MSCI Inc.’s (MSCI - Free Report) third-quarter 2020 adjusted earnings of $2.20 per share beat the Zacks Consensus Estimate by 20.2% and also increased 31% from the year-ago quarter.
Operating revenues improved 7.9% year over year to $425.3 million and beat the consensus mark by 0.8%. This year-over-year growth was driven by 8.7% and 4.5% rise in recurring subscriptions (73.6% of revenues) and asset-based fees (23.6% of revenues), respectively.
Non-recurring revenues (2.8% of revenues) surged 16.2% year over year to $11.8 million.
At the end of the quarter, average assets under management were $908.9 billion in ETFs linked to MSCI indexes. Total retention rate was 94.5% in the quarter under review.
Index Revenue Details
In the third quarter, Index operating revenues (60.1% of operating revenues) improved 7.7% year over year to $255.7 million, primarily driven by growth in recurring subscriptions (up 9.7%) and asset-based fees (up 4.5%).
Higher recurring subscriptions were driven by growth in core products, factor and ESG/Climate index products, and custom index products.
Index net new recurring subscription sales decreased 6.4% year over year.
Analytics Revenue Details
Analytics operating revenues (30.2% of operating revenues) improved 3.8% year over year to $128.3 million. While recurring subscription revenues increased 3.4%, non-recurring revenues jumped 40.7%.
Analytics net new recurring subscription sales fell 5.6%.
All Other Segment Revenue Details
All Other operating revenues (9.7% of operating revenues) increased 24.3% from the year-ago quarter to $41.3 million, primarily driven by recurring subscriptions (up 24.4%).
All Other organic operating revenue growth was 18.6% with ESG organic operating revenues increasing 19.4%. Moreover, Real Estate organic operating revenues grew 16.7% in the reported quarter.
All Other net new recurring subscription sales increased 15.1% year over year.
Operating Details
Adjusted EBITDA increased 13% year over year to $249.4 million in the reported quarter. Moreover, adjusted EBITDA margin expanded 260 basis points (bps) on a year-over-year basis to 58.6%.
Total operating expenses increased 2.4% on a year-over-year basis at $197.7 million, primarily due to higher compensation costs.
Research & development, and selling & marketing expenses increased 2.4% and 4% respectively. Moreover, general & administrative expenses rose 4% year over year.
Operating income improved 13.1% from the year-ago quarter to $227.6 million. Operating margin expanded 250 bps to 53.5%.
Balance Sheet & Cash Flow
Total cash and cash equivalents, as of Sep 30, 2020, were $1.3 billion compared with $1.38 billion as of Jun 30, 2020.
Total debt was $3.4 billion as of Sep 30, unchanged sequentially. Total debt to adjusted EBITDA ratio (based on trailing twelve-month-adjusted EBITDA) was 3.6 times, higher than management’s target range of 3-3.5 times.
Net cash provided by operating activities was $199.8 million in the third quarter, up 6% year over year. Free cash flow was $251.1 million, up 41.8% year over year.
In the third quarter, MSCI repurchased 598,031 million shares for a total value of $206.6 million. Notably, $0.8 billion is outstanding under the share-repurchase authorization as of Oct 23, 2020.
MSCI also paid out dividends worth $65.3 million in the third quarter.
Guidance
For 2020, MSCI expects total operating expenses of $800-$820 million (up from previous guidance range of$790-$840 million). Adjusted EBITDA expenses are expected between $710 million and $730 million (up from previous guidance range of $700 - $750 million.)
Capex is expected to be $50-$55 million.
Moreover, net cash provided by operating activities and free cash flow are expected to be $705-$750 million and $650-$700 million, respectively.
Zacks Rank & Stocks to Consider
Currently, MSCI has a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader technology sector are Avnet (AVT - Free Report) , Alphabet (GOOGL - Free Report) and Arrow Electronics (ARW - Free Report) . While Avnet sports a Zacks Rank #1 (Strong Buy), both Alphabet and Arrow Electronics carry Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Avnet is set to release quarterly results on Oct 28. Both Alphabet and Arrow Electronics are scheduled to report earnings on Oct 29.
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MSCI Inc.’s (MSCI - Free Report) third-quarter 2020 adjusted earnings of $2.20 per share beat the Zacks Consensus Estimate by 20.2% and also increased 31% from the year-ago quarter.
Operating revenues improved 7.9% year over year to $425.3 million and beat the consensus mark by 0.8%. This year-over-year growth was driven by 8.7% and 4.5% rise in recurring subscriptions (73.6% of revenues) and asset-based fees (23.6% of revenues), respectively.
Non-recurring revenues (2.8% of revenues) surged 16.2% year over year to $11.8 million.
At the end of the quarter, average assets under management were $908.9 billion in ETFs linked to MSCI indexes. Total retention rate was 94.5% in the quarter under review.
Index Revenue Details
In the third quarter, Index operating revenues (60.1% of operating revenues) improved 7.7% year over year to $255.7 million, primarily driven by growth in recurring subscriptions (up 9.7%) and asset-based fees (up 4.5%).
Higher recurring subscriptions were driven by growth in core products, factor and ESG/Climate index products, and custom index products.
Index net new recurring subscription sales decreased 6.4% year over year.
Analytics Revenue Details
Analytics operating revenues (30.2% of operating revenues) improved 3.8% year over year to $128.3 million. While recurring subscription revenues increased 3.4%, non-recurring revenues jumped 40.7%.
Analytics net new recurring subscription sales fell 5.6%.
All Other Segment Revenue Details
All Other operating revenues (9.7% of operating revenues) increased 24.3% from the year-ago quarter to $41.3 million, primarily driven by recurring subscriptions (up 24.4%).
All Other organic operating revenue growth was 18.6% with ESG organic operating revenues increasing 19.4%. Moreover, Real Estate organic operating revenues grew 16.7% in the reported quarter.
All Other net new recurring subscription sales increased 15.1% year over year.
Operating Details
Adjusted EBITDA increased 13% year over year to $249.4 million in the reported quarter. Moreover, adjusted EBITDA margin expanded 260 basis points (bps) on a year-over-year basis to 58.6%.
Total operating expenses increased 2.4% on a year-over-year basis at $197.7 million, primarily due to higher compensation costs.
Research & development, and selling & marketing expenses increased 2.4% and 4% respectively. Moreover, general & administrative expenses rose 4% year over year.
Operating income improved 13.1% from the year-ago quarter to $227.6 million. Operating margin expanded 250 bps to 53.5%.
Balance Sheet & Cash Flow
Total cash and cash equivalents, as of Sep 30, 2020, were $1.3 billion compared with $1.38 billion as of Jun 30, 2020.
Total debt was $3.4 billion as of Sep 30, unchanged sequentially. Total debt to adjusted EBITDA ratio (based on trailing twelve-month-adjusted EBITDA) was 3.6 times, higher than management’s target range of 3-3.5 times.
Net cash provided by operating activities was $199.8 million in the third quarter, up 6% year over year. Free cash flow was $251.1 million, up 41.8% year over year.
In the third quarter, MSCI repurchased 598,031 million shares for a total value of $206.6 million. Notably, $0.8 billion is outstanding under the share-repurchase authorization as of Oct 23, 2020.
MSCI also paid out dividends worth $65.3 million in the third quarter.
Guidance
For 2020, MSCI expects total operating expenses of $800-$820 million (up from previous guidance range of$790-$840 million). Adjusted EBITDA expenses are expected between $710 million and $730 million (up from previous guidance range of $700 - $750 million.)
Capex is expected to be $50-$55 million.
Moreover, net cash provided by operating activities and free cash flow are expected to be $705-$750 million and $650-$700 million, respectively.
Zacks Rank & Stocks to Consider
Currently, MSCI has a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader technology sector are Avnet (AVT - Free Report) , Alphabet (GOOGL - Free Report) and Arrow Electronics (ARW - Free Report) . While Avnet sports a Zacks Rank #1 (Strong Buy), both Alphabet and Arrow Electronics carry Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Avnet is set to release quarterly results on Oct 28. Both Alphabet and Arrow Electronics are scheduled to report earnings on Oct 29.
Just Released: Zacks’ 7 Best Stocks for Today
Experts extracted 7 stocks from the list of 220 Zacks Rank #1 Strong Buys that has beaten the market more than 2X over with a stunning average gain of +24.5% per year.
These 7 were selected because of their superior potential for immediate breakout.
See these time-sensitive tickers now >>
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
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