UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
DC 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report
(Date of earliest event reported): January 7,
2010
MSCI
Inc.
(Exact name of
registrant as specified in its charter)
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Delaware
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001-33812
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13-4038723
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(State
or other jurisdiction
of
incorporation)
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(Commission
File Number)
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(IRS
Employer
Identification
No.)
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88
Pine Street, New York, NY 10005
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10005
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(Address
of principal executive offices)
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(Zip
Code)
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(212)
804-3900
(Registrant’s
telephone number, including area code)
NOT
APPLICABLE
(Former name or
former address, if changed since last report)
Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (see General Instruction A.2. below):
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¨
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Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
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¨
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
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¨
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Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR
240.14d-2(b))
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¨
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Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
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On
January 7, 2010, MSCI Inc. (the “Registrant”) released financial information
with respect to its fiscal year and fourth quarter ended
November 30, 2009. A copy of the press release containing
this information is annexed as Exhibit 99.1 to this Report.
The
Registrant’s press release contains certain non-GAAP financial measures. A
reconciliation of these non-GAAP financial measures to the comparable GAAP
financial measures is also contained in Exhibit 99.1.
The
information furnished under Item 2.02 of this Report, including Exhibit 99.1
shall not be deemed “filed” for purposes of Section 18 of the Securities
Exchange Act of 1934 (the “Exchange Act”), as amended, or otherwise subject to
the liabilities of that section, nor shall it be deemed incorporated by
reference into any filing under the Securities Act of 1933, as amended, or the
Exchange Act, except as shall be expressly set forth by specific reference in
such filing.
(d)
Exhibits.
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Exhibit No.
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Description
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Exhibit
99.1
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Press release of the Registrant
dated January 7, 2010 containing financial information
for the fiscal year and fourth quarter ended November 30, 2009.
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Pursuant to the requirements of the
Exchange Act, the Registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
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MSCI Inc.
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Date: January 7,
2010
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By:
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/s/ Henry A.
Fernandez
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Name:
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Henry A.
Fernandez
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Title:
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Chief Executive Officer, President
and Chairman
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Exhibit
99.1
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www.mscibarra.com
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MSCI
Inc. Reports Record Fourth Quarter and Fiscal Year 2009 Financial
Results
New York – January 7, 2010 –
MSCI Inc. (NYSE: MXB), a leading global
provider of investment decision support tools, including indices and portfolio
risk and performance analytics, today announced results for the fourth quarter
and fiscal year ended November 30, 2009.
(Note: Percentage
changes are referenced to the comparable period in fiscal year 2008, unless
otherwise noted.)
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·
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Operating
revenues increased 10.6% to $118.8 million in fourth quarter 2009 and
increased 2.8% to $442.9 million in fiscal year
2009.
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·
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Adjusted
EBITDA increased 22.0% to a record $59.3 million in fourth quarter 2009
for an adjusted EBITDA margin of 49.9% and increased 10.4% to $215.1
million for an adjusted EBITDA margin of 48.6% in fiscal year 2009. See
Tables 8 and 12 each titled "Reconciliation of Adjusted EBITDA to Net
Income."
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·
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Net income
increased 91.3% to $24.5 million, or $0.24 per diluted share, in fourth
quarter 2009 for a net income margin of 20.7% and increased 19.8% to $81.8
million in fiscal year 2009 for a net income margin of
18.5%.
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Henry A. Fernandez,
Chairman and CEO, said “We delivered record fourth quarter and fiscal year
financial results. We are especially pleased with our ability to generate growth
in both revenue and adjusted EBITDA in fiscal 2009 which was a period of
unprecedented volatility and turbulence in financial markets throughout the
world. In the fourth quarter, we experienced double-digit growth in both
revenues and adjusted EBITDA largely reflecting strength in our asset based fees
and disciplined expense management.”
“As our fiscal year
came to a close, we continued to see stabilization in our subscription business.
In the fourth quarter, new subscription sales continued to recover, albeit at a
modest pace, and our retention rate increased sequentially. The sequential
improvement in the retention rate is particularly encouraging as it was a break
from the typical seasonal pattern in which the fourth quarter retention rate is
down from the third quarter. Looking at 2010, we are cautiously optimistic about
the unfolding recovery in our end markets and, as such, we will be making
additional investments in our business in order to launch new products and
position ourselves to better serve our clients. We expect this investment
spending will accelerate our revenue growth over the medium and longer term,”
added Mr. Fernandez.
Selected
Financial Information
Table
1a
MSCI
Inc.
Selected Income
Statement Items (unaudited)
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Three Months
Ended
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Fiscal Year
Ended
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|||||||||||||||||||||||
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November
30,
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November
30,
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|||||||||||||||||||||||
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In thousands,
except per share data
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2009
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2008
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Change
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2009
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2008
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Change
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||||||||||||||||||
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Operating
revenues
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$ | 118,790 | $ | 107,416 | 10.6 | % | $ | 442,948 | $ | 430,961 | 2.8 | % | ||||||||||||
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Operating
expenses
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$ | 75,034 | $ | 77,214 | (2.8 | %) | $ | 291,956 | $ | 295,171 | (1.1 | %) | ||||||||||||
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Net
income
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$ | 24,535 | $ | 12,825 | 91.3 | % | $ | 81,801 | $ | 68,268 | 19.8 | % | ||||||||||||
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%
Margin
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20.7 | % | 11.9 | % | 18.5 | % | 15.8 | % | ||||||||||||||||
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Diluted
EPS
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$ | 0.24 | $ | 0.13 | 84.6 | % | $ | 0.80 | $ | 0.67 | 19.4 | % | ||||||||||||
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Adjusted
EBITDA1
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$ | 59,262 | $ | 48,590 | 22.0 | % | $ | 215,074 | $ | 194,845 | 10.4 | % | ||||||||||||
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%
Margin
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49.9 | % | 45.2 | % | 48.6 | % | 45.2 | % | ||||||||||||||||
1 See
Tables 8 and 12 each titled "Reconciliation of Adjusted EBITDA to Net Income"
and information about the use of non-GAAP financial information provided under
"Notes Regarding the Use of Non-GAAP Financial Measures.”
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Table 1b
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MSCI
Inc.
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Selected
Balance Sheet Items (unaudited)
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As
of
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||||||||
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November
30,
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November
30,
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|||||||
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In
thousands
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2009
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2008
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||||||
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Cash and cash
equivalents
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$ | 176,024 | $ | 268,077 | ||||
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Short-term
investments
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$ | 295,304 | $ | 0 | ||||
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Trade
receivables, net of allowances
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$ | 77,180 | $ | 85,723 | ||||
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Deferred
revenue
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$ | 152,944 | $ | 144,711 | ||||
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Current
maturities of long-term debt
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$ | 42,088 | $ | 22,086 | ||||
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Long-term
debt, net of current maturities
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$ | 337,622 | $ | 379,709 | ||||
Summary
of Results for Fiscal Fourth Quarter 2009
Operating
Revenues – See Table 6
Total operating
revenues for the three months ended November 30, 2009 (fourth quarter 2009)
increased $11.4 million, or 10.6%, to $118.8 million compared to $107.4 million
for the three months ended November 30, 2008 (fourth quarter 2008). Subscription
revenues increased by 2.2% to $96.0 million while equity index asset-based fees
rose 69.0% to $22.8 million. Subscription revenue growth resulted from increases
in revenues related to equity index subscriptions, Multi-Asset Class Portfolio
Analytics and Other Products which were up 6.3%, 12.8% and 2.1%, respectively,
in fourth quarter 2009 offset, in part, by a decrease of 6.5% in Equity
Portfolio Analytics. Non-recurring revenues declined $1.2 million to $2.1
million in the quarter. We saw growth in all regions, especially in the Americas
and Japan. Revenue growth from asset managers and asset owners helped offset
declines from hedge funds and broker dealers. Our revenues, excluding
asset-based fees, would have been $1.2 million lower had foreign exchange rates
remained unchanged from fourth quarter 2008.
Equity
Indices: Revenues related to Equity Indices increased $12.1
million, or 20.6%, to $71.1 million in fourth quarter 2009 compared to fourth
quarter 2008. By client segment, revenues from asset managers and asset owners
increased but declined in the hedge fund and broker dealer categories. Revenues
from equity index subscriptions were up 6.3% to $48.4 million in fourth quarter
2009 with growth in all regions and all client types except for hedge funds and
broker dealers. The increase reflects continued growth in our emerging
market, developed market,
small cap and sector index
module subscriptions as well as in research and reporting
license fees, which more than offset a decline in our style index module subscriptions
and non-recurring fees for historical index
data.
Revenues
attributable to equity index asset based fees increased 69.0% to $22.8 million
in fourth quarter 2009 compared to fourth quarter 2008, reflecting increases of 75.3% to $18.5 million for ETF asset
based fees, 55.1% to $3.2 million for institutional and
retail indexed funds asset based fees, and 24.1% to $1.1 million for other asset
and transaction based fees. The average value of assets in ETFs
linked to MSCI equity indices increased 60.7% to $216.8 billion for fourth quarter 2009
compared to $134.9 billion for fourth quarter 2008. As of November 30, 2009, the value of
assets in ETFs linked to MSCI equity indices was $234.2 billion, representing an increase
of $115.2 billion, or 96.8%, from $119.0 billion as of November 30,
2008. We estimate that the $115.2 billion
year-over-year increase in assets in ETFs linked to MSCI equity indices was
attributable to $66.7 billion of net asset appreciation and
$48.5 billion of net asset
inflows.
Compared to third
quarter 2009, equity index asset based fee revenues increased 13.0%, led by growth in ETF asset based
fees. The average value of assets in ETFs
linked to MSCI equity indices increased 20.2% to $216.8 billion from $180.3 billion in third
quarter 2009. The value of assets in ETFs linked to
MSCI equity indices at the end of fourth quarter 2009 rose 17.6%, or $35.0 billion, from the end of the third quarter
2009. We estimate that the $35.0 billion
increase from third quarter 2009 was attributable to asset appreciation of $18.0
billion and asset inflows of $17.0 billion. The $17.0 billion of asset inflows was
comprised of $16.0 billion of asset inflows into
established ETFs supplemented by $1.1 billion of asset inflows into ETFs
launched over the last 12 months.
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The four MSCI indices with the largest amount of
ETF assets linked to them as of November 30, 2009 were the MSCI Emerging
Markets, EAFE (an index of
stocks in developed markets outside the United States and Canada),US Broad Market Indices and Brazil indices. The assets linked to these indices
were $63.3 billion, $39.6 billion, $12.9 billion and $12.9 billion,
respectively.
Equity Portfolio
Analytics: Revenues related to Equity Portfolio Analytics
products decreased $2.1 million, or 6.5%, to $30.4 million in fourth quarter
2009 compared to the same period in 2008. The decline in revenues was a result
of lower levels of new
subscriptions (most notably for Aegis, our proprietary equity risk data and
software product). Revenues declined 7.8% to
$20.1 million for Aegis and 6.1% to $9.0 million for
Models Direct (our proprietary risk data product accessed directly). These
declines were partially offset by an increase of 18.1% to $1.3 million for Barra
on Vendors (our proprietary risk data product accessed through third party
vendors). Revenues declined across all client categories with the exception of
asset owners. On a regional basis, revenues rose in Japan but declined across
all other regions.
Multi-Asset Class Portfolio
Analytics: Revenues related to Multi-Asset Class Portfolio
Analytics increased $1.2 million, or 12.7%, to $10.6 million in fourth quarter
2009 compared to the same period in 2008. Sales of the BarraOne product remained
the biggest driver of growth in this product category. BarraOne revenues rose by
25.6% to $8.9 million offset, in part, by a 26.7% decline to $1.7 million in
revenues from TotalRisk. TotalRisk is in the process of being decommissioned,
with its existing users being offered the opportunity to transition to
BarraOne. Revenues
rose in all client categories except for hedge funds and across all
regions.
Other Products: Revenues from
Other Products increased $0.1 million, or 2.1%, to $6.7 million in fourth
quarter 2009 compared to fourth quarter 2008. The growth reflects an increase of
10.9% to $4.9 million for our energy and commodity analytics products, offset,
in part, by a decrease
of 5.2% to $1.5 million in revenues for fixed income analytics. The growth in our energy and commodity
analytics products reflects
continued strong demand for
asset optimization models and pricing for natural gas storage, power generation
and structured products.
Revenue for investable
hedge fund indices in fourth quarter 2009 were $0.2 million compared to $0.4 million in fourth quarter
2008. The decline largely reflects the
termination of the last remaining MSCI investable hedge fund indices
license.
Operating
Expenses – See Tables 7a – 7c
Operating expenses
decreased $2.2 million, or 2.8%, to $75.0 million in fourth quarter 2009
compared to fourth quarter
2008. Reductions in
non-compensation expenses more than offset increased compensation costs.
Our operating expenses would have been lower by $1.0 million had foreign
exchange rates remained unchanged from fourth quarter 2008.
Compensation
expense increased $3.0 million, or 7.1%, to $45.5 million in fourth quarter 2009
(including lower founders grant expense of
$2.4 million).
Excluding founders grant expenses, compensation expense increased 16.0%
to $39.4 million. The increase excluding founders grant expense largely reflects
an increase in headcount of 112, or 14.6%, to 878 full-time employees.
Other factors resulting in the increase include $2.1 million in higher payroll
taxes associated with the vesting of the first tranche of founders grant awards
and higher bonus expense. Offsetting these increases was a non-recurring
favorable adjustment of approximately $3 million resulting from a change in our
compensation structure. The change in the compensation structure resulted in a
higher portion of senior management’s bonuses being paid in equity rather than
cash. Because a majority of the equity awards are amortized over three years for
accounting purposes, the change lowered compensation expense for
2009.
Non-compensation
expenses excluding depreciation and amortization of intangibles decreased $4.7
million to $20.2 million, a 19.0% decrease. The decline largely reflects the
elimination of expense allocations from Morgan Stanley, lower professional
services costs, information technology and travel and entertainment expenses.
These declines were partially offset by increases in market data and marketing
expenses.
Depreciation and
amortization expense increased $0.4 million to $3.1 million reflecting greater
depreciation and amortization of the property, equipment and leasehold
improvements purchased, in large part, to operate independently from Morgan
Stanley.
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Cost of services
expenses decreased $2.9 million, or 8.2%, to $32.2 million in fourth quarter
2009. Compensation expenses decreased 4.5% to $22.9 million largely as the
result of a $1.0 million reduction in founders grant expense. Non-compensation expenses
decreased 16.2% to $9.3 million largely reflecting the elimination of the expense
allocation from Morgan Stanley, lower information technology spending
and lower travel and entertainment costs, partially offset by an increase in
market data expenses.
Selling, general
and administrative expenses increased $1.2 million, or 3.7%, to $33.5 million in
fourth quarter 2009. Compensation expenses increased 22.2% to $22.6 million
reflecting higher headcount and higher bonuses offset, in part, by lower founders grant
expense of $1.3 million.
Non-compensation expenses decreased 21.2% to $10.9 million primarily
reflecting lower professional services costs, the elimination of the expense allocation
from Morgan Stanley, lower
information technology spending and lower travel and
entertainment expenses. Selling expenses decreased 1.1% to $13.9 million in fourth quarter
2009 and general and administrative expenses increased 7.4% to $19.6
million.
Founders grant
expenses decreased to $6.3 million in fourth quarter 2009 from $8.6 million in
fourth quarter 2008, reflecting the vesting of a portion of these awards at the
two-year anniversary of the company’s initial public offering on November 14,
2009 as well as a change in forfeiture assumptions. Expenses related to the
founders grant awards reflect the amortization of share based compensation
expenses associated with restricted stock units and options awarded to employees
as a one-time grant in connection with our IPO completed in November 2007. Of
the $6.3 million of founders grant expenses in fourth quarter 2009, $2.1 million was recorded in cost of
services and $4.2 million was recorded in selling,
general and administrative expenses.
Other
Expense (Income), Net
Other expense
(income), net was an expense of $4.1 million in fourth quarter 2009 compared to
an expense of $9.8 million in fourth quarter 2008. The $5.7 million decrease
primarily reflects a reduction of $1.3 million in interest expense due to a
lower average of outstanding debt and the impact of lower interest rates on the
unhedged portion of our debt as well as a reduction of $1.4 million in foreign
exchange losses. In the fourth quarter of 2008, we incurred a charge of $3.0
million related to the write off of our 17% stake in Alacra.
Provision
for Income Taxes
The provision for
income taxes increased 100.2% to $15.1 million in fourth quarter 2009. The effective tax rate for fourth
quarter 2009 was
38.1% compared to 37.1% in fourth quarter
2008. The $7.6 million
increase in the income tax
expense was primarily the result of higher pre-tax earnings during the
current year.
Net
Income
Net income
increased 91.3% to $24.5 million in fourth quarter 2009 from fourth quarter 2008
and the net income margin increased to 20.7% from 11.9%. The increase in net
income primarily reflects higher operating revenue and lower operating
expenses.
Adjusted
EBITDA
Adjusted EBITDA
increased 22.0% to $59.3 million for fourth quarter 2009 from $48.6 million for
fourth quarter 2008. See Table 8 titled “Reconciliation of Adjusted EBITDA to
Net Income” and “Notes Regarding the Use of Non-GAAP Financial Measures” below.
The adjusted EBITDA margin increased to 49.9% in fourth quarter 2009 from 45.2%
in fourth quarter 2008.
Retention
Rate
Our Aggregate
Retention Rate (as defined in Table 3) increased to 81.6% for fourth quarter
2009 from 80.6% for fourth quarter 2008. An increase in the retention rate of
Equity Portfolio Analytics products offset a decline in Equity Indices and
Multi-Asset Class Portfolio Analytics. The decline in the aggregate
retention rate for Multi-Asset Class Portfolio Analytics to 60.0% from 85.1%
largely reflects cancellations of TotalRisk, a product we are decommissioning.
The retention rate for BarraOne increased to 78.9% from 76.9%. Our Core
Retention Rate (as defined in Table 3) was 82.8% for fourth quarter 2009
compared to 85.3% for fourth quarter 2008. Please see Table 3 for Retention
Rates by product category.
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Client
Count
At November 30,
2009, we had a total of 3,123 clients, excluding clients that pay only asset
based fees. Our client count increased by 32 from November 30, 2008 and by 26
from 3,097 at August 31, 2009.
Summary
of Results for Fiscal 2009
Operating
Revenues – See Table 10
Total operating
revenues for the fiscal year ended November 30, 2009 (fiscal year 2009)
increased $12.0 million, or 2.8%, to a record $442.9 million compared to the
fiscal year ended November 30, 2008 (fiscal year 2008). Revenue gains in our Equity Indices and Multi-Asset Class
Portfolio Analytics products, which grew by 8.4% and 8.0%, respectively, more
than offset declines in the Equity Portfolio Analytics and Other Product areas,
which declined by 6.9% and 7.5%, respectively. Our revenues would have
been higher by $1.4 million had foreign exchange rates remained unchanged from
2008. Full year operating revenues rose in every region, with the exception of
EMEA. The company recorded revenue growth across all client types, with the
exception of hedge funds.
Revenues from our
subscription products grew $10.4 million, or 2.9%, in aggregate for fiscal year
2009 to $371.6 million. Revenue growth was recorded across all regions, with the
exception of EMEA and across all client segments, with the exception of hedge
funds. Subscription revenue growth was led by equity index subscriptions, which
increased 10.9% to $188.3 million for fiscal year 2009 compared to fiscal year
2008 and by Multi-Asset Class Portfolio Analytics which increased 8.0% to $37.6
million as BarraOne Revenues grew by 19.0%. Partially offsetting these gains
were declines in Equity Portfolio Analytics and in Other Products revenues.
Non-recurring subscription revenues fell by $3.2 million to $8.8 million.
Revenues attributable to equity index asset based fees increased $1.6 million,
or 2.3%, to $71.3 million. Growth in the total number of listed ETFs from 167 to
268 helped us more than offset a modest decline in average assets under
management in ETFs linked to MSCI indices, which fell by 3.3% to $164.5 billion
from $170.2 billion.
Revenues from
Equity Portfolio Analytics decreased 6.9% to $123.3 million for fiscal year 2009
reflecting lower levels of new subscriptions and lower retention rates. Other
Products revenues decreased 7.5% to $22.5 million for fiscal year 2009 compared
to fiscal year 2008. The decline reflects a decrease of 70.6%
in asset based fees from investment products linked to MSCI investable hedge
fund indices products and a decrease of 9.7% for fixed income analytics offset, in part, by a 6.3% increase for our energy and
commodity analytics products.
Our Aggregate
Retention Rate was 85.2% for fiscal year 2009 compared to 89.9% for fiscal year
2008. Our Core Retention Rate was 86.4% for fiscal year 2009 compared to 92.1%
for fiscal year 2008.
Operating
Expenses – See Tables 11a - 11c
Operating expenses
for fiscal year 2009 decreased $3.2 million, or 1.1%, to $292.0 million compared
to fiscal year 2008. Reductions in
non-compensation expenses more than offset increased compensation costs. Our
operating expense would have been higher by $9.4 million had foreign
exchange rates remained unchanged from 2008.
Compensation
expense increased $10.4 million, or 6.1%, to $180.5 million for fiscal year
2009. Excluding founders grant expenses, compensation expense increased 6.5% to
$153.9 million. The increase in compensation expense includes costs related to new hires, an increase of $5.1 million of stock based compensation
costs, an increase of
$1.3 million in severance costs, and $2.1 million in payroll taxes
associated with the vesting of the first tranche of founders grant awards. These
increases were offset, in part, by increased migration of positions to
emerging market centers and favorable foreign exchange rates resulting from the
strengthening of the U.S. dollar. In addition, a change in compensation
structure resulted in a reduction in 2009 compensation expense of approximately
$3 million.
Non-compensation
expenses excluding depreciation and amortization of intangibles decreased $17.7
million, or 19.3%, to $74.0 million. The decline largely reflects the
elimination of the expense allocation from Morgan Stanley,
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lower professional services costs, and
lower travel and entertainment expenses, offset in part by increases in market
data costs.
Cost of services
decreased $4.7 million, or 3.8%, to $118.7 million in fiscal year 2009. The decline largely reflects the
elimination of the expense allocation from Morgan Stanley, lower professional
services costs, lower information technology expenses, and lower travel and
entertainment expenses, offset, in part, by increases in compensation expense
and market data costs.
Selling, general
and administrative expenses decreased $2.5 million, or 1.8%, to $135.8 million
in fiscal year 2009. The decline
largely reflects the elimination of the expense allocation from Morgan Stanley,
lower professional services costs, and lower travel and entertainment expenses,
offset in part by increases in compensation expense and higher insurance and
license fees.
Other
Expense (Income), Net
Other expense
(income), net was an expense of $19.3 million for fiscal year 2009 compared to
an expense of $26.1 million for fiscal year 2008. The $6.9 million decrease
primarily reflects a reduction of $7.2 million in interest expense due to lower
average outstanding debt and the impact of lower interest rates on the unhedged
portion of our debt and a reduction of $3.9 million in charges related to
changes in foreign exchange rates during the fiscal year, offset in part by a
$7.1 million reduction in interest income. In addition, the company incurred a
charge of $3.0 million related to the write off of our 17% stake in Alacra in
2008.
Provision
for Income Taxes
The provision for
income taxes increased 20.7% to $49.9 million for fiscal year 2009 compared to
fiscal year 2008. The effective tax rate for fiscal year 2009 was 37.9% compared to 37.7% for fiscal year
2008. The $8.5 million increase in the income tax expense was primarily
the result of higher pre-tax earnings during the
current year.
Net
Income
Net income
increased 19.8% to $81.8 million for fiscal year 2009 from fiscal year 2008 and
the net income margin was 18.5%. The increase in net income primarily reflects
higher revenues and lower operating expenses.
Adjusted
EBITDA
Adjusted EBITDA
increased 10.4% to $215.1 million for fiscal year 2009 from $194.8 million for
the comparable period in 2008. See Table 12 titled “Reconciliation of Adjusted
EBITDA to Net Income.” The adjusted EBITDA margin increased to 48.6% for fiscal
year 2009 from 45.2% for fiscal year 2008.
Employees
As of November 30,
2009, the company employed 878 full-time employees, an increase of 14.6%, or 112
from November 30, 2008. In fourth quarter 2009, we continued to
increase our staff in emerging market centers. As of November 30, 2009, 43% of
our employees were located in emerging market centers compared to 28% as of
November 30, 2008.
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Table
2a
Key Operating
Metrics
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As of or For
the Quarter Ended
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Change
from
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|||||||||||||||||||
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November
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August
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November
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August
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|||||||||||||||||
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U.S. dollars
in thousands
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2009
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2008
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2009
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2008
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2009
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Run Rates
1
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||||||||||||||||||||
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Equity
indices
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Equity index
subscriptions
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$ | 185,787 | $ | 170,992 | $ | 182,166 | 8.7 | % | 2.0 | % | ||||||||||
|
Equity index
asset based fees 2
|
95,301 | 51,596 | 81,349 | 84.7 | % | 17.2 | % | |||||||||||||
|
Equity
Indices total
|
281,088 | 222,588 | 263,515 | 26.3 | % | 6.7 | % | |||||||||||||
|
Equity
portfolio analytics
|
118,487 | 129,168 | 120,973 | (8.3 | %) | (2.1 | %) | |||||||||||||
|
Multi-asset
class analytics
|
40,401 | 35,105 | 38,734 | 15.1 | % | 4.3 | % | |||||||||||||
|
Other
Products
|
||||||||||||||||||||
|
Energy and
commodity analytics
|
15,365 | 13,506 | 14,706 | 13.8 | % | 4.5 | % | |||||||||||||
|
Other 3
|
5,232 | 7,573 | 5,609 | (30.9 | %) | (6.7 | %) | |||||||||||||
|
Other
Products total
|
20,597 | 21,079 | 20,315 | (2.3 | %) | 1.4 | % | |||||||||||||
|
Total Run
Rate
|
$ | 460,573 | $ | 407,941 | $ | 443,537 | 12.9 | % | 3.8 | % | ||||||||||
|
Subscription
total
|
365,272 | 354,965 | 362,188 | 2.9 | % | 0.9 | % | |||||||||||||
|
Asset based
fees total
|
95,301 | 52,976 | 81,349 | 79.9 | % | 17.2 | % | |||||||||||||
|
Total Run
Rate
|
$ | 460,573 | $ | 407,941 | $ | 443,537 | 12.9 | % | 3.8 | % | ||||||||||
|
Subscription
Run Rate by region
|
||||||||||||||||||||
|
%
Americas
|
43.2 | % | 44.6 | % | 43.4 | % | ||||||||||||||
|
%
non-Americas
|
56.8 | % | 55.4 | % | 56.6 | % | ||||||||||||||
|
Subscription
Run Rate by client type
|
||||||||||||||||||||
|
%
Asset Managers
|
61.2 | % | 61.6 | % | 61.6 | % | ||||||||||||||
|
%
Broker Dealers
|
11.5 | % | 12.1 | % | 11.7 | % | ||||||||||||||
|
%
Hedge Funds
|
5.5 | % | 6.1 | % | 5.7 | % | ||||||||||||||
|
%
Asset Owners
|
6.3 | % | 6.0 | % | 6.3 | % | ||||||||||||||
|
%
Others
|
15.5 | % | 14.3 | % | 14.7 | % | ||||||||||||||
|
New Recurring
Subscription Sales
|
$ | 16,123 | $ | 18,354 | $ | 15,524 | (12.2 | %) | 3.9 | % | ||||||||||
|
Subscription
Cancellations
|
$ | (16,312 | ) | $ | (15,227 | ) | $ | (17,175 | ) | 7.1 | % | (5.0 | %) | |||||||
|
Net New
Recurring Subscription Sales
|
$ | (188 | ) | $ | 3,128 | $ | (1,651 | ) | (106.0 | %) | (88.6 | %) | ||||||||
|
Non-Recurring
Sales
|
$ | 1,244 | $ | 1,845 | $ | 1,144 | (32.6 | %) | 8.7 | % | ||||||||||
|
Client count
4
|
3,123 | 3,091 | 3,097 | 1.0 | % | 0.8 | % | |||||||||||||
|
Full-time
employees
|
878 | 766 | 850 | 14.6 | % | 3.3 | % | |||||||||||||
|
% Full-time
employees by location
|
||||||||||||||||||||
|
Developed
Market Centers
|
57 | % | 72 | % | 61 | % | ||||||||||||||
|
Emerging
Market Centers
|
43 | % | 28 | % | 39 | % | ||||||||||||||
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 license whose fees are linked to an investment product’s
assets or trading volume, the run rate calculation reflects an annualization of
the most recent periodic fee earned under such license. The run rate does not
include fees associated with “one-time” and other non-recurring transactions. In
addition, we remove from the run rate the fees associated with any subscription
or investment product license agreement with respect to which we have received a
notice of termination or non-renewal at the time we determine 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 Includes
asset based fees for ETFs, institutional and retail indexed funds, transaction
volume-based fees for futures and options traded on certain MSCI indices and
other structured products.
3 Includes
run rate related to subscriptions to fixed income analytics and to investable
hedge fund index asset based fees.
4 The
client count excludes clients that pay only asset based fees. Our client count
includes affiliates, cities and certain business units within a single
organization as distinct clients when they separately subscribe to our
products.
7 of 17
|
www.mscibarra.com
|
Table
2b
|
Recurring
Subscription Sales1
& Subscription Cancellations
|
|
2009
|
||||||||||||||||||||
|
For the
Quarter Ended
|
||||||||||||||||||||
|
February
|
May
|
August
|
November
|
FY2009
|
||||||||||||||||
|
New Recurring
Subscription Sales
|
$ | 10,770 | 14,286 | 15,524 | 16,123 | 56,704 | ||||||||||||||
|
Subscription
Cancellations
|
(8,187 | ) | (10,913 | ) | (17,175 | ) | (16,312 | ) | (52,587 | ) | ||||||||||
|
Net New
Recurring Subscription Sales
|
$ | 2,583 | 3,374 | (1,651 | ) | (188 | ) | 4,117 | ||||||||||||
|
2008
|
||||||||||||||||||||
|
For the
Quarter Ended
|
||||||||||||||||||||
|
February
|
May
|
August
|
November
|
FY2008
|
||||||||||||||||
|
New Recurring
Subscription Sales
|
$ | 20,945 | 18,961 | 18,658 | 18,354 | 76,918 | ||||||||||||||
|
Subscription
Cancellations
|
(2,695 | ) | (7,336 | ) | (6,543 | ) | (15,227 | ) | (31,802 | ) | ||||||||||
|
Net New
Recurring Subscription Sales
|
$ | 18,250 | 11,624 | 12,114 | 3,128 | 45,116 | ||||||||||||||
|
2007
|
||||||||||||||||||||
|
For the
Quarter Ended
|
||||||||||||||||||||
|
February
|
May
|
August
|
November
|
FY2007
|
||||||||||||||||
|
New Recurring
Subscription Sales
|
$ | 16,676 | 15,575 | 20,708 | 15,523 | 68,482 | ||||||||||||||
|
Subscription
Cancellations
|
(5,259 | ) | (4,433 | ) | (5,019 | ) | (6,686 | ) | (21,396 | ) | ||||||||||
|
Net New
Recurring Subscription Sales
|
$ | 11,417 | 11,143 | 15,689 | 8,838 | 47,086 | ||||||||||||||
|
1
This does not include
non-recurring sales.
|
||||||||||
Table
3
Retention
Rates
|
For the
Quarter Ended
|
||||||||||||
|
November
|
August
|
|||||||||||
|
2009
|
2008
|
2009
|
||||||||||
|
Aggregate
Retention Rate 1
|
||||||||||||
|
Equity
indices
|
88.6 | % | 89.3 | % | 91.4 | % | ||||||
|
Equity
portfolio analytics
|
78.9 | % | 69.6 | % | 67.6 | % | ||||||
|
Multi-asset
class analytics
|
60.0 | % | 85.1 | % | 73.9 | % | ||||||
|
Other
products
|
77.7 | % | 80.8 | % | 84.2 | % | ||||||
|
Total
aggregate retention
|
81.6 | % | 80.6 | % | 80.6 | % | ||||||
|
Core
Retention Rate 2
|
||||||||||||
|
Equity
indices
|
89.2 | % | 89.5 | % | 92.2 | % | ||||||
|
Equity
portfolio analytics
|
79.2 | % | 80.5 | % | 68.9 | % | ||||||
|
Multi-asset
class analytics
|
65.6 | % | 86.8 | % | 77.5 | % | ||||||
|
Other
products
|
81.7 | % | 83.6 | % | 86.1 | % | ||||||
|
Total core
retention
|
82.8 | % | 85.3 | % | 81.9 | % | ||||||
|
1
The 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. Aggregate Retention Rates are
generally higher during the first three fiscal quarters and lower in the
fourth fiscal quarter. For the calculation of the Core Retention Rate the
same methodology is used except the amount of cancellations in the quarter
is reduced by the amount of product swaps.
|
|
2 Our
Core Retention Rate is calculated similarly to our Aggregate Retention
Rate except that the Core Retention Rate does not treat switches between
our products as a cancellation.
|
8 of 17
|
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|
Table
4
|
ETF Assets
linked to MSCI Indices
|
||||||||||||||||
|
(Quarterly
Average)
|
|
2008
|
2009
|
|||||||||||||||||||||||||||||||
|
In
Billions
|
February
|
May
|
August
|
November
|
February
|
May
|
August
|
November
|
||||||||||||||||||||||||
|
AUM in ETFs
linked to MSCI Indices
|
$ | 183.2 | $ | 184.4 | $ | 178.3 | $ | 134.9 | $ | 126.4 | $ | 134.7 | $ | 180.3 | $ | 216.8 | ||||||||||||||||
|
ETF Assets
linked to MSCI Indices
|
|
(Quarter-End)
|
|
2008
|
2009
|
|||||||||||||||||||||||||||||||
|
In
Billions
|
February
|
May
|
August
|
November
|
February
|
May
|
August
|
November
|
||||||||||||||||||||||||
|
AUM in ETFs
linked to MSCI Indices
|
$ | 179.2 | $ | 199.6 | $ | 166.3 | $ | 119.0 | $ | 107.8 | $ | 175.9 | $ | 199.2 | $ | 234.2 | ||||||||||||||||
|
Sequential
Change ($ Growth in Billions)
|
||||||||||||||||||||||||||||||||
|
Appreciation/Depreciation
|
$ | (15.2 | ) | $ | 9.9 | $ | (31.2 | ) | $ | (63.2 | ) | $ | (13.6 | ) | $ | 42.2 | $ | 20.1 | $ | 18.0 | ||||||||||||
|
Cash Inflow/
Outflow
|
2.7 | 10.5 | (2.1 | ) | 15.9 | 2.4 | 25.9 | 3.2 | 17.0 | |||||||||||||||||||||||
|
Total
Change
|
$ | (12.5 | ) | $ | 20.4 | $ | (33.3 | ) | $ | (47.3 | ) | $ | (11.2 | ) | $ | 68.1 | $ | 23.3 | $ | 35.0 | ||||||||||||
|
Source:
Bloomberg and MSCI
|
Conference
Call Information
Investors will have
the opportunity to listen to MSCI Inc.'s senior management review fourth quarter
and fiscal year 2009 results on Thursday, January 7, 2010 at 11:00 am Eastern
time. To hear the live event, visit the investor relations section of MSCI's
website, http://ir.msci.com, or dial 1-888-267-6301 within the United States.
International callers dial 1-719-457-2604.
An
audio recording of the conference call will be available on our website
approximately two hours after the conclusion of the live event and will be
accessible through January 14, 2010. To listen to the recording, visit the
investor relations section at http://ir.msci.com, or dial 1-888-203-1112
(passcode: 9742808) within the United States. International callers dial
1-719-457-0820 (passcode: 9742808).
9 of 17
|
www.mscibarra.com
|
About MSCI Inc.
MSCI Inc. is a
leading provider of investment decision support tools to investment institutions
worldwide. MSCI Inc. products include indices and portfolio risk and performance
analytics for use in managing equity, fixed income and multi-asset class
portfolios.
The company’s
flagship products are the MSCI International Equity Indices, which include over
120,000 indices calculated daily across more than 70 countries, and the Barra
risk models and portfolio analytics, which cover 59 equity and 48 fixed income
markets. MSCI Inc. is headquartered in New York, with research and commercial
offices around the world. MXB#IR
For
further information on MSCI Inc. or our products please visit
www.mscibarra.com.
MSCI Inc. Contact:
|
Lisa Monaco,
MSCI, New York
|
+
1.866.447.7874
|
|
Edings
Thibault, MSCI, New York
|
+
1.866.447.7874
|
|
For media inquiries please
contact:
|
|
|
Sally Todd |
Clare Milton, Penrose Financial, London
|
+
44.20.7786.4888
|
|
Pen Pendleton
| Patrick Clifford, Abernathy MacGregor, New York
|
+
1.212.371.5999
|
Forward-Looking
Statements
This release
contains forward-looking statements. These statements relate to future events or
to future financial performance and involve known and unknown risks,
uncertainties and other factors that may cause our actual results, levels of
activity, performance, or achievements to be materially different from any
future results, levels of activity, performance, or achievements expressed or
implied by these forward-looking statements. In some cases, you can identify
forward-looking statements by the use of words such as “may,” “could,” “expect,”
“intend,” “plan,” “seek,” “anticipate,” “believe,” “estimate,” “predict,”
“potential,” or “continue” or the negative of these terms or other comparable
terminology. You should not place undue reliance on forward-looking statements
because they involve known and unknown risks, uncertainties and other factors
that are, in some cases, beyond our control and that could materially affect
actual results, levels of activity, performance, or achievements.
Other factors that
could materially affect actual results, levels of activity, performance or
achievements can be found in MSCI's Annual Report on form 10-K for the fiscal
year ended November 30, 2008 and filed with the Securities and Exchange
Commission on January 29, 2009 and in quarterly reports on form 10-Q and current
reports on form 8-K. 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.
10 of
17
|
www.mscibarra.com
|
Table
5
MSCI
Inc.
Consolidated
Statements of Income (unaudited)
|
Three Months
Ended
|
||||||||||||
|
November
30,
|
August
31,
|
|||||||||||
|
In thousands,
except per share data
|
2009
|
2008
|
2009
|
|||||||||
|
Operating
revenues
|
$ | 118,790 | $ | 107,416 | $ | 108,868 | ||||||
|
Operating
expenses
|
||||||||||||
|
Cost
of services
|
32,214 | 35,094 | 28,247 | |||||||||
|
Selling,
general and administrative
|
33,487 | 32,299 | 33,525 | |||||||||
|
Amortization
of intangible assets
|
6,268 | 7,125 | 6,429 | |||||||||
|
Depreciation
and amortization of property, equipment, and leasehold
improvements
|
3,065 | 2,696 | 2,869 | |||||||||
|
Total
operating expenses
|
75,034 | 77,214 | 71,070 | |||||||||
|
Operating
income
|
43,756 | 30,202 | 37,798 | |||||||||
|
Interest
income
|
(339 | ) | (419 | ) | (373 | ) | ||||||
|
Interest
expense
|
4,513 | 5,810 | 4,628 | |||||||||
|
Other expense
(income)
|
(71 | ) | 4,435 | (168 | ) | |||||||
|
Other expense
(income), net
|
4,103 | 9,826 | 4,087 | |||||||||
|
Income before
provision for income taxes
|
39,653 | 20,376 | 33,711 | |||||||||
|
Provision for
income taxes
|
15,118 | 7,551 | 12,787 | |||||||||
|
Net
income
|
$ | 24,535 | $ | 12,825 | $ | 20,924 | ||||||
|
Earnings per
basic common share
|
$ | 0.24 | $ | 0.13 | $ | 0.21 | ||||||
|
Earnings per
diluted common share
|
$ | 0.24 | $ | 0.13 | $ | 0.20 | ||||||
|
Weighted
average shares outstanding used in computing earnings per
share
|
||||||||||||
|
Basic
|
101,383 | 100,060 | 100,402 | |||||||||
|
Diluted
|
103,792 | 101,067 | 102,717 | |||||||||
11 of
17
|
www.mscibarra.com
|
Table
6
Operating Revenues
by Product Category
|
Three Months
Ended
|
Change
from
|
|||||||||||||||||||
|
November
30,
|
August
31,
|
November
30,
|
August
31,
|
|||||||||||||||||
|
In
thousands
|
2009
|
2008
|
2009
|
2008
|
2009
|
|||||||||||||||
|
Equity
indices
|
||||||||||||||||||||
|
Equity
index subscriptions
|
$ | 48,385 | $ | 45,538 | $ | 47,393 | 6.3 | % | 2.1 | % | ||||||||||
|
Equity
index asset based fees
|
22,761 | 13,472 | 20,137 | 69.0 | % | 13.0 | % | |||||||||||||
|
Equity
indices total
|
71,146 | 59,010 | 67,530 | 20.6 | % | 5.4 | % | |||||||||||||
|
Equity
portfolio analytics
|
30,399 | 32,495 | 29,157 | (6.5 | %) | 4.3 | % | |||||||||||||
|
Multi-asset
class portfolio analytics
|
10,581 | 9,384 | 7,816 | 12.8 | % | 35.4 | % | |||||||||||||
|
Other
products
|
6,664 | 6,527 | 4,366 | 2.1 | % | 52.6 | % | |||||||||||||
|
Total
operating revenues
|
$ | 118,790 | $ | 107,416 | $ | 108,869 | 10.6 | % | 9.1 | % | ||||||||||
|
Subscriptions
|
96,029 | 93,944 | 88,732 | 2.2 | % | 8.2 | % | |||||||||||||
|
Equity index
asset based fees
|
22,761 | 13,472 | 20,137 | 69.0 | % | 13.0 | % | |||||||||||||
|
Total
operating revenues
|
$ | 118,790 | $ | 107,416 | $ | 108,869 | 10.6 | % | 9.1 | % | ||||||||||
Table
7a
Operating Expenses
by Category with Founders Grant Shown Separately
(Compensation vs.
Non-compensation)
|
Three Months
Ended
|
Change
from
|
|||||||||||||||||||
|
November
30,
|
August
31,
|
November
30,
|
August
31,
|
|||||||||||||||||
|
In
thousands
|
2009
|
2008
|
2009
|
2008
|
2009
|
|||||||||||||||
|
Compensation
|
$ | 39,354 | $ | 33,935 | $ | 36,985 | 16.0 | % | 6.4 | % | ||||||||||
|
Non-compensation
excluding depreciation
|
20,174 | 24,891 | 17,928 | (19.0 | %) | 12.5 | % | |||||||||||||
|
Total
|
59,528 | 58,826 | 54,913 | 1.2 | % | 8.4 | % | |||||||||||||
|
Amortization
of intangible assets
|
6,268 | 7,125 | 6,429 | (12.0 | %) | (2.5 | %) | |||||||||||||
|
Depreciation
and amortization of
|
3,065 | 2,696 | 2,869 | 13.7 | % | 6.8 | % | |||||||||||||
|
property,
equipment, and leasehold improvement
|
||||||||||||||||||||
|
Operating
expenses excluding founders grant
|
68,861 | 68,647 | 64,212 | 0.3 | % | 7.2 | % | |||||||||||||
|
Founders
grant1
|
6,173 | 8,567 | 6,859 | (27.9 | %) | (10.0 | %) | |||||||||||||
|
Operating
expenses including founders grant
|
$ | 75,034 | $ | 77,214 | $ | 71,070 | (2.8 | %) | 5.6 | % | ||||||||||
1 Excludes
$0.1 million of cash-settled founders grant expense in fourth quarter 2009,
which has been included in compensation.
12 of
17
|
www.mscibarra.com
|
Table
7b
Operating Expenses
by Category with Founders Grant Shown Separately
(Cost of Services
vs. Selling, General and Administrative)
|
Three Months
Ended
|
Change
from
|
|||||||||||||||||||
|
November
30,
|
August
31,
|
November
30,
|
August
31,
|
|||||||||||||||||
|
In
thousands
|
2009
|
2008
|
2009
|
2008
|
2009
|
|||||||||||||||
|
Cost of
services
|
||||||||||||||||||||
|
Compensation
|
$ | 20,805 | $ | 20,877 | $ | 18,727 | (0.3 | %) | 11.1 | % | ||||||||||
|
Non-compensation
excluding depreciation
|
9,311 | 11,110 | 7,205 | (16.2 | %) | 29.2 | % | |||||||||||||
|
Total
|
30,116 | 31,987 | 25,932 | (5.8 | %) | 16.1 | % | |||||||||||||
|
Selling,
general and administrative
|
||||||||||||||||||||
|
Compensation
|
18,549 | 13,058 | 18,257 | 42.1 | % | 1.6 | % | |||||||||||||
|
Non-compensation
excluding depreciation
|
10,863 | 13,781 | 10,723 | (21.2 | %) | 1.3 | % | |||||||||||||
|
Total
|
29,412 | 26,839 | 28,981 | 9.6 | % | 1.5 | % | |||||||||||||
|
Amortization
of intangible assets
|
6,268 | 7,125 | 6,429 | (12.0 | %) | (2.5 | %) | |||||||||||||
|
Depreciation
and amortization of property,
equipment, and leasehold improvement
|
3,065 | 2,696 | 2,869 | 13.7 | % | 6.8 | % | |||||||||||||
|
Operating
expenses excluding founders grant
|
68,861 | 68,647 | 64,212 | 0.3 | % | 7.2 | % | |||||||||||||
|
Founders
grant1
|
6,173 | 8,567 | 6,859 | (27.9 | %) | (10.0 | %) | |||||||||||||
|
Operating
expenses including founders grant
|
$ | 75,034 | $ | 77,214 | $ | 71,070 | (2.8 | %) | 5.6 | % | ||||||||||
1 Excludes $0.1 million of cash-settled
founders grant expense in fourth quarter 2009, which has been included in
compensation.
Table
7c
Operating Expenses
by Category
(Cost of Services
vs. Selling, General and Administrative)
|
Three Months
Ended
|
Change
from
|
|||||||||||||||||||
|
November
30,
|
August
31,
|
November
30,
|
August
31,
|
|||||||||||||||||
|
In
thousands
|
2009
|
2008
|
2009
|
2008
|
2009
|
|||||||||||||||
|
Cost of
services
|
||||||||||||||||||||
|
Compensation
|
$ | 20,805 | $ | 20,876 | $ | 18,727 | (0.3 | %) | 11.1 | % | ||||||||||
|
Founders
grant1
|
2,098 | 3,108 | 2,315 | (32.5 | %) | (9.4 | %) | |||||||||||||
|
Total
|
22,903 | 23,984 | 21,042 | (4.5 | %) | 8.8 | % | |||||||||||||
|
Non-compensation
excluding depreciation
|
9,311 | 11,110 | 7,205 | (16.2 | %) | 29.2 | % | |||||||||||||
|
Total
|
32,214 | 35,094 | 28,247 | (8.2 | %) | 14.0 | % | |||||||||||||
|
Selling,
general and administrative
|
||||||||||||||||||||
|
Compensation
|
18,549 | 13,058 | 18,257 | 42.1 | % | 1.6 | % | |||||||||||||
|
Founders
grant1
|
4,075 | 5,460 | 4,544 | (25.4 | %) | (10.3 | %) | |||||||||||||
|
Total
|
22,624 | 18,518 | 22,801 | 22.2 | % | (0.8 | %) | |||||||||||||
|
Non-compensation
excluding depreciation
|
10,863 | 13,781 | 10,723 | (21.2 | %) | 1.3 | % | |||||||||||||
|
Total
|
33,487 | 32,299 | 33,525 | 3.7 | % | (0.1 | %) | |||||||||||||
|
Amortization
of intangible assets
|
6,268 | 7,125 | 6,429 | (12.0 | %) | (2.5 | %) | |||||||||||||
|
Depreciation
and amortization of property,
equipment, and leasehold improvement
|
3,065 | 2,696 | 2,869 | 13.7 | % | 6.8 | % | |||||||||||||
|
Operating
expenses including founders grant
|
$ | 75,034 | $ | 77,214 | $ | 71,070 | (2.8 | %) | 5.6 | % | ||||||||||
1 Excludes
cash-settled founders grant expense in fourth quarter 2009, which has been
included in compensation.
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|
www.mscibarra.com
|
Table
8
Reconciliation of
Adjusted EBITDA to Net Income
|
Three Months
Ended
|
||||||||||||
|
November
30,
|
August
31,
|
|||||||||||
|
In
thousands
|
2009
|
2008
|
2009
|
|||||||||
|
Adjusted
EBITDA1
|
$ | 59,262 | $ | 48,590 | $ | 53,955 | ||||||
|
Less: Founders
grant expense2
|
6,173 | 8,567 | 6,859 | |||||||||
|
Less: Depreciation
and amortization
|
3,065 | 2,696 | 2,869 | |||||||||
|
Less: Amortization
of intangible assets
|
6,268 | 7,125 | 6,429 | |||||||||
|
Less: Other
expense (income), net
|
4,103 | 9,826 | 4,087 | |||||||||
|
Less: Provision
for income taxes
|
15,118 | 7,551 | 12,787 | |||||||||
|
Net
income
|
$ | 24,535 | $ | 12,825 | $ | 20,924 | ||||||
|
1
All stock based compensation other than the stock-settled founders grant
expense is considered an expense for purposes of calculating adjusted
EBITDA
2 Excludes $0.1
million of cash-settled founders grant expense in fourth quarter
2009.
|
||||||||||||
Table
9
MSCI
Inc.
Consolidated
Statements of Income (unaudited)
|
Fiscal Year
Ended
|
||||||||
|
November
30,
|
||||||||
|
In thousands,
except per share data
|
2009
|
2008
|
||||||
|
Operating
revenues
|
$ | 442,948 | $ | 430,961 | ||||
|
Operating
expenses
|
||||||||
|
Cost
of services
|
118,665 | 123,390 | ||||||
|
Selling,
general and administrative
|
135,780 | 138,311 | ||||||
|
Amortization
of intangible assets
|
25,554 | 28,500 | ||||||
|
Depreciation
and amortization of property, equipment, and leasehold
improvements
|
11,957 | 4,970 | ||||||
|
Total
operating expenses
|
291,956 | 295,171 | ||||||
|
Operating
income
|
150,992 | 135,790 | ||||||
|
Interest
income
|
(1,053 | ) | (8,142 | ) | ||||
|
Interest
expense
|
19,683 | 26,932 | ||||||
|
Other expense
(income)
|
641 | 7,357 | ||||||
|
Other expense
(income), net
|
19,271 | 26,147 | ||||||
|
Income before
provision for income taxes
|
131,721 | 109,643 | ||||||
|
Provision for
income taxes
|
49,920 | 41,375 | ||||||
|
Net
income
|
$ | 81,801 | $ | 68,268 | ||||
|
Earnings per
basic common share
|
$ | 0.81 | $ | 0.68 | ||||
|
Earnings per
diluted common share
|
$ | 0.80 | $ | 0.67 | ||||
|
Weighted
average shares outstanding used in computing earnings per
share
|
||||||||
|
Basic
|
100,607 | 100,037 | ||||||
|
Diluted
|
102,475 | 101,194 | ||||||
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|
Table
10
Operating Revenues
by Product Category
|
Full Year
Ended
|
||||||||||||
|
November
30,
|
||||||||||||
|
In
thousands
|
2009
|
2008
|
Change
|
|||||||||
|
Equity
indices
|
||||||||||||
|
Equity
index subscriptions
|
$ | 188,327 | $ | 169,817 | 10.9 | % | ||||||
|
Equity
index asset based fees
|
71,300 | 69,679 | 2.3 | % | ||||||||
|
Equity
indices total
|
259,627 | 239,496 | 8.4 | % | ||||||||
|
Equity
portfolio analytics
|
123,278 | 132,398 | (6.9 | %) | ||||||||
|
Multi-asset
class portfolio analytics
|
37,591 | 34,797 | 8.0 | % | ||||||||
|
Other
products
|
22,452 | 24,270 | (7.5 | %) | ||||||||
|
Total
operating revenues
|
$ | 442,948 | $ | 430,961 | 2.8 | % | ||||||
|
Subscriptions
|
371,648 | 361,282 | 2.9 | % | ||||||||
|
Equity index
asset based fees
|
71,300 | 69,679 | 2.3 | % | ||||||||
|
Total
operating revenues
|
$ | 442,948 | $ | 430,961 | 2.8 | % | ||||||
Table
11a
Operating Expenses
by Category with Founders Grant Shown Separately
(Compensation vs.
Non-compensation)
|
Fiscal Year
Ended
|
||||||||||||
|
November
30,
|
||||||||||||
|
In
thousands
|
2009
|
2008
|
Change
|
|||||||||
|
Compensation
|
$ | 153,899 | $ | 144,451 | 6.5 | % | ||||||
|
Non-compensation
|
73,975 | 91,665 | (19.3 | %) | ||||||||
|
Total
|
227,874 | 236,116 | (3.5 | %) | ||||||||
|
Amortization
of intangible assets
|
25,554 | 28,500 | (10.3 | %) | ||||||||
|
Depreciation
and amortization of property,
equipment, and leasehold improvement
|
11,957 | 4,970 | 140.6 | % | ||||||||
|
Operating
expenses excluding founders grant
|
265,385 | 269,586 | (1.6 | %) | ||||||||
|
Founders
grant1
|
26,571 | 25,585 | 3.9 | % | ||||||||
|
Operating
expenses including founders grant
|
$ | 291,956 | $ | 295,171 | (1.1 | %) | ||||||
|
1
Excludes $0.1 million of cash-settled founders grant expense in fourth
quarter 2009, which has been included in
compensation.
|
||||||||||||
15 of
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|
www.mscibarra.com
|
Table
11b
Operating Expenses
by Category with Founders Grant Shown Separately
(Cost of Services
vs. Selling, General and Administrative)
|
Fiscal Year
Ended
|
||||||||||||
|
November
30,
|
||||||||||||
|
In
thousands
|
2009
|
2008
|
Change
|
|||||||||
|
Cost of
services
|
||||||||||||
|
Compensation
|
$ | 78,322 | $ | 75,622 | 3.6 | % | ||||||
|
Non-compensation
|
30,993 | 39,910 | (22.3 | %) | ||||||||
|
Total
|
109,315 | 115,532 | (5.4 | %) | ||||||||
|
Selling,
general and administrative
|
||||||||||||
|
Compensation
|
75,577 | 68,829 | 9.8 | % | ||||||||
|
Non-compensation
|
42,982 | 51,755 | (17.0 | %) | ||||||||
|
Total
|
118,559 | 120,584 | (1.7 | %) | ||||||||
|
Amortization
of intangible assets
|
25,554 | 28,500 | (10.3 | %) | ||||||||
|
Depreciation
and amortization of property,
equipment, and leasehold improvement
|
11,957 | 4,970 | 140.6 | % | ||||||||
|
Operating
expenses excluding founders grant
|
265,385 | 269,586 | (1.6 | %) | ||||||||
|
Founders
grant1
|
26,571 | 25,585 | 3.9 | % | ||||||||
|
Operating
expenses including founders grant
|
$ | 291,956 | $ | 295,171 | (1.1 | %) | ||||||
| 1 Excludes $0.1 million of cash-settled founders grant expense in fourth quarter 2009, which has been included in compensation. | ||||||||||||
Table
11c
Operating Expenses
by Category
(Cost of Services
vs. Selling, General and Administrative)
|
Fiscal Year
Ended
|
||||||||||||
|
November
30,
|
||||||||||||
|
In
thousands
|
2009
|
2008
|
Change
|
|||||||||
|
Cost of
services
|
||||||||||||
|
Compensation
|
$ | 78,322 | $ | 75,622 | 3.6 | % | ||||||
|
Founders
grant1
|
9,350 | 7,858 | 19.0 | % | ||||||||
|
Total
|
87,672 | 83,480 | 5.0 | % | ||||||||
|
Non-compensation
|
30,993 | 39,910 | (22.3 | %) | ||||||||
|
Total
|
118,665 | 123,390 | (3.8 | %) | ||||||||
|
Selling,
general and administrative
|
||||||||||||
|
Compensation
|
75,577 | 68,829 | 9.8 | % | ||||||||
|
Founders
grant1
|
17,221 | 17,727 | (2.9 | %) | ||||||||
|
Total
|
92,798 | 86,556 | 7.2 | % | ||||||||
|
Non-compensation
|
42,982 | 51,755 | (17.0 | %) | ||||||||
|
Total
|
135,780 | 138,311 | (1.8 | %) | ||||||||
|
Amortization
of intangible assets
|
25,554 | 28,500 | (10.3 | %) | ||||||||
|
Depreciation
and amortization of property,
equipment, and leasehold improvement
|
11,957 | 4,970 | 140.6 | % | ||||||||
|
Operating
expenses including founders grant
|
$ | 291,956 | $ | 295,171 | (1.1 | %) | ||||||
| 1 Excludes cash-settled founders grant expense in fourth quarter 2009, which has been included in compensation. | ||||||||||||
16 of
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|
www.mscibarra.com
|
Table
12
Reconciliation of
Adjusted EBITDA to Net Income
|
Fiscal Year
Ended
|
||||||||
|
November
30,
|
||||||||
|
In
thousands
|
2009
|
2008
|
||||||
|
Adjusted
EBITDA1
|
$ | 215,074 | $ | 194,845 | ||||
|
Less: Founders
grant expense2
|
26,571 | 25,585 | ||||||
|
Less: Depreciation
and amortization
|
11,957 | 4,970 | ||||||
|
Less: Amortization
of intangible assets
|
25,554 | 28,500 | ||||||
|
Less: Other
expense (income), net
|
19,271 | 26,147 | ||||||
|
Less: Provision
for income taxes
|
49,920 | 41,375 | ||||||
|
Net
income
|
$ | 81,801 | $ | 68,268 | ||||
|
1 All stock
based compensation other than the stock-settled founders grant expense is
considered an expense for purposes of calculating adjusted
EBITDA
2 Excludes $0.1
million of cash-settled founders grant expense in fourth quarter
2009.
|
||||||||
Notes
Regarding the Use of Non-GAAP Financial Measures
Adjusted
EBITDA
Adjusted EBITDA is
defined as income before interest income, interest expense, other income,
provision for income taxes, depreciation, amortization and founders grant
expense. Adjusted EBITDA is not presented as an alternative measure of operating
results, as determined in accordance with accounting principles generally
accepted in the U.S. Rather, we believe adjusted EBITDA is one additional
measure that investors use to evaluate companies, like our company, that have
substantial amortization of intangible assets and other unusual one-time
non-cash charges included in their statement of income. This is particularly
relevant to a company in our industry because we do not believe other companies
in our industry have as significant a proportion of their operating expenses
represented by amortization of intangible assets and one-time founders grant as
we do. As stated above, adjusted EBITDA excludes expense for the one-time $68.0
million founders grant which is being amortized through 2011. Management
believes that it is useful to exclude the founders grant expense in order to
focus on what is deemed to be a more reliable indicator of ongoing operating
performance. Amortization expense for the one-time $68.0 million founders grant,
representing restricted stock units and options awarded to employees effective
with the IPO, is expected to be amortized through 2011.
Additionally, our
management uses adjusted EBITDA to compare MSCI to other companies in the same
industry when evaluating relative performance and industry development. Adjusted
EBITDA as presented herein, however, may not be comparable to similarly titled
measures reported by other companies. Adjusted EBITDA is a non-GAAP measure that
should not be considered as an alternative to net income, as an indication of
financial performance or as an alternative to cash flow from operations as a
measure of liquidity.
Operating Expenses
excluding Founders Grant
Operating expenses
excluding founders grant (described above), cost of services expenses excluding
founders grant, and selling, general, and administrative expenses excluding
founders grant are deemed to be a more reliable indicator of ongoing expense
trends. Management believes that it is useful to exclude founders grant expenses
from operating expenses because the founders grant was a one-time event,
although the amortization expense of the award will be recognized over four
years.
17 of
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