Investor News

NEW YORK--(BUSINESS WIRE)-- MSCI Inc. (NYSE: MSCI), a leading global provider of investment decision support tools, including indices, portfolio risk and performance analytics and corporate governance services, today announced results for the third quarter and nine months ended September 30, 2012.

(Note: Percentage changes are referenced to the comparable period in 2011, unless otherwise noted.)

• Operating revenues increased 4.6% to $235.4 million in third quarter 2012 and 4.2% to $703.1 million for nine months 2012.
• Net income declined by 3.0% to $48.3 million in third quarter 2012. Net income grew 0.6% to $129.8 million for nine months 2012.
• Adjusted EBITDA (defined below) grew by 4.3% to $108.1 million in third quarter 2012 despite the impact of higher severance expenses. For nine months 2012, Adjusted EBITDA grew by 0.9% to $317.9 million. Third quarter 2012 Adjusted EBITDA margin declined slightly to 45.9% from 46.0% and nine months 2012 Adjusted EBITDA margin fell to 45.2% from 46.7%.
• Diluted EPS for third quarter 2012 fell 2.5% to $0.39 and nine months 2012 Diluted EPS was unchanged at $1.05.
• Third quarter 2012 Adjusted EPS (defined below) was unchanged at $0.49. Nine months 2012 Adjusted EPS rose 2.9% to $1.43.

Henry A. Fernandez, Chairman and CEO, said, "MSCI continued to grow its subscription revenues and run rate during the third quarter of 2012, despite volatile financial markets. I am especially pleased that our index and ESG run rate grew by 6% year-over-year, even after taking into account the impact of the Vanguard announcement. The growth of index and ESG run rate is an indication of the value that we provide to global investors. Our governance revenues grew by 4%, reflecting the recent positive momentum we are seeing in that business.

"We are confident in the long-term secular trends driving our growth and are focused on how we can best position MSCI to capture these opportunities," added Mr. Fernandez.

Table 1: MSCI Inc. Selected Financial Information (unaudited)

			Three Months Ended								Change from			Nine Months Ended								Change From
			September 30,				September 30,				September 30,			September 30,				September 30,				September 30,
In thousands, except per share data			2012				2011				2011			2012				2011				2011
Operating revenues			$	235,444			$	225,026			4.6	%		$	703,061			$	674,807			4.2	%
Operating expenses				151,915				142,781			6.4	%			451,432				434,442			3.9	%
Net income				48,274				49,787			(3.0	%)			129,786				128,968			0.6	%
	% Margin			20.5	%			22.1	%						18.5	%			19.1	%
Diluted EPS			$	0.39			$	0.40			(2.5	%)		$	1.05			$	1.05			0.0	%
Adjusted EPS1			$	0.49			$	0.49			0.0	%		$	1.43			$	1.39			2.9	%
Adjusted EBITDA2			$	108,074			$	103,624			4.3	%		$	317,893			$	315,093			0.9	%
	% Margin			45.9	%			46.0	%						45.2	%			46.7	%

1 Per share net income before after-tax impact of amortization of intangibles, non-recurring stock-based compensation, restructuring costs, debt repayment, refinancing expenses, and the lease exit charge. See Table 14 titled "Reconciliation of Adjusted Net Income and Adjusted EPS to Net Income and EPS (unaudited)" and information about the use of non-GAAP financial information provided under "Notes Regarding the Use of Non-GAAP Financial Measures."

2 Net Income before income taxes, other net expense and income, depreciation, amortization, non-recurring stock-based compensation, restructuring costs, and the lease exit charge. See Table 13 titled "Reconciliation of Adjusted EBITDA to Net Income (unaudited)" and information about the use of non-GAAP financial information provided under "Notes Regarding the Use of Non-GAAP Financial Measures."

Summary of Results for Third Quarter 2012 compared to Third Quarter 2011

Operating Revenues — See Table 4

Total operating revenues for the three months ended September 30, 2012 (third quarter 2012) increased $10.4 million, or 4.6%, to $235.4 million compared to $225.0 million for the three months ended September 30, 2011 (third quarter 2011). Total third quarter 2012 subscription revenues rose $13.9 million, or 7.5%, to $197.6 million while asset-based fees declined $1.0 million, or 2.8%, to $34.0 million.

Non-recurring revenues fell $2.5 million to $3.8 million. The decline in non-recurring revenues was driven by a decline in index derivative license revenues as well as a decline in non-recurring governance revenues.

Performance and Risk segment revenues rose $9.2 million, or 4.7%, to $205.4 million, primarily driven by growth in index and environmental, social and governance ("ESG") products, and risk management analytics.

• Index and ESG products: Index and ESG products revenues increased $6.6 million, or 6.5%, to $107.9 million. Subscription revenues grew by $7.6 million, or 11.5%, to $73.9 million, driven by growth in revenues from MSCI's ACWI (All Country World Index) core and other index modules as well as higher usage fees, offset, in part, by a $1.4 million decline in non-recurring subscription revenues.

Revenues attributable to equity index asset-based fees declined $1.0 million, or 2.8%, to $34.0 million largely as a result of a change in the mix of funds linked to our indices that more than offset the impact of higher assets under management. The average assets under management in ETFs linked to MSCI indices increased 4.7% to $344.7 billion from $329.1 billion in third quarter 2011.

• Risk management analytics: Revenues related to risk management analytics increased $3.1 million, or 5.1%, to $65.0 million. The increase in risk management analytics revenues was driven by higher revenues from our primary risk management platforms, RiskManager and BarraOne.
• Portfolio management analytics: Revenues related to portfolio management analytics declined $1.1 million, or 3.7%, to $29.1 million.
• Energy and commodity analytics: Revenues from energy and commodity analytics were $3.3 million, up $0.5 million, or 18.6%, from third quarter 2011. At the beginning of 2012, we corrected an error in our revenue recognition policy for our energy and commodity analytics products. The correction resulted in a greater proportion of annual revenue being recognized in third quarter 2012 than in third quarter 2011.

Governance segment revenues rose $1.3 million, or 4.4%, to $30.1 million in third quarter 2012, driven by higher revenues from our compensation data and analytic products and a higher renewal rate.

Operating Expenses — See Table 6

Total operating expenses rose $9.1 million, or 6.4%, to $151.9 million, primarily driven by higher compensation costs and a lease exit charge.

Compensation costs: Total compensation costs rose $6.8 million, or 7.8%, to $93.0 million in third quarter 2012. Excluding non-recurring stock-based compensation expense, total compensation costs rose $7.4 million, or 8.7%, to $92.4 million. Compensation costs were impacted by an increase in average headcount and by higher severance costs, which rose $3.7 million to $4.1 million.

Non-compensation costs excluding the lease exit charge, depreciation and amortization, and restructuring costs: Non-compensation operating expenses excluding the lease exit charge, depreciation and amortization, and restructuring costs declined $1.5 million, or 4.0%, to $35.0 million in third quarter 2012. The biggest drivers of the decline were lower travel and entertainment expenses, recruiting fees, and market data costs, partially offset by higher occupancy costs.

Lease exit charge: The third quarter 2012 included $3.3 million associated with a lease exit charge resulting from the consolidation of our New York offices.

Depreciation and amortization: Amortization of intangibles expense totaled $16.0 million compared to $16.4 million in third quarter 2011, a decline of 2.8%. Depreciation and amortization of property, plant and equipment was flat at $4.6 million.

Other Expense (Income), Net

Other expense (income), net for third quarter 2012 was $7.9 million, a decline of $4.0 million from third quarter 2011. Interest expense fell by $5.8 million to $7.3 million as a result of lower levels of indebtedness and lower interest rates following our second quarter 2012 refinancing.

Provision for Income Taxes

Income tax expense was $27.3 million in third quarter 2012, an increase of $6.8 million, or 33.2%, from third quarter 2011. The effective tax rate in third quarter 2012 was 36.1%. Third quarter 2011 income tax expense was impacted by $4.2 million of certain non-recurring benefits relating to prior tax periods, which resulted in an effective rate of 29.2%.

Net Income and Earnings per Share — See Table 14

Net income declined $1.5 million, or 3.0%, to $48.3 million for third quarter 2012. The net income margin fell to 20.5% from 22.1% as a result of the lower operating profit margin and higher tax rate. Diluted EPS declined by one cent, or 2.5%, to $0.39.

Adjusted net income, which excludes the after-tax impact of the lease exit charge, amortization of intangibles, non-recurring stock-based compensation expense, restructuring costs and debt repayment and refinancing expenses totaling $12.6 million, was flat at $60.9 million. Adjusted EPS, which excludes the after-tax, per share impact of the lease exit charge, amortization of intangibles, non-recurring stock-based compensation expense, restructuring costs and debt repayment and refinancing expenses totaling $0.10, was unchanged at $0.49.

See Table 14 titled "Reconciliation of Adjusted Net Income and Adjusted EPS to Net Income and EPS" and "Notes Regarding the Use of Non-GAAP Financial Measures" below.

Adjusted EBITDA — See Table 13

Adjusted EBITDA, which excludes income taxes, other net expense and income, depreciation, amortization, non-recurring stock-based compensation, restructuring costs, and the lease exit charge, was $108.1 million, up $4.5 million, or 4.3%, from third quarter 2011. The Adjusted EBITDA margin declined to 45.9% from 46.0%.

By segment, Adjusted EBITDA for the Performance and Risk segment increased $4.4 million, or 4.6%, to $100.4 million in third quarter 2012. The Adjusted EBITDA margin for this segment was unchanged at 48.9%. Adjusted EBITDA for the Governance segment increased $0.1 million, or 1.0%, to $7.7 million and the Adjusted EBITDA margin for this segment fell to 25.7% from 26.5%.

See Table 13 titled "Reconciliation of Adjusted EBITDA to Net Income" and "Notes Regarding the Use of Non-GAAP Financial Measures" below.

Summary of Results for Nine Months Ended September 30, 2012 compared to Nine Months Ended September 30, 2011

Operating Revenues — See Table 5

Total operating revenues for the nine months ended September 30, 2012 (nine months 2012) increased $28.3 million, or 4.2%, to $703.1 million compared to $674.8 million for the nine months ended September 30, 2011 (nine months 2011). Total subscription revenues rose $39.6 million, or 7.3%, to $582.3 million, while asset-based fees declined $2.2 million, or 2.1%, to $102.7 million. Total non-recurring revenues fell $9.2 million, or 33.8%, to $18.0 million.

Index and ESG products and risk management analytics revenues grew 6.6% and 6.7%, respectively, in nine months 2012. Portfolio management analytics declined 1.4% and governance revenues rose 1.1%. Energy and other commodity analytics revenues fell 39.7%, primarily as a result of a $5.2 million non-cash cumulative revenue reduction in first quarter 2012 to correct an error.

By segment, Performance and Risk revenues rose $27.3 million, or 4.7%, to $611.1 million for nine months 2012. Governance revenues rose $1.0 million, or 1.1%, to $92.0 million.

Operating Expenses — See Table 7

Total operating expenses increased $17.0 million, or 3.9%, to $451.4 million in nine months 2012 compared to nine months 2011, primarily driven by higher compensation costs and the lease exit charge, partially offset by lower depreciation, amortization, and restructuring expenses. Excluding non-recurring stock-based compensation, compensation expenses were up $24.6 million, or 9.7%. Compensation costs were impacted by an increase in average headcount and by higher severance costs, which rose $7.8 million to $8.4 million. Non-compensation expenses costs excluding the lease exit charge, depreciation and amortization, and restructuring costs rose by $0.9 million, or 0.8%, to $107.2 million, mostly as a result of higher occupancy costs. Restructuring costs declined by $3.5 million. Depreciation and amortization expenses declined by $2.9 million, or 4.5%.

Other Expense (Income), Net

Other expense (income), net for nine months 2012 was $50.5 million, an increase of $3.5 million from nine months 2011. Other expense (income), net includes debt repayment and refinancing expenses of $20.6 million in nine months 2012 and $6.4 million in nine months 2011. Excluding the change in debt repayment and refinancing expenses, other expense declined by $10.7 million in nine months 2012 as a result of a combination of lower levels of indebtedness and a lower interest rates.

Provision for Income Taxes

The provision for income tax expense was $71.3 million in nine months 2012, up $7.0 million, or 10.9% from nine months 2011. The effective tax rate was 35.5% in nine months 2012, up from 33.3% in nine months 2011. Nine months 2011 income tax expense was impacted by $4.2 million of certain non-recurring benefits relating to prior tax periods.

Net Income and Earnings per Share — See Table 14

Net income was essentially flat at $129.8 million. The net income margin decreased to 18.5% from 19.1%. Diluted EPS was unchanged at $1.05.

Adjusted net income rose $5.3 million, or 3.1%, to $177.0 million. Adjusted EPS rose 2.9% to $1.43 in nine months 2012.

See table 14 titled "Reconciliation of Adjusted Net Income and Adjusted EPS to Net Income and EPS" and "Notes Regarding the Use of Non-GAAP Financial Measures" below.

Adjusted EBITDA — See Table 13

Adjusted EBITDA, which excludes income taxes, other net expense and income, depreciation, amortization, non-recurring stock-based compensation, restructuring costs, and the lease exit charge, was $317.9 million, up $2.8 million, or 0.9%, from nine months 2011. Adjusted EBITDA margin fell to 45.2% from 46.7%.

By segment, Adjusted EBITDA for the Performance and Risk segment increased $6.6 million, or 2.3%, to $297.1 million from nine months 2011. The Adjusted EBITDA margin for the Performance and Risk segment declined to 48.6% from 49.8% in nine months 2011. Adjusted EBITDA for the Governance segment declined $3.8 million, or 15.6%, to $20.8 million in nine months 2012. The Adjusted EBITDA margin for the Governance segment was 22.6%, down from 27.0% in nine months 2011.

See Table 13 titled "Reconciliation of Adjusted EBITDA to Net Income" and "Notes Regarding the Use of Non-GAAP Financial Measures" below.

Key Operating Metrics — See Tables 10, 11, 12

Total run rate grew by $38.8 million, or 4.4%, to $915.0 million as of September 30, 2012 versus September 30, 2011. Subscription run rate, which excludes the impact of asset-based fees, grew by $42.2 million, or 5.6%, to $800.4 million. Asset-based fee run rate declined by $3.4 million, or 2.8%, to $114.6 million. The decline in asset-based fee run rate was driven by the decision by Vanguard to switch the indices for 22 of its ETFs, the impact of which lowered run rate by $24.4 million at September 30, 2012. Excluding the impact of the Vanguard indices being switched, total run rate grew by $55.9 million, or 6.5%, and asset-based fee run rate grew by $13.7 million, or 13.6%.

At the end of third quarter 2012, assets under management ("AUM") in ETFs linked to MSCI indices were $363.7 billion, up $73.6 billion, or 25.4%, from the end of third quarter 2011 and up $36.3 billion, or 11.1%, from the end of second quarter 2012. Excluding AUM in Vanguard ETFs due to be switched, AUM in MSCI-linked ETFs was $232.5 billion, up from $198.1 billion at the end of third quarter 2011 and $210.1 billion as of June 30, 2012. ETFs linked to MSCI indices attracted net inflows of $15.2 billion in third quarter 2012, including $7.6 billion in the Vanguard ETFs.

As of September 30, 2012, 39.4% of assets under management in ETFs linked to MSCI indices were linked to emerging markets indices, 32.5% were linked to other developed markets outside the United States, 25.0% were linked to U.S. market indices and 3.1% were linked to other global indices.

Acquisition of IPD Group

On October 31, 2012, MSCI announced that its subsidiary, MSCI Limited, entered into a definitive agreement to acquire IPD Group Limited ("IPD"), a holding company for the IPD Group, for a purchase price¹ of approximately $125 million¹ (£78 million), funded through existing cash. IPD is a leading provider of real estate investment performance benchmarking, performance analysis, market indices, risk management tools and market research to the owners, institutional investors, managers, lenders on, and occupiers of, real estate. For the year ended December 31, 2011 and the six month period ended June 30, 2012, IPD had U.S. dollar equivalent revenues² of $47.7 million² (£29.7 million) and $26.4 million² (£16.7 million), respectively. The acquisition is not expected to have a material impact on MSCI's results of operations in fiscal year 2012. The transaction is subject to customary closing conditions for transactions of this nature and is expected to close during the fourth quarter of 2012.

¹ Purchase price shown in U.S. dollars assumes a GBP / USD exchange rate of 1.60. Purchase price excludes certain employee retention payments and expenses.

² Revenues shown in U.S. dollars based on average exchange rates over the applicable periods.

Conference Call Information

Investors will have the opportunity to listen to MSCI Inc.'s senior management review third quarter 2012 results on Tuesday, November 6, 2012 at 11:00 am Eastern Time. To listen to the live event, visit the investor relations section of MSCI's website, http://ir.msci.com/events.cfm, or dial 1-877-312-9206 within the United States. International callers dial 1-408-774-4001.

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 November 8, 2012. To listen to the recording, visit http://ir.msci.com/events.cfm, or dial 1-855-859-2056 (passcode: 43175268) within the United States. International callers dial 1-404-537-3406 (passcode: 43175268).

About MSCI Inc.

MSCI Inc. is a leading provider of investment decision support tools to investors globally, including asset managers, banks, hedge funds and pension funds. MSCI products and services include indices, portfolio risk and performance analytics, and governance tools.

The company's flagship product offerings are: the MSCI indices with approximately USD 7 trillion estimated to be benchmarked to them on a worldwide basis¹; Barra multi-asset class factor models, portfolio risk and performance analytics; RiskMetrics multi-asset class market and credit risk analytics; ISS governance research and outsourced proxy voting and reporting services; and FEA valuation models and risk management software for the energy and commodities markets. MSCI is headquartered in New York, with research and commercial offices around the world. MSCI#IR

¹As of March 31, 2012, based on eVestment, Lipper and Bloomberg data.

For further information on MSCI Inc. or our products please visit www.msci.com.

Forward-Looking Statements

This earnings release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements relate to future events or to future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance, or achievements to be materially different from any future results, levels of activity, performance, or achievements expressed or implied by these forward-looking statements. In some cases, you can identify forward-looking statements by the use of words such as "may," "could," "expect," "intend," "plan," "seek," "anticipate," "believe," "estimate," "predict," "potential," or "continue", or the negative of these terms or other comparable terminology. You should not place undue reliance on forward-looking statements because they involve known and unknown risks, uncertainties and other factors that are, in some cases, beyond our control and that could materially affect actual results, levels of activity, performance, or achievements.

Other factors that could materially affect actual results, levels of activity, performance or achievements can be found in MSCI's Annual Report on Form 10-K for the fiscal year ended December 31, 2011 and filed with the Securities and Exchange Commission (SEC) on February 29, 2012, and in quarterly reports on Form 10-Q and current reports on Form 8-K filed with the SEC. If any of these risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may vary significantly from what we projected. Any forward-looking statement in this release reflects our current views with respect to future events and is subject to these and other risks, uncertainties and assumptions relating to our operations, results of operations, growth strategy and liquidity. We assume no obligation to publicly update or revise these forward-looking statements for any reason, whether as a result of new information, future events, or otherwise.

Notes Regarding the Use of Non-GAAP Financial Measures

MSCI has presented supplemental non-GAAP financial measures as part of this earnings release. A reconciliation is provided that reconciles each non-GAAP financial measure with the most comparable GAAP measure. The presentation of non-GAAP financial measures should not be considered as alternative measures for the most directly comparable GAAP financial measures. These measures are used by management to monitor the financial performance of the business, inform business decision making and forecast future results.

Adjusted EBITDA is defined as net income before provision for income taxes, other net expense and income, depreciation and amortization, non-recurring stock-based compensation expense, the lease exit charge and restructuring costs.

Adjusted net income and Adjusted EPS are defined as net income and EPS, respectively, before provision for non-recurring stock-based compensation expenses, amortization of intangible assets, lease exit charge, restructuring costs and the accelerated amortization or write off of deferred financing and debt discount costs as a result of debt repayment (debt repayment and refinancing expenses), as well as for any related tax effects.

We believe that adjustments related to the lease exit charge, restructuring costs and debt repayment and refinancing expenses are useful to management and investors because it allows for an evaluation of MSCI's underlying operating performance. Additionally, we believe that adjusting for non-recurring stock-based compensation expenses, debt repayment and refinancing expenses and depreciation and amortization may help investors compare our performance to that of other companies in our industry as we do not believe that other companies in our industry have as significant a portion of their operating expenses represented by these items. 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, Adjusted net income and Adjusted EPS are not defined in the same manner by all companies and may not be comparable to other similarly titled measures of other companies.

Table 2: MSCI Inc. Consolidated Statement of Income (unaudited)

			Three Months Ended												Nine Months Ended
			September 30,				September 30,				June 30,				September 30,				September 30,
In thousands, except per share data			2012				2011				2012				2012				2011
Operating revenues			$	235,444			$	225,026			$	238,565			$	703,061			$	674,807
Operating expenses
	Cost of services			68,350				68,968				73,243				213,884				208,026
	Selling, general and administrative			62,973				53,724				57,602				176,011				158,463
	Restructuring costs			-				(1,002	)			(22	)			(51	)			3,469
	Amortization of intangibles			15,959				16,422				15,959				47,877				49,537
	Depreciation and amortization of property,
	equipment and leasehold improvements			4,633				4,669				4,662				13,711				14,947
Total operating expenses			$	151,915			$	142,781			$	151,444			$	451,432			$	434,442
Operating income			$	83,529			$	82,245			$	87,121			$	251,629			$	240,365
Operating margin				35.5	%			36.5	%			36.5	%			35.8	%			35.6	%
Interest income				(252	)			(184	)			(237	)			(712	)			(513	)
Interest expense				7,314				13,113				29,581				49,250				42,552
Other expense (income)				873				(983	)			516				1,997				5,041
Other expenses (income), net			$	7,935			$	11,946			$	29,860			$	50,535			$	47,080
Income before taxes				75,594				70,299				57,261				201,094				193,285
Provision for income taxes				27,320				20,512				19,715				71,308				64,317
Net income			$	48,274			$	49,787			$	37,546			$	129,786			$	128,968
Net income margin				20.5	%			22.1	%			15.7	%			18.5	%			19.1	%
Earnings per basic common share			$	0.39			$	0.41			$	0.31			$	1.06			$	1.06
Earnings per diluted common share			$	0.39			$	0.40			$	0.30			$	1.05			$	1.05
Weighted average shares outstanding used
in computing earnings per share
Basic				122,261				120,831				122,030				122,016				120,570
Diluted				123,450				122,303				123,295				123,287				122,186

Table 3: MSCI Inc. Selected Balance Sheet Items (unaudited)

									As of
									September 30,			December 31,
In thousands									2012			2011
Cash and cash equivalents									$	340,458		$	252,211
Short-term investments										93,885			140,490
Trade receivables, net of allowances										124,309			180,566
Deferred revenue									$	323,503		$	289,217
Current maturities of long-term debt										43,082			10,339
Long-term debt, net of current maturities										822,401			1,066,548

Table 4: Quarterly Operating Revenues by Product Category and Revenue Type (unaudited)

			Three Months Ended									% Change from
			September 30,			September 30,			June 30,			September 30,			June 30,
In thousands			2012			2011			2012			2011			2012
Index and ESG products
	Subscriptions		$	73,894		$	66,279		$	75,829		11.5	%		(2.6	%)
	Asset-based fees			34,042			35,030			34,094		(2.8	%)		(0.2	%)
Index and ESG products total				107,936			101,309			109,923		6.5	%		(1.8	%)
Risk management analytics				64,998			61,861			64,547		5.1	%		0.7	%
Portfolio management analytics				29,138			30,263			29,326		(3.7	%)		(0.6	%)
Energy and commodity analytics				3,317			2,797			3,780		18.6	%		(12.2	%)
	Total Performance and Risk revenues		$	205,389		$	196,230		$	207,576		4.7	%		(1.1	%)
	Total Governance revenues			30,055			28,796			30,989		4.4	%		(3.0	%)
Total operating revenues			$	235,444		$	225,026		$	238,565		4.6	%		(1.3	%)
	Recurring subscriptions		$	197,591		$	183,735		$	198,104		7.5	%		(0.3	%)
	Asset-based fees			34,042			35,030			34,094		(2.8	%)		(0.2	%)
	Non-recurring revenue			3,811			6,261			6,367		(39.1	%)		(40.1	%)
Total operating revenues			$	235,444		$	225,026		$	238,565		4.6	%		(1.3	%)

Table 5: Nine Months Operating Revenues by Product Category and Revenue Type (unaudited)

						Nine Months Ended							% Change from
						September 30,				September 30,			September 30,
In thousands						2012				2011			2011
Index and ESG products
	Subscriptions					$	221,362			$	194,713		13.7	%
	Asset-based fees						102,745				109,186		(5.9	%)
Index and ESG products total							324,107				303,899		6.6	%
Risk management analytics							193,622				181,533		6.7	%
Portfolio management analytics							87,527				88,740		(1.4	%)
Energy and commodity analytics
	Recurring Energy and commodity analytics						11,001				9,616		14.4	%
	Correction1						(5,203	)			-		n/m
Net energy and commodity analytics							5,798				9,616		(39.7	%)
	Total Performance and Risk revenues					$	611,054			$	583,788		4.7	%
	Total Governance revenues						92,007				91,019		1.1	%
Total operating revenues						$	703,061			$	674,807		4.2	%
	Recurring subscriptions					$	582,330			$	542,711		7.3	%
	Asset-based fees						102,745				104,924		(2.1	%)
	Non-recurring revenue						17,986				27,172		(33.8	%)
Total operating revenues						$	703,061			$	674,807		4.2	%

1 In first quarter 2012, MSCI recorded a non-cash $5.2 million cumulative revenue reduction to correct an error related to energy and commodity analytics revenues previously reported prior to January 1, 2012. MSCI's previous policy had resulted in the immediate recognition of a substantial portion of the revenue related to a majority of its contracts rather than amortizing that revenue over the life of that contract, which is now the method of recognition.

Table 6: Quarterly Operating Expense Detail (unaudited)

			Three Months Ended											% Change from
			September 30,			September 30,				June 30,				September 30,			June 30,
In thousands			2012			2011				2012				2011			2012
Cost of services
	Compensation		$	50,111		$	50,114			$	55,492			(0.0	%)		(9.7	%)
	Non-recurring stock based compensation			267			470				94			(43.2	%)		184.0	%
	Total compensation		$	50,378		$	50,584			$	55,586			(0.4	%)		(9.4	%)
	Non-compensation			16,448			18,384				17,657			(10.5	%)		(6.8	%)
	Lease exit charge1			1,524			-				-			n/m			n/m
	Total non-compensation			17,972			18,384				17,657			(2.2	%)		1.8	%
Total cost of services			$	68,350		$	68,968			$	73,243			(0.9	%)		(6.7	%)
Selling, general and administrative
	Compensation		$	42,296		$	34,874			$	38,025			21.3	%		11.2	%
	Non-recurring stock based compensation			359			820				98			(56.2	%)		266.3	%
	Total compensation		$	42,655		$	35,694			$	38,123			19.5	%		11.9	%
	Non-compensation			18,515			18,030				19,479			2.7	%		(4.9	%)
	Lease exit charge1			1,803			-				-			n/m			n/m
	Total non-compensation			20,318			18,030				19,479			12.7	%		4.3	%
Total selling, general and administrative			$	62,973		$	53,724			$	57,602			17.2	%		9.3	%
Restructuring costs				-			(1,002	)			(22	)		n/m			n/m
Amortization of intangibles				15,959			16,422				15,959			(2.8	%)		0.0	%
Depreciation and amortization				4,633			4,669				4,662			(0.8	%)		(0.6	%)
Total operating expenses			$	151,915		$	142,781			$	151,444			6.4	%		0.3	%
Compensation			$	92,407		$	84,988			$	93,517			8.7	%		(1.2	%)
Non-recurring stock-based compensation				626			1,290				192			(51.5	%)		226.0	%
Non-compensation expenses				34,963			36,414				37,136			(4.0	%)		(5.9	%)
Lease exit charge1				3,327			-				-			n/m			n/m
Restructuring costs				-			(1,002	)			(22	)		n/m			n/m
Amortization of intangibles				15,959			16,422				15,959			(2.8	%)		0.0	%
Depreciation and amortization				4,633			4,669				4,662			(0.8	%)		(0.6	%)
	Total operating expenses		$	151,915		$	142,781			$	151,444			6.4	%		0.3	%

1The third quarter 2012 included a total $3.3 million charge associated with a lease exit resulting from the consolidation of our New York offices.

Table 7: Nine Months Operating Expense Detail (unaudited)

			Nine Months Ended							% Change from
			September 30,				September 30,			September 30,
In thousands			2012				2011			2012
Cost of services
	Compensation		$	159,152			$	149,316		6.6	%
	Non-recurring stock based compensation			629				2,707		(76.8	%)
	Total compensation		$	159,781			$	152,023		5.1	%
	Non-compensation			52,579				56,003		(6.1	%)
	Lease exit charge1			1,524				-		n/m
	Total non-compensation			54,103				56,003		(3.4	%)
Total cost of services			$	213,884			$	208,026		2.8	%
Selling, general and administrative
	Compensation		$	118,813			$	104,049		14.2	%
	Non-recurring stock based compensation			771				4,068		(81.0	%)
	Total compensation		$	119,584			$	108,117		10.6	%
	Non-compensation			54,624				50,346		8.5	%
	Lease exit charge1			1,803				-		n/m
	Total non-compensation			56,427				50,346		12.1	%
Total selling, general and administrative			$	176,011			$	158,463		11.1	%
Restructuring costs				(51	)			3,469		(101.5	%)
Amortization of intangibles				47,877				49,537		(3.4	%)
Depreciation and amortization				13,711				14,947		(8.3	%)
Total operating expenses			$	451,432			$	434,442		3.9	%
Compensation			$	277,965			$	253,365		9.7	%
Non-recurring stock-based compensation				1,400				6,775		(79.3	%)
Non-compensation expenses				107,203				106,349		0.8	%
Lease exit charge1				3,327				-		n/m
Restructuring costs				(51	)			3,469		(101.5	%)
Amortization of intangibles				47,877				49,537		(3.4	%)
Depreciation and amortization				13,711				14,947		(8.3	%)
	Total operating expenses		$	451,432			$	434,442		3.9	%

1The third quarter 2012 included a total $3.3 million charge associated with a lease exit resulting from the consolidation of our New York offices.

Table 8: Summary Quarterly Segment Information (unaudited)

			Three Months Ended												% Change from
			September 30,				September 30,				June 30,				September 30,			June 30,
In thousands			2012				2011				2012				2011			2012
Revenues:
Performance and Risk			$	205,389			$	196,230			$	207,576			4.7	%		(1.1	%)
Governance				30,055				28,796				30,989			4.4	%		(3.0	%)
	Total Operating revenues		$	235,444			$	225,026			$	238,565			4.6	%		(1.3	%)
Operating Income:
Performance and Risk				80,472				78,957				85,980			1.9	%		(6.4	%)
	Margin			39.2	%			40.2	%			41.4	%
Governance				3,057				3,288				1,141			(7.0	%)		167.9	%
	Margin			10.2	%			11.4	%			3.7	%
	Total Operating Income		$	83,529			$	82,245			$	87,121			1.6	%		(4.1	%)
	Margin			35.5	%			36.5	%			36.5	%
Adjusted EBITDA:
Performance and Risk				100,362				95,986				102,595			4.6	%		(2.2	%)
	Margin			48.9	%			48.9	%			49.4	%
Governance				7,712				7,638				5,317			1.0	%		45.0	%
	Margin			25.7	%			26.5	%			17.2	%
	Total Adjusted EBITDA		$	108,074			$	103,624			$	107,912			4.3	%		0.2	%
	Margin			45.9	%			46.0	%			45.2	%

Table 9: Summary Nine Months Segment Information (unaudited)

					Nine Months Ended								% Change from
					September 30,				September 30,				September 30,
In thousands					2012				2011				2011
Revenues:
Performance and Risk					$	611,054			$	583,788			4.7	%
Governance						92,007				91,019			1.1	%
	Total Operating revenues				$	703,061			$	674,807			4.2	%
Operating Income:
Performance and Risk						243,927				231,458			5.4	%
	Margin					39.9	%			39.6	%
Governance						7,702				8,907			(13.5	%)
	Margin					8.4	%			9.8	%
	Total Operating Income				$	251,629			$	240,365			4.7	%
	Margin					35.8	%			35.6	%
Adjusted EBITDA:
Performance and Risk						297,142				290,496			2.3	%
	Margin					48.6	%			49.8	%
Governance						20,751				24,597			(15.6	%)
	Margin					22.6	%			27.0	%
	Total Adjusted EBITDA				$	317,893			$	315,093			0.9	%
	Margin					45.2	%			46.7	%

Table 10: Key Operating Metrics

				As of													% Change from
	In thousands			September 2012					September 2011				June 2012				September 2011			June 2012
	Run Rates1
	Index and ESG products
		Subscription		$	292,787				$	264,722			$	285,604			10.6	%		2.5	%
		Asset based fees			114,576		(2)			117,928				129,045			(2.8	%)		(11.2	%)
	Index and ESG products total				407,363					382,650				414,649			6.5	%		(1.8	%)
	Risk management analytics				261,776					251,804				258,995			4.0	%		1.1	%
	Portfolio management analytics				115,958					119,220				117,153			(2.7	%)		(1.0	%)
	Energy and commodity analytics				14,040					15,343				14,839			(8.5	%)		(5.4	%)
		Total Performance and Risk			799,137					769,017				805,636			3.9	%		(0.8	%)
		Governance			115,840					107,152				113,976			8.1	%		1.6	%
	Total Run Rate			$	914,977				$	876,169			$	919,612			4.4	%		(0.5	%)
	Subscription total			$	800,401				$	758,241			$	790,567			5.6	%		1.2	%
	Asset-based fees total				114,576		(2)			117,928				129,045			(2.8	%)		(11.2	%)
	Total Run Rate			$	914,977				$	876,169			$	919,612			4.4	%		(0.5	%)
	New Recurring Subscription Sales			$	27,164				$	31,661			$	28,453			(14.2	%)		(4.5	%)
	Subscription Cancellations				(19,134	)				(15,364	)			(17,229	)		24.5	%		11.1	%
		Net New Recurring Subscription Sales		$	8,030				$	16,297			$	11,224			(50.7	%)		(28.5	%)
	Non-recurring sales			$	3,878				$	6,560			$	5,099			(40.9	%)		(23.9	%)
	Employees				2,416					2,277				2,384			6.1	%		1.3	%
	% Employees by location
	Developed Market Centers				56	%				62	%			58	%
	Emerging Market Centers				44	%				38	%			42	%

1 The run rate at a particular point in time represents the forward-looking fees for the next 12 months from all subscriptions and investment product licenses we currently provide to our clients under renewable contracts assuming all contracts that come up for renewal are renewed and assuming then-current exchange rates. For any subscription or 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 or subscription. 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 during the period and we have determined that such notice evidences the client's final decision to terminate or not renew the applicable subscription or agreement, even though the notice is not effective until a later date.

2 The asset-based fee run rate for third quarter 2012 includes the reduction of $24.4 million in run rate associated with 22 Vanguard ETFs due to be switched from MSCI indices.

Table 11: ETF Assets Linked to MSCI Indices¹ (unaudited)

																											Nine Months
			Three Months Ended 2011														Three Months Ended 2012										Ended September
In Billions			March			June				September				December			March			June				September			2011				2012
Beginning Period AUM in ETFs linked to MSCI Indices			$	333.3		$	350.1			$	360.5			$	290.1		$	301.6		$	354.7			$	327.4		$	333.3			$	301.6
Cash Inflow/ Outflow				6.7			14.2				(0.0	)			1.0			15.2			0.3				15.2			20.9				30.7
Appreciation/Depreciation				10.1			(3.8	)			(70.4	)			10.5			37.9			(27.6	)			21.1			(64.1	)			31.4
Period End AUM in ETFs linked to MSCI Indices			$	350.1		$	360.5			$	290.1			$	301.6		$	354.7		$	327.4			$	363.7		$	290.1			$	363.7
Period Average AUM in ETFs linked to MSCI Indices 2			$	337.6		$	356.8			$	329.1			$	305.0		$	341.0		$	331.6			$	344.7		$	340.1			$	339.2

1 ETF assets under management calculation methodology is ETF net asset value multiplied by shares outstanding. Source: Bloomberg and MSCI

2 September 2012 period end assets under management includes $131 billion of AUM in 22 Vanguard ETFs due to be switched from MSCI indices.

Table 12: Supplemental Operating Metrics

					Recurring Subscription Sales & Subscription Cancellations
					Three Months Ended 2011																	Three Months Ended 2012													Nine Months Ended
	In thousands				March				June				September				December					March				June				September					Sept. 2011				Sept. 2012
	New Recurring Subscription Sales				$	34,612			$	30,298			$	31,661			$	35,444				$	33,506			$	28,453			$	27,164				$	96,571			$	89,123
	Subscription Cancellations					(14,402	)			(14,965	)			(15,364	)			(27,245	)				(13,498	)			(17,229	)			(19,134	)				(44,731	)			(49,861	)
	Net New Recurring Subscription Sales				$	20,210			$	15,333			$	16,297			$	8,199				$	20,008			$	11,224			$	8,030				$	51,840			$	39,262
	Non-recurring sales					13,647				8,415				6,560				7,460					9,338				5,099				3,878					28,622				18,315
	Total Sales				$	48,259			$	38,713			$	38,221			$	42,904				$	42,844			$	33,552			$	31,042				$	125,193			$	107,438
												Aggregate Retention Rates
					Three Months Ended 2011																	Three Months Ended 2012													Nine Months Ended
					March				June				September				December					March				June				September					Sept. 2011				Sept. 2012
	Aggregate Retention Rate 1
		Index and ESG products				95.0	%			92.8	%			95.2	%			89.3	%				94.5	%			94.9	%			94.0	%				94.3	%			94.4	%
		Risk management analytics				94.2	%			92.2	%			92.1	%			80.8	%				93.9	%			90.0	%			88.5	%				92.6	%			90.7	%
		Portfolio management analytics				88.6	%			91.4	%			86.6	%			87.2	%				91.9	%			84.2	%			84.9	%				88.8	%			87.0	%
		Energy & commodity analytics				76.9	%			88.8	%			89.3	%			75.0	%				90.2	%			85.5	%			76.6	%				85.0	%			84.1	%
	Total Performance and Risk					93.0	%			92.2	%			92.2	%			85.2	%				93.7	%			90.9	%			89.8	%				92.3	%			91.4	%
	Total Governance					85.0	%			90.4	%			86.2	%			80.6	%				88.7	%			92.1	%			91.1	%				87.2	%			90.7	%
		Total Aggregate Retention Rate				91.8	%			91.9	%			91.3	%			84.5	%				93.0	%			91.0	%			90.0	%				91.6	%			91.3	%

1The quarterly Aggregate Retention Rates are calculated by annualizing the cancellations for which we have received a notice of termination or non-renewal during the quarter and we have determined that such notice evidences the client's final decision to terminate or not renew the applicable subscription or agreement, even though such notice is not effective until a later date. This annualized cancellation figure is then divided by the subscription Run Rate at the beginning of the year to calculate a cancellation rate. This cancellation rate is then subtracted from 100% to derive the annualized Retention Rate for the quarter. The Aggregate Retention Rate is computed on a product-by-product basis. Therefore, if a client reduces the number of products to which it subscribes or switches between our products, we treat it as a cancellation. In addition, we treat any reduction in fees resulting from renegotiated contracts as a cancellation in the calculation to the extent of the reduction.

Table 13: Reconciliation of Adjusted EBITDA to Net Income (unaudited)

				Three Months Ended September 30, 2012												Three Months Ended September 30, 2011
In thousands				Performance and Risk				Governance				Total				Performance and Risk				Governance				Total
Net Income												$	48,274											$	49,787
Plus:		Provision for income taxes											27,320												20,512
Plus:		Other expense (income), net											7,935												11,946
Operating income				$	80,472			$	3,057			$	83,529			$	78,957			$	3,288			$	82,245
Plus:		Non-recurring stock-based compensation			572				54				626				1,246				44				1,290
Plus:		Depreciation and amortization			3,755				878				4,633				3,529				1,140				4,669
Plus:		Amortization of intangible assets			12,638				3,321				15,959				13,072				3,350				16,422
Plus:		Lease exit charge			2,925				402				3,327				-				-				-
Plus:		Restructuring costs			-				-				-				(818	)			(184	)			(1,002	)
Adjusted EBITDA				$	100,362			$	7,712			$	108,074			$	95,986			$	7,638			$	103,624
				Nine Months Ended September 30, 2012												Nine Months Ended September 30, 2011
In thousands				Performance and Risk				Governance				Total				Performance and Risk				Governance				Total
Net Income												$	129,786											$	128,968
Plus:		Provision for income taxes											71,308												64,317
Plus:		Other expense (income), net											50,535												47,080
Operating income				$	243,927			$	7,702			$	251,629			$	231,458			$	8,907			$	240,365
Plus:		Non-recurring stock-based compensation			1,269				131				1,400				6,432				343				6,775
Plus:		Depreciation and amortization			11,137				2,574				13,711				11,549				3,398				14,947
Plus:		Amortization of intangible assets			37,916				9,961				47,877				39,487				10,050				49,537
Plus:		Lease exit charge			2,925				402				3,327				-				-				-
Plus:		Restructuring costs			(32	)			(19	)			(51	)			1,570				1,899				3,469
Adjusted EBITDA				$	297,142			$	20,751			$	317,893			$	290,496			$	24,597			$	315,093

Table 14: Reconciliation of Adjusted Net Income and Adjusted EPS to Net Income and EPS (unaudited)

				Three Months Ended												Nine Months Ended
				September 30,				September 30,				June 30,				September 30,				September 30,
In thousands				2012				2011				2012				2012				2011
Net Income				$	48,274			$	49,787			$	37,546			$	129,786			$	128,968
Plus:		Non-recurring stock-based compensation			626				1,290				192				1,400				6,775
Plus:		Amortization of intangible assets			15,959				16,422				15,959				47,877				49,537
Plus:		Debt repayment and refinancing expenses			-				-				20,639				20,639				6,404
Plus:		Lease exit charge			3,327				-				-				3,327				-
Plus:		Restructuring costs			-				(1,002	)			(22	)			(51	)			3,469
Less:		Income tax effect			(7,280	)			(5,585	)			(12,775	)			(25,954	)			(23,450	)
Adjusted net income				$	60,906			$	60,912			$	61,539			$	177,024			$	171,703
Diluted EPS				$	0.39			$	0.40			$	0.30			$	1.05			$	1.05
Plus:		Non-recurring stock-based compensation		$	0.01			$	0.01			$	-			$	0.01			$	0.05
Plus:		Amortization of intangible assets		$	0.13			$	0.13			$	0.13			$	0.39			$	0.40
Plus:		Debt repayment and refinancing expenses		$	-			$	-			$	0.17			$	0.17			$	0.05
Plus:		Lease exit charge		$	0.03			$	-			$	-			$	0.03			$	-
Plus:		Restructuring costs		$	-			$	(0.01	)		$	-			$	(0.00	)		$	0.03
Less:		Income tax effect		$	(0.07	)		$	(0.04	)		$	(0.10	)		$	(0.22	)		$	(0.19	)
Adjusted EPS				$	0.49			$	0.49			$	0.50			$	1.43			$	1.39

MSCI Inc. Contact:
MSCI, New York
Edings Thibault, + 1.212.804.5273
or
For media inquiries please contact:
Abernathy MacGregor, New York
Patrick Clifford | Nick Connors, + 1.212.371.5999
or
MHP Communications, London
Sally Todd | Jennifer Spivey, + 44.20.3128.8100

Source: MSCI Inc.

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