MSCI’s (MSCI Quick QuoteMSCI - Free Report) third-quarter 2024 adjusted earnings of $3.86 per share beat the Zacks Consensus Estimate by 2.39% and increased 11.9% year over year.

MSCI’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, which is commendable.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

Revenues increased 15.9% year over year to $724.7 million, beating the consensus mark by 1.54%. Organic revenues rose 11.1% year over year.

MSCI Inc Price, Consensus and EPS Surprise

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

Recurring subscriptions of $536.6 million increased 15.4% year over year and contributed 74% to revenues. 

Asset-based fees of $168.6 million jumped 19.5% year over year and contributed 23.3% to revenues. 

Non-recurring revenues of $19.5 million increased 0.4% year over year and contributed 2.7% to revenues. 

At the end of the reported quarter, average assets under management (AUM) were $1.762 trillion in ETFs linked to MSCI indexes. 

The total retention rate was 94.2% in the quarter under review.

MSCI’s Top-Line Details

In the third quarter, Index revenues of $404.8 million increased 11.8% year-over-year. Recurring subscriptions and asset-based fees rose 8.5% and 19.5% on a year-over-year basis, respectively. However, non-recurring revenues declined 15.7% year over year. Organically, Index operating revenue growth was 11.8%.

Growth in Index revenues also included $0.21 million from the acquisition of Foxberry. Organic operating revenue growth for the Index was 11.8%.

The uptick in recurring subscription revenues was driven by strong growth from market-cap-weighted Index products and ETFs linked to MSCI equity indexes.

Analytics operating revenues of $172.4 million increased 11.7% year over year. Organically, Analytics’ operating revenue growth was 11.7%.

Recurring subscriptions and non-recurring revenues jumped 11.2% and 40.9% on a year-over-year basis, respectively.

ESG and Climate segment’s operating revenues of $83.6 million and surged 14.5% year over year. Organically, ESG and Climate operating revenue growth was 11%. 

Recurring subscriptions and non-recurring revenues increased 13.6% and 62.8% on a year-over-year basis, respectively.

All Other – Private Assets operating revenues, which primarily comprise the Real Assets operating segment and the Private Capital Solutions (formerly known as Burgiss), were $63.8 million, up 77.2% year over year. Organic operating revenue growth for All Other – Private Assets was 1%.

MSCI’s Operating Details

Adjusted EBITDA increased 16.7% year over year to $450.7 million in the reported quarter. Adjusted EBITDA margin in the third quarter of 2024 was 62.2% compared to 61.8% in the third quarter of 2023.

Total operating expenses increased 18.8% on a year-over-year basis to $323.4 million. 

Adjusted EBITDA expenses were $274 million, up 14.6%, reflecting higher compensation and incentive compensation expenses related to higher headcount.

Operating income improved 13.6% year over year to $401.3 million. The operating margin contracted 110 bps on a year-over-year basis to 55.4%.

MSCI’s Balance Sheet & Cash Flow

Total cash and cash equivalents, as of Sept. 30, 2024, were $501 million compared with $451.4 million as of June 30, 2024.

Total debt was $4.5 billion as of Sept. 30, unchanged sequentially. The total debt-to-adjusted EBITDA ratio (based on trailing 12-month-adjusted EBITDA) was 2.7 times, lower than management’s target range of 3-3.5 times.

As of Sept. 30, 2024, free cash flow was $394 million, up 45.8% year over year, compared with $321.9 million as of June 30, 2024.

MSCI had $1.9 billion outstanding under its share-repurchase authorization as of Oct. 28, 2024. 

It paid out dividends worth $125.4 million in the third quarter.

MSCI’s 2024 Guidance

For 2024, MSCI expects total operating expenses in the range of $1.305-$1.345 billion. 

Adjusted EBITDA expenses are expected between $1.130 billion and $1.160 billion.

Interest expenses are expected between $183 million and $186 million.

Net cash provided by operating activities and free cash flow are expected in the $1.42-$1.47 billion band and the $1.305-$1.365 billion range, respectively.

MSCI: In a Nutshell

MSCI shares have underperformed the Zacks Computer & Technology sector year to date. While MSCI shares have risen 5.2%, the Computer & Technology sector has advanced 26.2%. The underperformance is likely to have been caused by challenging macroeconomic conditions.

However, MSCI is benefiting from strong demand for custom and factor index modules, recurring revenue business models and the growing adoption of its ESG and Climate solutions in the investment process. This is expected to boost MSCI shares.

Currently, MSCI carries a Zacks Rank #2 (Buy), which implies that investors should accumulate the stock post-third-quarter earnings. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Other Stocks to Consider

Shopify (SHOP Quick QuoteSHOP - Free Report) , Garmin (GRMN Quick QuoteGRMN - Free Report) and Twilio (TWLO Quick QuoteTWLO - Free Report) are some other top-ranked stocks that investors can consider in the broader sector. While SHOP currently sports a Zacks Rank #1, Garmin and Twilio carry a Zacks Rank #2 at present. 

Shopify shares have risen 2.5% year to date. SHOP is set to report its third-quarter 2024 results on Nov. 12.

Garmin shares have rallied 29.4% year to date. GRMN is set to report its third-quarter 2024 results on Oct. 30.

Twilio shares have dropped 6.9% year to date. TWLO is set to report its third-quarter 2024 results on Oct. 30.