MSCI Reports Financial Results for Third Quarter and Nine Months 2023
NEW YORK----October 31, 2023--
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, 2023 (“third quarter 2023”) and nine months ended September 30, 2023 (“nine months 2023”).
Financial and Operational Highlights for Third Quarter 2023
(Note: Unless otherwise noted, percentage and other changes are relative to the three months ended September 30, 2022 (“third quarter 2022”) and Run Rate percentage changes are relative to September 30, 2022).
-- Operating revenues of $625.4 million, up 11.6%; Organic operating
revenue growth of 10.9%
-- Recurring subscription revenues up 10.7%; Asset-based fees up 12.3%
-- Operating margin of 56.5%; Adjusted EBITDA margin of 61.8%
-- Diluted EPS of $3.27, up 22.0%; Adjusted EPS of $3.45, up 21.1%
-- Organic recurring subscription Run Rate growth of 10.7%; Retention Rate
of 95.4%
-- In third quarter 2023 and through trade date of October 30, 2023, a
total of $17.9 million or 38,263 shares were repurchased at an average
repurchase price of $467.13
-- Approximately $109.2 million in dividends were paid to shareholders in
third quarter 2023; Cash dividend of $1.38 per share declared by MSCI
Board of Directors for fourth quarter 2023
Three Months Ended Nine Months Ended
-------------------------------------- ------------------------------------------
Sep. 30, Sep. 30, Sep. 30, Sep. 30,
In
thousands,
except per
share data
(unaudited) 2023 2022 % Change 2023 2022 % Change
------------ ------------ ------------ -------------- --------------
Operating
revenues $625,439 $560,639 11.6% $1,838,814 $1,672,390 10.0%
Operating
income $353,309 $309,531 14.1% $1,013,864 $ 898,890 12.8%
Operating
margin % 56.5% 55.2% 55.1% 53.7%
Net income $259,659 $216,592 19.9% $ 745,212 $ 655,602 13.7%
Diluted EPS $ 3.27 $ 2.68 22.0% $ 9.32 $ 8.05 15.8%
Adjusted EPS $ 3.45 $ 2.85 21.1% $ 9.85 $ 8.61 14.4%
Adjusted
EBITDA $386,289 $340,961 13.3% $1,108,324 $ 990,649 11.9%
Adjusted
EBITDA
margin % 61.8% 60.8% 60.3% 59.2%
“During the third quarter, MSCI delivered impressive results in an uncertain environment, posting Adjusted EPS growth of 21.1%, revenue growth of 11.6%, and a retention rate of 95.4%. Index, our largest product line, continued to report double-digit subscription Run Rate growth and Climate achieved a Run Rate increase of nearly 50% across our product lines firm-wide. Meanwhile, our Analytics segment delivered a near-record retention rate of 95.1%,” said Henry A. Fernandez, Chairman and CEO of MSCI.
“We continue to benefit from MSCI’s resilient business model, underpinned by recurring revenues and mission-critical investment tools. Our recent acquisitions of Burgiss and Trove will help us further capture major industry trends and strengthen our ability to provide clients with market-leading portfolio solutions,” Mr. Fernandez added.
Third Quarter Consolidated Results
Operating Revenues: Operating revenues were $625.4 million, up 11.6%. Organic operating revenue growth was 10.9%. The $64.8 million increase was comprised of $44.8 million in higher recurring subscription revenues and $15.4 million in higher asset-based fees, as well as a $4.6 million increase in non-recurring revenues.
Run Rate and Retention Rate: Total Run Rate at September 30, 2023 was $2,468.4 million, up 12.0%. Recurring subscription Run Rate increased by $198.9 million, and asset-based fees Run Rate increased by $66.1 million. Organic recurring subscription Run Rate growth was 10.7%. Retention Rate in third quarter 2023 was 95.4%, compared to 96.4% in third quarter 2022.
Expenses: Total operating expenses were $272.1 million, up 8.4%. Adjusted EBITDA expenses were $239.2 million, up 8.9%, primarily reflecting higher compensation and incentive compensation expenses related to higher headcount to support business growth. Total operating expenses excluding the impact of foreign currency exchange rate fluctuations (“ex-FX”) and adjusted EBITDA expenses ex-FX increased 6.4% and 6.7%, respectively.
Operating Income: Operating income was $353.3 million, up 14.1%. Operating income margin in third quarter 2023 was 56.5%, compared to 55.2% in third quarter 2022.
Headcount: As of September 30, 2023, headcount was 5,005 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 $35.7 million, down 11.6% primarily driven by higher interest income, reflecting higher yields, and the impact of favorable foreign currency exchange rate fluctuations, partially offset by higher interest expense due to higher interest rates.
Income Taxes: The effective tax rate was 18.3% in the third quarter 2023 compared to 19.5% in third quarter 2022. The decrease was primarily related to favorable discrete prior-year items in the third quarter 2023.
Net Income: As a result of the factors described above, net income was $259.7 million, up 19.9%.
Adjusted EBITDA: Adjusted EBITDA was $386.3 million, up 13.3%. Adjusted EBITDA margin in third quarter 2023 was 61.8%, compared to 60.8% in third quarter 2022.
Index Segment:
Table 1A: Results (unaudited)
Three Months Ended Nine Months Ended
-------------------------------------- ----------------------------------------
Sep. 30, Sep. 30, Sep. 30, Sep. 30,
In thousands 2023 2022 % Change 2023 2022 % Change
---------------- ------------ ------------ ---------- -------------- ------------ ----------
Operating
revenues:
Recurring
subscriptions $206,453 $185,531 11.3% $ 603,845 $539,740 11.9%
Asset-based
fees 141,066 125,620 12.3% 412,354 402,889 2.3%
Non-recurring 14,603 11,089 31.7% 47,621 31,319 52.1%
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Total operating
revenues 362,122 322,240 12.4% 1,063,820 973,948 9.2%
Adjusted EBITDA
expenses 84,450 76,273 10.7% 255,396 236,936 7.8%
------- ------- --------- -------
Adjusted EBITDA $277,672 $245,967 12.9% $ 808,424 $737,012 9.7%
======= ======= ========= =======
Adjusted EBITDA
margin % 76.7% 76.3% 76.0% 75.7%
Index operating revenues were $362.1 million, up 12.4%. The $39.9 million increase was driven by $20.9 million in higher recurring subscription revenues, $15.4 million in higher asset-based fees and $3.5 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 about three-fourths of the increase in revenues attributable to asset-based fees. Non-ETF indexed funds linked to MSCI indexes drove the balance of the increase, mainly driven by an increase in average AUM and average basis point fees, partially offset by lower revenues from exchange traded futures and options contracts linked to MSCI indexes, driven by lower volumes.
Index Run Rate as of September 30, 2023, was $1.4 billion, up 12.2%. The $150.7 million increase was comprised of a $84.5 million increase in recurring subscription Run Rate and a $66.1 million increase in asset-based fees Run Rate. The increase in recurring subscription Run Rate was primarily driven by growth from market cap-weighted products and custom Index products and special packages. The increase reflected growth across all regions and client segments. The increase in asset-based fees Run Rate primarily reflected higher AUM in ETFs linked to MSCI equity indexes.
Analytics Segment:
Table 1B: Results (unaudited)
Three Months Ended Nine Months Ended
-------------------------------------- --------------------------------------
Sep. 30, Sep. 30, Sep. 30, Sep. 30,
In thousands 2023 2022 % Change 2023 2022 % Change
---------------- ------------ ------------ ---------- ------------ ------------ ----------
Operating
revenues:
Recurring
subscriptions $151,269 $142,751 6.0% $443,276 $420,047 5.5%
Non-recurring 2,999 2,164 38.6% 7,943 6,349 25.1%
------- ------- ------- -------
Total operating
revenues 154,268 144,915 6.5% 451,219 426,396 5.8%
Adjusted EBITDA
expenses 82,487 77,281 6.7% 253,509 244,912 3.5%
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