NEW YORK--(BUSINESS WIRE)--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, 2012.
(Note: Percentage changes are referenced to the comparable period in 2011, unless otherwise noted.)
- Operating revenues increased 4.6% to $235.4 million in third quarter 2012 and 4.2% to $703.1 million for nine months 2012.
- Net income declined by 3.0% to $48.3 million in third quarter 2012. Net income grew 0.6% to $129.8 million for nine months 2012.
- Adjusted EBITDA (defined below) grew by 4.3% to $108.1 million in third quarter 2012 despite the impact of higher severance expenses. For nine months 2012, Adjusted EBITDA grew by 0.9% to $317.9 million. Third quarter 2012 Adjusted EBITDA margin declined slightly to 45.9% from 46.0% and nine months 2012 Adjusted EBITDA margin fell to 45.2% from 46.7%.
- Diluted EPS for third quarter 2012 fell 2.5% to $0.39 and nine months 2012 Diluted EPS was unchanged at $1.05.
- Third quarter 2012 Adjusted EPS (defined below) was unchanged at $0.49. Nine months 2012 Adjusted EPS rose 2.9% to $1.43.
Henry A. Fernandez, Chairman and CEO, said, “MSCI continued to grow its subscription revenues and run rate during the third quarter of 2012, despite volatile financial markets. I am especially pleased that our index and ESG run rate grew by 6% year-over-year, even after taking into account the impact of the Vanguard announcement. The growth of index and ESG run rate is an indication of the value that we provide to global investors. Our governance revenues grew by 4%, reflecting the recent positive momentum we are seeing in that business.
“We are confident in the long-term secular trends driving our growth and are focused on how we can best position MSCI to capture these opportunities,” added Mr. Fernandez.
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 | 2012 | 2011 | 2011 | 2012 | 2011 | 2011 | |||||||||||||||||
| Operating revenues | $ | 235,444 | $ | 225,026 | 4.6 | % | $ | 703,061 | $ | 674,807 | 4.2 | % | |||||||||||
| Operating expenses | 151,915 | 142,781 | 6.4 | % | 451,432 | 434,442 | 3.9 | % | |||||||||||||||
| Net income | 48,274 | 49,787 | (3.0 | %) | 129,786 | 128,968 | 0.6 | % | |||||||||||||||
| % Margin | 20.5 | % | 22.1 | % | 18.5 | % | 19.1 | % | |||||||||||||||
| Diluted EPS | $ | 0.39 | $ | 0.40 | (2.5 | %) | $ | 1.05 | $ | 1.05 | 0.0 | % | |||||||||||
| Adjusted EPS1 | $ | 0.49 | $ | 0.49 | 0.0 | % | $ | 1.43 | $ | 1.39 | 2.9 | % | |||||||||||
| Adjusted EBITDA2 | $ | 108,074 | $ | 103,624 | 4.3 | % | $ | 317,893 | $ | 315,093 | 0.9 | % | |||||||||||
| % Margin | 45.9 | % | 46.0 | % | 45.2 | % | 46.7 | % | |||||||||||||||
| 1 Per share net income before after-tax impact of amortization of intangibles, non-recurring stock-based compensation, restructuring costs, debt repayment, refinancing expenses, and the lease exit charge. 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.” |
|
2 Net Income before income taxes, other net expense and income, depreciation, amortization, non-recurring stock-based compensation, restructuring costs, and the lease exit charge. 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.” |
Summary of Results for Third Quarter 2012 compared to Third Quarter 2011
Operating Revenues – See Table 4
Total operating revenues for the three months ended September 30, 2012 (third quarter 2012) increased $10.4 million, or 4.6%, to $235.4 million compared to $225.0 million for the three months ended September 30, 2011 (third quarter 2011). Total third quarter 2012 subscription revenues rose $13.9 million, or 7.5%, to $197.6 million while asset-based fees declined $1.0 million, or 2.8%, to $34.0 million.
Non-recurring revenues fell $2.5 million to $3.8 million. The decline in non-recurring revenues was driven by a decline in index derivative license revenues as well as a decline in non-recurring governance revenues.
Performance and Risk segment revenues rose $9.2 million, or 4.7%, to $205.4 million, primarily driven by growth in index and environmental, social and governance (“ESG”) products, and risk management analytics.
- Index and ESG products: Index and ESG products revenues increased $6.6 million, or 6.5%, to $107.9 million. Subscription revenues grew by $7.6 million, or 11.5%, to $73.9 million, driven by growth in revenues from MSCI’s ACWI (All Country World Index) core and other index modules as well as higher usage fees, offset, in part, by a $1.4 million decline in non-recurring subscription revenues.
Revenues attributable to equity index asset-based fees declined $1.0 million, or 2.8%, to $34.0 million largely as a result of a change in the mix of funds linked to our indices that more than offset the impact of higher assets under management. The average assets under management in ETFs linked to MSCI indices increased 4.7% to $344.7 billion from $329.1 billion in third quarter 2011.
- Risk management analytics: Revenues related to risk management analytics increased $3.1 million, or 5.1%, to $65.0 million. The increase in risk management analytics revenues was driven by higher revenues from our primary risk management platforms, RiskManager and BarraOne.
- Portfolio management analytics: Revenues related to portfolio management analytics declined $1.1 million, or 3.7%, to $29.1 million.
- Energy and commodity analytics: Revenues from energy and commodity analytics were $3.3 million, up $0.5 million, or 18.6%, from third quarter 2011. At the beginning of 2012, we corrected an error in our revenue recognition policy for our energy and commodity analytics products. The correction resulted in a greater proportion of annual revenue being recognized in third quarter 2012 than in third quarter 2011.
Governance segment revenues rose $1.3 million, or 4.4%, to $30.1 million in third quarter 2012, driven by higher revenues from our compensation data and analytic products and a higher renewal rate.
Operating Expenses – See Table 6
Total operating expenses rose $9.1 million, or 6.4%, to $151.9 million, primarily driven by higher compensation costs and a lease exit charge.
Compensation costs: Total compensation costs rose $6.8 million, or 7.8%, to $93.0 million in third quarter 2012. Excluding non-recurring stock-based compensation expense, total compensation costs rose $7.4 million, or 8.7%, to $92.4 million. Compensation costs were impacted by an increase in average headcount and by higher severance costs, which rose $3.7 million to $4.1 million.
Non-compensation costs excluding the lease exit charge, depreciation and amortization, and restructuring costs: Non-compensation operating expenses excluding the lease exit charge, depreciation and amortization, and restructuring costs declined $1.5 million, or 4.0%, to $35.0 million in third quarter 2012. The biggest drivers of the decline were lower travel and entertainment expenses, recruiting fees, and market data costs, partially offset by higher occupancy costs.
Lease exit charge: The third quarter 2012 included $3.3 million associated with a lease exit charge resulting from the consolidation of our New York offices.
Depreciation and amortization: Amortization of intangibles expense totaled $16.0 million compared to $16.4 million in third quarter 2011, a decline of 2.8%. Depreciation and amortization of property, plant and equipment was flat at $4.6 million.
Other Expense (Income), Net
Other expense (income), net for third quarter 2012 was $7.9 million, a decline of $4.0 million from third quarter 2011. Interest expense fell by $5.8 million to $7.3 million as a result of lower levels of indebtedness and lower interest rates following our second quarter 2012 refinancing.
Provision for Income Taxes
Income tax expense was $27.3 million in third quarter 2012, an increase of $6.8 million, or 33.2%, from third quarter 2011. The effective tax rate in third quarter 2012 was 36.1%. Third quarter 2011 income tax expense was impacted by $4.2 million of certain non-recurring benefits relating to prior tax periods, which resulted in an effective rate of 29.2%.
Net Income and Earnings per Share – See Table 14
Net income declined $1.5 million, or 3.0%, to $48.3 million for third quarter 2012. The net income margin fell to 20.5% from 22.1% as a result of the lower operating profit margin and higher tax rate. Diluted EPS declined by one cent, or 2.5%, to $0.39.
Adjusted net income, which excludes the after-tax impact of the lease exit charge, amortization of intangibles, non-recurring stock-based compensation expense, restructuring costs and debt repayment and refinancing expenses totaling $12.6 million, was flat at $60.9 million. Adjusted EPS, which excludes the after-tax, per share impact of the lease exit charge, amortization of intangibles, non-recurring stock-based compensation expense, restructuring costs and debt repayment and refinancing expenses totaling $0.10, was unchanged at $0.49.
See Table 14 titled “Reconciliation of Adjusted Net Income and Adjusted EPS to Net Income and EPS” 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, restructuring costs, and the lease exit charge, was $108.1 million, up $4.5 million, or 4.3%, from third quarter 2011. The Adjusted EBITDA margin declined to 45.9% from 46.0%.
By segment, Adjusted EBITDA for the Performance and Risk segment increased $4.4 million, or 4.6%, to $100.4 million in third quarter 2012. The Adjusted EBITDA margin for this segment was unchanged at 48.9%. Adjusted EBITDA for the Governance segment increased $0.1 million, or 1.0%, to $7.7 million and the Adjusted EBITDA margin for this segment fell to 25.7% from 26.5%.
See Table 13 titled “Reconciliation of Adjusted EBITDA to Net Income” and “Notes Regarding the Use of Non-GAAP Financial Measures” below.
Summary of Results for Nine Months Ended September 30, 2012 compared to Nine Months Ended September 30, 2011
Operating Revenues – See Table 5
Total operating revenues for the nine months ended September 30, 2012 (nine months 2012) increased $28.3 million, or 4.2%, to $703.1 million compared to $674.8 million for the nine months ended September 30, 2011 (nine months 2011). Total subscription revenues rose $39.6 million, or 7.3%, to $582.3 million, while asset-based fees declined $2.2 million, or 2.1%, to $102.7 million. Total non-recurring revenues fell $9.2 million, or 33.8%, to $18.0 million.
Index and ESG products and risk management analytics revenues grew 6.6% and 6.7%, respectively, in nine months 2012. Portfolio management analytics declined 1.4% and governance revenues rose 1.1%. Energy and other commodity analytics revenues fell 39.7%, primarily as a result of a $5.2 million non-cash cumulative revenue reduction in first quarter 2012 to correct an error.
By segment, Performance and Risk revenues rose $27.3 million, or 4.7%, to $611.1 million for nine months 2012. Governance revenues rose $1.0 million, or 1.1%, to $92.0 million.
Operating Expenses – See Table 7
Total operating expenses increased $17.0 million, or 3.9%, to $451.4 million in nine months 2012 compared to nine months 2011, primarily driven by higher compensation costs and the lease exit charge, partially offset by lower depreciation, amortization, and restructuring expenses. Excluding non-recurring stock-based compensation, compensation expenses were up $24.6 million, or 9.7%. Compensation costs were impacted by an increase in average headcount and by higher severance costs, which rose $7.8 million to $8.4 million. Non-compensation expenses costs excluding the lease exit charge, depreciation and amortization, and restructuring costs rose by $0.9 million, or 0.8%, to $107.2 million, mostly as a result of higher occupancy costs. Restructuring costs declined by $3.5 million. Depreciation and amortization expenses declined by $2.9 million, or 4.5%.
Other Expense (Income), Net
Other expense (income), net for nine months 2012 was $50.5 million, an increase of $3.5 million from nine months 2011. Other expense (income), net includes debt repayment and refinancing expenses of $20.6 million in nine months 2012 and $6.4 million in nine months 2011. Excluding the change in debt repayment and refinancing expenses, other expense declined by $10.7 million in nine months 2012 as a result of a combination of lower levels of indebtedness and a lower interest rates.
Provision for Income Taxes
The provision for income tax expense was $71.3 million in nine months 2012, up $7.0 million, or 10.9% from nine months 2011. The effective tax rate was 35.5% in nine months 2012, up from 33.3% in nine months 2011. Nine months 2011 income tax expense was impacted by $4.2 million of certain non-recurring benefits relating to prior tax periods.
Net Income and Earnings per Share – See Table 14
Net income was essentially flat at $129.8 million. The net income margin decreased to 18.5% from 19.1%. Diluted EPS was unchanged at $1.05.
Adjusted net income rose $5.3 million, or 3.1%, to $177.0 million. Adjusted EPS rose 2.9% to $1.43 in nine months 2012.
See table 14 titled “Reconciliation of Adjusted Net Income and Adjusted EPS to Net Income and EPS” 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, restructuring costs, and the lease exit charge, was $317.9 million, up $2.8 million, or 0.9%, from nine months 2011. Adjusted EBITDA margin fell to 45.2% from 46.7%.
By segment, Adjusted EBITDA for the Performance and Risk segment increased $6.6 million, or 2.3%, to $297.1 million from nine months 2011. The Adjusted EBITDA margin for the Performance and Risk segment declined to 48.6% from 49.8% in nine months 2011. Adjusted EBITDA for the Governance segment declined $3.8 million, or 15.6%, to $20.8 million in nine months 2012. The Adjusted EBITDA margin for the Governance segment was 22.6%, down from 27.0% in nine months 2011.
See Table 13 titled “Reconciliation of Adjusted EBITDA to Net Income” and “Notes Regarding the Use of Non-GAAP Financial Measures” below.
Key Operating Metrics – See Tables 10, 11, 12
Total run rate grew by $38.8 million, or 4.4%, to $915.0 million as of September 30, 2012 versus September 30, 2011. Subscription run rate, which excludes the impact of asset-based fees, grew by $42.2 million, or 5.6%, to $800.4 million. Asset-based fee run rate declined by $3.4 million, or 2.8%, to $114.6 million. The decline in asset-based fee run rate was driven by the decision by Vanguard to switch the indices for 22 of its ETFs, the impact of which lowered run rate by $24.4 million at September 30, 2012. Excluding the impact of the Vanguard indices being switched, total run rate grew by $55.9 million, or 6.5%, and asset-based fee run rate grew by $13.7 million, or 13.6%.
At the end of third quarter 2012, assets under management (“AUM”) in ETFs linked to MSCI indices were $363.7 billion, up $73.6 billion, or 25.4%, from the end of third quarter 2011 and up $36.3 billion, or 11.1%, from the end of second quarter 2012. Excluding AUM in Vanguard ETFs due to be switched, AUM in MSCI-linked ETFs was $232.5 billion, up from $198.1 billion at the end of third quarter 2011 and $210.1 billion as of June 30, 2012. ETFs linked to MSCI indices attracted net inflows of $15.2 billion in third quarter 2012, including $7.6 billion in the Vanguard ETFs.
As of September 30, 2012, 39.4% of assets under management in ETFs linked to MSCI indices were linked to emerging markets indices, 32.5% were linked to other developed markets outside the United States, 25.0% were linked to U.S. market indices and 3.1% were linked to other global indices.
Acquisition of IPD Group
On October 31, 2012, MSCI announced that its subsidiary, MSCI Limited, entered into a definitive agreement to acquire IPD Group Limited ("IPD"), a holding company for the IPD Group, for a purchase price1 of approximately $125 million1 (£78 million), funded through existing cash. IPD is a leading provider of real estate investment performance benchmarking, performance analysis, market indices, risk management tools and market research to the owners, institutional investors, managers, lenders on, and occupiers of, real estate. For the year ended December 31, 2011 and the six month period ended June 30, 2012, IPD had U.S. dollar equivalent revenues2 of $47.7 million2 (£29.7 million) and $26.4 million2 (£16.7 million), respectively. The acquisition is not expected to have a material impact on MSCI’s results of operations in fiscal year 2012. The transaction is subject to customary closing conditions for transactions of this nature and is expected to close during the fourth quarter of 2012.
1 Purchase price shown in U.S. dollars assumes a GBP / USD exchange rate of 1.60. Purchase price excludes certain employee retention payments and expenses.
2 Revenues shown in U.S. dollars based on average exchange rates over the applicable periods.
Conference Call Information
Investors will have the opportunity to listen to MSCI Inc.'s senior management review third quarter 2012 results on Tuesday, November 6, 2012 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 8, 2012. To listen to the recording, visit http://ir.msci.com/events.cfm, or dial 1-855-859-2056 (passcode: 43175268) within the United States. International callers dial 1-404-537-3406 (passcode: 43175268).
About MSCI Inc.
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 USD 7 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; 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
1As of March 31, 2012, based on eVestment, Lipper and Bloomberg data.
For further information on MSCI Inc. or our products please visit www.msci.com.
Forward-Looking Statements
This earnings release contains 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, 2011 and filed with the Securities and Exchange Commission (SEC) on February 29, 2012, and in quarterly reports on Form 10-Q and current reports on Form 8-K filed with the SEC. If any of these risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may vary significantly from what we projected. Any forward-looking statement in this release reflects our current views with respect to future events and is subject to these and other risks, uncertainties and assumptions relating to our operations, results of operations, growth strategy and liquidity. We assume 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.
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, lease exit charge, restructuring costs 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 adjustments related to the lease exit charge, restructuring costs and debt repayment and refinancing expenses are 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. Consolidated Statement 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 | 2012 | 2011 | 2012 | 2012 | 2011 | ||||||||||||||||
| Operating revenues | $ | 235,444 | $ | 225,026 | $ | 238,565 | $ | 703,061 | $ | 674,807 | |||||||||||
| Operating expenses | |||||||||||||||||||||
| Cost of services | 68,350 | 68,968 | 73,243 | 213,884 | 208,026 | ||||||||||||||||
| Selling, general and administrative | 62,973 | 53,724 | 57,602 | 176,011 | 158,463 | ||||||||||||||||
| Restructuring costs | - | (1,002 | ) | (22 | ) | (51 | ) | 3,469 | |||||||||||||
| Amortization of intangibles | 15,959 | 16,422 | 15,959 | 47,877 | 49,537 | ||||||||||||||||
| Depreciation and amortization of property, | |||||||||||||||||||||
| equipment and leasehold improvements | 4,633 | 4,669 | 4,662 | 13,711 | 14,947 | ||||||||||||||||
| Total operating expenses | $ | 151,915 | $ | 142,781 | $ | 151,444 | $ | 451,432 | $ | 434,442 | |||||||||||
| Operating income | $ | 83,529 | $ | 82,245 | $ | 87,121 | $ | 251,629 | $ | 240,365 | |||||||||||
| Operating margin | 35.5 | % | 36.5 | % | 36.5 | % | 35.8 | % | 35.6 | % | |||||||||||
| Interest income | (252 | ) | (184 | ) | (237 | ) | (712 | ) | (513 | ) | |||||||||||
| Interest expense | 7,314 | 13,113 | 29,581 | 49,250 | 42,552 | ||||||||||||||||
| Other expense (income) | 873 | (983 | ) | 516 | 1,997 | 5,041 | |||||||||||||||
| Other expenses (income), net | $ | 7,935 | $ | 11,946 | $ | 29,860 | $ | 50,535 | $ | 47,080 | |||||||||||
| Income before taxes | 75,594 | 70,299 | 57,261 | 201,094 | 193,285 | ||||||||||||||||
| Provision for income taxes | 27,320 | 20,512 | 19,715 | 71,308 | 64,317 | ||||||||||||||||
| Net income | $ | 48,274 | $ | 49,787 | $ | 37,546 | $ | 129,786 | $ | 128,968 | |||||||||||
| Net income margin | 20.5 | % | 22.1 | % | 15.7 | % | 18.5 | % | 19.1 | % | |||||||||||
| Earnings per basic common share | $ | 0.39 | $ | 0.41 | $ | 0.31 | $ | 1.06 | $ | 1.06 | |||||||||||
| Earnings per diluted common share | $ | 0.39 | $ | 0.40 | $ | 0.30 | $ | 1.05 | $ | 1.05 | |||||||||||
| Weighted average shares outstanding used | |||||||||||||||||||||
| in computing earnings per share | |||||||||||||||||||||
| Basic | 122,261 | 120,831 | 122,030 | 122,016 | 120,570 | ||||||||||||||||
| Diluted | 123,450 | 122,303 | 123,295 | 123,287 | 122,186 | ||||||||||||||||
Table 3: MSCI Inc. Selected Balance Sheet Items (unaudited)
| As of | |||||||||||||
| September 30, | December 31, | ||||||||||||
| In thousands | 2012 | 2011 | |||||||||||
| Cash and cash equivalents | $ | 340,458 | $ | 252,211 | |||||||||
| Short-term investments | 93,885 | 140,490 | |||||||||||
| Trade receivables, net of allowances | 124,309 | 180,566 | |||||||||||
| Deferred revenue | $ | 323,503 | $ | 289,217 | |||||||||
| Current maturities of long-term debt | 43,082 | 10,339 | |||||||||||
| Long-term debt, net of current maturities | 822,401 | 1,066,548 | |||||||||||
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 | 2012 |
2011 |
2012 |
2011 |
2012 |
|||||||||||
| Index and ESG products | ||||||||||||||||
| Subscriptions | $ | 73,894 | $ | 66,279 | $ | 75,829 | 11.5 | % | (2.6 | %) | ||||||
| Asset-based fees | 34,042 | 35,030 | 34,094 | (2.8 | %) | (0.2 | %) | |||||||||
| Index and ESG products total | 107,936 | 101,309 | 109,923 | 6.5 | % | (1.8 | %) | |||||||||
| Risk management analytics | 64,998 | 61,861 | 64,547 | 5.1 | % | 0.7 | % | |||||||||
| Portfolio management analytics | 29,138 | 30,263 | 29,326 | (3.7 | %) | (0.6 | %) | |||||||||
| Energy and commodity analytics | 3,317 | 2,797 | 3,780 | 18.6 | % | (12.2 | %) | |||||||||
| Total Performance and Risk revenues | $ | 205,389 | $ | 196,230 | $ | 207,576 | 4.7 | % | (1.1 | %) | ||||||
| Total Governance revenues | 30,055 | 28,796 | 30,989 | 4.4 | % | (3.0 | %) | |||||||||
| Total operating revenues | $ | 235,444 | $ | 225,026 | $ | 238,565 | 4.6 | % | (1.3 | %) | ||||||
| Recurring subscriptions | $ | 197,591 | $ | 183,735 | $ | 198,104 | 7.5 | % | (0.3 | %) | ||||||
| Asset-based fees | 34,042 | 35,030 | 34,094 | (2.8 | %) | (0.2 | %) | |||||||||
| Non-recurring revenue | 3,811 | 6,261 | 6,367 | (39.1 | %) | (40.1 | %) | |||||||||
| Total operating revenues | $ | 235,444 | $ | 225,026 | $ | 238,565 | 4.6 | % | (1.3 | %) | ||||||
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 | 2012 | 2011 | 2011 | |||||||||||
| Index and ESG products | ||||||||||||||
| Subscriptions | $ | 221,362 | $ | 194,713 | 13.7 | % | ||||||||
| Asset-based fees | 102,745 | 109,186 | (5.9 | %) | ||||||||||
| Index and ESG products total | 324,107 | 303,899 | 6.6 | % | ||||||||||
| Risk management analytics | 193,622 | 181,533 | 6.7 | % | ||||||||||
| Portfolio management analytics | 87,527 | 88,740 | (1.4 | %) | ||||||||||
| Energy and commodity analytics | ||||||||||||||
| Recurring Energy and commodity analytics | 11,001 | 9,616 | 14.4 | % | ||||||||||
| Correction1 | (5,203 | ) | - | n/m | ||||||||||
| Net energy and commodity analytics | 5,798 | 9,616 | (39.7 | %) | ||||||||||
| Total Performance and Risk revenues | $ | 611,054 | $ | 583,788 | 4.7 | % | ||||||||
| Total Governance revenues | 92,007 | 91,019 | 1.1 | % | ||||||||||
| Total operating revenues | $ | 703,061 | $ | 674,807 | 4.2 | % | ||||||||
| Recurring subscriptions | $ | 582,330 | $ | 542,711 | 7.3 | % | ||||||||
| Asset-based fees | 102,745 | 104,924 | (2.1 | %) | ||||||||||
| Non-recurring revenue | 17,986 | 27,172 | (33.8 | %) | ||||||||||
| Total operating revenues | $ | 703,061 | $ | 674,807 | 4.2 | % | ||||||||
| 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. |
Table 6: Quarterly Operating Expense Detail (unaudited)
| Three Months Ended | % Change from | |||||||||||||||||
| September 30, | September 30, | June 30, | September 30, | June 30, | ||||||||||||||
| In thousands | 2012 | 2011 | 2012 | 2011 | 2012 | |||||||||||||
| Cost of services | ||||||||||||||||||
| Compensation | $ | 50,111 | $ | 50,114 | $ | 55,492 | (0.0 | %) | (9.7 | %) | ||||||||
| Non-recurring stock based compensation | 267 | 470 | 94 | (43.2 | %) | 184.0 | % | |||||||||||
| Total compensation | $ | 50,378 | $ | 50,584 | $ | 55,586 | (0.4 | %) | (9.4 | %) | ||||||||
| Non-compensation | 16,448 | 18,384 | 17,657 | (10.5 | %) | (6.8 | %) | |||||||||||
| Lease exit charge1 | 1,524 | - | - | n/m | n/m | |||||||||||||
| Total non-compensation | 17,972 | 18,384 | 17,657 | (2.2 | %) | 1.8 | % | |||||||||||
| Total cost of services | $ | 68,350 | $ | 68,968 | $ | 73,243 | (0.9 | %) | (6.7 | %) | ||||||||
| Selling, general and administrative | ||||||||||||||||||
| Compensation | $ | 42,296 | $ | 34,874 | $ | 38,025 | 21.3 | % | 11.2 | % | ||||||||
| Non-recurring stock based compensation | 359 | 820 | 98 | (56.2 | %) | 266.3 | % | |||||||||||
| Total compensation | $ | 42,655 | $ | 35,694 | $ | 38,123 | 19.5 | % | 11.9 | % | ||||||||
| Non-compensation | 18,515 | 18,030 | 19,479 | 2.7 | % | (4.9 | %) | |||||||||||
| Lease exit charge1 | 1,803 | - | - | n/m | n/m | |||||||||||||
| Total non-compensation | 20,318 | 18,030 | 19,479 | 12.7 | % | 4.3 | % | |||||||||||
| Total selling, general and administrative | $ | 62,973 | $ | 53,724 | $ | 57,602 | 17.2 | % | 9.3 | % | ||||||||
| Restructuring costs | - | (1,002 | ) | (22 | ) | n/m | n/m | |||||||||||
| Amortization of intangibles | 15,959 | 16,422 | 15,959 | (2.8 | %) | 0.0 | % | |||||||||||
| Depreciation and amortization | 4,633 | 4,669 | 4,662 | (0.8 | %) | (0.6 | %) | |||||||||||
| Total operating expenses | $ | 151,915 | $ | 142,781 | $ | 151,444 | 6.4 | % | 0.3 | % | ||||||||
| Compensation | $ | 92,407 | $ | 84,988 | $ | 93,517 | 8.7 | % | (1.2 | %) | ||||||||
| Non-recurring stock-based compensation | 626 | 1,290 | 192 | (51.5 | %) | 226.0 | % | |||||||||||
| Non-compensation expenses | 34,963 | 36,414 | 37,136 | (4.0 | %) | (5.9 | %) | |||||||||||
| Lease exit charge1 | 3,327 | - | - | n/m | n/m | |||||||||||||
| Restructuring costs | - | (1,002 | ) | (22 | ) | n/m | n/m | |||||||||||
| Amortization of intangibles | 15,959 | 16,422 | 15,959 | (2.8 | %) | 0.0 | % | |||||||||||
| Depreciation and amortization | 4,633 | 4,669 | 4,662 | (0.8 | %) | (0.6 | %) | |||||||||||
|
|
Total operating expenses | $ | 151,915 | $ | 142,781 | $ | 151,444 | 6.4 | % | 0.3 | % | |||||||
| 1The third quarter 2012 included a total $3.3 million charge associated with a lease exit resulting from the consolidation of our New York offices. |
Table 7: Nine Months Operating Expense Detail (unaudited)
| Nine Months Ended | % Change from | ||||||||||
| September 30, | September 30, | September 30, | |||||||||
| In thousands | 2012 | 2011 | 2012 | ||||||||
| Cost of services | |||||||||||
| Compensation | $ | 159,152 | $ | 149,316 | 6.6 | % | |||||
| Non-recurring stock based compensation | 629 | 2,707 | (76.8 | %) | |||||||
| Total compensation | $ | 159,781 | $ | 152,023 | 5.1 | % | |||||
| Non-compensation | 52,579 | 56,003 | (6.1 | %) | |||||||
| Lease exit charge1 | 1,524 | - | n/m | ||||||||
| Total non-compensation | 54,103 | 56,003 | (3.4 | %) | |||||||
| Total cost of services | $ | 213,884 | $ | 208,026 | 2.8 | % | |||||
| Selling, general and administrative | |||||||||||
| Compensation | $ | 118,813 | $ | 104,049 | 14.2 | % | |||||
| Non-recurring stock based compensation | 771 | 4,068 | (81.0 | %) | |||||||
| Total compensation | $ | 119,584 | $ | 108,117 | 10.6 | % | |||||
| Non-compensation | 54,624 | 50,346 | 8.5 | % | |||||||
| Lease exit charge1 | 1,803 | - | n/m | ||||||||
| Total non-compensation | 56,427 | 50,346 | 12.1 | % | |||||||
| Total selling, general and administrative | $ | 176,011 | $ | 158,463 | 11.1 | % | |||||
| Restructuring costs | (51 | ) | 3,469 | (101.5 | %) | ||||||
| Amortization of intangibles | 47,877 | 49,537 | (3.4 | %) | |||||||
| Depreciation and amortization | 13,711 | 14,947 | (8.3 | %) | |||||||
| Total operating expenses | $ | 451,432 | $ | 434,442 | 3.9 | % | |||||
| Compensation | $ | 277,965 | $ | 253,365 | 9.7 | % | |||||
| Non-recurring stock-based compensation | 1,400 | 6,775 | (79.3 | %) | |||||||
| Non-compensation expenses | 107,203 | 106,349 | 0.8 | % | |||||||
| Lease exit charge1 | 3,327 | - | n/m | ||||||||
| Restructuring costs | (51 | ) | 3,469 | (101.5 | %) | ||||||
| Amortization of intangibles | 47,877 | 49,537 | (3.4 | %) | |||||||
| Depreciation and amortization | 13,711 | 14,947 | (8.3 | %) | |||||||
|
|
Total operating expenses | $ | 451,432 | $ | 434,442 | 3.9 | % | ||||
| 1The third quarter 2012 included a total $3.3 million charge associated with a lease exit resulting from the consolidation of our New York offices. |
Table 8: Summary Quarterly Segment Information (unaudited)
| Three Months Ended | % Change from | ||||||||||||||||||
| September 30, | September 30, | June 30, | September 30, | June 30, | |||||||||||||||
| In thousands | 2012 | 2011 | 2012 | 2011 | 2012 | ||||||||||||||
| Revenues: | |||||||||||||||||||
| Performance and Risk | $ | 205,389 | $ | 196,230 | $ | 207,576 | 4.7 | % | (1.1 | %) | |||||||||
| Governance | 30,055 | 28,796 | 30,989 | 4.4 | % | (3.0 | %) | ||||||||||||
| Total Operating revenues | $ | 235,444 | $ | 225,026 | $ | 238,565 | 4.6 | % | (1.3 | %) | |||||||||
| Operating Income: | |||||||||||||||||||
| Performance and Risk | 80,472 | 78,957 | 85,980 | 1.9 | % | (6.4 | %) | ||||||||||||
| Margin | 39.2 | % | 40.2 | % | 41.4 | % | |||||||||||||
| Governance | 3,057 | 3,288 | 1,141 | (7.0 | %) | 167.9 | % | ||||||||||||
| Margin | 10.2 | % | 11.4 | % | 3.7 | % | |||||||||||||
| Total Operating Income | $ | 83,529 | $ | 82,245 | $ | 87,121 | 1.6 | % | (4.1 | %) | |||||||||
| Margin | 35.5 | % | 36.5 | % | 36.5 | % | |||||||||||||
| Adjusted EBITDA: | |||||||||||||||||||
| Performance and Risk | 100,362 | 95,986 | 102,595 | 4.6 | % | (2.2 | %) | ||||||||||||
| Margin | 48.9 | % | 48.9 | % | 49.4 | % | |||||||||||||
| Governance | 7,712 | 7,638 | 5,317 | 1.0 | % | 45.0 | % | ||||||||||||
| Margin | 25.7 | % | 26.5 | % | 17.2 | % | |||||||||||||
| Total Adjusted EBITDA | $ | 108,074 | $ | 103,624 | $ | 107,912 | 4.3 | % | 0.2 | % | |||||||||
| Margin | 45.9 | % | 46.0 | % | 45.2 | % | |||||||||||||
Table 9: Summary Nine Months Segment Information (unaudited)
| Nine Months Ended | % Change from | |||||||||||||
| September 30, | September 30, | September 30, | ||||||||||||
| In thousands | 2012 | 2011 | 2011 | |||||||||||
| Revenues: | ||||||||||||||
| Performance and Risk | $ | 611,054 | $ | 583,788 | 4.7 | % | ||||||||
| Governance | 92,007 | 91,019 | 1.1 | % | ||||||||||
| Total Operating revenues | $ | 703,061 | $ | 674,807 | 4.2 | % | ||||||||
| Operating Income: | ||||||||||||||
| Performance and Risk | 243,927 | 231,458 | 5.4 | % | ||||||||||
| Margin | 39.9 | % | 39.6 | % | ||||||||||
| Governance | 7,702 | 8,907 | (13.5 | %) | ||||||||||
| Margin | 8.4 | % | 9.8 | % | ||||||||||
| Total Operating Income | $ | 251,629 | $ | 240,365 | 4.7 | % | ||||||||
| Margin | 35.8 | % | 35.6 | % | ||||||||||
| Adjusted EBITDA: | ||||||||||||||
| Performance and Risk | 297,142 | 290,496 | 2.3 | % | ||||||||||
| Margin | 48.6 | % | 49.8 | % | ||||||||||
| Governance | 20,751 | 24,597 | (15.6 | %) | ||||||||||
| Margin | 22.6 | % | 27.0 | % | ||||||||||
| Total Adjusted EBITDA | $ | 317,893 | $ | 315,093 | 0.9 | % | ||||||||
| Margin | 45.2 | % | 46.7 | % | ||||||||||
Table 10: Key Operating Metrics
| As of | % Change from | ||||||||||||||||||||
| In thousands |
September |
September |
June |
September |
June |
||||||||||||||||
| Run Rates1 | |||||||||||||||||||||
| Index and ESG products | |||||||||||||||||||||
| Subscription | $ | 292,787 | $ | 264,722 | $ | 285,604 | 10.6 | % | 2.5 | % | |||||||||||
| Asset based fees | 114,576 | (2) | 117,928 | 129,045 | (2.8 | %) | (11.2 | %) | |||||||||||||
| Index and ESG products total | 407,363 | 382,650 | 414,649 | 6.5 | % | (1.8 | %) | ||||||||||||||
| Risk management analytics | 261,776 | 251,804 | 258,995 | 4.0 | % | 1.1 | % | ||||||||||||||
| Portfolio management analytics | 115,958 | 119,220 | 117,153 | (2.7 | %) | (1.0 | %) | ||||||||||||||
| Energy and commodity analytics | 14,040 | 15,343 | 14,839 | (8.5 | %) | (5.4 | %) | ||||||||||||||
| Total Performance and Risk | 799,137 | 769,017 | 805,636 | 3.9 | % | (0.8 | %) | ||||||||||||||
| Governance | 115,840 | 107,152 | 113,976 | 8.1 | % | 1.6 | % | ||||||||||||||
| Total Run Rate | $ | 914,977 | $ | 876,169 | $ | 919,612 | 4.4 | % | (0.5 | %) | |||||||||||
| Subscription total | $ | 800,401 | $ | 758,241 | $ | 790,567 | 5.6 | % | 1.2 | % | |||||||||||
| Asset-based fees total | 114,576 | (2) | 117,928 | 129,045 | (2.8 | %) | (11.2 | %) | |||||||||||||
| Total Run Rate | $ | 914,977 | $ | 876,169 | $ | 919,612 | 4.4 | % | (0.5 | %) | |||||||||||
| New Recurring Subscription Sales | $ | 27,164 | $ | 31,661 | $ | 28,453 | (14.2 | %) | (4.5 | %) | |||||||||||
| Subscription Cancellations | (19,134 | ) | (15,364 | ) | (17,229 | ) | 24.5 | % | 11.1 | % | |||||||||||
| Net New Recurring Subscription Sales | $ | 8,030 | $ | 16,297 | $ | 11,224 | (50.7 | %) | (28.5 | %) | |||||||||||
| Non-recurring sales | $ | 3,878 | $ | 6,560 | $ | 5,099 | (40.9 | %) | (23.9 | %) | |||||||||||
| Employees | 2,416 | 2,277 | 2,384 | 6.1 | % | 1.3 | % | ||||||||||||||
| % Employees by location | |||||||||||||||||||||
| Developed Market Centers | 56 | % | 62 | % | 58 | % | |||||||||||||||
| Emerging Market Centers | 44 | % | 38 | % | 42 | % | |||||||||||||||
| 1 The run rate at a particular point in time represents the forward-looking fees for the next 12 months from all subscriptions and investment product licenses we currently provide to our clients under renewable contracts assuming all contracts that come up for renewal are renewed and assuming then-current exchange rates. For any subscription or license whose 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 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 we have determined that such notice evidences the client's final decision to terminate or not renew the applicable subscription or agreement, even though the notice is not effective until a later date. |
| 2 The asset-based fee run rate for third quarter 2012 includes the reduction of $24.4 million in run rate associated with 22 Vanguard ETFs due to be switched from MSCI indices. |
Table 11: ETF Assets Linked to MSCI Indices1 (unaudited)
| Nine Months | ||||||||||||||||||||||||||||||||
| Three Months Ended 2011 | Three Months Ended 2012 | Ended September | ||||||||||||||||||||||||||||||
| In Billions | March | June | September | December | March | June | September | 2011 | 2012 | |||||||||||||||||||||||
|
Beginning Period AUM in ETFs linked to MSCI Indices |
$ | 333.3 | $ | 350.1 | $ | 360.5 | $ | 290.1 | $ | 301.6 | $ | 354.7 | $ | 327.4 | $ | 333.3 | $ | 301.6 | ||||||||||||||
| Cash Inflow/ Outflow | 6.7 | 14.2 | (0.0 | ) | 1.0 | 15.2 | 0.3 | 15.2 | 20.9 | 30.7 | ||||||||||||||||||||||
| Appreciation/Depreciation | 10.1 | (3.8 | ) | (70.4 | ) | 10.5 | 37.9 | (27.6 | ) | 21.1 | (64.1 | ) | 31.4 | |||||||||||||||||||
|
Period End AUM in ETFs linked to MSCI Indices |
$ | 350.1 | $ | 360.5 | $ | 290.1 | $ | 301.6 | $ | 354.7 | $ | 327.4 | $ | 363.7 | $ | 290.1 | $ | 363.7 | ||||||||||||||
|
Period Average AUM in ETFs linked to MSCI Indices 2 |
$ | 337.6 | $ | 356.8 | $ | 329.1 | $ | 305.0 | $ | 341.0 | $ | 331.6 | $ | 344.7 | $ | 340.1 | $ | 339.2 | ||||||||||||||
| 1 ETF assets under management calculation methodology is ETF net asset value multiplied by shares outstanding. Source: Bloomberg and MSCI |
| 2 September 2012 period end assets under management includes $131 billion of AUM in 22 Vanguard ETFs due to be switched from MSCI indices. |
Table 12: Supplemental Operating Metrics
|
|
Recurring Subscription Sales & Subscription Cancellations |
||||||||||||||||||||||||||||||||||||||||
| Three Months Ended 2011 | Three Months Ended 2012 | Nine Months Ended | |||||||||||||||||||||||||||||||||||||||
| In thousands | March | June | September | December | March | June | September | Sept. 2011 | Sept. 2012 | ||||||||||||||||||||||||||||||||
| New Recurring Subscription Sales | $ | 34,612 | $ | 30,298 | $ | 31,661 | $ | 35,444 | $ | 33,506 | $ | 28,453 | $ | 27,164 | $ | 96,571 | $ | 89,123 | |||||||||||||||||||||||
| Subscription Cancellations | (14,402 | ) | (14,965 | ) | (15,364 | ) | (27,245 | ) | (13,498 | ) | (17,229 | ) | (19,134 | ) | (44,731 | ) | (49,861 | ) | |||||||||||||||||||||||
| Net New Recurring Subscription Sales | $ | 20,210 | $ | 15,333 | $ | 16,297 | $ | 8,199 | $ | 20,008 | $ | 11,224 | $ | 8,030 | $ | 51,840 | $ | 39,262 | |||||||||||||||||||||||
| Non-recurring sales | 13,647 | 8,415 | 6,560 | 7,460 | 9,338 | 5,099 | 3,878 | 28,622 | 18,315 | ||||||||||||||||||||||||||||||||
| Total Sales | $ | 48,259 | $ | 38,713 | $ | 38,221 | $ | 42,904 | $ | 42,844 | $ | 33,552 | $ | 31,042 | $ | 125,193 | $ | 107,438 | |||||||||||||||||||||||
|
|
Aggregate Retention Rates |
||||||||||||||||||||||||||||||||||||||||
| Three Months Ended 2011 | Three Months Ended 2012 | Nine Months Ended | |||||||||||||||||||||||||||||||||||||||
| March | June | September | December | March | June | September | Sept. 2011 | Sept. 2012 | |||||||||||||||||||||||||||||||||
| Aggregate Retention Rate 1 | |||||||||||||||||||||||||||||||||||||||||
| Index and ESG products | 95.0 | % | 92.8 | % | 95.2 | % | 89.3 | % | 94.5 | % | 94.9 | % | 94.0 | % | 94.3 | % | 94.4 | % | |||||||||||||||||||||||
| Risk management analytics | 94.2 | % | 92.2 | % | 92.1 | % | 80.8 | % | 93.9 | % | 90.0 | % | 88.5 | % | 92.6 | % | 90.7 | % | |||||||||||||||||||||||
| Portfolio management analytics | 88.6 | % | 91.4 | % | 86.6 | % | 87.2 | % | 91.9 | % | 84.2 | % | 84.9 | % | 88.8 | % | 87.0 | % | |||||||||||||||||||||||
| Energy & commodity analytics | 76.9 | % | 88.8 | % | 89.3 | % | 75.0 | % | 90.2 | % | 85.5 | % | 76.6 | % | 85.0 | % | 84.1 | % | |||||||||||||||||||||||
| Total Performance and Risk | 93.0 | % | 92.2 | % | 92.2 | % | 85.2 | % | 93.7 | % | 90.9 | % | 89.8 | % | 92.3 | % | 91.4 | % | |||||||||||||||||||||||
| Total Governance | 85.0 | % | 90.4 | % | 86.2 | % | 80.6 | % | 88.7 | % | 92.1 | % | 91.1 | % | 87.2 | % | 90.7 | % | |||||||||||||||||||||||
| Total Aggregate Retention Rate | 91.8 | % | 91.9 | % | 91.3 | % | 84.5 | % | 93.0 | % | 91.0 | % | 90.0 | % | 91.6 | % | 91.3 | % | |||||||||||||||||||||||
| 1The quarterly 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. |
Table 13: Reconciliation of Adjusted EBITDA to Net Income (unaudited)
| Three Months Ended September 30, 2012 | Three Months Ended September 30, 2011 | |||||||||||||||||||||||||
| In thousands |
Performance and |
Governance | Total |
Performance and |
Governance | Total | ||||||||||||||||||||
| Net Income | $ | 48,274 | $ | 49,787 | ||||||||||||||||||||||
| Plus: | Provision for income taxes | 27,320 | 20,512 | |||||||||||||||||||||||
| Plus: | Other expense (income), net | 7,935 | 11,946 | |||||||||||||||||||||||
| Operating income | $ | 80,472 | $ | 3,057 | $ | 83,529 | $ | 78,957 | $ | 3,288 | $ | 82,245 | ||||||||||||||
| Plus: | Non-recurring stock-based compensation | 572 | 54 | 626 | 1,246 | 44 | 1,290 | |||||||||||||||||||
| Plus: | Depreciation and amortization | 3,755 | 878 | 4,633 | 3,529 | 1,140 | 4,669 | |||||||||||||||||||
| Plus: | Amortization of intangible assets | 12,638 | 3,321 | 15,959 | 13,072 | 3,350 | 16,422 | |||||||||||||||||||
| Plus: | Lease exit charge | 2,925 | 402 | 3,327 | - | - | - | |||||||||||||||||||
| Plus: | Restructuring costs | - | - | - | (818 | ) | (184 | ) | (1,002 | ) | ||||||||||||||||
| Adjusted EBITDA | $ | 100,362 | $ | 7,712 | $ | 108,074 | $ | 95,986 | $ | 7,638 | $ | 103,624 | ||||||||||||||
| Nine Months Ended September 30, 2012 | Nine Months Ended September 30, 2011 | |||||||||||||||||||||||||
| In thousands |
Performance and |
Governance | Total |
Performance and |
Governance | Total | ||||||||||||||||||||
| Net Income | $ | 129,786 | $ | 128,968 | ||||||||||||||||||||||
| Plus: | Provision for income taxes | 71,308 | 64,317 | |||||||||||||||||||||||
| Plus: | Other expense (income), net | 50,535 | 47,080 | |||||||||||||||||||||||
| Operating income | $ | 243,927 | $ | 7,702 | $ | 251,629 | $ | 231,458 | $ | 8,907 | $ | 240,365 | ||||||||||||||
| Plus: | Non-recurring stock-based compensation | 1,269 | 131 | 1,400 | 6,432 | 343 | 6,775 | |||||||||||||||||||
| Plus: | Depreciation and amortization | 11,137 | 2,574 | 13,711 | 11,549 | 3,398 | 14,947 | |||||||||||||||||||
| Plus: | Amortization of intangible assets | 37,916 | 9,961 | 47,877 | 39,487 | 10,050 | 49,537 | |||||||||||||||||||
| Plus: | Lease exit charge | 2,925 | 402 | 3,327 | - | - | - | |||||||||||||||||||
| Plus: | Restructuring costs | (32 | ) | (19 | ) | (51 | ) | 1,570 | 1,899 | 3,469 | ||||||||||||||||
| Adjusted EBITDA | $ | 297,142 | $ | 20,751 | $ | 317,893 | $ | 290,496 | $ | 24,597 | $ | 315,093 | ||||||||||||||
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 | 2012 | 2011 | 2012 | 2012 | 2011 | |||||||||||||||||
| Net Income | $ | 48,274 | $ | 49,787 | $ | 37,546 | $ | 129,786 | $ | 128,968 | ||||||||||||
| Plus: | Non-recurring stock-based compensation | 626 | 1,290 | 192 | 1,400 | 6,775 | ||||||||||||||||
| Plus: | Amortization of intangible assets | 15,959 | 16,422 | 15,959 | 47,877 | 49,537 | ||||||||||||||||
| Plus: | Debt repayment and refinancing expenses | - | - | 20,639 | 20,639 | 6,404 | ||||||||||||||||
| Plus: | Lease exit charge | 3,327 | - | - | 3,327 | - | ||||||||||||||||
| Plus: | Restructuring costs | - | (1,002 | ) | (22 | ) | (51 | ) | 3,469 | |||||||||||||
| Less: | Income tax effect | (7,280 | ) | (5,585 | ) | (12,775 | ) | (25,954 | ) | (23,450 | ) | |||||||||||
| Adjusted net income | $ | 60,906 | $ | 60,912 | $ | 61,539 | $ | 177,024 | $ | 171,703 | ||||||||||||
| Diluted EPS | $ | 0.39 | $ | 0.40 | $ | 0.30 | $ | 1.05 | $ | 1.05 | ||||||||||||
| Plus: | Non-recurring stock-based compensation | $ | 0.01 | $ | 0.01 | $ | - | $ | 0.01 | $ | 0.05 | |||||||||||
| Plus: | Amortization of intangible assets | $ | 0.13 | $ | 0.13 | $ | 0.13 | $ | 0.39 | $ | 0.40 | |||||||||||
| Plus: | Debt repayment and refinancing expenses | $ | - | $ | - | $ | 0.17 | $ | 0.17 | $ | 0.05 | |||||||||||
| Plus: | Lease exit charge | $ | 0.03 | $ | - | $ | - | $ | 0.03 | $ | - | |||||||||||
| Plus: | Restructuring costs | $ | - | $ | (0.01 | ) | $ | - | $ | (0.00 | ) | $ | 0.03 | |||||||||
| Less: | Income tax effect | $ | (0.07 | ) | $ | (0.04 | ) | $ | (0.10 | ) | $ | (0.22 | ) | $ | (0.19 | ) | ||||||
| Adjusted EPS | $ | 0.49 | $ | 0.49 | $ | 0.50 | $ | 1.43 | $ | 1.39 | ||||||||||||