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MSCI Q4 Earnings Miss Estimates, Recurring Subscriptions Up Y/Y
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MSCI Inc.’s (MSCI - Free Report) fourth-quarter 2021 adjusted earnings of $2.51 per share missed the Zacks Consensus Estimate by 0.4% but decreased 28.1% from the year-ago quarter.
Shares were up 1.17% in pre-market trading following the announcement.
Operating revenues improved 23.9% year over year to $549.8 million and beat the consensus mark by 2.39%.
This year-over-year growth was driven by 14.4% and 34.4% rise in recurring subscriptions (69.6% of revenues) and asset-based fees (27.2% of revenues), respectively. Non-recurring revenues (3.3% of revenues) jumped 51% year over year to $17.9 million.
At the end of the reported 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 fourth quarter, Index operating revenues improved 23.5% year over year to $331.8 million.
Analytics operating revenues improved 4.3% year over year to $138.1 million.
ESG and Climate segment’s operating revenues increased 54.9% from the year-ago quarter to $48.4 million, primarily driven by strong growth in Ratings products, including Climate products.
All Other revenues, which primarily comprise of the Real Estate operating segment, were $31.5 million, up 177.8% year over year.
Adjusted EBITDA increased 24.4% year over year to $318.7 million in the reported quarter. Adjusted EBITDA margin expanded 30 basis points (bps) on a year-over-year basis to 58%.
Total operating expenses increased 28.5% on a year-over-year basis to $269.3 million. Adjusted EBITDA expenses were $231.2 million, up 23.3%, primarily reflecting higher compensation and benefits costs.
Operating income improved 19.9% from the year-ago quarter to $280.6 million. However, operating margin contracted 180 bps on a year-over-year basis to 51%.
Balance Sheet & Cash Flow
Total cash and cash equivalents, as of Dec 31, 2021, were $1.4 billion compared with $1.3 billion as of Sep 30, 2021.
Total debt was $4.2 billion as of Dec 31. Total-debt-to-adjusted-EBITDA ratio (based on trailing twelve-month-adjusted EBITDA) was 3.5 times, in line with the higher end of management’s target range of 3-3.5 times.
Net cash provided by operating activities was $279.7 million in the fourth quarter, up 18.5% year over year. Free cash flow was $263.1 million, up 20.1% year over year.
MSCI bought shares worth $5.2 million during the reported quarter. Notably, $1.1 billion is outstanding under MSCI’s share-repurchase authorization as of Jan 25, 2022. The company paid out dividends worth $85.8 million in the fourth quarter.
Guidance
For 2022, MSCI expects total operating expenses of $1.075-$1.115 million. Adjusted EBITDA expenses are expected between $975 million and $1.005 billion.
Interest expenses are expected to be roughly $162 million.
Capex is expected to be $60-$70 million.
Net cash provided by operating activities and free cash flow are expected to be $1.120-$1.160 billion and $1.050-$1.100billion, respectively.
Zacks Rank & Other Stocks to Consider
Currently, MSCI has a Zacks Rank #2 (Buy).
MSCI shares have outperformed the Zacks Computer & Technology sector in the past year. While MSCI shares have increased 25.1%, Computer & Technology sector returned 4.5%.
Littelfuse shares have outperformed the Zacks Computer & Technology sector in the past year. Littelfuse returned 5.1% compared with sector’s rise of 4.5%.
LFUS is set to report fourth-quarter 2021 on Feb 1, 2022.
NETGEAR shares have underperformed the Zacks Computer & Technology sector in the past year. NETGEAR shares are down 39.9%.
NTGR is set to report fourth-quarter 2021 results on Feb 2.
Mandiant shares are down 31.9% in the past year.
MNDT is set to report fourth-quarter 2021 results on Feb 8.
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MSCI Q4 Earnings Miss Estimates, Recurring Subscriptions Up Y/Y
MSCI Inc.’s (MSCI - Free Report) fourth-quarter 2021 adjusted earnings of $2.51 per share missed the Zacks Consensus Estimate by 0.4% but decreased 28.1% from the year-ago quarter.
Shares were up 1.17% in pre-market trading following the announcement.
Operating revenues improved 23.9% year over year to $549.8 million and beat the consensus mark by 2.39%.
This year-over-year growth was driven by 14.4% and 34.4% rise in recurring subscriptions (69.6% of revenues) and asset-based fees (27.2% of revenues), respectively. Non-recurring revenues (3.3% of revenues) jumped 51% year over year to $17.9 million.
MSCI Inc Price, Consensus and EPS Surprise
MSCI Inc price-consensus-eps-surprise-chart | MSCI Inc Quote
At the end of the reported 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 fourth quarter, Index operating revenues improved 23.5% year over year to $331.8 million.
Analytics operating revenues improved 4.3% year over year to $138.1 million.
ESG and Climate segment’s operating revenues increased 54.9% from the year-ago quarter to $48.4 million, primarily driven by strong growth in Ratings products, including Climate products.
All Other revenues, which primarily comprise of the Real Estate operating segment, were $31.5 million, up 177.8% year over year.
Adjusted EBITDA increased 24.4% year over year to $318.7 million in the reported quarter. Adjusted EBITDA margin expanded 30 basis points (bps) on a year-over-year basis to 58%.
Total operating expenses increased 28.5% on a year-over-year basis to $269.3 million. Adjusted EBITDA expenses were $231.2 million, up 23.3%, primarily reflecting higher compensation and benefits costs.
Operating income improved 19.9% from the year-ago quarter to $280.6 million. However, operating margin contracted 180 bps on a year-over-year basis to 51%.
Balance Sheet & Cash Flow
Total cash and cash equivalents, as of Dec 31, 2021, were $1.4 billion compared with $1.3 billion as of Sep 30, 2021.
Total debt was $4.2 billion as of Dec 31. Total-debt-to-adjusted-EBITDA ratio (based on trailing twelve-month-adjusted EBITDA) was 3.5 times, in line with the higher end of management’s target range of 3-3.5 times.
Net cash provided by operating activities was $279.7 million in the fourth quarter, up 18.5% year over year. Free cash flow was $263.1 million, up 20.1% year over year.
MSCI bought shares worth $5.2 million during the reported quarter. Notably, $1.1 billion is outstanding under MSCI’s share-repurchase authorization as of Jan 25, 2022. The company paid out dividends worth $85.8 million in the fourth quarter.
Guidance
For 2022, MSCI expects total operating expenses of $1.075-$1.115 million. Adjusted EBITDA expenses are expected between $975 million and $1.005 billion.
Interest expenses are expected to be roughly $162 million.
Capex is expected to be $60-$70 million.
Net cash provided by operating activities and free cash flow are expected to be $1.120-$1.160 billion and $1.050-$1.100billion, respectively.
Zacks Rank & Other Stocks to Consider
Currently, MSCI has a Zacks Rank #2 (Buy).
MSCI shares have outperformed the Zacks Computer & Technology sector in the past year. While MSCI shares have increased 25.1%, Computer & Technology sector returned 4.5%.
Littelfuse (LFUS - Free Report) , NETGEAR (NTGR - Free Report) and Mandiant are some better-ranked stocks that investors can consider in the broader sector. All the three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Littelfuse shares have outperformed the Zacks Computer & Technology sector in the past year. Littelfuse returned 5.1% compared with sector’s rise of 4.5%.
LFUS is set to report fourth-quarter 2021 on Feb 1, 2022.
NETGEAR shares have underperformed the Zacks Computer & Technology sector in the past year. NETGEAR shares are down 39.9%.
NTGR is set to report fourth-quarter 2021 results on Feb 2.
Mandiant shares are down 31.9% in the past year.
MNDT is set to report fourth-quarter 2021 results on Feb 8.