Msci Inc. · NYSE:MSCI
Msci — FY2017 Earnings Presentation
33 slides from Msci's earnings presentation, Feb 1, 2018
Slide 1: MSCI Fourth Quarter and Full-Year 2017 Earnings Presentation
MSCI FOURTH QUARTER AND FULL-YEAR 2017 Earnings Presentation February 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 • On August 1, 2016, MSCI closed the sale of its Real Estate presentation may not sum due to rounding. occupiers benchmarking business. Unless indicated • Percentage changes refer to the comparable period in otherwise, reported finan
Slide 4: FY 2017 – Record Results
FY 2017 – RECORD RESULTS1 Exceptional Revenue Growth Strong EPS Revenue Growth Driven Subscription Run Rate Recurring Net New Growth by Asset-Based Fees & Growth Growth Index Subscription +11% +37% +11% Adjusted EPS Continued Operational Efficiency +31% Adj. EBITDA Expenses / Adj. EBITDA Margin / Op
Slide 5: Central to the Investment Process
CENTRAL TO THE INVESTMENT PROCESS Provide Unique Insights into Client Investment Objective Mission Critical Common Tools and Framework Services Deliver More Receive Industry Effective Tools and Input and Services to Address Feedback Client Needs Thought Innovation Leadership Develop Increasing Role
Slide 6: Power of Integrated Franchise
POWER OF INTEGRATED FRANCHISE Client Investment Opportunities and Challenges Clients Research and Product Development Models / Methodologies Content Derived Data Algorithms Content-Enabling Applications / Services Applications & Services Better / More Efficient Client Investment Decisions Integrated
Slide 7: Integrated Franchise Driving Key Successes
INTEGRATED FRANCHISE DRIVING KEY SUCCESSES Recent Initiatives / New Offerings Recent Successes1 • C-Level Engagement (MSCI and Client) • 19% YoY run rate growth from clients >$2m Integrated • Senior / Key Account Management (58% of run rate; 95.7% Retention Rate) Approach to Programs • Improved sale
Slide 8: Integrated Content Innovation
INTEGRATED CONTENT INNOVATION (US$ in millions) Factor Index and Analytics Run Rate Growth1 ESG Content and ESG Index Run Rate Growth2 CAGR % CAGR % (FY 2015 - FY 2017) (FY 2015 - FY 2017) $208 16% $83 31% $179 52% $156 52% $61 $48 27% 9% FY 2015 FY 2016 FY 2017 FY 2015 FY 2016 FY 2017 3 ESG Content
Slide 9: Q4'17 Financial Summary
Q4’17 FINANCIAL SUMMARY (US$ in millions) Operating Revenue Operating Expenses Operating Income Earnings Per Share Cash Generation Operating Adj. EBITDA +14.3% Expenses Adj. EPS Cash from Operations +18.2% Negligible FX1 +8.4% +42.0% +3.1% +19.9% ex FX1 +6.7% ex FX 51.9% $138.9 $143.2 $180.8 50.2% $
Slide 10: Q4'17 vs. Q4'16 Adjusted EPS Bridge
Q4’17 VS. Q4’16 ADJUSTED EPS BRIDGE Business Growth + Investment Capital Activities Taxes + FX +$0.31 ($0.08) +$0.03 +$0.08 +42.0% ($0.02) $0.11 ($0.05) ($0.03) $0.02 $0.01 $0.17 $0.14 $1.15 $0.81 Q4'16 Adj. EPS Higher (Investment) / Lower Share Count Net Interest Expense Effective Tax Rate FX Q4'17
Slide 11: FY 2017 Financial Summary
FY 2017 FINANCIAL SUMMARY (US$ in millions) Operating Revenue Operating Expenses Operating Income Earnings Per Share Cash Generation Operating Adj. EBITDA +10.7% Expenses Adj. EPS Cash from Operations +15.8% +11.1% ex FX1 +4.9% +31.4% (8.6%) +16.4% ex FX1 +5.1% ex FX 51.7% 49.5% $442.4 $695.0 $3.98
Slide 12: Strong Operating Performance
STRONG OPERATING PERFORMANCE (US$ in millions) YoY Run Rate Growth YoY Recurring Net New Sales Growth for FY +17.4% +23.1% +8.4% +23.1% +36.7% +17.0% +90.1% +26.8% $89.6 $65.6 $1,365.7 $44.3 $37.9 $1,163.3 $30.5 $16.1 $11.7 $14.8 2016 2017 2016 2017 2016 2017 2016 2017 $767.9 43.0%MSCI Index Analyti
Slide 13: Segment Results
SEGMENT RESULTS
Slide 14: Q4'17 Segment Results
Q4’17 SEGMENT RESULTS Operating Revenue Adj. EBITDA Year-over-Year Commentary • 11.6% recurring subscription revenue growth $193.8m $142.6m • 40.7% asset-based fee (ABF) revenue growth: Index +22% YoY +26% YoY • 46.1% in ETF related revenue Negligible FX1 73.6% Margin • 28.3% in non-ETF passive prod
Slide 15: Index Subscription Run Rate Growth
INDEX SUBSCRIPTION RUN RATE GROWTH (US$ in millions) FY’17 Run Rate 4-year CAGR Global Index Content1 ($451) 10% Demand Key Growth Drivers 14% • Investors seeking efficient and Factor & ESG $37 +15% systematic means of implementing 8% of Total Run Rate factor and ESG strategies 8% • Increasing usage
Slide 16: Index Segment – Asset-Based Fees Detail
INDEX SEGMENT – ASSET-BASED FEES DETAIL (US$ in millions, except AUM in billions and Average BPS) Quarterly Asset-Based Fees Revenue Trend Quarter-End AUM & Market Movement of ETFs Linked to MSCI Indexes Cash Inflows +$139.4B $32.0 $78.5 $38.0 $72.9 Market Appreciation +$123.6B $32.2 $67.2 $3.6 $17.
Slide 17: Analytics Key Metrics
ANALYTICS KEY METRICS (US$ in millions) Adjusted EBITDA Margin Progression 28.7% 27.4% Includes $5m of 22.0% one-time 17.4% incremental 4.1% 3.1% FY 2014 4.5% 4.1% FY 2015 3.4% 3.1% FY 2016 Recurring Revenue YoY % Run Rate YoY % 8.4% 2.7% FY 2017 severance cost Investment in Content and Base for L-T
Slide 18: Capital, Liquidity and Guidance
CAPITAL, LIQUIDITY AND GUIDANCE
Slide 19: Balance Sheet and Liquidity
BALANCE SHEET AND LIQUIDITY (US$ in millions) Capital Position (As of 12/31/17) Impact of Tax Reform Cash in US $387 Cash outside US $503 • Ability to access additional capital Total Cash1 $890 Benefits • Approximately $350m of existing of Tax Reform overseas cash available Total Debt1 $2,100 • Ongo
Slide 20: FY 2018 Guidance
FY 2018 GUIDANCE (US$ in millions) FY 2017 FY 2018 Guidance Operating Expenses $695.0 $725 - $750 Adjusted EBITDA Expenses $615.0 $645 - $665 Interest Expense $116.1 $116 Effective Tax Rate 34.9% 21.0% - 24.0% Net Cash Provided by Operating Activities $404.2 $490 - $540 Capex ($48.8) ($50 - $40) Fre
Slide 21: Appendix
APPENDIX
Slide 22: Strong Track Record of Returning Capital
STRONG TRACK RECORD OF RETURNING CAPITAL (US$ in millions, except period-end shares) $857 112 $759 $97 101 $88 91 90 $420 $20 $759 $671 $258 $400 $121 $137 FY 2014 FY 2015 FY 2016 FY 2017 Value of Shares Repurchased Dividends Period-End Shares Outstanding (in millions) $2.5 Billion Capital Returned
Slide 23: ETFs Linked to MSCI Indexes – Differentiated Licensing
ETFS LINKED TO MSCI INDEXES – DIFFERENTIATED LICENSING (US$ in billions) Growth in AUM in ETFs Linked to MSCI Indexes % of 2017 % of 12/31/2016 Net Growth 12/31/2017 Total Total 1 $345.3 72% Flagship Indexes $80.1 $93.4 +50% $518.8 70% 2 $61.2 12% New Indexes $49.9 $21.6 +117% $132.7 18% $74.9 16% U
Slide 24: Q1'13 – Q4'17 YoY Run Rate Growth Trend
Q1’13 – Q4’17 YOY RUN RATE GROWTH TREND YoY Run Rate Growth as Reported 46% 38% 37% 34% 28% 25% 21% 21% 21% 18% 15% 17% 14% 12% 14% 13% 13% 14% 10% 11% 10% 10% 10% 10% 6% 9% 8% 7% 8% 8% 9% 8% 8% 8% 8% 7% 9% 2% 12% 9% 11% 8% 7% 8% 8% 8% 7% 6% 6% 6% 6% 7% 5% 5% 7% 7% 6% 7% (2%) (3%) Q1'13 Q2'13 Q3'13
Slide 25: Q1'13 – Q4'17 YoY Segment Run Rate Growth Trend
Q1’13 – Q4’17 YOY SEGMENT RUN RATE GROWTH TREND Index 46% 38% 37% 28% 34% 25% 21% 21% 21% 18% 11% 15% 9% 8% 14% 10% 10% 13% 10% 11% 11% 8% 9% 10% 11% 10% 10% 2% 10% 10% 10% 8% 10% 10% 10% 5% (3%) 10% (2%) 6% Q1'13 Q2'13 Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4
Slide 26: Reconciliation of Adjusted EBITDA to Net Income
RECONCILIATION OF ADJUSTED EBITDA TO NET INCOME Three Months Ended Year Ended Dec. 31, Dec. 31, Sep. 30, Dec. 31, Dec. 31, In thousands 2017 2016 2017 2017 2016 Index adjusted EBITDA $ 142,631 $ 113,161 $ 134,299 $ 522,043 $ 431,478 Analytics adjusted EBITDA 31,060 33,344 33,013 125,349 128,507 All
Slide 27: Reconciliation of Adjusted Net Income and Adjusted EPS
RECONCILIATION OF ADJUSTED NET INCOME AND ADJUSTED EPS TO NET INCOME AND EPS Three Months Ended Year Ended Dec. 31, Dec. 31, Sep. 30, Dec. 31, Dec. 31, In thousands, except per share data 2017 2016 2017 2017 2016 Net income $ 64,602 $ 68,250 $ 85,153 $ 303,972 $ 260,855 Plus: Amortization of acquire
Slide 28: Reconciliation of Adjusted EBITDA Expenses to Operating Expenses
RECONCILIATION OF ADJUSTED EBITDA EXPENSES TO OPERATING EXPENSES Three Months Ended Year Ended Full-Year Dec. 31, Dec. 31, Sep. 30, Dec. 31, Dec. 31, 2018 In thousands 2017 2016 2017 2017 2016 Outlook Index adjusted EBITDA expenses $ 51,143 $ 45,909 $ 50,295 $ 196,916 $ 182,073 Analytics adjusted EB
Slide 29: Reconciliation of Free Cash Flow to Operating Cash Flow
RECONCILIATION OF FREE CASH FLOW TO NET CASH PROVIDED BY OPERATING ACTIVITIES Three Months Ended Year Ended Full-Year Dec. 31, Dec. 31, Sep. 30, Dec. 31, Dec. 31, 2018 In thousands 2017 2016 2017 2017 2016 Outlook Net cash provided by operating activities $ 143,158 $ 138,853 $ 101,773 $ 404,163 $ 44
Slide 30: Reconciliation of Effective Tax Rate to Adjusted Tax Rate
RECONCILIATION OF EFFECTIVE TAX RATE TO ADJUSTED TAX RATE Three Months Ended Year Ended Dec. 31, Dec. 31, Sep. 30, Dec. 31, Dec. 31, 2017 2016 2017 2017 2016 Effective tax rate 49.12% 29.71% 29.51% 34.90% 32.41% Less: Tax Reform impact on effective tax rate 27.17% —% —% 7.39% —% Adjusted tax rate 21
Slide 31: Use of Non-GAAP Financial Measures
USE OF NON-GAAP FINANCIAL MEASURES • MSCI has presented supplemental non-GAAP financial measures as part • From time to time, we may present normalized cash flows that take of this earnings presentation. Reconciliations are provided in slides 26- into account the timing of cash collections and other
Slide 32: Use of Operating Metrics
USE OF OPERATING METRICS • MSCI has presented supplemental key operating metrics as part of Filings. For any Client Contract where fees are linked to an this earnings presentation, including Run Rate, subscription sales investment product’s assets or trading volume, the Run Rate and cancellations, n
Slide 33: MSCI
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