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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2021

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission file number 001-33812

 

MSCI INC.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

 

13-4038723

(State or other jurisdiction of

Incorporation or Organization)

 

(I.R.S. Employer

Identification Number)

 

 

 

7 World Trade Center

250 Greenwich Street, 49th Floor

New York, New York

 

10007

(Address of Principal Executive Offices)

 

(Zip Code)

Registrant’s telephone number, including area code: (212804-3900

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Common stock, par value $0.01 per share

 

MSCI

 

New York Stock Exchange

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

 

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

As of April 20, 2021, there were 82,422,647 shares of the registrant’s common stock, par value $0.01, outstanding.

 

 

 


 

 

FOR THE QUARTER ENDED MARCH 31, 2021

TABLE OF CONTENTS

 

 

 

 

 

Page

 

 

Part I – Financial Information

 

 

Item 1.

 

Financial Statements

 

4

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

20

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

36

Item 4.

 

Controls and Procedures

 

37

 

 

 

 

 

 

 

Part II – Other Information

 

 

Item 1.

 

Legal Proceedings

 

38

Item 1A.

 

Risk Factors

 

38

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

38

Item 6.

 

Exhibits

 

39

 

2


 

 

AVAILABLE INFORMATION

Our corporate headquarters is located at 7 World Trade Center, 250 Greenwich Street, 49th Floor, New York, New York, 10007, and our telephone number is (212) 804-3900. We maintain a website on the internet at www.msci.com. The contents of our website are not a part of or incorporated by reference in this Quarterly Report on Form 10-Q.

We file annual, quarterly and current reports, proxy statements and other information with the SEC. The SEC maintains a website that contains reports, proxy and information statements and other information that we file electronically with the SEC at www.sec.gov. We also make available free of charge, on or through our website, these reports, proxy statements and other information as soon as reasonably practicable following the time they are electronically filed with or furnished to the SEC. To access these, click on the “SEC Filings” link found on our Investor Relations homepage (http://ir.msci.com).

We also use our Investor Relations homepage, Corporate Responsibility homepage and corporate Twitter account (@MSCI_Inc) as channels of distribution of Company information. The information we post through these channels may be deemed material.

Accordingly, investors should monitor these channels, in addition to following our press releases, SEC filings and public conference calls and webcasts. In addition, you may automatically receive email alerts and other information about us when you enroll your email address by visiting the “Email Alert Subscription” section of our Investor Relations homepage at http://ir.msci.com/alerts.cfm. The contents of our website, including our Investor Relations homepage, Corporate Responsibility homepage and social media channels are not, however, a part of or incorporated by reference in this Quarterly Report on Form 10-Q.

FORWARD-LOOKING STATEMENTS

We have included in this Quarterly Report on Form 10-Q, and from time to time may make in our public filings, press releases or other public statements, certain statements that constitute forward-looking statements. In addition, our management may make forward-looking statements to analysts, investors, representatives of the media and others. These forward-looking statements are not historical facts and represent only MSCI’s beliefs regarding future events, many of which, by their nature, are inherently uncertain and beyond our control.

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.  Statements concerning our financial position, business strategy and plans or objectives for future operations are forward-looking statements. 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. Such risks and uncertainties include those set forth under “Risk Factors” in Part I, Item 1A of the 2020 Annual Report on Form 10-K filed with the SEC on February 12, 2021. Other factors that could materially affect actual results, levels of activity, performance or achievements can be found in quarterly reports on Form 10-Q and current reports on Form 8-K filed or furnished with the SEC. The forward-looking statements in this report speak only as of the time they are made and do not necessarily reflect our outlook at any other point in time. We undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or for any other reason. Therefore, readers should carefully review the risk factors set forth in other reports or documents we file from time to time with the Securities and Exchange Commission (the “SEC”).

3


 

PART I – FINANCIAL INFORMATION

Item 1.

Financial Statements

MSCI INC.

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(in thousands, except per share and share data)

 

 

 

As of

 

 

 

March 31,

 

 

December 31,

 

 

 

2021

 

 

2020

 

 

 

(unaudited)

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

1,747,147

 

 

$

1,300,521

 

Accounts receivable, net of allowances

 

 

506,849

 

 

 

558,569

 

Prepaid income taxes

 

 

13,657

 

 

 

20,097

 

Prepaid and other assets

 

 

38,986

 

 

 

46,411

 

Total current assets

 

 

2,306,639

 

 

 

1,925,598

 

Property, equipment and leasehold improvements, net

 

 

75,712

 

 

 

80,446

 

Right of use assets

 

 

150,716

 

 

 

153,330

 

Goodwill

 

 

1,566,541

 

 

 

1,566,022

 

Intangible assets, net

 

 

229,595

 

 

 

234,748

 

Equity method investment

 

 

187,889

 

 

 

190,898

 

Deferred tax assets

 

 

24,131

 

 

 

23,627

 

Other non-current assets

 

 

24,306

 

 

 

23,978

 

Total assets

 

$

4,565,529

 

 

$

4,198,647

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

7,259

 

 

$

14,253

 

Income taxes payable

 

 

25,764

 

 

 

26,195

 

Accrued compensation and related benefits

 

 

66,392

 

 

 

161,557

 

Current maturities of long-term debt

 

 

496,425

 

 

 

 

Other accrued liabilities

 

 

157,433

 

 

 

143,894

 

Deferred revenue

 

 

672,054

 

 

 

675,870

 

Total current liabilities

 

 

1,425,327

 

 

 

1,021,769

 

Long-term debt

 

 

3,369,469

 

 

 

3,366,777

 

Long-term operating lease liabilities

 

 

149,296

 

 

 

152,342

 

Deferred tax liabilities

 

 

14,414

 

 

 

12,774

 

Other non-current liabilities

 

 

88,605

 

 

 

88,219

 

Total liabilities

 

 

5,047,111

 

 

 

4,641,881

 

 

 

 

 

 

 

 

 

 

Commitments and Contingencies (see Note 7)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shareholders' equity (deficit):

 

 

 

 

 

 

 

 

Preferred stock (par value $0.01, 100,000,000 shares authorized; no shares issued)

 

 

 

 

 

 

Common stock (par value $0.01; 750,000,000 common shares authorized; 133,130,562

   and 132,829,175 common shares issued and 82,422,314 and 82,573,407 common

   shares outstanding at March 31, 2021 and December 31, 2020, respectively)

 

 

1,331

 

 

 

1,328

 

Treasury shares, at cost (50,708,248 and 50,255,768 common shares held at March 31, 2021

   and December 31, 2020, respectively)

 

 

(4,529,709

)

 

 

(4,342,535

)

Additional paid in capital

 

 

1,421,445

 

 

 

1,402,537

 

Retained earnings

 

 

2,685,167

 

 

 

2,554,295

 

Accumulated other comprehensive loss

 

 

(59,816

)

 

 

(58,859

)

Total shareholders' equity (deficit)

 

 

(481,582

)

 

 

(443,234

)

Total liabilities and shareholders' equity (deficit)

 

$

4,565,529

 

 

$

4,198,647

 

 

See Notes to Condensed Consolidated Financial Statements (Unaudited)

4


 

MSCI INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share data)

 

 

 

Three Months Ended

 

 

 

 

March 31,

 

 

 

 

2021

 

 

2020

 

 

 

 

(unaudited)

Operating revenues

 

$

478,423

 

 

$

416,780

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

Cost of revenues

 

 

85,780

 

 

 

74,609

 

 

Selling and marketing

 

 

56,467

 

 

 

55,549

 

 

Research and development

 

 

24,862

 

 

 

26,562

 

 

General and administrative

 

 

34,728

 

 

 

30,833

 

 

Amortization of intangible assets

 

 

15,068

 

 

 

13,776

 

 

Depreciation and amortization of property, equipment and

   leasehold improvements

 

 

7,143

 

 

 

7,567

 

 

Total operating expenses

 

 

224,048

 

 

 

208,896

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

 

254,375

 

 

 

207,884

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

(386

)

 

 

(3,483

)

 

Interest expense

 

 

37,584

 

 

 

40,231

 

 

Other expense (income)

 

 

1,149

 

 

 

8,287

 

 

 

 

 

 

 

 

 

 

 

 

Other expense (income), net

 

 

38,347

 

 

 

45,035

 

 

 

 

 

 

 

 

 

 

 

 

Income before provision for income taxes

 

 

216,028

 

 

 

162,849

 

 

Provision for income taxes

 

 

19,209

 

 

 

14,724

 

 

Net income

 

$

196,819

 

 

$

148,125

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per basic common share

 

$

2.38

 

 

$

1.75

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per diluted common share

 

$

2.36

 

 

$

1.73

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding used in computing

   earnings per share

 

 

 

 

 

 

 

 

 

Basic

 

 

82,640

 

 

 

84,870

 

 

Diluted

 

 

83,493

 

 

 

85,548

 

 

 

See Notes to Condensed Consolidated Financial Statements (Unaudited)

5


 

MSCI INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

 

 

 

Three Months Ended

 

 

 

 

March 31,

 

 

 

 

2021

 

 

2020

 

 

 

 

(unaudited)

Net income

 

$

196,819

 

 

$

148,125

 

 

Other comprehensive (loss) income:

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

(1,705

)

 

 

(12,363

)

 

Income tax effect

 

 

612

 

 

 

2,468

 

 

Foreign currency translation adjustments, net

 

 

(1,093

)

 

 

(9,895

)

 

 

 

 

 

 

 

 

 

 

 

Pension and other post-retirement adjustments

 

 

256

 

 

 

306

 

 

Income tax effect

 

 

(120

)

 

 

(36

)

 

Pension and other post-retirement adjustments, net

 

 

136

 

 

 

270

 

 

Other comprehensive (loss) income, net of tax

 

 

(957

)

 

 

(9,625

)

 

Comprehensive income

 

$

195,862

 

 

$

138,500

 

 

 

See Notes to Condensed Consolidated Financial Statements (Unaudited)

6


 

MSCI INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT)

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

Common

 

 

Treasury

 

 

Paid in

 

 

Retained

 

 

Comprehensive

 

 

 

 

 

 

 

Stock

 

 

Stock

 

 

Capital

 

 

Earnings

 

 

Income (Loss)

 

 

Total

 

 

 

(unaudited)

 

Balance at December 31, 2020

 

$

1,328

 

 

$

(4,342,535

)

 

$

1,402,537

 

 

$

2,554,295

 

 

$

(58,859

)

 

$

(443,234

)

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

196,819

 

 

 

 

 

 

 

196,819

 

Dividends declared ($0.78 per common share)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(65,947

)

 

 

 

 

 

 

(65,947

)

Dividends paid in shares

 

 

 

 

 

 

 

 

 

 

66

 

 

 

 

 

 

 

 

 

 

 

66

 

Other comprehensive income (loss), net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(957

)

 

 

(957

)

Common stock issued

 

 

3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3

 

Shares withheld for tax withholding and exercises

 

 

 

 

 

 

(52,814

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(52,814

)

Compensation payable in common stock

 

 

 

 

 

 

 

 

 

 

18,842

 

 

 

 

 

 

 

 

 

 

 

18,842

 

Common stock repurchased and held in treasury

 

 

 

 

 

 

(134,340

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(134,340

)

Common stock issued to Directors and (held in)/released from treasury

 

 

 

 

 

 

(20

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(20

)

Balance at March 31, 2021

 

$

1,331

 

 

$

(4,529,709

)

 

$

1,421,445

 

 

$

2,685,167

 

 

$

(59,816

)

 

$

(481,582

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2019

 

$

1,324

 

 

$

(3,565,784

)

 

$

1,351,031

 

 

$

2,199,294

 

 

$

(62,579

)

 

$

(76,714

)

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

148,125

 

 

 

 

 

 

 

148,125

 

Cumulative-effect adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

631

 

 

 

 

 

 

 

631

 

Dividends declared ($0.68 per common share)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(59,233

)

 

 

 

 

 

 

(59,233

)

Dividends paid in shares

 

 

 

 

 

 

 

 

 

 

78

 

 

 

 

 

 

 

 

 

 

 

78

 

Other comprehensive income (loss), net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(9,625

)

 

 

(9,625

)

Common stock issued

 

 

4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4

 

Shares withheld for tax withholding

 

 

 

 

 

 

(47,195

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(47,195

)

Compensation payable in common stock

 

 

 

 

 

 

 

 

 

 

15,333

 

 

 

 

 

 

 

 

 

 

 

15,333

 

Common stock repurchased and held in treasury

 

 

 

 

 

 

(325,699

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(325,699

)

Common stock issued to Directors and (held in)/released from treasury

 

 

 

 

 

 

(36

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(36

)

Balance at March 31, 2020

 

$

1,328

 

 

$

(3,938,714

)

 

$

1,366,442

 

 

$

2,288,817

 

 

$

(72,204

)

 

$

(354,331

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See Notes to Condensed Consolidated Financial Statements (Unaudited)

7


 

MSCI INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2021

 

 

2020

 

 

 

(unaudited)

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

Net income

 

$

196,819

 

 

$

148,125

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Amortization of intangible assets

 

 

15,068

 

 

 

13,776

 

Stock-based compensation expense

 

 

18,910

 

 

 

15,163

 

Depreciation and amortization of property, equipment and leasehold improvements

 

 

7,143

 

 

 

7,567

 

Amortization of right of use assets

 

 

6,128

 

 

 

5,989

 

Amortization of debt origination fees

 

 

1,107

 

 

 

1,089

 

Loss on extinguishment of debt

 

 

 

 

 

9,966

 

Deferred taxes

 

 

1,142

 

 

 

(5,165

)

Other adjustments

 

 

3,363

 

 

 

337

 

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

50,630

 

 

 

15,926

 

Prepaid income taxes

 

 

6,312

 

 

 

3,330

 

Prepaid and other assets

 

 

5,611

 

 

 

296

 

Accounts payable

 

 

(7,901

)

 

 

(1,536

)

Accrued compensation and related benefits

 

 

(94,323

)

 

 

(98,658

)

Income taxes payable

 

 

1,709

 

 

 

2,229

 

Other accrued liabilities

 

 

12,888

 

 

 

(3,563

)

Deferred revenue

 

 

(2,790

)

 

 

2,252

 

Long-term operating lease liabilities

 

 

(5,898

)

 

 

(6,078

)

Other

 

 

(461

)

 

 

1,725

 

Net cash provided by operating activities

 

 

215,457

 

 

 

112,770

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

 

 

 

Acquisition of equity method investment

 

 

 

 

 

(190,822

)

Capitalized software development costs

 

 

(9,696

)

 

 

(7,203

)

Capital expenditures

 

 

(664

)

 

 

(3,613

)

Net cash used in investing activities

 

 

(10,360

)

 

 

(201,638

)

 

 

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

 

 

Proceeds from borrowings, inclusive of premium

 

 

503,750

 

 

 

405,000

 

Repayment of borrowings

 

 

 

 

 

(307,875

)

Repurchase of common stock held in treasury

 

 

(187,154

)

 

 

(372,894

)

Payment of dividends

 

 

(66,087

)

 

 

(59,378

)

Payment of debt issuance costs in connection with debt

 

 

(4,967

)

 

 

(4,934

)

Net cash provided by (used in) financing activities

 

 

245,542

 

 

 

(340,081

)

 

 

 

 

 

 

 

 

 

Effect of exchange rate changes

 

 

(4,013

)

 

 

(10,762

)

 

 

 

 

 

 

 

 

 

Net increase (decrease) in cash

 

 

446,626

 

 

 

(439,711

)

Cash and cash equivalent, beginning of period

 

 

1,300,521

 

 

 

1,506,567

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalent, end of period

 

$

1,747,147

 

 

$

1,066,856

 

 

 

 

 

 

 

 

 

 

Supplemental disclosure of cash flow information: