01—Abstract
Summary
Summary of the 10-K filed February 29, 2012. Cited figures are marked; the original filing is the authoritative source.
MSCI Inc. reported fiscal 2011 (year ended December 31, 2011) operating revenues of $900.9 milliona, up 35.9% from $662.9 million for the year ended November 30, 2010, with operating income of $322.0 million (up 56.2%) and net income of $173.5 million, or $1.41 per diluted share.
The filing attributes roughly $170.5 millionb of the revenue growth to acquisitions made during fiscal 2010, notably RiskMetrics (acquired June 1, 2010, for approximately $1,572.4 million), and states that excluding the RiskMetrics and Measurisk acquisitions, operating revenues and operating income increased 13.4% and 26.7%, respectively. Growth was led by the Risk Management Analytics category, which rose 81.1% to $243.6 million, and the Governance business, which contributed $119.6 million. Recurring revenue remains the core of the model: approximately $732.5 million, or 81.3%, of 2011 revenue came from annual recurring subscriptions.
Asset-based fees from ETFs linked to MSCI indices were $136.0 millionc, and the value of those assets was $301.6 billion at December 31, 2011, down 3.0% from November 30, 2010. The Aggregate Retention Rate was 89.8% for 2011, versus 86.8% for 2010. Ten largest clients contributed 25.8% of revenue, and BlackRock accounted for 8.1%.
Balance sheet and cash flow: cash and cash equivalents were $252.2 milliond, and $1,077.8 million of debt was outstanding under the New Credit Facility, as amended. Operating cash flow was $255.0 million, and the company made a $35.0 million prepayment on December 30, 2011. Goodwill and intangible assets totaled $2,353.5 million.
The company does not pay dividends. Item 9B discloses an internal investigation and cooperation with SEC and Department of Justice inquiries after a reported allegation that an ISS employee provided client voting data to proxy solicitors.
02—Key points
Key Highlights
- Operating revenues rose 35.9% to $900.9 million; operating income rose 56.2% to $322.0 million, with operating margin of 35.7%.
- Net income was $173.5 million, or $1.41 per diluted share, compared with $92.2 million, or $0.81 per diluted share, for the year ended November 30, 2010.
- Annual recurring subscriptions accounted for approximately $732.5 million, or 81.3%, of 2011 revenue.
- Aggregate Retention Rate improved to 89.8% from 86.8%; Core Retention Rate improved to 90.2% from 87.7%.
- Assets in ETFs linked to MSCI equity indices were $301.6 billion at December 31, 2011, down 3.0% from November 30, 2010; asset-based fees were $136.0 million.
- Debt under the New Credit Facility was $1,077.8 million at year end, with cash and short-term investments of $252.2 million and $140.5 million, respectively.
- Item 9B discloses an internal investigation and cooperation with SEC and Department of Justice inquiries regarding an alleged ISS client voting data disclosure.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2011filed February 29, 2012Financial Statements
FY2011 against FY2010
| Line item | FY2011FY2010 | Change |
|---|---|---|
| Revenue | $900.94M$662.90M | +35.9% |
| SG&A Expenses | $212.97M$190.24M | +11.9% |
| Operating Expenses | $578.94M— | — |
| Operating Income | $322.00M$206.12M | +56.2% |
| Interest Expense | $55.82M$51.34M | +8.7% |
| Net Income | $173.45M$92.17M | +88.2% |
| EPS (Basic) | $1.43$0.82 | +74.4% |
| EPS (Diluted) | $1.41$0.81 | +74.1% |
| Shares Outstanding (Basic) | 120.72M112.07M | +7.7% |
| Shares Outstanding (Diluted) | 122.28M113.36M | +7.9% |
05—Questions
Frequently Asked Questions
How much of the revenue growth came from acquisitions?
The filing states that approximately $170.5 million of the $238.0 million year-over-year increase in operating revenues was comprised of revenues contributed by acquisitions made during the year ended November 30, 2010, principally RiskMetrics. The remaining $67.5 million reflected higher asset-based fees ($34.4 million) and subscription revenues ($33.1 million).
What is the main source of recurring revenue?
The company licenses annual, recurring subscriptions to its products, which generated approximately $732.5 million, or 81.3%, of 2011 revenues. Asset-based fees from index-linked investment products, such as ETFs, contributed an additional $136.0 million.
How concentrated is the client base?
Revenues from the ten largest clients accounted for 25.8% of total 2011 revenues. BlackRock and its affiliates, the largest client, accounted for 8.1% of operating revenues, and approximately 83.9% of BlackRock revenue came from fees on ETFs linked to MSCI indices.
What is the company's debt position?
At December 31, 2011, the company had $1,077.8 million of indebtedness under the New Credit Facility, as amended, with $11.3 million in current maturities. The filing reports a Consolidated Leverage Ratio of 2.43:1.00 and an Interest Coverage Ratio of 8.43:1.00 against covenant thresholds of 3.25:1.00 and 5.00:1.00, respectively.
What regulatory or legal matters does the filing disclose?
Item 9B states that, following a February 10, 2012 report that a whistleblower had complained to the SEC, the company launched an internal investigation, placed an ISS employee on administrative leave, and is cooperating with SEC and Department of Justice investigations concerning alleged provision of client voting data to proxy solicitors. Item 3 states that management does not expect pending matters to have a material effect.
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