Msci Inc. · NYSE:MSCI
Msci — Q3 2018 Earnings Presentation
29 slides from Msci's earnings presentation, Nov 1, 2018
Slide 1: MSCI Third Quarter 2018 Earnings Presentation
MSCI THIRD QUARTER 2018 Earnings Presentation November 1, 2018 © 2018 MSCI Inc. All rights reserved. Please refer to the disclaimer at the end of this document.
Slide 2: Forward-Looking Statements
FORWARD – LOOKING STATEMENTS • This earnings presentation contains forward-looking • Other factors that could materially affect actual results, statements within the meaning of the Private Securities levels of activity, performance or achievements can be Litigation Reform Act of 1995, including with
Slide 3: Other Information
OTHER INFORMATION • Percentage changes and totals in this earnings presentation may not sum due to rounding. • Percentage changes refer to the comparable period in 2017, unless otherwise noted. • Gross sales include both recurring subscription and non- recurring sales as reported in Table 6: Sales a
Slide 4: Q3'18 Financial Results
Q3’18 – FINANCIAL RESULTS1 Exceptional Revenue Growth Outstanding Revenue Growth Subscription Run Rate Growth EPS Growth (Subscription & Asset-Based Fees) Reported / Organic +11% +9% / +11% Adjusted EPS Continued Operational Efficiency +35% Adj. EBITDA Margin (Change in bps) / Adj. EBITDA Growth / O
Slide 5: High Subscription Run Rate Growth
HIGH SUBSCRIPTION RUN RATE GROWTH (US$ in millions) Index Analytics All Other Factor & ESG Other Real Estate Custom & Specialized Equity ESG Market Cap Weighted Multi-Asset Class +5.2% +11.4% $499.2 $489.5 $474.7 +7.4% +18.9% $57.5 (10.7%) $120.4 $439.3 +11.4% $38.8 +23.1% Organic +20.7% $64.4 $31.5
Slide 6: Q3'18 Financial Summary
Q3’18 FINANCIAL SUMMARY (US$ in millions) Operating Revenue Operating Expenses Operating Income Earnings Per Share Cash Generation Operating Expenses Adj. EBITDA +11.1% Adj. EPS Cash from Operations +4.8% +15.9% +11.2% ex FX +35.0% +41.3% +6.2% ex FX +14.6% ex FX $357.9 54.6% $181.5 $322.1 $173.3 52
Slide 7: Adjusted EPS Growth
ADJUSTED EPS GROWTH % of Business Growth Capital Activities Tax Benefits FX / Other Total: 57% 0% 40% 3% +$0.28 ($0.08) +$0.00 +$0.15 +35.0% $0.01 $0.07 ($0.08) $0.14 $0.01 ($0.01) $0.21 $1.35 $1.00 Q3'17 Adj. EPS Higher Revenue (Investment) / Lower Share Count Net Interest Effective Tax Rate FX / O
Slide 8: Segment Results
SEGMENT RESULTS
Slide 9: Q3'18 Segment Results
Q3’18 SEGMENT RESULTS (US$ in millions) Index Analytics Revenue Adjusted EBITDA Revenue Adjusted EBITDA 73.5% 30.9% +13.9% +6.4% Margin Margin ex FX ex FX, +71 bps +213 bps +13.9% +4.3% ex FEA1 YoY YoY $210.2 $115.0 $119.9 $184.6 $1.4 $1.0 +15.0% +12.0% $82.0 $154.5 $72.9 $37.0 $134.3 $33.1 $6.9 $3.
Slide 10: Continued Operating Momentum
CONTINUED OPERATING MOMENTUM (US$ in millions) YoY Run Rate Growth YoY Recurring Sales Growth Total RR1 +10.5% +0.3% +11.7% +41.1% (Reported) +10.0% +11.9% +5.2% +18.9% Sub. RR1 $38.8 (organic) +10.5% +11.4% +7.4% +20.7% $35.1 $1,435.3 $1,305.0 $15.5 $15.5 $15.0 $16.8 $4.6 $6.5 Q3'17 Q3'18 Q3'17 Q3'
Slide 11: Integrated Factor and ESG Run Rate Trends
INTEGRATED FACTOR AND ESG RUN RATE TRENDS (US$ in millions) Factor Index and Analytics Run Rate Growth1 ESG Content and ESG Index Run Rate Growth2 3 Year 3 Year CAGR % CAGR % $220 13% 30% $101 $199 $177 $55 46% $43 $26 53% $152 $75 $31 $18 $57 $16 $46 $10 $165 7% $7 $146 $156 $75 25% $134 $59 $39 $4
Slide 12: Index Segment – Asset-Based Fees Detail
INDEX SEGMENT – ASSET-BASED FEES DETAIL (US$ in millions, except AUM in billions and Average BPS) Quarter-End AUM by Market Quarterly Avg. AUM and Avg. BPS1 of ETFs ABF Revenue Exposure2 of ETFs Linked to Linked to MSCI Indexes MSCI Indexes Futures and Options Average AUM US Non-ETF Average BPS EM E
Slide 13: Q3 & YTD'18 AUM Drivers: MSCI-Linked Equity ETFs
Q3 & YTD’18 AUM DRIVERS: MSCI-LINKED EQUITY ETFS (US$ in billions) Q3’18 Sequential Change in AUM $765.5 Cash inflows / (outflows) $9.0 U.S. $5.5 $7.0 DM ex. U.S. $1.7 EM $744.7 ($2.0) ($0.4) Q2’18 Ending AUM US Developed Emerging Markets Market Change Q3’18 Ending AUM Markets ex US YTD Sep’18 Chang
Slide 14: Capital, Liquidity and Guidance
CAPITAL, LIQUIDITY AND GUIDANCE
Slide 15: Capital and Liquidity
CAPITAL AND LIQUIDITY (US$ in millions) Capital Position (As of 9/30/18) Continued Capital Discipline Total Cash $1,398 • Repurchased $388.4 million of shares at average price of $151.06 as of October Return of 31, 2018, year-to-date. 1 Capital Total Debt $2,600 • $1.3 billion remains under board au
Slide 16: Full Year 2018 Guidance
FULL YEAR 2018 GUIDANCE (US$ in millions) Prior Guidance Current Guidance Operating Expenses $725 - $750 $743 - $750 Adjusted EBITDA Expenses $645 - $665 $658 - $665 Interest Expense $133 $133 Effective Tax Rate 21.0% - 24.0% 19.0% - 21.0% Net Cash Provided by Operating Activities $490 - $540 $520 -
Slide 17: Exceptional Shareholder Value Creation
EXCEPTIONAL SHAREHOLDER VALUE CREATION Accelerating Growth Rates and Expanding Profits ~$6B of Value Creation since 2016 Run Rate Adj. EPS Total Shareholder Return1 Since MSCI (US$ in millions) CAGR CAGR Jan 1, 2016 Total Shareholder Return % 1.8 107% Return +11% +30% $1,435.3 5.11 1.6 $326.1 +20% 1
Slide 18: Market Outlook and Trends
MARKET OUTLOOK AND TRENDS Revenue Q3’18 Q3’18 YoY Source Run Rate % of Total Growth % Market Trends MSCI Focus Areas • Global Investing • Consistent Strategy and Subscription Execution • ESG Integration +9.3% • Solutions1-Focused Approach • Private Asset Growth Subscription $1.1B 77% (+10.5% • Resea
Slide 19: Appendix
APPENDIX
Slide 20: Q1'13 – Q3'18 YoY Run Rate Growth Trend
Q1’13 – Q3’18 YOY RUN RATE GROWTH TREND YoY Run Rate Growth as Reported 46% 38% 37% 38% 34% 28% 25% 21% 21% 21% 21% 18% 15% 17% 16% 14% 13% 13% 14% 10% 11% 14% 10% 10% 12% 10% 10% 9% 8% 9% 12% 13% 8% 8% 6% 8% 7%8% 10% 9% 8% 7% 8% 12% 6% 8% 5% 7% 9% 11% 11% 9% 9% 2% 7% 8% 8% 8% 7% 6% 6% 6% 7% 5% 7% 6
Slide 21: Q1'13 – Q3'18 YoY Segment Run Rate Growth Trend
Q1’13 – Q3’18 YOY SEGMENT RUN RATE GROWTH TREND Index 46% 34% 38% 37% 38% 28% 25% 21% 21% 18% 14% 21% 21% 10% 11% 15% 10% 13% 10% 10% 11% 11% 11% 13% 9% 8% 8% 9% 10% 11% 10% 10% 10% 10% 10% 6% 10% 5% 10% 8% 10% 12% 11% (2%) 2% (3%) Q1'13 Q2'13 Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 Q4
Slide 22: Reconciliation of Adjusted EBITDA to Net Income
RECONCILIATION OF ADJUSTED EBITDA TO NET INCOME Three Months Ended Nine Months Ended Sep. 30, Sep. 30, June 30, Sep. 30, Sep. 30, In thousands 2018 2017(1) 2018 2018 2017(1) Index adjusted EBITDA $ 154,477 $ 134,342 $ 157,516 $ 457,923 $ 379,538 Analytics adjusted EBITDA 37,046 33,078 36,327 106,966
Slide 23: Reconciliation of Adjusted Net Income and Adjusted EPS
RECONCILIATION OF ADJUSTED NET INCOME AND ADJUSTED EPS TO NET INCOME AND EPS Three Months Ended Nine Months Ended Sep. 30, Sep. 30, June 30, Sep. 30, Sep. 30, In thousands, except per share data 2018 2017 2018 2018 2017 Net income $ 123,832 $ 85,153 $ 116,829 $ 355,753 $ 239,370 Plus: Amortization o
Slide 24: Reconciliation of Adjusted EBITDA Expenses to Operating Expenses
RECONCILIATION OF ADJUSTED EBITDA EXPENSES TO OPERATING EXPENSES Three Months Ended Nine Months Ended Full-Year Sep. 30, Sep. 30, June 30, Sep. 30, Sep. 30, 2018 In thousands 2018 2017(1) 2018 2018 2017(1) Outlook(2) Index adjusted EBITDA expenses $ 55,717 $ 50,252 $ 55,418 $ 167,119 $ 145,647 Analy
Slide 25: Reconciliation of Free Cash Flow
RECONCILIATION OF FREE CASH FLOW TO NET CASH PROVIDED BY OPERATING ACTIVITIES Three Months Ended Nine Months Ended Full-Year Sep. 30, Sep. 30, June 30, Sep. 30, Sep. 30, 2018 In thousands 2018 2017 2018 2018 2017 Outlook(1) Net cash provided by operating activities $ 143,825 $ 101,773 $ 207,165 $ 43
Slide 26: Reconciliation of Effective Tax Rate to Adjusted Tax Rate
RECONCILIATION OF EFFECTIVE TAX RATE TO ADJUSTED TAX RATE Three Months Ended Nine Months Ended Sep. 30, Sep. 30, June 30, Sep. 30, Sep. 30, 2018 2017 2018 2018 2017 Effective tax rate 15.67% 29.51% 25.26% 19.62% 29.58% Tax Reform impact on effective tax rate —% —% —% 0.36% —% Adjusted tax rate 15.67
Slide 27: Use of Non-GAAP Financial Measures
USE OF NON-GAAP FINANCIAL MEASURES • MSCI has presented supplemental non-GAAP financial measures as part • We believe adjusted EBITDA and adjusted EBITDA expenses are of this earnings presentation. Reconciliations are provided in slides 22- meaningful measures of the operating performance of MSCI be
Slide 28: Use of Operating Metrics
USE OF OPERATING METRICS • MSCI has presented supplemental key operating metrics as part of and quarter ended June 30, 2018, and accordingly, we do not believe this earnings presentation, including Run Rate, subscription sales and changes to those previously reported cancellation rates are required.
Slide 29: MSCI
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