On July 23, 2024, MSCI Inc (MSCI, Financial) released its 8-K filing for the second quarter of 2024, showcasing a strong financial performance that surpassed analyst expectations. The company reported operating revenues of $707.9 million, a 14.0% increase from the same period last year, and a diluted EPS of $3.37, up 9.1% year-over-year.
Company Overview
MSCI Inc (MSCI, Financial) is a leading provider of critical decision support tools and services for the global investment community. The company’s largest and most profitable segment is its index segment, which provides benchmarking to asset managers and asset owners. MSCI also offers portfolio management and risk management analytics software through its analytics segment. Additionally, MSCI has ESG and climate, and private assets segments, providing ESG data and real estate reporting, market data, benchmarking, and analytics to investors and real estate managers.
Performance Highlights
MSCI Inc (MSCI, Financial) reported significant growth across various financial metrics for the second quarter of 2024:
- Operating revenues of $707.9 million, up 14.0% year-over-year.
- Recurring subscription revenues increased by 14.4%, while asset-based fees rose by 18.2%.
- Operating margin stood at 54.0%, with an adjusted EBITDA margin of 60.7%.
- Diluted EPS of $3.37, up 9.1%, and adjusted EPS of $3.64, up 11.7%.
- Organic recurring subscription Run Rate growth of 8.6% and a retention rate of 94.8%.
Financial Achievements
MSCI Inc (MSCI, Financial) achieved several notable financial milestones during the second quarter:
- Repurchased 598,928 shares for $289.9 million at an average price of $484.01 per share.
- Paid approximately $126.6 million in dividends to shareholders.
- Declared a cash dividend of $1.60 per share for the third quarter of 2024.
Income Statement and Key Metrics
| Metric | Q2 2024 | Q2 2023 | % Change |
|---|---|---|---|
| Operating Revenues | $707.9 million | $621.2 million | 14.0% |
| Operating Income | $382.6 million | $346.0 million | 10.6% |
| Net Income | $266.8 million | $246.8 million | 8.1% |
| Diluted EPS | $3.37 | $3.09 | 9.1% |
| Adjusted EBITDA | $430.0 million | $377.3 million | 14.0% |
Segment Performance
MSCI Inc (MSCI, Financial) reported growth across its key segments:
- Index Segment: Operating revenues of $397.2 million, up 9.6%, driven by higher asset-based fees and recurring subscription revenues.
- Analytics Segment: Operating revenues of $166.0 million, up 10.8%, primarily due to growth in recurring subscriptions and non-recurring revenues.
- ESG and Climate Segment: Operating revenues of $79.9 million, up 12.1%, driven by growth in Climate, Screening, and Ratings products.
- Private Assets Segment: Operating revenues of $64.9 million, up 72.0%, primarily driven by revenues from Private Capital (Trades, Portfolio) Solutions and recurring subscriptions.
Balance Sheet and Cash Flow
MSCI Inc (MSCI, Financial) reported cash and cash equivalents of $451.4 million as of June 30, 2024. The company’s total debt stood at $4.5 billion, with a total debt to adjusted EBITDA ratio of 2.8x. Capex for the quarter was $27.3 million, and net cash provided by operating activities increased by 19.7% to $349.2 million. Free cash flow for the second quarter was up 21.3% to $321.9 million.
Commentary
“MSCI’s second quarter results demonstrate the strength of our all-weather franchise, our blue-chip client base, our wide range of solutions, and our relentless focus on execution. Highlights included another quarter of record AUM balances in financial products linked to MSCI indexes, ABF run rate growth of 16%, our best-ever Q2 of new recurring subscription sales, and a retention rate of almost 95%,” said Henry A. Fernandez, Chairman and CEO of MSCI.
Analysis
MSCI Inc (MSCI, Financial) has demonstrated robust financial performance in the second quarter of 2024, exceeding analyst estimates for both revenue and earnings per share. The company's strong growth in recurring subscription revenues and asset-based fees highlights its ability to generate consistent and predictable revenue streams. The high retention rate of 94.8% underscores the loyalty and satisfaction of its client base.
Despite the increase in operating expenses, primarily due to higher compensation and benefits costs and recent acquisitions, MSCI Inc (MSCI, Financial) maintained a solid operating margin of 54.0%. The company's strategic initiatives, including its ESG and sustainability partnership with Moody’s and the
Explore the complete 8-K earnings release (here) from MSCI Inc for further details.
