Msci Inc. · NYSE:MSCI
Msci — Q2 2018 Earnings Presentation
30 slides from Msci's earnings presentation, Aug 2, 2018
Slide 1: MSCI Second Quarter 2018 Earnings Presentation
MSCI SECOND QUARTER 2018 Earnings Presentation August 2, 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: Q2'18 – Financial Results
Q2’18 – FINANCIAL RESULTS1 Exceptional Revenue Growth Outstanding Revenue Growth Driven by Asset- Subscription Run Rate Growth EPS Growth Based Fees & Index Subscription Reported / Organic +15% +9% / +10% Adjusted EPS Continued Operational Efficiency +37% Adj. EBITDA Margin (Expansion) / Adj. EBITDA
Slide 5: Investment Ecosystem and Client Opportunities
INVESTMENT ECOSYSTEM AND CLIENT OPPORTUNITIES • Constructing single and multi-asset Asset Owners • Focusing on total portfolio risk & class portfolios on unified risk and return analysis performance architecture • Leveraging index-based products • Generating efficiencies to achieve objectives • Diff
Slide 6: Growing Opportunity with One MSCI Content
GROWING OPPORTUNITY WITH ONE MSCI CONTENT Products1 Purchased by Clients2 Run Rate by Client2 Size % of Total Run Rate 10% $1,411.7 100% 1 Product, 1 Product, CAGR 18% 13% 2 Products, $381.6 27% 2 Products, 17% $1,062.8 100% 22% 3 Products, $352.7 34% 20% 3 Products, 22% All $1,030.2 73% All Product
Slide 7: Q2'18 Financial Summary
Q2’18 FINANCIAL SUMMARY (US$ in millions) Operating Revenue Operating Expenses Operating Income Earnings Per Share Cash Generation Operating Expenses Adj. EBITDA +14.9% Adj. EPS Cash from Operations +11.5% +20.5% +14.5% ex FX +36.8% +69.5% +10.3% ex FX +20.9% ex FX 55.2% $207.2 $189.5 52.6% $200.4 $
Slide 8: Q2'18 vs. Q2'17 Adjusted EPS Bridge
Q2’18 VS. Q2’17 ADJUSTED EPS BRIDGE Business Growth + Investment Capital Activities Taxes + FX / Other % of 77% from Business 20% from (0%) from FX 3% from Capital Activities Total: Growth Tax Benefits / Other +$0.35 ($0.08) +$0.01 +$0.07 +36.8% $0.07 ($0.00) ($0.08) $0.01 $0.16 $0.00 $0.19 $1.30 $0
Slide 9: Segment Results
SEGMENT RESULTS
Slide 10: Q2'18 Segment Results
Q2’18 SEGMENT RESULTS Operating Revenue Adj. EBITDA Year-over-Year Commentary • +13.2% recurring subscription revenue $212.9m $157.5m • +30.4% asset-based fee (ABF) revenue: Index +20% YoY +22% YoY • +28.4% in equity ETF-related revenue Negligible FX 74.0% Margin • +39.3% in non-ETF passive products
Slide 11: Continued Operating Momentum
CONTINUED OPERATING MOMENTUM (US$ in millions) YoY Run Rate Growth YoY Recurring Sales Growth Total RR 1 +44.4% +53.3% +44.4% +22.4% (Reported) +12.0% +15.4% +5.3% +19.5% $45.0 Sub. RR 1 (organic) +10.2% +11.7% +7.0% +19.1% $31.1 $1,411.7 $20.9 $17.4 $13.6 $12.1 $1,260.4 $5.5 $6.7 Q2'17 Q2'18 Q2'17
Slide 12: Index Segment – Asset-Based Fees Detail
INDEX SEGMENT – ASSET-BASED FEES DETAIL (US$ 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 +87.3B +$87.3B $85.5 $87.6 +30.4% $78.5 Market Appreciation +33.1B +$33.1B $7
Slide 13: Q2 & 1H'18 AUM Drivers: MSCI-Linked Equity ETFs
Q2 & 1H’18 AUM DRIVERS: MSCI-LINKED EQUITY ETFS Q2’18 Sequential Change in AUM $764.9 $5.0 ($4.2) $5.8 U.S. ($1.6) ($18.6) EM $744.7 ($6.6) DM ex. U.S. Q1'18 AUM U.S. Developed Markets Emerging Markets Market Change Q2'18 AUM ex. U.S. 1H’18 Change in AUM $14.6 ($31.2) $8.4 $744.3 $8.6 $744.7 Q4'17 A
Slide 14: Analytics Subscription Run Rate Growth
ANALYTICS SUBSCRIPTION RUN RATE GROWTH Capabilities Q2’18 Run Rate YoY1 % Growth Drivers • Need for complete solutions across reporting, $303 million regulatory compliance and risk management Multi-Asset Class & Fixed Income 62% of Run +10% Rate • Continued outsourcing of “non-core” operations to im
Slide 15: Integrated Content Innovation
INTEGRATED CONTENT INNOVATION (US$ in millions) Factor Index and Analytics Run Rate Growth1 ESG Content and ESG Index Run Rate Growth2 YoY % YoY % $214 $220 15% $208 $192 $199 $96 37% $90 $47 $51 $56 40% $83 $40 $43 $75 $24 68% $70 $21 $19 $16 $14 $152 $156 $161 $163 $163 8% $72 29% $65 $69 $56 $59
Slide 16: Capital, Liquidity and Guidance
CAPITAL, LIQUIDITY AND GUIDANCE
Slide 17: Capital and Liquidity
CAPITAL AND LIQUIDITY (US$ in millions) Capital Position (As of 6/30/18) Continued Capital Discipline Total Cash $1,368 • Board approved 53% increase to quarterly dividend ($0.58 per share) Return of 1 Capital Total Debt $2,600 • Increase in dividend payout ratio target to 40.0% - 50.0% of adjusted
Slide 18: Strong Track Record of Returning Capital
STRONG TRACK RECORD OF RETURNING CAPITAL (US$ in millions, except period-end shares) $857 $759 $97 120 118 112 $88 101 91 90 89 $420 $20 $759 $671 $292 $258 $69 $400 $121 $100 $100 $223 $137 $100 $100 1 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 YTD 2018 Value of Shares Repurchased Dividends Pe
Slide 19: Full Year 2018 Guidance
FULL YEAR 2018 GUIDANCE (US$ in millions) Full Year 2018 Guidance Previous Current Operating Expenses $725 - $750 $725 - $750 Adjusted EBITDA Expenses $645 - $665 $645 - $665 Interest Expense1 $116 $133 Effective Tax Rate 21.0% - 24.0% 21.0% - 24.0% Net Cash Provided by Operating Activities $490 - $
Slide 20: Appendix
APPENDIX
Slide 21: Q1'13 – Q2'18 YoY Run Rate Growth Trend
Q1’13 – Q2’18 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% 8% 8% 6% 8% 7% 8% 9% 8% 7% 8% 12% 6% 8% 5% 7% 7% 6% 9% 11% 11% 7% 8% 8% 8% 7% 7% 7% 9% 2% 6% 6% 6% 5% (2%)
Slide 22: Q1'13 – Q2'18 YoY Segment Run Rate Growth Trend
Q1’13 – Q2’18 YOY SEGMENT RUN RATE GROWTH TREND Index 46% 34% 38% 38% 37% 28% 25% 21% 21% 18% 14% 21% 21% 10% 11% 15% 10% 13% 10% 10% 11% 11% 11% 9% 8% 8% 9% 10% 11% 10% 10% 10% 10% 10% 10% 8% 10% 12% 2% 10% 6% 5% (2%) (3%) Q1'13 Q2'13 Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 Q4'15 Q1'1
Slide 23: Reconciliation of Adjusted EBITDA to Net Income
RECONCILIATION OF ADJUSTED EBITDA TO NET INCOME Three Months Ended Six Months Ended June 30, June 30, Mar. 31, June 30, June 30, In thousands 2018 2017(1) 2018 2018 2017(1) Index adjusted EBITDA $ 157,516 $ 129,519 $ 145,929 $ 303,446 $ 245,196 Analytics adjusted EBITDA 36,327 31,805 33,593 69,920 6
Slide 24: Reconciliation of Adjusted Net Income and Adjusted EPS to Net Income and EPS
RECONCILIATION OF ADJUSTED NET INCOME AND ADJUSTED EPS TO NET INCOME AND EPS Three Months Ended Six Months Ended June 30, June 30, Mar. 31, June 30, June 30, In thousands, except per share data 2018 2017 2018 2018 2017 Net income $ 116,829 $ 81,266 $ 115,092 $ 231,921 $ 154,217 Plus: Amortization of
Slide 25: Reconciliation of Adjusted EBITDA Expenses to Operating Expenses
RECONCILIATION OF ADJUSTED EBITDA EXPENSES TO OPERATING EXPENSES Three Months Ended Six Months Ended Full-Year June 30, June 30, Mar. 31, June 30, June 30, 2018 In thousands 2018 2017(1) 2018 2018 2017(1) Outlook(2) Index adjusted EBITDA expenses $ 55,418 $ 47,637 $ 55,984 $ 111,402 $ 95,395 Analyti
Slide 26: Reconciliation of Free Cash Flow to Net Cash Provided by Operating Activities
RECONCILIATION OF FREE CASH FLOW TO NET CASH PROVIDED BY OPERATING ACTIVITIES Three Months Ended Six Months Ended Full-Year June 30, June 30, Mar. 31, June 30, June 30, 2018 In thousands 2018 2017 2018 2018 2017 Outlook(1) Net cash provided by operating activities $ 207,165 $ 122,217 $ 88,597 $ 295,
Slide 27: Reconciliation of Effective Tax Rate to Adjusted Tax Rate
RECONCILIATION OF EFFECTIVE TAX RATE TO ADJUSTED TAX RATE Three Months Ended Six Months Ended June 30, June 30, Mar. 31, June 30, June 30, 2018 2017 2018 2018 2017 Effective tax rate 25.26% 30.84% 17.46% 21.59% 29.63% Less: Tax Reform impact on effective tax rate —% —% 1.15% 0.54% —% Adjusted tax ra
Slide 28: 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 23- meaningful measures of the operating performance of MSCI be
Slide 29: Use of Operating Metrics
USE OF OPERATING METRICS • MSCI has presented supplemental key operating metrics as part of we do not believe changes to previously reported cancellation rates this earnings presentation, including Run Rate, subscription sales and are required. Beginning in the second quarter 2018, “Aggregate cancel
Slide 30: MSCI
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