01—Abstract
Summary
Summary of the 10-K filed February 12, 2021. Cited figures are marked; the original filing is the authoritative source.
MSCI Inc. reported full-year 2020 operating revenues of $1,695.4 milliona, up 8.8% from $1,557.8 million in 2019, with operating income of $884.8 million (operating margin 52.2%) and net income of $601.8 million, or $7.12 per diluted share.
Adjusted EBITDA rose 14.2% to $971.5 millionb, and Adjusted EBITDA margin improved to 57.3% from 54.6%. Growth was led by the Index segment, whose revenues rose 10.4% to $1,016.5 million, and Analytics revenues grew 3.4% to $513.8 million. The All Other segment (ESG and Real Estate) grew 18.0% to $165.1 million, with ESG revenues up 22.8%.
Total Run Rate grew 12.1% to $1,832.5 millionc at December 31, 2020, and recurring subscription Run Rate rose 10.5%. Subscription cancellations increased 26.6% in 2020 to $75.8 million, and the Retention Rate for the year fell to 93.9% from 94.7%. The filing attributes the cancellation increase partly to the COVID-19 pandemic, which it says did not materially affect 2020 results, though it notes continuing uncertainty.
On the balance sheet, MSCI had $3,400.0 milliond of Senior Notes outstanding and a $400.0 million undrawn revolver. Shareholders' equity was a deficit of $443.2 million, reflecting $778.5 million of share repurchases and $247.5 million of dividends declared in 2020. Cash flow from operations was $811.1 million, and the company made a $190.8 million investment in Burgiss, a 40% equity-method stake.
02—Key points
Key Highlights
- Operating revenues increased 8.8% to $1,695.4 million, with recurring subscriptions up 8.2% to $1,248.2 million and asset-based fees up 10.5% to $399.8 million.
- Adjusted EBITDA grew 14.2% to $971.5 million, and Adjusted EBITDA margin rose to 57.3% from 54.6%.
- Total Run Rate grew 12.1% to $1,832.5 million as of December 31, 2020; AUM in equity ETFs linked to MSCI indexes reached $1,103.6 billion, up 18.1%.
- Subscription cancellations rose 26.6% to $75.8 million, and the annual Retention Rate declined to 93.9% from 94.7%.
- BlackRock accounted for 11.0% of 2020 total revenues, with 94.3% of that revenue from fees on assets in its ETFs based on MSCI indexes.
- The company returned capital through $778.5 million of share repurchases and $247.5 million of dividends declared, while shareholders' equity was a deficit of $443.2 million.
- Effective January 1, 2021, the company revised its reportable segments, presenting ESG separately as ESG and Climate and combining Real Estate and Burgiss into All Other – Private Assets.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2020, Msci kept $0.35.
- Revenue$1.70B100.0%
- Cost of revenue−$291.7M17.2%
- Gross profit$1.40B82.8%
- Operating costs−$518.9M30.6%
- Operating income$884.8M52.2%
- Interest, other & tax−$282.9M16.7%
- Net income$601.8M35.5%
Where FY2020 revenue went
$1.70B- Net income: $601.8M, 35% of revenue
- Other operating costs: $417.9M, 25% of revenue
- Cost of revenue: $291.7M, 17% of revenue
- Interest, other & tax: $282.9M, 17% of revenue
- R&D: $101.1M, 6.0% of revenue
Kept 35% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2020filed February 12, 2021Financial Statements
FY2020 against FY2019
| Line item | FY2020FY2019 | Change |
|---|---|---|
| Revenue | $1.70B$1.56B | +8.8% |
| Cost of Revenue | $291.70M$294.96M | −1.1% |
| Gross Profit | $1.40B$1.26B | +11.2% |
| R&D Expenses | $101.05M$98.33M | +2.8% |
| Operating Expenses | $810.63M$802.10M | +1.1% |
| Operating Income | $884.76M$755.70M | +17.1% |
| Interest Expense | $156.32M$148.04M | +5.6% |
| Net Income | $601.82M$563.65M | +6.8% |
| EPS (Basic) | $7.19$6.66 | +8.0% |
| EPS (Diluted) | $7.12$6.59 | +8.0% |
| Shares Outstanding (Basic) | 83.72M84.64M | −1.1% |
| Shares Outstanding (Diluted) | 84.52M85.54M | −1.2% |
05—Questions
Frequently Asked Questions
How much did MSCI's revenue and profit grow in 2020?
Operating revenues rose 8.8% to $1,695.4 million, operating income rose 17.1% to $884.8 million, and net income increased 6.8% to $601.8 million, or $7.12 per diluted share. The net income growth was held back by a $198.5 million increase in other expense, net, which included $35.0 million and $10.0 million of debt extinguishment losses.
How concentrated is MSCI's revenue among its clients?
BlackRock was the largest client organization by revenue, accounting for 11.0% of total 2020 revenues, down from 11.5% in 2019. BlackRock represented 18.0% of Index segment operating revenues. The filing notes that clients may negotiate lower asset-based fees or stop using MSCI indexes, which could reduce revenue.
What is MSCI's debt and capital return position?
MSCI had $3,400.0 million of Senior Notes outstanding and a $400.0 million undrawn Revolving Credit Agreement at December 31, 2020. Its Consolidated Leverage Ratio was 3.21:1.00 against a 4.25:1.00 maximum, and its Consolidated Interest Coverage Ratio was 6.29:1.00 against a 4.00:1.00 minimum. As of February 5, 2021, $1,728.8 million remained under the share repurchase authorization, and the Board declared a quarterly dividend of $0.78 per share in January 2021.
What did the filing say about the impact of COVID-19?
The filing states that MSCI was not materially impacted in 2020. It notes that the pandemic caused significant economic disruption and that its effects remain uncertain. It reported that the company did not delay any index rebalancings during 2020, and that a substantial majority of its workforce continued working from home.
06—Continue