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MSCI Q2 Earnings and Revenues Beat Estimates, Shares Up
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MSCI Inc.’s (MSCI - Free Report) second-quarter 2021 adjusted earnings of $2.45 per share beat the Zacks Consensus Estimate by 6.1% and increased 38.4% from the year-ago quarter.
Shares were up 1.6% in pre-market trading following the announcement.
Operating revenues improved 21.6% year over year to $498.2 million and beat the consensus mark by 2.5%. This year-over-year growth was driven by 12.3% and 54.6% rise in recurring subscriptions (69.9% of revenues) and asset-based fees (27.3% of revenues), respectively.
Non-recurring revenues (2.8% of revenues) increased 19.3% year over year to $13.9 million.
At the end of the quarter, average assets under management were $1.34 trillion in ETFs linked to MSCI indexes. Total retention rate was 94.4% in the quarter under review.
Quarter Details
In the second quarter, Index operating revenues improved 26% year over year to $306 million, primarily driven by growth in recurring subscriptions (10.1%) and asset-based fees (54.6%).
Analytics operating revenues improved 6.5% year over year to $135.9 million. While recurring subscription revenues increased 5.7%, non-recurring revenues surged 84.4%.
ESG and Climate segment’s operating revenues increased 49.4% from the year-ago quarter to $39.3 million, primarily driven by strong growth from Ratings products, including Climate products.
All Other revenues, which primarily comprise of the Real Estate operating segment, were $17 million, up 32.4% year over year.
Adjusted EBITDA increased 24.6% year over year to $294.9 million in the reported quarter. Moreover, adjusted EBITDA margin expanded 140 basis points (bps) on a year-over-year basis to 59.2%.
Total operating expenses increased 23.8% on a year-over-year basis to $240.6 million. Adjusted EBITDA expenses were $203.2 million, up 17.5%, primarily reflecting higher compensation and benefits costs.
Operating income improved 19.7% from the year-ago quarter to $257.5 million. However, operating margin contracted 80 bps to 51.7%.
Balance Sheet & Cash Flow
Total cash and cash equivalents, as of Jun 30, 2021, were $2 billion compared with $1.7 billion as of Mar 31, 2021.
Total debt was $4 billion as of Jun 30. Total-debt-to-adjusted-EBITDA ratio (based on trailing twelve-month-adjusted EBITDA) was 3.7 times, higher than management’s target range of 3-3.5 times.
Net cash provided by operating activities was $225.1 million in the second quarter, down 14.3% year over year. Free cash flow was $214 million, down 14.8% year over year.
Notably, $1.6 billion is outstanding under MSCI’s share-repurchase authorization as of Jul 23, 2021. The company paid out dividends worth $64.3 million in the second quarter.
Guidance
For 2021, MSCI expects total operating expenses of $920-$940 million, up from the previous guidance range of $885-$920 million. Adjusted EBITDA expenses are expected between $885 million and $920 million, up from the previous guidance of $795-$825 million.
Capex is expected to be $50-$60 million.
Net cash provided by operating activities and free cash flow is expected to be $900-$940 million and $840-$890 million, respectively.
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MSCI Q2 Earnings and Revenues Beat Estimates, Shares Up
MSCI Inc.’s (MSCI - Free Report) second-quarter 2021 adjusted earnings of $2.45 per share beat the Zacks Consensus Estimate by 6.1% and increased 38.4% from the year-ago quarter.
Shares were up 1.6% in pre-market trading following the announcement.
Operating revenues improved 21.6% year over year to $498.2 million and beat the consensus mark by 2.5%. This year-over-year growth was driven by 12.3% and 54.6% rise in recurring subscriptions (69.9% of revenues) and asset-based fees (27.3% of revenues), respectively.
Non-recurring revenues (2.8% of revenues) increased 19.3% year over year to $13.9 million.
MSCI Inc Price, Consensus and EPS Surprise
MSCI Inc price-consensus-eps-surprise-chart | MSCI Inc Quote
At the end of the quarter, average assets under management were $1.34 trillion in ETFs linked to MSCI indexes. Total retention rate was 94.4% in the quarter under review.
Quarter Details
In the second quarter, Index operating revenues improved 26% year over year to $306 million, primarily driven by growth in recurring subscriptions (10.1%) and asset-based fees (54.6%).
Analytics operating revenues improved 6.5% year over year to $135.9 million. While recurring subscription revenues increased 5.7%, non-recurring revenues surged 84.4%.
ESG and Climate segment’s operating revenues increased 49.4% from the year-ago quarter to $39.3 million, primarily driven by strong growth from Ratings products, including Climate products.
All Other revenues, which primarily comprise of the Real Estate operating segment, were $17 million, up 32.4% year over year.
Adjusted EBITDA increased 24.6% year over year to $294.9 million in the reported quarter. Moreover, adjusted EBITDA margin expanded 140 basis points (bps) on a year-over-year basis to 59.2%.
Total operating expenses increased 23.8% on a year-over-year basis to $240.6 million. Adjusted EBITDA expenses were $203.2 million, up 17.5%, primarily reflecting higher compensation and benefits costs.
Operating income improved 19.7% from the year-ago quarter to $257.5 million. However, operating margin contracted 80 bps to 51.7%.
Balance Sheet & Cash Flow
Total cash and cash equivalents, as of Jun 30, 2021, were $2 billion compared with $1.7 billion as of Mar 31, 2021.
Total debt was $4 billion as of Jun 30. Total-debt-to-adjusted-EBITDA ratio (based on trailing twelve-month-adjusted EBITDA) was 3.7 times, higher than management’s target range of 3-3.5 times.
Net cash provided by operating activities was $225.1 million in the second quarter, down 14.3% year over year. Free cash flow was $214 million, down 14.8% year over year.
Notably, $1.6 billion is outstanding under MSCI’s share-repurchase authorization as of Jul 23, 2021. The company paid out dividends worth $64.3 million in the second quarter.
Guidance
For 2021, MSCI expects total operating expenses of $920-$940 million, up from the previous guidance range of $885-$920 million. Adjusted EBITDA expenses are expected between $885 million and $920 million, up from the previous guidance of $795-$825 million.
Capex is expected to be $50-$60 million.
Net cash provided by operating activities and free cash flow is expected to be $900-$940 million and $840-$890 million, respectively.
Zacks Rank & Stocks to Consider
Currently, MSCI has a Zacks Rank #3 (Hold).
Better-ranked stocks in the broader technology sector are CyberArk Software (CYBR - Free Report) , Bruker (BRKR - Free Report) and Carrier Global (CARR - Free Report) . While CyberArk sports a Zacks Rank #1 (Strong Buy), both Bruker and Carrier Global carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Carrier Global is set to report its quarterly earnings on Jul 29. Bruker and CyberArk are scheduled to report the same on Aug 2 and 12, respectively.