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MSCI Inc.’s (MSCI - Free Report) second-quarter 2023 adjusted earnings of $3.26 per share beat the Zacks Consensus Estimate by 4.49% and increased 17.3% from the year-ago quarter’s levels.
Operating revenues increased 12.6% year over year to $621.2 million and beat the consensus mark by 2.72%. Organic operating revenues increased 12.8% year over year.
Recurring subscriptions of $455.7 million beat the Zacks Consensus Estimate by 0.22% and increased 12% year over year. Recurring subscriptions accounted for 73.4% of revenues.
Asset-based fees of $138.2 million beat the consensus mark by 4.37% and increased 4.5% year over year. Asset-based fees contributed 22.2% to revenues.
Non-recurring revenues of $16.91 million beat the consensus mark by 61.46% and increased 117.7% year over year. Non-recurring revenues contributed 4.4% to revenues.
At the end of the reported quarter, average assets under management were $1.37 trillion in ETFs linked to MSCI indexes. The figure beat the consensus mark by 2.19%
The total retention rate was 95.5% in the quarter under review, beating the consensus estimate by 0.36%.
Quarter Details
In the second quarter, Index operating revenues of $362.3 million beat the Zacks Consensus Estimate by 4.96% and increased 12.9% year over year. The year-over-year growth was primarily due to higher recurring subscription revenues (up 11.7% year over year).
Growth in recurring subscription revenues was primarily driven by strong growth from market-cap weighted and factor, ESG and climate Index products.
Growth in non-recurring revenues was primarily driven by one-time license fees related to prior periods and non-recurring licensed data products. The increase in asset-based fees primarily reflected an increase in revenues from ETFs linked to MSCI equity indexes, mainly driven by an increase in average AUM.
Analytics operating revenues of $149.9 million missed the consensus mark by 0.94%, but increased 5.8% year over year. The increase was driven by higher recurring subscription revenues from Multi-Asset Class and Equity Analytics products.
ESG and Climate segment’s operating revenues of $71.2 million beat the consensus mark by 1.06% and increased 29.2% from the year-ago quarter’s levels, primarily driven by strong growth from recurring subscriptions related to Ratings, Climate and Screening products.
Other revenues, which primarily comprise the Real Estate operating segment, were $37.7 million, up 10.9% year over year. The metric beat the consensus mark by 0.83%.
Adjusted EBITDA increased 13.9% year over year to $377.3 million in the reported quarter. Adjusted EBITDA margin expanded 70 basis points (bps) on a year-over-year basis to 60.7%.
Total operating expenses increased 9.5% on a year-over-year basis to $275.2 million. Adjusted EBITDA expenses were $243.9 million, up 10.5%, primarily reflecting higher compensation, incentive compensation and benefit costs related to continued investments to support growth.
Operating income improved 15.2% from the year-ago quarter’s levels to $346 million. Moreover, the operating margin expanded 130 bps on a year-over-year basis to 55.7%.
Balance Sheet & Cash Flow
Total cash and cash equivalents, as of Jun 30, 2023, were $792.3 million compared with $1.08 billion as of Mar 31, 2023.
Total debt was $4.5 billion as of Jun 30 unchanged sequentially. The total debt-to-adjusted-EBITDA ratio (based on trailing twelve-month-adjusted EBITDA) was 3.2 times, within the management’s target range of 3-3.5 times.
Free cash flow was $265.3 million, up 37.1% year over year.
MSCI had $0.8 billion outstanding under its share-repurchase authorization as of Jul 24. The company paid out dividends worth $109.6 million in the second quarter.
Guidance
For 2023, MSCI expects total operating expenses in the range of $1.090-$1.130 billion. Adjusted EBITDA expenses are expected between $965 million and $995 million.
Interest expenses are expected between $185 million and $187 million.
Capex is expected to be $80-$90 million.
Net cash provided by operating activities and free cash flow is expected to be $1.145-$1.195 billion and $1.060-$1.120 billion, respectively.
Zacks Rank & Stocks to Consider
Currently, MSCI has a Zacks Rank #3 (Hold).
MSCI shares have underperformed the Zacks Computer & Technology sector year to date. While MSCI shares have gained 8.1%, the Computer & Technology sector increased 38.4%.
Image: Bigstock
MSCI Q2 Earnings Beat, Recurring Subscriptions Rise Y/Y
MSCI Inc.’s (MSCI - Free Report) second-quarter 2023 adjusted earnings of $3.26 per share beat the Zacks Consensus Estimate by 4.49% and increased 17.3% from the year-ago quarter’s levels.
Operating revenues increased 12.6% year over year to $621.2 million and beat the consensus mark by 2.72%. Organic operating revenues increased 12.8% year over year.
Recurring subscriptions of $455.7 million beat the Zacks Consensus Estimate by 0.22% and increased 12% year over year. Recurring subscriptions accounted for 73.4% of revenues.
Asset-based fees of $138.2 million beat the consensus mark by 4.37% and increased 4.5% year over year. Asset-based fees contributed 22.2% to revenues.
MSCI Inc Price, Consensus and EPS Surprise
MSCI Inc price-consensus-eps-surprise-chart | MSCI Inc Quote
Non-recurring revenues of $16.91 million beat the consensus mark by 61.46% and increased 117.7% year over year. Non-recurring revenues contributed 4.4% to revenues.
At the end of the reported quarter, average assets under management were $1.37 trillion in ETFs linked to MSCI indexes. The figure beat the consensus mark by 2.19%
The total retention rate was 95.5% in the quarter under review, beating the consensus estimate by 0.36%.
Quarter Details
In the second quarter, Index operating revenues of $362.3 million beat the Zacks Consensus Estimate by 4.96% and increased 12.9% year over year. The year-over-year growth was primarily due to higher recurring subscription revenues (up 11.7% year over year).
Growth in recurring subscription revenues was primarily driven by strong growth from market-cap weighted and factor, ESG and climate Index products.
Growth in non-recurring revenues was primarily driven by one-time license fees related to prior periods and non-recurring licensed data products. The increase in asset-based fees primarily reflected an increase in revenues from ETFs linked to MSCI equity indexes, mainly driven by an increase in average AUM.
Analytics operating revenues of $149.9 million missed the consensus mark by 0.94%, but increased 5.8% year over year. The increase was driven by higher recurring subscription revenues from Multi-Asset Class and Equity Analytics products.
ESG and Climate segment’s operating revenues of $71.2 million beat the consensus mark by 1.06% and increased 29.2% from the year-ago quarter’s levels, primarily driven by strong growth from recurring subscriptions related to Ratings, Climate and Screening products.
Other revenues, which primarily comprise the Real Estate operating segment, were $37.7 million, up 10.9% year over year. The metric beat the consensus mark by 0.83%.
Adjusted EBITDA increased 13.9% year over year to $377.3 million in the reported quarter. Adjusted EBITDA margin expanded 70 basis points (bps) on a year-over-year basis to 60.7%.
Total operating expenses increased 9.5% on a year-over-year basis to $275.2 million. Adjusted EBITDA expenses were $243.9 million, up 10.5%, primarily reflecting higher compensation, incentive compensation and benefit costs related to continued investments to support growth.
Operating income improved 15.2% from the year-ago quarter’s levels to $346 million. Moreover, the operating margin expanded 130 bps on a year-over-year basis to 55.7%.
Balance Sheet & Cash Flow
Total cash and cash equivalents, as of Jun 30, 2023, were $792.3 million compared with $1.08 billion as of Mar 31, 2023.
Total debt was $4.5 billion as of Jun 30 unchanged sequentially. The total debt-to-adjusted-EBITDA ratio (based on trailing twelve-month-adjusted EBITDA) was 3.2 times, within the management’s target range of 3-3.5 times.
Free cash flow was $265.3 million, up 37.1% year over year.
MSCI had $0.8 billion outstanding under its share-repurchase authorization as of Jul 24. The company paid out dividends worth $109.6 million in the second quarter.
Guidance
For 2023, MSCI expects total operating expenses in the range of $1.090-$1.130 billion. Adjusted EBITDA expenses are expected between $965 million and $995 million.
Interest expenses are expected between $185 million and $187 million.
Capex is expected to be $80-$90 million.
Net cash provided by operating activities and free cash flow is expected to be $1.145-$1.195 billion and $1.060-$1.120 billion, respectively.
Zacks Rank & Stocks to Consider
Currently, MSCI has a Zacks Rank #3 (Hold).
MSCI shares have underperformed the Zacks Computer & Technology sector year to date. While MSCI shares have gained 8.1%, the Computer & Technology sector increased 38.4%.
ON Semiconductor (ON - Free Report) , Meta Platforms (META - Free Report) and Intel (INTC - Free Report) are some better-ranked stocks that investors can consider in the broader sector. All three stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
onsemi shares have gained 56.6% year to date. ON is set to report its second-quarter 2023 results on July 31.
Meta Platforms shares have gained 142.4% year to date. META is set to report its second-quarter 2023 results on July 26.
Intel shares have gained 27.5% year to date. INTC is set to report its second-quarter 2023 results on July 27.