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MSCI Q1 Earnings and Revenues Beat Estimates, Shares Up

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MSCI Inc.’s (MSCI - Free Report) first-quarter 2021 adjusted earnings of $2.46 per share beat the Zacks Consensus Estimate by 7.4% and increased 29.5% from the year-ago quarter.

Operating revenues improved 14.8% year over year to $478.4 million and beat the consensus mark by 1.5%. This year-over-year growth was driven by 10.9% and 26.5% rise in recurring subscriptions (70.6% of revenues) and asset-based fees (26.5% of revenues), respectively.

Non-recurring revenues (2.9% of revenues) increased 15% year over year to $14 million.

At the end of the quarter, average assets under management were $1.21 trillion in ETFs linked to MSCI indexes. Total retention rate was 96.3% in the quarter under review.
 

MSCI Inc Price, Consensus and EPS Surprise

MSCI Inc Price, Consensus and EPS Surprise

MSCI Inc price-consensus-eps-surprise-chart | MSCI Inc Quote

 

Shares were up 1.6% in pre-market. MSCI shares are up 9%, outperforming the Zacks Business- Software Services industry’s year-to-date rally of 7.6%.

Revenue Details

In the first quarter, Index operating revenues improved 17.3% year over year to $292.5 million, primarily driven by growth in recurring subscriptions (up 10.9%) and asset-based fees (up 26.5%).

Higher recurring subscriptions were driven by growth in market-cap weighted products.

Analytics operating revenues improved 6.8% year over year to $134 million. While recurring subscription revenues increased 6.1%, non-recurring revenues surged 62.5%.

ESG and Climate segment operating revenues increased 37.7% from the year-ago quarter to $34.8 million, primarily driven by strong growth from Ratings products, including Climate products. ESG and Climate operating revenues grew 31.8% on an organic basis.

All Other revenues, which primarily comprise of the Real Estate operating segment, were $17.2 million, up 2.3% year over year.

Operating Details

Adjusted EBITDA increased 20.7% year over year to $276.6 million in the reported quarter. Moreover, adjusted EBITDA margin expanded 280 basis points (bps) on a year-over-year basis to 57.8%.

Total operating expenses increased 7.3% on a year-over-year basis to $224 million. General & administrative, and selling & marketing expenses increased 12.6% and 1.7%, respectively. Moreover, research & development expenses fell 6.4% year over year.

Operating income improved 22.4% from the year-ago quarter to $254.4 million. Operating margin expanded 330 bps to 53.2%.

Balance Sheet & Cash Flow

Total cash and cash equivalents, as of Mar 31, 2021, were $1.7 billion compared with $1.3 billion as of Dec 31, 2020.

Total debt was $3.9 billion as of Mar 31. Total-debt-to-adjusted-EBITDA ratio (based on trailing twelve-month-adjusted EBITDA) was 3.8 times, higher than management’s target range of 3-3.5 times.

Net cash provided by operating activities was $215.5 million in the first quarter, up 91.1% year over year. Free cash flow was $205.1 million, up 101.2% year over year.

In the first quarter, MSCI repurchased 329,508 million shares for a total value of $134.3 million. Notably, $1.6 billion is outstanding under the share-repurchase authorization as of Apr 23, 2021.

MSCI also paid out dividends worth $64.6 million in the first quarter.

Guidance

For 2021, MSCI expects total operating expenses of $885-$920 million, up from the previous guidance range of $870-$895 million. Adjusted EBITDA expenses are expected between $795 million and $825 million, up from the previous guidance range of $780-$800 million.

Capex is still expected to be $50-$60 million.

Moreover, net cash provided by operating activities and free cash flow is expected to be $885-$925 million and $845-$885 million, respectively.

Zacks Rank & Stocks to Consider

Currently, MSCI has a Zacks Rank #2 (Buy).

Similarly ranked stocks in the broader technology sector are AMETEK (AME - Free Report) , Avnet (AVT - Free Report) and CDW Corporation (CDW - Free Report) . You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Avnet is set to report its quarter earnings on Apr 28. AMETEK and CDW are scheduled to report the same on May 4 and 5, respectively.

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