NEW YORK--(BUSINESS WIRE)--MSCI Inc. (NYSE: MSCI), a leading provider of critical decision support tools and services for the global investment community, today announced its financial results for the three months ended December 31, 2020 and year ended December 31, 2020.

Financial and Operational Highlights for Fourth Quarter 2020

(Note: Unless otherwise noted, percentage and other changes are relative to the three months ended December 31, 2019 (“fourth quarter 2019”) and Run Rate percentage changes are relative to December 31, 2019).

• Operating revenues of $443.7 million, up 9.1%
• Recurring subscription revenues up 8.9%; Asset-based fees up 15.3%
• Operating margin of 52.8%; Adjusted EBITDA margin of 57.7%
• Diluted EPS of $1.87, up 29.9%; Adjusted EPS of $1.96, up 17.4%
• New recurring subscription sales growth of 9.3%; Organic subscription Run Rate growth of 9.4%; Retention Rate of 92.6%
• Repurchase of 471,591 shares at an average price of $347.78 per share for a total value of $164.0 million
• Assets in equity ETFs linked to MSCI indexes surpass $1.0 trillion
• Approximately $64.4 million in dividends paid to shareholders in fourth quarter 2020; Cash dividend of $0.78 per share declared by MSCI Board of Directors for first quarter 2021

“MSCI delivered robust performance in the fourth quarter and full year 2020, a validation of our highly integrated, client-centric, all-weather franchise and the dedication of our employees,” said Henry A. Fernandez, Chairman and CEO of MSCI.

“While the early part of 2021 has seen continued social, political and economic challenges, we maintain strong conviction in both our long-term growth opportunities and our ability to drive value for our clients and shareholders.”

Fourth Quarter Consolidated Results

Operating Revenues: Operating revenues were $443.7 million, up 9.1%. The $37.1 million increase was driven by $26.3 million in higher recurring subscription revenues and $14.8 million in higher asset-based fees, offset by $4.0 million in lower non-recurring revenues.

Run Rate and Retention Rate: Total Run Rate at December 31, 2020 was $1,832.5 million, up 12.1% compared to December 31, 2019. The $198.0 million increase was driven by a $130.0 million increase in recurring subscription Run Rate and a $68.0 million increase in asset-based fees Run Rate. Organic subscription Run Rate growth was 9.4%, driven by increases across all three reporting segments. Retention Rate in fourth quarter 2020 was 92.6%, compared to 92.9% in fourth quarter 2019.

Expenses: Total operating expenses were $209.6 million, up slightly from fourth quarter 2019. Adjusted EBITDA expenses were $187.5 million, also up slightly, reflecting higher information technology costs and compensation costs, substantially offset by lower travel and entertainment expense. Total operating expenses excluding the impact of foreign currency exchange rate fluctuations (“ex-FX”) and adjusted EBITDA expenses ex-FX increased 0.5% and decreased 0.1%, respectively.

Headcount: As of December 31, 2020, headcount was 3,633 employees, with approximately 35% and approximately 65% of employees located in developed market and emerging market locations, respectively.

Other Expense (Income), Net: Other expense (income), net was $38.9 million, down 26.4%. The lower net expense primarily reflected the absence of debt extinguishment costs that resulted from a notes redemption in the prior period, as well as lower interest expense compared to fourth quarter 2019, partially offset by lower interest income due to lower rates earned on cash balances.

Income Taxes:The effective tax rate was 20.0% in fourth quarter 2020, compared to 16.2% in fourth quarter 2019 reflecting higher U.S. taxable income compared to the prior period resulting, in part, from the absence of debt extinguishment costs related to a notes redemption realized in fourth quarter 2019. In addition, fourth quarter 2020 reflected lower tax benefits from the vesting of share-based compensation awards.

Net Income: As a result of the factors described above, net income was $156.2 million, up 27.2%.

Adjusted EBITDA: Adjusted EBITDA was $256.1 million, up 16.3%. Adjusted EBITDA margin in fourth quarter 2020 was 57.7%, compared to 54.2% in fourth quarter 2019.

Index operating revenues for fourth quarter 2020 were $268.6 million, up 10.5%. The $25.5 million increase was primarily driven by $14.8 million in higher asset-based fees and $11.0 million in higher recurring subscription revenues.

The increase in recurring subscription revenues primarily reflected growth in market cap-weighted products.

Growth in asset-based fees reflected increases in revenues from exchange traded funds (“ETFs”) linked to MSCI indexes, from exchange traded futures & options contracts linked to MSCI indexes and from non-ETF indexed funds linked to MSCI indexes. The increase in revenues from ETFs linked to MSCI indexes was driven by a 15.0% increase in average AUM in equity ETFs linked to MSCI indexes, partially offset by lower fees resulting from the impact of changes in product mix.

Index Run Rate as of December 31, 2020 was $1.1 billion, up 13.3%. The $127.1 million increase was driven by a $68.0 million increase in asset-based fees Run Rate and a $59.1 million increase in recurring subscription Run Rate. The increase in recurring subscription Run Rate was primarily driven by strong growth in market cap-weighted products and reflected growth across all regions and all client segments. The increase in asset-based fees Run Rate was primarily driven by higher AUM in equity ETFs linked to MSCI indexes.Analytics operating revenues for fourth quarter 2020 were $132.4 million, up 3.3%. The $4.2 million increase was driven by higher recurring subscription revenues, predominantly from Multi-Asset Class Analytics products, offset by lower non-recurring revenues.

Analytics Run Rate as of December 31, 2020 was $555.1 million, up 5.4%. The increase of $28.3 million was primarily driven by growth in Multi-Asset Class Analytics products, with increases across all regions. Analytics organic subscription Run Rate growth was 4.0%.

All Other operating revenues for fourth quarter 2020 were $42.6 million, up 21.0%. The $7.4 million increase was driven by $6.3 million of higher ESG operating revenues, primarily driven by strong growth from Ratings products, and $1.1 million of higher Real Estate operating revenues, primarily driven by higher revenues from Enterprise Analytics products. ESG operating revenues were $31.3 million and Real Estate operating revenues were $11.3 million. All Other organic operating revenue growth was 19.0%, including ESG organic operating revenue growth of 23.5% and Real Estate organic operating revenue growth of 7.8%.

All Other Run Rate as of December 31, 2020 was $194.8 million, up 28.0%. The $42.6 million increase was driven by a $36.9 million increase in ESG Run Rate, primarily reflecting strong growth in both Ratings and Climate products. Real Estate Run Rate increased $5.7 million, reflecting growth in both Enterprise Analytics and Global Intel products. All Other organic subscription Run Rate growth was 23.9%, with ESG organic subscription Run Rate growth of 32.6% and Real Estate organic subscription Run Rate growth of 6.6%.

Select Balance Sheet Items and Capital Allocation

Cash Balances and Outstanding Debt: Cash and cash equivalents was $1.3 billion as of December 31, 2020. MSCI typically seeks to maintain minimum cash balances globally of approximately $200.0 million to $250.0 million for general operating purposes but may maintain higher minimum cash balances while the COVID-19 pandemic continues to impact global economic markets.

Total outstanding debt as of December 31, 2020 was $3.4 billion. The total debt to net income ratio (based on trailing twelve months net income) was 5.6x. The total debt to adjusted EBITDA ratio (based on trailing twelve months adjusted EBITDA) was 3.5x.

MSCI seeks to maintain gross leverage to adjusted EBITDA in a target range of 3.0x to 3.5x.

Capex and Cash Flow: For fourth quarter 2020, Capex was $16.9 million, cash provided by operating activities was $235.9 million, down 3.2%, and free cash flow was $219.0 million, down 2.7%.

Share Count and Share Repurchases: Weighted average diluted shares outstanding were 83.7 million in fourth quarter 2020, down 2.1% year-over-year. During fourth quarter 2020, a total of 471,591 shares were repurchased at an average price of $347.78 per share for a total value of $164.0 million. A total of $1.7 billion of outstanding share repurchase authorization remains as of January 26, 2021. Total shares outstanding as of December 31, 2020 were 82.6 million.

Dividends: Approximately $64.4 million in dividends were paid to shareholders in fourth quarter 2020. On January 25, 2021, the MSCI Board of Directors declared a cash dividend of $0.78 per share for first quarter 2021, payable on February 26, 2021 to shareholders of record as of the close of trading on February 19, 2021.

About MSCI Inc.

MSCI is a leading provider of critical decision support tools and services for the global investment community. With over 50 years of expertise in research, data and technology, we power better investment decisions by enabling clients to understand and analyze key drivers of risk and return and confidently build more effective portfolios. We create industry-leading research-enhanced solutions that clients use to gain insight into and improve transparency across the investment process. To learn more, please visit www.msci.com. MSCI#IR