The following table presents the average value of AUM in ETFs linked to MSCI equity indexes for the periods indicated:
2023
2024
(in billions)
March
June
September
December
March
June
September
AUM in ETFs linked to MSCI equity indexes(1), (2)
Quarterly average
$
1,287.5
$
1,333.8
$
1,376.5
$
1,364.9
$
1,508.8
$
1,590.6
$
1,677.0
Year-to-date average
$
1,287.5
$
1,310.7
$
1,332.6
$
1,340.7
$
1,508.8
$
1,549.7
$
1,592.1
___________________________
(1)The historical values of the AUM in ETFs linked to our equity indexes as of the last day of the month and the monthly average balance can be found under the link “AUM in ETFs Linked to MSCI Equity Indexes” on our Investor Relations homepage at http://ir.msci.com. This information is updated mid-month each month. Information contained on our website is not deemed part of or incorporated by reference into this Quarterly Report on Form 10-Q or any other report filed with the SEC. The AUM in ETFs also includes AUM in Exchange Traded Notes, the value of which is less than 1.0% of the AUM amounts presented.
(2)The value of AUM in ETFs linked to MSCI equity indexes is calculated by multiplying the equity ETF net asset value by the number of shares outstanding.
The average value of AUM in ETFs linked to MSCI equity indexes for the three months ended September 30, 2024, was up $300.5 billion, or 21.8%. For the nine months ended September 30, 2024, the average value of AUM in ETFs linked to MSCI equity indexes was up $259.5 billion, or 19.5%.
The following table presents operating revenues by reportable segment and revenue type for the periods indicated:
Three Months Ended September 30,
% Change
Nine Months Ended September 30,
% Change
(in thousands)
2024
2023
2024
2023
Operating revenues:
Index
Recurring subscriptions
$
223,945
$
206,453
8.5
%
$
653,929
$
603,845
8.3
%
Asset-based fees
168,622
141,066
19.5
%
482,162
412,354
16.9
%
Non-recurring
12,315
14,603
(15.7
%)
39,855
47,621
(16.3
%)
Index total
404,882
362,122
11.8
%
1,175,946
1,063,820
10.5
%
Analytics
Recurring subscriptions
168,150
151,269
11.2
%
490,829
443,276
10.7
%
Non-recurring
4,226
2,999
40.9
%
11,508
7,943
44.9
%
Analytics total
172,376
154,268
11.7
%
502,337
451,219
11.3
%
ESG and Climate
Recurring subscriptions
81,536
71,744
13.6
%
235,954
207,523
13.7
%
Non-recurring
2,107
1,294
62.8
%
5,428
3,792
43.1
%
ESG and Climate total
83,643
73,038
14.5
%
241,382
211,315
14.2
%
All Other - Private Assets
Recurring subscriptions
62,991
35,531
77.3
%
190,434
111,292
71.1
%
Non-recurring
813
480
69.4
%
2,520
1,168
115.8
%
All Other - Private Assets total
63,804
36,011
77.2
%
192,954
112,460
71.6
%
Total operating revenues
$
724,705
$
625,439
15.9
%
$
2,112,619
$
1,838,814
14.9
%
Refer to the section titled “Segment Results” that follows for further discussion of segment revenues.
Operating Expenses
We group our operating expenses into the following activity categories:
•Cost of revenues;
•Selling and marketing;
•Research and development (“R&D”);
•General and administrative (“G&A”);
•Amortization of intangible assets; and
•Depreciation and amortization of property, equipment and leasehold improvements.
Costs are assigned to these activity categories based on the nature of the expense or, when not directly attributable, an estimated allocation based on the type of effort involved. Cost of revenues, selling and marketing, R&D and G&A all include both compensation as well as non-compensation related expenses.
The following table presents operating expenses by activity category for the periods indicated:
Three Months Ended September 30,
% Change
Nine Months Ended September 30,
% Change
(in thousands)
2024
2023
2024
2023
Operating expenses:
Cost of revenues
$
126,192
$
105,311
19.8
%
$
382,815
$
324,024
18.1
%
Selling and marketing
70,763
66,581
6.3
%
214,385
201,044
6.6
%
Research and development
38,584
31,438
22.7
%
120,182
92,901
29.4
%
General and administrative
41,561
36,826
12.9
%
137,958
113,527
21.5
%
Amortization of intangible assets
41,939
26,722
56.9
%
121,316
77,543
56.4
%
Depreciation and amortization of property, equipment and leasehold improvements
4,332
5,252
(17.5
%)
12,639
15,911
(20.6
%)
Total operating expenses
$
323,371
$
272,130
18.8
%
$
989,295
$
824,950
19.9
%
Total operating expenses increased 18.8% for the three months ended September 30, 2024. Adjusting for the impact of foreign currency exchange rate fluctuations, the increase would have been 18.9%.
Total operating expenses increased 19.9% for the nine months ended September 30, 2024. Adjusting for the impact of foreign currency exchange rate fluctuations, the increase would have been 19.9%.
Cost of Revenues
Cost of revenues expenses consist of costs related to the production and servicing of our products and services and primarily includes related information technology costs, including data center, cloud service, platform and infrastructure costs; costs to acquire, produce and maintain market data information; costs of research to support and maintain existing products; costs of product management teams; costs of client service and consultant teams to support customer needs; as well as other support costs directly attributable to the cost of revenues including certain human resources, finance and legal costs.
Cost of revenues increased 19.8% for the three months ended September 30, 2024, reflecting increases across all reportable segments. The change was driven by increases in compensation and benefits costs, primarily relating to higher wages and salaries, incentive compensation and benefits costs as a result of increased headcount, as well as increases in non-compensation costs reflecting higher professional fees, information technology and market data costs.
Cost of revenues increased 18.1% for the nine months ended September 30, 2024, reflecting increases across all reportable segments. The change was driven by increases in compensation and benefits costs, primarily relating to higher wages and salaries, incentive compensation and benefits costs as a result of increased headcount, as well as increases in non-compensation costs reflecting higher information technology, professional fees and market data costs.
Selling and Marketing
Selling and marketing expenses consist of costs associated with acquiring new clients or selling new products or product renewals to existing clients and primarily includes the costs of our sales and marketing teams, as well as costs incurred in other departments associated with acquiring new business, including product management, research, technology and sales operations.
Selling and marketing expenses increased 6.3% for the three months ended September 30, 2024, reflecting increases across the All Other - Private Assets and Index reportable segments, partially offset by decreases in the Analytics and ESG and Climate reportable segments. The change was driven by increases in compensation and benefits costs, primarily relating to higher wages and salaries as a result of increased headcount, as well as increases in non-compensation costs reflecting higher marketing costs.
Selling and marketing expenses increased 6.6% for the nine months ended September 30, 2024, reflecting increases across the All Other - Private Assets and Index reportable segments, partially offset by decreases in the ESG and Climate and Analytics reportable segments. The change was driven by increases in compensation and benefits costs, primarily relating to higher incentive compensation and wages and salaries as a result of increased headcount, as well as increases in non-compensation costs reflecting higher marketing costs.
R&D expenses consist of costs to develop new, or enhance existing, products and the costs to develop new or enhanced technologies and service platforms for the delivery of our products and services and primarily include the costs of development, research, product management, project management and the technology support directly associated with these activities.
R&D expenses increased 22.7% for the three months ended September 30, 2024, reflecting increases across all reportable segments. The change was driven by increases in compensation and benefits costs, relating to higher wages and salaries and incentive compensation costs as a result of increased headcount, partially offset by increased capitalization of costs related to internally developed software projects.
R&D expenses increased 29.4% for the nine months ended September 30, 2024, reflecting increases across all reportable segments. The change was primarily driven by increases in compensation and benefits costs, relating to higher wages and salaries and incentive compensation costs as a result of increased headcount, partially offset by increased capitalization of costs related to internally developed software projects.
General and Administrative
G&A expenses consist of costs primarily related to finance operations, human resources, office of the CEO, legal, corporate technology, corporate development, acquisition integration, changes in the fair value of contingent consideration and certain other administrative costs that are not directly attributed to a product or service, but are instead allocated to G&A expenses.
G&A expenses increased 12.9% for the three months ended September 30, 2024, reflecting increases across the All Other - Private Assets, and ESG and Climate reportable segments, partially offset by decreases in the Index and Analytics reportable segments. The change was primarily driven by increases in non-compensation costs primarily relating to higher occupancy costs and higher professional fees.
G&A expenses increased 21.5% for the nine months ended September 30, 2024, reflecting increases across all reportable segments. The change was driven by increases in non-compensation costs, reflecting higher transaction costs related expenses due to the recent acquisitions, professional fees and information technology costs, as well as increases in compensation and benefits costs, relating to higher wages and salaries, incentive compensation and benefits costs as a result of increased headcount.
The following table presents operating expenses using compensation and non-compensation categories, rather than using activity categories, for the periods indicated:
Three Months Ended September 30,
% Change
Nine Months Ended September 30,
% Change
(in thousands)
2024
2023
2024
2023
Compensation and benefits
$
194,809
$
171,815
13.4
%
$
618,421
$
527,566
17.2
%
Non-compensation expenses
82,291
68,341
20.4
%
236,919
203,930
16.2
%
Amortization of intangible assets
41,939
26,722
56.9
%
121,316
77,543
56.4
%
Depreciation and amortization of property, equipment and leasehold improvements
4,332
5,252
(17.5
%)
12,639
15,911
(20.6
%)
Total operating expenses
$
323,371
$
272,130
18.8
%
$
989,295
$
824,950
19.9
%
Compensation and Benefits
A significant portion of the incentive compensation component of operating expenses is based on the achievement of a number of financial and operating metrics. In a scenario where operating revenue growth and profitability moderate, incentive compensation would be expected to decrease accordingly.
We had 6,118 employees as of September 30, 2024, compared to 5,005 employees as of September 30, 2023, reflecting a 22.2% growth in the number of employees which is primarily related to recent acquisitions. Continued growth of our emerging market centers around the world is an important factor in our ability to manage and control the growth of our compensation and benefits costs. As of September 30, 2024, 68.5% of our employees were located in emerging market centers compared to 66.5% as of September 30, 2023.
Compensation and benefits costs increased 13.4% and 17.2%, for the three and nine months ended September 30, 2024, driven by an increase in wages and salaries, incentive compensation and benefits costs due to headcount growth, partially offset by
increased capitalization of expenses related to internally developed software projects. Adjusting for the impact of foreign currency exchange rate fluctuations and recent acquisitions, compensation and benefits costs would have increased by 2.7% and increased by 6.1%, respectively, for the three and nine months ended September 30, 2024.
Non-Compensation Expenses
Fixed costs constitute a significant portion of the non-compensation component of operating expenses. The discretionary non-compensation component of operating expenses could, however, be reduced in the near-term in a scenario where operating revenue growth moderates.
Non-compensation expenses increased 20.4% for the three months ended September 30, 2024, driven by higher professional fees, market data costs, information technology, marketing costs, transaction and integration costs related to recent acquisitions and recruiting costs.
Non-compensation expenses increased 16.2% for the nine months ended September 30, 2024, driven by higher professional fees, information technology, transaction and integration costs related to recent acquisitions, market data costs and travel and entertainment costs. Adjusting for the impact of foreign currency exchange rate fluctuations and recent acquisitions, non-compensation expenses would have increased by 8.5% and increased by 6.1%, respectively, for the three and nine months ended September 30, 2024.
Amortization of Intangible Assets
Amortization of intangible assets expense relates to definite-lived intangible assets arising from past acquisitions and capitalization of internally developed software projects recognized over their estimated useful lives.
Amortization of intangible assets expense increased 56.9% and 56.4% for the three and nine months ended September 30, 2024, respectively, primarily driven by higher amortization recognized on acquired intangible assets from recent acquisitions
and higher amortization of internal use software.
Depreciation and Amortization of Property, Equipment and Leasehold Improvements
Depreciation and amortization of property, equipment and leasehold improvements consists of expenses related to depreciating or amortizing the cost of computer and related equipment, leasehold improvements, software and furniture and fixtures over the estimated useful life of the assets.
Depreciation and amortization of property, equipment and leasehold improvements decreased 17.5% and 20.6% for the three and nine months ended September 30, 2024, respectively, primarily driven by lower depreciation on computer and related equipment.
Total Other Expense (Income), Net
The following table shows our other expense (income), net for the periods indicated:
Three Months Ended September 30,
% Change
Nine Months Ended September 30,
% Change
(in thousands)
2024
2023
2024
2023
Interest income
$
(5,217)
$
(10,314)
(49.4
%)
$
(17,375)
$
(31,079)
(44.1
%)
Interest expense
46,688
46,902
(0.5
%)
139,995
139,725
0.2
%
Other expense (income)
2,927
(935)
(413.0
%)
7,881
4,032
95.5
%
Total other expense (income), net
$
44,398
$
35,653
24.5
%
$
130,501
$
112,678
15.8
%
Total other expense (income), net increased 24.5% for the three months ended September 30, 2024, primarily driven by lower interest income reflecting lower average cash balances and the impact of foreign currency exchange rate fluctuations.
Total other expense (income), net increased 15.8% for the nine months ended September 30, 2024, primarily driven by lower interest income, reflecting lower average cash balances as well as loss on extinguishment related to unamortized debt issuance costs associated with the prepayment of the Tranche A Term Loans and the entry into the Credit Agreement and the impact of foreign currency exchange rate fluctuations.
The following table shows our income tax provision and effective tax rate for the periods indicated:
Three Months Ended September 30,
% Change
Nine Months Ended September 30,
% Change
(in thousands)
2024
2023
2024
2023
Provision for income taxes
$
76,035
$
57,997
31.1
%
$
189,210
$
155,974
21.3
%
Effective tax rate
21.3
%
18.3
%
16.4
%
19.1
%
17.3
%
10.4
%
The effective tax rate of 21.3% for the three months ended September 30, 2024 reflects the Company’s estimate of the effective tax rate for the period and was impacted by certain unfavorable discrete items totaling $3.6 million, primarily related to prior-year items.
The effective tax rate of 18.3% for the three months ended September 30, 2023 reflects the Company’s estimate of the effective tax rate for the period and was impacted by certain favorable discrete items totaling $3.4 million, primarily related to $3.2 million of prior-year items.
The effective tax rate of 19.1% for the nine months ended September 30, 2024 reflects the Company’s estimate of the effective tax rate for the period and was impacted by certain favorable discrete items totaling $12.4 million, related to $15.9 million of excess tax benefits recognized on share-based compensation vested during the period partially offset by $3.5 million related to prior-year items.
The effective tax rate of 17.3% for the nine months ended September 30, 2023 reflects the Company’s estimate of the effective tax rate for the period and was impacted by certain favorable discrete items totaling $19.8 million, related to $11.4 million of excess tax benefits recognized on share-based compensation vested during the period and $8.4 million related to prior-year items.
Net Income
The following table shows our net income for the periods indicated:
Three Months Ended September 30,
% Change
Nine Months Ended September 30,
% Change
(in thousands)
2024
2023
2024
2023
Net income
$
280,901
$
259,659
8.2
%
$
803,613
$
745,212
7.8
%
As a result of the factors described above, net income increased 8.2% for the three months ended September 30, 2024, and increased 7.8% for the nine months ended September 30, 2024.
Weighted Average Shares and Common Shares Outstanding
The following table shows our weighted average shares outstanding for the periods indicated:
Three Months Ended September 30,
% Change
Nine Months Ended September 30,
% Change
(in thousands)
2024
2023
2024
2023
Weighted average shares outstanding:
Basic
78,499
79,116
(0.8
%)
78,925
79,580
(0.8
%)
Diluted
78,729
79,500
(1.0
%)
79,159
79,959
(1.0
%)
The following table shows our common shares outstanding for the periods indicated:
The decrease in weighted average shares and common shares outstanding for the three and nine months ended September 30, 2024 primarily reflects the impact of share repurchases made pursuant to the Company’s stock repurchase program.
Adjusted EBITDA
“Adjusted EBITDA,” a non-GAAP measure used by management to assess operating performance, is defined as net income before (1) provision for income taxes, (2) other expense (income), net, (3) depreciation and amortization of property, equipment and leasehold improvements, (4) amortization of intangible assets and, at times, (5) certain other transactions or adjustments, including, when applicable, impairment related to sublease of leased property and certain acquisition-related integration and transaction costs.
“Adjusted EBITDA expenses,” a non-GAAP measure used by management to assess operating performance, is defined as operating expenses less depreciation and amortization of property, equipment and leasehold improvements and amortization of intangible assets and, at times, certain other transactions or adjustments, including, when applicable, impairment related to sublease of leased property and certain acquisition-related integration and transaction costs.
“Adjusted EBITDA margin” is defined as Adjusted EBITDA divided by operating revenues.
Adjusted EBITDA, Adjusted EBITDA expenses and Adjusted EBITDA margin are believed to be meaningful measures for management to assess the operating performance of the Company because they adjust for significant one-time, unusual or non-recurring items as well as eliminate the accounting effects of certain capital spending and acquisitions that do not directly affect what management considers to be the Company’s ongoing operating performance in the period. All companies do not calculate adjusted EBITDA, adjusted EBITDA expenses and adjusted EBITDA margin in the same way. These measures can differ significantly from company to company depending on, among other things, long-term strategic decisions regarding capital structure, the tax jurisdictions in which companies operate and capital investments. Accordingly, the Company’s computation of the Adjusted EBITDA, Adjusted EBITDA margin and Adjusted EBITDA expenses measures may not be comparable to similarly titled measures computed by other companies.
The following table presents non-GAAP Adjusted EBITDA for the periods indicated:
Three Months Ended September 30,
% Change
Nine Months Ended September 30,
% Change
(in thousands)
2024
2023
2024
2023
Operating revenues
$
724,705
$
625,439
15.9
%
$
2,112,619
$
1,838,814
14.9
%
Adjusted EBITDA expenses
274,003
239,150
14.6
%
848,389
730,490
16.1
%
Adjusted EBITDA
$
450,702
$
386,289
16.7
%
$
1,264,230
$
1,108,324
14.1
%
Operating margin %
55.4
%
56.5
%
53.2
%
55.1
%
Adjusted EBITDA margin %
62.2
%
61.8
%
59.8
%
60.3
%
The change in Adjusted EBITDA margin reflects changes in the rate of growth of Adjusted EBITDA expenses as compared to the rate of growth of operating revenues, driven by the factors previously described.
Reconciliation of Net Income to Adjusted EBITDA and Operating Expenses to Adjusted EBITDA Expenses
The following table presents the reconciliation of net income to Adjusted EBITDA for the periods indicated:
Three Months Ended September 30,
% Change
Nine Months Ended September 30,
% Change
(in thousands)
2024
2023
2024
2023
Net income
$
280,901
$
259,659
8.2
%
$
803,613
$
745,212
7.8
%
Provision for income taxes
76,035
57,997
31.1
%
189,210
155,974
21.3
%
Other expense (income), net
44,398
35,653
24.5
%
130,501
112,678
15.8
%
Operating income
401,334
353,309
13.6
%
1,123,324
1,013,864
10.8
%
Amortization of intangible assets
41,939
26,722
56.9
%
121,316
77,543
56.4
%
Depreciation and amortization of property, equipment and leasehold improvements
4,332
5,252
(17.5
%)
12,639
15,911
(20.6
%)
Acquisition-related integration and
transaction costs (1)
3,097
1,006
207.9
%
6,951
1,006
591.0
%
Consolidated Adjusted EBITDA
$
450,702
$
386,289
16.7
%
$
1,264,230
$
1,108,324
14.1
%
Index Adjusted EBITDA
314,148
277,672
13.1
%
898,898
808,424
11.2
%
Analytics Adjusted EBITDA
90,287
71,781
25.8
%
244,171
197,710
23.5
%
ESG and Climate Adjusted EBITDA
29,989
25,440
17.9
%
75,010
66,114
13.5
%
All Other - Private Assets Adjusted EBITDA
16,278
11,396
42.8
%
46,151
36,076
27.9
%
Consolidated Adjusted EBITDA
$
450,702
$
386,289
16.7
%
$
1,264,230
$
1,108,324
14.1
%
___________________________
(1)Represents transaction expenses and other costs directly related to the acquisition and integration of acquired businesses, including professional fees, severance expenses, regulatory filing fees and other costs, in each case that are incurred no later than 12 months after the close of the relevant acquisition.
The following table presents the reconciliation of operating expenses to Adjusted EBITDA expenses for the periods indicated:
Three Months Ended September 30,
% Change
Nine Months Ended September 30,
% Change
(in thousands)
2024
2023
2024
2023
Total operating expenses
$
323,371
$
272,130
18.8
%
$
989,295
$
824,950
19.9
%
Amortization of intangible assets
41,939
26,722
56.9
%
121,316
77,543
56.4
%
Depreciation and amortization of property, equipment and leasehold improvements
4,332
5,252
(17.5
%)
12,639
15,911
(20.6
%)
Acquisition-related integration and
transaction costs (1)
3,097
1,006
207.9
%
6,951
1,006
591.0
%
Consolidated Adjusted EBITDA expenses
$
274,003
$
239,150
14.6
%
$
848,389
$
730,490
16.1
%
Index Adjusted EBITDA expenses
90,734
84,450
7.4
%
277,048
255,396
8.5
%
Analytics Adjusted EBITDA expenses
82,089
82,487
(0.5
%)
258,166
253,509
1.8
%
ESG and Climate Adjusted EBITDA expenses
53,654
47,598
12.7
%
166,372
145,201
14.6
%
All Other - Private Assets Adjusted EBITDA expenses
47,526
24,615
93.1
%
146,803
76,384
92.2
%
Consolidated Adjusted EBITDA expenses
$
274,003
$
239,150
14.6
%
$
848,389
$
730,490
16.1
%
___________________________
(1)Represents transaction expenses and other costs directly related to the acquisition and integration of acquired businesses, including professional fees, severance expenses, regulatory filing fees and other costs, in each case that are incurred no later than 12 months after the close of the relevant acquisition.
The following table presents the results for the Index segment for the periods indicated:
Three Months Ended September 30,
% Change
Nine Months Ended September 30,
% Change
(in thousands)
2024
2023
2024
2023
Operating revenues:
Recurring subscriptions
$
223,945
$
206,453
8.5
%
$
653,929
$
603,845
8.3
%
Asset-based fees
168,622
141,066
19.5
%
482,162
412,354
16.9
%
Non-recurring
12,315
14,603
(15.7
%)
39,855
47,621
(16.3
%)
Operating revenues total
404,882
362,122
11.8
%
1,175,946
1,063,820
10.5
%
Adjusted EBITDA expenses
90,734
84,450
7.4
%
277,048
255,396
8.5
%
Adjusted EBITDA
$
314,148
$
277,672
13.1
%
$
898,898
$
808,424
11.2
%
Adjusted EBITDA margin %
77.6
%
76.7
%
76.4
%
76.0
%
Index operating revenues increased 11.8% for the three months ended September 30, 2024, primarily driven by strong growth in higher asset-based fees and higher recurring subscription revenue, partially offset by lower non-recurring revenues. Adjusting for the impact of the acquisition of Foxberry and foreign currency exchange rate fluctuations, Index operating revenues would have increased 11.8%.
Operating revenues from recurring subscriptions increased 8.5% for the three months ended September 30, 2024, primarily driven by growth from market cap-weighted and factor, ESG and climate Index products.
Operating revenues from asset-based fees increased 19.5% for the three months ended September 30, 2024, primarily driven by growth in revenues from ETFs linked to MSCI equity indexes and non-ETF indexed funds linked to MSCI indexes. Operating revenues from ETFs linked to MSCI equity indexes and non-ETF indexed funds linked to MSCI indexes increased by 19.7% and 21.1%, respectively, primarily driven by an increase in average AUM. Operating revenues from exchange traded futures and options contracts linked to MSCI indexes increased by 11.3%, driven by volume increases.
Index segment Adjusted EBITDA expenses increased 7.4% for the three months ended September 30, 2024, primarily driven by higher non-compensation expenses across cost of revenues, selling and marketing, and G&A expense activity categories, partially offset by a decrease in the R&D expense activity category. The increase in non-compensation expenses was primarily driven by higher professional fees and marketing costs. The increase was also driven by higher compensation expenses in R&D, cost of revenues, and selling and marketing expense activity categories, partially offset by the G&A expense activity category. The increase in compensation expenses was driven by higher wages and salaries and incentive compensation costs. Adjusting for the impact of the acquisition of Foxberry and foreign currency exchange rate fluctuations, Index segment Adjusted EBITDA expenses would have increasedby 6.4%.
Index operating revenues increased 10.5% for the nine months ended September 30, 2024, primarily driven by strong growth from asset-based fees and recurring subscriptions, partially offset by a decrease in non-recurring revenue. Adjusting for the impact of the acquisition of Foxberry and foreign currency exchange rate fluctuations, Index operating revenues would have increased 10.7%.
Operating revenues from recurring subscriptions increased 8.3% for the nine months ended September 30, 2024, primarily driven by growth from market cap-weighted and factor, ESG and climate index products.
Operating revenues from asset-based fees increased 16.9% for the nine months ended September 30, 2024, primarily driven by strong growth in revenues from ETFs linked to MSCI equity indexes and non-ETF indexed funds linked to MSCI indexes. Operating revenues from ETFs linked to MSCI equity indexes and non-ETF indexed funds linked to MSCI indexes increased by 17.9% and 19.4%, respectively, primarily driven by an increase in average AUM.
Index segment Adjusted EBITDA expenses increased 8.5% for the nine months ended September 30, 2024, primarily driven by higher compensation expenses across all expense activity categories. The increase reflects higher incentive compensation and wages and salaries. The increase was also driven by non-compensation expenses across the cost of revenues, G&A, and selling and marketing expense activity categories, partially offset by the R&D expense activity category. This increase was primarily due to higher professional fees and transaction fees related to the acquisition of Foxberry. Adjusting for the impact of the acquisition of Foxberry and foreign currency exchange rate fluctuations, Index segment Adjusted EBITDA expenses would have increased by 7.5%.
The following table presents the results for the Analytics segment for the periods indicated:
Three Months Ended September 30,
% Change
Nine Months Ended September 30,
% Change
(in thousands)
2024
2023
2024
2023
Operating revenues:
Recurring subscriptions
$
168,150
$
151,269
11.2
%
$
490,829
$
443,276
10.7
%
Non-recurring
4,226
2,999
40.9
%
11,508
7,943
44.9
%
Operating revenues total
172,376
154,268
11.7
%
502,337
451,219
11.3
%
Adjusted EBITDA expenses
82,089
82,487
(0.5
%)
258,166
253,509
1.8
%
Adjusted EBITDA
$
90,287
$
71,781
25.8
%
$
244,171
$
197,710
23.5
%
Adjusted EBITDA margin %
52.4
%
46.5
%
48.6
%
43.8
%
Analytics operating revenues increased 11.7% for the three months ended September 30, 2024, primarily driven by growth from recurring subscriptions related to both Multi-Asset Class and Equity Analytics products, which also benefited from subscription revenue impacted by client implementations. The increase was also driven by an increase in non-recurring revenues driven by one-time deals related to both Multi-Asset Class and Equity products as well as a number of implementations which were completed in the quarter. Adjusting for the impact of the acquisition of Fabric and foreign currency exchange rate fluctuations, Analytics operating revenues would have increased 11.7%.
Analytics segment Adjusted EBITDA expenses decreased 0.5% for the three months ended September 30, 2024, primarily driven by lower compensation expenses across the selling and marketing and G&A expense activity categories, partially
offset by higher compensation expenses across the R&D and cost of revenues expense activity categories. The decrease was primarily driven by increased capitalization of expenses related to internally developed software projects. Adjusting for the impact of the acquisition of Fabric and foreign currency exchange rate fluctuations, Analytics segment Adjusted EBITDA expenses would have decreased 1.6%.
Analytics operating revenues increased 11.3% for the nine months ended September 30, 2024, primarily driven by growth from recurring subscriptions related to both Multi-Asset Class and Equity Analytics products, which also benefited from subscription revenue impacted by client implementations. The increase was also driven by an increase in non-recurring revenues driven by one-time deals related to both Multi-Asset Class and Equity products as well as a number of implementations which were completed during the year. Adjusting for the impact of the acquisition of Fabric and foreign currency exchange rate fluctuations, Analytics operating revenues would have increased 11.6%.
Analytics segment Adjusted EBITDA expenses increased 1.8% for the nine months ended September 30, 2024, primarily driven by higher non-compensation expense across cost of revenues, selling and marketing, and G&A expense activity categories, partially offset by a decrease in the R&D expense activity category. The increase reflects higher professional fees and information technology costs. The increase was also driven by higher compensation expenses across R&D, cost of revenues and G&A expense activity categories, partially offset by lower compensation expenses in the selling and marketing expense activity category. The increase was primarily driven by higher incentive compensation costs, partially offset by increased capitalization of expenses related to internally developed software projects. Adjusting for the impact of the acquisition of Fabric and foreign currency exchange rate fluctuations, Analytics segment Adjusted EBITDA expenses would have increased 0.7%.
The following table presents the results for the ESG and Climate segment for the periods indicated:
Three Months Ended September 30,
% Change
Nine Months Ended September 30,
% Change
(in thousands)
2024
2023
2024
2023
Operating revenues:
Recurring subscriptions
$
81,536
$
71,744
13.6
%
$
235,954
$
207,523
13.7
%
Non-recurring
2,107
1,294
62.8
%
5,428
3,792
43.1
%
Operating revenues total
83,643
73,038
14.5
%
241,382
211,315
14.2
%
Adjusted EBITDA expenses
53,654
47,598
12.7
%
166,372
145,201
14.6
%
Adjusted EBITDA
$
29,989
$
25,440
17.9
%
$
75,010
$
66,114
13.5
%
Adjusted EBITDA margin %
35.9
%
34.8
%
31.1
%
31.3
%
ESG and Climate operating revenues increased 14.5% for the three months ended September 30, 2024, primarily driven by growth from recurring subscriptions related to Ratings, Climate and Screening products. Adjusting for the impact of the acquisition of Trove and foreign currency exchange rate fluctuations, ESG and Climate operating revenues would have increased 11.0%.
ESG and Climate segment Adjusted EBITDA expenses increased 12.7% for the three months ended September 30, 2024, primarily driven by higher compensation expenses across R&D, cost of revenues and G&A expense activity categories, partially offset by a decrease in the selling and marketing expense activity category. The increase reflects higher wages and salaries and incentive compensation costs. The increase is also driven by higher non-compensation expenses across all expense activity categories. The increase reflects higher professional fees. Adjusting for the impact of the acquisition of Trove and foreign currency exchange rate fluctuations, ESG and Climate segment Adjusted EBITDA expenses would have increased 4.6%.
ESG and Climate operating revenues increased 14.2% for the nine months ended September 30, 2024, primarily driven by growth from recurring subscriptions related to Ratings, Climate and Screening products. Adjusting for the impact of the acquisition of Trove and foreign currency exchange rate fluctuations, ESG and Climate operating revenues would have increased 10.7%.
ESG and Climate segment Adjusted EBITDA expenses increased 14.6% for the nine months ended September 30, 2024, primarily driven by higher compensation expense across R&D, cost of revenues and G&A expense activity categories, partially offset by lower compensation expense in selling and marketing expense activity category. The increase reflects higher wages and salaries, incentive compensation, and benefits costs. Adjusting for the impact of the acquisition of Trove and foreign currency exchange rate fluctuations, ESG and Climate segment Adjusted EBITDA expenses would have increased 6.1%.
All Other – Private Assets Segment
The following table presents the results for the All Other – Private Assets segment for the periods indicated:
Three Months Ended September 30,
% Change
Nine Months Ended September 30,
% Change
(in thousands)
2024
2023
2024
2023
Operating revenues:
Recurring subscriptions
$
62,991
$
35,531
77.3
%
$
190,434
$
111,292
71.1
%
Non-recurring
813
480
69.4
%
2,520
1,168
115.8
%
Operating revenues total
63,804
36,011
77.2
%
192,954
112,460
71.6
%
Adjusted EBITDA expenses
47,526
24,615
93.1
%
146,803
76,384
92.2
%
Adjusted EBITDA
$
16,278
$
11,396
42.8
%
$
46,151
$
36,076
27.9
%
Adjusted EBITDA margin %
25.5
%
31.6
%
23.9
%
32.1
%
All Other – Private Assets operating revenues increased 77.2% for the three months ended September 30, 2024, primarily driven by revenues attributable to the step acquisition of Burgiss. Adjusting for the impact of the step acquisition of Burgiss and foreign currency exchange rate fluctuations, All Other – Private Assets operating revenues would have increased 1.0%.
All Other – Private Assets segment Adjusted EBITDA expenses increased 93.1% for the three months ended September 30, 2024, driven by higher compensation and non-compensation expenses across all expense activity categories, primarily due to the step acquisition of Burgiss. Adjusting for the impact of the step acquisition of Burgiss and foreign currency exchange rate fluctuations, All Other - Private Assets segment Adjusted EBITDA expenses would have decreased 5.5%.
All Other – Private Assets operating revenues increased 71.6% for the nine months ended September 30, 2024, primarily driven by revenues attributable to the step acquisition of Burgiss. Adjusting for the impact of the step acquisition of Burgiss and foreign currency exchange rate fluctuations, All Other – Private Assets operating revenues would have increased 1.7%.
All Other – Private Assets segment Adjusted EBITDA expenses increased 92.2% for the nine months ended September 30, 2024, driven by higher compensation and non-compensation expenses across all expense activity categories, primarily due to the step acquisition of Burgiss. Adjusting for the impact of the step acquisition of Burgiss and foreign currency exchange rate fluctuations, All Other - Private Assets segment Adjusted EBITDA expenses would have decreased 5.1%.
“Run Rate” estimates at a particular point in time the annualized value of the recurring revenues under our client license agreements (“Client Contracts”) for the next 12 months, assuming all Client Contracts that come up for renewal, or reach the end of the committed subscription period, are renewed and assuming then-current currency exchange rates, subject to the adjustments and exclusions described below. For any Client Contract where fees are linked to an investment product’s assets or trading volume/fees, the Run Rate calculation reflects, for ETFs, the market value on the last trading day of the period, for futures and options, the most recent quarterly volumes and/or reported exchange fees, and for other non-ETF products, the most recent client-reported assets. Run Rate does not include fees associated with “one-time” and other non-recurring transactions. In addition, we add to Run Rate the annualized fee value of recurring new sales, whether to existing or new clients, when we execute Client Contracts, even though the license start date, and associated revenue recognition, may not be effective until a later date. We remove from Run Rate the annualized fee value associated with products or services under any Client Contract when we (i) have received a notice of termination, non-renewal or an indication the client does not intend to continue their subscription during the period and (ii) have determined that such notice evidences the client’s final decision to terminate or not renew the applicable products or services, even though such termination or non-renewal may not be effective until a later date.
Changes in our recurring revenues typically lag changes in Run Rate. The actual amount of recurring revenues we will realize over the following 12 months will differ from Run Rate for numerous reasons, including:
•fluctuations in revenues associated with new recurring sales;
•modifications, cancellations and non-renewals of existing Client Contracts, subject to specified notice requirements;
•differences between the recurring license start date and the date the Client Contract is executed due to, for example, contracts with onboarding periods or fee waiver periods;
•fluctuations in asset-based fees, which may result from changes in certain investment products’ total expense ratios, market movements, including foreign currency exchange rates, or from investment inflows into and outflows from investment products linked to our indexes;
•fluctuations in fees based on trading volumes of futures and options contracts linked to our indexes;
•price changes or discounts;
•revenue recognition differences under U.S. GAAP, including those related to the timing of implementation and report deliveries for certain of our products and services;
•fluctuations in the number of hedge funds for which we provide investment information and risk analysis to hedge fund investors;
•fluctuations in foreign currency exchange rates; and
The following table presents Run Rates by reportable segment as of the dates indicated and the growth percentages over the periods indicated:
As of
% Change
(in thousands)
September 30, 2024
September 30, 2023
Index:
Recurring subscriptions
$
906,803
$
835,334
8.6
%
Asset-based fees
683,462
545,548
25.3
%
Index total
1,590,265
1,380,882
15.2
%
Analytics
691,333
639,462
8.1
%
ESG and Climate
344,015
297,297
15.7
%
All Other - Private Assets
268,577
150,749
78.2
%
Total Run Rate
$
2,894,190
$
2,468,390
17.3
%
Recurring subscriptions total
$
2,210,728
$
1,922,842
15.0
%
Asset-based fees
683,462
545,548
25.3
%
Total Run Rate
$
2,894,190
$
2,468,390
17.3
%
Total Run Rate increased 17.3%, driven by a 15.0% increase from recurring subscriptions and a 25.3% increase from asset-based fees. Adjusting for the impact of recent acquisitions and foreign currency exchange rate fluctuations, recurring subscriptions Run Rate would have increased 8.0%.
Run Rate from Index recurring subscriptions increased 8.6%, primarily driven by growth from market cap-weighted and custom Index products and special packages. The increase reflected growth across all regions. Adjusting for the impact of the acquisition of Foxberry and foreign currency exchange rate fluctuations, Index Run Rate would have increased 8.5%.
Run Rate from Index asset-based fees increased 25.3%, primarily driven by higher AUM in both ETFs linked to MSCI equity indexes and non-ETF indexed funds linked to MSCI indexes.
Run Rate from Analytics products increased 8.1%, primarily driven by growth in both Multi-Asset Class and Equity Analytics products, and reflected growth across all regions and client segments. Adjusting for the impact of the acquisition of Fabric and foreign currency exchange rate fluctuations, Analytics Run Rate would have increased 7.1%.
Run Rate from ESG and Climate products increased 15.7%, driven by strong growth in Ratings, Climate and Screening products with contributions across all regions and client segments. Adjusting for the impact of the acquisition of Trove and foreign currency exchange rate fluctuations, ESG and Climate Run Rate would have increased 11.2%.
Run Rate from All Other - Private Assets increased 78.2%, and included $110.1 million associated with Burgiss. Excluding the impact of the step acquisition of Burgiss, the growth was primarily driven by Index Intel products. Adjusting for the impact of the step acquisition of Burgiss and foreign currency exchange rate fluctuations, All Other - Private Assets Run Rate would have increased 2.4%.
Sales
Sales represents the annualized value of products and services clients commit to purchase from MSCI and will result in additional operating revenues. Non-recurring sales represent the actual value of the customer agreements entered into during the period and are not a component of Run Rate. New recurring subscription sales represent additional selling activities, such as new customer agreements, additions to existing agreements or increases in price that occurred during the period and are additions to Run Rate. Subscription cancellations reflect client activities during the period, such as discontinuing products and services and/or
reductions in price, resulting in reductions to Run Rate. Net new recurring subscription sales represent the amount of new recurring subscription sales net of subscription cancellations during the period, which reflects the net impact to Run Rate during the period.
Total gross sales represent the sum of new recurring subscription sales and non-recurring sales. Total net sales represent the total gross sales net of the impact from subscription cancellations.
The following table presents our recurring subscription sales, cancellations and non-recurring sales by reportable segment for the periods indicated:
Three Months Ended
Nine Months Ended
(in thousands)
September 30, 2024
September 30, 2023
% Change
September 30, 2024
September 30, 2023
% Change
Index
New recurring subscription sales
$
25,271
$
23,978
5.4
%
$
80,081
$
80,156
(0.1
%)
Subscription cancellations
(9,862)
(7,402)
33.2
%
(34,876)
(22,617)
54.2
%
Net new recurring subscription sales
$
15,409
$
16,576
(7.0
%)
$
45,205
$
57,539
(21.4
%)
Non-recurring sales
$
13,883
$
14,679
(5.4
%)
$
44,687
$
54,365
(17.8
%)
Total gross sales
$
39,154
$
38,657
1.3
%
$
124,768
$
134,521
(7.3
%)
Total Index net sales
$
29,292
$
31,255
(6.3
%)
$
89,892
$
111,904
(19.7
%)
Analytics
New recurring subscription sales
$
20,780
$
18,787
10.6
%
$
56,137
$
50,751
10.6
%
Subscription cancellations
(10,307)
(7,543)
36.6
%
(28,001)
(24,094)
16.2
%
Net new recurring subscription sales
$
10,473
$
11,244
(6.9
%)
$
28,136
$
26,657
5.5
%
Non-recurring sales
$
7,293
$
3,206
127.5
%
$
13,812
$
8,734
58.1
%
Total gross sales
$
28,073
$
21,993
27.6
%
$
69,949
$
59,485
17.6
%
Total Analytics net sales
$
17,766
$
14,450
22.9
%
$
41,948
$
35,391
18.5
%
ESG and Climate
New recurring subscription sales
$
9,333
$
12,124
(23.0
%)
$
39,361
$
38,497
2.2
%
Subscription cancellations
(5,575)
(2,639)
111.3
%
(17,496)
(7,331)
138.7
%
Net new recurring subscription sales
$
3,758
$
9,485
(60.4
%)
$
21,865
$
31,166
(29.8
%)
Non-recurring sales
$
2,345
$
1,532
53.1
%
$
6,852
$
4,066
68.5
%
Total gross sales
$
11,678
$
13,656
(14.5
%)
$
46,213
$
42,563
8.6
%
Total ESG and Climate net sales
$
6,103
$
11,017
(44.6
%)
$
28,717
$
35,232
(18.5
%)
All Other - Private Assets
New recurring subscription sales
$
9,959
$
4,788
108.0
%
$
29,877
$
14,746
102.6
%
Subscription cancellations
(4,610)
(3,153)
46.2
%
(15,112)
(8,634)
75.0
%
Net new recurring subscription sales
$
5,349
$
1,635
227.2
%
$
14,765
$
6,112
141.6
%
Non-recurring sales
$
520
$
262
98.5
%
$
2,361
$
1,069
120.9
%
Total gross sales
$
10,479
$
5,050
107.5
%
$
32,238
$
15,815
103.8
%
Total All Other - Private Assets net sales
$
5,869
$
1,897
209.4
%
$
17,126
$
7,181
138.5
%
Consolidated
New recurring subscription sales
$
65,343
$
59,677
9.5
%
$
205,456
$
184,150
11.6
%
Subscription cancellations
(30,354)
(20,737)
46.4
%
(95,485)
(62,676)
52.3
%
Net new recurring subscription sales
$
34,989
$
38,940
(10.1
%)
$
109,971
$
121,474
(9.5
%)
Non-recurring sales
$
24,041
$
19,679
22.2
%
$
67,712
$
68,234
(0.8
%)
Total gross sales
$
89,384
$
79,356
12.6
%
$
273,168
$
252,384
8.2
%
Total net sales
$
59,030
$
58,619
0.7
%
$
177,683
$
189,708
(6.3
%)
Asignificant portion of MSCI’s operating revenues are derived from subscriptions or licenses of products and services, which are provided over contractually-agreed periods of time that are subject to renewal or cancellation at the end of current contract terms.
The following table presents our Retention Rate by reportable segment for the periods indicated:
Three Months Ended September 30,
Nine Months Ended September 30,
2024
2023
2024
2023
Index(1)
95.4%
96.2%
94.6%
96.1%
Analytics(1)
93.8%
95.1%
94.4%
94.8%
ESG and Climate(1)
93.0%
96.0%
92.7%
96.3%
All Other - Private Assets(1)
92.7%
91.3%
92.0%
92.1%
Total(1)
94.2%
95.4%
93.9%
95.4%
___________________________
(1)Retention rate for Index excluding the impact of the acquisition of Foxberry was 95.5% and 94.6% for the three and nine months ended September 30, 2024, respectively. Retention rate for Analytics excluding the impact of the acquisition of Fabric was 93.8% and 94.4% for the three and nine months ended September 30, 2024, respectively. Retention rate for ESG and Climate excluding the impact of the acquisition of Trove was 93.4% and 92.9% for the three and nine months ended September 30, 2024, respectively. Retention rate for All Other – Private Assets excluding the impact of the step acquisition of Burgiss was 92.2% and 90.7% for the three and nine months and year ended September 30, 2024, respectively. Total retention rate excluding the impact of the acquisitions of Foxberry, Fabric, Trove, and Burgiss was 94.4% and 94.0% for three and nine months and year ended September 30, 2024, respectively.
Retention Rate is an important metric because subscription cancellations decrease our Run Rate and ultimately our future operating revenues over time. The annual Retention Rate represents the retained subscription Run Rate (subscription Run Rate at the beginning of the fiscal year less actual cancels during the year) as a percentage of the subscription Run Rate at the beginning of the fiscal year.
The Retention Rate for a non-annual period is calculated by annualizing the cancellations for which we have received a notice of termination or for which we believe there is an intention not to renew or discontinue the subscription during the non-annual period, and we believe that such notice or intention evidences the client’s final decision to terminate or not renew the applicable agreement, even though such termination or non-renewal may not be effective until a later date. This annualized cancellation figure is then divided by the subscription Run Rate at the beginning of the fiscal year to calculate a cancellation rate. This cancellation rate is then subtracted from 100% to derive the annualized Retention Rate for the period.
Retention Rate is computed by operating segment on a product/service-by-product/service basis. In general, if a client reduces the number of products or services to which it subscribes within a segment, or switches between products or services within a segment, we treat it as a cancellation for purposes of calculating our Retention Rate except in the case of a product or service switch that management considers to be a replacement product or service. In those replacement cases, only the net change to the client subscription, if a decrease, is reported as a cancel. In the Analytics and the ESG and Climate operating segments, substantially all product or service switches are treated as replacement products or services and netted in this manner, while in our Index and Real Assets operating segments, product or service switches that are treated as replacement products or services and receive netting treatment occur only in certain limited instances. In addition, we treat any reduction in fees resulting from a down-sell of the same product or service as a cancellation to the extent of the reduction. We do not calculate Retention Rate for that portion of our Run Rate attributable to assets in index-linked investment products or futures and options contracts, in each case, linked to our indexes.
Retention Rate is generally higher during the first three quarters and lower in the fourth quarter, as the fourth quarter is traditionally the largest renewal period in the year.
We require capital to fund ongoing operations, internal growth initiatives and acquisitions. Our primary sources of liquidity are cash flows generated from our operations, existing cash and cash equivalents and credit capacity under our existing credit facility. In addition, we believe we have access to additional funding in the public and private markets. We intend to use these sources of liquidity to, among other things, service our existing and future debt obligations, fund our working capital requirements for capital expenditures, investments, acquisitions and dividend payments, and make repurchases of our common stock. In connection with our business strategy, we regularly evaluate acquisition and strategic partnership opportunities. We believe our liquidity, along with other financing alternatives, will provide the necessary capital to fund these transactions and achieve our planned growth.
Senior Notes and Credit Agreement
As of September 30, 2024, we had an aggregate of $4,200.0 million in Senior Notes outstanding. In addition, under the Credit Agreement, we had as of September 30, 2024 an aggregate of $311.9 million in outstanding borrowings under the revolving credit facility. See Note 8, “Debt” and Note 13, “Subsequent Events”, of the Notes to Condensed Consolidated Financial Statements (Unaudited) included herein for additional information on our outstanding indebtedness and revolving credit facility.
On January 26, 2024, we entered into a Second Amended and Restated Credit Agreement (the “Credit Agreement”) amending and restating in its entirety the Prior Credit Agreement. The Credit Agreement makes available an aggregate of $1,250.0 million of revolving loan commitments under the Revolving Credit Facility, which may be drawn until January 26, 2029. The Revolving Credit Facility under the Credit Agreement was drawn at closing in an amount sufficient to prepay all term loans outstanding under the TLA Facility under the Prior Credit Agreement. The obligations under the Credit Agreement are general unsecured obligations of the Company.
The Senior Notes and the Prior Credit Agreement were previously fully and unconditionally, and jointly and severally, guaranteed by our direct or indirect wholly owned domestic subsidiaries that account for more than 5% of our and our subsidiaries’ consolidated assets, other than certain excluded subsidiaries (the “subsidiary guarantors”). Upon the closing of the Credit Agreement on January 26, 2024, the subsidiary guarantors’ were released from their guarantees under the Prior Credit Agreement and the indentures governing our Senior Notes (the “Indentures”).
The Indentures among us and Computershare, National Association, as trustee and successor to Wells Fargo Bank, National Association, contain covenants that limit our and our subsidiaries’ ability to, among other things, incur liens, enter into sale/leaseback transactions and consolidate, merge or sell all or substantially all of our assets, and that limit the ability of our subsidiaries to incur certain indebtedness. The Credit Agreement also contains covenants that limit our and our subsidiaries’ ability to, among other things, incur liens, enter into sale/leaseback transactions and consolidate, merge or sell all or substantially all of our assets, and that limit the ability of our subsidiaries to incur certain indebtedness.
The Credit Agreement and the Indentures also contain customary events of default, including those relating to non-payment, breach of representations, warranties or covenants, cross-default and cross-acceleration, and bankruptcy and insolvency events, and, in the case of the Credit Agreement, invalidity or impairment of loan documentation, change of control and customary ERISA defaults in addition to the foregoing. None of the restrictions detailed above are expected to impact our ability to effectively operate the business.
The Credit Agreement also requires us and our subsidiaries to achieve financial and operating results sufficient to maintain compliance with the following financial ratios on a consolidated basis through the termination of the Credit Agreement: (1) the maximum Consolidated Leverage Ratio (as defined in the Credit Agreement) measured quarterly on a rolling four-quarter basis not to exceed 4.25:1.00 (or 4.50:1.00 for four fiscal quarters following a material acquisition) and (2) the minimum Consolidated Interest Coverage Ratio (as defined in the Credit Agreement) measured quarterly on a rolling four-quarter basis of at least 4.00:1.00. As of September 30, 2024, our Consolidated Leverage Ratio was 2.39:1.00 and our Consolidated Interest Coverage Ratio was 9.79:1.00.
The following table provides information with respect to repurchases of the Company’s common stock pursuant to open market repurchases:
Nine months ended
(in thousands except per share data)
Average Price Paid Per Share
Total Number of Shares Repurchased
Dollar
Value of
Shares
Repurchased(1)
September 30, 2024
$
500.52
880
$
440,265
September 30, 2023
$
468.26
980
$
458,721
___________________________
(1)The values in this column exclude the 1% excise tax incurred on share repurchases. Any excise tax incurred is recognized as part of the cost of the shares acquired in the Unaudited Condensed Consolidated Statement of Shareholders’ Equity (Deficit).
As of September 30, 2024, there was $405.4 million of available authorization remaining under the 2022 Repurchase Program. This authorization may be modified, suspended or terminated by the Board of Directors at any time without prior notice.
Cash Dividends
On October 28, 2024, the Board of Directors declared a quarterly cash dividend of $1.60 per share for the three months ending December 31, 2024. The fourth quarter 2024 dividend is payable on November 29, 2024 to shareholders of record as of the close of trading on November 15, 2024.
Cash Flows
The following table presents the Company’s cash and cash equivalents, including restricted cash, as of the dates indicated:
As of
(in thousands)
September 30, 2024
December 31, 2023
Cash and cash equivalents (includes restricted cash of $3,909 and
$3,878 at September 30, 2024 and December 31, 2023, respectively)
$
500,979
$
461,693
We typically seek to maintain minimum cash balances globally of approximately $225.0 million to $275.0 million for general operating purposes. As of September 30, 2024 and December 31, 2023, $244.0 million and $285.2 million, respectively, of the Company’s cash and cash equivalents were held by foreign subsidiaries. Repatriation of some foreign cash may be subject to certain withholding taxes in local jurisdictions and other distribution restrictions. We believe the global cash and cash equivalent balances that are maintained will be available to meet our global needs whether for general corporate purposes or other needs, including acquisitions or expansion of our products.
We believe that global cash flows from operations, together with existing cash and cash equivalents and funds available under our existing revolving credit facility and our ability to access bank debt, private debt and the capital markets for additional funds, will continue to be sufficient to fund our global operating activities and cash commitments for investing and financing activities, such as material capital expenditures and share repurchases, for at least the next 12 months and for the foreseeable future thereafter. In addition, we expect that foreign cash flows from operations, together with existing cash and cash equivalents, will continue to be sufficient to fund our foreign operating activities and cash commitments for investing activities, such as material capital expenditures, for at least the next 12 months and for the foreseeable future thereafter.
Net Cash Provided by (Used In) Operating, Investing and Financing Activities
Nine Months Ended September 30,
(in thousands)
2024
2023
Net cash provided by operating activities
$
1,070,994
$
847,076
Net cash (used in) investing activities
(107,522)
(69,411)
Net cash (used in) provided by financing activities
(926,125)
(842,364)
Effect of exchange rate changes
1,939
(313)
Net increase (decrease) in cash, cash equivalents and restricted cash
$
39,286
$
(65,012)
Cash Flows From Operating Activities
Cash flows from operating activities consist of net income adjusted for certain non-cash items and changes in assets and liabilities. The year-over-year change was primarily driven by higher cash collections from customers and lower cash paid for income taxes, partially offset by higher payments for cash expenses.
Our primary uses of cash from operating activities are for the payment of cash compensation expenses, income taxes, interest expenses, technology costs, professional fees, market data costs and office rent. Historically, the payment of cash for compensation and benefits is at its highest level in the first quarter when we pay discretionary employee compensation related to the previous fiscal year.
Cash Flows From Investing Activities
The year-over-year change was primarily driven by the acquisitions of Fabric and Foxberry and higher capitalized software development costs.
Cash Flows From Financing Activities
The year-over-year change was primarily driven by the repayment of outstanding balances under our Revolving Credit Facility and higher dividend payments.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Foreign Currency Risk
We are subject to foreign currency exchange fluctuation risk. Exchange rate movements can impact the U.S. dollar-reported value of our revenues, expenses, assets and liabilities denominated in non-U.S. dollar currencies or where the currency of such items is different than the functional currency of the entity where these items were recorded.
We generally invoice our clients in U.S. dollars; however, we invoice a portion of our clients in Euros, British pounds sterling, Japanese yen and a limited number of other non-U.S. dollar currencies. For the nine months ended September 30, 2024 and 2023, 16.6% and 17.0%, respectively, of our revenues are subject to foreign currency exchange rate risk and primarily included clients billed in foreign currency as well as U.S. dollar exposures on non-U.S. dollar foreign operating entities. Of the 16.6% of non-U.S. dollar exposure for the nine months ended September 30, 2024, 42.2% was in Euros, 32.9% was in British pounds sterling and 17.7% was in Japanese yen. Of the 17.0% of non-U.S. dollar exposure for the nine months ended September 30, 2023, 41.7% was in Euros, 32.5% was in British pounds sterling and 17.6% was in Japanese yen.
Revenues from asset-based fees represented 22.8% and 22.4% of operating revenues for the nine months ended September 30, 2024 and 2023, respectively. While a substantial portion of our asset-based fees are invoiced in U.S. dollars, the fees are based on the assets in investment products, of which approximately three-fifths are invested in securities denominated in currencies other than the U.S. dollar. Accordingly, declines in such other currencies against the U.S. dollar will decrease the fees payable to us under such licenses. In addition, declines in such currencies against the U.S. dollar could impact the attractiveness of such investment products resulting in net fund outflows, which would further reduce the fees payable under such licenses.
We are exposed to additional foreign currency risk in certain of our operating costs. Approximately 41.8% and 43.4% of our operating expenses for the nine months ended September 30, 2024 and 2023, respectively, were denominated in foreign currencies, the significant majority of which were denominated in British pounds sterling, Indian rupees, Euros, Hungarian forints, Mexican pesos and Swiss francs.
We have certain monetary assets and liabilities denominated in currencies other than local functional amounts, and when these balances are remeasured into their local functional currency, either a gain or a loss results from the change of the value of the functional currency as compared to the originating currencies. We manage foreign currency exchange rate risk, in part, through the use of derivative financial instruments comprised principally of forward contracts on foreign currency which are not designated as hedging instruments for accounting purposes. The objective of the derivative instruments is to minimize the impact on the income statement of the volatility of amounts denominated in certain foreign currencies. We recognized total foreign currency exchange losses of $5.0 million and $2.9 million for the nine months ended September 30, 2024 and 2023, respectively.
Item 4. Controls and Procedures
Our Chief Executive Officer and Chief Financial Officer have evaluated our disclosure controls and procedures, as defined in Rule 13a-15(e) or 15d-15(e) of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”), as of the end of the period covered by this report, and have concluded that these disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time specified in the SEC’s rules and forms. These disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is accumulated and communicated to management, including the Chief Executive Officer and the Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the three months ended September 30, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Various lawsuits, arbitrations, claims, government inquiries, requests for information, regulatory investigations, examinations, inspections, other proceedings and subpoenas have been or may be instituted or asserted against the Company in the ordinary course of business. While the potential losses could be substantial, due to uncertainties surrounding the potential outcomes, management cannot currently reasonably estimate the possible loss or range of loss that may arise from these matters. Consequently, it is possible that MSCI’s business, operating results, financial condition or cash flows in a particular period could be materially affected by these matters. However, based on facts currently available, we believe that the disposition of matters that are currently pending or asserted will not, individually or in the aggregate, have a material effect on MSCI’s business, operating results, financial condition or cash flows.
Item 1A. Risk Factors
For a discussion of the risk factors affecting the Company, see “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for fiscal year ended December 31, 2023.
There have been no material changes to the risk factors and uncertainties known to the Company and disclosed in the Company’s Form 10-K for the fiscal year ended December 31, 2023, that, if they were to materialize or occur, would, individually or in the aggregate, have a material effect on MSCI’s business, operating results, financial condition or cash flows.
Item 2. Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities
There were no unregistered sales of equity securities during the three months ended September 30, 2024.
The table below presents information with respect to purchases made by or on behalf of the Company of its shares of common stock during the three months ended September 30, 2024.
Issuer Purchases of Equity Securities
Period
Total
Number of
Shares
Purchased(1)
Average Price
Paid
Per Share(2)
Total Number of Shares Purchased As Part of Publicly Announced Plans or Programs
Approximate
Dollar
Value of Shares
that May Yet
Be
Purchased
Under
the Plans or
Programs(3)
July 1, 2024 - July 31, 2024
151,620
$
504.62
151,361
$
527,786,000
August 1, 2024 - August 31, 2024
210,822
$
533.04
210,269
$
415,710,000
September 1, 2024 - September 30, 2024
19,355
$
549.16
18,767
$
405,412,000
Total
381,797
$
522.57
380,397
$
405,412,000
___________________________
(1)Includes, when applicable, (i) shares purchased by the Company on the open market under the stock repurchase program; (ii) shares withheld to satisfy tax withholding obligations on behalf of employees that occur upon vesting and delivery of outstanding shares underlying restricted stock units; and (iii) shares held in treasury under the MSCI Inc. Non-Employee Directors Deferral Plan. The value of shares withheld to satisfy tax withholding obligations was determined using the fair market value of the Company’s common stock on the date of withholding, using a valuation methodology established by the Company.
(2)Excludes 1% excise tax incurred on share repurchases.
(3)See Note 10, “Shareholders’ Equity (Deficit),” of the Notes to the Unaudited Condensed Consolidated Financial Statements included herein for further information regarding our stock repurchase program.
Item 5. Other Information
During the three months ended September 30, 2024, none of the Company’s directors or officers, as defined in Section 16 of the Exchange Act, adopted or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K of the Exchange Act.
Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Dated: October 31, 2024
MSCI INC. (Registrant)
By:
/s/ Andrew C. Wiechmann
Andrew C. Wiechmann Chief Financial Officer (Principal Financial Officer)
