01—Abstract
Summary
Summary of the 10-K filed February 18, 2020. Cited figures are marked; the original filing is the authoritative source.
MSCI Inc. reported full-year 2019 operating revenues of $1,557.8 milliona, up 8.6% from $1,434.0 million in 2018, with operating income of $755.7 million (operating margin 48.5%) and net income of $563.6 million, or $6.59 per diluted share.
Adjusted EBITDA rose 10.1% to $850.5 millionb, with the Adjusted EBITDA margin improving to 54.6%. The company reported total Run Rate of $1,634.5 million at year-end, up 14.2%, and recurring subscription Run Rate of $1,238.3 million, up 10.6%. Net income was helped by a 6.6% effective tax rate, which reflected $85.7 million of discrete favorable items, and was offset by a $152.4 million other expense, including a $16.8 million loss on extinguishment of debt tied to the partial redemption of the 2024 Senior Notes.
The balance sheet shows total shareholders' deficit of $(76.7) million at December 31, 2019, against $3,100.0 millionc of Senior Notes outstanding and cash of $1,506.6 million. The company issued $1.0 billion of 4.000% 2029 Senior Notes in November 2019, used $500.0 million of proceeds with available cash to redeem part of the 2024 Senior Notes, and had $1,456.1 million of share repurchase authorization remaining. Operating cash flow was $709.5 million.
Dividends declared totaled $2.52d per share for 2019, and a quarterly dividend of $0.68 was declared in January 2020. Concentration remains a key risk: BlackRock accounted for 11.5% of 2019 total revenues and 94.5% of its revenue from BlackRock came from fees based on assets in BlackRock's ETFs linked to MSCI indexes.
The filing also flags data-supplier, regulatory (including Brexit and EU benchmark rules), and cybersecurity risks. In January 2020, MSCI invested $190.0 million for a non-controlling interest in The Burgiss Group, LLC.
02—Key points
Key Highlights
- Operating revenues rose 8.6% to $1,557.8 million, with recurring subscriptions up 8.2% to $1,154.0 million and asset-based fees up 7.5% to $361.9 million.
- Net income increased 11.0% to $563.6 million; diluted EPS was $6.59, up from $5.66.
- Adjusted EBITDA grew 10.1% to $850.5 million, and Adjusted EBITDA margin rose to 54.6% from 53.9%.
- Total Run Rate increased 14.2% to $1,634.5 million at December 31, 2019, with asset-based fee Run Rate up 27.0% to $396.1 million.
- The effective tax rate fell to 6.6% from 19.4%, aided by $85.7 million of discrete favorable items, and other expense rose to $152.4 million, including a $16.8 million loss on debt extinguishment.
- Balance sheet carries $3,100.0 million of Senior Notes against $1,506.6 million of cash, with a shareholders' deficit of $(76.7) million; the revolver was undrawn and the company had $1,456.1 million of buyback authorization remaining.
- BlackRock accounted for 11.5% of 2019 total revenues, a concentration risk the filing highlights.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2019, Msci kept $0.36.
- Revenue$1.56B100.0%
- Cost of revenue−$295.0M18.9%
- Gross profit$1.26B81.1%
- Operating costs−$507.1M32.6%
- Operating income$755.7M48.5%
- Interest, other & tax−$192.1M12.3%
- Net income$563.6M36.2%
Where FY2019 revenue went
$1.56B- Net income: $563.6M, 36% of revenue
- Other operating costs: $408.8M, 26% of revenue
- Cost of revenue: $295.0M, 19% of revenue
- Interest, other & tax: $192.1M, 12% of revenue
- R&D: $98.3M, 6.3% of revenue
Kept 36% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2019filed February 18, 2020Financial Statements
FY2019 against FY2018
| Line item | FY2019FY2018 | Change |
|---|---|---|
| Revenue | $1.56B$1.43B | +8.6% |
| Cost of Revenue | $294.96M$287.33M | +2.7% |
| Gross Profit | $1.26B$1.15B | +10.1% |
| R&D Expenses | $98.33M$81.41M | +20.8% |
| Operating Expenses | $802.10M$747.09M | +7.4% |
| Operating Income | $755.70M$686.90M | +10.0% |
| Interest Expense | $148.04M$133.11M | +11.2% |
| Net Income | $563.65M$507.88M | +11.0% |
| EPS (Basic) | $6.66$5.83 | +14.2% |
| EPS (Diluted) | $6.59$5.66 | +16.4% |
| Shares Outstanding (Basic) | 84.64M87.18M | −2.9% |
| Shares Outstanding (Diluted) | 85.54M89.70M | −4.6% |
05—Questions
Frequently Asked Questions
How did MSCI perform financially in 2019?
Operating revenues reached $1,557.8 million, up 8.6%, and operating income was $755.7 million, an operating margin of 48.5%. Net income rose 11.0% to $563.6 million, or $6.59 per diluted share. Operating cash flow was $709.5 million.
What drove the growth in revenue?
Recurring subscription revenue increased 8.2% to $1,154.0 million, mainly from Index products, which grew $53.4 million or 11.2%. Asset-based fees rose 7.5% to $361.9 million, driven by exchange-traded futures and options linked to MSCI indexes and higher ETF revenues tied to a 7.6% increase in average AUM.
How much debt does MSCI carry and what changed in 2019?
The company had $3,100.0 million of Senior Notes outstanding at year-end. In November 2019 it issued $1,000.0 million of 4.000% 2029 Senior Notes and used $500.0 million of proceeds, together with available cash, to partially redeem the 5.250% 2024 Senior Notes, resulting in a $16.8 million loss on extinguishment. The $400.0 million Revolving Credit Agreement was undrawn at December 31, 2019.
How concentrated is MSCI's client base?
BlackRock was the largest client, accounting for 11.5% of total 2019 revenues and 18.9% of Index segment operating revenues. The filing notes that 94.5% of BlackRock revenue came from fees based on assets in its ETFs that use MSCI indexes. The filing also says clients may reduce fees or cease using MSCI indexes.
What did MSCI return to shareholders?
The company declared dividends of $2.52 per share for 2019 and repurchased $292.1 million of common stock in 2019. As of February 12, 2020, $1,456.1 million remained available under the share repurchase authorization. A quarterly dividend of $0.68 per share was declared on January 29, 2020.
06—Continue