Msci Inc. · NYSE:MSCI
Msci — Q1 2018 Earnings Presentation
30 slides from Msci's earnings presentation, May 3, 2018
Slide 1: MSCI First Quarter 2018 Earnings Presentation
MSCI FIRST QUARTER 2018 Earnings Presentation May 3, 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: Q1 2018 – Financial Results
Q1 2018 – FINANCIAL RESULTS1 Exceptional Revenue Growth Outstanding Revenue Growth Driven by Asset- Subscription Run Rate Growth EPS Growth Based Fees & Index Subscription +17% +11% Adjusted EPS Continued Operational Efficiency +49% Adj. EBITDA Margin (Expansion) / Adj. EBITDA Growth / Operating Ope
Slide 5: 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 6: ESG Evolution and Performance
ESG EVOLUTION AND PERFORMANCE (US$ in millions) ESG Factors ESG Fixed in Models Income ESG Equity Indexes CAGR % Indexes (FY'14 - Q1'18) ESG Ratings and Research $90 29% ESG Screening $83 and Exclusions $21 53% $19 $61 $48 $12 ESG1 $40 $8 Run Rate $5 $69 24% $64 $49 $35 $40 2014 2015 2016 2017 Q1'18
Slide 7: Q1'18 Financial Summary
Q1’18 FINANCIAL SUMMARY (US$ in millions) Operating Revenue Operating Expenses Operating Income Earnings Per Share Cash Generation Operating Expenses Adj. EBITDA +16.6% Adj. EPS Cash from Operations +8.0% +23.8% +16.0% ex FX1 +48.9% +139.4% +4.7% ex FX +26.1% ex FX1 53.1% $184.2 $88.6 $1.31 $170.5 5
Slide 8: Q1'18 vs. Q1'17 Adjusted EPS Bridge
Q1’18 VS. Q1’17 ADJUSTED EPS BRIDGE Business Growth + Investment Capital Activities Taxes + FX / Other +$0.38 ($0.07) +$0.00 +$0.12 % of 72% from Business 37% from (9%) from FX Total: Growth Tax Benefits / Other +48.9% ($0.04) $0.16 ($0.07) $0.22 ($0.01) $0.01 $0.16 $1.31 $0.88 Q1'17 Adj. EPS Higher
Slide 9: Segment Results
SEGMENT RESULTS
Slide 10: Q1'18 Segment Results
Q1’18 SEGMENT RESULTS Operating Revenue Adj. EBITDA Year-over-Year Commentary • 10.8% recurring subscription revenue growth $201.9m $145.9m • 48.6% asset-based fee (ABF) revenue growth: Index +24% YoY +26% YoY • 47.0% in equity ETF-related revenue Negligible FX1 72.3% Margin • 50.1% in non-ETF passi
Slide 11: Continued Operating Momentum
CONTINUED OPERATING MOMENTUM (US$ in millions) YoY Run Rate Growth YoY Recurring Sales Growth Total RR1 +6.1% +7.1% (4.4%) +32.7% (Reported) +16.2% +20.6% +8.2% +25.0% $32.0 Sub. RR1 $30.2 (ex FX) +9.3% +10.6% +6.4% +18.2% $1,403.1 $14.2 $15.2 $11.9 $11.4 $1,207.1 $4.1 $5.5 Q1'17 Q1'18 Q1'17 Q1'18 Q
Slide 12: Index Subscription Run Rate Growth
INDEX SUBSCRIPTION RUN RATE GROWTH Client Segment Q1’18 Run Rate 4-Yr CAGR Global Demand Key Growth Drivers Demand for ACWI, including small caps as Client Segments Asset Management $341 investors increasingly take Established million a global view 74% of +9% Use of custom indexes for Asset Owners &
Slide 13: Index Segment – Asset-Based Fees Detail
INDEX SEGMENT – ASSET-BASED FEES DETAIL (US$ 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 YoY Cash Inflows +133.2B $85.5 +48.6% $78.5 Market Appreciation +76.0B $72.9 $4.4 +66.5% $67.2
Slide 14: Analytics Key Metrics
ANALYTICS KEY METRICS (US$ in millions) YoY Recurring Revenue and Run Rate Growth 8.2% 8.4% 4.5% 6.3% 4.1% 3.4% 4.1% 3.1% 3.1% 2.8% FY 2014 FY 2015 FY 2016 FY 2017 Q1 2018 Recurring Revenue YoY Growth Run Rate YoY Growth Adjusted EBITDA Margin Progression 28.7% 28.2% 27.4% 22.0% 17.4% Restructuring
Slide 15: Capital, Liquidity and Guidance
CAPITAL, LIQUIDITY AND GUIDANCE
Slide 16: Capital and Liquidity
CAPITAL AND LIQUIDITY (US$ in millions) Capital Position (As of 3/31/18) Continued Capital Discipline Total Cash $850 • 1.4 million shares repurchased for a total of $210 million, through May 2, 2018 Return of 1 Capital • Additional $35 million returned Total Debt $2,100 through quarterly dividend •
Slide 17: Strong Track Record of Returning Capital
STRONG TRACK RECORD OF RETURNING CAPITAL (US$ in millions, except period-end shares) $857 $759 $97 120 118 112 $88 101 91 90 90 $420 $20 $759 $671 $258 $245 $35 $400 $121 $100 $100 $210 $137 $100 $100 1 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 YTD 2018 Value of Shares Repurchased Dividends Pe
Slide 18: Full Year 2018 Guidance
FULL YEAR 2018 GUIDANCE (US$ in millions) Full Year 2018 Guidance Operating Expenses $725 - $750 Adjusted EBITDA Expenses $645 - $665 Interest Expense1 $116 Effective Tax Rate 21.0% - 24.0% Net Cash Provided by Operating Activities $490 - $540 Capex ($50 - $40) Free Cash Flow $440 - $500 Dividend Pa
Slide 19: Appendix
APPENDIX
Slide 20: ETFs Linked to MSCI Indexes – Differentiated Licensing
ETFS LINKED TO MSCI INDEXES – DIFFERENTIATED LICENSING (US$ in billions) Growth in AUM in ETFs Linked to MSCI Indexes 12/31/2017 % of Total QoQ Net Growth 3/31/2018 % of Total 1 $518.8 70% Flagship Indexes ($6.5) $7.0 +0.1% $519.3 68% 2 $132.7 18% New Indexes ($1.6) $24.3 +17.1% $155.4 20% 3 $92.9 1
Slide 21: Q1'13 – Q1'18 YoY Run Rate Growth Trend
Q1’13 – Q1’18 YOY RUN RATE GROWTH TREND YoY Run Rate Growth as Reported 46% 38% 37% 34% 28% 25% 21% 38% 21% 21% 18% 15% 17% 16% 14% 14% 13% 13% 14% 10% 11% 12% 10% 10% 10% 10% 6% 9% 9% 8% 8% 8% 8% 8% 7% 8% 8% 7% 9% 2% 12% 9% 11% 11% 8% 7% 8% 8% 8% 7% 6% 6% 6% 6% 7% 5% 5% 7% 7% 6% 7% (2%) (3%) Q1'13
Slide 22: Q1'13 – Q1'18 YoY Segment Run Rate Growth Trend
Q1’13 – Q1’18 YOY SEGMENT RUN RATE GROWTH TREND Index 46% 38% 37% 38% 28% 34% 25% 21% 21% 21% 18% 14% 11% 15% 9% 8% 10% 10% 13% 10% 11% 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
Slide 23: Reconciliation of Adjusted EBITDA to Net Income
RECONCILIATION OF ADJUSTED EBITDA TO NET INCOME Three Months Ended Mar. 31, Mar. 31, Dec. 31, In thousands 2018 2017 (1) 2017 (1) Index adjusted EBITDA $ 145,929 $ 115,677 $ 142,702 Analytics adjusted EBITDA 33,593 29,600 31,141 All Other adjusted EBITDA 7,187 5,544 (26) Consolidated adjusted EBITDA
Slide 24: Reconciliation of Adjusted Net Income and Adjusted EPS
RECONCILIATION OF ADJUSTED NET INCOME AND ADJUSTED EPS TO NET INCOME AND EPS Three Months Ended Mar. 31, Mar. 31, Dec. 31, In thousands, except per share data 2018 2017 2017 Net income $ 115,092 $ 72,951 $ 64,602 Plus: Amortization of acquired intangible assets 9,207 10,530 9,238 Plus: Tax Reform ad
Slide 25: Reconciliation of Adjusted EBITDA Expenses to Operating Expenses
RECONCILIATION OF ADJUSTED EBITDA EXPENSES TO OPERATING EXPENSES Three Months Ended Full-Year Mar. 31, Mar. 31, Dec. 31, 2018 In thousands 2018 2017 (1) 2017 (1) Outlook (2) Index adjusted EBITDA expenses $ 55,984 $ 47,758 $ 51,072 Analytics adjusted EBITDA expenses 85,395 82,820 86,369 All Other ad
Slide 26: Reconciliation of Free Cash Flow
RECONCILIATION OF FREE CASH FLOW TO NET CASH PROVIDED BY OPERATING ACTIVITIES Three Months Ended Full-Year Mar. 31, Mar. 31, Dec. 31, 2018 In thousands 2018 2017 2017 Outlook (1) Net cash provided by operating activities $ 88,597 $ 37,015 $ 143,153 $490,000 - $540,000 Capital expenditures (1,512) (7
Slide 27: Reconciliation of Effective Tax Rate to Adjusted Tax Rate
RECONCILIATION OF EFFECTIVE TAX RATE TO ADJUSTED TAX RATE Three Months Ended Mar. 31, Mar. 31, Dec. 31, 2018 2017 2017 Effective tax rate 17.46% 28.22% 49.12% Less: Tax Reform impact on effective tax rate 1.15% —% (27.18%) Adjusted tax rate 18.61% 28.22% 21.94% 27
Slide 28: Use of Non-GAAP Financial Measures
USE OF NON-GAAP FINANCIAL MEASURES • MSCI has presented supplemental non-GAAP financial measures as part they adjust for significant one-time, unusual or non-recurring items as of this earnings presentation. Reconciliations are provided in slides 23- well as eliminate the accounting effects of capit
Slide 29: Use of Operating Metrics
USE OF OPERATING METRICS • MSCI has presented supplemental key operating metrics as part of adjustments and exclusions described elsewhere in our Public this earnings presentation, including Run Rate, subscription sales Filings. For any Client Contract where fees are linked to an and cancellations,
Slide 30: MSCI
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