MSCI(MSCI) - 2025 Q2 - Quarterly Results

Financial and Operational Highlights MSCI reported strong Q2 2025 financial performance with increased revenues, diluted EPS, and significant growth in asset-based fees and total Run Rate Q2 and H1 2025 Financial Highlights (YoY) | In thousands, except per share data | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | % Change | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Operating revenues | $772,679 | $707,949 | 9.1% | $1,518,505 | $1,387,914 | 9.4% | | Operating income | $425,234 | $382,608 | 11.1% | $802,257 | $721,990 | 11.1% | | Net income | $303,650 | $266,758 | 13.8% | $592,250 | $522,712 | 13.3% | | Diluted EPS | $3.92 | $3.37 | 16.3% | $7.63 | $6.59 | 15.8% | | Adjusted EPS | $4.17 | $3.64 | 14.6% | $8.17 | $7.17 | 13.9% | | Adjusted EBITDA | $474,379 | $429,955 | 10.3% | $900,020 | $813,528 | 10.6% | - CEO Henry A. Fernandez highlighted strong performance driven by record AUM in ETFs, with more cash flows into equity ETFs tied to MSCI indexes than any other provider, alongside double-digit subscription run-rate growth across several client segments[3] - Key operational metrics for Q2 2025 include: - Organic operating revenue growth of 8.3%[5] - Recurring subscription revenues up 7.9%; Asset-based fees up 12.7%[5] - Organic recurring subscription Run Rate growth of 7.4% with a Retention Rate of 94.4%[5] - Repurchased $131.2 million of shares and paid $139.3 million in dividends[5] Consolidated Financial Results Consolidated operating revenues grew 9.1% to $772.7 million, driven by recurring subscriptions and asset-based fees, resulting in expanded operating margins - Total Run Rate as of June 30, 2025, increased by 10.7% to $3,106.7 million, composed of a $188.9 million increase in recurring subscription Run Rate and a $110.5 million increase in asset-based fees Run Rate[7] - Total operating expenses rose 6.8% to $347.4 million, and Adjusted EBITDA expenses grew 7.3% to $298.3 million, primarily due to higher compensation, benefits, and severance costs[8] - Operating income increased by 11.1% to $425.2 million, with the operating margin improving to 55.0% in Q2 2025 from 54.0% in Q2 2024[9] - Net income grew 13.8% to $303.7 million, and Adjusted EBITDA rose 10.3% to $474.4 million, with the Adjusted EBITDA margin expanding to 61.4% from 60.7%[12] Segment Performance Analysis All business segments showed revenue growth in Q2 2025, led by the Index segment and strong Adjusted EBITDA growth in Sustainability and Climate Index Segment Index segment operating revenue grew 9.5% to $434.8 million, driven by asset-based fees and subscriptions, with a slight Adjusted EBITDA margin decrease Index Segment Q2 2025 Results (YoY) | In thousands | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Recurring subscriptions | $235,647 | $217,032 | 8.6% | | Asset-based fees | $184,072 | $163,281 | 12.7% | | Total operating revenues | $434,833 | $397,192 | 9.5% | | Adjusted EBITDA | $330,158 | $306,990 | 7.5% | | Adjusted EBITDA margin % | 75.9% | 77.3% | - | - The growth in asset-based fees was mainly driven by increased average AUM in both ETFs and non-ETF indexed funds linked to MSCI indexes[14] - Index Run Rate increased by 12.2% to $1.7 billion, comprising a $110.5 million increase in asset-based fees Run Rate and a $77.1 million increase in recurring subscription Run Rate[15] Analytics Segment Analytics segment operating revenue increased 7.1% to $177.7 million, driven by subscriptions and non-recurring revenues, improving Adjusted EBITDA margin Analytics Segment Q2 2025 Results (YoY) | In thousands | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Recurring subscriptions | $169,781 | $162,128 | 4.7% | | Non-recurring | $7,922 | $3,867 | 104.9% | | Total operating revenues | $177,703 | $165,995 | 7.1% | | Adjusted EBITDA | $92,606 | $81,672 | 13.4% | | Adjusted EBITDA margin % | 52.1% | 49.2% | - | - Revenue growth was driven by recurring subscriptions for both Multi-Asset Class and Equity Analytics products, as well as higher non-recurring revenues from one-time contracts and overage fees[16][17] - Analytics Run Rate increased by 8.3% to $730.6 million, reflecting growth across all regions and client segments, particularly in Multi-Asset Class and Equity Analytics products[18] Sustainability and Climate Segment Sustainability and Climate segment operating revenues grew 11.3% to $88.9 million, fueled by recurring subscriptions and significant Adjusted EBITDA margin expansion Sustainability and Climate Segment Q2 2025 Results (YoY) | In thousands | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Recurring subscriptions | $87,027 | $78,000 | 11.6% | | Total operating revenues | $88,911 | $79,855 | 11.3% | | Adjusted EBITDA | $31,677 | $23,930 | 32.4% | | Adjusted EBITDA margin % | 35.6% | 30.0% | - | - Revenue growth was primarily driven by recurring subscriptions related to Ratings and Climate products, with notable strength in the EMEA region[19] - The segment's Run Rate increased by 10.8% to $369.8 million, reflecting growth in Climate and Ratings products, with asset manager, wealth manager, and asset owner client segments being the main drivers[20] All Other – Private Assets All Other – Private Assets segment revenue increased 9.7% to $71.2 million, driven by Private Capital Solutions subscriptions and improved Adjusted EBITDA margin All Other – Private Assets Segment Q2 2025 Results (YoY) | In thousands | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Recurring subscriptions | $70,313 | $64,309 | 9.3% | | Total operating revenues | $71,232 | $64,907 | 9.7% | | Adjusted EBITDA | $19,938 | $17,363 | 14.8% | | Adjusted EBITDA margin % | 28.0% | 26.8% | - | - Revenue growth was mainly driven by recurring subscriptions in Private Capital Solutions (Private Capital Intel, Total Plan Portfolio Management, Transparency Data) and Real Assets (Index Intel product)[21][22] - The segment's Run Rate increased by 7.6% to $280.3 million, primarily driven by growth from Private Capital Solutions products across all regions, with asset owner and asset manager clients leading the growth[23] Capital Management and Financial Position MSCI maintained a strong financial position with $347.3 million in cash, a 2.5x debt to Adjusted EBITDA ratio, and active capital returns - As of June 30, 2025, cash and cash equivalents stood at $347.3 million, while total principal debt was $4.5 billion[24][25] - The total debt to trailing twelve months adjusted EBITDA ratio was 2.5x, which is below the company's target range of 3.0x to 3.5x[25][26] - In Q2 2025, the company repurchased 250,818 shares for $131.2 million, with approximately $1.2 billion remaining on the share repurchase authorization as of July 21, 2025[27] - A cash dividend of $1.80 per share for Q3 2025 was declared by the Board of Directors, following a payment of $139.3 million in dividends in Q2 2025[28] Full-Year 2025 Guidance MSCI projects full-year 2025 Adjusted EBITDA Expenses between $1,220 million and $1,250 million, and Free Cash Flow between $1,400 million and $1,460 million Full-Year 2025 Guidance | Guidance Item | Current Guidance for Full-Year 2025 | | :--- | :--- | | Operating Expense | $1,405 to $1,445 million | | Adjusted EBITDA Expense | $1,220 to $1,250 million | | Interest Expense | $182 to $186 million | | Depreciation & Amortization Expense | $185 to $195 million | | Effective Tax Rate | 17.5% to 20.0% | | Capital Expenditures | $115 to $125 million | | Net Cash Provided by Operating Activities | $1,525 to $1,575 million | | Free Cash Flow | $1,400 to $1,460 million | - The guidance is subject to uncertainty and risks related to macroeconomic factors and capital markets, as detailed in the company's SEC filings[29] Appendix: Financial Statements and Reconciliations This appendix provides detailed financial statements, key operating metrics, and comprehensive GAAP to non-GAAP reconciliations for transparent reporting Condensed Consolidated Financial Statements This subsection presents unaudited condensed consolidated financial statements, including income, balance sheet, and cash flow, for a detailed financial overview - Table 2: The Condensed Consolidated Statements of Income details revenues, expenses, and net income for the second quarter and first six months of 2025 and 2024[63] - Table 3: The Condensed Consolidated Balance Sheet shows the company's assets, liabilities, and shareholders' equity (deficit) as of June 30, 2025, compared to December 31, 2024[65] - Table 4: The Condensed Consolidated Statement of Cash Flow outlines the cash flows from operating, investing, and financing activities for the second quarter and first six months of 2025 and 2024[66] Key Operating Metrics This subsection details key operating metrics, including sales, retention rates, AUM in ETFs, and Run Rate by segment, highlighting operational performance - Table 6: Details sales and retention rates by segment, showing consolidated net new recurring subscription sales of $43.8 million and a total retention rate of 94.4% for Q2 2025[70] - Table 7: Shows AUM in ETFs linked to MSCI equity indexes increased to $2,024.6 billion at the end of Q2 2025, up from $1,631.9 billion a year prior, driven by market appreciation and cash inflows[71] - Table 8: Presents Run Rate by segment as of June 30, 2025, with Total Run Rate growing 10.7% YoY to $3,106.7 million, and asset-based fees Run Rate growing 17.1%[73] Non-GAAP Reconciliations This subsection provides comprehensive GAAP to non-GAAP reconciliations for Adjusted EBITDA, Adjusted EPS, Free Cash Flow, and organic revenue growth - Table 9 reconciles Net Income of $303.7 million to Adjusted EBITDA of $474.4 million for Q2 2025[74] - Table 10 reconciles Diluted EPS of $3.92 to Adjusted EPS of $4.17 for Q2 2025[75] - Tables 13 and 14 provide a detailed breakdown of reported revenue growth versus organic revenue growth, adjusting for foreign currency impacts, with consolidated organic operating revenue growth at 8.3% for Q2 2025[80][81]