Msci Inc. · NYSE:MSCI
Msci — Investor Presentation (February 2020)
39 slides from Msci's investor presentation, Feb 4, 2020
Slide 1: MSCI Investor Presentation
MSCI Investor Presentation February 4, 2020 © 2020 MSCI Inc. All rights reserved.
Slide 2: Forward-Looking Statements
Forward-Looking Statements • This earnings presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including without limitation, MSCI’s long-term targets. These forward-looking statements relate to future events or to future financ
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 2018, unless otherwise noted. • Gross sales include both new recurring subscription and non-recurring sales as reported in Table 6: Sale
Slide 4: Table of contents
Table of contents 1 Company overview 2 Financial review 3 Segment highlights 4 Appendix 4
Slide 5: Company overview
Company overview © 2020 MSCI Inc. All rights reserved.
Slide 6: MSCI at a glance
MSCI at a glance Who we are 7,5001 blue-chip clients Must-have products 3,300 talented Strong performance in 85+ countries (as of and services employees (as of and inclusive culture 12/31/2019) • Across asset classes for 12/31/2019) • Global, multi-cultural • Across investment and performance and ri
Slide 7: Clients across the investment process turn to MSCI's tools to support their investment needs
Clients across the investment process turn to MSCI’s tools to support their investment needs Client investment process Performance Asset Portfolio and Risk Allocation Construction Management MSCI tools to support: • Defining investable universes • Allocating assets sustainably • Creating investment
Slide 8: Powering better investment decisions
Powering better investment decisions Client Portfolio Needs Clients use our Indexes to Clients use our Performance and help them build portfolios Risk models and Analytics to help them build portfolios MSCI Solutions Equity and For Public Factor Models ESG Ratings and Performance and Content Enablin
Slide 9: Helping clients adapt to a transforming industry
Helping clients adapt to a transforming industry Investment Client Industry Trends Transformations From To Globalization Home Country Global Active Index-enabled ESG Management Short-Term Sustainable Returns Returns Diversity Public Assets Private Assets Developed Emerging Complexity Markets Markets
Slide 10: Key pillars of our strategy to drive long-term growth
Key pillars of our strategy to drive long-term growth Grow core business Execute in-flight Invest in next wave opportunities of opportunities • Fixed Income Indexes • Multi-Asset Class ESG & Factor • Market Cap Indexes with ESG & Factors Develop Indexes • Equity Factors & ESG Indexes • Fixed Income
Slide 11: How and why we win
How and why we win 1 2 3 Differentiated value Delivering actionable solutions Research-driven content and proposition with actionable to our clients that help them insights underlying products client solutions, unique content build portfolios driven by our and services to help power and flexible tec
Slide 12: Financial review
Financial review © 2020 MSCI Inc. All rights reserved.
Slide 13: Delivering growth across key metrics
Delivering growth across key metrics Financial discipline and rigor underpinned by culture of performance and accountability Revenue ($m) 10% Adjusted EBITDA ($m) 15% CAGR CAGR $1,558 $850 $1,434 $772 $1,274 $660 $1,151 $1,075 $569 $482 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 Free Cash Flo
Slide 14: Robust financial model
Robust financial model FY 2015-2019 4Q19 Recurring, Visible Recurring revenues1 ~97% Recurring revenues1 >96% Revenue Model annually RECURRING REVENUE & HIGH RETENTION Strong Historical >92% annually 92.9% Retention Rates Adjusted EBITDA margin / Adjusted EBITDA margin / Scalable Cost Operating marg
Slide 15: Capital and liquidity
Capital and liquidity (US$ in millions) Capital Position (As of 12/31/2019) Continued Capital Discipline Total Cash $1,507 • No repurchases in 4Q19, total of $102.1 million of shares repurchased in 2019 at average price of $147.97 Return • $1.46 billion of remaining repurchase Total Debt $3,072 of a
Slide 16: Growing dividend and opportunistic share repurchase
Growing dividend and opportunistic share repurchase (US$ in millions) 110 97 92 90 86 $172 Return of Capital Approach $97 $88 Opportunistic Repurchases Driven by: Availability of Cash, $925 Market Volatility $759 $671 Meaningful & Sustainable $121 $221 Dividend Per Share: Target of 40%-50% of $137 $
Slide 17: Long-Term targets
Long-Term targets Revenue Adj. EBITDA Adj. EBITDA Adj. EBITDA Growth Rate Expense Growth Rate Margin % (ex. ABF) Growth Rate Low Double High Single Index Digit Digit High Single Mid to High Analytics Digit to Low Single Digit Double Digit Mid ESG Twenties Low to Mid Teens Mid Real Estate Teens Low D
Slide 18: Segment highlights
Segment highlights © 2020 MSCI Inc. All rights reserved.
Slide 19: Index products overview
Index products overview • We harness first class content from across our firm to develop MSCI Indexes • Clients use our solutions across three core investment functions Industry CLIENTS USES Framework ESG PORTFOLIO FACTORS TECHNOLOGY CONSTRUCTION MSCI TOP QUALITY PERFORMANCE DATA AI INDEXES MODELS M
Slide 20: Index segment run rate fundamentals
Index segment run rate fundamentals Subscription Run Rate Asset-Based Fee Run Rate ($559M as of 4Q19) ($396M as of 4Q19) • Market Cap Weighted • ETFs Products/ • Non-ETFs • Factor & ESG Content • Custom & Specialized • Futures & Options • ETFs – basis point fees on AUM Pricing Model • License fees •
Slide 21: Resilient Index subscription franchise
Resilient Index subscription franchise Index Subscription Run Rate ($m) Growth 18% 15% 15% 11% 11% 11% 10% 10% 10% 10% 9% $559 9% $503 $451 $407 $369 $335 $305 $279 $253 $219 $189 $173 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Index Subscription Growth % Index Subscription 21
Slide 22: Index subscription at a glance
Index subscription at a glance Asset managers, asset owners, broker-dealers and wealth managers globally use our solutions for portfolio construction, performance and risk management Index Subscription Run Rate Index Subscription Run Rate ex. ABF as of 12/31/2019 ex. ABF by Geography and Client Base
Slide 23: Analytics products overview
Analytics products overview • We serve the portfolio construction, performance and risk management needs of investors across their entire organizations INVESTMENT PRODUCT AND MARKETING AND TEAMS OPERATIONS DISTRIBUTION TEAMS TEAMS WHAT WHAT WHAT Asset allocation, Enterprise risk Investor reporting a
Slide 24: Analytics strongly positioned to capitalize on a large opportunity
Analytics strongly positioned to capitalize on a large opportunity $20B+ in TAM1 globally Greenfield • Greenfield Opportunities • Investment innovation (e.g., factor Opportunity investing, ESG) • Regulation (e.g., liquidity) • Increasing adoption of best practices Replacement and technology (e.g., a
Slide 25: Clients use MSCI's Analytics content and technology to help them build portfolios
Clients use MSCI’s Analytics content and technology to help them build portfolios SOLUTIONS INPUT CONTENT ENABLING DATA Portfolio Construction, Performance and Risk TECHNOLOGY Distribution / Delivery Calculation Engines Client Data Interactive Pricing Risk Performance Optimization Applications APIs
Slide 26: Analytics segment at a glance
Analytics segment at a glance Extensively used by asset owners, asset managers and intermediaries globally to solve a broad range of investment problems Analytics Segment Run Rate as of 12/31/2019 Analytics Segment Run Rate by Geography and Client Base Other Global Footprint Diverse Client Base Equi
Slide 27: All Other Segment (ESG & Real Estate) at a glance
All Other Segment (ESG & Real Estate) at a glance All Other Segment Run Rate All Other Segment Run Rate as of 12/31/2019 (ESG and Real Estate) by Geography and Client Base Global Footprint Diverse Client Base Real Estate ESG Hedge Funds Wealth 3% Management +21.3% 3% +21.9% Organic $152.2 APAC 9% As
Slide 28: ESG Increasingly part of investment decisions
ESG Increasingly part of investment decisions TWO GROWTH DRIVERS 1 New Clients Penetration rate still low at 30% 2 New Use Cases Most Clients Have Two, Leading Clients Have 4 or 5 • We expect revenue growth to be driven by • We expect our clients will expand the number of increased penetration of as
Slide 29: ESG products overview
ESG products overview • MSCI’s Ratings, Indexes and Analytics solutions enable ESG integration throughout the investment process INTEGRATING ESG ACROSS ✓ A LEADER IN ESG RATINGS & RESEARCH1 ENTIRE INVESTMENT PROCESS OBJECTIVES & INVESTMENT INNOVATIVE EQUITY & FIXED INCOME REPORTING POLICY & ✓ INDEXE
Slide 30: ESG: Robust growth across ESG Content and ESG Indexes
ESG: Robust growth across ESG Content and ESG Indexes MSCI’s ESG Content and ESG Index Run Rate1 (US$ in millions) $147 $45 $107 $27 $83 $19 $61 $48 $12 $101 $40 $8 $5 $79 $25 $27 $65 $18 $21 $4 $49 $6 $40 $1 $5 $35 $19 $23 $17 $17 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 ESG Content ESG In
Slide 31: Real Estate product overview
Real Estate product overview • Provide insights by leveraging one of the most extensive private real estate databases in the world Collect Lease, Asset and Portfolio Data + Validate and Aggregate + Standardized Data Input to Products and Indexes Enterprise Analytics Global Intel Indexes & Benchmarks
Slide 32: Appendix
Appendix © 2020 MSCI Inc. All rights reserved.
Slide 33: Reconciliation of Adjusted EBITDA to Net Income
Three Months Ended Dec. 31, Reconciliation of Adjusted EBITDA to Net Income In thousands 2019 Index adjusted EBITDA $ 176,382 Analytics adjusted EBITDA 38,847 (UNAUDITED) All Other adjusted EBITDA Consolidated adjusted EBITDA 4,978 220,207 Multi-Year PSU payroll tax expense — Amortization of intangi
Slide 34: Reconciliation of Net Income to Adjusted Net Income
Reconciliation of Net Income to Adjusted Net Income (UNAUDITED) Year Ended Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, In thousands, except per share data 2019 2018 2017 2016 2015 Net income $ 563,648 $ 507,885 $ 303,972 $ 260,855 $ 223,648 Less: Income (loss) from discontinued operations, net of i
Slide 35: Reconciliation of Diluted EPS to Adjusted EPS
Plus: Multi-Year PSU payroll tax expense 15,389 — — — — Less: Discrete excess tax benefit related to Multi-Year PSU vesting (66,581) — — — — Reconciliation of Diluted EPS to Adjusted EPS Plus: Debt extinguishment costs associated with the 2024 Senior Notes Redemption 16,794 — — — — Less: Gain on sal
Slide 36: Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow
Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow (UNAUDITED) Three Months Ended Twelve Months Ended In thousands In thousands Dec. 31, 2019 Dec. 31, 2019 Dec. 31, 2018 Dec. 31, 2017 Dec. 31, 2016 Dec. 31, 2015 Net cash Net cash provided by operating provided by operating
Slide 37: Reconciliation of Effective Tax Rate to Adjusted Tax Rate
Reconciliation of Effective Tax Rate to Adjusted Tax Rate (UNAUDITED) Three Months Ended Dec. 31, 2019 Effective tax rate 16.2% Tax Reform impact on effective tax rate —% Multi-Year PSU impact on effective tax rate —% Adjusted tax rate 16.2% Three Months Ended Year Ended Dec. 31, Dec. 31, Dec. 31, D
Slide 38: Use of Non-GAAP Financial Measures
Use of Non-GAAP Financial Measures • MSCI has presented supplemental non-GAAP financial measures as part of this earnings presentation. Reconciliations are provided in slides 34-37 that reconcile each non-GAAP financial measure with the most comparable GAAP measure. The non-GAAP financial measures p
Slide 39: Use of Operating Metrics
Use of Operating Metrics • MSCI has presented supplemental key operating metrics as part of this earnings presentation, including Run Rate, subscription sales and cancellations, non-recurring sales and Retention Rate. • Retention Rate is an important metric because subscription cancellations decreas