MSCI Reports Financial Results for Third Quarter and Nine Months 2024

NEW YORK–(BUSINESS WIRE)–MSCI Inc. (“MSCI” or the “Company”) (NYSE: MSCI), a leading provider of critical decision support tools and services for the global investment community, today announced its financial results for the three months ended September 30, 2024 (“third quarter 2024”) and nine months ended September 30, 2024 (“nine months 2024”).

Financial and Operational Highlights for Third Quarter 2024

(Note: Unless otherwise noted, percentage and other changes are relative to the three months ended September 30, 2023 (“third quarter 2023”) and Run Rate percentage changes are relative to September 30, 2023).

• Operating revenues of $724.7 million, up 15.9%; Organic operating revenue growth of 11.1%
• Recurring subscription revenues up 15.4%; Asset-based fees up 19.5%
• Operating margin of 55.4%; Adjusted EBITDA margin of 62.2%
• Diluted EPS of $3.57, up 9.2%; Adjusted EPS of $3.86, up 11.9%
• Organic recurring subscription Run Rate growth of 8.0%; Retention Rate of 94.2%
• In third quarter 2024, a total of $198.7 million or 380,397 shares were repurchased at an average repurchase price of $522.47
• Approximately $125.4 million in dividends were paid to shareholders in third quarter 2024; Cash dividend of $1.60 per share declared by MSCI Board of Directors (“MSCI Board”) for fourth quarter 2024
• On October 28, 2024, the MSCI Board authorized an additional $1.5 billion share repurchase program

“MSCI’s third-quarter results highlight the underlying strength of our business model and client footprint, as well as the essential role that our solutions play across the investment ecosystem. Among other achievements, we posted our best-ever Q3 for recurring sales in Index and Analytics, along with nearly 20% growth in asset-based-fee revenue, which was driven by record AUM balances in financial products linked to our indexes,” said Henry A. Fernandez, Chairman and CEO of MSCI.

“All of this demonstrates our single most important competitive advantage: the global, diversified, and integrated nature of our franchise. MSCI has always tried to capture the biggest trends reshaping our industry, and we are now better equipped than ever to harness those trends while supporting both traditional and newer client segments,” Fernandez added.

Third Quarter Consolidated Results

Operating Revenues: Operating revenues were $724.7 million, up 15.9%. Organic operating revenue growth was 11.1%. The $99.3 million increase was the result of $71.6 million in higher recurring subscription revenues and $27.6 million in higher asset-based fees.

Run Rate and Retention Rate: Total Run Rate at September 30, 2024 was $2,894.2 million, up 17.3%. Recurring subscription Run Rate increased by $287.9 million, and asset-based fees Run Rate increased by $137.9 million. Organic recurring subscription Run Rate growth was 8.0%. Retention Rate in third quarter 2024 was 94.2%, compared to 95.4% in third quarter 2023.

Expenses: Total operating expenses were $323.4 million, up 18.8%, including $37.8 million of operating expenses associated with Private Capital Solutions (formerly known as The Burgiss Group, LLC), Carbon Markets (formerly known as Trove Research Ltd), Fabric RQ Inc. (“Fabric”) and Foxberry Ltd (“Foxberry”).

Adjusted EBITDA expenses were $274.0 million, up 14.6%, primarily reflecting higher compensation and benefits costs related to higher headcount as a result of business growth and the recent acquisitions as well as increases in non-compensation costs, primarily reflecting higher professional fees, information technology and market data costs.

Adjusted EBITDA expense included $23.8 million of expenses associated with Private Capital Solutions, Carbon Markets, Fabric and Foxberry. Approximately $3.1 million in integration costs and $10.9 million of depreciation and amortization related to these acquisitions were excluded from Adjusted EBITDA expense.

Total operating expenses excluding the impact of foreign currency exchange rate fluctuations (“ex-FX”) and adjusted EBITDA expenses ex-FX increased 18.9% and 14.7%, respectively.

Operating Income: Operating income was $401.3 million, up 13.6%. Operating income margin in third quarter 2024 was 55.4%, compared to 56.5% in third quarter 2023.

Headcount: As of September 30, 2024, we had 6,118 employees, reflecting a 22.2% increase, which was primarily driven by our recent acquisitions. Approximately 31.5% and 68.5% of employees are located in developed market and emerging market locations, respectively.

Other Expense (Income), Net: Other expense (income), net was $44.4 million, up 24.5%, primarily driven by lower interest income reflecting lower average cash balances and the impact of foreign currency exchange rate fluctuations.

Income Taxes: The effective tax rate was 21.3% in the third quarter 2024 compared to 18.3% in third quarter 2023. The increase was primarily driven by higher statutory tax rates and unfavorable discrete items related to prior years.

Net Income: As a result of the factors described above, net income was $280.9 million, up 8.2%.

Adjusted EBITDA: Adjusted EBITDA was $450.7 million, up 16.7%. Adjusted EBITDA margin in third quarter 2024 was 62.2%, compared to 61.8% in third quarter 2023.

Index Segment:

Table 1A: Results (unaudited)

Index operating revenues were $404.9 million, up 11.8% and included $0.21 million from the acquisition of Foxberry. The $42.8 million increase was driven by $27.6 million in higher asset-based fees and $17.5 million in higher recurring subscription revenues, partially offset by $2.3 million in lower non-recurring revenues. Organic operating revenue growth for Index was 11.8%.

The growth in recurring subscription revenues was primarily driven by growth from market-cap weighted indexes and factor, ESG and climate index products.

The growth in revenues attributed to asset-based fees were primarily driven by ETFs linked to MSCI equity indexes and non-ETF indexed funds linked to MSCI indexes, primarily due to an increase in average AUM.

Index Run Rate as of September 30, 2024, was $1.6 billion, up 15.2%. The $209.4 million increase was comprised of a $137.9 million increase in asset-based fees Run Rate and a $71.5 million increase in recurring subscription Run Rate. The increase in asset-based fees Run Rate primarily reflected higher AUM in both ETFs linked to MSCI equity indexes and non-ETF indexed funds linked to MSCI indexes. The increase in recurring subscription Run Rate was primarily driven by growth from market cap-weighted and custom Index products and special packages. The increase reflected growth across all regions. Organic recurring subscription Run Rate growth for Index was 8.5%.

Analytics Segment:

Table 1B: Results (unaudited)

Analytics operating revenues were $172.4 million, up 11.7%. The $18.1 million increase was primarily driven by growth from recurring subscriptions related to both Multi-Asset Class and Equity Analytics products, which also benefited from subscription revenue impacted by client implementations. The increase was also driven by an increase in non-recurring revenues driven by one-time deals related to both Multi-Asset Class and Equity products as well as a number of implementations which were completed in the quarter. Organic operating revenue growth for Analytics was 11.7%.

Analytics Run Rate as of September 30, 2024, was $691.3 million, up 8.1%. The increase of $51.9 million was primarily driven by growth in both Multi-Asset Class and Equity Analytics products, and reflected growth across all regions and client segments. Organic recurring subscription Run Rate growth for Analytics was 7.1%.

ESG and Climate Segment:

Table 1C: Results (unaudited)

ESG and Climate operating revenues were $83.6 million, up 14.5%. The $10.6 million increase was primarily driven by growth from recurring subscriptions related to Ratings, Climate and Screening products. Organic operating revenue growth for ESG and Climate was 11.0%.

ESG and Climate Run Rate as of September 30, 2024, was $344.0 million, up 15.7%. The $46.7 million increase primarily reflects growth from Ratings, Climate and Screening products with contributions across all regions and client segments. Organic recurring subscription Run Rate growth for ESG and Climate was 11.2%.

All Other – Private Assets Segment:

Table 1D: Results (unaudited)

All Other – Private Assets operating revenues, which reflect the Real Assets and Private Capital Solutions operating segments, were $63.8 million, up 77.2% The growth in revenue is primarily driven by revenues attributable to the step acquisition of Burgiss. Organic operating revenue growth for All Other – Private Assets was 1.0%.

All Other – Private Assets Run Rate, which reflects the Real Assets and Private Capital Solutions operating segments, was $268.6 million as of September 30, 2024, up 78.2%, and included $110.1 million from Private Capital Solutions. The remaining growth in the run rate was primarily driven by Index Intel products. Organic recurring subscription Run Rate growth for All Other – Private Assets was 2.4%.

Select Balance Sheet Items and Capital Allocation

Cash Balances and Outstanding Debt: Cash and cash equivalents was $501.0 million as of September 30, 2024. MSCI typically seeks to maintain minimum cash balances globally of approximately $225.0 million to $275.0 million for general operating purposes.

Total principal amounts of debt outstanding as of September 30, 2024, were $4.5 billion. The total debt to net income ratio (based on trailing twelve months net income) was 3.7x. The total debt to adjusted EBITDA ratio (based on trailing twelve months adjusted EBITDA) was 2.7x.

MSCI seeks to maintain total debt to adjusted EBITDA in a target range of 3.0x to 3.5x.

In September and October 2024, MSCI repaid $25.0 million and $125.0 million, respectively, of the revolving loans under the Revolving Credit Facility.

Capex and Cash Flow: Capex was $27.6 million, and net cash provided by operating activities increased by 44.8% to $421.6 million, primarily reflecting higher cash collections from clients, partially offset by higher operating expenses. Free cash flow for third quarter 2024 was up 45.8% to $394.0 million.

Share Count and Share Repurchases: Weighted average diluted shares outstanding were 78.7 million in third quarter 2024, down 1.0% year-over-year. Total share repurchases during the quarter were $198.7 million or 380,397 shares at an average repurchase price of $522.47. Total shares outstanding as of September 30, 2024 were 78.4 million. A total of approximately $1.9 billion remains on the outstanding share repurchase authorization as of October 28, 2024, following the MSCI Board’s approval of the 2024 share repurchase program.

Dividends: Approximately $125.4 million in dividends were paid to shareholders in third quarter 2024. On October 28, 2024, the MSCI Board declared a cash dividend of $1.60 per share for fourth quarter 2024, payable on November 29, 2024, to shareholders of record as of the close of trading on November 15, 2024.

Full-Year 2024 Guidance

MSCI’s guidance for the year ending December 31, 2024 (“Full-Year 2024”) is based on assumptions about a number of factors, in particular related to macroeconomic factors and the capital markets. These assumptions are subject to uncertainty, and actual results for the year could differ materially from our current guidance, including as a result of the uncertainties, risks and assumptions discussed in the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of our Annual Report on Form 10-K, as updated in quarterly reports on Form 10-Q and current reports on Form 8-K filed or furnished with the SEC. See “Forward-Looking Statements” below.

Conference Call Information

MSCI’s senior management will review the third quarter 2024 results on Tuesday, October 29, 2024 at 11:00 AM Eastern Time. To listen to the live event via webcast, visit the events and presentations section of MSCI’s Investor Relations website, https://ir.msci.com/events-and-presentations, or via telephone, dial +1-888-596-4144 conference ID 9979278 within the United States. International callers may dial +1-646-968-2525 conference ID 9979278. The teleconference will also be webcast with an accompanying slide presentation that can be accessed through MSCI’s Investor Relations website.

About MSCI Inc.

MSCI is a leading provider of critical decision support tools and services for the global investment community. With over 50 years of expertise in research, data and technology, we power better investment decisions by enabling clients to understand and analyze key drivers of risk and return and confidently build more effective portfolios. We create industry-leading research-enhanced solutions that clients use to gain insight into and improve transparency across the investment process. To learn more, please visit www.msci.com. MSCI#IR

Forward-Looking Statements

This earnings release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including without limitation, MSCI’s Full-Year 2024 guidance. These forward-looking statements relate to future events or to future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these statements. In some cases, you can identify forward-looking statements by the use of words such as “may,” “could,” “expect,” “intend,” “plan,” “seek,” “anticipate,” “believe,” “estimate,” “predict,” “potential” or “continue,” or the negative of these terms or other comparable terminology. You should not place undue reliance on forward-looking statements because they involve known and unknown risks, uncertainties and other factors that are, in some cases, beyond MSCI’s 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, 2023 filed with the Securities and Exchange Commission (“SEC”) on February 9, 2024 and in quarterly reports on Form 10-Q and current reports on Form 8-K filed or furnished with the SEC. If any of these risks, uncertainties or other matters materialize, or if MSCI’s underlying assumptions prove to be incorrect, actual results may vary significantly from what MSCI projected. Any forward-looking statement in this earnings release reflects MSCI’s current views with respect to future events and is subject to these and other risks, uncertainties and assumptions relating to MSCI’s operations, results of operations, growth strategy and liquidity. MSCI assumes 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, except as required by law.

Website and Social Media Disclosure

MSCI uses its Investor Relations homepage and its Corporate Responsibility homepage as channels of distribution of company information. The information MSCI posts through these channels may be deemed material. Accordingly, investors should monitor these channels, in addition to following MSCI’s press releases, SEC filings and public conference calls and webcasts. In addition, you may automatically receive email alerts and other information about MSCI when you enroll your email address by visiting the “Email Alerts” section of MSCI’s Investor Relations homepage at http://ir.msci.com/email-alerts. The contents of MSCI’s website, including its quarterly updates, blog, podcasts and social media channels are not, however, incorporated by reference into this earnings release.

Notes Regarding the Use of Operating Metrics

MSCI has presented supplemental key operating metrics as part of this earnings release, including Retention Rate, Run Rate, subscription sales, subscription cancellations and non-recurring sales.

Retention Rate is an important metric because subscription cancellations decrease our Run Rate and ultimately our future operating revenues over time. The annual Retention Rate represents the retained subscription Run Rate (subscription Run Rate at the beginning of the fiscal year less actual cancels during the year) as a percentage of the subscription Run Rate at the beginning of the fiscal year.

The Retention Rate for a non-annual period is calculated by annualizing the cancellations for which we have received a notice of termination or for which we believe there is an intention not to renew or discontinue the subscription during the non-annual period, and we believe that such notice or intention evidences the client’s final decision to terminate or not renew the applicable agreement, even though such termination or non-renewal may not be effective until a later date. This annualized cancellation figure is then divided by the subscription Run Rate at the beginning of the fiscal year to calculate a cancellation rate. This cancellation rate is then subtracted from 100% to derive the annualized Retention Rate for the period.

Retention Rate is computed by operating segment on a product/service-by-product/service basis. In general, if a client reduces the number of products or services to which it subscribes within a segment, or switches between products or services within a segment, we treat it as a cancellation for purposes of calculating our Retention Rate except in the case of a product or service switch that management considers to be a replacement product or service. In those replacement cases, only the net change to the client subscription, if a decrease, is reported as a cancel. In the Analytics and the ESG and Climate operating segments, substantially all product or service switches are treated as replacement products or services and netted in this manner, while in our Index and Real Assets operating segments, product or service switches that are treated as replacement products or services and receive netting treatment occur only in certain limited instances. In addition, we treat any reduction in fees resulting from a down-sell of the same product or service as a cancellation to the extent of the reduction. We do not calculate Retention Rate for that portion of our Run Rate attributable to assets in index-linked investment products or futures and options contracts, in each case, linked to our indexes.

Run Rate estimates at a particular point in time the annualized value of the recurring revenues under our client license agreements (“Client Contracts”) for the next 12 months, assuming all Client Contracts that come up for renewal, or reach the end of the committed subscription period, are renewed and assuming then-current currency exchange rates, subject to the adjustments and exclusions described below. For any Client Contract where fees are linked to an investment product’s assets or trading volume/fees, the Run Rate calculation reflects, for ETFs, the market value on the last trading day of the period, for futures and options, the most recent quarterly volumes and/or reported exchange fees, and for other non-ETF products, the most recent client-reported assets.

Contacts

MSCI Inc. Contacts

Investor Inquiries

jeremy.ulan@msci.com
Jeremy Ulan +1 646 778 4184

jisoo.suh@msci.com
Jisoo Suh + 1 917 825 7111

Media Inquiries

PR@msci.com
Melanie Blanco +1 212 981 1049

Konstantinos Makrygiannis +44(0)7768 930056

Tina Tan + 852 2844 9320

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