MSCI Reports Financial Results for Fourth Quarter and Full Year 2023
NEW YORK--(BUSINESS WIRE)--January 30, 2024--
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 December 31, 2023 (“fourth quarter 2023”) and full year ended December 31, 2023 (“full year 2023”).
Financial and Operational Highlights for Fourth Quarter 2023
(Note: Unless otherwise noted, percentage and other changes are relative to the three months ended December 31, 2022 (“fourth quarter 2022”) and Run Rate percentage changes are relative to December 31, 2022).
-- Operating revenues of $690.1 million, up 19.8%; Organic operating
revenue growth of 14.7%
-- Recurring subscription revenues up 16.8%; Asset-based fees up 15.9%
-- Operating margin of 53.7%; Adjusted EBITDA margin of 60.1%
-- Diluted EPS of $5.07, up 89.9%; Adjusted EPS of $3.68, up 29.6%
-- New recurring subscription sales up by 1.9%; Organic recurring
subscription Run Rate growth of 9.9%; Retention Rate of 93.6%
-- In full year 2023 and through trade date of January 29, 2024, a total
of $458.7 million or 979,623 shares were repurchased at an average
repurchase price of $468.26
-- In fourth quarter 2023, dividends of $109.2 million were paid to
shareholders; Cash dividend of $1.60 per share declared by MSCI Board of
Directors for first quarter 2024, an increase of 15.9%
Three Months Ended Year Ended
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In thousands,
except per
share data Dec. 31, Dec. 31, Dec. 31, Dec. 31,
(unaudited) 2023 2022 % Change 2023 2022 % Change
------------- ------------ ------------ ---------- -------------- -------------- ----------
Operating
revenues $690,106 $576,208 19.8% $2,528,920 $2,248,598 12.5%
Operating
income $370,745 $308,750 20.1% $1,384,609 $1,207,640 14.7%
Operating
margin % 53.7% 53.6% 54.8% 53.7%
Net income $403,380 $214,971 87.6% $1,148,592 $ 870,573 31.9%
Diluted EPS $ 5.07 $ 2.67 89.9% $ 14.39 $ 10.72 34.2%
Adjusted EPS $ 3.68 $ 2.84 29.6% $ 13.52 $ 11.45 18.1%
Adjusted
EBITDA $414,627 $339,022 22.3% $1,522,951 $1,329,671 14.5%
Adjusted
EBITDA
margin % 60.1% 58.8% 60.2% 59.1%
“MSCI delivered impressive results to close out 2023, despite continued external headwinds. In the fourth quarter, we achieved Adjusted EPS growth of nearly 30%, and organic revenue growth of 14.7%. Operationally, we completed our 10th consecutive year of double-digit subscription run-rate growth in Index, while achieving our highest-ever full-year retention rate in Analytics, along with our best quarter and full year on record for recurring sales in Equity Analytics,” said Henry A. Fernandez, Chairman and CEO of MSCI.
“We continue to capitalize on important secular trends that are reshaping the global investment landscape, such as rising demand for portfolio customization at scale. Looking ahead, MSCI remains committed to making organic investments and bolt-on acquisitions that add value, while returning excess capital to our owners through share buybacks and dividend payments. As always, we will balance our long-term strategic investments with our commitment to rigorous financial management and short-term execution,” Mr. Fernandez added.
Fourth Quarter Consolidated Results
Operating Revenues: Operating revenues were $690.1 million, up 19.8%. Organic operating revenue growth was 14.7%. The $113.9 million increase was driven by $72.9 million in higher recurring subscription revenues and $21.1 million in higher non-recurring revenues primarily related to the Index and Analytics segments, as well as $19.9 million in higher asset-based fees.
Run Rate and Retention Rate: Total Run Rate at December 31, 2023 was $2,686.2 million, up 15.8%. Recurring subscription Run Rate increased by $289.2 million, and asset-based fees Run Rate increased by $76.6 million. Organic recurring subscription Run Rate growth was 9.9%. Retention Rate in fourth quarter 2023 was 93.6%, compared to 93.0% in fourth quarter 2022.
Expenses: Total operating expenses were $319.4 million, up 19.4%, including $33.4 million associated with The Burgiss Group, LLC (“Burgiss”) and Trove Research Ltd (“Trove”). Adjusted EBITDA expenses were $275.5 million, up 16.1%, primarily reflecting higher compensation and incentive compensation expenses related to higher headcount to support business growth, partially offset by lower severance costs. Adjusted EBITDA expense also includes $22.6 million of expenses associated with Burgiss and Trove. Approximately $1.4 million in non-recurring integration and transaction costs related to the acquisition of Burgiss and $9.3 million of acquired intangible assets amortization expenses related to Burgiss and Trove were excluded from Adjusted EBITDA expenses. Total operating expenses excluding the impact of foreign currency exchange rate fluctuations (“ex-FX”) and adjusted EBITDA expenses ex-FX increased 17.6% and 14.2%, respectively.
Operating Income: Operating income was $370.7 million, up 20.1%. Operating income margin in fourth quarter 2023 was 53.7%, compared to 53.6% in fourth quarter 2022.
Headcount: As of December 31, 2023, headcount was 5,794 employees, with approximately 33.5% and approximately 66.5% of employees located in developed market and emerging market locations, respectively.
Other Expense (Income), Net: Other expense (income), net was ($97.1) million in fourth quarter 2023, as compared to $43.1 for the fourth quarter 2022, primarily driven by the non-taxable, one-time gain on the remeasurement of our equity method investment in Burgiss of $143.0 million, partially offset by lower interest income due to lower cash balance and higher interest expense due to higher interest rates.
Income Taxes: In the fourth quarter 2023, the effective tax rate was 13.8% compared to 19.1% in the fourth quarter 2022, primarily due to the non-taxable, one-time gain on the remeasurement of our equity method investment in Burgiss of $143.0 million and a discrete benefit related to a favorable outcome on the application of a foreign tax law change received late in the quarter, partially offset by an increase due to accruals related to open tax audits.
Net Income: As a result of the factors described above, net income was $403.4 million, up 87.6%.
Adjusted EBITDA: Adjusted EBITDA was $414.6 million, up 22.3%. Adjusted EBITDA margin in fourth quarter 2023 was 60.1%, compared to 58.8% in fourth quarter 2022.
Index Segment:
Table 1A: Results (unaudited)
Three Months Ended Year Ended
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Dec. 31, Dec. 31, Dec. 31, Dec. 31,
In thousands 2023 2022 % Change 2023 2022 % Change
----------------- ------------ ------------ ---------- -------------- -------------- ----------
Operating
revenues:
Recurring
subscriptions $210,737 $189,970 10.9% $ 814,582 $ 729,710 11.6%
Asset-based
fees 145,148 125,238 15.9% 557,502 528,127 5.6%
Non-recurring 32,110 14,053 128.5% 79,731 45,372 75.7%
------- ------- --------- ---------
Total operating
revenues 387,995 329,261 17.8% 1,451,815 1,303,209 11.4%
Adjusted EBITDA
expenses 89,446 80,866 10.6% 344,842 317,802 8.5%
------- ------- --------- ---------
Adjusted EBITDA $298,549 $248,395 20.2% $1,106,973 $ 985,407 12.3%
======= ======= ========= =========
Adjusted EBITDA
margin % 76.9% 75.4% 76.2% 75.6%
Index operating revenues were $388.0 million, up 17.8%. The $58.7 million increase was driven by $20.8 million in higher recurring subscription revenues, $19.9 million in higher asset-based fees, as well as $18.1 million in higher non-recurring revenues.
Growth in recurring subscription revenues was primarily driven by strong growth from market-cap weighted Index products.
Revenues from ETFs linked to MSCI equity indexes, mainly driven by an increase in average AUM, drove more than half of the increase in revenues attributable to asset-based fees. The balance of the increase was contributed by non-ETF indexed funds linked to MSCI indexes, driven by an increase in average AUM as well as an increase in average basis point fees.
Non-recurring revenues were $32.1 million, up 128.5%. The $18.1 million increase was primarily driven by $16 million related to fees for unlicensed usage of our content in historical periods, which is recognized in the current period given the signing of an agreement during the quarter to be paid for that past usage.