01—Abstract
Summary
Summary of the 10-K filed February 26, 2016. Cited figures are marked; the original filing is the authoritative source.
MSCI Inc. reported full-year 2015 operating revenues of $1,075.0 milliona, up 7.9% from $996.7 million in 2014, with recurring subscriptions of $857.5 million, asset-based fees of $198.0 million and non-recurring revenue of $19.5 million.
Operating income rose 19.8% to $403.9 millionb and the operating margin expanded to 37.6% from 33.8%. Adjusted EBITDA increased 17.8% to $481.7 million, with the Adjusted EBITDA margin rising to 44.8% from 41.0%. Net income fell 21.3% to $223.6 million, driven by a $6.4 million loss from discontinued operations tied to the ISS sale, and diluted EPS was $2.03 versus $2.43.
Income from continuing operations rose 15.6% to $230.0 millionc. The company's balance sheet became more leveraged during the year. MSCI issued $800.0 million of 5.75% Senior Notes due 2025 in August 2015, bringing total senior notes to $1.6 billion, and reported long-term debt of $1,579.4 million at year-end versus $788.4 million a year earlier.
Shareholders' equity fell to $901.5 milliond from $1,432.8 million as the company returned capital through repurchases and dividends. The Consolidated Leverage Ratio was 3.08:1.00 against a 3.75:1.00 covenant maximum, and one rating agency downgraded the company's credit rating after the notes offering. The company paid $670.8 million for about 10.7 million shares on the open market and began quarterly dividends of $0.22 per share.
The filing reports that assets under management in ETFs linked to MSCI equity indexes reached $433.4 billion at December 31, 2015, up 16.1%, and that asset-based fees made up 18.4% of revenues. Management also highlighted concentration risk: BlackRock accounted for 10.3% of operating revenues, and the ten largest clients accounted for 26.0%. The Aggregate Retention Rate was 93.4% for 2015, compared with 93.0% for 2014.
02—Key points
Key Highlights
- Operating revenues rose 7.9% to $1,075.0 million, led by recurring subscriptions of $857.5 million (up 7.0%) and asset-based fees of $198.0 million (up 11.8%).
- Adjusted EBITDA increased 17.8% to $481.7 million, and the Adjusted EBITDA margin expanded to 44.8% from 41.0%.
- Net income declined 21.3% to $223.6 million, reflecting a $6.4 million loss from discontinued operations, while income from continuing operations rose 15.6% to $230.0 million.
- Long-term debt more than doubled to $1,579.4 million after the $800.0 million 5.75% Senior Notes due 2025 were issued, and the Consolidated Leverage Ratio was 3.08:1.00.
- Shareholders' equity fell to $901.5 million from $1,432.8 million, as the company repurchased $670.8 million of stock on the open market and paid $87.7 million in dividends.
- ETF assets linked to MSCI equity indexes reached $433.4 billion at year-end, up 16.1%, and the Aggregate Retention Rate was 93.4%.
- BlackRock accounted for 10.3% of operating revenues, and the ten largest clients accounted for 26.0%, highlighting client concentration.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2015, Msci kept $0.21.
- Revenue$1.08B100.0%
- Cost of revenue−$267.7M24.9%
- Gross profit$807.3M75.1%
- Operating costs−$403.4M37.5%
- Operating income$403.9M37.6%
- Interest, other & tax−$180.3M16.8%
- Net income$223.6M20.8%
Where FY2015 revenue went
$1.08B- Other operating costs: $326.1M, 30% of revenue
- Cost of revenue: $267.7M, 25% of revenue
- Net income: $223.6M, 21% of revenue
- Interest, other & tax: $180.3M, 17% of revenue
- R&D: $77.3M, 7.2% of revenue
Kept 21% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2015filed February 26, 2016Financial Statements
FY2015 against FY2014
| Line item | FY2015FY2014 | Change |
|---|---|---|
| Revenue | $1.08B$996.68M | +7.9% |
| Cost of Revenue | $267.69M$276.62M | −3.2% |
| Gross Profit | $807.32M$720.06M | +12.1% |
| R&D Expenses | $77.32M$71.09M | +8.8% |
| Operating Expenses | $671.12M$659.51M | +1.8% |
| Operating Income | $403.90M$337.17M | +19.8% |
| Interest Expense | $62.39M$31.82M | +96.1% |
| Net Income | $223.65M$284.11M | −21.3% |
| EPS (Basic) | $2.05$2.45 | −16.3% |
| EPS (Diluted) | $2.03$2.43 | −16.5% |
| Shares Outstanding (Basic) | 109.12M115.74M | −5.7% |
| Shares Outstanding (Diluted) | 109.93M116.71M | −5.8% |
05—Questions
Frequently Asked Questions
How did MSCI's core revenue and profitability perform in 2015?
Operating revenues rose 7.9% to $1,075.0 million. Operating income grew 19.8% to $403.9 million, and the operating margin widened to 37.6% from 33.8%. Adjusted EBITDA reached $481.7 million, with a 44.8% margin.
Why did net income decline even though operating results improved?
Net income fell 21.3% to $223.6 million. Other expense rose to $54.3 million, mainly from higher interest expense on the Senior Notes, and discontinued operations recorded a $6.4 million loss tied to the ISS sale. Income from continuing operations rose 15.6% to $230.0 million.
How much debt does MSCI carry and how leveraged is it?
MSCI had $1.6 billion of senior unsecured notes outstanding and reported long-term debt of $1,579.4 million at year-end. Its Consolidated Leverage Ratio was 3.08:1.00 against a covenant maximum of 3.75:1.00, and its Consolidated Interest Coverage Ratio was 8.64:1.00. A rating agency downgraded the company's credit rating following the August 2015 notes offering.
How is MSCI returning capital to shareholders?
The company paid $670.8 million for about 10.7 million shares on the open market under its 2014 and 2015 programs, and it had $879.3 million remaining under the $1.0 billion 2015 program as of December 31, 2015. It also began paying a quarterly dividend, with $0.80 declared per share in 2015, and declared $0.22 per share for the first quarter of 2016.
What are the main concentration risks for investors?
BlackRock accounted for 10.3% of operating revenues in 2015, and 93.0% of BlackRock revenue came from fees on ETFs linked to MSCI equity indexes. The ten largest clients contributed 26.0% of total revenues, and asset-based fees made up 18.4% of revenues, so changes in client demand or fee levels could have a material effect.
06—Continue