How did MSCI's revenue perform in the first quarter of 2024?

Operating revenues were $680.0 million, up 14.8%, and organic operating revenue growth was 10.3%. Recurring subscription revenues rose 15.2% and asset-based fees rose 12.9%. The filing attributes the increase to higher recurring subscription revenues ($67.8 million), asset-based fees ($17.1 million) and non-recurring revenues ($2.8 million).

Why did MSCI's operating margin decline?

Operating margin was 49.9%, compared with 53.1% in the prior-year quarter. Total operating expenses rose 22.7% to $340.6 million, including $35.1 million associated with Private Capital Solutions, Carbon Markets and Fabric. Adjusted EBITDA expenses increased 19.8%, primarily reflecting higher compensation and benefits costs from headcount growth and recent acquisitions.

What drove the decline in MSCI's Retention Rate?

The Retention Rate was 92.8%, compared with 95.2% in the first quarter of 2023. Approximately $7.0 million of cancels related to one client event tied to the merger of banking clients. Management said most cancels were due to corporate events, such as organizations closing, shutting funds, restructuring or downsizing, and that it does not expect this level of cancels to continue.

What is MSCI's capital allocation outlook?

The Board declared a cash dividend of $1.60 per share for the second quarter of 2024, payable May 31, 2024. Approximately $0.8 billion remained available under the outstanding share repurchase authorization as of April 22, 2024. Total debt principal was $4.5 billion, with a debt to adjusted EBITDA ratio of 2.9x against a target range of 3.0x to 3.5x.

What is MSCI's full-year 2024 guidance?

Guidance calls for operating expense of $1,300 to $1,340 million, adjusted EBITDA expense of $1,130 to $1,160 million, interest expense of $185 to $189 million, depreciation and amortization of $170 to $180 million, an effective tax rate of 18% to 21%, capital expenditures of $95 to $105 million, net cash provided by operating activities of $1,330 to $1,380 million, and free cash flow of $1,225 to $1,285 million.

MSCI 8-K: Earnings & Results

01—Abstract

Summary

Summary of the 8-K filed April 23, 2024. Cited figures are marked; the original filing is the authoritative source.

MSCI Inc. (NYSE: MSCI) reported first quarter 2024 results on April 23, 2024, with operating revenues of $680.0 million^a, up 14.8%, and organic operating revenue growth of 10.3%.

Operating income was $339.4 million^b, up 7.9%, and net income was $256.0 million, up 7.2%. Diluted EPS was $3.22, up 8.4%, and Adjusted EPS was $3.52, up 12.1%. Adjusted EBITDA was $383.6 million, up 11.3%, with an adjusted EBITDA margin of 56.4%, compared to 58.2% a year earlier.

Operating margin declined to 49.9%^c from 53.1%, reflecting total operating expenses up 22.7%, driven by higher compensation tied to headcount growth and recent acquisitions. Growth was led by asset-based fees, which rose 12.9% on record AUM in MSCI-linked index products. Recurring subscription revenues rose 15.2%, but the Retention Rate fell to 92.8% from 95.2%, with management attributing elevated cancels to a concentration of unusual client events, including a large banking merger, and stating it does not expect that level of cancels to continue.

Analytics delivered its highest first quarter in a decade for new recurring sales, according to management. MSCI generated free cash flow of $275.9 million^d and paid approximately $126.8 million in dividends during the quarter. The Board declared a $1.60 per share cash dividend for second quarter 2024.

Full-year 2024 guidance includes operating expense of $1,300 to $1,340 million, adjusted EBITDA expense of $1,130 to $1,160 million, and free cash flow of $1,225 to $1,285 million. Total debt was $4.5 billion, with a debt to adjusted EBITDA ratio of 2.9x, and the company seeks to maintain a target range of 3.0x to 3.5x.

02—Key points

Key Highlights

Operating revenues of $680.0 million, up 14.8%; organic operating revenue growth of 10.3%
Asset-based fees up 12.9%, driven by higher AUM in ETFs linked to MSCI equity indexes; ETF AUM period-end reached $1,582.6 billion
Retention Rate declined to 92.8% from 95.2%, with management citing elevated cancels from a concentrated set of client events, including a large banking merger
Operating margin fell to 49.9% from 53.1% as total operating expenses rose 22.7%, largely from compensation tied to headcount growth and acquisitions
Diluted EPS of $3.22, up 8.4%; Adjusted EPS of $3.52, up 12.1%
Free cash flow of $275.9 million, up 13.7%; $126.8 million paid in dividends during the quarter
Full-year 2024 guidance: operating expense of $1,300 to $1,340 million and free cash flow of $1,225 to $1,285 million; Board declared a $1.60 per share dividend for Q2 2024

03—Questions

Frequently Asked Questions

How did MSCI's revenue perform in the first quarter of 2024?
Operating revenues were $680.0 million, up 14.8%, and organic operating revenue growth was 10.3%. Recurring subscription revenues rose 15.2% and asset-based fees rose 12.9%. The filing attributes the increase to higher recurring subscription revenues ($67.8 million), asset-based fees ($17.1 million) and non-recurring revenues ($2.8 million).
Why did MSCI's operating margin decline?
Operating margin was 49.9%, compared with 53.1% in the prior-year quarter. Total operating expenses rose 22.7% to $340.6 million, including $35.1 million associated with Private Capital Solutions, Carbon Markets and Fabric. Adjusted EBITDA expenses increased 19.8%, primarily reflecting higher compensation and benefits costs from headcount growth and recent acquisitions.
What drove the decline in MSCI's Retention Rate?
The Retention Rate was 92.8%, compared with 95.2% in the first quarter of 2023. Approximately $7.0 million of cancels related to one client event tied to the merger of banking clients. Management said most cancels were due to corporate events, such as organizations closing, shutting funds, restructuring or downsizing, and that it does not expect this level of cancels to continue.
What is MSCI's capital allocation outlook?
The Board declared a cash dividend of $1.60 per share for the second quarter of 2024, payable May 31, 2024. Approximately $0.8 billion remained available under the outstanding share repurchase authorization as of April 22, 2024. Total debt principal was $4.5 billion, with a debt to adjusted EBITDA ratio of 2.9x against a target range of 3.0x to 3.5x.
What is MSCI's full-year 2024 guidance?
Guidance calls for operating expense of $1,300 to $1,340 million, adjusted EBITDA expense of $1,130 to $1,160 million, interest expense of $185 to $189 million, depreciation and amortization of $170 to $180 million, an effective tax rate of 18% to 21%, capital expenditures of $95 to $105 million, net cash provided by operating activities of $1,330 to $1,380 million, and free cash flow of $1,225 to $1,285 million.

04—Continue

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