MSCI Inc. (NYSE: MSCI), a leading provider of critical decision
support tools and services for the global investment community,
today announced results for the three months ended June 30, 2019
(“second quarter 2019”) and six months ended June 30, 2019 (“six
months 2019”).
Financial and Operational Highlights for Second Quarter
2019 (Note: Percentage and other changes refer to second
quarter 2018 unless otherwise noted.)
- Organic subscription Run Rate growth of 10.1%; Index up
11.1%, Analytics up 6.8% and All Other up 19.7%.
- Operating revenues up 6.2% with recurring subscription
revenues up 8.4%, asset-based fees and non-recurring revenues
together up 0.1%.
- Organic operating revenue growth was 8.2% with organic
recurring subscription revenue growth of 11.0%.
- Diluted EPS of $1.47, up 14.8%; Adjusted EPS of $1.54, up
18.5%.
- Quarterly Retention Rate at 95.5%, highest over the last
decade.
- Board of Directors (“Board”) approved a 17.2% increase to
quarterly dividend to $0.68 per share payable in the third quarter
of 2019; payout ratio target maintained at a range of 40% to 50% of
Adjusted EPS.
Three Months Ended
Six Months Ended
In thousands,
June 30,
June 30,
Mar. 31,
YoY %
June 30,
June 30,
YoY %
except per share data
(unaudited)
2019
2018
2019
Change
2019
2018
Change
Operating revenues
$
385,558
$
363,046
$
371,381
6.2
%
$
756,939
$
714,362
6.0
%
Operating income
$
192,378
$
173,511
$
162,675
10.9
%
$
355,053
$
340,677
4.2
%
Operating margin %
49.9
%
47.8
%
43.8
%
46.9
%
47.7
%
Net income
$
125,690
$
116,829
$
178,192
7.6
%
$
303,882
$
231,921
31.0
%
Diluted EPS
$
1.47
$
1.28
$
2.08
14.8
%
$
3.55
$
2.52
40.9
%
Adjusted EPS
$
1.54
$
1.30
$
1.55
18.5
%
$
3.09
$
2.61
18.4
%
Adjusted EBITDA
$
211,796
$
200,425
$
197,707
5.7
%
$
409,503
$
387,134
5.8
%
Adjusted EBITDA margin %
54.9
%
55.2
%
53.2
%
54.1
%
54.2
%
“Our Run Rate, recurring net new sales, and retention rate all
reached record levels for the first half of the year as clients
turn to MSCI’s offerings to help them better achieve their
objectives and operate more efficiently. This is reflected by some
significant client wins and momentum across client segments and
geographies,” commented Henry A. Fernandez, Chairman and CEO of
MSCI.
“We are only scratching the surface of what is possible in key
growth areas such as ESG, factors, fixed income, wealth management,
index derivatives and private assets. We see enormous growth
opportunities in front of us, and our strong performance in the
first half of 2019 amid a rapidly transforming industry is a
testament to the value we bring to the global investment
community,” added Mr. Fernandez.
Second Quarter 2019 Consolidated
Results
Revenues: Operating revenues
for second quarter 2019 increased $22.5 million, or 6.2%, to $385.6
million, compared to the three months ended June 30, 2018 (“second
quarter 2018”). The $22.5 million increase in operating revenues
was driven by a $22.4 million, or 8.4%, increase in recurring
subscriptions (driven primarily by a $12.5 million, or 10.5%,
increase in Index, a $4.2 million, or 24.9%, increase in ESG, and a
$4.2 million, or 3.5%, increase in Analytics). Asset-based fees and
non-recurring revenues were relatively flat compared to second
quarter 2018. Organic operating revenue growth was 8.2%, with
organic recurring subscriptions revenue growth of 11.0%, organic
non-recurring revenue growth of 4.8% and organic asset-based fee
growth of 0.2%.
For six months 2019, operating revenues increased $42.6 million,
or 6.0%, to $756.9 million, compared to $714.4 million for the six
months ended June 30, 2018 (“six months 2018”). The $42.6 million
increase was driven by a $44.0 million, or 8.3%, increase in
recurring subscriptions and $2.2 million, or 16.0%, increase in
non-recurring revenues, partially offset by a $3.6 million, or
2.1%, decrease in asset-based fees. For six months 2019, organic
operating revenue growth was 8.4%, with organic recurring
subscriptions revenue growth of 11.6%, organic non-recurring
revenue growth of 21.1% and organic asset-based fee decline of
2.0%.
Run Rate: Total Run Rate at
June 30, 2019 grew by $106.0 million, or 7.5%, to $1,517.7 million,
compared to June 30, 2018. The $106.0 million increase was driven
by an $88.2 million, or 8.1%, increase in recurring subscription
Run Rate to $1,172.6 million, and a $17.8 million, or 5.4%,
increase in asset-based fees Run Rate to $345.1 million. Organic
subscription Run Rate growth of 10.1% in second quarter 2019 was
driven by strong growth in the Index and ESG segments and in the
Analytics segment’s Multi-Asset Class and Equity Analytics
products. Retention Rate was 95.5% in second quarter 2019, our
highest quarterly retention rate over the last decade, compared to
94.1% in second quarter 2018.
Expenses: Total operating
expenses for second quarter 2019 increased $3.6 million, or 1.9%,
to $193.2 million compared to second quarter 2018, driven mainly by
an $8.2 million, or 7.1%, increase in compensation and benefits
costs and a $2.9 million, or 6.3%, increase in non-compensation
costs, partially offset by a $7.9 million non-cash charge in second
quarter 2018 related to the write-off of the IPD tradename used by
the Real Estate segment. The compensation and benefits costs
increase is primarily attributable to higher incentive compensation
and benefit costs. The non-compensation costs increase is primarily
attributable to higher travel and entertainment costs, professional
fees, information technology costs and miscellaneous expenses,
partially offset by lower non-income taxes.
Adjusted EBITDA expenses for second quarter 2019 increased $11.1
million, or 6.9%, to $173.8 million, compared to second quarter
2018. Total operating expenses excluding the impact of foreign
currency exchange rate fluctuations (“ex-FX”) and adjusted EBITDA
expenses ex-FX for second quarter 2019 increased 3.7% and 8.9%,
respectively, compared to second quarter 2018.
For six months 2019, total operating expenses increased $28.2
million, or 7.5%, to $401.9 million. Adjusted EBITDA expenses
increased $20.2 million, or 6.2%, to $347.4 million compared to six
months 2018. Total operating expenses and adjusted EBITDA expenses
ex-FX for six months 2019 increased 10.0% and 8.9%, respectively,
compared to six months 2018.
Headcount: As of June 30,
2019, there were 3,266 employees, up 6.7% from 3,062 as of June 30,
2018, and up 2.7% from 3,179 as of March 31, 2019. The 6.7%
year-over-year increase in employees was primarily driven by
increased headcount in emerging market centers and in areas related
to technology, data and content services and research. As of June
30, 2019, a total of 37.2% and 62.8% of employees were located in
developed market and emerging market centers, respectively,
compared to 40.2% in developed market centers and 59.8% in emerging
market centers as of June 30, 2018.
Amortization and Depreciation
Expenses: Amortization and depreciation expenses
decreased $7.5 million, or 27.9%, to $19.4 million, compared to
second quarter 2018, primarily as a result of lower amortization
from the write-off of the IPD tradename used by the Real Estate
segment in second quarter 2018 and the impact of the Investor Force
Holdings, Inc. ("InvestorForce") divestiture in October 2018,
partially offset by higher amortization of internally developed
capitalized software. For six months 2019, amortization and
depreciation expenses of $39.1 million decreased by $7.4 million,
or 15.9%, compared to six months 2018.
Other Expense (Income), Net:
Other expense (income), net increased $15.4 million, or 89.9%, to
$32.6 million, compared to second quarter 2018, primarily due to
the gain realized in second quarter 2018 from the divestiture of
Financial Engineering Associates, Inc. (“FEA”), coupled with higher
interest expense associated with higher outstanding debt. For six
months 2019, other expense (income), net increased $22.1 million,
or 49.2%, to $67.0 million, compared to six months 2018.
Income Taxes: Income tax
expense was $34.1 million for second quarter 2019, compared to
$39.5 million for second quarter 2018. The effective tax rates were
21.3% and 25.3% for second quarter 2019 and second quarter 2018,
respectively. The decline was primarily due to a beneficial
geographic mix of earnings and lower anticipated taxes on
repatriation of foreign earnings. For second quarter 2019, there
were certain discrete items totaling $0.8 million, including $1.2
million of excess tax benefits on share-based compensation.
For six months 2019, there was an income tax benefit of $15.8
million, compared to an income tax expense of $63.8 million for six
months 2018. The effective tax rates were a negative 5.5% and 21.6%
for six months 2019 and six months 2018, respectively. The lower
effective tax rate compared to six months 2018 was driven by the
income tax benefit (the "PSU windfall benefit") related to the
vesting of the multi-year restricted stock units ("PSUs") granted
in 2016 to certain senior executives that are subject to the
achievement of multi-year total shareholder return targets, which
are performance targets with a market condition ("Multi-Year
PSUs"), a beneficial geographic mix of earnings and other discrete
items. The PSU windfall benefit totaled $66.6 million in the three
months ended March 31, 2019 (“first quarter 2019”) and is excluded
from both the adjusted net income and adjusted EPS measures for six
months 2019. Excluding the PSU windfall benefit, the six months
2019 adjusted tax rate was 17.6%.
Net Income: Net income
increased 7.6% to $125.7 million in second quarter 2019, compared
to $116.8 million in second quarter 2018. For six months 2019, net
income increased 31.0% to $303.9 million, compared to $231.9
million for six months 2018.
Adjusted EBITDA: Adjusted
EBITDA was $211.8 million in second quarter 2019, up $11.4 million,
or 5.7%, from second quarter 2018. Adjusted EBITDA margin in second
quarter 2019 was 54.9%, compared to 55.2% in second quarter 2018.
For six months 2019, adjusted EBITDA was $409.5 million, up 5.8%
from six months 2018, and adjusted EBITDA margin was 54.1% for six
months 2019, compared to 54.2% for six months 2018.
Cash Balances and Outstanding
Debt: Total cash and cash equivalents as of June 30,
2019 was $771.1 million. MSCI seeks to maintain minimum cash
balances globally of approximately $200.0 million to $250.0 million
for general operating purposes.
Total outstanding debt as of June 30, 2019 was $2,600.0 million,
which excludes deferred financing fees of $22.7 million. Net debt,
defined as total outstanding debt less cash and cash equivalents,
was $1,828.9 million as of June 30, 2019. The total debt to
operating income ratio (based on trailing twelve months operating
income) was 3.7x. The total debt to adjusted EBITDA ratio (based on
trailing twelve months adjusted EBITDA) was 3.3x, which is within
the stated gross leverage to adjusted EBITDA target range of 3.0x
to 3.5x.
Cash Flow and Capex: Net
cash provided by operating activities was $189.5 million in second
quarter 2019, compared to $207.2 million in second quarter 2018 and
$87.9 million in the first quarter 2019. Capex for second quarter
2019 was $12.4 million, compared to $7.2 million in second quarter
2018 and $8.1 million in first quarter 2019. Free cash flow was
$177.1 million in second quarter 2019, compared to $200.0 million
in second quarter 2018 and $79.7 million in first quarter 2019. The
increase in net cash provided by operating activities compared to
first quarter 2019 was driven primarily by lower payments of cash
expenses (primarily related to the impact of the annual cash
incentives paid in the first quarter), partially offset by higher
income tax payments and lower cash collections. The increase in
free cash flow, compared to first quarter 2019, was driven by the
higher net cash provided by operating activities described in the
preceding sentence, partially offset by higher Capex. The decrease
in net cash provided by operating activities, compared to second
quarter 2018, was driven primarily by higher payments of cash
expenses, interest payments and lower cash collections, partially
offset by lower payments of income taxes. The decrease in free cash
flow, compared to second quarter 2018, was driven by the lower net
cash provided by operating activities described in the preceding
sentence as well as higher Capex.
Net cash provided by operating activities was $277.3 million for
six months 2019, compared to $295.8 million for six months 2018.
Capex for six months 2019 was $20.5 million, compared to $13.1
million for six months 2018. Free cash flow was $256.8 million for
six months 2019, compared to $282.7 million for six months 2018.
The decrease in net cash provided by operating activities for six
months 2019 compared to the same period of the prior year was
primarily driven by higher payments of cash expenses and interest
payments, partially offset by higher cash collections and lower
payments of income taxes. The decrease in free cash flow for six
months 2019, compared to the same period of the prior year, was
driven by the lower net cash provided by operating activities
described in the preceding sentence as well as higher Capex.
Share Count and Capital
Return: The weighted average diluted shares outstanding
in second quarter 2019 declined 6.8% to 85.4 million, compared to
91.6 million in second quarter 2018. In six months 2019, a total of
0.7 million shares were repurchased at an average price of $147.97
per share for a total value of $102.1 million, with no repurchases
in second quarter 2019. A total of $0.7 billion remains on the
outstanding share repurchase authorization as of July 30, 2019.
Total shares outstanding as of June 30, 2019 was 84.7 million.
On July 30, 2019, the Board declared a cash dividend of $0.68
per share for third quarter 2019, representing an increase of 17.2%
from $0.58 per share in the previous quarter. The third quarter
2019 dividend is payable on August 30, 2019 to shareholders of
record as of the close of trading on August 16, 2019.
Table 1: Results by Segment (unaudited)
Index
Analytics
All Other
Adjusted
Adjusted
Adjusted
Operating
Adjusted
EBITDA
Operating
Adjusted
EBITDA
Operating
Adjusted
EBITDA
In thousands
Revenues
EBITDA
Margin
Revenues
EBITDA
Margin
Revenues
EBITDA
Margin
2Q'19
$
225,550
$
163,915
72.7
%
$
123,681
$
39,071
31.6
%
$
36,327
$
8,810
24.3
%
2Q'18
$
212,934
$
157,516
74.0
%
$
119,119
$
36,327
30.5
%
$
30,993
$
6,582
21.2
%
1Q'19
$
214,773
$
152,211
70.9
%
$
121,435
$
36,398
30.0
%
$
35,173
$
9,098
25.9
%
YoY % change
5.9
%
4.1
%
3.8
%
7.6
%
17.2
%
33.8
%
YTD 2019
$
440,323
$
316,126
71.8
%
$
245,116
$
75,469
30.8
%
$
71,500
$
17,908
25.0
%
YTD 2018
$
414,848
$
303,446
73.1
%
$
238,106
$
69,920
29.4
%
$
61,408
$
13,768
22.4
%
% change
6.1
%
4.2
%
2.9
%
7.9
%
16.4
%
30.1
%
Index Segment: Operating
revenues for second quarter 2019 increased $12.6 million, or 5.9%,
to $225.6 million, compared to second quarter 2018. The increase
was driven by a $12.5 million, or 10.5%, increase in recurring
subscriptions. Non-recurring revenues and asset-based fees were
flat compared to second quarter 2018. The increase in recurring
subscriptions was driven by strong growth in core products, factor
and ESG index products and custom index products.
Revenues from asset-based fees of $87.7 million were flat, with
a $0.7 million, or 19.5%, increase in revenues from exchange traded
futures and options contracts based on MSCI indexes, offset by a
$0.6 million, or 0.9%, decline in revenues from exchange traded
funds (“ETFs”) linked to MSCI indexes and a $0.1 million, or 0.3%,
decline in revenues from non-ETF passive funds linked to MSCI
indexes. The increase in revenues from futures and options was
primarily driven by the increase in total trading volumes. The
decrease in revenues from ETFs linked to MSCI indexes was driven by
a decline in average basis point fees resulting primarily from a
change in product mix, partially offset by a 4.5% increase in
average assets under management (“AUM”).
The adjusted EBITDA margin for Index was 72.7% for second
quarter 2019, compared to 74.0% for second quarter 2018.
Operating revenues for six months 2018 increased $25.5 million,
or 6.1%, to $440.3 million, compared to $414.8 million for six
months 2018. The $25.5 million increase was driven by a $27.0
million, or 11.6%, increase in recurring subscriptions and a $2.1
million, or 23.2%, increase in non-recurring revenues, partially
offset by a $3.6 million, or 2.1%, decline in asset-based fees. The
adjusted EBITDA margin for Index was 71.8% for six months 2019,
compared to 73.1% for six months 2018.
Index Run Rate at June 30, 2019 grew by $71.0 million, or 8.8%,
to $876.7 million, compared to June 30, 2018. The increase was
driven by a $53.2 million, or 11.1%, increase in recurring
subscription Run Rate, and a $17.8 million, or 5.4%, increase in
asset-based fees Run Rate. The 11.1% increase in Index recurring
subscription Run Rate was driven by strong growth in core developed
and emerging market modules, factor and ESG, and custom index
products. The growth was also supported by strong performance
across our asset management, banking, hedge funds, wealth
management and asset owner client segments. The increase in
asset-based fees Run Rate was primarily driven by higher AUM in
ETFs linked to MSCI indexes, as well as an increase in non-ETF
passive funds linked to MSCI indexes and higher volume in futures
and options.
Analytics Segment: Operating
revenues for second quarter 2019 increased $4.6 million, or 3.8%,
to $123.7 million, compared to second quarter 2018, primarily
driven by growth in both Multi-Asset Class and Equity Analytics
products and the timing of client implementations, partially offset
by the divestiture of InvestorForce. Organic operating revenue
growth was 8.6%. The adjusted EBITDA margin for Analytics was 31.6%
for second quarter 2019, compared to 30.5% for second quarter
2018.
Operating revenues for six months 2019 increased $7.0 million,
or 2.9%, to $245.1 million, compared to $238.1 million for six
months 2018. Organic operating revenue growth was 8.9%. The
adjusted EBITDA margin for Analytics was 30.8% for six months 2019,
compared to 29.4% for six months 2018.
Analytics Run Rate at June 30, 2019 grew by $14.0 million, or
2.9%, to $504.0 million, compared to June 30, 2018, primarily
driven by growth in both Multi-Asset Class and Equity Analytics
products, partially offset by the removal of Run Rate associated
with InvestorForce, which was divested in October 2018. Analytics
organic subscription Run Rate growth was 6.8% compared to June 30,
2018.
All Other Segment: Operating
revenues for second quarter 2019 increased $5.3 million, or 17.2%,
to $36.3 million, compared to second quarter 2018. The increase in
All Other operating revenues was driven by a $4.1 million, or
24.0%, increase in ESG operating revenues to $21.4 million, coupled
with a $1.2 million, or 8.7%, increase in Real Estate operating
revenues to $14.9 million. The increase in ESG operating revenues
was driven by strong growth in ESG Ratings products and ESG
Screening product revenues, as we continue to see strong demand
across all client segments and new use cases. The increase in Real
Estate operating revenues was primarily driven by strong growth in
our Global Intel product offering, partially offset by the
unfavorable impact of foreign currency exchange rate fluctuations.
Second quarter 2019 All Other organic operating revenue growth was
21.9%, with ESG organic operating revenue growth of 27.3% and Real
Estate organic operating revenue growth of 15.0%. The adjusted
EBITDA margin for All Other was 24.2% for second quarter 2019,
compared to 21.2% for second quarter 2018.
Operating revenues for six months 2019 increased $10.1 million,
or 16.4%, to $71.5 million, compared to $61.4 million for six
months 2018. The increase in All Other revenues was driven by a
$9.3 million, or 27.4%, increase in ESG revenues to $43.0 million,
and a $0.8 million, or 3.0%, increase in Real Estate revenues to
$28.5 million. All Other organic operating revenue growth for six
months 2019 was 21.4%, with ESG organic operating revenue growth of
30.7% and Real Estate organic operating revenue growth of 10.0%.
The adjusted EBITDA margin for All Other was 25.0% for six months
2019, compared to 22.4% for six months 2018.
All Other Run Rate at June 30, 2019 grew by $21.0 million, or
18.1%, to $137.0 million, compared to June 30, 2018. The increase
was driven by a $17.4 million, or 24.3%, increase in ESG Run Rate
to $88.9 million, and a $3.7 million, or 8.2%, increase in Real
Estate Run Rate to $48.1 million. The increase in ESG Run Rate was
primarily driven by strong growth in ESG Ratings products and an
increase in ESG Screening products. The increase in Real Estate Run
Rate was primarily driven by growth in Global Intel products. All
Other organic subscription Run Rate growth was 19.7%, with organic
ESG Run Rate growth of 25.2%, and organic Real Estate Run Rate
growth of 10.7%, each compared to June 30, 2018.
Full-Year 2019 Guidance
MSCI’s guidance for full-year 2019 is as follows:
- Total operating expenses are expected to be in the range of
$775 million to $800 million.
- Adjusted EBITDA expenses1 are expected to be in the range of
$685 million to $705 million.
- Interest expense, including the amortization of financing fees,
is expected to be approximately $144 million, assuming no
additional financings.
- Capex is expected to be in the range of $45 million to $55
million.
- Net cash provided by operating activities and free cash flow
are expected to be in the ranges of $600 million to $630 million
and $545 million to $585 million, respectively.
- The effective tax rate2 is now expected to be in the range of
8.0% to 11.0%.
1Excludes the payroll tax impact from the vesting in first
quarter 2019 of the Multi-Year PSUs. 2Includes the PSU windfall
benefit which is expected to reduce the 2019 effective tax rate by
~11 percentage points. The previous effective tax rate guidance was
expected to be in the range of 9.0% to 12.0%.
Conference Call Information
MSCI's senior management will review the second quarter 2019
results on Thursday, August 1, 2019 at 11:00 AM Eastern Time. To
listen to the live event, visit the events and presentations
section of MSCI's Investor Relations homepage,
http://ir.msci.com/events.cfm, or dial 1-877-376-9931 conference
ID: 7743929 within the United States. International callers dial
1-720-405-2251 conference ID: 7743929. The earnings release, second
quarter update and related investor presentation used during the
conference call will be made available on MSCI's Investor Relations
homepage.
An audio recording of the conference call will be available on
our Investor Relations website, http://ir.msci.com/events.cfm,
beginning approximately two hours after the conclusion of the live
event. Through August 4, 2019, the recording will also be available
by dialing 1-855-859-2056 conference ID: 7743929 within the United
States or 1-404-537-3406 conference ID: 7743929 for international
callers. A replay of the conference call will be archived in the
events and presentations section of MSCI's Investor Relations
website for 12 months after the call.
About MSCI Inc.
MSCI is a leading provider of critical decision support tools
and services for the global investment community. With over 45
years of expertise in research, data and technology, we power
better investment decisions by enabling clients to understand and
analyze key drivers of risk and return and confidently build more
effective portfolios. We create industry-leading, research-enhanced
solutions that clients use to gain insight into and improve
transparency across the investment process.
To learn more, please visit www.msci.com. MSCI#IR
Forward-Looking Statements
This earnings release contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of
1995, including without limitation, MSCI’s full-year 2019 guidance.
These forward-looking statements relate to future events or to
future financial performance and involve known and unknown risks,
uncertainties and other factors that may cause our actual results,
levels of activity, performance or achievements to be materially
different from any future results, levels of activity, performance
or achievements expressed or implied by these statements. In some
cases, you can identify forward-looking statements by the use of
words such as “may,” “could,” “expect,” “intend,” “plan,” “seek,”
“anticipate,” “believe,” “estimate,” “predict,” “potential” or
“continue,” or the negative of these terms or other comparable
terminology. You should not place undue reliance on forward-looking
statements because they involve known and unknown risks,
uncertainties and other factors that are, in some cases, beyond
MSCI’s control and that could materially affect actual results,
levels of activity, performance or achievements.
Other factors that could materially affect actual results,
levels of activity, performance or achievements can be found in
MSCI’s Annual Report on Form 10-K for the fiscal year ended
December 31, 2018 filed with the Securities and Exchange Commission
(“SEC”) on February 22, 2019 and in quarterly reports on Form 10-Q
and current reports on Form 8-K filed or furnished with the SEC. If
any of these risks or uncertainties materialize, or if MSCI’s
underlying assumptions prove to be incorrect, actual results may
vary significantly from what MSCI projected. Any forward-looking
statement in this earnings release reflects MSCI’s current views
with respect to future events and is subject to these and other
risks, uncertainties and assumptions relating to MSCI’s operations,
results of operations, growth strategy and liquidity. MSCI assumes
no obligation to publicly update or revise these forward-looking
statements for any reason, whether as a result of new information,
future events, or otherwise, except as required by law.
Website and Social Media Disclosure
MSCI uses its website, including its second quarter update,
blog, podcasts and social media channels, including its corporate
Twitter account (@MSCI_Inc), as channels of distribution of company
information. The information we post through these channels may be
deemed material. Accordingly, investors should monitor these
channels, in addition to following our press releases, SEC filings
and public conference calls and webcasts. In addition, you may
automatically receive email alerts and other information about MSCI
when you enroll your email address by visiting the “Email Alerts
Subscription” section of MSCI’s Investor Relations homepage at
http://ir.msci.com/email-alerts. The contents of MSCI’s website,
including its second quarter update, blog, podcasts and social
media channels are not, however, incorporated by reference into
this earnings release.
Notes Regarding the Use of Operating Metrics
MSCI has presented supplemental key operating metrics as part of
this earnings release, including Run Rate, subscription sales and
cancellations, non-recurring sales and Retention Rate.
Retention Rate is an important metric because subscription
cancellations decrease our Run Rate and ultimately our operating
revenues over time. The annual Retention Rate represents the
retained subscription Run Rate (subscription Run Rate at the
beginning of the fiscal year less actual cancels during the year)
as a percentage of the subscription Run Rate at the beginning of
the fiscal year.
The Retention Rate for a non-annual period is calculated by
annualizing the cancellations for which we have received a notice
of termination or for which we believe there is an intention not to
renew during the non-annual period, and we believe that such notice
or intention evidences the client’s final decision to terminate or
not renew the applicable agreement, even though such notice is not
effective until a later date. This annualized cancellation figure
is then divided by the subscription Run Rate at the beginning of
the fiscal year to calculate a cancellation rate. This cancellation
rate is then subtracted from 100% to derive the annualized
Retention Rate for the period.
Retention Rate is computed by operating segment on a
product/service-by-product/service basis. In general, if a client
reduces the number of products or services to which it subscribes
within a segment, or switches between products or services within a
segment, we treat it as a cancellation for purposes of calculating
our Retention Rate except in the case of a product or service
switch that management considers to be a replacement product or
service. In those replacement cases, only the net change to the
client subscription, if a decrease, is reported as a cancel. In the
Analytics and the ESG segments, substantially all product or
service switches are treated as replacement products or services
and netted in this manner, while in our Index and Real Estate
segments, product or service switches that are treated as
replacement products or services and receive netting treatment
occur only in certain limited instances. In addition, we treat any
reduction in fees resulting from a down-sale of the same product or
service as a cancellation to the extent of the reduction. We do not
calculate Retention Rate for that portion of our Run Rate
attributable to assets in index-linked investment products or
futures and options contracts, in each case, linked to our
indexes.
Run Rate estimates at a particular point in time the annualized
value of the recurring revenues under our client license agreements
(“Client Contracts”) for the next 12 months, assuming all Client
Contracts that come up for renewal are renewed and assuming
then-current currency exchange rates, subject to the adjustments
and exclusions described below. For any Client Contract where fees
are linked to an investment product’s assets or trading
volume/fees, the Run Rate calculation reflects, for ETFs, the
market value on the last trading day of the period, for futures and
options, the most recent quarterly volumes and/or reported exchange
fees, and for other non-ETF products, the most recent
client-reported assets. Run Rate does not include fees associated
with “one-time” and other non-recurring transactions. In addition,
we add to Run Rate the annualized fee value of recurring new sales,
whether to existing or new clients, when we execute Client
Contracts, even though the license start date, and associated
revenue recognition, may not be effective until a later date. We
remove from Run Rate the annualized fee value associated with
products or services under any Client Contract with respect to
which we have received a notice of termination or non-renewal
during the period and have determined that such notice evidences
the client’s final decision to terminate or not renew the
applicable products or services, even though such notice is not
effective until a later date.
“Organic subscription Run Rate growth” is defined as the period
over period Run Rate growth, excluding the impact of changes in
foreign currency and the first year impact of any acquisitions. It
is also adjusted for divestitures. Changes in foreign currency are
calculated by applying the currency exchange rate from the
comparable prior period to current period foreign currency
denominated Run Rate.
Notes Regarding the Use of Non-GAAP Financial
Measures
MSCI has presented supplemental non-GAAP financial measures as
part of this earnings release. Reconciliations are provided in
Tables 9 through 15 below that reconcile each non-GAAP financial
measure with the most comparable GAAP measure. The non-GAAP
financial measures presented in this earnings release should not be
considered as alternative measures for the most directly comparable
GAAP financial measures. The non-GAAP financial measures presented
in this earnings release are used by management to monitor the
financial performance of the business, inform business
decision-making and forecast future results.
“Adjusted EBITDA” is defined as net income before (1) provision
for income taxes, (2) other expense (income), net, (3) depreciation
and amortization of property, equipment and leasehold improvements,
(4) amortization of intangible assets and, at times, (5) certain
other transactions or adjustments, including the impact related to
the vesting of the Multi-Year PSUs.
“Adjusted EBITDA expenses” is defined as operating expenses less
depreciation and amortization of property, equipment and leasehold
improvements and amortization of intangible assets and, at times,
certain other transactions or adjustments, including the impact
related to the vesting of the Multi-Year PSUs.
“Adjusted net income” and “adjusted EPS” are defined as net
income and diluted EPS, respectively, before the after-tax impact
of the amortization of acquired intangible assets, the impact of
divestitures, the impact of adjustments for the Tax Cuts and Jobs
Act that was enacted on December 22, 2017 (“Tax Reform”), except
for amounts associated with active tax planning implemented as a
result of Tax Reform, and, at times, certain other transactions or
adjustments, including the impact related to the vesting of the
Multi-Year PSUs.
“Adjusted tax rate” is defined as the effective tax rate
excluding the impact of Tax Reform adjustments (except for amounts
associated with active tax planning implemented as a result of Tax
Reform) and the impact related to the vesting of the Multi-Year
PSUs.
“Capex” is defined as capital expenditures plus capitalized
software development costs.
“Free cash flow” is defined as net cash provided by operating
activities, less Capex.
“Organic operating revenue growth” is defined as operating
revenue growth compared to the prior year period excluding the
impact of acquired businesses, divested businesses and foreign
currency exchange rate fluctuations.
Asset-based fees ex-FX does not adjust for the impact from
foreign currency exchange rate fluctuations on the underlying
AUM.
We believe adjusted EBITDA and adjusted EBITDA expenses are
meaningful measures of the operating performance of MSCI because
they adjust for significant one-time, unusual or non-recurring
items as well as eliminate the accounting effects of capital
spending and acquisitions that do not directly affect what
management considers to be our core operating performance in the
period.
We believe adjusted net income and adjusted EPS are meaningful
measures of the performance of MSCI because they adjust for the
after-tax impact of significant one-time, unusual or non-recurring
items as well as eliminate the accounting effects of acquisitions
that do not directly affect what management considers to be our
core performance in the period.
We believe that adjusted tax rate is useful to investors because
it increases the comparability of period-to-period results by
adjusting for the estimated net impact of Tax Reform and the impact
related to the vesting of the Multi-Year PSUs.
We believe that free cash flow is useful to investors because it
relates the operating cash flow of MSCI to the capital that is
spent to continue and improve business operations, such as
investment in MSCI’s existing products. Further, free cash flow
indicates our ability to strengthen MSCI’s balance sheet, repay our
debt obligations, pay cash dividends and repurchase shares of our
common stock.
We believe organic operating revenue growth is a meaningful
measure of the operating performance of MSCI because it adjusts for
the impact of foreign currency exchange rate fluctuations and
excludes the impact of operating revenues attributable to acquired
and divested businesses for the comparable prior year period,
providing insight into our core operating performance for the
period(s) presented.
We believe that the non-GAAP financial measures presented in
this earnings release facilitate meaningful period-to-period
comparisons and provide a baseline for the evaluation of future
results.
Adjusted EBITDA expenses, adjusted EBITDA, adjusted net income,
adjusted EPS, adjusted tax rate, Capex, free cash flow and organic
operating revenue growth are not defined in the same manner by all
companies and may not be comparable to similarly-titled non-GAAP
financial measures of other companies. These measures can differ
significantly from company to company depending on, among other
things, long-term strategic decisions regarding capital structure,
the tax jurisdictions in which companies operate and capital
investments. Accordingly, the Company’s computation of these
measures may not be comparable to similarly titled measures
computed by other companies.
Notes Regarding Adjusting for the Impact of Foreign Currency
Exchange Rate Fluctuations
Foreign currency exchange rate fluctuations reflect the
difference between the current period results as reported compared
to the current period results recalculated using the foreign
currency exchange rates in effect for the comparable prior period.
While operating revenues adjusted for the impact of foreign
currency fluctuations includes asset-based fees that have been
adjusted for the impact of foreign currency fluctuations, the
underlying AUM, which is the primary component of asset-based fees,
is not adjusted for foreign currency fluctuations. Approximately
two-thirds of the AUM are invested in securities denominated in
currencies other than the U.S. dollar, and accordingly, any such
impact is excluded from the disclosed foreign currency adjusted
variances.
Table 2: Condensed Consolidated Statements of Income
(unaudited)
Three Months Ended
Six Months Ended
June 30,
June 30,
Mar. 31,
YoY %
June 30,
June 30,
YoY %
In thousands, except per share
data
2019
2018
2019
Change
2019
2018
Change
Operating revenues
$
385,558
$
363,046
$
371,381
6.2
%
$
756,939
$
714,362
6.0
%
Operating expenses:
Cost of revenues
71,975
71,368
82,346
0.9
%
154,321
142,672
8.2
%
Selling and marketing
51,657
47,416
56,048
8.9
%
107,705
93,825
14.8
%
Research and development
23,752
19,801
23,172
20.0
%
46,924
40,508
15.8
%
General and administrative
26,378
24,036
27,497
9.7
%
53,875
50,223
7.3
%
Amortization of intangible assets
12,013
19,537
11,793
(38.5
%)
23,806
30,875
(22.9
%)
Depreciation and amortization of
property,
equipment and leasehold improvements
7,405
7,377
7,850
0.4
%
15,255
15,582
(2.1
%)
Total operating expenses(1)
193,180
189,535
208,706
1.9
%
401,886
373,685
7.5
%
Operating income
192,378
173,511
162,675
10.9
%
355,053
340,677
4.2
%
Interest income
(3,345
)
(4,281
)
(4,086
)
(21.9
%)
(7,431
)
(7,051
)
5.4
%
Interest expense
35,915
31,761
35,915
13.1
%
71,830
61,321
17.1
%
Other expense (income)
63
(10,292
)
2,554
(100.6
%)
2,617
(9,354
)
(128.0
%)
Other expense (income), net
32,633
17,188
34,383
89.9
%
67,016
44,916
49.2
%
Income before provision for income
taxes
159,745
156,323
128,292
2.2
%
288,037
295,761
(2.6
%)
Provision for income taxes
34,055
39,494
(49,900
)
(13.8
%)
(15,845
)
63,840
(124.8
%)
Net income
$
125,690
$
116,829
$
178,192
7.6
%
$
303,882
$
231,921
31.0
%
Earnings per basic common share
$
1.48
$
1.31
$
2.11
13.0
%
$
3.60
$
2.59
39.0
%
Earnings per diluted common share
$
1.47
$
1.28
$
2.08
14.8
%
$
3.55
$
2.52
40.9
%
Weighted average shares outstanding
used
in computing earnings per share:
Basic
84,750
89,112
84,253
(4.9
%)
84,503
89,591
(5.7
%)
Diluted
85,393
91,586
85,649
(6.8
%)
85,522
92,084
(7.1
%)
(1) Includes stock-based compensation
expense of $11.5 million, $9.7 million, and $10.5 million for the
three months ended Jun. 30, 2019, Jun. 30, 2018, and Mar. 31, 2019,
respectively. Includes stock-based compensation expense of $22.0
million and $19.5 million for the six months ended Jun. 30, 2019
and Jun. 30, 2018, respectively.
Table 3: Selected Balance Sheet Items (unaudited)
As of
June 30,
June 30,
Dec. 31,
In thousands
2019
2018
2018
Cash and cash equivalents
$771,117
$1,367,596
$904,176
Accounts receivable, net of allowances
$438,313
$394,886
$473,433
Deferred revenue
$528,919
$483,229
$537,977
Long-term debt(1)
$2,577,273
$2,573,730
$2,575,502
(1) Consists of gross long-term debt, net
of deferred financing fees. Gross long-term debt at Jun. 30, 2019,
Jun. 30, 2018 and Dec. 31, 2018 was $2.6 billion.
Table 4: Selected Cash Flow Items (unaudited)
Three Months Ended
Six Months Ended
June 30,
June 30,
Mar. 31,
YoY %
June 30,
June 30,
YoY %
In thousands
2019
2018
2019
Change
2019
2018
Change
Net cash provided by operating
activities
$
189,470
$
207,165
$
87,875
(8.5
%)
$
277,345
$
295,762
(6.2
%)
Net cash (used in) provided by investing
activities
(12,391
)
13,805
(8,136
)
(189.8
%)
(20,527
)
7,933
n/m
Net cash (used in) provided by financing
activities
(49,914
)
304,416
(341,635
)
(116.4
%)
(391,549
)
178,358
n/m
Effect of exchange rate changes
1,171
(7,618
)
501
(115.4
%)
1,672
(3,959
)
(142.2
%)
Net increase (decrease) in cash and
cash equivalents
$
128,336
$
517,768
$
(261,395
)
(75.2
%)
$
(133,059
)
$
478,094
(127.8
%)
n/m: not meaningful.
Table 5: Operating Results by Segment and Revenue Type
(unaudited)
Index
Three Months Ended
Six Months Ended
June 30,
June 30,
Mar. 31,
YoY %
June 30,
June 30,
YoY %
In thousands
2019
2018
2019
Change
2019
2018
Change
Operating revenues:
Recurring subscriptions
$
132,145
$
119,626
$
127,674
10.5
%
$
259,819
$
232,831
11.6
%
Asset-based fees
87,733
87,636
81,808
0.1
%
169,541
173,119
(2.1
%)
Non-recurring
5,672
5,672
5,291
—%
10,963
8,898
23.2
%
Total operating revenues
225,550
212,934
214,773
5.9
%
440,323
414,848
6.1
%
Adjusted EBITDA expenses
61,635
55,418
62,562
11.2
%
124,197
111,402
11.5
%
Adjusted EBITDA
$
163,915
$
157,516
$
152,211
4.1
%
$
316,126
$
303,446
4.2
%
Adjusted EBITDA margin %
72.7
%
74.0
%
70.9
%
71.8
%
73.1
%
Analytics
Three Months Ended
Six Months Ended
June 30,
June 30,
Mar. 31,
YoY %
June 30,
June 30,
YoY %
In thousands
2019
2018
2019
Change
2019
2018
Change
Operating revenues:
Recurring subscriptions
$
121,699
$
117,528
$
120,110
3.5
%
$
241,809
$
235,772
2.6
%
Non-recurring
1,982
1,591
1,325
24.6
%
3,307
2,334
41.7
%
Total operating revenues
123,681
119,119
121,435
3.8
%
245,116
238,106
2.9
%
Adjusted EBITDA expenses
84,610
82,792
85,037
2.2
%
169,647
168,186
0.9
%
Adjusted EBITDA
$
39,071
$
36,327
$
36,398
7.6
%
$
75,469
$
69,920
7.9
%
Adjusted EBITDA margin %
31.6
%
30.5
%
30.0
%
30.8
%
29.4
%
All Other
Three Months Ended
Six Months Ended
June 30,
June 30,
Mar. 31,
YoY %
June 30,
June 30,
YoY %
In thousands
2019
2018
2019
Change
2019
2018
Change
Operating revenues:
Recurring subscriptions
$
35,305
$
29,584
$
34,580
19.3
%
$
69,885
$
58,951
18.5
%
Non-recurring
1,022
1,409
593
(27.5
%)
1,615
2,457
(34.3
%)
Total operating revenues
36,327
30,993
35,173
17.2
%
71,500
61,408
16.4
%
Adjusted EBITDA expenses
27,517
24,411
26,075
12.7
%
53,592
47,640
12.5
%
Adjusted EBITDA
$
8,810
$
6,582
$
9,098
33.8
%
$
17,908
$
13,768
30.1
%
Adjusted EBITDA margin %
24.3
%
21.2
%
25.9
%
25.0
%
22.4
%
Consolidated
Three Months Ended
Six Months Ended
June 30,
June 30,
Mar. 31,
YoY %
June 30,
June 30,
YoY %
In thousands
2019
2018
2019
Change
2019
2018
Change
Operating revenues:
Recurring subscriptions
$
289,149
$
266,738
$
282,364
8.4
%
$
571,513
$
527,554
8.3
%
Asset-based fees
87,733
87,636
81,808
0.1
%
169,541
173,119
(2.1
%)
Non-recurring
8,676
8,672
7,209
0.0
%
15,885
13,689
16.0
%
Operating revenues total
385,558
363,046
371,381
6.2
%
756,939
714,362
6.0
%
Adjusted EBITDA expenses
173,762
162,621
173,674
6.9
%
347,436
327,228
6.2
%
Adjusted EBITDA
$
211,796
$
200,425
$
197,707
5.7
%
$
409,503
$
387,134
5.8
%
Adjusted EBITDA margin %
54.9
%
55.2
%
53.2
%
54.1
%
54.2
%
Operating margin %
49.9
%
47.8
%
43.8
%
46.9
%
47.7
%
Table 6: Sales and Retention Rate by Segment
(unaudited)
Three Months Ended
Six Months Ended
June 30,
Mar. 31,
Dec. 31,
Sep. 30,
June 30,
June 30,
June 30,
In thousands
2019
2019
2018
2018
2018
2019
2018
Index
New recurring subscription sales
$
19,526
$
17,329
$
21,013
$
15,546
$
20,906
$
36,855
$
36,101
Subscription cancellations
(3,601
)
(4,366
)
(7,699
)
(4,428
)
(4,577
)
(7,967
)
(8,692
)
Net new recurring subscription sales
$
15,925
$
12,963
$
13,314
$
11,118
$
16,329
$
28,888
$
27,409
Non-recurring sales
$
5,982
$
5,081
$
6,845
$
7,097
$
5,328
$
11,063
$
8,787
Total gross sales(1)
$
25,508
$
22,410
$
27,858
$
22,643
$
26,234
$
47,918
$
44,888
Total Index net sales
$
21,907
$
18,044
$
20,159
$
18,215
$
21,657
$
39,951
$
36,196
Index Retention Rate(2)
97.1
%
96.5
%
93.2
%
96.1
%
95.9
%
96.8
%
96.1
%
Analytics
New recurring subscription sales
$
13,669
$
12,751
$
19,438
$
16,797
$
17,395
$
26,420
$
28,752
Subscription cancellations
(7,102
)
(7,764
)
(8,524
)
(7,117
)
(9,452
)
(14,866
)
(18,030
)
Net new recurring subscription sales
$
6,567
$
4,987
$
10,914
$
9,680
$
7,943
$
11,554
$
10,722
Non-recurring sales
$
2,631
$
2,577
$
3,249
$
3,189
$
2,425
$
5,208
$
3,770
Total gross sales(1)
$
16,300
$
15,328
$
22,687
$
19,986
$
19,820
$
31,628
$
32,522
Total Analytics net sales
$
9,198
$
7,564
$
14,163
$
12,869
$
10,368
$
16,762
$
14,492
Analytics Retention Rate(2)
94.2
%
93.7
%
92.7
%
94.1
%
92.1
%
94.0
%
92.6
%
All Other
New recurring subscription sales
$
8,014
$
7,215
$
7,596
$
6,459
$
6,678
$
15,229
$
12,146
Subscription cancellations
(1,902
)
(1,275
)
(1,959
)
(1,547
)
(1,384
)
(3,177
)
(2,915
)
Net new recurring subscription sales
$
6,112
$
5,940
$
5,637
$
4,912
$
5,294
$
12,052
$
9,231
Non-recurring sales
$
630
$
454
$
1,194
$
641
$
909
$
1,084
$
1,603
Total gross sales(1)
$
8,644
$
7,669
$
8,790
$
7,100
$
7,587
$
16,313
$
13,749
Total All Other net sales
$
6,742
$
6,394
$
6,831
$
5,553
$
6,203
$
13,136
$
10,834
All Other Retention Rate(2)
93.9
%
95.9
%
92.8
%
94.3
%
94.9
%
94.9
%
94.6
%
Consolidated
New recurring subscription sales
$
41,209
$
37,295
$
48,047
$
38,802
$
44,979
$
78,504
$
76,999
Subscription cancellations
(12,605
)
(13,405
)
(18,182
)
(13,092
)
(15,413
)
(26,010
)
(29,637
)
Net new recurring subscription sales
$
28,604
$
23,890
$
29,865
$
25,710
$
29,566
$
52,494
$
47,362
Non-recurring sales
$
9,243
$
8,112
$
11,288
$
10,927
$
8,662
$
17,355
$
14,160
Total gross sales(1)
$
50,452
$
45,407
$
59,335
$
49,729
$
53,641
$
95,859
$
91,159
Total net sales
$
37,847
$
32,002
$
41,153
$
36,637
$
38,228
$
69,849
$
61,522
Total Retention Rate(2)
95.5
%
95.2
%
92.9
%
95.0
%
94.1
%
95.4
%
94.4
%
(1) Total gross sales equal new recurring
subscription sales plus non-recurring sales.
(2) See "Notes Regarding the Use of
Operating Metrics" for details regarding the definition of
Retention Rate.
Table 7: AUM in ETFs Linked to MSCI Indexes
(unaudited)(1)(2)(3)
Three Months Ended
Six Months Ended
June 30,
Mar. 31,
Dec. 31,
Sep. 30,
June 30,
June 30,
June 30,
In billions
2019
2019
2018
2018
2018
2019
2018
Beginning Period AUM in ETFs linked to
MSCI indexes
$
802.2
$
695.6
$
765.5
$
744.7
$
764.9
$
695.6
$
744.3
Market Appreciation/(Depreciation)
14.9
78.3
(94.7
)
15.6
(19.4
)
93.2
(31.1
)
Cash Inflows
2.2
28.3
24.8
5.2
(0.8
)
30.5
31.5
Period-End AUM in ETFs linked to
MSCI indexes
$
819.3
$
802.2
$
695.6
$
765.5
$
744.7
$
819.3
$
744.7
Period Average AUM in ETFs linked to
MSCI indexes
$
811.4
$
766.0
$
717.1
$
755.8
$
776.5
$
788.7
$
778.0
Avg. Basis Point Fee(4)
2.85
2.88
2.92
2.90
2.96
2.85
2.96
(1) The historical values of the AUM in
ETFs linked to our indexes as of the last day of the month and the
monthly average balance can be found under the link “AUM in ETFs
Linked to MSCI Indexes” on our Investor Relations homepage at
http://ir.msci.com. Information contained on our website is not
incorporated by reference into this Earnings Release or any other
report filed with the SEC. The AUM in ETFs numbers also include AUM
in Exchange Traded Notes, the value of which is less than 1.0% of
the AUM amounts presented.
(2) The values for periods prior to April
26, 2019 were based on data from Bloomberg and MSCI, while the
values for periods on or after April 26, 2019 were based on data
from Refinitiv and MSCI. De minimis amounts of data are
reported on a delayed basis.
(3) The value of AUM in ETFs linked to
MSCI indexes is calculated by multiplying the ETF net asset value
by the number of shares outstanding.
(4) Based on period-end Run Rate for ETFs
linked to MSCI indexes using period-end AUM.
Table 8: Run Rate by Segment and Type (unaudited)(1)
As of
June 30,
June 30,
Mar. 31,
YoY %
In thousands
2019
2018
2019
Change
Index
Recurring subscriptions
$
531,590
$
478,421
$
515,667
11.1
%
Asset-based fees
345,126
327,299
335,261
5.4
%
Index Run Rate
876,716
805,720
850,928
8.8
%
Analytics Run Rate
503,969
489,979
496,183
2.9
%
All Other Run Rate
137,045
116,021
130,979
18.1
%
Total Run Rate
$
1,517,730
$
1,411,720
$
1,478,090
7.5
%
Total recurring subscriptions
$
1,172,604
$
1,084,421
$
1,142,829
8.1
%
Total asset-based fees
345,126
327,299
335,261
5.4
%
Total Run Rate
$
1,517,730
$
1,411,720
$
1,478,090
7.5
%
(1) See "Notes Regarding the Use of
Operating Metrics" for details regarding the definition of Run
Rate.
Table 9: Reconciliation of Adjusted EBITDA to Net Income
(unaudited)
Three Months Ended
Six Months Ended
June 30,
June 30,
Mar. 31,
June 30,
June 30,
In thousands
2019
2018
2019
2019
2018
Index adjusted EBITDA
$
163,915
$
157,516
$
152,211
$
316,126
$
303,446
Analytics adjusted EBITDA
39,071
36,327
36,398
75,469
69,920
All Other adjusted EBITDA
8,810
6,582
9,098
17,908
13,768
Consolidated adjusted EBITDA
211,796
200,425
197,707
409,503
387,134
Multi-Year PSU payroll tax expense
—
—
15,389
15,389
—
Amortization of intangible assets
12,013
19,537
11,793
23,806
30,875
Depreciation and amortization of
property,
equipment and leasehold improvements
7,405
7,377
7,850
15,255
15,582
Operating income
192,378
173,511
162,675
355,053
340,677
Other expense (income), net
32,633
17,188
34,383
67,016
44,916
Provision for income taxes
34,055
39,494
(49,900
)
(15,845
)
63,840
Net income
$
125,690
$
116,829
$
178,192
$
303,882
$
231,921
Table 10: Reconciliation of Net Income and Diluted EPS to
Adjusted Net Income and Adjusted EPS (unaudited)
Three Months Ended
Six Months Ended
June 30,
June 30,
Mar. 31,
June 30,
June 30,
In thousands, except per share
data
2019
2018
2019
2019
2018
Net income
$
125,690
$
116,829
$
178,192
$
303,882
$
231,921
Plus: Amortization of acquired intangible
assets
8,663
17,029
8,716
17,379
26,236
Plus: Multi-Year PSU payroll tax
expense
—
—
15,389
15,389
—
Less: Discrete excess tax benefit
related
to Multi-Year PSU vesting
—
—
(66,581
)
(66,581
)
—
Less: Gain on sale of FEA (not-tax
effected)
—
(10,636
)
—
—
(10,636
)
Less: Tax Reform adjustments
—
—
—
—
(1,601
)
Less: Income tax effect
(2,638
)
(4,121
)
(3,134
)
(5,772
)
(5,729
)
Adjusted net income
$
131,715
$
119,101
$
132,582
$
264,297
$
240,191
Diluted EPS
$
1.47
$
1.28
$
2.08
$
3.55
$
2.52
Plus: Amortization of acquired intangible
assets
0.10
0.19
0.10
0.20
0.28
Plus: Multi-Year PSU payroll tax
expense
—
—
0.18
0.18
—
Less: Discrete excess tax benefit
related
to Multi-Year PSU vesting
—
—
(0.78
)
(0.78
)
—
Less: Gain on sale of FEA (not-tax
effected)
—
(0.12
)
—
—
(0.12
)
Less: Tax Reform adjustments
—
—
—
—
(0.02
)
Less: Income tax effect
(0.03
)
(0.05
)
(0.03
)
(0.06
)
(0.05
)
Adjusted EPS
$
1.54
$
1.30
$
1.55
$
3.09
$
2.61
Table 11: Reconciliation of Adjusted EBITDA Expenses to
Operating Expenses (unaudited)
Three Months Ended
Six Months Ended
Full-Year
June 30,
June 30,
Mar. 31,
June 30,
June 30,
2019
In thousands
2019
2018
2019
2019
2018
Outlook(1)
Index adjusted EBITDA expenses
$
61,635
$
55,418
$
62,562
$
124,197
$
111,402
Analytics adjusted EBITDA expenses
84,610
82,792
85,037
169,647
168,186
All Other adjusted EBITDA expenses
27,517
24,411
26,075
53,592
47,640
Consolidated adjusted EBITDA
expenses
173,762
162,621
173,674
347,436
327,228
$685,000 - $705,000
Multi-Year PSU payroll tax expense
—
—
15,389
15,389
—
15,389
Amortization of intangible assets
12,013
19,537
11,793
23,806
30,875
Depreciation and amortization of
property,
75,000 - 85,000
equipment and leasehold improvements
7,405
7,377
7,850
15,255
15,582
Total operating expenses
$
193,180
$
189,535
$
208,706
$
401,886
$
373,685
$775,389 - $ 800,389
(1) We have not provided a line-item
reconciliation for adjusted EBITDA expenses to total operating
expenses for this future period because we do not provide guidance
on the individual reconciling items between total operating
expenses and adjusted EBITDA expenses.
Table 12: Reconciliation of Net Cash Provided by Operating
Activities to Free Cash Flow (unaudited)
Three Months Ended
Six Months Ended
Full-Year
June 30,
June 30,
Mar. 31,
June 30,
June 30,
2019
In thousands
2019
2018
2019
2019
2018
Outlook(1)
Net cash provided by operating
activities
$
189,470
$
207,165
$
87,875
$
277,345
$
295,762
$600,000 - $630,000
Capital expenditures
(6,278
)
(2,967
)
(3,156
)
(9,434
)
(4,479
)
Capitalized software development costs
(6,113
)
(4,238
)
(4,990
)
(11,103
)
(8,598
)
Capex
(12,391
)
(7,205
)
(8,146
)
(20,537
)
(13,077
)
(55,000 - 45,000)
Free cash flow
$
177,079
$
199,960
$
79,729
$
256,808
$
282,685
$545,000 - $585,000
(1) We have not provided a line-item
reconciliation for free cash flow to net cash from operating
activities for this future period because we do not provide
guidance on the individual reconciling items between net cash from
operating activities and free cash flow.
Table 13: Reconciliation of Effective Tax Rate to Adjusted
Tax Rate (unaudited)
Three Months Ended
Six Months Ended
June 30,
June 30,
Mar. 31,
June 30,
June 30,
2019
2018
2019
2019
2018
Effective tax rate
21.32%
25.26%
(38.90%)
(5.50%)
21.59%
Tax Reform impact on effective tax
rate
—%
—%
—%
—%
0.54%
Multi-Year PSU impact on effective tax
rate
—%
—%
51.90%
23.11%
—%
Adjusted tax rate
21.32%
25.26%
13.00%
17.61%
22.13%
Table 14: Second Quarter 2019 Reconciliation of Operating
Revenue Growth to Organic Operating Revenue Growth
(unaudited)
Comparison of the Three Months
Ended June 30, 2019 and 2018
Total
Recurring Subscription
Asset-Based Fees
Non-Recurring Revenues
Index
Change Percentage
Change Percentage
Change Percentage
Change Percentage
Operating revenue growth
5.9%
10.5%
0.1%
—%
Impact of acquisitions and
divestitures
—%
—%
—%
—%
Impact of foreign currency exchange rate
fluctuations
0.1%
—%
0.1%
—%
Organic operating revenue growth
6.0%
10.5%
0.2%
—%
Total
Recurring Subscription
Asset-Based Fees
Non-Recurring Revenues
Analytics
Change Percentage
Change Percentage
Change Percentage
Change Percentage
Operating revenue growth
3.8%
3.5%
—%
24.6%
Impact of acquisitions and
divestitures
4.7%
4.5%
—%
32.7%
Impact of foreign currency exchange rate
fluctuations
0.1%
—%
—%
0.7%
Organic operating revenue growth
8.6%
8.0%
—%
58.0%
Total
Recurring Subscription
Asset-Based Fees
Non-Recurring Revenues
All Other
Change Percentage
Change Percentage
Change Percentage
Change Percentage
Operating revenue growth
17.2%
19.3%
—%
(27.5%)
Impact of acquisitions and
divestitures
—%
—%
—%
—%
Impact of foreign currency exchange rate
fluctuations
4.7%
4.8%
—%
3.8%
Organic operating revenue growth
21.9%
24.1%
—%
(23.7%)
Total
Recurring Subscription
Asset-Based Fees
Non-Recurring Revenues
Consolidated
Change Percentage
Change Percentage
Change Percentage
Change Percentage
Operating revenue growth
6.2%
8.4%
0.1%
—%
Impact of acquisitions and
divestitures
1.5%
2.0%
—%
4.0%
Impact of foreign currency exchange rate
fluctuations
0.5%
0.6%
0.1%
0.8%
Organic operating revenue growth
8.2%
11.0%
0.2%
4.8%
Table 15: Six Months 2019 Reconciliation of Operating Revenue
Growth to Organic Operating Revenue Growth (unaudited)
Comparison of the Six Months
Ended June 30, 2019 and 2018
Total
Recurring Subscription
Asset-Based Fees
Non-Recurring Revenues
Index
Change Percentage
Change Percentage
Change Percentage
Change Percentage
Operating revenue growth
6.1%
11.6%
(2.1%)
23.2%
Impact of acquisitions and
divestitures
—%
—%
—%
—%
Impact of foreign currency exchange rate
fluctuations
0.1%
—%
0.1%
0.1%
Organic operating revenue growth
6.2%
11.6%
(2.0%)
23.3%
Total
Recurring Subscription
Asset-Based Fees
Non-Recurring Revenues
Analytics
Change Percentage
Change Percentage
Change Percentage
Change Percentage
Operating revenue growth
2.9%
2.6%
—%
41.7%
Impact of acquisitions and
divestitures
5.9%
5.6%
—%
35.8%
Impact of foreign currency exchange rate
fluctuations
0.1%
0.1%
—%
1.3%
Organic operating revenue growth
8.9%
8.3%
—%
78.8%
Total
Recurring Subscription
Asset-Based Fees
Non-Recurring Revenues
All Other
Change Percentage
Change Percentage
Change Percentage
Change Percentage
Operating revenue growth
16.4%
18.5%
—%
(34.3%)
Impact of acquisitions and
divestitures
—%
—%
—%
—%
Impact of foreign currency exchange rate
fluctuations
5.0%
5.1%
—%
3.7%
Organic operating revenue growth
21.4%
23.6%
—%
(30.6%)
Total
Recurring Subscription
Asset-Based Fees
Non-Recurring Revenues
Consolidated
Change Percentage
Change Percentage
Change Percentage
Change Percentage
Operating revenue growth
6.0%
8.3%
(2.1%)
16.0%
Impact of acquisitions and
divestitures
1.9%
2.6%
—%
4.2%
Impact of foreign currency exchange rate
fluctuations
0.5%
0.7%
0.1%
0.9%
Organic operating revenue growth
8.4%
11.6%
(2.0%)
21.1%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190801005505/en/
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