01—Abstract
Summary
Summary of the 10-K filed February 10, 2023. Cited figures are marked; the original filing is the authoritative source.
MSCI Inc. reported operating revenues of $2,248,598 thousanda for the year ended December 31, 2022, up 10.0% from $2,043,544 thousand in 2021.
Net income rose 19.9% to $870,573 thousandb, and Adjusted EBITDA increased 11.1% to $1,329,671 thousand, with an Adjusted EBITDA margin of 59.1%. Growth was led by recurring subscriptions, which rose 16.4% to $1,659,523 thousand, while asset-based fees fell 4.7% to $528,127 thousand as AUM in ETFs linked to MSCI equity indexes declined on average. The company's four reportable segments are Index, Analytics, ESG and Climate, and All Other – Private Assets, with the ESG and Climate segment's revenues up 37.4% and the Real Assets/Burgiss segment's up 73.4%, the latter largely due to the RCA acquisition completed in September 2021 for $949.0 million.
The company's balance sheet carries $4,200.0 millionc of Senior Notes and $347.8 million of Tranche A Term Loans as of December 31, 2022, with total shareholders' equity in deficit of $(1,007,925) thousand, reflecting $1,284,825 thousand of share repurchases in 2022 and $373,898 thousand of dividends declared. Cash and cash equivalents fell to $993,564 thousand from $1,421,449 thousand. Management reported a Consolidated Leverage Ratio of 3.08:1.00 against a maximum of 4.25:1.00, and an Interest Coverage Ratio of 8.45:1.00 against a minimum of 4.00:1.00.
BlackRock accounted for 10.3%d of consolidated operating revenues in 2022, down from 12.7% in 2021. The filing notes risks including dependence on third-party data suppliers, client pressure to reduce asset-based fees, potential cancellations by the largest clients, cyber threats, and evolving ESG and benchmark regulation. The auditor, PricewaterhouseCoopers LLP, issued an unqualified opinion on the financial statements and on internal control over financial reporting as of December 31, 2022.
02—Key points
Key Highlights
- Operating revenues rose 10.0% to $2,248,598 thousand in 2022, with net income up 19.9% to $870,573 thousand.
- Recurring subscriptions grew 16.4% to $1,659,523 thousand, while asset-based fees declined 4.7% to $528,127 thousand.
- ESG and Climate operating revenues increased 37.4% to $228,311 thousand, and All Other – Private Assets revenues increased 73.4% to $140,971 thousand, driven in part by the RCA acquisition.
- Adjusted EBITDA increased 11.1% to $1,329,671 thousand, with an Adjusted EBITDA margin of 59.1% versus 58.6% in 2021.
- Total Run Rate increased 5.3% to $2,320,307 thousand as of December 31, 2022, with recurring subscription Run Rate up 11.9% and asset-based fee Run Rate down 12.7%.
- Stockholder equity was a deficit of $(1,007,925) thousand, with $1,284,825 thousand of share repurchases and $373,898 thousand of dividends declared in 2022; $1,304.4 million of repurchase authorization remained as of December 31, 2022.
- Debt totaled $4,547.8 million principal at year-end, with a Consolidated Leverage Ratio of 3.08:1.00 and a Consolidated Interest Coverage Ratio of 8.45:1.00 against covenant limits of 4.25:1.00 and a minimum of 4.00:1.00.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2022filed February 10, 2023Financial Statements
FY2022 against FY2021
| Line item | FY2022FY2021 | Change |
|---|---|---|
| Revenue | $2.25B$2.04B | +10.0% |
| R&D Expenses | $107.20M$111.56M | −3.9% |
| Operating Expenses | $1.04B$970.82M | +7.2% |
| Operating Income | $1.21B$1.07B | +12.6% |
| Interest Expense | $171.57M$159.61M | +7.5% |
| Net Income | $870.57M$725.98M | +19.9% |
| EPS (Basic) | $10.78$8.80 | +22.5% |
| EPS (Diluted) | $10.72$8.70 | +23.2% |
| Shares Outstanding (Basic) | 80.75M82.51M | −2.1% |
| Shares Outstanding (Diluted) | 81.22M83.48M | −2.7% |
05—Questions
Frequently Asked Questions
How concentrated is MSCI's revenue among its largest clients?
BlackRock, the largest client organization by revenue, accounted for 10.3% of consolidated operating revenues in 2022, down from 12.7% in 2021. BlackRock also accounted for 17.4% of Index segment operating revenues in 2022, and 95.2% of BlackRock's operating revenues came from fees based on assets in its ETFs that are based on MSCI indexes.
What drove the change in asset-based fees in 2022?
Asset-based fees decreased 4.7% to $528,127 thousand. The filing attributes the decline to lower revenues from ETFs linked to MSCI equity indexes (down 7.7%) and non-ETF indexed funds (down 6.9%), partially offset by a 15.1% increase in revenues from exchange traded futures and options contracts linked to MSCI indexes. Average AUM in ETFs linked to MSCI equity indexes was down $42.4 billion, or 3.2%, versus 2021.
How is MSCI's debt structure and leverage positioned at year-end 2022?
MSCI had $4,200.0 million of Senior Notes outstanding and $347.8 million of Tranche A Term Loans, with the $500 million revolving credit facility undrawn. The Consolidated Leverage Ratio was 3.08:1.00, below the 4.25:1.00 maximum, and the Consolidated Interest Coverage Ratio was 8.45:1.00, above the 4.00:1.00 minimum.
What did MSCI's capital return program look like in 2022?
MSCI repurchased $1,284,825 thousand of common stock on the open market in 2022 at an average price of $470.68 per share, and declared dividends of $4.58 per share totaling $373,898 thousand. On January 30, 2023, the Board declared a quarterly dividend of $1.38 per share, a 10.4% increase over the prior quarter's dividend. As of February 9, 2023, $1,304.4 million of repurchase authorization remained.
What are the main risks the filing highlights for investors?
Key risks include dependence on third-party data suppliers and distributors, potential errors in products leading to liability, reputational concerns related to ESG ratings and index composition, clients negotiating lower asset-based fees or ceasing to use MSCI indexes, cancellations by the largest clients, cyber-attacks and technology disruptions, evolving benchmark and ESG regulation, and foreign currency fluctuation. The filing also notes that COVID-19 has not had a material negative impact on the company to date.
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