MSCI : Q1 2021 Earnings Release

PRESS RELEASE

MSCI Reports Financial Results for

First Quarter 2021

New York - April 27, 2021 - MSCI Inc. ("MSCI" or the "Company") (NYSE: MSCI), a leading provider of critical decision support tools and services for the global investment community, today announced its financial results for the three months ended March 31, 2021 ("first quarter 2021").

Financial and Operational Highlights for First Quarter 2021

(Note: Unless otherwise noted, percentage and other changes are relative to the three months ended March 31, 2020 ("first quarter 2020") and Run Rate percentage changes are relative to March 31, 2020).

• Operating revenues of $478.4 million, up 14.8%
• Recurring subscription revenues up 10.9%; Asset-based fees up 26.5%
• Operating margin of 53.2%; Adjusted EBITDA margin of 57.8%
• Diluted EPS of $2.36, up 36.4%; Adjusted EPS of $2.46, up 29.5%
• New recurring subscription sales growth of 20.7%; Organic subscription Run Rate growth of 10.3%; Retention Rate of 96.3%
• Repurchased 329,508 shares at an average price of $407.70 per share for a total value of $134.3 million
• Paid $64.6 million in dividends to shareholders; Cash dividend of $0.78 per share declared by MSCI Board of Directors for second quarter 2021

		Three Months Ended
In thousands,		Mar. 31,		Mar. 31,
except per share data (unaudited)		2021		2020	% Change
Operating revenues	$	478,423	$	416,780	14.8%
Operating income	$	254,375	$	207,884	22.4%
Operating margin %		53.2%		49.9%
Net income	$	196,819	$	148,125	32.9%
Diluted EPS	$	2.36	$	1.73	36.4%
Adjusted EPS	$	2.46	$	1.90	29.5%
Adjusted EBITDA	$	276,586	$	229,227	20.7%
Adjusted EBITDA margin %		57.8%		55.0%

"In the first quarter of 2021, we reported 11.1% subscription run rate growth and 26.5% asset-based fee growth, fundamental indicators of the long-term health of the MSCI franchise. Combined with impressive quarterly revenues and Adjusted EPS, we are beginning the year with a strong financial foundation that positions us well to execute on the 'Triple Crown' investments that we shared at our 2021 Investor Day in February," said Henry A. Fernandez, Chairman and CEO of MSCI.

"Our focus remains on supporting the investment process needs of our clients with highly differentiated solutions enabled by best-in-class capabilities. We have a strong conviction in our ability to drive innovation in the investment industry and sustain our track record of growth and compounding shareholder value," added Mr. Fernandez.

First Quarter Consolidated Results

Operating Revenues: Operating revenues were $478.4 million, up 14.8%. The $61.6 million increase

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was comprised of $33.3 million in higher recurring subscription revenues and $26.5 million in higher asset-based fees, as well as $1.8 million in higher non-recurring revenues.

Run Rate and Retention Rate: Total Run Rate at March 31, 2021 was $1,899.0 million, up 18.4%. The $294.8 million increase was driven by a $155.0 million increase in asset-based fees Run Rate and a $139.8 million increase in recurring subscription Run Rate. Organic subscription Run Rate growth was 10.3%. Retention Rate in first quarter 2021 was 96.3%, compared to 95.0% in first quarter 2020.

Expenses: Total operating expenses were $224.0 million, up 7.3%. Adjusted EBITDA expenses were $201.8 million, up 7.6%, reflecting higher compensation and benefits expense, as well as technology investments, partially offset by lower travel and entertainment expense. Total operating expenses excluding the impact of foreign currency exchange rate fluctuations ("ex-FX") and adjusted EBITDA expenses ex-FX increased 5.4% and 5.6%, respectively.

Headcount: As of March 31, 2021, headcount was 3,728 employees, with approximately 35% and approximately 65% of employees located in developed market and emerging market locations, respectively.

Other Expense (Income), Net: Other expense (income), net was $38.3 million, down 14.9%. The lower net expense primarily reflected the absence of debt extinguishment costs that resulted from a notes redemption in first quarter 2020.

Income Taxes:The effective tax rate was 8.9% in first quarter 2021 compared to 9.0% in first quarter 2020. The lower effective tax rate was driven by the level and jurisdictional mix of earnings as well as the favorable impact of final regulations released during the third quarter 2020 clarifying certain provisions in the Tax Cuts and Jobs Act that was enacted on December 22, 2017 ("Tax Reform"). In addition, both periods reflected significant discrete income tax benefits, primarily related to the vesting of annual equity awards.

Net Income: As a result of the factors described above, net income was $196.8 million, up 32.9%.

Adjusted EBITDA: Adjusted EBITDA was $276.6 million, up 20.7%. Adjusted EBITDA margin in first quarter 2021 was 57.8%, compared to 55.0% in first quarter 2020.

Index Segment:

Table 1A: Results (unaudited)

		Three Months Ended
	Mar. 31,		Mar. 31,
In thousands	2021		2020	% Change
Operating revenues:
Recurring subscriptions	$155,117		$139,840	10.9%
Asset-based fees	126,706		100,196	26.5%
Non-recurring	10,668		9,220	15.7%
Total operating revenues	292,491		249,256	17.3%
Adjusted EBITDA expenses	72,612		65,669	10.6%
Adjusted EBITDA	$219,879		$183,587	19.8%
Adjusted EBITDA margin %	75.2%		73.7%

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Index operating revenues were $292.5 million, up 17.3%. The $43.2 million increase was primarily driven by $26.5 million in higher asset-based fees and $15.3 million in higher recurring subscription revenues.

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

Growth in asset-based fees primarily reflected an increase in revenues from exchange traded funds ("ETFs") linked to MSCI equity indexes. This increase was in turn driven by a 33.3% increase in average AUM in ETFs linked to MSCI equity indexes, partially offset by a change in fee levels of certain products. Non-ETF indexed funds linked to MSCI equity indexes and exchange traded futures & options contracts linked to MSCI equity indexes also contributed to the increase in revenues.

Index Run Rate as of March 31, 2021 was $1.1 billion, up 23.4%. The $215.4 million increase was comprised of a $155.0 million increase in asset-based fees Run Rate and a $60.4 million increase in recurring subscription Run Rate. The increase in recurring subscription Run Rate was primarily driven by growth in market cap-weighted index products and reflected growth across all regions and all client segments. The increase in asset-based fees Run Rate was primarily driven by higher AUM in ETFs linked to MSCI equity indexes.

Analytics Segment:

Table 1B: Results (unaudited)

		Three Months Ended
	Mar. 31,		Mar. 31,
In thousands	2021		2020	% Change
Operating revenues:
Recurring subscriptions	$131,672		$124,065	6.1%
Non-recurring	2,345		1,443	62.5%
Total operating revenues	134,017		125,508	6.8%
Adjusted EBITDA expenses	88,286		89,191	(1.0%)
Adjusted EBITDA	$45,731		$36,317	25.9%
Adjusted EBITDA margin %	34.1%		28.9%

Analytics operating revenues were $134.0 million, up 6.8%. The $8.5 million increase was driven by higher recurring subscription revenues, predominantly from Multi-Asset Class Analytics products.

Analytics Run Rate as of March 31, 2021 was $557.0 million, up 5.4%. The increase of $28.6 million was driven by growth in both Multi-Asset Class and Equity Analytics products. Analytics organic Run Rate growth was 4.7%.

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ESG and Climate Segment:

Table 1C: Results (unaudited)

		Three Months Ended
	Mar. 31,		Mar. 31,
In thousands	2021		2020	% Change
Operating revenues:
Recurring subscriptions	$34,140		$24,901	37.1%
Non-recurring	610		332	83.7%
Total operating revenues	34,750		25,233	37.7%
Adjusted EBITDA expenses	29,705		21,607	37.5%
Adjusted EBITDA	$5,045		$3,626	39.1%
Adjusted EBITDA margin %	14.5%		14.4%

ESG and Climate operating revenues were $34.8 million, up 37.7%. The $9.5 million increase was primarily driven by strong growth from Ratings products, including Climate products. ESG and Climate organic operating revenue growth was 31.8%.

ESG and Climate Run Rate as of March 31, 2021 was $147.3 million, up 42.0%. The $43.6 million increase reflects strong growth across both Ratings and Climate products. ESG and Climate organic Run Rate growth was 38.8%.

All Other - Private Assets Segment:

Table 1D: Results (unaudited)

		Three Months Ended
	Mar. 31,		Mar. 31,
In thousands	2021		2020	% Change
Operating revenues:
Recurring subscriptions	$16,803		$15,619	7.6%
Non-recurring	362		1,164	(68.9%)
Total operating revenues	17,165		16,783	2.3%
Adjusted EBITDA expenses	11,234		11,086	1.3%
Adjusted EBITDA	$5,931		$5,697	4.1%
Adjusted EBITDA margin %	34.6%		33.9%

All Other - Private Assets operating revenues, which is reflective of the Real Estate operating segment, were $17.2 million, up 2.3%, primarily reflecting favorable foreign currency exchange rate fluctuations, partially offset by the absence of a previously disclosed one-time data license fee in first quarter 2020.

All Other - Private Assets Run Rate, which is reflective of the Real Estate operating segment, as of March 31, 2021 was $56.9 million, up 14.6%. The $7.2 million increase primarily reflected strong growth in both Enterprise Analytics and Global Intel products and growth from new sales of Real Estate Climate Value-at-Risk products. All Other - Private Assets organic subscription Run Rate growth was 7.4%.

Select Balance Sheet Items and Capital Allocation

Cash Balances and Outstanding Debt: Cash and cash equivalents was $1.7 billion as of March 31, 2021 and included the proceeds from the issuance of $500.0 million aggregate principal amount of 3.625% senior unsecured notes due 2030 completed on March 26, 2021 (the "2030 Senior Notes"). On April 12, 2021, the Company used the proceeds from the 2030 Senior Notes, together with available

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cash, for the pre-maturity redemption of all $500.0 million aggregate principal amount outstanding of its 4.750% senior unsecured notes due 2026 (the "April Notes Redemption"), which is expected to result in redemption charges of approximately $21.8 million in the second quarter 2021. MSCI typically seeks to maintain minimum cash balances globally of approximately $200.0 million to $250.0 million for general operating purposes.

Total outstanding debt, including the current portion of long-term debt, as of March 31, 2021 was $3.9 billion. The total debt to net income ratio (based on trailing twelve months net income) was 5.9x. The total debt to adjusted EBITDA ratio (based on trailing twelve months adjusted EBITDA) was 3.8x.

Taking the April Notes Redemption into account, the total debt to net income ratio (based on trailing twelve months net income) would be 5.2x, and the total debt to adjusted EBITDA ratio (based on trailing twelve months adjusted EBITDA) would be 3.3x.

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

Capex and Cash Flow: Capex was $10.4 million. Cash provided by operating activities was $215.5 million, up 91.1% primarily reflecting higher collections. Free cash flow was $205.1 million, up 101.2%.

Share Count and Share Repurchases: Weighted average diluted shares outstanding were 83.5 million in first quarter 2021, down 2.4% year-over-year. During first quarter 2021, a total of 329,508 shares were repurchased at an average price of $407.70 per share for a total value of $134.3 million. A total of $1.6 billion of outstanding share repurchase authorization remains as of April 23, 2021. Total shares outstanding as of March 31, 2021 were 82.4 million.

Dividends: Approximately $64.6 million in dividends were paid to shareholders in first quarter 2021. On April 26, 2021, the MSCI Board of Directors declared a cash dividend of $0.78 per share for second quarter 2021, payable on May 28, 2021 to shareholders of record as of the close of trading on May 14, 2021.

Full-Year 2021 Guidance

MSCI's guidance for the year ending December 31, 2021 ("Full-Year 2021") is based on assumptions about a number of macroeconomic and capital market factors, in particular related to equity markets. These assumptions are subject to uncertainty, and actual results for the year could differ materially from our current guidance, including as a result of ongoing uncertainty related to the duration, magnitude and impact of the COVID-19 pandemic.

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