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MSCI Q3 Earnings and Revenues Beat Estimates, Shares Up
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MSCI Inc.'s (MSCI - Free Report) third-quarter 2021 adjusted earnings of $2.53 per share beat the Zacks Consensus Estimate by 5.9% and increased 15% from the year-ago quarter.
Shares were up 1.1% in pre-market trading following the announcement.
Operating revenues improved 21.6% year over year to $517.1 million and beat the consensus mark by 2.4%. This year-over-year growth was driven by 14.2% and 41.2% rise in recurring subscriptions (69.2% of revenues) and asset-based fees (27.4% of revenues), respectively.
Non-recurring revenues (3.4% of revenues) increased 50.5% year over year to $17.7 million.
At the end of the quarter, average assets under management were $1.36 trillion in ETFs linked to MSCI indexes. Total retention rate was 94.5% in the quarter under review.
Quarter Details
In the third quarter, Index operating revenues improved 25.7% year over year to $321.6 million, primarily driven by growth in recurring subscriptions (12.9%) and asset-based fees (41.2%).
Analytics operating revenues improved 6.2% year over year to $136.3 million. While recurring subscription revenues increased 6.4%, non-recurring revenues declined 5.2%.
ESG and Climate segment’s operating revenues increased 53% from the year-ago quarter to $43.7 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 $15.6 million, up 22.4% year over year.
Adjusted EBITDA increased 22.9% year over year to $306.6 million in the reported quarter. Moreover, adjusted EBITDA margin expanded 70 basis points (bps) on a year-over-year basis to 59.3%.
Total operating expenses increased 19.8% on a year-over-year basis to $236.9 million. Adjusted EBITDA expenses were $210.5 million, up 19.7%, primarily reflecting higher compensation and benefits costs.
Operating income improved 23.1% from the year-ago quarter to $280.2 million. However, operating margin expanded 70 bps to 54.2%.
Balance Sheet & Cash Flow
Total cash and cash equivalents, as of Sep 30, 2021, were $1.3 billion compared with $2 billion as of Jun 30, 2021.
Total debt was $4.2 billion as of Sep 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 $215.9 million in the third quarter, up 8.1% year over year. Free cash flow was $201.1 million, up 6.9% year over year.
Notably, $1.6 billion is outstanding under MSCI’s share-repurchase authorization as of Oct 22, 2021. The company paid out dividends worth $85.8 million in the third quarter.
Guidance
For 2021, MSCI expects total operating expenses of $955-$975 million, up from the previous guidance range of $920-$940 million. Adjusted EBITDA expenses are expected between $840 million and $860 million, up from the previous guidance of $820-$840 million.
Capex is expected to be $50-$60 million.
Net cash provided by operating activities and free cash flow is expected to be $800-$840 million and $740-$790 million, respectively.
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MSCI Q3 Earnings and Revenues Beat Estimates, Shares Up
MSCI Inc.'s (MSCI - Free Report) third-quarter 2021 adjusted earnings of $2.53 per share beat the Zacks Consensus Estimate by 5.9% and increased 15% from the year-ago quarter.
Shares were up 1.1% in pre-market trading following the announcement.
Operating revenues improved 21.6% year over year to $517.1 million and beat the consensus mark by 2.4%. This year-over-year growth was driven by 14.2% and 41.2% rise in recurring subscriptions (69.2% of revenues) and asset-based fees (27.4% of revenues), respectively.
Non-recurring revenues (3.4% of revenues) increased 50.5% year over year to $17.7 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 $1.36 trillion in ETFs linked to MSCI indexes. Total retention rate was 94.5% in the quarter under review.
Quarter Details
In the third quarter, Index operating revenues improved 25.7% year over year to $321.6 million, primarily driven by growth in recurring subscriptions (12.9%) and asset-based fees (41.2%).
Analytics operating revenues improved 6.2% year over year to $136.3 million. While recurring subscription revenues increased 6.4%, non-recurring revenues declined 5.2%.
ESG and Climate segment’s operating revenues increased 53% from the year-ago quarter to $43.7 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 $15.6 million, up 22.4% year over year.
Adjusted EBITDA increased 22.9% year over year to $306.6 million in the reported quarter. Moreover, adjusted EBITDA margin expanded 70 basis points (bps) on a year-over-year basis to 59.3%.
Total operating expenses increased 19.8% on a year-over-year basis to $236.9 million. Adjusted EBITDA expenses were $210.5 million, up 19.7%, primarily reflecting higher compensation and benefits costs.
Operating income improved 23.1% from the year-ago quarter to $280.2 million. However, operating margin expanded 70 bps to 54.2%.
Balance Sheet & Cash Flow
Total cash and cash equivalents, as of Sep 30, 2021, were $1.3 billion compared with $2 billion as of Jun 30, 2021.
Total debt was $4.2 billion as of Sep 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 $215.9 million in the third quarter, up 8.1% year over year. Free cash flow was $201.1 million, up 6.9% year over year.
Notably, $1.6 billion is outstanding under MSCI’s share-repurchase authorization as of Oct 22, 2021. The company paid out dividends worth $85.8 million in the third quarter.
Guidance
For 2021, MSCI expects total operating expenses of $955-$975 million, up from the previous guidance range of $920-$940 million. Adjusted EBITDA expenses are expected between $840 million and $860 million, up from the previous guidance of $820-$840 million.
Capex is expected to be $50-$60 million.
Net cash provided by operating activities and free cash flow is expected to be $800-$840 million and $740-$790 million, respectively.
Zacks Rank & Stocks to Consider
Currently, MSCI has a Zacks Rank #3 (Hold).
Better-ranked stocks in the broader technology sector are Advanced Micro Devices (AMD - Free Report) , Microsoft (MSFT - Free Report) and Perficient (PRFT - Free Report) . All the three stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Both Advanced Micro Devices and Microsoft are set to report earnings results on Oct 26. Perficient is set to report the same on Oct 28.