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MSCI Inc.’s (MSCI - Free Report) first-quarter 2020 adjusted earnings of $1.90 per share beat the Zacks Consensus Estimate by 13.1% and also increased 22.6% from the year-ago quarter.
Operating revenues improved 12.2% year over year to $416.8 million but lagged the consensus mark by 1%. This year-over-year growth was driven by a 7.8% and 22.5% rise in recurring subscriptions (73% of revenues) and asset-based fees (24% of revenues), respectively.
Non-recurring revenues (2.9% of revenues) surged 68.7% year over year to $12.2 million.
Organic operating revenues (excluding the impact of acquisitions, divestitures and foreign currency exchange rate fluctuations) rose 12.3% year over year.
Organic recurring subscription, asset-based fee and non-recurring revenues grew 8%, 22.5% and 67.8% each.
At the end of the quarter, average assets under management (AUM) were $709.5 billion in ETFs linked to MSCI indexes. Total retention rate was 95% in the quarter under review.
Index Revenue Details
In the first quarter, Index operating revenues (59.8% of operating revenues) improved 16.1% year over year to $249.3 million, primarily driven by strong growth in recurring subscriptions (up 9.5%) and asset-based fees (up 22.5%).
Higher recurring subscriptions were driven by growth in custom and specialized index products, core products and factor and ESG index products.
Index net new recurring subscription sales increased 7.5%.
Analytics Revenue Details
Analytics operating revenues (30.1% of operating revenues) improved 3.4% year over year to $125.5 million. While recurring subscription revenues increased 3.3%, non-recurring revenues were up 8.9%. Multi-Asset Class and Equity Analytics products also witnessed growth in the quarter.
Analytics net new recurring subscription sales plunged 40.4%.
All Other Segment Revenue Details
All Other operating revenues (10.1% of operating revenues) rose 19.5% from the year-ago quarter to $42 million, primarily driven by recurring subscriptions (up 17.2%).
All Other organic operating revenue growth was 20.7% with ESG organic operating revenues increasing 17.2% and Real Estate organic operating revenues rising 26.2%.
All Other net new recurring subscription sales grew 3%.
Operating Details
Adjusted EBITDA grew 15.9% year over year to $229.2 million in the reported quarter. Moreover, adjusted EBITDA margin expanded 180 basis points (bps) on a year-over-year basis to 55%.
Total operating expenses were flat on a year-over-year basis at $209 million, primarily due to higher compensation and benefit costs.
Research & Development (R&D) and general & Administrative (G&A) expenses rose 14.6% and 12.1%, respectively. Selling & Marketing (S&M) expenses slid 0.9%.
Operating income improved 27.8% from the year-ago quarter to $207.9 million. Operating margin expanded 610 bps to 49.9%.
Balance Sheet & Cash Flow
Total cash and cash equivalents as of Mar 31, 2020 were $1.07 billion compared with $1.51 billion as of Dec 31, 2019.
Total debt was $3.2 billion as of Mar 31. Total debt to adjusted EBITDA ratio (based on trailing twelve-month-adjusted EBITDA) was 3.6X, higher than management’s target range of 3-3.5x.
Net cash provided by operating activities was $112.8 million in the first quarter compared with $243.6 million in the sequential quarter. Free cash flow was $102 million compared with $225.2 million in the prior-reported quarter.
In first quarter and through Apr 24, 2020, MSCI repurchased 1.4 million shares for a total value of $356.8 million. Notably, $1.1 billion is outstanding under the share repurchase authorization as of Apr 24, 2020.
MSCI also paid out dividend worth $57.8 million in the first quarter.
Guidance
For 2020, MSCI expects total operating expenses of $790-$840 million, down from the previous guided range of $840-$860 million. Adjusted EBITDA expenses are expected between $700 million and $750 million, down from the past projection of $750-$770 million.
Capex is expected to be $50-$60 million, down from the earlier forecast of $60-$70 million.
Moreover, net cash provided by operating activities and free cash flow are expected to be $600-$650 million (down from $650-$700 million) and $540-$600 million (down from $580-$640 million), respectively.
Both Pixelworks and Fortive are scheduled to report earnings on Apr 30. Shopify is set to release quarterly results on May 6.
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MSCI Q1 Earnings Beat, Recurring Subscription Revenues Rise
MSCI Inc.’s (MSCI - Free Report) first-quarter 2020 adjusted earnings of $1.90 per share beat the Zacks Consensus Estimate by 13.1% and also increased 22.6% from the year-ago quarter.
Operating revenues improved 12.2% year over year to $416.8 million but lagged the consensus mark by 1%. This year-over-year growth was driven by a 7.8% and 22.5% rise in recurring subscriptions (73% of revenues) and asset-based fees (24% of revenues), respectively.
Non-recurring revenues (2.9% of revenues) surged 68.7% year over year to $12.2 million.
Organic operating revenues (excluding the impact of acquisitions, divestitures and foreign currency exchange rate fluctuations) rose 12.3% year over year.
Organic recurring subscription, asset-based fee and non-recurring revenues grew 8%, 22.5% and 67.8% each.
MSCI Inc Price, Consensus and EPS Surprise
MSCI Inc price-consensus-eps-surprise-chart | MSCI Inc Quote
At the end of the quarter, average assets under management (AUM) were $709.5 billion in ETFs linked to MSCI indexes. Total retention rate was 95% in the quarter under review.
Index Revenue Details
In the first quarter, Index operating revenues (59.8% of operating revenues) improved 16.1% year over year to $249.3 million, primarily driven by strong growth in recurring subscriptions (up 9.5%) and asset-based fees (up 22.5%).
Higher recurring subscriptions were driven by growth in custom and specialized index products, core products and factor and ESG index products.
Index net new recurring subscription sales increased 7.5%.
Analytics Revenue Details
Analytics operating revenues (30.1% of operating revenues) improved 3.4% year over year to $125.5 million. While recurring subscription revenues increased 3.3%, non-recurring revenues were up 8.9%. Multi-Asset Class and Equity Analytics products also witnessed growth in the quarter.
Analytics net new recurring subscription sales plunged 40.4%.
All Other Segment Revenue Details
All Other operating revenues (10.1% of operating revenues) rose 19.5% from the year-ago quarter to $42 million, primarily driven by recurring subscriptions (up 17.2%).
All Other organic operating revenue growth was 20.7% with ESG organic operating revenues increasing 17.2% and Real Estate organic operating revenues rising 26.2%.
All Other net new recurring subscription sales grew 3%.
Operating Details
Adjusted EBITDA grew 15.9% year over year to $229.2 million in the reported quarter. Moreover, adjusted EBITDA margin expanded 180 basis points (bps) on a year-over-year basis to 55%.
Total operating expenses were flat on a year-over-year basis at $209 million, primarily due to higher compensation and benefit costs.
Research & Development (R&D) and general & Administrative (G&A) expenses rose 14.6% and 12.1%, respectively. Selling & Marketing (S&M) expenses slid 0.9%.
Operating income improved 27.8% from the year-ago quarter to $207.9 million. Operating margin expanded 610 bps to 49.9%.
Balance Sheet & Cash Flow
Total cash and cash equivalents as of Mar 31, 2020 were $1.07 billion compared with $1.51 billion as of Dec 31, 2019.
Total debt was $3.2 billion as of Mar 31. Total debt to adjusted EBITDA ratio (based on trailing twelve-month-adjusted EBITDA) was 3.6X, higher than management’s target range of 3-3.5x.
Net cash provided by operating activities was $112.8 million in the first quarter compared with $243.6 million in the sequential quarter. Free cash flow was $102 million compared with $225.2 million in the prior-reported quarter.
In first quarter and through Apr 24, 2020, MSCI repurchased 1.4 million shares for a total value of $356.8 million. Notably, $1.1 billion is outstanding under the share repurchase authorization as of Apr 24, 2020.
MSCI also paid out dividend worth $57.8 million in the first quarter.
Guidance
For 2020, MSCI expects total operating expenses of $790-$840 million, down from the previous guided range of $840-$860 million. Adjusted EBITDA expenses are expected between $700 million and $750 million, down from the past projection of $750-$770 million.
Capex is expected to be $50-$60 million, down from the earlier forecast of $60-$70 million.
Moreover, net cash provided by operating activities and free cash flow are expected to be $600-$650 million (down from $650-$700 million) and $540-$600 million (down from $580-$640 million), respectively.
Zacks Rank & Stocks to Consider
Currently, MSCI has a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader technology sector are Pixelworks (PXLW - Free Report) , Fortive (FTV - Free Report) and Shopify (SHOP - Free Report) . While both Pixelworks and Fortive sport a Zacks Rank #1 (Strong Buy), Shopify has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Both Pixelworks and Fortive are scheduled to report earnings on Apr 30. Shopify is set to release quarterly results on May 6.
The Hottest Tech Mega-Trend of All
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>