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MSCI Reports Financial Results for First Quarter 2024

23-Apr-24 06:45

For best results when printing this announcement, please click on link below:

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MSCI Reports Financial Results for First Quarter 2024

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

March 31, 2024 (“first quarter 2024”).

Financial and Operational Highlights for First Quarter 2024

(Note: Unless otherwise noted, percentage and other changes are relative to

the three months ended March 31, 2023 (“first quarter 2023”) and Run Rate

percentage changes are relative to March 31, 2023).

* Operating revenues of $680.0 million, up 14.8%; Organic operating revenue

growth of 10.3%

* Recurring subscription revenues up 15.2%; Asset-based fees up 12.9%

* Operating margin of 49.9%; Adjusted EBITDA margin of 56.4%

* Diluted EPS of $3.22, up 8.4%; Adjusted EPS of $3.52, up 12.1%

* Organic recurring subscription Run Rate growth of 8.7%; Retention Rate of

92.8%

* Approximately $126.8 million in dividends were paid to shareholders in first

quarter 2024; Cash dividend of $1.60 per share declared by MSCI Board of

Directors for second quarter 2024

Three Months Ended

Mar. 31, Mar. 31,

In thousands, except per share data (unaudited) 2024 2023 % Change

Operating revenues $ 679,965 $ 592,218 14.8 %

Operating income $ 339,382 $ 314,602 7.9 %

Operating margin % 49.9 % 53.1 %

Net income $ 255,954 $ 238,728 7.2 %

Diluted EPS $ 3.22 $ 2.97 8.4 %

Adjusted EPS $ 3.52 $ 3.14 12.1 %

Adjusted EBITDA $ 383,573 $ 344,729 11.3 %

Adjusted EBITDA margin % 56.4 % 58.2 %

“MSCI’s first-quarter financial results affirm that we can deliver solid

earnings amid continued operating environment challenges. Record AUM balances

in MSCI-linked index products drove strong revenue growth from asset-based

fees, which helped offset lower subscription revenue. This highlights the

underlying strength and stability of our all-weather franchise,” said Henry

A. Fernandez, Chairman and CEO of MSCI.

“Our operating metrics showed resilience in our new recurring sales,

especially in Analytics, which was our highest first quarter in a decade.

Elevated cancels reflected a concentration of unusual client events, including

a large merger among our banking clients. We are managing through these

pressures and do not expect this level of cancels to continue,” Fernandez

added.

“We are encouraged by our deep client engagement across segments, which is

enabling us to accelerate product innovation. Our long-term strategy and

recent acquisitions have positioned us well to benefit from secular trends

that are reshaping our industry, such as portfolio indexation and

customization, the growth of private assets and the global sustainability

revolution. All of this supports our conviction that we can maintain

attractive profitability and growth in 2024 and beyond.”

First Quarter Consolidated Results

Operating Revenues: Operating revenues were $680.0 million, up 14.8%. Organic

operating revenue growth was 10.3%. The $87.7 million increase was the result

of a $67.8 million increase in recurring subscription revenues; a $17.1

million increase in asset-based fees and a $2.8 million increase in

non-recurring revenues.

Run Rate and Retention Rate: Total Run Rate at March 31, 2024 was $2,726.5

million, up 14.6%. Recurring subscription Run Rate increased by $262.4

million, and asset-based fees Run Rate increased by $84.9 million. Organic

recurring subscription Run Rate growth was 8.7%. Retention Rate in first

quarter 2024 was 92.8%, compared to 95.2% in first quarter 2023. Approximately

$7.0 million of the cancels related to one client event related to the merger

of our banking clients, which impacted Index, ESG and Climate, and Analytics.

The majority of first quarter 2024 cancels were due to corporate events

including organizations closing, shutting funds, restructuring or downsizing.

Approximately 85% of MSCI’s subscription Run Rate as of March 31, 2024 was

with clients subscribing to multiple products, and these clients had a 93.1%

or higher Retention Rate in first quarter 2024.

Expenses: Total operating expenses were $340.6 million, up 22.7%, including

$35.1 million associated with Private Capital Solutions; formerly known as The

Burgiss Group, LLC ("Burgiss")), Carbon Markets (formerly known as Trove

Research Ltd ("Trove")) and Fabric RQ Inc. ("Fabric").

Adjusted EBITDA expenses were $296.4 million, up 19.8%, primarily reflecting

higher compensation and benefits costs related to higher headcount as a result

of business growth and the recent acquisitions. Adjusted EBITDA expense

includes $23.9 million of expenses associated with Private Capital Solutions,

Carbon Markets and Fabric. Approximately $1.5 million in integration costs

related to the acquisition of the remaining interest in Burgiss and $9.7

million of acquired intangible asset amortization expenses related to Private

Capital Solutions, Carbon Markets and Fabric 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

21.9% and 18.9%, respectively.

Operating Income: Operating income was $339.4 million, up 7.9%. Operating

income margin in first quarter 2024 was 49.9%, compared to 53.1% in first

quarter 2023.

Headcount: As of March 31, 2024, we had 5,858 employees reflecting a 20.9%

increase, which was primarily driven by our recent acquisitions. Approximately

32.8% and 67.2% of employees are located in developed market and emerging

market locations, respectively.

Other Expense (Income), Net: Other expense (income), net was $43.5 million, up

13.8% primarily driven by lower interest income reflecting lower average cash

balances as well as loss on extinguishment related to unamortized debt

issuance costs associated with the prepayment of the Tranche A Term Loans and

the entry into the amended and restated credit agreement (the "Credit

Amendment"), partially offset by the impact of favorable foreign currency

exchange rate fluctuations.

Income Taxes: The effective tax rate was 13.5% in first quarter 2024 compared

to 13.6% in first quarter 2023. A higher operating tax rate in the current

period was offset by favorable discrete items related to prior years, as well

as higher excess tax benefits recognized on share-based compensation vested

during the period.

Net Income: As a result of the factors described above, net income was $256.0

million, up 7.2%.

Adjusted EBITDA: Adjusted EBITDA was $383.6 million, up 11.3%. Adjusted EBITDA

margin in first quarter 2024 was 56.4%, compared to 58.2% in first quarter

2023.

Index Segment:

Table 1A: Results (unaudited)

Three Months Ended

Mar. 31, Mar. 31,

In thousands 2024 2023 % Change

Operating revenues:

Recurring subscriptions $ 212,952 $ 196,678 8.3 %

Asset-based fees 150,259 133,126 12.9 %

Non-recurring 10,661 9,578 11.3 %

Total operating revenues 373,872 339,382 10.2 %

Adjusted EBITDA expenses 96,112 85,700 12.1 %

Adjusted EBITDA $ 277,760 $ 253,682 9.5 %

Adjusted EBITDA margin % 74.3 % 74.7 %

Index operating revenues were $373.9 million, up 10.2%. The $34.5 million

increase was primarily driven by $17.1 million in higher asset-based fees and

$16.3 million in higher recurring subscription revenues.

Revenues from ETFs linked to MSCI equity indexes, driven by an increase in

average AUM, drove more than 70% of the increase in revenues attributable to

asset-based fees. The revenue increase was also impacted by non-ETF indexed

funds linked to MSCI indexes, driven by an increase in average AUM. The

increase was partially offset by a decrease in average basis point fees for

both ETFs linked to MSCI equity indexes as well as non-ETF indexed linked

funds linked to MSCI indexes and a decrease in revenue from futures and

options contracts linked to MSCI indexes.

More than 90% of the growth in recurring subscription revenues was driven by

strong growth from market-cap weighted and custom Index products and special

packages.

Index Run Rate as of March 31, 2024, was $1.5 billion, up 12.0%. The $159.3

million increase was comprised of an $84.9 million increase in asset-based

fees Run Rate and a $74.3 million increase in recurring subscription Run Rate.

The increase in asset-based fees Run Rate primarily reflected higher AUM in

ETFs linked to MSCI equity indexes and non-ETF indexed funds linked to MSCI

indexes. The increase in recurring subscription Run Rate was primarily driven

by growth from market cap-weighted and custom Index products and special

packages. The increase reflected growth across all regions.

Analytics Segment:

Table 1B: Results (unaudited)

Three Months Ended

Mar. 31, Mar. 31,

In thousands 2024 2023 % Change

Operating revenues:

Recurring subscriptions $ 160,551 $ 144,503 11.1 %

Non-recurring 3,415 2,567 33.0 %

Total operating revenues 163,966 147,070 11.5 %

Adjusted EBITDA expenses 91,754 86,290 6.3 %

Adjusted EBITDA $ 72,212 $ 60,780 18.8 %

Adjusted EBITDA margin % 44.0 % 41.3 %

Analytics operating revenues were $164.0 million, up 11.5%. The $16.9 million

increase was primarily driven by growth from recurring subscriptions related

to both Multi-Asset Class and Equity Analytics products. Organic operating

revenue growth for Analytics was 11.9%.

Analytics Run Rate as of March 31, 2024, was $662.1 million, up 6.5%. The

increase of $40.5 million was driven by growth in both Multi-Asset Class and

Equity Analytics products, and reflected growth across all regions and client

segments. Organic recurring subscription Run Rate growth for Analytics was

7.0%.

ESG and Climate Segment:

Table 1C: Results (unaudited)

Three Months Ended

Mar. 31, Mar. 31,

In thousands 2024 2023 % Change

Operating revenues:

Recurring subscriptions $ 76,418 $ 65,732 16.3 %

Non-recurring 1,466 1,326 10.6 %

Total operating revenues 77,884 67,058 16.1 %

Adjusted EBITDA expenses 56,793 49,182 15.5 %

Adjusted EBITDA $ 21,091 $ 17,876 18.0 %

Adjusted EBITDA margin % 27.1 % 26.7 %

ESG and Climate operating revenues were $77.9 million, up 16.1%. The $10.8

million increase was driven by growth in Ratings, Climate and Screening

products. Organic operating revenue growth for ESG and Climate was 11.0%.

ESG and Climate Run Rate as of March 31, 2024, was $320.6 million, up 14.9%.

The $41.7 million increase primarily reflects strong growth from Ratings,

Climate and Screening products with contributions across all regions and

client segments. Organic recurring subscription Run Rate growth for ESG and

Climate was 13.3%.

All Other – Private Assets Segment:

Table 1D: Results (unaudited)

Three Months Ended

Mar. 31, Mar. 31,

In thousands 2024 2023 % Change

Operating revenues:

Recurring subscriptions $ 63,134 $ 38,334 64.7 %

Non-recurring 1,109 374 196.5 %

Total operating revenues 64,243 38,708 66.0 %

Adjusted EBITDA expenses 51,733 26,317 96.6 %

Adjusted EBITDA $ 12,510 $ 12,391 1.0 %

Adjusted EBITDA margin % 19.5 % 32.0 %

All Other – Private Assets operating revenues, which reflect the Real Assets

and Private Capital Solutions operating segments, were $64.2 million, up 66.0%

and included $24.2 million of revenue from Private Capital Solutions. The

remaining growth in revenue was primarily driven by growth from recurring

subscriptions related to Index Intel products and favorable foreign currency

exchange rate fluctuations, partially offset by a decrease in recurring

subscriptions related to our Property Intel product. Organic operating revenue

growth for All Other – Private Assets was 2.6%.

All Other – Private Assets Run Rate, which reflects the Real Assets and

Private Capital Solutions operating segments, was $254.4 million as of March

31, 2024, up 71.4%, and included $101.0 million associated with Private

Capital Solutions. The remaining growth in the run rate was primarily driven

by Index Intel, RCA and Performance Insights products, partially offset by a

decline in Property Intel product. Organic recurring subscription Run Rate

growth for All Other – Private Assets was 3.5%.

Select Balance Sheet Items and Capital Allocation

Cash Balances and Outstanding Debt: Cash and cash equivalents was $519.3

million as of March 31, 2024, including $3.8 million of restricted cash. MSCI

typically seeks to maintain minimum cash balances globally of approximately

$225.0 million to $275.0 million for general operating purposes.

Total principal amounts of debt outstanding as of March 31, 2024, were $4.5

billion. The total debt to net income ratio (based on trailing twelve months

net income) was 3.9x. The total debt to adjusted EBITDA ratio (based on

trailing twelve months adjusted EBITDA) was 2.9x.

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

to 3.5x.

During the quarter, we amended and restated the credit agreement governing our

credit facilities (the “Credit Agreement”) to provide for a new revolving

credit facility (the “Revolving Credit Facility”) with an aggregate of

$1.25 billion of revolving loan commitments, which may be drawn until January

2029. On the closing of the Credit Agreement, we drew down $336.9 million on

the Revolving Credit Facility in order to prepay the term loans outstanding

under the prior term loan A facility.

Capex and Cash Flow: Capex was $24.2 million, and net cash provided by

operating activities increased by 13.6% to $300.1 million, primarily

reflecting higher cash collections from customers partially offset by higher

cash expenses. Free cash flow for first quarter 2024 was up 13.7% to $275.9

million.

Share Count and Share Repurchases: Weighted average diluted shares outstanding

were 79.5 million in first quarter 2024, down 1.2% year-over-year. Total

shares outstanding as of March 31, 2024 were 79.2 million. As of April 22,

2024, a total of approximately $0.8 billion remains available on the

outstanding share repurchase authorization.

Dividends: Approximately $126.8 million in dividends were paid to shareholders

in first quarter 2024. On April 22, 2024, the MSCI Board of Directors declared

a cash dividend of $1.60 per share for second quarter 2024, payable on May 31,

2024 to shareholders of record as of the close of trading on May 17, 2024.

Full-Year 2024 Guidance

MSCI’s guidance for the year ending December 31, 2024 (“Full-Year 2024”)

is based on assumptions about a number of factors, in particular related to

macroeconomic factors and the capital 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 the uncertainties, risks and

assumptions discussed in the “Risk Factors” and “Management’s

Discussion and Analysis of Financial Condition and Results of Operations”

sections of our Annual Report on Form 10-K, as updated in quarterly reports on

Form 10-Q and current reports on Form 8-K filed or furnished with the SEC. See

“Forward-Looking Statements” below.

Guidance Item Current Guidance for Full-Year 2024

Operating Expense $1,300 to $1,340 million

Adjusted EBITDA Expense $1,130 to $1,160 million

Interest Expense $185 to $189 million

(including amortization of financing fees)((1))

Depreciation & Amortization Expense $170 to $180 million

Effective Tax Rate 18% to 21%

Capital Expenditures $95 to $105 million

Net Cash Provided by Operating Activities $1,330 to $1,380 million

Free Cash Flow $1,225 to $1,285 million

(1) A portion of our annual interest expense is from our variable rate

indebtedness under our Revolving Credit Facility, while the majority is from

fixed rate senior unsecured notes. Changes to the secured overnight funding

rate (“SOFR”) and indebtedness levels can cause our annual interest

expense to vary.

Conference Call Information

MSCI’s senior management will review the first quarter 2024 results on

Tuesday, April 23, 2024 at 10:00 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

(https://cts.businesswire.com/ct/CT?id=smartlink&url=https%3A%2F%2Fir.msci.com%2Fevents-and-presentations&esheet=53943260&newsitemid=20240423155431&lan=en-US&anchor=https%3A%2F%2Fir.msci.com%2Fevents-and-presentations&index=1&md5=ec5484ad58560f3dab1f03aaef6854e3)

, or via telephone, dial 1-833-630-1956 within the United States.

International callers may dial 1-412-317-1837. Participants should ask the

operator to be joined into the MSCI call. The teleconference will also be

webcast with an accompanying slide presentation that 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

(https://cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww.msci.com&esheet=53943260&newsitemid=20240423155431&lan=en-US&anchor=www.msci.com&index=2&md5=cbbce7b66736b8331150972273181c6f)

. 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 2024 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, 2023 filed with the Securities and

Exchange Commission (“SEC”) on February 9, 2024 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 Investor Relations homepage and its Corporate Responsibility

homepage 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, 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” section of MSCI’s Investor Relations homepage at

http://ir.msci.com/email-alerts

(https://cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fir.msci.com%2Femail-alerts&esheet=53943260&newsitemid=20240423155431&lan=en-US&anchor=http%3A%2F%2Fir.msci.com%2Femail-alerts&index=3&md5=422a4e4b0e6aad5913a0db6fdfbbc347)

. 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 future 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 Assets 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-sell 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.

“Organic recurring subscription Run Rate growth” is defined as the period

over period Run Rate growth, excluding the impact of changes in foreign

currency and the first year impact of any acquisitions. It is also adjusted

for divestitures. Changes in foreign currency are calculated by applying the

currency exchange rate from the comparable prior period to current period

foreign currency denominated Run Rate.

Sales represents the annualized value of products and services clients commit

to purchase from MSCI and will result in additional operating revenues.

Non-recurring sales represent the actual value of the customer agreements

entered into during the period and are not a component of Run Rate. New

recurring subscription sales represent additional selling activities, such as

new customer agreements, additions to existing agreements or increases in

price that occurred during the period and are additions to Run Rate.

Subscription cancellations reflect client activities during the period, such

as discontinuing products and services and/or reductions in price, resulting

in reductions to Run Rate. Net new recurring subscription sales represent the

amount of new recurring subscription sales net of subscription cancellations

during the period, which reflects the net impact to Run Rate during the

period.

Total gross sales represent the sum of new recurring subscription sales and

non-recurring sales. Total net sales represent the total gross sales net of

the impact from subscription cancellations.

Notes Regarding the Use of Non-GAAP Financial Measures

MSCI has presented supplemental non-GAAP financial measures as part of this

earnings release. Reconciliations are provided in Tables 9 through 13 below

that reconcile each non-GAAP financial measure with the most comparable GAAP

measure. The non-GAAP financial measures presented in this earnings release

should not be considered as alternative measures for the most directly

comparable GAAP financial measures. The non-GAAP financial measures presented

in this earnings release are used by management to monitor the financial

performance of the business, inform business decision-making and forecast

future results.

“Adjusted EBITDA” is defined as net income before (1) provision for income

taxes, (2) other expense (income), net, (3) depreciation and amortization of

property, equipment and leasehold improvements, (4) amortization of intangible

assets and, at times, (5) certain other transactions or adjustments,

including, when applicable, certain acquisition-related integration and

transaction costs.

“Adjusted EBITDA expenses” is defined as operating expenses less

depreciation and amortization of property, equipment and leasehold

improvements and amortization of intangible assets and, at times, certain

other transactions or adjustments, including, when applicable, certain

acquisition-related integration and transaction costs.

“Adjusted EBITDA margin” is defined as adjusted EBITDA divided by

operating revenues.

“Adjusted net income” and “adjusted EPS” are defined as net income and

diluted EPS, respectively, before the after-tax impact of: the amortization of

acquired intangible assets, including the amortization of the basis difference

between the cost of the equity method investment and MSCI’s share of the net

assets of the investee at historical carrying value and, at times, certain

other transactions or adjustments, including, when applicable, the impact

related to certain acquisition-related integration and transaction costs, the

impact related to write-off of deferred fees on debt extinguishment and the

impact related to gain from changes in ownership interest of investees.

“Capex” is defined as capital expenditures plus capitalized software

development costs.

“Free cash flow” is defined as net cash provided by operating activities,

less Capex.

“Organic operating revenue growth” is defined as operating revenue growth

compared to the prior year period excluding the impact of acquired businesses,

divested businesses and foreign currency exchange rate fluctuations.

Asset-based fees ex-FX does not adjust for the impact from foreign currency

exchange rate fluctuations on the underlying assets under management

(“AUM”).

We believe adjusted EBITDA, adjusted EBITDA margin and adjusted EBITDA

expenses are meaningful measures of the operating performance of MSCI because

they adjust for significant one-time, unusual or non-recurring items as well

as eliminate the accounting effects of certain capital spending and

acquisitions that do not directly affect what management considers to be our

ongoing operating performance in the period.

We believe adjusted net income and adjusted EPS are meaningful measures of the

performance of MSCI because they adjust for the after-tax impact of

significant one-time, unusual or non-recurring items as well as eliminate the

impact of any transactions that do not directly affect what management

considers to be our ongoing operating performance in the period. We also

exclude the after-tax impact of the amortization of acquired intangible assets

and amortization of the basis difference between the cost of the equity method

investment and MSCI’s share of the net assets of the investee at historical

carrying value, as these non-cash amounts are significantly impacted by the

timing and size of each acquisition and therefore not meaningful to the

ongoing operating performance in the period.

We believe that free cash flow is useful to investors because it relates the

operating cash flow of MSCI to the capital that is spent to continue and

improve business operations, such as investment in MSCI’s existing products.

Further, free cash flow indicates our ability to strengthen MSCI’s balance

sheet, repay our debt obligations, pay cash dividends and repurchase shares of

our common stock.

We believe organic operating revenue growth is a meaningful measure of the

operating performance of MSCI because it adjusts for the impact of foreign

currency exchange rate fluctuations and excludes the impact of operating

revenues attributable to acquired and divested businesses for the comparable

prior year period, providing insight into our ongoing operating performance

for the period(s) presented.

We believe that the non-GAAP financial measures presented in this earnings

release facilitate meaningful period-to-period comparisons and provide a

baseline for the evaluation of future results.

Adjusted EBITDA expenses, adjusted EBITDA margin, adjusted EBITDA, adjusted

net income, adjusted EPS, Capex, free cash flow and organic operating revenue

growth are not defined in the same manner by all companies and may not be

comparable to similarly-titled non-GAAP financial measures of other companies.

These measures can differ significantly from company to company depending on,

among other things, long-term strategic decisions regarding capital structure,

the tax jurisdictions in which companies operate and capital investments.

Accordingly, the Company’s computation of these measures may not be

comparable to similarly-titled measures computed by other companies.

Notes Regarding Adjusting for the Impact of Foreign Currency Exchange Rate

Fluctuations

Foreign currency exchange rate fluctuations reflect the difference between the

current period results as reported compared to the current period results

recalculated using the foreign currency exchange rates in effect for the

comparable prior period. While operating revenues adjusted for the impact of

foreign currency fluctuations includes asset-based fees that have been

adjusted for the impact of foreign currency fluctuations, the underlying AUM,

which is the primary component of asset-based fees, is not adjusted for

foreign currency fluctuations. Approximately three-fifths of the AUM is

invested in securities denominated in currencies other than the U.S. dollar,

and accordingly, any such impact is excluded from the disclosed foreign

currency-adjusted variances.

Table 2: Condensed Consolidated Statements of Income (unaudited)

Three Months Ended

Mar. 31, Mar. 31, %

In thousands, except per share data 2024 2023 Change

Operating revenues $ 679,965 $ 592,218 14.8 %

Operating expenses:

Cost of revenues (exclusive of depreciation and amortization) 128,514 108,647 18.3 %

Selling and marketing 72,168 66,475 8.6 %

Research and development 40,525 31,323 29.4 %

General and administrative 56,691 41,044 38.1 %

Amortization of intangible assets 38,604 24,667 56.5 %

Depreciation and amortization of property,

equipment and leasehold improvements 4,081 5,460 (25.3 )%

Total operating expenses(1) 340,583 277,616 22.7 %

Operating income 339,382 314,602 7.9 %

Interest income (6,048 ) (10,362 ) (41.6 )%

Interest expense 46,674 46,206 1.0 %

Other expense (income) 2,863 2,386 20.0 %

Other expense (income), net 43,489 38,230 13.8 %

Income before provision for income taxes 295,893 276,372 7.1 %

Provision for income taxes 39,939 37,644 6.1 %

Net income $ 255,954 $ 238,728 7.2 %

Earnings per basic common share $ 3.23 $ 2.98 8.4 %

Earnings per diluted common share $ 3.22 $ 2.97 8.4 %

Weighted average shares outstanding used in computing earnings per share:

Basic 79,195 80,041 (1.1 )%

Diluted 79,508 80,482 (1.2 )%

(1) Includes stock-based compensation expense of $34.7 million and $21.6

million for the three months ended Mar. 31, 2024 and 2023, respectively.

Table 3: Selected Balance Sheet Items (unaudited)

As of

Mar. 31, Dec. 31,

In thousands 2024 2023

Cash and cash equivalents (1) $519,315 $461,693

Accounts receivable, net of allowances $745,611 $839,555

Current deferred revenue $1,053,961 $1,083,864

Current portion of long-term debt (2) $— $10,902

Long-term debt (3) $4,507,686 $4,496,826

(1) Includes restricted cash of $3.8 million at Mar. 31, 2024 and $3.9 million

at Dec. 31, 2023.

(2) Consists of gross current portion of long-term debt, net of deferred

financing fees. Gross current portion of long-term debt was $0.0 million at

Mar. 31, 2024 and $10.9 million at Dec. 31, 2023.

(3) Consists of gross long-term debt, net of deferred financing fees. Gross

long-term debt was $4,536.9 million at Mar. 31, 2024 and $4,528.1 million at

Dec. 31, 2023.

Table 4: Selected Cash Flow Items (unaudited)

Three Months Ended

Mar. 31, Mar. 31, %

In thousands 2024 2023 Change

Net cash provided by operating activities $ 300,137 $ 264,141 13.6 %

Net cash used in investing activities (32,333 ) (21,762 ) (48.6 )%

Net cash (used in) provided by financing activities (207,223 ) (158,293 ) (30.9 )%

Effect of exchange rate changes (2,959 ) 2,958 (200.0 )%

Net (decrease) increase in cash, cash equivalents and restricted cash $ 57,622 $ 87,044 (33.8 )%

Table 5: Operating Results by Segment and Revenue Type (unaudited)

Index Three Months Ended

Mar. 31, Mar. 31, %

In thousands 2024 2023 Change

Operating revenues:

Recurring subscriptions $ 212,952 $ 196,678 8.3 %

Asset-based fees 150,259 133,126 12.9 %

Non-recurring 10,661 9,578 11.3 %

Total operating revenues 373,872 339,382 10.2 %

Adjusted EBITDA expenses 96,112 85,700 12.1 %

Adjusted EBITDA $ 277,760 $ 253,682 9.5 %

Adjusted EBITDA margin % 74.3 % 74.7 %

Analytics Three Months Ended

Mar. 31, Mar. 31, %

In thousands 2024 2023 Change

Operating revenues:

Recurring subscriptions $ 160,551 $ 144,503 11.1 %

Non-recurring 3,415 2,567 33.0 %

Total operating revenues 163,966 147,070 11.5 %

Adjusted EBITDA expenses 91,754 86,290 6.3 %

Adjusted EBITDA $ 72,212 $ 60,780 18.8 %

Adjusted EBITDA margin % 44.0 % 41.3 %

ESG and Climate Three Months Ended

Mar. 31, Mar. 31, %

In thousands 2024 2023 Change

Operating revenues:

Recurring subscriptions $ 76,418 $ 65,732 16.3 %

Non-recurring 1,466 1,326 10.6 %

Total operating revenues 77,884 67,058 16.1 %

Adjusted EBITDA expenses 56,793 49,182 15.5 %

Adjusted EBITDA $ 21,091 $ 17,876 18.0 %

Adjusted EBITDA margin % 27.1 % 26.7 %

All Other - Private Assets Three Months Ended

Mar. 31, Mar. 31, %

In thousands 2024 2023 Change

Operating revenues:

Recurring subscriptions $ 63,134 $ 38,334 64.7 %

Non-recurring 1,109 374 196.5 %

Total operating revenues 64,243 38,708 66.0 %

Adjusted EBITDA expenses 51,733 26,317 96.6 %

Adjusted EBITDA $ 12,510 $ 12,391 1.0 %

Adjusted EBITDA margin % 19.5 % 32.0 %

Consolidated Three Months Ended

Mar. 31, Mar. 31, %

In thousands 2024 2023 Change

Operating revenues:

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 %

Operating revenues total 679,965 592,218 14.8 %

Adjusted EBITDA expenses 296,392 247,489 19.8 %

Adjusted EBITDA $ 383,573 $ 344,729 11.3 %

Operating margin % 49.9 % 53.1 %

Adjusted EBITDA margin % 56.4 % 58.2 %

Table 6: Sales and Retention Rate by Segment (unaudited)(1)

Three Months Ended

Mar. 31, Mar. 31,

In thousands 2024 2023

Index

New recurring subscription sales $ 23,513 $ 25,090

Subscription cancellations (14,702 ) (7,082 )

Net new recurring subscription sales $ 8,811 $ 18,008

Non-recurring sales $ 12,811 $ 12,782

Total gross sales $ 36,324 $ 37,872

Total Index net sales $ 21,622 $ 30,790

Index Retention Rate 93.2 % 96.4 %

Analytics

New recurring subscription sales $ 14,088 $ 13,674

Subscription cancellations (10,794 ) (9,183 )

Net new recurring subscription sales $ 3,294 $ 4,491

Non-recurring sales $ 2,462 $ 1,370

Total gross sales $ 16,550 $ 15,044

Total Analytics net sales $ 5,756 $ 5,861

Analytics Retention Rate(2) 93.5 % 94.0 %

ESG and Climate

New recurring subscription sales $ 11,471 $ 12,486

Subscription cancellations (7,351 ) (2,635 )

Net new recurring subscription sales $ 4,120 $ 9,851

Non-recurring sales $ 1,672 $ 1,219

Total gross sales $ 13,143 $ 13,705

Total ESG and Climate net sales $ 5,792 $ 11,070

ESG and Climate Retention Rate(3) 90.8 % 96.1 %

All Other - Private Assets

New recurring subscription sales $ 8,264 $ 5,143

Subscription cancellations (4,922 ) (2,856 )

Net new recurring subscription sales $ 3,342 $ 2,287

Non-recurring sales $ 1,089 $ 213

Total gross sales $ 9,353 $ 5,356

Total All Other - Private Assets net sales $ 4,431 $ 2,500

All Other - Private Assets Retention Rate(4) 92.2 % 92.1 %

Consolidated

New recurring subscription sales $ 57,336 $ 56,393

Subscription cancellations (37,769 ) (21,756 )

Net new recurring subscription sales $ 19,567 $ 34,637

Non-recurring sales $ 18,034 $ 15,584

Total gross sales $ 75,370 $ 71,977

Total net sales $ 37,601 $ 50,221

Total Retention Rate(5) 92.8 % 95.2 %

(1) See "Notes Regarding the Use of Operating Metrics" for details regarding

the definition of new recurring subscription sales, subscription

cancellations, net new recurring subscription sales, non-recurring sales,

total gross sales, total net sales and Retention Rate.

(2) Retention rate for Analytics excluding the impact of the acquisition of

Fabric was 93.5% for the three months ended Mar. 31, 2024.

(3) Retention rate for ESG and Climate excluding the impact of the acquisition

of Trove was 90.7% for the three months ended Mar. 31, 2024.

(4) Retention rate for All Other – Private Assets excluding the impact of

the acquisition of Burgiss was 89.9% for the three months ended Mar. 31, 2024.

(5) Total retention rate excluding the impact of the acquisitions of Fabric,

Trove and Burgiss was 92.6% for the three months ended Mar. 31, 2024.

Table 7: AUM in ETFs Linked to MSCI Equity Indexes (unaudited)(1)(2)

Three Months Ended

Mar. 31 Jun. 30 Sep. 30 Dec. 31 Mar. 31

In billions 2023 2023 2023 2023 2024

Beginning Period AUM in ETFs linked to

MSCI equity indexes $ 1,222.9 $ 1,305.4 $ 1,372.5 $ 1,322.8 $ 1,468.9

Market Appreciation/(Depreciation) 75.1 48.4 (56.1 ) 130.5 92.8

Cash Inflows 7.4 18.7 6.4 15.6 20.9

Period-End AUM in ETFs linked to

MSCI equity indexes $ 1,305.4 $ 1,372.5 $ 1,322.8 $ 1,468.9 $ 1,582.6

Period Average AUM in ETFs linked to

MSCI equity indexes $ 1,287.5 $ 1,333.8 $ 1,376.5 $ 1,364.9 $ 1,508.8

Period-End Basis Point Fee(3) 2.53 2.52 2.51 2.50 2.48

(1) The historical values of the AUM in ETFs linked to our equity indexes as

of the last day of the month and the monthly average balance can be found

under the link “AUM in ETFs Linked to MSCI Equity Indexes” on our Investor

Relations homepage at http://ir.msci.com

(https://cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fir.msci.com&esheet=53943260&newsitemid=20240423155431&lan=en-US&anchor=http%3A%2F%2Fir.msci.com&index=4&md5=aab1f8a3f75c5c8ebf23c1364f527b0e)

. Information contained on our website is not incorporated by reference into

this Press Release or any other report furnished or filed with the SEC. The

AUM in ETFs also includes AUM in Exchange Traded Notes, the value of which is

less than 1.0% of the AUM amounts presented.

(2) The value of AUM in ETFs linked to MSCI equity indexes is calculated by

multiplying the equity ETFs net asset value by the number of shares

outstanding.

(3) Based on period-end Run Rate for ETFs linked to MSCI equity indexes using

period-end AUM.

Table 8: Run Rate by Segment and Type (unaudited)(1)

As of

Mar. 31, Mar. 31, %

In thousands 2024 2023 Change

Index

Recurring subscriptions $ 869,931 $ 795,621 9.3 %

Asset-based fees 619,431 534,491 15.9 %

Index Run Rate 1,489,362 1,330,112 12.0 %

Analytics Run Rate 662,079 621,611 6.5 %

ESG and Climate Run Rate 320,611 278,947 14.9 %

All Other - Private Assets Run Rate 254,432 148,440 71.4 %

Total Run Rate $ 2,726,484 $ 2,379,110 14.6 %

Total recurring subscriptions $ 2,107,053 $ 1,844,619 14.2 %

Total asset-based fees 619,431 534,491 15.9 %

Total Run Rate $ 2,726,484 $ 2,379,110 14.6 %

(1) See "Notes Regarding the Use of Operating Metrics" for details regarding

the definition of Run Rate.

Table 9: Reconciliation of Net Income to Adjusted EBITDA (unaudited)

Three Months Ended

Mar. 31, Mar. 31,

In thousands 2024 2023

Net income $ 255,954 $ 238,728

Provision for income taxes 39,939 37,644

Other expense (income), net 43,489 38,230

Operating income 339,382 314,602

Amortization of intangible assets 38,604 24,667

Depreciation and amortization of property,

equipment and leasehold improvements 4,081 5,460

Acquisition-related integration and transaction costs(1) 1,506 —

Consolidated adjusted EBITDA $ 383,573 $ 344,729

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

Consolidated adjusted EBITDA $ 383,573 $ 344,729

(1) Represents transaction expenses and other costs directly related to the

acquisition and integration of acquired businesses, including professional

fees, severance expenses, regulatory filing fees and other costs, in each case

that are incurred no later than 12 months after the close of the relevant

acquisition.

Table 10: Reconciliation of Net Income and Diluted EPS to Adjusted Net Income

and Adjusted EPS (unaudited)

Three Months Ended

Mar. 31, Mar. 31,

In thousands, except per share data 2024 2023

Net income $ 255,954 $ 238,728

Plus: Amortization of acquired intangible assets and

equity method investment basis difference 25,267 16,809

Plus: Acquisition-related integration and transaction costs(1) 1,506 —

Plus: Write-off of deferred fees on debt extinguishment 1,510 —

Less: Gain from changes in ownership interest of investees — (447 )

Less: Income tax effect(2) (4,008 ) (2,196 )

Adjusted net income $ 280,229 $ 252,894

Diluted EPS $ 3.22 $ 2.97

Plus: Amortization of acquired intangible assets and

equity method investment basis difference 0.32 0.21

Plus: Acquisition-related integration and transaction costs(1) 0.02 —

Plus: Write-off of deferred fees on debt extinguishment 0.02 —

Less: Gain from changes in ownership interest of investees — (0.01 )

Less: Income tax effect(2) (0.06 ) (0.03 )

Adjusted EPS $ 3.52 $ 3.14

Diluted weighted average common shares outstanding 79,508 80,482

(1) Represents transaction expenses and other costs directly related to the

acquisition and integration of acquired businesses, including professional

fees, severance expenses, regulatory filing fees and other costs, in each case

that are incurred no later than 12 months after the close of the relevant

acquisition.

(2) Adjustments relate to the tax effect of non-GAAP adjustments, which were

determined based on the nature of the underlying non-GAAP adjustments and

their relevant jurisdictional tax rates.

Table 11: Reconciliation of Operating Expenses to Adjusted EBITDA Expenses

(unaudited)

Three Months Ended Full-Year

Mar. 31, Mar. 31, 2024

In thousands 2024 2023 Guidance(1)

Total operating expenses $ 340,583 $ 277,616 $1,300,000 - $1,340,000

Amortization of intangible assets 38,604 24,667

Depreciation and amortization of property,

equipment and leasehold improvements 4,081 5,460 $170,000 - $180,000

Acquisition-related integration and transaction costs(2) 1,506 —

Consolidated adjusted EBITDA expenses $ 296,392 $ 247,489 $1,130,000 - $1,160,000

Index adjusted EBITDA expenses $ 96,112 $ 85,700

Analytics adjusted EBITDA expenses 91,754 86,290

ESG and Climate adjusted EBITDA expenses 56,793 49,182

All Other - Private Assets adjusted EBITDA expenses 51,733 26,317

Consolidated adjusted EBITDA expenses $ 296,392 $ 247,489 $1,130,000 - $1,160,000

(1) We have not provided a full line-item reconciliation for total operating

expenses to adjusted EBITDA expenses for this future period because we believe

such a reconciliation would imply a degree of precision and certainty that

could be confusing to investors and we are unable to reasonably predict

certain items contained in the GAAP measure without unreasonable efforts. This

is due to the inherent difficulty of forecasting the timing or amount of

various items that have not yet occurred and are out of the Company's control

or cannot be reasonably predicted. For the same reasons, the Company is unable

to address the probable significance of the unavailable information.

Forward-looking non-GAAP financial measures provided without the most directly

comparable GAAP financial measures may vary materially from the corresponding

GAAP financial measures. See “Forward-Looking Statements” above.

(2) Represents transaction expenses and other costs directly related to the

acquisition and integration of acquired businesses, including professional

fees, severance expenses, regulatory filing fees and other costs, in each case

that are incurred no later than 12 months after the close of the relevant

acquisition.

Table 12: Reconciliation of Net Cash Provided by Operating Activities to Free

Cash Flow (unaudited)

Three Months Ended Full-Year

Mar. 31, Mar. 31, 2024

In thousands 2024 2023 Guidance(1)

Net cash provided by operating activities $ 300,137 $ 264,141 $1,330,000 - $1,380,000

Capital expenditures (4,271 ) (6,225 )

Capitalized software development costs (19,966 ) (15,351 )

Capex (24,237 ) (21,576 ) ($95,000 - $105,000)

Free cash flow $ 275,900 $ 242,565 $1,225,000 - $1,285,000

(1) We have not provided a line-item reconciliation for free cash flow to net

cash provided by operating activities for this future period because we

believe such a reconciliation would imply a degree of precision and certainty

that could be confusing to investors and we are unable to reasonably predict