01—Abstract
Summary
Summary of the 10-K filed February 24, 2017. Cited figures are marked; the original filing is the authoritative source.
MSCI Inc. reported full-year 2016 operating revenues of $1,150.7 milliona, up 7.0% from $1,075.0 million in 2015, with recurring subscriptions of $913.7 million, asset-based fees of $210.2 million and non-recurring revenue of $26.8 million.
Operating income rose 20.8% to $488.1 millionb and net income rose 16.6% to $260.9 million. Adjusted EBITDA increased 18.2% to $569.5 million, with the Adjusted EBITDA margin widening to 49.5% from 44.8%. Index segment revenue grew 9.8% to $613.6 million, Analytics grew 3.4% to $448.4 million, and the All Other segment (ESG and Real Estate) grew 7.4% to $88.8 million.
The company's growth is supported by a high share of recurring revenue and by its index business, where asset-based fees depend on AUM in ETFs linked to MSCI indexes. That AUM reached $481.4 billionc at December 31, 2016, up 11.1%. The filing also flags concentration risk: BlackRock accounted for 9.4% of operating revenues, and the ten largest clients accounted for 25.7%.
The Aggregate Retention Rate was 92.7%, down from 93.4% in 2015. Balance-sheet leverage is a key consideration. Senior Notes outstanding total $2.1 billiond, with interest expense of $101.7 million in 2016.
The Consolidated Leverage Ratio was 3.50:1.00 against a 4.25:1.00 maximum. The company repurchased about 10.3 million shares for $759.4 million in 2016, and total shareholders' equity fell to $317.6 million from $901.5 million. Quarterly dividends rose to $0.28 per share, and the Board declared the first-quarter 2017 dividend on February 1, 2017.
02—Key points
Key Highlights
- Operating revenues rose 7.0% to $1,150.7 million, with recurring subscriptions at $913.7 million (up 6.5%).
- Operating income increased 20.8% to $488.1 million; operating margin improved to 42.4% from 37.6%.
- Adjusted EBITDA grew 18.2% to $569.5 million, and Adjusted EBITDA margin expanded to 49.5% from 44.8%.
- Index segment revenue of $613.6 million (53.3% of total) carried a 70.3% segment Adjusted EBITDA margin.
- AUM in ETFs linked to MSCI indexes reached $481.4 billion at year-end 2016, up 11.1%.
- Senior Notes of $2.1 billion carry interest expense of $101.7 million; the Consolidated Leverage Ratio was 3.50:1.00.
- Share repurchases totaled $759.4 million in 2016, and shareholders' equity declined to $317.6 million from $901.5 million.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2016, Msci kept $0.23.
- Revenue$1.15B100.0%
- Cost of revenue−$252.1M21.9%
- Gross profit$898.6M78.1%
- Operating costs−$410.5M35.7%
- Operating income$488.1M42.4%
- Interest, other & tax−$227.2M19.7%
- Net income$260.9M22.7%
Where FY2016 revenue went
$1.15B- Other operating costs: $335.3M, 29% of revenue
- Net income: $260.9M, 23% of revenue
- Cost of revenue: $252.1M, 22% of revenue
- Interest, other & tax: $227.2M, 20% of revenue
- R&D: $75.2M, 6.5% of revenue
Kept 23% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2016filed February 24, 2017Financial Statements
FY2016 against FY2015
| Line item | FY2016FY2015 | Change |
|---|---|---|
| Revenue | $1.15B$1.08B | +7.0% |
| Cost of Revenue | $252.11M$267.69M | −5.8% |
| Gross Profit | $898.56M$807.32M | +11.3% |
| R&D Expenses | $75.20M$77.32M | −2.7% |
| Operating Expenses | $662.57M$671.12M | −1.3% |
| Operating Income | $488.10M$403.90M | +20.8% |
| Interest Expense | $101.65M$62.39M | +62.9% |
| Net Income | $260.86M$223.65M | +16.6% |
| EPS (Basic) | $2.72$2.05 | +32.7% |
| EPS (Diluted) | $2.70$2.03 | +33.0% |
| Shares Outstanding (Basic) | 95.99M109.12M | −12.0% |
| Shares Outstanding (Diluted) | 96.54M109.93M | −12.2% |
05—Questions
Frequently Asked Questions
How concentrated is MSCI's client base?
The ten largest clients contributed 25.7% of 2016 revenues. BlackRock, the largest client, accounted for 9.4% of operating revenues, and 93.7% of BlackRock revenue came from asset-based fees on ETFs linked to MSCI equity indexes.
How exposed is MSCI to currency movements?
16.9% of 2016 revenues were subject to foreign currency exchange risk, and 38.3% of operating expenses were denominated in foreign currencies. Foreign currency exchange losses were $0.2 million in 2016.
How much debt does MSCI carry and how is it managed?
The company had $2.1 billion of Senior Notes at December 31, 2016 and an undrawn $220.0 million revolving credit agreement. Its Consolidated Leverage Ratio was 3.50:1.00 against a maximum of 4.25:1.00, and its Consolidated Interest Coverage Ratio was 6.74:1.00 against a minimum of 4.00:1.00.
What was the trend in client retention?
The Aggregate Retention Rate was 92.7% for 2016, compared with 93.4% for 2015. The filing notes that the fourth quarter is traditionally the largest renewal period, and 34.4% of 2016 cancellations occurred in that quarter.
What capital return and dividend actions were disclosed?
MSCI repurchased about 10.3 million shares for $759.4 million in 2016. As of February 17, 2017, $792.4 million remained available under the share repurchase authorization. The Board declared a $0.28 per share quarterly dividend on February 1, 2017, payable March 15, 2017.
06—Continue