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MSCI(MSCI) - 2025 Q2 - Quarterly Report

Part I – Financial Information Financial Statements The company's financial statements reflect revenue and net income growth, a slight asset decrease, and strong operating cash flow despite significant financing outflows Condensed Consolidated Statements of Financial Condition Total assets slightly decreased to $5.37 billion while the total shareholders' deficit improved, driven by retained earnings growth as of June 30, 2025 Condensed Consolidated Statements of Financial Condition (as of June 30, 2025 vs. Dec 31, 2024) | Account | June 30, 2025 ($ thousands) | Dec 31, 2024 ($ thousands) | | :--- | :--- | :--- | | Total Assets | 5,373,676 | 5,445,439 | | Cash and cash equivalents | 347,318 | 409,351 | | Goodwill | 2,925,600 | 2,915,167 | | Total Liabilities | 6,259,884 | 6,385,436 | | Deferred revenue (Current) | 1,060,335 | 1,123,423 | | Long-term debt | 4,513,028 | 4,510,816 | | Total Shareholders' Equity (Deficit) | (886,208) | (939,997) | Condensed Consolidated Statements of Income The company reported year-over-year growth in operating revenues, net income, and diluted EPS for both the second quarter and first half of 2025 Q2 & H1 2025 Financial Performance (YoY) | Metric | Q2 2025 ($ thousands) | Q2 2024 ($ thousands) | YoY Change | H1 2025 ($ thousands) | H1 2024 ($ thousands) | YoY 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 | $6.59 | +15.8% | Condensed Consolidated Statements of Cash Flows Operating cash flow remained strong but slightly decreased, while financing activities saw a significant cash outflow due to share repurchases and dividend payments Cash Flow Summary for Six Months Ended June 30 | Cash Flow Activity | 2025 ($ thousands) | 2024 ($ thousands) | | :--- | :--- | :--- | | Net cash provided by operating activities | 637,875 | 649,385 | | Net cash used in investing activities | (67,467) | (79,458) | | Net cash used in financing activities | (642,824) | (575,859) | | Net (decrease) in cash | (62,033) | (10,292) | - Major uses of cash in financing activities for H1 2025 included $351.6 million for share repurchases and $283.5 million for dividend payments24 Notes to Condensed Consolidated Financial Statements Key notes detail revenue recognition, segment information, debt structure, shareholder equity activities, and identify BlackRock as a significant customer - In Q1 2025, the "ESG and Climate" segment was renamed to "Sustainability and Climate" to better reflect its offerings, with no change to its composition or historical results31 - BlackRock, Inc. accounted for 10.3% of the company's consolidated operating revenues for the six months ended June 30, 2025, up slightly from 10.1% in the prior year period32 - The company completed the acquisition of Fabric RQ, Inc. for $16.1 million and Foxberry Ltd. for $42.6 million in the first half of 20244445 - As of June 30, 2025, the company had $4.54 billion in total principal debt outstanding, primarily composed of senior unsecured notes with maturities ranging from 2029 to 20335253 - The company repurchased 514,000 shares for $286.6 million in the first six months of 2025, with $1.25 billion remaining available under the 2024 Repurchase Program as of June 30, 20256465 Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management highlights strong revenue growth across all segments, stable operating metrics, and active capital return to shareholders through dividends and buybacks Results of Operations Q2 2025 saw 9.1% revenue growth driven by recurring subscriptions and asset-based fees, outpacing the 6.8% rise in operating expenses Q2 2025 Revenue by Type (YoY) | Revenue Type | Q2 2025 ($ thousands) | Q2 2024 ($ thousands) | % Change | | :--- | :--- | :--- | :--- | | Recurring subscriptions | 562,768 | 521,469 | 7.9% | | Asset-based fees | 184,072 | 163,281 | 12.7% | | Non-recurring | 25,839 | 23,199 | 11.4% | | Total operating revenues | 772,679 | 707,949 | 9.1% | Q2 2025 Operating Expenses by Type (YoY) | Expense Type | Q2 2025 ($ thousands) | Q2 2024 ($ thousands) | % Change | | :--- | :--- | :--- | :--- | | Compensation and benefits | 216,927 | 200,618 | 8.1% | | Non-compensation expenses | 81,373 | 79,724 | 2.1% | | Amortization of intangible assets | 43,760 | 40,773 | 7.3% | | Depreciation & amortization | 5,385 | 4,226 | 27.4% | | Total operating expenses | 347,445 | 325,341 | 6.8% | - The effective tax rate for Q2 2025 was 19.6%, down from 21.5% in Q2 2024, driven by non-taxable adjustments on contingent consideration related to prior acquisitions121 Segment Results All segments reported revenue growth in Q2 2025, with the Index segment remaining the largest contributor and most segments showing expanded Adjusted EBITDA margins Q2 2025 Segment Performance (YoY) | Segment | Operating Revenues ($ thousands) | YoY Change | Adjusted EBITDA ($ thousands) | YoY Change | Adjusted EBITDA Margin % | | :--- | :--- | :--- | :--- | :--- | :--- | | Index | 434,833 | +9.5% | 330,158 | +7.5% | 75.9% | | Analytics | 177,703 | +7.1% | 92,606 | +13.4% | 52.1% | | Sustainability and Climate | 88,911 | +11.3% | 31,677 | +32.4% | 35.6% | | All Other - Private Assets | 71,232 | +9.7% | 19,938 | +14.8% | 28.0% | - The average value of AUM in ETFs linked to MSCI equity indexes for Q2 2025 was $1,868.7 billion, an increase of 17.5% from Q2 2024, driving growth in asset-based fees140 Operating Metrics Total Run Rate grew 10.7% year-over-year to $3.11 billion, while the company-wide annualized Retention Rate remained strong at 94.4% Run Rate by Segment (as of June 30, 2025) | Segment | Run Rate ($ thousands) | YoY Growth % | Organic Growth % | | :--- | :--- | :--- | :--- | | Index | 1,726,010 | 12.2% | 12.2% | | Analytics | 730,640 | 8.3% | 6.8% | | Sustainability and Climate | 369,759 | 10.8% | 6.5% | | All Other - Private Assets | 280,313 | 7.6% | 6.0% | | Total | 3,106,722 | 10.7% | 9.6% | Q2 2025 Sales Metrics (vs. Q2 2024) | Metric ($ thousands) | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | New recurring subscription sales | 75,188 | 82,777 | | Subscription cancellations | (31,346) | (27,362) | | Net new recurring subscription sales | 43,842 | 55,415 | - The total annualized Retention Rate was 94.4% for Q2 2025, compared to 94.8% for Q2 2024176 Liquidity and Capital Resources The company maintains a strong liquidity position while actively returning capital to shareholders through significant share repurchases and dividend payments - As of June 30, 2025, the company had $4.2 billion in senior notes and $337.0 million in revolving loans outstanding179 - The company repurchased 514,000 shares at an average price of $557.70 for a total of $286.6 million during the six months ended June 30, 2025186 - On July 21, 2025, the Board of Directors declared a quarterly cash dividend of $1.80 per share for Q3 2025187 Quantitative and Qualitative Disclosures About Market Risk The company is exposed to foreign currency exchange risk, with a significant portion of revenues and expenses denominated in non-U.S. dollar currencies - For H1 2025, 16.6% of revenues were subject to foreign currency risk, primarily from the Euro (42.2%), British pound (32.6%), and Japanese yen (18.2%)197 - For H1 2025, 41.2% of operating expenses were denominated in foreign currencies, with significant exposure to the British pound, Indian rupee, Euro, Hungarian forint, Mexican peso, and Swiss franc200 Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective, with no material changes to internal controls during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report202 - No changes in internal control over financial reporting occurred during Q2 2025 that have materially affected, or are reasonably likely to materially affect, internal controls203 Part II – Other Information Legal Proceedings Management believes that the outcomes of various pending legal and regulatory matters will not materially affect the company's financial condition - MSCI states that while it is subject to various legal proceedings, it does not expect the disposition of currently pending matters to have a material effect on its business or financial condition206 Risk Factors No material changes have been made to the risk factors previously disclosed in the company's 2024 Annual Report on Form 10-K - The company reports no material changes to the risk factors previously disclosed in its 2024 Annual Report on Form 10-K208 Unregistered Sales of Equity Securities and Use of Proceeds The company continued its share repurchase program in Q2 2025, buying back 250,818 shares and leaving $1.25 billion available for future repurchases Issuer Purchases of Equity Securities (Q2 2025) | Period | Total Shares Purchased | Average Price Paid Per Share | Shares Purchased as Part of Program | Approx. Value Remaining ($ millions) | | :--- | :--- | :--- | :--- | :--- | | April 2025 | 230,271 | $521.08 | 230,271 | $1,260 | | May 2025 | 1,812 | $552.88 | — | $1,260 | | June 2025 | 20,547 | $546.31 | 20,547 | $1,249 | | Total | 252,630 | $523.36 | 250,818 | $1,249 |