MSCI Inc. Reports Third Quarter 2013 Financial Results

Thu Oct 31, 2013 7:30am EDT

* Reuters is not responsible for the content in this press release.

MSCI Inc. Reports Third Quarter 2013 Financial Results

Exploring Strategic Alternatives for Governance Business

MSCI Inc. (NYSE:MSCI), a leading global provider of investment decision support tools, including indices, portfolio risk and performance analytics and corporate governance services, today announced results for the third quarter and nine months ended September 30, 2013.

(Note: Percentage changes are referenced to the comparable period in 2012, unless otherwise noted.)

  • Operating revenues increased 9.7% to $258.2 million in third quarter 2013 and 9.2% to $768.0 million for nine months 2013.
  • Net income increased 14.6% to $55.3 million in third quarter 2013 and net income grew 35.1% to $175.3 million for nine months 2013.
  • Diluted EPS for third quarter 2013 rose 17.9% to $0.46 and nine months 2013 Diluted EPS increased 37.1% to $1.44.
  • Adjusted EBITDA1 grew by 4.4% to $112.8 million in third quarter 2013. For nine months 2013, Adjusted EBITDA1 grew by 6.8% to $339.5 million. Third quarter 2013 Adjusted EBITDA1 margin fell to 43.7% from 45.9% and nine months 2013 Adjusted EBITDA1 margin fell to 44.2% from 45.2%.
  • Third quarter 2013 Adjusted EPS2 rose 8.2% to $0.53. Nine months 2013 Adjusted EPS2 rose 17.5% to $1.68.
  • MSCI’s Run Rate grew by 12.1% to $1,025.8 million in third quarter 2013, driven by organic3 subscription growth of 4.4%, asset-based fee growth of 28.3% and the acquisitions of IPD and InvestorForce.
  • MSCI repurchased a total of 2.7 million shares in third quarter 2013 as part of the conclusion of its December 2012 accelerated share repurchase (“ASR”) agreement and the commencement of its August 2013 ASR.
  • MSCI has engaged Morgan Stanley to explore strategic alternatives for its Governance business.

Table 1: MSCI Inc. Selected Financial Information (unaudited)

                         
Three Months Ended Change from   Nine Months Ended Change From
September 30, September 30, September 30, September 30, September 30, September 30,
In thousands, except per share data       2013 2012 2012 2013 2012 2012
Operating revenues $ 258,238 $ 235,444 9.7% $ 768,045 $ 703,061 9.2%
Operating expenses 165,802 151,915 9.1% 487,910 451,432 8.1%
Net income 55,310 48,274 14.6% 175,300 129,786 35.1%
% Margin 21.4% 20.5% 22.8% 18.5%
Diluted EPS $ 0.46 $ 0.39 17.9% $ 1.44 $ 1.05 37.1%
 
Adjusted EPS2 $ 0.53 $ 0.49 8.2% $ 1.68 $ 1.43 17.5%
Adjusted EBITDA1 $ 112,818 $ 108,074 4.4% $ 339,473 $ 317,893 6.8%
% Margin 43.7% 45.9% 44.2% 45.2%
 

1 Net Income before income taxes, other net expense and income, depreciation, amortization, non-recurring stock-based compensation, lease exit charge and restructuring costs. See Table 13 titled "Reconciliation of Adjusted EBITDA to Net Income (unaudited)" and information about the use of non-GAAP financial information provided under "Notes Regarding the Use of Non-GAAP Financial Measures."

2 Per share net income before after-tax impact of amortization of intangibles, non-recurring stock-based compensation, restructuring costs, lease exit charge and debt repayment and refinancing expenses. See Table 14 titled "Reconciliation of Adjusted Net Income and Adjusted EPS to Net Income and EPS (unaudited)" and information about the use of non-GAAP financial information provided under "Notes Regarding the Use of Non-GAAP Financial Measures."

3 For the purposes of calculating organic Run Rate growth, comparisons exclude the Run Rate from the acquisitions of IPD and InvestorForce as well as the Run Rate of the CFRA product line, which was sold.

 

“MSCI’s revenues, Adjusted EBITDA and Adjusted EPS continued to grow in the third quarter. Our Run Rate grew 12%, driven by 10% growth in subscriptions and 28% growth in asset-based fees. The growth in our asset-based fees highlights the strong demand for MSCI-linked ETF products as well as the value that MSCI indices deliver to our clients. During the third quarter, MSCI repurchased a total of 2.7 million shares, underscoring our commitment to return capital to shareholders while we continue to invest in our organic growth,” Henry A. Fernandez, Chairman and CEO, said.

“We announced today that MSCI has engaged Morgan Stanley to help us explore strategic alternatives for our Governance business. Over the past three years, MSCI has worked hard to return that business to a growth track. We have launched new products, most notably executive compensation data and analytics and Quickscore, grown our salesforce, reached out to new clients and invested in the technology platform. We also strengthened the senior management team, which we expect will remain in place. In the third quarter of 2013, the Governance business reported organic revenue growth of 7% and Adjusted EBITDA growth of 12%. We believe the time is right to explore our strategic alternatives,” added Mr. Fernandez.

Summary of Results for Third Quarter 2013 Compared to Third Quarter 2012

Operating Revenues – See Table 4

Operating revenues for the three months ended September 30, 2013 (“third quarter 2013”) increased $22.8 million, or 9.7%, to $258.2 million compared to $235.4 million for the three months ended September 30, 2012 (“third quarter 2012”). For the purposes of analyzing revenue trends, organic growth comparisons exclude the impact of the acquisitions of IPD Group Limited (“IPD”) and Investor Force Holdings, Inc. (“InvestorForce”), acquired on November 30, 2012 and January 29, 2013, respectively, as well as the sale of the CFRA product line on March 31, 2013. On an organic basis, operating revenues grew by 4.8%.

Third quarter 2013 recurring subscription revenues rose $19.3 million, or 9.8%, to $216.9 million and 4.1% on an organic basis. Asset-based fees increased $2.8 million, or 8.1%, to $36.8 million and non-recurring revenues rose $0.7 million to $4.5 million.

Performance and Risk segment revenues rose $23.2 million to $228.6 million, an increase of 11.3% and 4.5% on an organic basis. The increase was primarily driven by higher revenues from index and environmental, social and governance (“ESG”) products.

   

 

Index and ESG products: Index and ESG product revenues increased $21.7 million, or 20.1%, to $129.6 million. Subscription revenues grew by $18.9 million, or 25.6%, to $92.8 million, driven by the acquisition of IPD and growth in revenues from equity index benchmark products. On an organic basis, index and ESG subscription revenue growth was 10.1%.

 
Revenues attributable to equity index asset-based fees rose $2.8 million, or 8.1%, to $36.8 million, largely as a result of higher revenues from non-ETF passive funds. In addition, a change in the mix of ETFs linked to MSCI indices more than offset a decline of $58.5 billion, or 17.0%, in average assets under management (“AUM”) in ETFs linked to MSCI indices. Excluding $5.6 million in asset-based fees linked to certain Vanguard ETFs that transitioned from third quarter 2012, asset-based fees would have grown by 29.3%.
 

Risk management analytics: Revenues related to risk management analytics products increased $4.7 million, or 7.2%, to $69.7 million. On an organic basis, revenues grew by 3.2%, driven by higher revenues from our RiskManager and hedge fund transparency products.

 

Portfolio management analytics: Revenues related to portfolio management analytics products declined $2.9 million, or 10.0%, to $26.2 million as a result of lower sales and elevated cancellations of equity analytics products in prior periods as well as lower fixed income analytics revenues.

 

Energy and commodity analytics: Revenues from energy and commodity analytics products were $3.1 million, a decline of $0.2 million.

Governance segment revenues fell $0.4 million, or 1.4%, to $29.6 million in third quarter 2013, as the loss of revenues resulting from the sale of the CFRA product line more than offset organic growth. On an organic basis, Governance revenues rose 7.4%, driven by higher revenues from executive compensation data and analytics products.

Operating Expenses – See Table 6

Total operating expenses rose $13.9 million, or 9.1%, to $165.8 million.

   

 

Compensation costs: Total compensation costs rose $10.2 million, or 11.0%, to $103.2 million in third quarter 2013, driven primarily by increased costs from the acquisitions of IPD and InvestorForce and increased hiring, offset by lower severance costs and the sale of the CFRA product line.

 

Non-compensation costs excluding depreciation and amortization, the lease exit charge and restructuring costs: Non-compensation costs rose $7.2 million, or 20.6%, to $42.2 million in third quarter 2013. The increase in non-compensation costs reflects the acquisitions of IPD and InvestorForce, and increases in travel and entertainment costs, marketing expenses and recruiting costs, among other items.

 

Depreciation and amortization: Amortization of intangibles expense totaled $14.4 million compared to $16.0 million in third quarter 2012, a decline of 9.5%, primarily due to certain intangibles becoming fully amortized since the prior period, partially offset by additional amortization related to the IPD and InvestorForce acquisitions. Depreciation and amortization of property, equipment and leasehold improvements rose $1.3 million, or 28.1%, to $5.9 million.

Other Expense (Income), Net

Other expense (income), net for third quarter 2013 was $6.2 million, a decline of $1.7 million from third quarter 2012 driven by lower interest rates and lower indebtedness.

Provision for Income Taxes

Income tax expense was $30.9 million in third quarter 2013, up $3.6 million from third quarter 2012. The effective tax rate in third quarter 2013 fell to 35.9% from 36.1% a year ago.

Net Income and Earnings per Share – See Table 14

Net income rose $7.0 million, or 14.6%, to $55.3 million for third quarter 2013. The net income margin increased to 21.4% from 20.5% as a result of the higher operating profit margin, lower interest costs and lower tax rate. Diluted EPS rose by $0.07, or 17.9%, to $0.46, driven by higher net income and a 2.3% decline in the weighted average diluted shares outstanding in third quarter 2013. Adjusted net income, which excludes the after-tax impact of amortization of intangibles, non-recurring stock-based compensation expense, the lease exit charge and restructuring costs rose $3.7 million, or 6.0%, to $64.6 million. Adjusted EPS, which excludes the after-tax, per diluted share impact of amortization of intangibles and restructuring costs, non-recurring stock-based compensation expense, the lease exit charge and restructuring costs totaling $0.07, rose $0.04, or 8.2%, to $0.53.

See Table 14 titled “Reconciliation of Adjusted Net Income and Adjusted EPS to Net Income and EPS (unaudited)” and “Notes Regarding the Use of Non-GAAP Financial Measures” below.

Adjusted EBITDA – See Table 13

Adjusted EBITDA, which excludes income taxes, other net expense and income, depreciation, amortization, non-recurring stock-based compensation, the lease exit charge and restructuring costs was $112.8 million, up $4.7 million, or 4.4%, from third quarter 2012. The Adjusted EBITDA margin declined to 43.7% from 45.9%.

By segment, Adjusted EBITDA for the Performance and Risk segment increased $3.8 million, or 3.8%, to $104.2 million in third quarter 2013. The Adjusted EBITDA margin for this segment fell to 45.6% from 48.9%. Adjusted EBITDA for the Governance segment increased $0.9 million, or 11.6%, to $8.6 million and the Adjusted EBITDA margin rose to 29.1% from 25.7% on improved operating results. The increase in Governance segment Adjusted EBITDA was driven by a reduction in severance, occupancy and information technology costs compared to third quarter 2012.

See Table 13 titled “Reconciliation of Adjusted EBITDA to Net Income (unaudited)” and “Notes Regarding the Use of Non-GAAP Financial Measures” below.

Summary of Results for Nine Months Ended September 30, 2013 compared to Nine Months Ended September 30, 2012

Operating Revenues – See Table 5

Total operating revenues for the nine months ended September 30, 2013 (“nine months 2013”) increased $65.0 million, or 9.2%, to $768.0 million compared to $703.1 million for the nine months ended September 30, 2012 (“nine months 2012”). Subscription revenues rose $56.7 million, or 9.7%, to $639.0 million, while asset-based fees rose $7.5 million, or 7.3%, to $110.3 million. Non-recurring revenues rose $0.7 million to $18.7 million. On an organic basis, total operating revenues grew by 3.9%.

Performance and Risk segment revenues rose $65.4 million, or 10.7%, to $676.5 million for nine months 2013, and 3.7% on an organic basis. Index and ESG products and risk management analytics revenues grew 18.2% and 5.4%, respectively, in nine months 2013, or organically by 7.0% and 2.1%, respectively. Portfolio management analytics revenues fell 8.7%. Energy and other commodity analytics revenues increased $3.5 million, or 60.8%, primarily as a result of a $5.2 million non-cash cumulative revenue reduction to correct an error that was recorded in first quarter 2012. Excluding the impact of that error, energy and commodity analytics revenues declined 15.2%.

Governance revenues were $91.5 million, down slightly versus nine months 2012. On an organic basis, revenue grew by 5.1%.

Operating Expenses – See Table 7

Total operating expenses increased $36.5 million, or 8.1%, to $487.9 million in nine months 2013 compared to nine months 2012 driven primarily by the acquisitions of IPD and InvestorForce. The increase largely reflects increases of $32.3 million, or 11.6%, in total compensation expenses and $6.0 million, or 5.4%, in non-compensation expenses including the lease exit charge of $3.3 million incurred in third quarter 2012, and offset by a decline of $1.9 million, or 3.1%, in total depreciation and amortization expenses.

Other Expense (Income), Net

Other expense (income), net for nine months 2013 was $19.1 million, a decline of $31.5 million from nine months 2012. Other expense (income), net includes debt repayment and refinancing expenses of $20.6 million in nine months 2012. Excluding the change in debt repayment and refinancing expenses, other expense (income), net declined by $10.9 million in nine months 2013 primarily as a result of a combination of a lower cost of debt and lower levels of indebtedness.

Provision for Income Taxes

The provision for income tax expense was $85.8 million in nine months 2013, up $14.4 million from nine months 2012. Year to date 2013 income tax expense benefited from discrete items of $3.3 million primarily related to a reduction in state taxes and the 2012 reinstatement of the research and development tax credit. The effective tax rate was 32.8% in nine months 2013, versus 35.5% a year ago.

Net Income and Earnings per Share – See Table 14

Net income increased $45.5 million, or 35.1%, to $175.3 million and the net income margin increased to 22.8% from 18.5%. Diluted EPS rose 37.1% to $1.44 from $1.05.

Adjusted net income, which excludes the after-tax impact of amortization of intangibles, non-recurring stock-based compensation expense, debt repayment and refinancing expenses, the lease exit charge and restructuring costs totaling $28.9 million, rose $27.2 million, or 15.4%, to $204.2 million. Adjusted EPS, which excludes the after-tax, per diluted share impact of amortization of intangibles, non-recurring stock-based compensation expense, debt repayment and refinancing expenses, the lease exit charge and restructuring costs totaling $0.24, rose 17.5% to $1.68 in nine months 2013.

See Table 14 titled “Reconciliation of Adjusted Net Income and Adjusted EPS to Net Income and EPS (unaudited)” and “Notes Regarding the Use of Non-GAAP Financial Measures” below.

Adjusted EBITDA – See Table 13

Adjusted EBITDA was $339.5 million, an increase of $21.6 million, or 6.8%, from nine months 2012. Adjusted EBITDA margin fell to 44.2% from 45.2%.

By segment, Adjusted EBITDA for the Performance and Risk segment increased $17.8 million, or 6.0%, to $315.0 million from nine months 2012. Adjusted EBITDA margin declined to 46.6% in nine months 2013 from 48.6% in nine months 2012. Adjusted EBITDA for the Governance segment rose $3.7 million, or 18.0%, to $24.5 million in nine months 2013. The Adjusted EBITDA margin for the Governance segment was 26.8%, up from 22.6% in nine months 2012.

See Table 13 titled “Reconciliation of Adjusted EBITDA to Net Income (unaudited)” and “Notes Regarding the Use of Non-GAAP Financial Measures” below.

Key Operating Metrics – See Tables 10, 11, 12

Total Run Rate grew by $110.8 million, or 12.1%, to $1,025.8 million as of September 30, 2013 compared to September 30, 2012. Total subscription Run Rate grew by $78.4 million, or 9.8%, to $878.8 million as of September 30, 2013 compared to September 30, 2012. Changes in foreign currency rates over the past twelve months negatively impacted subscription Run Rate by $2.0 million. Relative to second quarter 2013, changes in foreign currency rates lifted subscription Run Rate by $6.2 million. On an organic basis, total subscription Run Rate grew by 4.4%.

Performance and Risk segment Run Rate grew by $113.8 million, or 14.2%, to $912.9 million. On an organic basis, Performance and Risk Run Rate grew by 7.7%.

   

 

Index and ESG products: Index and ESG subscription Run Rate grew by $67.3 million, or 23.0%, to $360.0 million. On an organic basis, index and ESG subscription Run Rate grew by 8.5%, driven by growth in equity index benchmark and data products. Changes in foreign currency rates increased Run Rate by $2.3 million on a sequential basis but had only a very modest negative effect versus third quarter 2012.

 
Run Rate attributable to asset-based fees rose $32.4 million, or 28.3%, to $147.0 million. The increase was primarily driven by inflows and higher market performance in ETFs linked to MSCI indices. The third quarter 2012 asset-based fee Run Rate excludes those Vanguard ETFs that later switched benchmarks.
 
As of September 30, 2013, AUM in ETFs linked to MSCI indices were $302.6 billion, down $61.1 billion, or 16.8%, from September 30, 2012 but up $32.9 billion, or 12.2%, from June 30, 2013. Of that $32.9 billion sequential increase, market gains accounted for $20.2 billion and net inflows added an additional $12.7 billion.
 

If the AUM in those Vanguard ETFs which transitioned earlier in 2013 were excluded from the September 30, 2012 balance, AUM in MSCI-linked ETFs would have risen $70.0 billion, or 30.1%, compared to September 30, 2012.

 

Risk management analytics: Run Rate related to risk management analytics products increased $26.7 million, or 10.2%, to $288.5 million. On an organic basis, risk management analytics Run Rate grew by 6.3%. MSCI benefited from solid growth in Run Rate from BarraOne, RiskManager, and Hedge Platform. Changes in foreign currency positively benefited Run Rate by $1.3 million versus third quarter 2012 and by $2.5 million versus second quarter 2013.

 

Portfolio management analytics: Run Rate related to portfolio management analytics products declined $11.0 million, or 9.5%, to $104.9 million. Year-over-year Run Rate was negatively impacted, in part, by product swaps totaling $2.4 million and by changes in foreign currency rates which lowered Run Rate by an additional $3.4 million. On a sequential basis, changes in foreign currency rates benefited portfolio management analytics Run Rate by $0.5 million.

 

Energy and commodity analytics: Run Rate from energy and commodity analytics products declined to $12.5 million, down $1.5 million, or 11.0%, from third quarter 2012.

Governance

Run Rate declined by $2.9 million, or 2.5%, to $112.9 million. On an organic basis, Run Rate grew by 5.5%, reflecting strong growth in the Run Rate of executive compensation data and analytics products and services. Changes in foreign currency rates raised Governance Run Rate by $0.9 million versus second quarter 2013.

Accelerated Share Repurchase Agreements

During third quarter 2013, MSCI settled the $100.0 million ASR it had entered into on December 14, 2012, taking delivery of 0.8 million shares at that time. In addition, MSCI entered into a second $100.0 million agreement on August 2, 2013 and received 1.9 million shares at that time. The repurchased shares will be held in treasury. Additional shares may be delivered to MSCI at or prior to maturity of the second ASR agreement, which MSCI anticipates will be no later than December 2013.

Both of the ASR agreements were authorized pursuant to a $300.0 million share repurchase program approved by MSCI’s Board of Directors in 2012. The remaining $100.0 million balance of the authorization will be available for utilization from time to time through 2014 at management’s discretion.

Governance Update

MSCI has engaged Morgan Stanley to explore strategic alternatives for its Governance business, including the potential divestiture or other separation of the entire business. The products and services offered by MSCI’s Governance business include governance research and recommendations, as well as end-to-end proxy voting and distribution solutions, securities class-action claims management, and reliable governance data, analysis and modeling tools. The financial results of the Governance business are reported as the Governance segment.

There can be no assurance that the process of exploring strategic alternatives will result in a transaction or that any transaction will ultimately be consummated. MSCI does not intend to disclose further developments with respect to the process unless and until a definitive decision is reached with respect to a specific transaction or the process is otherwise terminated or concluded.

Conference Call Information

Investors will have the opportunity to listen to MSCI Inc.’s senior management review third quarter 2013 results on Thursday, October 31, 2013 at 11:00 am Eastern Time. To listen to the live event, visit the investor relations section of MSCI's website, http://ir.msci.com/events.cfm, or dial 1-877-312-9206 within the United States. International callers dial 1-408-774-4001.

An audio recording of the conference call will be available on our website approximately two hours after the conclusion of the live event and will be accessible through November 2, 2013. To listen to the recording, visit http://ir.msci.com/events.cfm, or dial 1-855-859-2056 (passcode: 75611658) within the United States. International callers dial 1-404-537-3406 (passcode: 75611658).

About MSCI

MSCI Inc. is a leading provider of investment decision support tools to investors globally, including asset managers, banks, hedge funds and pension funds. MSCI products and services include indices, portfolio risk and performance analytics, and governance tools.

The company’s flagship product offerings are: the MSCI indices with approximately $7.5 trillion estimated to be benchmarked to them on a worldwide basis1; Barra multi-asset class factor models, portfolio risk and performance analytics; RiskMetrics multi-asset class market and credit risk analytics; IPD real estate information, indices and analytics; MSCI ESG (environmental, social and governance) Research screening, analysis and ratings; ISS governance research and outsourced proxy voting and reporting services; and FEA valuation models and risk management software for the energy and commodities markets. MSCI is headquartered in New York, with research and commercial offices around the world. MSCI#IR

1 As of March 31, 2013, as published by eVestment, Lipper and Bloomberg on July 31, 2013

For further information on MSCI, please visit our website at www.msci.com.

Forward-Looking Statements

This earnings release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements relate to future events or to future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance, or achievements to be materially different from any future results, levels of activity, performance, or achievements expressed or implied by these forward-looking statements. In some cases, you can identify forward-looking statements by the use of words such as “may,” “could,” “expect,” “intend,” “plan,” “seek,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” or “continue,” or the negative of these terms or other comparable terminology. You should not place undue reliance on forward-looking statements because they involve known and unknown risks, uncertainties and other factors that are, in some cases, beyond our control and that could materially affect actual results, levels of activity, performance, or achievements.

Other factors that could materially affect actual results, levels of activity, performance or achievements can be found in MSCI’s Annual Report on Form 10-K for the fiscal year ended December 31, 2012 filed with the Securities and Exchange Commission (“SEC”) on March 1, 2013, and in quarterly reports on Form 10-Q and current reports on Form 8-K filed with the SEC, and may also include the risks and uncertainties associated with the process of evaluating strategic alternatives, including whether any appropriate alternatives will be identified and, if identified, whether any such alternative will result in a consummated transaction. If any of these risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may vary significantly from what MSCI projected. Any forward-looking statement in this release reflects MSCI’s current views with respect to future events and is subject to these and other risks, uncertainties and assumptions relating to MSCI’s operations, results of operations, growth strategy and liquidity. MSCI assumes no obligation to publicly update or revise these forward-looking statements for any reason, whether as a result of new information, future events, or otherwise, except as required by law.

Website and Social Media Disclosure

MSCI uses its website and corporate Twitter account (@MSCI_Inc) as channels of distribution of company information. The information we post through these channels may be deemed material. Accordingly, investors should monitor these channels, in addition to following our press releases, SEC filings and public conference calls and webcasts. In addition, you may automatically receive email alerts and other information about MSCI when you enroll your email address by visiting the “Email Alert Subscription” section at http://ir.msci.com/alerts.cfm?. The contents of MSCI’s website and social media channels are not, however, incorporated by reference into this earnings release.

Notes Regarding the Use of Non-GAAP Financial Measures

MSCI has presented supplemental non-GAAP financial measures as part of this earnings release. A reconciliation is provided that reconciles each non-GAAP financial measure with the most comparable GAAP measure. The presentation of non-GAAP financial measures should not be considered as alternative measures for the most directly comparable GAAP financial measures. These measures are used by management to monitor the financial performance of the business, inform business decision making and forecast future results.

Adjusted EBITDA is defined as net income before provision for income taxes, other net expense and income, depreciation and amortization, non-recurring stock-based compensation expense, the lease exit charge and restructuring costs.

Adjusted net income and Adjusted EPS are defined as net income and EPS, respectively, before provision for non-recurring stock-based compensation expenses, amortization of intangible assets, restructuring costs, the lease exit charge and the accelerated amortization or write-off of deferred financing and debt discount costs as a result of debt repayment (debt repayment and refinancing expenses), as well as for any related tax effects.

We believe that adjusting for the lease exit charge, restructuring costs and debt repayment and refinancing expenses is useful to management and investors because it allows for an evaluation of MSCI’s underlying operating performance. Additionally, we believe that adjusting for non-recurring stock-based compensation expenses, debt repayment and refinancing expenses and depreciation and amortization may help investors compare our performance to that of other companies in our industry as we do not believe that other companies in our industry have as significant a portion of their operating expenses represented by these items. We believe that the non-GAAP financial measures presented in this earnings release facilitate meaningful period-to-period comparisons and provide a baseline for the evaluation of future results.

Adjusted EBITDA, Adjusted net income and Adjusted EPS are not defined in the same manner by all companies and may not be comparable to other similarly titled measures of other companies.

Table 2: MSCI Inc. Condensed Consolidated Statements of Income (unaudited)

                     
Three Months Ended Nine Months Ended
September 30, September 30, June 30, September 30, September 30,
In thousands, except per share data         2013     2012     2013     2013     2012  
 
Operating revenues $ 258,238 $ 235,444 $ 257,898 $ 768,045 $ 703,061
 
Operating expenses
Cost of services 80,040 68,350 83,359 243,584 213,884
Selling, general and administrative 65,380 62,973 57,612 184,623 176,011
Restructuring costs - - - - (51 )
Amortization of intangible assets 14,448 15,959 14,509 43,443 47,877
Depreciation and amortization of property,
equipment and leasehold improvements   5,934     4,633     5,246     16,260     13,711  
Total operating expenses $ 165,802   $ 151,915   $ 160,726   $ 487,910   $ 451,432  
 
Operating income $ 92,436 $ 83,529 $ 97,172 $ 280,135 $ 251,629
Operating margin 35.8 % 35.5 % 37.7 % 36.5 % 35.8 %
 
Interest income (265 ) (252 ) (237 ) (770 ) (712 )
Interest expense 5,827 7,314 6,504 19,351 49,250
Other expense (income)   627     873     (354 )   497     1,997  
Other expenses (income), net $ 6,189   $ 7,935   $ 5,913   $ 19,078   $ 50,535  
 
Income before taxes 86,247 75,594 91,259 261,057 201,094
 
Provision for income taxes   30,937     27,320     30,206     85,757     71,308  
Net income $ 55,310   $ 48,274   $ 61,053   $ 175,300   $ 129,786  
Net income margin 21.4 % 20.5 % 23.7 % 22.8 % 18.5 %
 
Earnings per basic common share $ 0.46   $ 0.39   $ 0.50   $ 1.45   $ 1.06  
Earnings per diluted common share $ 0.46   $ 0.39   $ 0.50   $ 1.44   $ 1.05  
 
Weighted average shares outstanding used
in computing earnings per share
 
Basic   119,607     122,261     121,149     120,497     122,016  
Diluted   120,578     123,450     122,069     121,446     123,287  
 

Table 3: MSCI Inc. Selected Balance Sheet Items (unaudited)

             
As of
September 30, June 30, December 31,
In thousands       2013   2013 2012
 
Cash and cash equivalents $ 283,750 $ 334,701 $ 183,309
Short-term investments - - 70,898
Accounts receivable, net of allowances 179,920 160,101 153,557
 
Deferred revenue $ 334,094 $ 347,470 $ 308,022
Current maturities of long-term debt 54,130 43,118 43,093
Long-term debt, net of current maturities 753,285 775,072 811,623
 

Table 4: Quarterly Operating Revenues by Product Category and Revenue Type (unaudited)

                   
Three Months Ended

% Change from

September 30,

  September 30,

June 30,

September 30,

June 30,

In thousands       2013 2012 2013

2012

2013

Index and ESG products
Subscriptions $ 92,815 $ 73,894 $ 95,200 25.6 % (2.5 %)
Asset-based fees   36,801   34,042   36,970 8.1 % (0.5 %)
Index and ESG products total 129,616 107,936 132,170 20.1 % (1.9 %)
Risk management analytics 69,666 64,998 67,099 7.2 % 3.8 %
Portfolio management analytics 26,213 29,138 26,089 (10.0 %) 0.5 %
Energy and commodity analytics   3,113   3,317   3,065 (6.2 %) 1.6 %
 
Total Performance and Risk revenues $ 228,608 $ 205,389 $ 228,423 11.3 % 0.1 %
 
Total Governance revenues   29,630   30,055   29,475 (1.4 %) 0.5 %
 
Total operating revenues $ 258,238 $ 235,444 $ 257,898 9.7 % 0.1 %
 
Recurring subscriptions $ 216,905 $ 197,591 $ 213,502 9.8 % 1.6 %
Asset-based fees 36,801 34,042 36,970 8.1 % (0.5 %)
Non-recurring revenue   4,532   3,811   7,426 18.9 % (39.0 %)
Total operating revenues $ 258,238 $ 235,444 $ 257,898 9.7 % 0.1 %
 

Table 5: Nine Months Operating Revenues by Product Category and Revenue Type (unaudited)

           
Nine Months Ended % Change from
September 30,   September 30, September 30,
In thousands       2013 2012   2012
Index and ESG products
Subscriptions $ 272,903 $ 221,362 23.3 %
Asset-based fees   110,286   102,745   7.3 %
Index and ESG products total 383,189 324,107 18.2 %
Risk management analytics 204,039 193,622 5.4 %
Portfolio management analytics 79,948 87,527 (8.7 %)
Energy and commodity analytics
Recurring Energy and commodity analytics 9,324 11,001 (15.2 %)
Correction1   -   (5,203 ) n/m
Net energy and commodity analytics   9,324   5,798   60.8 %
 
Total Performance and Risk revenues $ 676,500 $ 611,054 10.7 %
 
Total Governance revenues   91,545   92,007   (0.5 %)
 
Total operating revenues $ 768,045 $ 703,061   9.2 %
 
Recurring subscriptions $ 639,032 $ 582,330 9.7 %
Asset-based fees 110,286 102,745 7.3 %
Non-recurring revenue   18,727   17,986   4.1 %
Total operating revenues $ 768,045 $ 703,061   9.2 %
 
1 In first quarter 2012, MSCI recorded a non-cash $5.2 million cumulative revenue reduction to correct an error related to energy and commodity analytics revenues previously reported prior to January 1, 2012. MSCI’s previous policy had resulted in the immediate recognition of a substantial portion of the revenue related to a majority of its contracts rather than amortizing that revenue over the life of that contract, which is now the method of recognition.

n/m = not meaningful

 

Table 6: Quarterly Operating Expense Detail (unaudited)

                     
Three Months Ended % Change from
September 30, September 30, June 30, September 30, June 30,
In thousands     2013 2012   2013   2012 2013
Cost of services

Compensation

$ 58,751 $ 50,111 $ 61,768 17.2 % (4.9 %)

Non-recurring stock based compensation

  -   267   -   n/m n/m

Total compensation

$ 58,751 $ 50,378 $ 61,768 16.6 % (4.9 %)

Non-compensation

21,289 16,448 21,734 29.4 % (2.0 %)

Lease exit charge1

  -   1,524   (143 ) n/m n/m

Total non-compensation

  21,289   17,972   21,591   18.5 % (1.4 %)
Total cost of services $ 80,040 $ 68,350 $ 83,359 17.1 % (4.0 %)
 
Selling, general and administrative

Compensation

$ 44,495 $ 42,296 $ 39,890 5.2 % 11.5 %

Non-recurring stock based compensation

  -   359   -   n/m n/m

Total compensation

$ 44,495 $ 42,655 $ 39,890 4.3 % 11.5 %

Non-compensation

20,885 18,515 17,944 12.8 % 16.4 %

Lease exit charge1

  -   1,803   (222 ) n/m n/m

Total non-compensation

  20,885   20,318   17,722   2.8 % 17.8 %
Total selling, general and administrative $ 65,380 $ 62,973 $ 57,612 3.8 % 13.5 %
 
Restructuring costs - - - n/m n/m
Amortization of intangible assets 14,448 15,959 14,509 (9.5 %) (0.4 %)
Depreciation and amortization of property,
equipment and leasehold improvements   5,934   4,633   5,246   28.1 % 13.1 %
Total operating expenses $ 165,802 $ 151,915 $ 160,726   9.1 % 3.2 %
 
               
Compensation $ 103,246 $ 92,407 $ 101,658 11.7 % 1.6 %
Non-recurring stock-based compensation - 626 - n/m n/m
Non-compensation expenses 42,174 34,963 39,678 20.6 % 6.3 %
Lease exit charge1 - 3,327 (365 ) n/m n/m
Restructuring costs - - - n/m n/m
Amortization of intangible assets 14,448 15,959 14,509 (9.5 %) (0.4 %)
Depreciation and amortization of property,
equipment and leasehold improvements   5,934   4,633   5,246   28.1 % 13.1 %
Total operation expenses $ 165,802 $ 151,915 $ 160,726   9.1 % 3.2 %
 

1 Second quarter 2013 and third quarter 2012 included benefits of $0.4 million and charges of $3.3 million, respectively, associated with an occupancy lease exit charge resulting from the consolidation of our New York offices.

n/m = not meaningful

 

Table 7: Nine Months Operating Expense Detail (unaudited)

             
Nine Months Ended % Change from
September 30, September 30, September 30,
In thousands       2013     2012   2012
Cost of services
Compensation $ 181,668 $ 159,152 14.1 %
Non-recurring stock based compensation   -     629   (100.0 %)
Total compensation $ 181,668 $ 159,781 13.7 %
Non-compensation 62,059 52,579 18.0 %
Lease exit charge1   (143 )   1,524   n/m
Total non-compensation   61,916     54,103   14.4 %
Total cost of services $ 243,584 $ 213,884 13.9 %
 
Selling, general and administrative
Compensation $ 130,041 $ 118,813 9.5 %
Non-recurring stock based compensation   -     771   (100.0 %)
Total compensation $ 130,041 $ 119,584 8.7 %
Non-compensation 54,804 54,624 0.3 %
Lease exit charge1   (222 )   1,803   n/m
Total non-compensation   54,582     56,427   (3.3 %)
Total selling, general and administrative $ 184,623 $ 176,011 4.9 %
 
Restructuring costs - (51 ) (100.0 %)
Amortization of intangible assets 43,443 47,877 (9.3 %)
Depreciation and amortization of property,
equipment and leasehold improvements   16,260     13,711   18.6 %
Total operating expenses $ 487,910   $ 451,432   8.1 %
 
           
Compensation $ 311,709 $ 277,965 12.1 %
Non-recurring stock-based compensation - 1,400 (100.0 %)
Non-compensation expenses 116,863 107,203 9.0 %
Lease exit charge1 (365 ) 3,327 n/m
Restructuring costs - (51 ) (100.0 %)
Amortization of intangible assets 43,443 47,877 (9.3 %)
Depreciation and amortization of property,
equipment and leasehold improvements   16,260     13,711   18.6 %
Total operation expenses

 

$ 487,910   $ 451,432   8.1 %
 

1 Nine months ended 2013 and 2012 included benefits of $0.4 million and charges of $3.3 million, respectively, associated with an occupancy lease exit resulting from the consolidation of our New York offices.

n/m = not meaningful

 

Table 8: Summary Quarterly Segment Information (unaudited)

                     
Three Months Ended % Change from
September 30, September 30, June 30, September 30, June 30,
In thousands       2013     2012     2013   2012   2013
 
Revenues:
Performance and Risk $ 228,608 $ 205,389 $ 228,423 11.3 % 0.1 %
Governance   29,630     30,055     29,475   (1.4 %) 0.5 %
Total Operating revenues $ 258,238 $ 235,444 $ 257,898 9.7 % 0.1 %
 
Operating Income:
Performance and Risk 88,172 80,472 93,574 9.6 % (5.8 %)
Margin 38.6 % 39.2 % 41.0 %
Governance 4,264 3,057 3,598 39.5 % 18.5 %
Margin 14.4 % 10.2 % 12.2 %
Total Operating Income $ 92,436 $ 83,529 $ 97,172 10.7 % (4.9 %)
Margin 35.8 % 35.5 % 37.7 %
 
Adjusted EBITDA:
Performance and Risk 104,210 100,362 108,816 3.8 % (4.2 %)
Margin 45.6 % 48.9 % 47.6 %
Governance 8,608 7,712 7,746 11.6 % 11.1 %
Margin 29.1 % 25.7 % 26.3 %
Total Adjusted EBITDA $ 112,818 $ 108,074 $ 116,562 4.4 % (3.2 %)
Margin 43.7 % 45.9 % 45.2 %
 

Table 9: Summary Nine Months Segment Information (unaudited)

             
Nine Months Ended % Change from
September 30, September 30, September 30,
In thousands       2013     2012   2012
 
Revenues:
Performance and Risk $ 676,500 $ 611,054 10.7 %
Governance   91,545     92,007   (0.5 %)
Total Operating revenues $ 768,045 $ 703,061 9.2 %
 
Operating Income:
Performance and Risk 268,445 243,927 10.1 %
Margin 39.7 % 39.9 %
Governance 11,690 7,702 51.8 %
Margin 12.8 % 8.4 %
Total Operating Income $ 280,135 $ 251,629 11.3 %
Margin 36.5 % 35.8 %
 
Adjusted EBITDA:
Performance and Risk 314,980 297,142 6.0 %
Margin 46.6 % 48.6 %
Governance 24,493 20,751 18.0 %
Margin 26.8 % 22.6 %
Total Adjusted EBITDA $ 339,473 $ 317,893 6.8 %
Margin 44.2 % 45.2 %
 

Table 10: Key Operating Metrics (unaudited)

                       
As of % Change from
September 30, September 30, June 30, September 30, June 30,
Dollars in thousands       2013     2012     2013   2012 2013
 
Run Rates1
Index and ESG products
Subscription $ 360,042 $ 292,787 $ 350,833 23.0 % 2.6 %
Asset-based fees   146,979     114,576     131,716   28.3 % 11.6 %
Index and ESG products total 507,021 407,363 482,549 24.5 % 5.1 %
Risk management analytics 288,452 261,776 281,022 10.2 % 2.6 %
Portfolio management analytics 104,938 115,958 104,524 (9.5 %) 0.4 %
Energy and commodity analytics   12,493     14,040     12,794   (11.0 %) (2.4 %)
Total Performance and Risk 912,904 799,137 880,889 14.2 % 3.6 %
 
Governance   112,911     115,840     111,686   (2.5 %) 1.1 %
Total Run Rate $ 1,025,815   $ 914,977   $ 992,575   12.1 % 3.3 %
 
Subscription total $ 878,836 $ 800,401 $ 860,859 9.8 % 2.1 %
Asset-based fees total   146,979     114,576     131,716   28.3 % 11.6 %
Total Run Rate $ 1,025,815   $ 914,977   $ 992,575   12.1 % 3.3 %
 
New Recurring Subscription Sales $ 30,157 $ 27,164 $ 31,133 11.0 % (3.1 %)
Subscription Cancellations   (16,458 )   (19,134 )   (16,082 ) (14.0 %) 2.3 %
Net New Recurring Subscription Sales $ 13,699   $ 8,030   $ 15,051   70.6 % (9.0 %)
Non-recurring sales $ 4,359   $ 3,878   $ 6,664   12.4 % (34.6 %)
 
Employees 3,123 2,416 2,957 29.3 % 5.6 %
% Employees by location
Developed Market Centers 55 % 56 % 56 %
Emerging Market Centers 45 % 44 % 44 %
 
1 The Run Rate at a particular point in time represents the forward-looking revenues for the next 12 months from all subscriptions and investment product licenses we currently provide to our clients under renewable contracts or agreements assuming all contracts or agreements that come up for renewal are renewed and assuming then-current currency exchange rates. For any license where fees are linked to an investment product’s assets or trading volume, the Run Rate calculation reflects an annualization of the most recent periodic fee earned under such license or subscription. The Run Rate for IPD products was approximated using the trailing 12 months of revenues primarily adjusted for estimates for non-recurring sales, new sales and cancellations. The Run Rate does not include fees associated with “one-time” and other non-recurring transactions. In addition, we remove from the Run Rate the fees associated with any subscription or investment product license agreement with respect to which we have received a notice of termination or non-renewal during the period and determined that such notice evidences the client’s final decision to terminate or not renew the applicable subscription or agreement, even though such notice is not effective until a later date.
 

Table 11: ETF Assets Linked to MSCI Indices1 (unaudited)

             
Three Months Ended 2012 Three Months Ended 2013 Nine Months Ended
In Billions     March     June     September     December March     June     September September 2012     September 2013
                       
Beginning Period AUM in ETFs linked to MSCI Indices $ 301.6 $ 354.7 $ 327.4 $ 363.7 $ 402.3 $ 357.3 $ 269.7 $ 301.6 $ 402.3
Cash Inflow/Outflow2 15.2 0.3 15.2 25.9 (61.0 ) (74.4 ) 12.7 30.7 (122.7 )
Appreciation/Depreciation   37.9       (27.6 )       21.1       12.7   16.0         (13.2 )       20.2   31.4       23.0  

Period End AUM in ETFs linked to

MSCI Indices

$ 354.7 $ 327.4 $ 363.7 $ 402.3 $ 357.3 $ 269.7 $ 302.6 $ 363.7 $ 302.6
 

Period Average AUM in ETFs linked to

MSCI Indices

$ 341.0 $ 331.6 $ 344.7 $ 376.6 $ 369.0 $ 324.1 $ 286.2 $ 339.2 $ 326.4
 
1 ETF assets under management calculation methodology is ETF net asset value multiplied by shares outstanding. Source: Bloomberg and MSCI

2 Cash Inflow/Outflow for the first and second quarter of 2013 includes the migration of $82.8 billion of AUM in 9 Vanguard ETFs and $74.8 billion of AUM in 13 Vanguard ETFs, respectively, that transitioned to other indices during each quarter.

 

Table 12: Supplemental Operating Metrics (unaudited)

                                     
Sales & Cancellations
Three Months Ended 2012 Three Months Ended 2013 Nine Months Ended
In thousands     March     June     September     December March     June     September September 2012     September 2013
New Recurring Subscription Sales $ 33,506 $ 28,453 $ 27,164 $ 29,742 $ 30,928 $ 31,133 $ 30,157 $ 89,123 $ 92,218
Subscription Cancellations   (13,498 )       (17,229 )       (19,134 )       (28,725 )   (16,691 )       (16,082 )       (16,458 )   (49,861 )       (49,231 )
Net New Recurring Subscription Sales $ 20,008       $ 11,224       $ 8,030       $ 1,017   $ 14,237       $ 15,051       $ 13,699   $ 39,262       $ 42,987  
 
Non-recurring sales   9,338         5,099         3,878         7,443     8,935         6,664         4,359     18,315         19,958  
Total Sales $ 42,844       $ 33,552       $ 31,042       $ 37,185   $ 39,863       $ 37,797       $ 34,516   $ 107,438       $ 112,176  
 
 
Aggregate & Core Retention Rates
Three Months Ended 2012 Three Months Ended 2013 Nine Months Ended
      March     June     September     December March     June     September September 2012     September 2013
Aggregate Retention Rate1
Index and ESG products 94.5 % 94.9 % 94.0 % 90.4 % 95.0 % 94.0 % 94.7 % 94.4 % 94.6 %
Risk management analytics 93.9 % 90.0 % 88.5 % 84.4 % 93.5 % 92.5 % 92.3 % 90.7 % 92.8 %
Portfolio management analytics 91.9 % 84.2 % 84.9 % 78.0 % 81.7 % 87.0 % 89.1 % 87.0 % 85.9 %
Energy & commodity analytics 90.2 % 85.5 % 76.6 % 60.4 % 90.1 % 86.0 % 80.2 % 84.1 % 85.4 %
 
Total Performance and Risk 93.7 % 90.9 % 89.8 % 85.2 % 92.4 % 92.3 % 92.7 % 91.4 % 92.4 %
 
Total Governance   88.7 %       92.1 %       91.1 %       83.6 %   90.0 %       92.9 %       88.5 %   90.7 %       90.5 %
 
Total Aggregate Retention Rate   93.0 %       91.0 %       90.0 %       84.9 %   92.1 %       92.3 %       92.2 %   91.3 %       92.2 %
 
Core Retention Rate1
Index and ESG products 94.6 % 95.0 % 94.0 % 90.5 % 95.0 % 94.1 % 94.8 % 94.5 % 94.7 %
Risk management analytics 94.0 % 92.0 % 89.3 % 84.4 % 93.9 % 93.1 % 92.3 % 91.6 % 93.1 %
Portfolio management analytics 92.2 % 87.0 % 86.5 % 83.6 % 82.8 % 87.5 % 90.3 % 88.5 % 86.9 %
Energy & commodity analytics 90.7 % 85.5 % 77.1 % 60.4 % 90.1 % 86.0 % 80.2 % 84.4 % 85.4 %
 
Total Performance and Risk 93.8 % 92.2 % 90.5 % 86.2 % 92.7 % 92.6 % 92.9 % 92.1 % 92.7 %
 
Total Governance   88.7 %       92.2 %       91.2 %       83.8 %   90.2 %       92.9 %       88.5 %   90.7 %       90.5 %
 
Total Core Retention Rate   93.1 %       92.2 %       90.6 %       85.9 %   92.4 %       92.6 %       92.4 %   91.9 %       92.5 %
 

1 The Aggregate Retention Rates are calculated by annualizing the cancellations for which we have received a notice of termination or non-renewal during the quarter and we have determined that such notice evidences the client’s final decision to terminate or not renew the applicable subscription or agreement, even though such notice is not effective until a later date. This annualized cancellation figure is then divided by the subscription Run Rate at the beginning of the year to calculate a cancellation rate. This cancellation rate is then subtracted from 100% to derive the annualized Retention Rate for the quarter. The Aggregate Retention Rate is computed on a product-by-product basis. Therefore, if a client reduces the number of products to which it subscribes or switches between our products, we treat it as a cancellation. In addition, we treat any reduction in fees resulting from renegotiated contracts as a cancellation in the calculation to the extent of the reduction. For the calculation of the Core Retention Rates the same methodology is used except the amount of cancellations in the quarter is reduced by the amount of product swaps.

 

Table 13: Reconciliation of Adjusted EBITDA to Net Income (unaudited)

                             
Three Months Ended September 30, 2013 Three Months Ended September 30, 2012
In thousands    

Performance
and Risk

    Governance     Total

Performance
and Risk

    Governance     Total
Net Income $ 55,310 $ 48,274
Plus: Provision for income taxes 30,937 27,320
Plus: Other expense (income), net               6,189                 7,935  
Operating income $ 88,172       $ 4,264       $ 92,436   $ 80,472       $ 3,057       $ 83,529  
Plus: Non-recurring stock-based compensation - - - 572 54 626

Plus:

Depreciation and amortization of property, equipment and leasehold improvements

4,845 1,089 5,934 3,755 878 4,633
Plus: Amortization of intangible assets 11,193 3,255 14,448 12,638 3,321 15,959
Plus: Lease exit charge - - - 2,925 402 3,327
Plus: Restructuring costs   -         -         -     -         -         -  
Adjusted EBITDA $ 104,210       $ 8,608       $ 112,818   $ 100,362       $ 7,712       $ 108,074  
 
 
 
Nine Months Ended September 30, 2013 Nine Months Ended September 30, 2012
In thousands    

Performance
and Risk

    Governance     Total

Performance
and Risk

    Governance     Total
Net Income $ 175,300 $ 129,786
Plus: Provision for income taxes 85,757 71,308
Plus: Other expense (income), net               19,078                 50,535  
Operating income $ 268,445       $ 11,690       $ 280,135   $ 243,927       $ 7,702       $ 251,629  
Plus: Non-recurring stock-based compensation - - - 1,269 131 1,400

Plus:

Depreciation and amortization of property, equipment and leasehold improvements

13,263 2,997 16,260 11,137 2,574 13,711
Plus: Amortization of intangible assets 33,580 9,863 43,443 37,916 9,961 47,877
Plus: Lease exit charge (308 ) (57 ) (365 ) 2,925 402 3,327
Plus: Restructuring costs   -         -         -     (32 )       (19 )       (51 )
Adjusted EBITDA $ 314,980       $ 24,493       $ 339,473   $ 297,142       $ 20,751       $ 317,893  
 

Table 14: Reconciliation of Adjusted Net Income and Adjusted EPS to Net Income and EPS (unaudited)

                 
Three Months Ended Nine Months Ended
September 30,     September 30, June 30, September 30,     September 30,
In thousands, except per share data       2013     2012     2013     2013     2012  
Net Income $ 55,310 $ 48,274 $ 61,053 $ 175,300 $ 129,786
Plus: Non-recurring stock-based compensation - 626 - - 1,400
Plus: Amortization of intangible assets 14,448 15,959 14,509 43,443 47,877
Plus: Debt repayment and refinancing expenses - - - - 20,639
Plus: Lease exit charge - 3,327 (365 ) (365 ) 3,327
Plus: Restructuring costs - - - - (51 )
Less: Income tax effect (5,172 ) (7,280 ) (4,711 ) (14,151 ) (25,954 )
         
Adjusted net income $ 64,586   $ 60,906   $ 70,486   $ 204,227   $ 177,024  
 
Diluted EPS $ 0.46 $ 0.39 $ 0.50 $ 1.44 $ 1.05
Plus: Non-recurring stock-based compensation - 0.01 - - 0.01
Plus: Amortization of intangible assets 0.12 0.13 0.12 0.36 0.39
Plus: Debt repayment and refinancing expenses - - - - 0.17
Plus: Lease exit charge - 0.03 - - 0.03
Plus: Restructuring costs - - - - -
Less: Income tax effect   (0.05 )   (0.07 )   (0.04 )   (0.12 )   (0.22 )
Adjusted EPS $ 0.53   $ 0.49   $ 0.58   $ 1.68   $ 1.43  

MSCI Inc.:
W. Edings Thibault, MSCI, New York +1-212-804-5273
or
Media Inquiries:
Jo Morgan, MSCI, London +44.20.7618.2224
W. Edings Thibault, MSCI, New York +1-212-804-5273
Sally Todd | Christian Pickel, MHP Communications, London +44.20.3128.8100

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