SEC Filing – MSCI Inc.

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msci-10q_20220331.htm

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, 2022


☐	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, 49^th Floor New York, New York		10007
(Address of Principal Executive Offices)		(Zip Code)

Registrant’s telephone number, including area code: (212) 804-3900

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 19, 2022, there were 81,123,043 shares of the registrant’s common stock, par value $0.01, outstanding.

FOR THE QUARTER ENDED MARCH 31, 2022

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	39
Item 6.	Exhibits	41

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 Securities and Exchange Commission (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 2021 Annual Report on Form 10-K filed with the SEC on February 11, 2022. 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 SEC.

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,
	2022			2021
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	679,315		$	1,421,449
Accounts receivable, net of allowances		592,326			664,511
Prepaid income taxes		13,050			5,951
Prepaid and other assets		47,730			51,499
Total current assets		1,332,421			2,143,410
Property, equipment and leasehold improvements, net		64,682			66,715
Right of use assets		134,368			144,584
Goodwill		2,235,199			2,236,386
Intangible assets, net		585,058			593,341
Equity method investment		218,128			218,763
Deferred tax assets		53,612			40,119
Other non-current assets		68,361			63,385
Total assets	$	4,691,829		$	5,506,703

LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Accounts payable	$	12,956		$	13,448
Income taxes payable		83,589			59,635
Accrued compensation and related benefits		70,749			207,640
Other accrued liabilities		160,929			145,302
Deferred revenue		832,203			824,912
Total current liabilities		1,160,426			1,250,937
Long-term debt		4,162,465			4,161,422
Long-term operating lease liabilities		139,895			150,029
Deferred tax liabilities		3,347			3,650
Other non-current liabilities		104,885			104,132
Total liabilities		5,571,018			5,670,170

Commitments and Contingencies (see Note 8)

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; 133,579,809 and 133,162,178 common shares issued and 81,168,130 and 82,439,449 common shares outstanding at March 31, 2022 and December 31, 2021, respectively)		1,336			1,332
Treasury shares, at cost (52,411,679 and 50,722,729 common shares held at March 31, 2022 and December 31, 2021, respectively)		(5,417,822	)		(4,540,144	)
Additional paid in capital		1,480,454			1,457,623
Retained earnings		3,117,660			2,976,517
Accumulated other comprehensive loss		(60,817	)		(58,795	)
Total shareholders’ equity (deficit)		(879,189	)		(163,467	)
Total liabilities and shareholders’ equity (deficit)	$	4,691,829		$	5,506,703

See Notes to Condensed Consolidated Financial Statements (Unaudited)

MSCI INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share data)

	Three Months Ended
	March 31,
	2022			2021
	(unaudited)
Operating revenues	$	559,945		$	478,423

Operating expenses:
Cost of revenues (exclusive of depreciation and amortization)		102,771			85,780
Selling and marketing		66,053			56,467
Research and development		28,322			24,862
General and administrative		45,567			34,728
Amortization of intangible assets		21,720			15,068
Depreciation and amortization of property, equipment and leasehold improvements		6,534			7,143
Total operating expenses		270,967			224,048

Operating income		288,978			254,375

Interest income		(298	)		(386	)
Interest expense		40,714			37,584
Other expense (income)		(381	)		1,149

Other expense (income), net		40,035			38,347

Income before provision for income taxes		248,943			216,028
Provision for income taxes		20,520			19,209
Net income	$	228,423		$	196,819

Earnings per share:
Basic	$	2.80		$	2.38
Diluted	$	2.78		$	2.36

Weighted average shares outstanding:
Basic		81,591			82,640
Diluted		82,286			83,493

See Notes to Condensed Consolidated Financial Statements (Unaudited)

MSCI INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

	Three Months Ended
	March 31,
	2022			2021
	(unaudited)
Net income	$	228,423		$	196,819
Other comprehensive (loss) income:
Foreign currency translation adjustments		(2,950	)		(1,705	)
Income tax effect		862			612
Foreign currency translation adjustments, net		(2,088	)		(1,093	)

Pension and other post-retirement adjustments		110			256
Income tax effect		(44	)		(120	)
Pension and other post-retirement adjustments, net		66			136
Other comprehensive (loss) income, net of tax		(2,022	)		(957	)
Comprehensive income	$	226,401		$	195,862

See Notes to Condensed Consolidated Financial Statements (Unaudited)

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, 2021	$	1,332	$	(4,540,144	)	$	1,457,623	$	2,976,517		$	(58,795	)	$	(163,467	)
Net income									228,423						228,423
Dividends declared ($1.04 per common share)									(87,280	)					(87,280	)
Dividends paid in shares							77								77
Other comprehensive income (loss), net of tax												(2,022	)		(2,022	)
Common stock issued		4													4
Shares withheld for tax withholding and exercises				(105,000	)										(105,000	)
Compensation payable in common stock							22,754								22,754
Common stock repurchased and held in treasury				(772,657	)										(772,657	)
Common stock issued to Directors and (held in)/released from treasury				(21	)										(21	)
Balance at March 31, 2022	$	1,336	$	(5,417,822	)	$	1,480,454	$	3,117,660		$	(60,817	)	$	(879,189	)

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	)

See Notes to Condensed Consolidated Financial Statements (Unaudited)

MSCI INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	Three Months Ended
	March 31,
	2022			2021
	(unaudited)
Cash flows from operating activities
Net income	$	228,423		$	196,819
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of intangible assets		21,720			15,068
Stock-based compensation expense		22,857			18,910
Depreciation and amortization of property, equipment and leasehold improvements		6,534			7,143
Amortization of right of use assets		6,292			6,128
Amortization of debt origination fees		1,403			1,107
Deferred taxes		(12,961	)		1,142
Other adjustments		933			3,363
Changes in assets and liabilities:
Accounts receivable		70,417			50,630
Prepaid income taxes		(7,170	)		6,312
Prepaid and other assets		3,062			5,611
Other non-current assets		(5,005	)		23
Accounts payable		(2,060	)		(7,901	)
Accrued compensation and related benefits		(135,148	)		(94,323	)
Income taxes payable		24,257			1,709
Other accrued liabilities		15,161			12,888
Deferred revenue		10,932			(2,790	)
Long-term operating lease liabilities		(5,542	)		(5,898	)
Other non-current liabilities		1,695			2,300
Other		(1,616	)		(2,784	)
Net cash provided by operating activities		244,184			215,457

Cash flows from investing activities
Capitalized software development costs		(14,084	)		(9,696	)
Capital expenditures		(1,254	)		(664	)
Other		28			—
Net cash used in investing activities		(15,310	)		(10,360	)

Cash flows from financing activities
Proceeds from borrowings, inclusive of premium		5,000			503,750
Repayment of borrowings		(5,000	)		—
Repurchase of common stock held in treasury		(877,657	)		(187,154	)
Payment of dividends		(87,769	)		(66,087	)
Payment of debt issuance costs in connection with debt		(559	)		(4,967	)
Payment of contingent consideration		(132	)		—
Net cash (used in) provided by financing activities		(966,117	)		245,542

Effect of exchange rate changes		(4,891	)		(4,013	)

Net (decrease) increase in cash		(742,134	)		446,626
Cash and cash equivalent, beginning of period		1,421,449