MSCI (MSCI) Tops Q4 EPS by 3c, Revenues Beat

MSCI (NYSE: MSCI) reported Q4 EPS of $1.96, $0.03 better than the analyst estimate of $1.93. Revenue for the quarter came in at $443.7 million versus the consensus estimate of $443.52 million.

• Operating revenues of $443.7 million, up 9.1%
• Recurring subscription revenues up 8.9%; Asset-based fees up 15.3%
• Operating margin of 52.8%; Adjusted EBITDA margin of 57.7%
• Diluted EPS of $1.87, up 29.9%; Adjusted EPS of $1.96, up 17.4%
• New recurring subscription sales growth of 9.3%; Organic subscription Run Rate growth of 9.4%; Retention Rate of 92.6%
• Repurchase of 471,591 shares at an average price of $347.78 per share for a total value of $164.0 million
• Assets in equity ETFs linked to MSCI indexes surpass $1.0 trillion
• Approximately $64.4 million in dividends paid to shareholders in fourth quarter 2020; Cash dividend of $0.78 per share declared by MSCI Board of Directors for first quarter 2021

“MSCI delivered robust performance in the fourth quarter and full year 2020, a validation of our highly integrated, client-centric, all-weather franchise and the dedication of our employees,” said Henry A. Fernandez, Chairman and CEO of MSCI.

“While the early part of 2021 has seen continued social, political and economic challenges, we maintain strong conviction in both our long-term growth opportunities and our ability to drive value for our clients and shareholders.”

Fourth Quarter Consolidated Results

• Operating Revenues: Operating revenues were $443.7 million, up 9.1%. The $37.1 million increase was driven by $26.3 million in higher recurring subscription revenues and $14.8 million in higher asset-based fees, offset by $4.0 million in lower non-recurring revenues.
• Run Rate and Retention Rate: Total Run Rate at December 31, 2020 was $1,832.5 million, up 12.1% compared to December 31, 2019. The $198.0 million increase was driven by a $130.0 million increase in recurring subscription Run Rate and a $68.0 million increase in asset-based fees Run Rate. Organic subscription Run Rate growth was 9.4%, driven by increases across all three reporting segments. Retention Rate in fourth quarter 2020 was 92.6%, compared to 92.9% in fourth quarter 2019.
• Expenses: Total operating expenses were $209.6 million, up slightly from fourth quarter 2019. Adjusted EBITDA expenses were $187.5 million, also up slightly, reflecting higher information technology costs and compensation costs, substantially offset by lower travel and entertainment expense. Total operating expenses excluding the impact of foreign currency exchange rate fluctuations (“ex-FX”) and adjusted EBITDA expenses ex-FX increased 0.5% and decreased 0.1%, respectively.
• Headcount: As of December 31, 2020, headcount was 3,633 employees, with approximately 35% and approximately 65% of employees located in developed market and emerging market locations, respectively.
• Other Expense (Income), Net: Other expense (income), net was $38.9 million, down 26.4%. The lower net expense primarily reflected the absence of debt extinguishment costs that resulted from a notes redemption in the prior period, as well as lower interest expense compared to fourth quarter 2019, partially offset by lower interest income due to lower rates earned on cash balances.
• Income Taxes: The effective tax rate was 20.0% in fourth quarter 2020, compared to 16.2% in fourth quarter 2019 reflecting higher U.S. taxable income compared to the prior period resulting, in part, from the absence of debt extinguishment costs related to a notes redemption realized in fourth quarter 2019. In addition, fourth quarter 2020 reflected lower tax benefits from the vesting of share-based compensation awards.
• Net Income: As a result of the factors described above, net income was $156.2 million, up 27.2%.
• Adjusted EBITDA: Adjusted EBITDA was $256.1 million, up 16.3%. Adjusted EBITDA margin in fourth quarter 2020 was 57.7%, compared to 54.2% in fourth quarter 2019.

Full-Year 2021 Guidance

MSCI's guidance for 2021 is based on assumptions about a number of macroeconomic and capital market factors, in particular related to equity markets. These assumptions are subject to uncertainty, and actual results for the year could differ materially from our current guidance, including as a result of ongoing uncertainty related to the duration, magnitude and impact of the COVID-19 pandemic.

For earnings history and earnings-related data on MSCI (MSCI) click here.

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