MSCI (MSCI) Tops Q1 EPS by 14c, Slight Beat on Revenues; Provides FY19 Operating Outlook

MSCI (NYSE: MSCI) reported Q1 EPS of $1.55, $0.14 better than the analyst estimate of $1.41. Revenue for the quarter came in at $371.38 million versus the consensus estimate of $371.24 million.

• Organic subscription Run Rate growth of 10.4%; Index up 11.6%, Analytics up 7.0% and All Other up 19.3%.
• Operating revenues up 5.7% with recurring subscription revenues up 8.3%, asset-based fees down 4.3% and non-recurring revenues up 43.7%.
• Organic operating revenue growth was 8.6% with organic recurring subscription revenues up 12.2%.
• Diluted EPS of $2.08, up 67.7%; Adjusted EPS of $1.55, up 18.3%.
• Record quarterly Retention Rate at 95.2%. New recurring subscription sales up 16.5%, total net new up 34.3%.
• During first quarter 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.

“We continue to deliver strong results quarter after quarter, including our sixth consecutive quarter of approximately 10% organic subscription run rate growth. We are off to a great start in 2019 as we continue to execute on the key pillars of our growth strategy. Our consistent and reliable operating and financial performance, amid volatile market conditions and a rapidly transforming industry, demonstrates the strength of our franchise and power of our value proposition. Our ingrained position at the center of the investment process, coupled with our flexible technology, differentiated content and actionable solutions, allows us to provide must-have mission critical tools enabling global investors to build better portfolios for a better world,” commented Henry A. Fernandez, Chairman and CEO of MSCI.

“We see enormous opportunities within our core areas of differentiated content such as equity indexes, factors and ESG, to build stronger strategic relationships with our clients globally. We also continue to execute our in-flight opportunities and are well-positioned to capitalize on the wide range of attractive investment opportunities we see to help drive top-line growth,” added Mr. Fernandez.

Full-Year 2019 Guidance

MSCI’s guidance for full-year 2019 is as follows:

• Total operating expenses are now 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 9.0% to 12.0%.

1. Excludes the payroll tax impact from the vesting in first quarter 2019 of the Multi-Year PSUs.
2. Includes 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 11.5% to 14.5%.
   

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