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MSCI Q4 Earnings Beat Estimates, Recurring Subscriptions Up
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MSCI Inc.’s (MSCI - Free Report) fourth-quarter 2022 adjusted earnings of $2.84 per share beat the Zacks Consensus Estimate by 4.80% and increased 13.1% from the year-ago quarter.
Operating revenues improved 4.8% year over year to $576.2 million and beat the consensus mark by 1.8%.
Recurring subscriptions accounted for 75.1% of revenues and increased 13.1% year over year to $432.5 million.
Asset-based fees accounted for 21.7% of revenues but declined 16.2% year over year to $125.2 million.
Non-recurring revenues accounted for 3.2% of revenues and also increased 3.2% year over year to $18.5 million.
At the end of the reported quarter, average assets under management were $1.222 trillion in ETFs linked to MSCI indexes. The total retention rate was 93% in the quarter under review.
Quarter Details
In the fourth quarter, Index operating revenues decreased 0.8% year over year to $329.3 million. The year-over-year decline was primarily due to lower asset-based fees, partially offset by higher recurring subscription revenues.
Growth in recurring subscription revenues was primarily driven by strong growth from market-cap weighted Index products and growth from factor, ESG and climate Index products.
Asset-based fees’ decline was primarily driven by a decrease in revenues from ETFs linked to MSCI equity indexes and non-ETF indexed funds linked to MSCI indexes, driven by a decrease in average AUM and average basis point fees.
Analytics operating revenues improved 8.4% year over year to $149.7 million, driven by higher recurring subscription revenues from both Multi-Asset Class and Equity Analytics products.
ESG and Climate segment’s operating revenues increased 31.2% from the year-ago quarter to $63.6 million, primarily driven by strong growth from recurring subscriptions related to Ratings and Climate products.
Other revenues, which primarily contain the Real Estate operating segment, were $33.7 million, up 6.9% year over year.
Adjusted EBITDA increased 6.4% year over year to $339 million in the reported quarter. Adjusted EBITDA margin expanded 260 basis points (bps) on a year-over-year basis to 53.6%.
Total operating expenses decreased 0.7% on a year-over-year basis to $267.5 million. Adjusted EBITDA expenses were $237.2 million, up 2.6%, primarily reflecting higher non-compensation costs related to information technology costs.
Operating income improved 10% from the year-ago quarter to $308.8 million. Moreover, the operating margin expanded 260 bps on a year-over-year basis to 53.6%.
Balance Sheet & Cash Flow
Total cash and cash equivalents, as of Dec 31, 2022, were $993.6 million compared with $867.1 million as of Sep 30, 2022.
Total debt was $4.5 billion as of Dec 31 compared with $4.51 billion as of Sep 30. The total debt-to-adjusted-EBITDA ratio (based on trailing 12-month-adjusted EBITDA) was 3.4 times, within the management’s target range of 3-3.5 times.
Free cash flow was $295 million, up 12.1% year over year.
MSCI bought shares worth $70.1 million during the reported quarter. Notably, $1.3 billion is outstanding under MSCI’s share-repurchase authorization as of Jan 30, 2023. The company paid out dividends worth $100.7 million in the fourth quarter.
Guidance
For 2023, MSCI expects total operating expenses in the range of $1.090-$1.130 million. Adjusted EBITDA expenses are expected between $965 million and $995 million.
Interest expenses are expected between $184 million and $187 million.
Capex is expected to be $75-$85 million.
Net cash provided by operating activities and free cash flow is expected to be $1.145-$1.195 billion and $1.060-$1.120 billion, respectively.
Zacks Rank & Stocks to Consider
Currently, MSCI has a Zacks Rank #3 (Hold).
MSCI shares have outperformed the Zacks Computer & Technology sector in the past year. While MSCI shares have declined 5.5%, the Computer & Technology sector dropped 23.3%.
Cambium Networks (CMBM - Free Report) , Amtech (ASYS - Free Report) and RingCentral (RNG - Free Report) are some better-ranked stocks that investors can consider in the broader sector. While Cambium sports a Zacks Rank #1 (Strong Buy), both Amtech and RingCentral carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Cambium shares have declined 13.9% in the past year. CMBM is set to report its fourth-quarter 2022 results on Feb 16.
Amtech shares have gained 19.2% in the past year. ASYS is set to report its first-quarter fiscal 2023 results on Feb 8.
RingCentral shares have declined 78.7% in the past year. RNG is set to report its fourth-quarter 2022 results on Feb 15.
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MSCI Q4 Earnings Beat Estimates, Recurring Subscriptions Up
MSCI Inc.’s (MSCI - Free Report) fourth-quarter 2022 adjusted earnings of $2.84 per share beat the Zacks Consensus Estimate by 4.80% and increased 13.1% from the year-ago quarter.
Operating revenues improved 4.8% year over year to $576.2 million and beat the consensus mark by 1.8%.
Recurring subscriptions accounted for 75.1% of revenues and increased 13.1% year over year to $432.5 million.
Asset-based fees accounted for 21.7% of revenues but declined 16.2% year over year to $125.2 million.
MSCI Inc Price, Consensus and EPS Surprise
MSCI Inc price-consensus-eps-surprise-chart | MSCI Inc Quote
Non-recurring revenues accounted for 3.2% of revenues and also increased 3.2% year over year to $18.5 million.
At the end of the reported quarter, average assets under management were $1.222 trillion in ETFs linked to MSCI indexes. The total retention rate was 93% in the quarter under review.
Quarter Details
In the fourth quarter, Index operating revenues decreased 0.8% year over year to $329.3 million. The year-over-year decline was primarily due to lower asset-based fees, partially offset by higher recurring subscription revenues.
Growth in recurring subscription revenues was primarily driven by strong growth from market-cap weighted Index products and growth from factor, ESG and climate Index products.
Asset-based fees’ decline was primarily driven by a decrease in revenues from ETFs linked to MSCI equity indexes and non-ETF indexed funds linked to MSCI indexes, driven by a decrease in average AUM and average basis point fees.
Analytics operating revenues improved 8.4% year over year to $149.7 million, driven by higher recurring subscription revenues from both Multi-Asset Class and Equity Analytics products.
ESG and Climate segment’s operating revenues increased 31.2% from the year-ago quarter to $63.6 million, primarily driven by strong growth from recurring subscriptions related to Ratings and Climate products.
Other revenues, which primarily contain the Real Estate operating segment, were $33.7 million, up 6.9% year over year.
Adjusted EBITDA increased 6.4% year over year to $339 million in the reported quarter. Adjusted EBITDA margin expanded 260 basis points (bps) on a year-over-year basis to 53.6%.
Total operating expenses decreased 0.7% on a year-over-year basis to $267.5 million. Adjusted EBITDA expenses were $237.2 million, up 2.6%, primarily reflecting higher non-compensation costs related to information technology costs.
Operating income improved 10% from the year-ago quarter to $308.8 million. Moreover, the operating margin expanded 260 bps on a year-over-year basis to 53.6%.
Balance Sheet & Cash Flow
Total cash and cash equivalents, as of Dec 31, 2022, were $993.6 million compared with $867.1 million as of Sep 30, 2022.
Total debt was $4.5 billion as of Dec 31 compared with $4.51 billion as of Sep 30. The total debt-to-adjusted-EBITDA ratio (based on trailing 12-month-adjusted EBITDA) was 3.4 times, within the management’s target range of 3-3.5 times.
Free cash flow was $295 million, up 12.1% year over year.
MSCI bought shares worth $70.1 million during the reported quarter. Notably, $1.3 billion is outstanding under MSCI’s share-repurchase authorization as of Jan 30, 2023. The company paid out dividends worth $100.7 million in the fourth quarter.
Guidance
For 2023, MSCI expects total operating expenses in the range of $1.090-$1.130 million. Adjusted EBITDA expenses are expected between $965 million and $995 million.
Interest expenses are expected between $184 million and $187 million.
Capex is expected to be $75-$85 million.
Net cash provided by operating activities and free cash flow is expected to be $1.145-$1.195 billion and $1.060-$1.120 billion, respectively.
Zacks Rank & Stocks to Consider
Currently, MSCI has a Zacks Rank #3 (Hold).
MSCI shares have outperformed the Zacks Computer & Technology sector in the past year. While MSCI shares have declined 5.5%, the Computer & Technology sector dropped 23.3%.
Cambium Networks (CMBM - Free Report) , Amtech (ASYS - Free Report) and RingCentral (RNG - Free Report) are some better-ranked stocks that investors can consider in the broader sector. While Cambium sports a Zacks Rank #1 (Strong Buy), both Amtech and RingCentral carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Cambium shares have declined 13.9% in the past year. CMBM is set to report its fourth-quarter 2022 results on Feb 16.
Amtech shares have gained 19.2% in the past year. ASYS is set to report its first-quarter fiscal 2023 results on Feb 8.
RingCentral shares have declined 78.7% in the past year. RNG is set to report its fourth-quarter 2022 results on Feb 15.