiscal year ended
Website and Social Media Disclosure
Notes Regarding the Use of Operating Metrics
Retention Rate for a period is calculated by annualizing the
cancellations for which we have received a notice of termination or for
which we believe there is an intention not to renew during the period,
and we believe that such notice or intention evidences the client's
final decision to terminate or not renew the applicable agreement, even
though such notice is not effective until a later date. This annualized
cancellation figure is then divided by the subscription
Retention Rate is computed by segment on a product/service-by-product/service basis. In general, if a client reduces the number of products or services to which it subscribes within a segment, or switches between products or services within a segment, we treat it as a cancellation for reporting purposes, except in the case of a product or service switch that management considers to be a replacement product or service. In those replacement cases, only the net change to the client subscription, if a decrease, is reported as a cancel. In the Analytics and the ESG segments, substantially all product or service switches are treated as replacement products or services and netted in this manner, while in our Index and Real Estate segments, product or service switches that are treated as replacement products or services and receive netting treatment occur only in certain limited instances. In addition, we treat any reduction in fees resulting from a down-sale of the same product or service as a cancellation to the extent of the reduction.
This definition of Retention Rate has been revised to describe our
methodology for calculating cancellations. We believe this methodology
has been applied in all material respects in calculating cancellation
rates reported in the prior periods covered in our Form 10-K for the
year ended
"Organic subscription
Notes Regarding the Use of Non-GAAP Financial Measures
"Adjusted EBITDA" is defined as net income before (1) provision for income taxes, (2) other expense (income), net, (3) depreciation and amortization of property, equipment and leasehold improvements, (4) amortization of intangible assets and, at times, (5) certain other transactions or adjustments.
"Adjusted EBITDA expenses" is defined as operating expenses less depreciation and amortization of property, equipment and leasehold improvements and amortization of intangible assets and, at times, certain other transactions or adjustments.
"Adjusted net income" and "adjusted EPS" are defined as net income and diluted EPS, respectively, before the after-tax impact of the amortization of acquired intangible assets, the impact of Tax Reform adjustments and, at times, certain other transactions or adjustments.
"Adjusted tax rate" is defined as the effective tax rate excluding the impact of Tax Reform.
"Capex" is defined as capital expenditures plus capitalized software development costs.
"Free cash flow" is defined as net cash provided by operating activities, less Capex.
We believe adjusted EBITDA and adjusted EBITDA expenses are meaningful
measures of the operating performance of
We believe adjusted net income and adjusted EPS are meaningful measures
of the performance of
We believe that free cash flow is useful to investors because it relates
the operating cash flow of
We believe that adjusted tax rate is useful to investors because it increases the comparability of period-to-period results by adjusting for the estimated net impact of Tax Reform.
We believe that the non-GAAP financial measures presented in this earnings release facilitate meaningful period-to-period comparisons and provide a baseline for the evaluation of future results.
Adjusted EBITDA expenses, adjusted EBITDA, adjusted net income, adjusted EPS, adjusted tax rate, Capex and free cash flow are not defined in the same manner by all companies and may not be comparable to similarly-titled non-GAAP financial measures of other companies.
Notes Regarding Adjusting for the Impact of Foreign Currency Exchange Rate Fluctuations
Foreign currency exchange rate fluctuations reflect the difference
between the current period results as reported compared to the current
period results recalculated using the foreign currency exchange rates in
effect for the comparable prior period. While operating revenues
adjusted for the impact of foreign currency fluctuations includes
asset-based fees that have been adjusted for the impact of foreign
currency fluctuations, the underlying AUM, which is the primary
component of asset-based fees, is not adjusted for foreign currency
fluctuations. Approximately two-thirds of the AUM are invested in
securities denominated in currencies other than the
|
Table 2: Condensed Consolidated Statements of Income (unaudited) |
||||||||||||||||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||||||||||||
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|
YoY % |
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YoY % | ||||||||||||||||||||
| In thousands, except per share data | 2018 | 2017(2) | 2018 | Change | 2018 | 2017(2) | Change | |||||||||||||||||||
| Operating revenues | $ | 363,046 | $ | 316,089 | $ | 351,316 | 14.9 | % | $ | 714,362 | $ | 617,296 | 15.7 | % | ||||||||||||
| Operating expenses: | ||||||||||||||||||||||||||
| Cost of revenues | 71,368 | 68,538 | 71,304 | 4.1 | % | 142,672 | 136,001 | 4.9 | % | |||||||||||||||||
| Selling and marketing | 47,416 | 41,550 | 46,409 | 14.1 | % | 93,825 | 84,522 | 11.0 | % | |||||||||||||||||
| Research and development | 19,801 | 18,196 | 20,707 | 8.8 | % | 40,508 | 37,166 | 9.0 | % | |||||||||||||||||
| General and administrative | 24,036 | 21,424 | 26,187 | 12.2 | % | 50,223 | 42,405 | 18.4 | % | |||||||||||||||||
| Amortization of intangible assets | 19,537 | 11,122 | 11,338 | 75.7 | % | 30,875 | 22,373 | 38.0 | % | |||||||||||||||||
| Depreciation and amortization of property, | ||||||||||||||||||||||||||
| equipment and leasehold improvements | 7,377 | 9,159 | 8,205 | (19.5 | %) | 15,582 | 17,997 | (13.4 | %) | |||||||||||||||||
| Total operating expenses(1) | 189,535 | 169,989 | 184,150 | 11.5 | % | 373,685 | 340,464 | 9.8 | % | |||||||||||||||||
| Operating income | 173,511 | 146,100 | 167,166 | 18.8 | % | 340,677 | 276,832 | 23.1 | % | |||||||||||||||||
| Interest income | (4,281 | ) | (1,310 | ) | (2,770 | ) | 226.8 | % | (7,051 | ) | (2,242 | ) | 214.5 | % | ||||||||||||
| Interest expense | 31,761 | 29,027 | 29,560 | 9.4 | % | 61,321 | 58,051 | 5.6 | % | |||||||||||||||||
| Other expense (income) | (10,292 | ) | 872 | 938 | n/m | (9,354 | ) | 1,887 | n/m | |||||||||||||||||
| Other expense (income), net | 17,188 | 28,589 | 27,728 | (39.9 | %) | 44,916 | 57,696 | (22.2 | %) | |||||||||||||||||
| Income before provision for income taxes | 156,323 | 117,511 | 139,438 | 33.0 | % | 295,761 | 219,136 | 35.0 | % | |||||||||||||||||
| Provision for income taxes | 39,494 | 36,245 | 24,346 | 9.0 | % | 63,840 | 64,919 | (1.7 | %) | |||||||||||||||||
| Net income | $ | 116,829 | $ | 81,266 | $ | 115,092 | 43.8 | % | $ | 231,921 | $ | 154,217 | 50.4 | % | ||||||||||||
| Earnings per basic common share | $ | 1.31 | $ | 0.90 | $ | 1.28 | 45.6 | % | $ | 2.59 | $ | 1.70 | 52.4 | % | ||||||||||||
| Earnings per diluted common share | $ | 1.28 | $ | 0.89 | $ | 1.24 | 43.8 | % | $ | 2.52 | $ | 1.68 | 50.0 | % | ||||||||||||
| Weighted average shares outstanding used | ||||||||||||||||||||||||||
| in computing earnings per share: | ||||||||||||||||||||||||||
| Basic | 89,112 | 90,404 | 90,075 | (1.4 | %) | 89,591 | 90,555 | (1.1 | %) | |||||||||||||||||
| Diluted | 91,585 | 91,708 | 92,587 | (0.1 | %) | 92,083 | 91,665 | 0.5 | % | |||||||||||||||||
|
(1) Includes stock-based compensation expense of |
|
(2) As a result of the adoption of recent accounting guidance, the
Company has restated its Condensed Consolidated Statements of
Income by reclassifying |
|
Table 3: Selected Balance Sheet Items (unaudited) |
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| As of | ||||||
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| In thousands | 2018 | 2017 | ||||
| Cash and cash equivalents |
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| Accounts receivable, net of allowances(1) |
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| Deferred revenue(2) |
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| Long-term debt(3) |
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(1) Accounts receivable, net of allowances would have been |
|
(2) Deferred revenue would have been |
|
(3) Consists of gross long-term debt, net of deferred financing
fees. Gross long-term debt at |
|
Table 4: Selected Cash Flow Items (unaudited) |
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| Three Months Ended | Six Months Ended | ||||||||||||||||||||
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| In thousands | 2018 | 2017 | 2018 | 2018 | 2017 | ||||||||||||||||
| Net cash provided by operating activities | $ | 207,165 | $ | 122,217 | $ | 88,597 | $ | 295,762 | $ | 159,232 | |||||||||||
| Net cash provided by (used in) investing activities | 13,805 | (6,264 | ) | (5,872 | ) | 7,933 | (15,893 | ) | |||||||||||||
| Net cash provided by (used in) financing activities | 304,416 | (65,398 | ) | (126,058 | ) | 178,358 | (190,624 | ) | |||||||||||||
| Effect of exchange rate changes | (7,618 | ) | 3,054 | 3,659 | (3,959 | ) | 6,032 | ||||||||||||||
| Net increase (decrease) in cash and cash equivalents | $ | 517,768 | $ | 53,609 | $ | (39,674 | ) | $ | 478,094 | $ | (41,253 | ) | |||||||||
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Table 5: Operating Results by Segment and Revenue Type (unaudited) |
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| Index | Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||||||
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YoY % | ||||||||||||||||||||||||||
| In thousands | 2018 | 2017 | 2018 | Change | 2018 | 2017 | Change | |||||||||||||||||||||||||
| Operating revenues: | ||||||||||||||||||||||||||||||||
| Recurring subscriptions | $ | 119,626 | $ | 105,645 | $ | 113,205 | 13.2 | % | $ | 232,831 | $ | 207,823 | 12.0 | % | ||||||||||||||||||
| Asset-based fees | 87,636 | 67,230 | 85,483 | 30.4 | % | 173,119 | 124,738 | 38.8 | % | |||||||||||||||||||||||
| Non-recurring | 5,672 | 4,281 | 3,226 | 32.5 | % | 8,898 | 8,030 | 10.8 | % | |||||||||||||||||||||||
| Total operating revenues | 212,934 | 177,156 | 201,913 | 20.2 | % | 414,848 | 340,591 | 21.8 | % | |||||||||||||||||||||||
| Adjusted EBITDA expenses | 55,418 | 47,637 | 55,984 | 16.3 | % | 111,402 | 95,395 | 16.8 | % | |||||||||||||||||||||||
| Adjusted EBITDA | $ | 157,516 | $ | 129,519 | $ | 145,929 | 21.6 | % | $ | 303,446 | $ | 245,196 | 23.8 | % | ||||||||||||||||||
| Adjusted EBITDA margin % | 74.0 | % | 73.1 | % | 72.3 | % | 73.1 | % | 72.0 | % | ||||||||||||||||||||||
| Analytics | Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||||||
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YoY % |
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YoY % | ||||||||||||||||||||||||||
| In thousands | 2018 | 2017 | 2018 | Change | 2018 | 2017 | Change | |||||||||||||||||||||||||
| Operating revenues: | ||||||||||||||||||||||||||||||||
| Recurring subscriptions | $ | 117,528 | $ | 112,061 | $ | 118,244 | 4.9 | % | $ | 235,772 | $ | 223,330 | 5.6 | % | ||||||||||||||||||
| Non-recurring | 1,591 | 1,306 | 744 | 21.8 | % | 2,334 | 2,457 | (5.0 | %) | |||||||||||||||||||||||
| Total operating revenues | 119,119 | 113,367 | 118,987 | 5.1 | % | 238,106 | 225,787 | 5.5 | % | |||||||||||||||||||||||
| Adjusted EBITDA expenses | 82,792 | 81,562 | 85,395 | 1.5 | % | 168,186 | 164,382 | 2.3 | % | |||||||||||||||||||||||
| Adjusted EBITDA | $ | 36,327 | $ | 31,805 | $ | 33,593 | 14.2 | % | $ | 69,920 | $ | 61,405 | 13.9 | % | ||||||||||||||||||
| Adjusted EBITDA margin % | 30.5 | % | 28.1 | % | 28.2 | % | 29.4 | % | 27.2 | % | ||||||||||||||||||||||
| All Other | Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||||||
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YoY % |
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YoY % | ||||||||||||||||||||||||||
| In thousands | 2018 | 2017 | 2018 | Change | 2018 | 2017 | Change | |||||||||||||||||||||||||
| Operating revenues: | ||||||||||||||||||||||||||||||||
| Recurring subscriptions | $ | 29,584 | $ | 24,739 | $ | 29,367 | 19.6 | % | $ | 58,951 | $ | 49,391 | 19.4 | % | ||||||||||||||||||
| Non-recurring | 1,409 | 827 | 1,048 | 70.4 | % | 2,457 | 1,527 | 60.9 | % | |||||||||||||||||||||||
| Total operating revenues | 30,993 | 25,566 | 30,415 | 21.2 | % | 61,408 | 50,918 | 20.6 | % | |||||||||||||||||||||||
| Adjusted EBITDA expenses | 24,411 | 20,509 | 23,228 | 19.0 | % | 47,640 | 40,317 | 18.2 | % | |||||||||||||||||||||||
| Adjusted EBITDA | $ | 6,582 | $ | 5,057 | $ | 7,187 | 30.2 | % | $ | 13,768 | $ | 10,601 | 29.9 | % | ||||||||||||||||||
| Adjusted EBITDA margin % | 21.2 | % | 19.8 | % | 23.6 | % | 22.4 | % | 20.8 | % | ||||||||||||||||||||||
| Consolidated | Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||||||
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YoY % |
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YoY % | ||||||||||||||||||||||||||
| In thousands | 2018 | 2017 | 2018 | Change | 2018 | 2017 | Change | |||||||||||||||||||||||||
| Operating revenues: | ||||||||||||||||||||||||||||||||
| Recurring subscriptions | $ | 266,738 | $ | 242,445 | $ | 260,815 | 10.0 | % | $ | 527,554 | $ | 480,544 | 9.8 | % | ||||||||||||||||||
| Asset-based fees | 87,636 | 67,230 | 85,483 | 30.4 | % | 173,119 | 124,738 | 38.8 | % | |||||||||||||||||||||||
| Non-recurring | 8,672 | 6,414 | 5,018 | 35.2 | % | 13,689 | 12,014 | 13.9 | % | |||||||||||||||||||||||
| Operating revenues total | 363,046 | 316,089 | 351,316 | 14.9 | % | 714,362 | 617,296 | 15.7 | % | |||||||||||||||||||||||
| Adjusted EBITDA expenses | 162,621 | 149,708 | 164,607 | 8.6 | % | 327,228 | 300,094 | 9.0 | % | |||||||||||||||||||||||
| Adjusted EBITDA | $ | 200,425 | $ | 166,381 | $ | 186,708 | 20.5 | % | $ | 387,134 | $ | 317,202 | 22.0 | % | ||||||||||||||||||
| Adjusted EBITDA margin % | 55.2 | % | 52.6 | % | 53.1 | % | 54.2 | % | 51.4 | % | ||||||||||||||||||||||
| Operating margin % | 47.8 | % | 46.2 | % | 47.6 | % | 47.7 | % | 44.8 | % | ||||||||||||||||||||||
|
Table 6: Sales and Retention Rate by Segment (unaudited) |
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| Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||||||||||
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| In thousands | 2018 | 2018 | 2017 | 2017 | 2017 | 2018 | 2017 | ||||||||||||||||||||||||||||
| Index | |||||||||||||||||||||||||||||||||||
| New recurring subscription sales | $ | 20,906 | $ | 15,195 | $ | 17,980 | $ | 15,499 | $ | 13,636 | $ | 36,101 | $ | 27,829 | |||||||||||||||||||||
| Subscription cancellations | (4,577 | ) | (4,115 | ) | (6,180 | ) | (4,605 | ) | (3,045 | ) | (8,692 | ) | (6,210 | ) | |||||||||||||||||||||
| Net new recurring subscription sales | $ | 16,329 | $ | 11,080 | $ | 11,800 | $ | 10,894 | $ | 10,591 | $ | 27,409 | $ | 21,619 | |||||||||||||||||||||
| Non-recurring sales | $ | 5,328 | $ | 3,459 | $ | 3,677 | $ | 3,704 | $ | 4,555 | $ | 8,787 | $ | 8,929 | |||||||||||||||||||||
| Total gross sales(1) | $ | 26,234 | $ | 18,654 | $ | 21,657 | $ | 19,203 | $ | 18,191 | $ | 44,888 | $ | 36,758 | |||||||||||||||||||||
| Total Index net sales | $ | 21,657 | $ | 14,539 | $ | 15,477 | $ | 14,598 | $ | 15,146 | $ | 36,196 | $ | 30,548 | |||||||||||||||||||||
| Index Retention Rate(2) | 95.9 | % | 96.4 | % | 93.9 | % | 95.5 | % | 97.0 | % | 96.1 | % | 96.9 | % | |||||||||||||||||||||
| Analytics | |||||||||||||||||||||||||||||||||||
| New recurring subscription sales | $ | 17,395 | $ | 11,356 | $ | 25,217 | $ | 15,036 | $ | 12,050 | $ | 28,752 | $ | 23,924 | |||||||||||||||||||||
| Subscription cancellations | (9,452 | ) | (8,578 | ) | (11,679 | ) | (7,444 | ) | (6,940 | ) | (18,030 | ) | (14,551 | ) | |||||||||||||||||||||
| Net new recurring subscription sales | $ | 7,943 | $ | 2,778 | $ | 13,538 | $ | 7,592 | $ | 5,110 | $ | 10,722 | $ | 9,373 | |||||||||||||||||||||
| Non-recurring sales | $ | 2,425 | $ | 1,346 | $ | 3,742 | $ | 2,792 | $ | 1,609 | $ | 3,770 | $ | 3,772 | |||||||||||||||||||||
| Total gross sales(1) | $ | 19,820 | $ | 12,702 | $ | 28,959 | $ | 17,828 | $ | 13,659 | $ | 32,522 | $ | 27,696 | |||||||||||||||||||||
| Total Analytics net sales | $ | 10,368 | $ | 4,124 | $ | 17,280 | $ | 10,384 | $ | 6,719 | $ | 14,492 | $ | 13,145 | |||||||||||||||||||||
| Analytics Retention Rate(2) | 92.1 | % | 93.0 | % | 89.7 | % | 93.4 | % | 93.9 | % | 92.6 | % | 93.6 | % | |||||||||||||||||||||
| All Other | |||||||||||||||||||||||||||||||||||
| New recurring subscription sales | $ | 6,678 | $ | 5,468 | $ | 8,391 | $ | 4,576 | $ | 5,456 | $ | 12,146 | $ | 9,577 | |||||||||||||||||||||
| Subscription cancellations | (1,384 | ) | (1,531 | ) | (1,954 | ) | (2,050 | ) | (2,030 | ) | (2,915 | ) | (3,713 | ) | |||||||||||||||||||||
| Net new recurring subscription sales | $ | 5,294 | $ | 3,937 | $ | 6,437 | $ | 2,526 | $ | 3,426 | $ | 9,231 | $ | 5,864 | |||||||||||||||||||||
| Non-recurring sales | $ | 909 | $ | 694 | $ | 1,479 | $ | 829 | $ | 958 | $ | 1,603 | $ | 1,567 | |||||||||||||||||||||
| Total gross sales(1) | $ | 7,587 | $ | 6,162 | $ | 9,870 | $ | 5,405 | $ | 6,414 | $ | 13,749 | $ | 11,144 | |||||||||||||||||||||
| Total All Other net sales | $ | 6,203 | $ | 4,631 | $ | 7,916 | $ | 3,355 | $ | 4,384 | $ | 10,834 | $ | 7,431 | |||||||||||||||||||||
| All Other Retention Rate(2) | 94.9 | % | 94.4 | % | 91.1 | % | 90.7 | % | 90.8 | % | 94.6 | % | 91.6 | % | |||||||||||||||||||||
| Consolidated | |||||||||||||||||||||||||||||||||||
| New recurring subscription sales | $ | 44,979 | $ | 32,019 | $ | 51,588 | $ | 35,111 | $ | 31,142 | $ | 76,999 | $ | 61,330 | |||||||||||||||||||||
| Subscription cancellations | (15,413 | ) | (14,224 | ) | (19,813 | ) | (14,099 | ) | (12,015 | ) | (29,637 | ) | (24,474 | ) | |||||||||||||||||||||
| Net new recurring subscription sales | $ | 29,566 | $ | 17,795 | $ | 31,775 | $ | 21,012 | $ | 19,127 | $ | 47,362 | $ | 36,856 | |||||||||||||||||||||
| Non-recurring sales | $ | 8,662 | $ | 5,499 | $ | 8,898 | $ | 7,325 | $ | 7,122 | $ | 14,160 | $ | 14,268 | |||||||||||||||||||||
| Total gross sales(1) | $ | 53,641 | $ | 37,518 | $ | 60,486 | $ | 42,436 | $ | 38,264 | $ | 91,159 | $ | 75,598 | |||||||||||||||||||||
| Total net sales | $ | 38,228 | $ | 23,294 | $ | 40,673 | $ | 28,337 | $ | 26,249 | $ | 61,522 | $ | 51,124 | |||||||||||||||||||||
| Total Retention Rate(2) | 94.1 | % | 94.6 | % | 91.6 | % | 94.0 | % | 94.9 | % | 94.4 | % | 94.8 | % | |||||||||||||||||||||
| (1) Total gross sales equal new recurring subscription sales plus non-recurring sales. |
| (2) See "Notes Regarding the Use of Operating Metrics" for details regarding the definition of Retention Rate. |
|
Table 7: AUM in ETFs Linked to |
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| Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||||||||
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| In billions | 2018 | 2018 | 2017 | 2017 | 2017 | 2018 | 2017 | |||||||||||||||||||||||||||
| Beginning Period AUM in ETFs linked to | ||||||||||||||||||||||||||||||||||
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$ | 764.9 | $ | 744.3 | $ | 674.3 | $ | 624.3 | $ | 555.7 | $ | 744.3 | $ | 481.4 | ||||||||||||||||||||
| Market Appreciation/(Depreciation) | (19.4 | ) | (11.7 | ) | 32.0 | 32.2 | 23.6 | (31.1 | ) | 59.4 | ||||||||||||||||||||||||
| Cash Inflows | (0.8 | ) | 32.3 | 38.0 | 17.8 | 45.0 | 31.5 | 83.5 | ||||||||||||||||||||||||||
| Period-End AUM in ETFs linked to | ||||||||||||||||||||||||||||||||||
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$ | 744.7 | $ | 764.9 | $ | 744.3 | $ | 674.3 | $ | 624.3 | $ | 744.7 | $ | 624.3 | ||||||||||||||||||||
| Period Average AUM in ETFs linked to | ||||||||||||||||||||||||||||||||||
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$ | 776.5 | $ | 779.5 | $ | 712.3 | $ | 654.4 | $ | 595.0 | $ | 778.0 | $ | 559.5 | ||||||||||||||||||||
| Avg. Basis Point Fee(3) | 2.96 | 3.02 | 3.04 | 3.05 | 3.07 | 2.96 | 3.07 | |||||||||||||||||||||||||||
Source: Bloomberg and
| (1) ETF assets under management calculation methodology is ETF net asset value multiplied by shares outstanding. |
| (2) The AUM in ETFs numbers also include AUM in Exchange Traded Notes, the value of which is less than 1.0% of the AUM amounts presented. |
|
(3) Based on period-end |
| AUM: Assets under management. |
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Table 8: |
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| As of | ||||||||||||||||
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YoY % | |||||||||||||
| In thousands | 2018 | 2017 | 2018 | Change | ||||||||||||
| Index | ||||||||||||||||
| Recurring subscriptions | $ | 478,421 | $ | 428,367 | $ | 462,097 | 11.7 | % | ||||||||
| Asset-based fees | 327,299 | 269,595 | 332,240 | 21.4 | % | |||||||||||
|
Index |
805,720 | 697,962 | 794,337 | 15.4 | % | |||||||||||
|
Analytics |
489,979 | 465,339 | 494,779 | 5.3 | % | |||||||||||
|
All Other |
116,021 | 97,057 | 114,015 | 19.5 | % | |||||||||||
|
Total |
$ | 1,411,720 | $ | 1,260,358 | $ | 1,403,131 | 12.0 | % | ||||||||
| Total recurring subscriptions | $ | 1,084,421 | $ | 990,763 | $ | 1,070,891 | 9.5 | % | ||||||||
| Total asset-based fees | 327,299 | 269,595 | 332,240 | 21.4 | % | |||||||||||
|
Total |
$ | 1,411,720 | $ | 1,260,358 | $ | 1,403,131 | 12.0 | % | ||||||||
|
(1) See "Notes Regarding the Use of Operating Metrics" for details
regarding the definition of |
|
Table 9: Reconciliation of Adjusted EBITDA to Net Income (unaudited) |
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| Three Months Ended | Six Months Ended | |||||||||||||||||||
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| In thousands | 2018 | 2017(1) | 2018 | 2018 | 2017(1) | |||||||||||||||
| Index adjusted EBITDA | $ | 157,516 | $ | 129,519 | $ | 145,929 | $ | 303,446 | $ | 245,196 | ||||||||||
| Analytics adjusted EBITDA | 36,327 | 31,805 | 33,593 | 69,920 | 61,405 | |||||||||||||||
| All Other adjusted EBITDA | 6,582 | 5,057 | 7,187 | 13,768 | 10,601 | |||||||||||||||
| Consolidated adjusted EBITDA | 200,425 | 166,381 | 186,708 | 387,134 | 317,202 | |||||||||||||||
| Amortization of intangible assets | 19,537 | 11,122 | 11,338 | 30,875 | 22,373 | |||||||||||||||
| Depreciation and amortization of property, | ||||||||||||||||||||
| equipment and leasehold improvements | 7,377 | 9,159 | 8,205 | 15,582 | 17,997 | |||||||||||||||
| Operating income | 173,511 | 146,100 | 167,166 | 340,677 | 276,832 | |||||||||||||||
| Other expense (income), net | 17,188 | 28,589 | 27,728 | 44,916 | 57,696 | |||||||||||||||
| Provision for income taxes | 39,494 | 36,245 | 24,346 | 63,840 | 64,919 | |||||||||||||||
| Net income | $ | 116,829 | $ | 81,266 | $ | 115,092 | $ | 231,921 | $ | 154,217 | ||||||||||
|
(1) As a result of the adoption of recent accounting guidance, the
Company has restated its adjusted EBITDA by reclassifying |
|
Table 10: Reconciliation of Adjusted Net Income and Adjusted EPS to Net Income and EPS (unaudited) |
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| Three Months Ended | Six Months Ended | ||||||||||||||||||||
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| In thousands, except per share data | 2018 | 2017 | 2018 | 2018 | 2017 | ||||||||||||||||
| Net income | $ | 116,829 | $ | 81,266 | $ | 115,092 | $ | 231,921 | $ | 154,217 | |||||||||||
| Plus: Amortization of acquired intangible assets | 17,029 | 10,119 | 9,207 | 26,236 | 20,649 | ||||||||||||||||
| Less: Gain on divestiture | (10,636 | ) | (771 | ) | — | (10,636 | ) | (771 | ) | ||||||||||||
| Less: Tax Reform adjustments | — | — | (1,601 | ) | (1,601 | ) | — | ||||||||||||||
| Less: Income tax effect | (4,121 | ) | (3,146 | ) | (1,608 | ) | (5,729 | ) | (6,118 | ) | |||||||||||
| Adjusted net income | $ | 119,101 | $ | 87,468 | $ | 121,090 | $ | 240,191 | $ | 167,977 | |||||||||||
| Diluted EPS | $ | 1.28 | $ | 0.89 | $ | 1.24 | $ | 2.52 | $ | 1.68 | |||||||||||
| Plus: Amortization of acquired intangible assets | 0.19 | 0.11 | 0.10 | 0.28 | 0.23 | ||||||||||||||||
| Less: Gain on divestiture | (0.12 | ) | (0.01 | ) | — | (0.12 | ) | (0.01 | ) | ||||||||||||
| Less: Tax Reform adjustments | — | — | (0.02 | ) | (0.02 | ) | — | ||||||||||||||
| Less: Income tax effect | (0.05 | ) | (0.04 | ) | (0.01 | ) | (0.05 | ) | (0.07 | ) | |||||||||||
| Adjusted EPS | $ | 1.30 | $ | 0.95 | $ | 1.31 | $ | 2.61 | $ | 1.83 | |||||||||||
|
Table 11: Reconciliation of Adjusted EBITDA Expenses to Operating Expenses (unaudited) |
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| Three Months Ended | Six Months Ended | Full-Year | |||||||||||||||||||||
| June 30, | June 30, | Mar. 31, | June 30, | June 30, | 2018 | ||||||||||||||||||
| In thousands | 2018 | 2017(2) | 2018 | 2018 | 2017(2) | Outlook(1) | |||||||||||||||||
| Index adjusted EBITDA expenses | $ | 55,418 | $ | 47,637 | $ | 55,984 | $ | 111,402 | $ | 95,395 | |||||||||||||
| Analytics adjusted EBITDA expenses | 82,792 | 81,562 | 85,395 | 168,186 | 164,382 | ||||||||||||||||||
| All Other adjusted EBITDA expenses | 24,411 | 20,509 | 23,228 | 47,640 | 40,317 | ||||||||||||||||||
| Consolidated adjusted EBITDA expenses | 162,621 | 149,708 | 164,607 | 327,228 | 300,094 | $645,000 - $665,000 | |||||||||||||||||
| Amortization of intangible assets | 19,537 | 11,122 | 11,338 | 30,875 | 22,373 | ||||||||||||||||||
| Depreciation and amortization of property, | 82,000 | ||||||||||||||||||||||
| equipment and leasehold improvements | 7,377 | 9,159 | 8,205 | 15,582 | 17,997 | ||||||||||||||||||
| Total operating expenses | $ | 189,535 | $ | 169,989 | $ | 184,150 | $ | 373,685 | $ | 340,464 | $725,000 - $750,000 | ||||||||||||
| (1) We have not provided a line-item reconciliation for adjusted EBITDA expenses to total operating expenses for this future period because we do not provide guidance on the individual reconciling items between total operating expenses and adjusted EBITDA expenses. |
| (2) As a result of the adoption of recent accounting guidance, the Company has restated its adjusted EBITDA by reclassifying $0.1 million and $0.3 million of non-service related pension costs out of adjusted EBITDA expenses for the three and six months ended Jun. 30, 2017, respectively. |
|
Table 12: Reconciliation of Free Cash Flow to Net Cash Provided by Operating Activities (unaudited) |
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| Three Months Ended | Six Months Ended | Full-Year | |||||||||||||||||||||
| June 30, | June 30, | Mar. 31, | June 30, | June 30, | 2018 | ||||||||||||||||||
| In thousands | 2018 | 2017 | 2018 | 2018 | 2017 | Outlook(1) | |||||||||||||||||
| Net cash provided by operating activities | $ | 207,165 | $ | 122,217 | $ | 88,597 | $ | 295,762 | $ | 159,232 | $490,000 - $540,000 | ||||||||||||
| Capital expenditures | (2,967 | ) | (3,729 | ) | (1,512 | ) | (4,479 | ) | (11,051 | ) | |||||||||||||
| Capitalized software development costs | (4,238 | ) | (3,306 | ) | (4,360 | ) | (8,598 | ) | (5,613 | ) | |||||||||||||
| Capex | (7,205 | ) | (7,035 | ) | (5,872 | ) | (13,077 | ) | (16,664 | ) | (50,000 - 40,000) | ||||||||||||
| Free cash flow | $ | 199,960 | $ | 115,182 | $ | 82,725 | $ | 282,685 | $ | 142,568 | $440,000 - $500,000 | ||||||||||||
| (1) We have not provided a line-item reconciliation for free cash flow to net cash from operating activities for this future period because we do not provide guidance on the individual reconciling items between net cash from operating activities and free cash flow. |
|
Table 13: Reconciliation of Effective Tax Rate to Adjusted Tax Rate (unaudited) |
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| Three Months Ended | Six Months Ended | ||||||||||||||
| June 30, | June 30, | Mar. 31, | June 30, | June 30, | |||||||||||
| 2018 | 2017 | 2018 | 2018 | 2017 | |||||||||||
| Effective tax rate | 25.26% | 30.84% | 17.46% | 21.59% | 29.63% | ||||||||||
| Less: Tax Reform impact on effective tax rate | —% | —% | 1.15% | 0.54% | —% | ||||||||||
| Adjusted tax rate | 25.26% | 30.84% | 18.61% | 22.13% | 29.63% | ||||||||||
View source version on businesswire.com: https://www.businesswire.com/news/home/20180802005375/en/
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