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Msci Annual Report, Year Ended Dec 31, 2012

Filing Date
Filed March 1, 2013
Period End
December 31, 2012
Security
MSCI
In the record · 2016–202610-K1110-Q338-K133

MSCI filed 11 annual reports (10-K), 33 quarterly reports (10-Q) and 133 current reports (8-K) between 2016 and 2026.

  1. FY2016 annual report10-K · Feb ’17Feb ’17
  2. Material agreement8-K · Nov ’19Nov ’19
  3. Leadership change8-K · Jan ’22Jan ’22
  4. Leadership change8-K · Nov ’25Nov ’25

01—Abstract

Summary

Summary of the 10-K filed March 1, 2013. Cited figures are marked; the original filing is the authoritative source.

MSCI Inc. (MSCI) reported 2012 operating revenues of $950.1 milliona, up 5.5% from $900.9 million in 2011, with operating income rising 7.7% to $346.9 million and net income of $184.2 million, or $1.48 per diluted share.

Growth was led by the Index and ESG segment, where subscription revenues rose 13.7% to $300.6 millionb, while asset-based fees were roughly flat at $140.9 million. Recurring subscriptions made up $784.3 million, or 82.5%, of revenues. The company describes itself as a leading global provider of investment decision support tools, serving about 7,500 clients in 83 countries, with its Performance and Risk segment generating $827.0 million of revenue and its Governance segment $123.2 million.

The filing highlights concentration and competitive risks. The ten largest clients accounted for 25.0% of 2012 revenues, and BlackRock alone for 7.6%. Vanguard's decision to stop using MSCI indices for certain funds beginning in 2013 represents a loss of run rate of approximately $24.8 millionc at December 31, 2012.

Total assets in ETFs linked to MSCI equity indices reached $402.3 billiond at year-end, up 33.4% from December 31, 2011. Run Rate, the forward 12-month recurring revenue measure, grew 9.7% to $967.4 million. Balance sheet and capital allocation: at December 31, 2012, MSCI had $858.0 million of indebtedness under its Amended and Restated Credit Facility, $183.3 million of cash and cash equivalents and $70.9 million of short-term investments.

The company acquired IPD in November 2012 for $124.8 million, announced a $300.0 million repurchase program with a $100.0 million accelerated share repurchase, and acquired InvestorForce in January 2013 for $23.5 million. The company does not currently intend to pay dividends.

02—Key points

Key Highlights

  1. Operating revenues rose 5.5% to $950.1 million in 2012; operating margin was 36.5%, up from 35.7% in 2011.
  2. Recurring subscriptions were $784.3 million, or 82.5% of 2012 revenues; Total Run Rate grew 9.7% to $967.4 million.
  3. Index and ESG revenues increased 9.1% to $441.5 million, with subscriptions up 13.7%; asset-based fees rose only 0.5%.
  4. Client concentration is material: the ten largest clients were 25.0% of revenues and BlackRock was 7.6%.
  5. Vanguard's decision to stop using MSCI indices for certain funds beginning in 2013 reduces run rate by approximately $24.8 million.
  6. Total debt was $858.0 million at December 31, 2012, against $183.3 million of cash and $70.9 million of short-term investments; the leverage ratio was 1.81:1.00 versus a 3.25:1.00 covenant maximum.
  7. The company completed the IPD acquisition for $124.8 million and the InvestorForce acquisition for $23.5 million in January 2013, and authorized up to $300.0 million in share repurchases through 2014.

03—One dollar

04—Financials

Financial Highlights

Figures from 10-KFY2012filed March 1, 2013
Revenue$826.99MNet Income$184.24M22.3% Net MarginEPS (Diluted)$1.48Total Assets$3.02BCash & Equivalents$183.31MFree Cash Flow$302.19M

Financial Statements

FY2012 against FY2011

Line itemFY2012FY2011Change
Revenue$826.99M$900.94M−8.2%
SG&A Expenses$211.91M$212.97M−0.5%
Operating Expenses$508.75M$578.94M−12.1%
Operating Income$318.24M$322.00M−1.2%
Interest Expense$56.40M$55.82M+1.0%
Net Income$184.24M$173.45M+6.2%
EPS (Basic)$1.50$1.43+4.9%
EPS (Diluted)$1.48$1.41+5.0%
Shares Outstanding (Basic)122.02M120.72M+1.1%
Shares Outstanding (Diluted)123.20M122.28M+0.8%

05—Questions

Frequently Asked Questions

  1. How did MSCI perform financially in 2012?

    Operating revenues grew 5.5% to $950.1 million and operating income rose 7.7% to $346.9 million. Net income was $184.2 million, or $1.48 per diluted share, compared with $173.5 million, or $1.41 per diluted share, in 2011.

  2. What drives MSCI's revenue, and how much of it is recurring?

    Revenue is primarily based on annual recurring subscriptions to its indices, risk analytics and governance products, which accounted for $784.3 million, or 82.5%, of 2012 revenues. Asset-based fees on ETFs and other index-linked products contributed $140.9 million.

  3. What are the main risks to MSCI's revenue?

    The filing cites client concentration, with the ten largest clients at 25.0% of revenues, and the possibility that clients cancel subscriptions, negotiate lower asset-based fees or switch to other indices. Vanguard's move away from MSCI indices and BlackRock's regulatory filing to create its own indices are cited examples.

  4. How leveraged is MSCI, and what are its debt terms?

    At December 31, 2012, MSCI had $858.0 million of indebtedness under its Amended and Restated Credit Facility, which matures on May 4, 2017. The filing reports a Consolidated Leverage Ratio of 1.81:1.00 against a maximum of 3.25:1.00, and an interest coverage ratio of 12.90:1.00 against a minimum of 5.00:1.00.

  5. What is MSCI's capital return policy?

    MSCI does not currently intend to pay cash dividends and instead plans to use cash for growth, acquisitions, debt repayment and share repurchases. Its Board approved a $300.0 million repurchase program on December 13, 2012, which included a $100.0 million accelerated share repurchase.

06—Continue

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