MSCI(US:MSCI)2024-04-23 17:10Part I – Financial Information Item 1. Financial Statements This section presents MSCI's unaudited condensed consolidated financial statements for Q1 2024, highlighting a 14.8% increase in operating revenues to $680.0 million and a 7.2% rise in net income to $256.0 million Condensed Consolidated Statements of Income (Q1 2024 vs Q1 2023) | Metric | Q1 2024 (in thousands) | Q1 2023 (in thousands) | % Change | | :--- | :--- | :--- | :--- | | Operating revenues | $679,965 | $592,218 | 14.8% | | Operating income | $339,382 | $314,602 | 7.9% | | Net income | $255,954 | $238,728 | 7.2% | | Diluted EPS | $3.22 | $2.97 | 8.4% | Condensed Consolidated Statements of Financial Condition | Metric | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | | :--- | :--- | :--- | | Total assets | $5,478,589 | $5,518,219 | | Total liabilities | $6,129,106 | $6,257,983 | | Total shareholders' equity (deficit) | $(650,517) | $(739,764) | Condensed Consolidated Statements of Cash Flows | Metric | Q1 2024 (in thousands) | Q1 2023 (in thousands) | | :--- | :--- | :--- | | Net cash provided by operating activities | $300,137 | $264,141 | | Net cash used in investing activities | $(32,333) | $(21,762) | | Net cash used in financing activities | $(207,223) | $(158,293) | Notes to Condensed Consolidated Financial Statements These notes provide detailed disclosures on accounting policies, recent acquisitions, and segment performance, noting BlackRock as a significant customer accounting for 10.0% of consolidated operating revenues - BlackRock, Inc. accounted for 10.0% of the Company's consolidated operating revenues for the three months ended March 31, 2024, down slightly from 10.2% in the same period of 202336 Operating Revenues by Segment (Q1 2024) | Segment | Recurring Subscriptions (in thousands) | Asset-based Fees (in thousands) | Non-recurring (in thousands) | Total (in thousands) | | :--- | :--- | :--- | :--- | :--- | | Index | $212,952 | $150,259 | $10,661 | $373,872 | | Analytics | $160,551 | $— | $3,415 | $163,966 | | ESG and Climate | $76,418 | $— | $1,466 | $77,884 | | All Other - Private Assets | $63,134 | $— | $1,109 | $64,243 | | Total | $513,055 | $150,259 | $16,651 | $679,965 | - The company completed the acquisition of Fabric RQ, Inc. on January 2, 2024, a wealth technology platform, which is now part of the Analytics segment. The aggregate purchase price was $16.1 million, including $8.1 million in contingent consideration535455 Segment Profitability (Adjusted EBITDA) | Segment | Q1 2024 (in thousands) | Q1 2023 (in thousands) | | :--- | :--- | :--- | | Index Adjusted EBITDA | $277,760 | $253,682 | | Analytics Adjusted EBITDA | $72,212 | $60,780 | | ESG and Climate Adjusted EBITDA | $21,091 | $17,876 | | All Other - Private Assets Adjusted EBITDA | $12,510 | $12,391 | | Total | $383,573 | $344,729 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2024 financial results, noting a 14.8% increase in operating revenues and 11.3% Adjusted EBITDA growth to $383.6 million, while the Adjusted EBITDA margin slightly compressed to 56.4% Results of Operations Operating revenues for Q1 2024 increased 14.8% to $680.0 million, driven by recurring subscriptions and asset-based fees, while total operating expenses rose 22.7% due to higher compensation and amortization, leading to a 7.2% net income growth Operating Revenues by Type (Q1 2024 vs Q1 2023) | Revenue Type | Q1 2024 (in thousands) | Q1 2023 (in thousands) | % Change | | :--- | :--- | :--- | :--- | | Recurring subscriptions | $513,055 | $445,247 | 15.2% | | Asset-based fees | $150,259 | $133,126 | 12.9% | | Non-recurring | $16,651 | $13,845 | 20.3% | | Total operating revenues | $679,965 | $592,218 | 14.8% | - The average value of AUM in ETFs linked to MSCI equity indexes for Q1 2024 was $1,508.8 billion, a 17.2% increase from $1,287.5 billion in Q1 2023, driving growth in asset-based fees119120 - Total operating expenses increased by 22.7%, primarily driven by a 22.8% rise in compensation and benefits costs and a 56.5% increase in amortization of intangible assets, largely due to recent acquisitions and headcount growth124134 - Employee headcount grew 20.9% to 5,858 as of March 31, 2024, from 4,846 a year prior, primarily due to acquisitions, with emerging market centers increasing to 67.2%136 Segment Results All segments reported revenue growth in Q1 2024, with Index growing 10.2% to $373.9 million, Analytics 11.5% to $164.0 million, ESG and Climate 16.1% to $77.9 million, and Private Assets surging 66.0% to $64.2 million due to acquisitions - Index Segment: Revenue grew 10.2% YoY to $373.9 million. Asset-based fees increased 12.9% driven by higher average AUM in linked ETFs. Adjusted EBITDA rose 9.5% to $277.8 million157159 - Analytics Segment: Revenue increased 11.5% YoY to $164.0 million, driven by growth in both Multi-Asset Class and Equity Analytics products. Adjusted EBITDA grew 18.8% to $72.2 million161162 - ESG and Climate Segment: Revenue rose 16.1% YoY to $77.9 million, led by growth in Ratings, Climate, and Screening products. Adjusted EBITDA increased 18.0% to $21.1 million164 - All Other – Private Assets Segment: Revenue surged 66.0% YoY to $64.2 million, primarily due to the Burgiss acquisition. Adjusted EBITDA was nearly flat, up 1.0% to $12.5 million, as expenses also rose significantly post-acquisition166168169 Operating Metrics Total Run Rate grew 14.6% to $2.73 billion, but net new recurring subscription sales decreased 43.5% to $19.6 million due to higher cancellations, leading to an overall Retention Rate decline to 92.8% Run Rate by Segment (as of March 31) | Segment | 2024 (in thousands) | 2023 (in thousands) | % Change | | :--- | :--- | :--- | :--- | | Index | $1,489,362 | $1,330,112 | 12.0% | | Analytics | $662,079 | $621,611 | 6.5% | | ESG and Climate | $320,611 | $278,947 | 14.9% | | All Other - Private Assets | $254,432 | $148,440 | 71.4% | | Total Run Rate | $2,726,484 | $2,379,110 | 14.6% | Sales and Cancellations (Q1 2024 vs Q1 2023) | Metric (in thousands) | Q1 2024 | Q1 2023 | % Change | | :--- | :--- | :--- | :--- | | New recurring subscription sales | $57,336 | $56,393 | 1.7% | | Subscription cancellations | $(37,769) | $(21,756) | 73.6% | | Net new recurring subscription sales | $19,567 | $34,637 | (43.5%) | Retention Rate by Segment (Q1) | Segment | 2024 | 2023 | | :--- | :--- | :--- | | Index | 93.2% | 96.4% | | Analytics | 93.5% | 94.0% | | ESG and Climate | 90.8% | 96.1% | | All Other - Private Assets | 92.2% | 92.1% | | Total | 92.8% | 95.2% | Liquidity and Capital Resources The company maintains liquidity through cash from operations and a $1.25 billion revolving credit facility, remaining in compliance with debt covenants, while declaring a $1.60 per share dividend and retaining $845.7 million for share repurchases - On January 26, 2024, the company entered into a Second Amended and Restated Credit Agreement, providing a $1.25 billion revolving credit facility maturing in 2029, with proceeds used to prepay outstanding Tranche A Term Loans190 - As of March 31, 2024, the company was in compliance with its financial covenants, with a Consolidated Leverage Ratio of 2.56:1.00 (below the maximum of 4.25:1.00) and a Consolidated Interest Coverage Ratio of 9.16:1.00 (above the minimum of 4.00:1.00)194 - As of March 31, 2024, $845.7 million of authorization remained under the 2022 stock repurchase program, with no open market repurchases made during Q1 2024195 - On April 22, 2024, the Board of Directors declared a quarterly cash dividend of $1.60 per share, payable on May 31, 202497196 Quantitative and Qualitative Disclosures About Market Risk The company is primarily exposed to foreign currency risk, with 16.8% of Q1 2024 revenues and 41.3% of operating expenses subject to fluctuations, mitigated by forward contracts - In Q1 2024, 16.8% of revenues were subject to foreign currency risk, primarily from billings in Euros (41.3%), British pounds (33.3%), and Japanese yen (17.3%)205 - Approximately 41.3% of operating expenses for Q1 2024 were denominated in foreign currencies, with significant exposure to the British pound, Indian rupee, Euro, Hungarian forint, Mexican peso, and Swiss franc207 Controls and Procedures The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of March 31, 2024, with no material changes to internal control over financial reporting during the quarter - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of the end of the period209 - No changes in internal control over financial reporting occurred during Q1 2024 that have materially affected, or are reasonably likely to materially affect, internal controls210 Part II – Other Information Legal Proceedings The company is involved in various legal proceedings, but management believes their outcomes will not materially affect the business, financial condition, or cash flows - Management believes that the disposition of currently pending legal matters will not have a material effect on MSCI's business, operating results, financial condition, or cash flows212 Risk Factors No material changes to the risk factors previously disclosed in the company's 2023 Annual Report on Form 10-K have been reported - The company reports no material changes to the risk factors previously disclosed in its 2023 Form 10-K213214 Unregistered Sales of Equity Securities and Use of Proceeds The company acquired 119,928 shares at an average price of $583.92 in Q1 2024, primarily for tax obligations on vested restricted stock units, with $845.7 million remaining for repurchases Issuer Purchases of Equity Securities (Q1 2024) | Period | Total Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | Jan 2024 | — | $— | | Feb 2024 | 119,652 | $584.00 | | Mar 2024 | 276 | $551.68 | | Total | 119,928 | $583.92 | - The approximate dollar value of shares that may yet be purchased under the publicly announced plan is $845.7 million as of March 31, 2024218 Other Information No directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during Q1 2024 - No directors or officers adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during Q1 2024218 Exhibits This section lists exhibits filed with the Form 10-Q, including corporate documents, credit agreements, and CEO/CFO certifications