MSCI Reports Financial Results for First Quarter 2024
NEW YORK--(BUSINESS WIRE)--April 23, 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 March 31, 2024 (“first quarter 2024”).
Financial and Operational Highlights for First Quarter 2024
(Note: Unless otherwise noted, percentage and other changes are relative to the three months ended March 31, 2023 (“first quarter 2023”) and Run Rate percentage changes are relative to March 31, 2023).
-- Operating revenues of $680.0 million, up 14.8%; Organic operating
revenue growth of 10.3%
-- Recurring subscription revenues up 15.2%; Asset-based fees up 12.9%
-- Operating margin of 49.9%; Adjusted EBITDA margin of 56.4%
-- Diluted EPS of $3.22, up 8.4%; Adjusted EPS of $3.52, up 12.1%
-- Organic recurring subscription Run Rate growth of 8.7%; Retention Rate
of 92.8%
-- Approximately $126.8 million in dividends were paid to shareholders in
first quarter 2024; Cash dividend of $1.60 per share declared by MSCI
Board of Directors for second quarter 2024
Three Months Ended
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Mar. 31, Mar. 31,
In thousands, except per
share data (unaudited) 2024 2023 % Change
--------------------------- ------------ ------------ ----------
Operating revenues $679,965 $592,218 14.8%
Operating income $339,382 $314,602 7.9%
Operating margin % 49.9% 53.1%
Net income $255,954 $238,728 7.2%
Diluted EPS $ 3.22 $ 2.97 8.4%
Adjusted EPS $ 3.52 $ 3.14 12.1%
Adjusted EBITDA $383,573 $344,729 11.3%
Adjusted EBITDA margin % 56.4% 58.2%
“MSCI’s first-quarter financial results affirm that we can deliver solid earnings amid continued operating environment challenges. Record AUM balances in MSCI-linked index products drove strong revenue growth from asset-based fees, which helped offset lower subscription revenue. This highlights the underlying strength and stability of our all-weather franchise,” said Henry A. Fernandez, Chairman and CEO of MSCI.
“Our operating metrics showed resilience in our new recurring sales, especially in Analytics, which was our highest first quarter in a decade. Elevated cancels reflected a concentration of unusual client events, including a large merger among our banking clients. We are managing through these pressures and do not expect this level of cancels to continue,” Fernandez added.
“We are encouraged by our deep client engagement across segments, which is enabling us to accelerate product innovation. Our long-term strategy and recent acquisitions have positioned us well to benefit from secular trends that are reshaping our industry, such as portfolio indexation and customization, the growth of private assets and the global sustainability revolution. All of this supports our conviction that we can maintain attractive profitability and growth in 2024 and beyond.”
First Quarter Consolidated Results
Operating Revenues: Operating revenues were $680.0 million, up 14.8%. Organic operating revenue growth was 10.3%. The $87.7 million increase was the result of a $67.8 million increase in recurring subscription revenues; a $17.1 million increase in asset-based fees and a $2.8 million increase in non-recurring revenues.
Run Rate and Retention Rate: Total Run Rate at March 31, 2024 was $2,726.5 million, up 14.6%. Recurring subscription Run Rate increased by $262.4 million, and asset-based fees Run Rate increased by $84.9 million. Organic recurring subscription Run Rate growth was 8.7%. Retention Rate in first quarter 2024 was 92.8%, compared to 95.2% in first quarter 2023. Approximately $7.0 million of the cancels related to one client event related to the merger of our banking clients, which impacted Index, ESG and Climate, and Analytics. The majority of first quarter 2024 cancels were due to corporate events including organizations closing, shutting funds, restructuring or downsizing. Approximately 85% of MSCI’s subscription Run Rate as of March 31, 2024 was with clients subscribing to multiple products, and these clients had a 93.1% or higher Retention Rate in first quarter 2024.
Expenses: Total operating expenses were $340.6 million, up 22.7%, including $35.1 million associated with Private Capital Solutions; formerly known as The Burgiss Group, LLC (“Burgiss”)), Carbon Markets (formerly known as Trove Research Ltd (“Trove”)) and Fabric RQ Inc. (“Fabric”).
Adjusted EBITDA expenses were $296.4 million, up 19.8%, primarily reflecting higher compensation and benefits costs related to higher headcount as a result of business growth and the recent acquisitions. Adjusted EBITDA expense includes $23.9 million of expenses associated with Private Capital Solutions, Carbon Markets and Fabric. Approximately $1.5 million in integration costs related to the acquisition of the remaining interest in Burgiss and $9.7 million of acquired intangible asset amortization expenses related to Private Capital Solutions, Carbon Markets and Fabric 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 21.9% and 18.9%, respectively.
Operating Income: Operating income was $339.4 million, up 7.9%. Operating income margin in first quarter 2024 was 49.9%, compared to 53.1% in first quarter 2023.
Headcount: As of March 31, 2024, we had 5,858 employees reflecting a 20.9% increase, which was primarily driven by our recent acquisitions. Approximately 32.8% and 67.2% of employees are located in developed market and emerging market locations, respectively.
Other Expense (Income), Net: Other expense (income), net was $43.5 million, up 13.8% primarily driven by lower interest income reflecting lower average cash balances as well as loss on extinguishment related to unamortized debt issuance costs associated with the prepayment of the Tranche A Term Loans and the entry into the amended and restated credit agreement (the “Credit Amendment”), partially offset by the impact of favorable foreign currency exchange rate fluctuations.
Income Taxes: The effective tax rate was 13.5% in first quarter 2024 compared to 13.6% in first quarter 2023. A higher operating tax rate in the current period was offset by favorable discrete items related to prior years, as well as higher excess tax benefits recognized on share-based compensation vested during the period.
Net Income: As a result of the factors described above, net income was $256.0 million, up 7.2%.
Adjusted EBITDA: Adjusted EBITDA was $383.6 million, up 11.3%. Adjusted EBITDA margin in first quarter 2024 was 56.4%, compared to 58.2% in first quarter 2023.
Index Segment:
Table 1A: Results (unaudited)
Three Months Ended
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Mar. 31, Mar. 31,
In thousands 2024 2023 % Change
--------------------------- ------------ ------------ ----------
Operating revenues:
Recurring subscriptions $212,952 $196,678 8.3%
Asset-based fees 150,259 133,126 12.9%
Non-recurring 10,661 9,578 11.3%
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Total operating revenues 373,872 339,382 10.2%
Adjusted EBITDA expenses 96,112 85,700 12.1%
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Adjusted EBITDA $277,760 $253,682 9.5%
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Adjusted EBITDA margin % 74.3% 74.7%
Index operating revenues were $373.9 million, up 10.2%. The $34.5 million increase was primarily driven by $17.1 million in higher asset-based fees and $16.3 million in higher recurring subscription revenues.
Revenues from ETFs linked to MSCI equity indexes, driven by an increase in average AUM, drove more than 70% of the increase in revenues attributable to asset-based fees. The revenue increase was also impacted by non-ETF indexed funds linked to MSCI indexes, driven by an increase in average AUM. The increase was partially offset by a decrease in average basis point fees for both ETFs linked to MSCI equity indexes as well as non-ETF indexed linked funds linked to MSCI indexes and a decrease in revenue from futures and options contracts linked to MSCI indexes.
More than 90% of the growth in recurring subscription revenues was driven by strong growth from market-cap weighted and custom Index products and special packages.
Index Run Rate as of March 31, 2024, was $1.5 billion, up 12.0%. The $159.3 million increase was comprised of an $84.9 million increase in asset-based fees Run Rate and a $74.3 million increase in recurring subscription Run Rate. The increase in asset-based fees Run Rate primarily reflected higher AUM in 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.