MSCI Reports Financial Results for Fourth Quarter and Full Year 2021

NEW YORK–(BUSINESS WIRE)–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 December 31, 2021 (“fourth quarter 2021”) and full year ended December 31, 2021 (“full year 2021”).

Financial and Operational Highlights for Fourth Quarter 2021

(Note: Unless otherwise noted, percentage and other changes are relative to the three months ended December 31, 2020 (“fourth quarter 2020”) and Run Rate percentage changes are relative to December 31, 2020).

• Operating revenues of $549.8 million, up 23.9%; Organic operating revenue growth of 19.8%
• Recurring subscription revenues up 19.3%; Asset-based fees up 34.4%
• Operating margin of 51.0%; Adjusted EBITDA margin of 58.0%
• Diluted EPS of $2.32, up 24.1%; Adjusted EPS of $2.51, up 28.1%
• New recurring subscription sales growth of 43.1%; Organic subscription Run Rate growth of 13.4%; Retention Rate of 94.4%
• In first quarter 2022 and through trade date of January 25, 2022, a total of $474.3 million or 915,866 shares were repurchased at an average repurchase price of $517.83
• Approximately $85.8 million in dividends were paid to shareholders in fourth quarter 2021; Cash dividend of $1.04 per share declared by MSCI Board of Directors for first quarter 2022

		Three Months Ended												Year Ended
		Dec. 31,				Dec. 31,				%				Dec. 31,				Dec. 31,				%
In thousands, except per share data		2021				2020				Change				2021				2020				Change
Operating revenues		$	549,842			$	443,661				23.9	%		$	2,043,544			$	1,695,390				20.5	%
Operating income		$	280,587			$	234,085				19.9	%		$	1,072,725			$	884,764				21.2	%
Operating margin %			51.0	%			52.8	%							52.5	%			52.2	%
Net income		$	193,865			$	156,216				24.1	%		$	725,983			$	601,822				20.6	%
Diluted EPS		$	2.32			$	1.87				24.1	%		$	8.70			$	7.12				22.2	%
Adjusted EPS		$	2.51			$	1.96				28.1	%		$	9.95			$	7.83				27.1	%
Adjusted EBITDA		$	318,660			$	256,136				24.4	%		$	1,196,790			$	971,510				23.2	%
Adjusted EBITDA margin %			58.0	%			57.7	%							58.6	%			57.3	%

“MSCI’s ground-breaking performance in the fourth quarter and full year of 2021 reflected strong success on key strategic investments, a laser focus on the needs of our clients, and unprecedented demand for our solutions. Among other milestones, we achieved record full-year and quarterly recurring sales and recurring net new sales, along with the 32nd consecutive quarter of double-digit subscription growth in our Index business,” said Henry A. Fernandez, Chairman and CEO of MSCI.

“Over the course of 2022, we will continue investing and executing aggressively to meet growing client demand and secure leadership positions across the enormous growth opportunities in front of us, including ESG and Climate. The global race to net-zero keeps accelerating, and we have positioned MSCI as a leading provider of climate-related tools for the capital markets industry,” added Mr. Fernandez.

Fourth Quarter Consolidated Results

Operating Revenues: Operating revenues were $549.8 million, up 23.9%. Organic operating revenue growth was 19.8%. The $106.2 million increase was comprised of $61.9 million in higher recurring subscription revenues and $38.3 million in higher asset-based fees, as well as $6.0 million in higher non-recurring revenues.

Run Rate and Retention Rate: Total Run Rate at December 31, 2021 was $2,203.9 million, up 20.3%. Recurring subscriptions Run Rate increased by $246.2 million and asset-based fees Run Rate increased by $125.2 million. Organic recurring subscriptions Run Rate growth was 13.4%. Retention Rate in fourth quarter 2021 was 94.4%, compared to 92.6% in fourth quarter 2020.

Expenses: Total operating expenses were $269.3 million, up 28.5%. Adjusted EBITDA expenses were $231.2 million, up 23.3%, primarily reflecting higher compensation and benefits costs, related to continued investments to support growth, including increased headcount in product development and research and technology and increased non-compensation costs in the areas of information technology costs, professional fees, market data costs and marketing costs. Approximately $8.7 million in impairment charges related to the sublease of leased property 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 29.0% and 23.9%, respectively.

Headcount: As of December 31, 2021, headcount was 4,303 employees, with approximately 37% and approximately 63% of employees located in developed market and emerging market locations, respectively.

Other Expense (Income), Net: Other expense (income), net was $34.8 million, down 10.5% primarily reflecting a one-time gain of $7.0 million related to the gain resulting from changes in ownership interest of The Burgiss Group, LLC, an equity method investee, partially offset by higher interest expense due to higher debt balances versus the prior period.

Income Taxes: The effective tax rate was 21.1% in fourth quarter 2021, compared to 20.0% in fourth quarter 2020, primarily driven by higher net unfavorable discrete expenses, including accruals for potential audit settlements and other prior year items.

Net Income: As a result of the factors described above, net income was $193.9 million, up 24.1%.

Adjusted EBITDA: Adjusted EBITDA was $318.7 million, up 24.4%. Adjusted EBITDA margin in fourth quarter 2021 was 58.0%, compared to 57.7% in fourth quarter 2020.

Index Segment:

Table 1A: Results (unaudited)

		Three Months Ended						Year Ended
		Dec. 31,		Dec. 31,		%		Dec. 31,		Dec. 31,		%
In thousands		2021		2020		Change		2021		2020		Change
Operating revenues:
Recurring subscriptions		$170,141		$148,762		14.4%		$650,629		$580,393		12.1%
Asset-based fees		149,398		111,129		34.4%		553,991		399,771		38.6%
Non-recurring		12,268		8,749		40.2%		47,144		36,331		29.8%
Total operating revenues		331,807		268,640		23.5%		1,251,764		1,016,495		23.1%
Adjusted EBITDA expenses		79,429		63,710		24.7%		300,452		250,002		20.2%
Adjusted EBITDA		$252,378		$204,930		23.2%		$951,312		$766,493		24.1%
Adjusted EBITDA margin %		76.1%		76.3%				76.0%		75.4%

Index operating revenues were $331.8 million, up 23.5%. The $63.2 million increase was primarily driven by $38.3 million in higher asset-based fees mainly reflecting an increase in revenues from exchange traded funds (“ETFs”) linked to MSCI equity indexes. This increase reflected higher average AUM in ETFs linked to MSCI equity indexes, partially offset by a decline in average basis point fees on those AUM.

Recurring subscription revenues increased by $21.4 million, primarily reflecting strong contributions from market cap-weighted index products and from factor, ESG and climate index products. The $3.5 million increase in non-recurring revenues reflected higher licenses of derivative and factor and ESG index products, including client license and usage fees related to prior periods.

Index Run Rate as of December 31, 2021 was $1.3 billion, up 18.6%. The $201.4 million increase was comprised of a $125.2 million increase in asset-based fees Run Rate and a $76.2 million increase in recurring subscription Run Rate. The increase in asset-based fees Run Rate was primarily driven by higher AUM in ETFs linked to MSCI equity indexes and higher AUM in non-ETF indexed funds linked to MSCI indexes. The increase in recurring subscription Run Rate was primarily driven by growth across products, including market cap-weighted index products and strong growth in factor, ESG and climate index products and reflected growth across all regions and all client segments.

Analytics Segment:

Table 1B: Results (unaudited)

		Three Months Ended						Year Ended
		Dec. 31,		Dec. 31,		%		Dec. 31,		Dec. 31,		%
In thousands		2021		2020		Change		2021		2020		Change
Operating revenues:
Recurring subscriptions		$133,818		$129,796		3.1%		$533,178		$506,301		5.3%
Non-recurring		4,264		2,604		63.7%		11,121		7,507		48.1%
Total operating revenues		138,082		132,400		4.3%		544,299		513,808		5.9%
Adjusted EBITDA expenses		85,119		87,016		(2.2%)		345,500		340,884		1.4%
Adjusted EBITDA		$52,963		$45,384		16.7%		$198,799		$172,924		15.0%
Adjusted EBITDA margin %		38.4%		34.3%				36.5%		33.7%

Analytics operating revenues were $138.1 million, up 4.3%. The $5.7 million increase was driven primarily by higher recurring subscription revenues from Equity Analytics products.

Analytics Run Rate as of December 31, 2021 was $585.2 million, up 5.4%. The increase of $30.1 million was also driven by growth in both Multi-Asset Class and Equity Analytics products. Analytics organic Run Rate growth was 6.8%.

ESG and Climate Segment:

Table 1C: Results (unaudited)

		Three Months Ended						Year Ended
		Dec. 31,		Dec. 31,		%		Dec. 31,		Dec. 31,		%
In thousands		2021		2020		Change		2021		2020		Change
Operating revenues:
Recurring subscriptions		$47,310		$30,984		52.7%		$162,609		$109,945		47.9%
Non-recurring		1,133		294		285.4%		3,583		1,419		152.5%
Total operating revenues		48,443		31,278		54.9%		166,192		111,364		49.2%
Adjusted EBITDA expenses		39,280		25,210		55.8%		136,444		88,513		54.2%
Adjusted EBITDA		$9,163		$6,068		51.0%		$29,748		$22,851		30.2%
Adjusted EBITDA margin %		18.9%		19.4%				17.9%		20.5%

ESG and Climate operating revenues were $48.4 million, up 54.9%. The $17.2 million increase was primarily driven by strong growth from Ratings, Climate and Screening products. Excluding foreign currency exchange rate fluctuations, ESG and Climate revenue growth was 53.0%.

ESG and Climate Run Rate as of December 31, 2021 was $199.6 million, up 44.3%. The $61.3 million increase primarily reflects strong growth from Ratings, Climate and Screening products with contributions across all regions and client segments. ESG and Climate organic Run Rate growth was 47.1%.

All Other – Private Assets Segment:

Table 1D: Results (unaudited)

		Three Months Ended						Year Ended
		Dec. 31,		Dec. 31,		%		Dec. 31,		Dec. 31,		%
In thousands		2021		2020		Change		2021		2020		Change
Operating revenues:
Recurring subscriptions		$31,269		$11,134		180.8%		$79,624		$51,536		54.5%
Non-recurring		241		209		15.3%		1,665		2,187		(23.9%)
Total operating revenues		31,510		11,343		177.8%		81,289		53,723		51.3%
Adjusted EBITDA expenses		27,354		11,589		136.0%		64,358		44,481		44.7%
Adjusted EBITDA		$4,156		$(246)		nm		$16,931		$9,242		83.2%
Adjusted EBITDA margin %		13.2%		(2.2%)				20.8%		17.2%

All Other – Private Assets operating revenues, which reflects the Real Estate operating segment, were $31.5 million, up 177.8%, and included $18.7 million from the acquisition of RCA which closed on September 13, 2021. Excluding the acquisition of RCA, All Other – Private Assets segment revenues increased 13.0% reflecting strong growth in Global Intel and Real Estate Climate Value-at-Risk products. Excluding foreign currency exchange rate fluctuations and contributions from RCA, All Other – Private Assets revenue growth was 12.9%.

All Other – Private Assets Run Rate, which reflects the Real Estate operating segment, was $135.1 million as of December 31, 2021, up 139.2%, and included $76.0 million associated with the RCA business. Excluding the acquisition, the increase reflected contributions from Global Intel products, as well as strong growth in new sales of Real Estate Climate Value-at-Risk products. All Other – Private Assets organic subscription Run Rate growth was 7.6%.

Select Balance Sheet Items and Capital Allocation

Cash Balances and Outstanding Debt: Cash and cash equivalents was $1.4 billion as of December 31, 2021. MSCI typically seeks to maintain minimum cash balances globally of approximately $200.0 million to $250.0 million for general operating purposes.

Total principal amounts of debt outstanding as of December 31, 2021 was $4.2 billion. The total debt to net income ratio (based on trailing twelve months net income) was 5.7x. The total debt to adjusted EBITDA ratio (based on trailing twelve months adjusted EBITDA) was 3.5x.

MSCI seeks to maintain total debt to adjusted EBITDA in a target range of 3.0x to 3.5x.

Capex and Cash Flow: Capex was $16.6 million, cash provided by operating activities increased by 18.5% to $279.7 million due to higher cash collections and free cash flow was $263.1 million, up 20.1%.

Share Count and Share Repurchases: Weighted average diluted shares outstanding were 83.6 million in fourth quarter 2021, down 0.2% year-over-year. Total share repurchases during the quarter were $5.2 million or 9,069 shares at an average repurchase price of $577.76. In first quarter 2022 and through trade date of January 25, 2022, a total of $474.3 million or 915,866 shares were repurchased at an average repurchase price of $517.83. Total shares outstanding as of December 31, 2021 were 82.4 million. A total of $1.1 billion remains on the outstanding share repurchase authorization as of trade date of January 25, 2021.

Dividends: Approximately $85.8 million in dividends were paid to shareholders in fourth quarter 2021. On January 24, 2022, the MSCI Board of Directors declared a cash dividend of $1.04 per share for first quarter 2022, payable on February 28, 2022 to shareholders of record as of the close of trading on February 18, 2022.

Full-Year 2022 Guidance

MSCI’s guidance for the year ending December 31, 2022 (“Full-Year 2022”) is based on assumptions about a number of macroeconomic and capital market factors, in particular related to equity markets. These assumptions are subject to uncertainty, and actual results for the year could differ materially from our current guidance, including as a result of ongoing uncertainty related to the duration, magnitude and impact of the ongoing COVID-19 pandemic.

Guidance Item	Current Guidance for Full-Year 2022
Operating Expense	$1,075 to $1,115 million
Adjusted EBITDA Expense	$975 to $1,005 million
Interest Expense (including amortization of financing fees)(1)	~$162 million
Depreciation & Amortization Expense	$100 to $110 million
Effective Tax Rate	15.5% to 18.5%
Capital Expenditures	$60 to $70 million
Net Cash Provided by Operating Activities	$1,120 to $1,160 million
Free Cash Flow	$1,050 to $1,100 million
(1) Interest income will continue to be impacted by the lower rates available on cash balances.

The guidance provided above assumes, among other things, that MSCI maintains its current debt levels. On January 26, 2022, the MSCI Board of Directors authorized management to opportunistically explore financing options that would increase the Company’s leverage ratio and interest expense. Any potential financing is subject to market and other conditions, and there can be no assurance as to the timing or certainty of a transaction.

Conference Call Information

MSCI’s senior management will review the fourth quarter and full year 2021 results on Thursday, January 27, 2022 at 11:00 AM Eastern Time. To listen to the live event via webcast, visit the events and presentations section of MSCI’s Investor Relations website, https://ir.msci.com/events-and-presentations, or via telephone, dial 1-877-376-9931 conference ID: 3990859 within the United States. International callers may dial 1-720-405-2251 conference ID: 3990859. The teleconference will also be webcast with an accompanying slide presentation which can be accessed through MSCI’s Investor Relations website.

About MSCI Inc.

MSCI is a leading provider of critical decision support tools and services for the global investment community. With over 50 years of expertise in research, data and technology, we power better investment decisions by enabling clients to understand and analyze key drivers of risk and return and confidently build more effective portfolios. We create industry-leading research-enhanced solutions that clients use to gain insight into and improve transparency across the investment process. To learn more, please visit www.msci.com. MSCI#IR

Forward-Looking Statements

This earnings release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including without limitation, MSCI’s full-year 2022 guidance. These forward-looking statements relate to future events or to future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these statements. In some cases, you can identify forward-looking statements by the use of words such as “may,” “could,” “expect,” “intend,” “plan,” “seek,” “anticipate,” “believe,” “estimate,” “predict,” “potential” or “continue,” or the negative of these terms or other comparable terminology. You should not place undue reliance on forward-looking statements because they involve known and unknown risks, uncertainties and other factors that are, in some cases, beyond MSCI’s control and that could materially affect actual results, levels of activity, performance or achievements.

Other factors that could materially affect actual results, levels of activity, performance or achievements can be found in MSCI’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020 filed with the Securities and Exchange Commission (“SEC”) on February 12, 2021 and in quarterly reports on Form 10-Q and current reports on Form 8-K filed or furnished with the SEC. If any of these risks or uncertainties materialize, or if MSCI’s underlying assumptions prove to be incorrect, actual results may vary significantly from what MSCI projected. Any forward-looking statement in this earnings release reflects MSCI’s current views with respect to future events and is subject to these and other risks, uncertainties and assumptions relating to MSCI’s operations, results of operations, growth strategy and liquidity. MSCI assumes no obligation to publicly update or revise these forward-looking statements for any reason, whether as a result of new information, future events, or otherwise, except as required by law.

Website and Social Media Disclosure

MSCI uses its website, including its quarterly updates, blog, podcasts and social media channels, including its corporate Twitter account (@MSCI_Inc), as channels of distribution of company information. The information MSCI posts through these channels may be deemed material. Accordingly, investors should monitor these channels, in addition to following MSCI’s press releases, quarterly SEC filings and public conference calls and webcasts. In addition, you may automatically receive email alerts and other information about MSCI when you enroll your email address by visiting the “Email Alerts Subscription” section of MSCI’s Investor Relations homepage at http://ir.msci.com/email-alerts. The contents of MSCI’s website, including its quarterly updates, blog, podcasts and social media channels are not, however, incorporated by reference into this earnings release.

Notes Regarding the Use of Operating Metrics

MSCI has presented supplemental key operating metrics as part of this earnings release, including Retention Rate, Run Rate, subscription sales, subscription cancellations and non-recurring sales.

Retention Rate is an important metric because subscription cancellations decrease our Run Rate and ultimately our operating revenues over time. The annual Retention Rate represents the retained subscription Run Rate (subscription Run Rate at the beginning of the fiscal year less actual cancels during the year) as a percentage of the subscription Run Rate at the beginning of the fiscal year.

The Retention Rate for a non-annual period is calculated by annualizing the cancellations for which we have received a notice of termination or for which we believe there is an intention not to renew or discontinue the subscription during the non-annual period, and we believe that such notice or intention evidences the client’s final decision to terminate or not renew the applicable agreement, even though such notice is not effective until a later date. This annualized cancellation figure is then divided by the subscription Run Rate at the beginning of the fiscal year to calculate a cancellation rate. This cancellation rate is then subtracted from 100% to derive the annualized Retention Rate for the period.

Retention Rate is computed by operating segment on a product/service-by-product/service basis. In general, if a client reduces the number of products or services to which it subscribes within a segment, or switches between products or services within a segment, we treat it as a cancellation for purposes of calculating our Retention Rate except in the case of a product or service switch that management considers to be a replacement product or service. In those replacement cases, only the net change to the client subscription, if a decrease, is reported as a cancel. In the Analytics and the ESG and Climate operating segments, substantially all product or service switches are treated as replacement products or services and netted in this manner, while in our Index and Real Estate operating segments, product or service switches that are treated as replacement products or services and receive netting treatment occur only in certain limited instances. In addition, we treat any reduction in fees resulting from a down-sale of the same product or service as a cancellation to the extent of the reduction. We do not calculate Retention Rate for that portion of our Run Rate attributable to assets in index-linked investment products or futures and options contracts, in each case, linked to our indexes.

Run Rate estimates at a particular point in time the annualized value of the recurring revenues under our client license agreements (“Client Contracts”) for the next 12 months, assuming all Client Contracts that come up for renewal, or reach the end of the committed subscription period, are renewed and assuming then-current currency exchange rates, subject to the adjustments and exclusions described below. For any Client Contract where fees are linked to an investment product’s assets or trading volume/fees, the Run Rate calculation reflects, for ETFs, the market value on the last trading day of the period, for futures and options, the most recent quarterly volumes and/or reported exchange fees, and for other non-ETF products, the most recent client-reported assets. Run Rate does not include fees associated with “one-time” and other non-recurring transactions. In addition, we add to Run Rate the annualized fee value of recurring new sales, whether to existing or new clients, when we execute Client Contracts, even though the license start date, and associated revenue recognition, may not be effective until a later date. We remove from Run Rate the annualized fee value associated with products or services under any Client Contract with respect to which we have received a notice of termination, non-renewal or an indication the client does not intend to continue their subscription during the period and have determined that such notice evidences the client’s final decision to terminate or not renew the applicable products or services, even though such notice is not effective until a later date.

Contacts

MSCI Inc.
Investor Inquiries
[email protected]
Jisoo Suh + 1 917 825 7111

Media Inquiries
[email protected]
Sam Wang +1 212 804 5244

Melanie Blanco +1 212 981 1049

Rachel Lai +852 2844 9315

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