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Presentation to the 32 nd Annual William Blair Growth Conference

Presentation to the 32 nd Annual William Blair Growth Conference. June 12, 2012. Not for Redistribution. Disclaimers.

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Presentation to the 32 nd Annual William Blair Growth Conference

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  1. Presentation to the 32nd Annual William Blair Growth Conference June 12, 2012 Not for Redistribution

  2. Disclaimers • This presentation may contain forward-looking statements within the meaning of Private Securities Litigation Reform At of 1995. 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. For a discussion of risk and uncertainties that could materially affect actual results, levels of activity, performance or achievements, please see the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011 and other reports filed with the SEC. • The information provided herein may include certain non-GAAP financial measures. The reconciliation of such measures to the comparable GAAP figures are included on pages 30-32 of this presentation. • This slide is part of a presentation by MSCI and is intended to be viewed as part of that presentation. The presentation is based on information generally available to the public and does not contain any material, non-public information. No representation is made that it is accurate or complete. The presentation has been prepared solely for informational purposes, is neither an offer to sell nor the solicitation of an offer to buy any security or instrument and has not been updated since it was originally presented. • All revenue, cost, and Adjusted EBITDA figures presented for fiscal years 2009 and 2010 are pro forma for the acquisition of RiskMetrics. All operating metrics, including run rates, sales, cancels, and retention rates are presented on a combined basis. • 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. Not for Redistribution

  3. Agenda Overview of MSCI MSCI Index Products MSCI Risk Management Analytics Products Financial Overview Q&A Not for Redistribution

  4. MSCI: Who We Are • MSCI is a worldwide provider of investment decision tools that aid institutional investors in the construction, understanding and management of investment portfolios • Our products share a set of common attributes. They are: Research-based Mission critical Backed by powerful brands • Our clients include the world’s premier investment organizations, including asset managers, hedge funds, banks, pension funds and corporate clients • MSCI employs over 2,400 professionals located in 20 countries around the world that are dedicated to supporting the needs of our clients Not for Redistribution

  5. MSCI – A 40 Year View of Risk & Return A leading provider of world-class, mission-critical investment decision support tools to financial institutions worldwide, with over 40 years of experience Delivering indices, risk and return portfolio analytics, and corporate governance tools for use throughout the investment process First provider of both global equity indices and multi-factor risk models

  6. Well-Positioned to Benefit from Secular Investment Trends • Globalization of investing • MSCI is a leading index provider for global markets • Popularity of passive investments continues to grow • MSCI is a leading provider of indices to equity ETFs • Critical need to understand, measure, manage and report risk • MSCI’s RiskMetrics and Barra analytics platforms are leading providers of risk measurement models and software • Increasing focus on issues of sustainability • ESG services and ISS enable investors to incorporate these issues into their investment processes and proxy voting decisions Not for Redistribution

  7. Historical Financial Profile • Since 2007 our combined revenues have grown annually by an average of 10% and our combined adjusted EBITDA by 17% Note: Revenues and Adjusted EBITDA are shown on a combined basis for fiscal years 2007 and 2008 and on a pro forma basis for fiscal years 2009 and 2010. Net income figures for fiscal years 2007-2011 and all figures for fiscal year 2011 are shown as reported (1) Income before interest income, interest expense, other income, provision for income taxes, depreciation, amortization, founders grant expense, restructuring charges and third party transaction costs; see pages 30-32 for reconciliation. Adjusted EBITDA margin = Adjusted EBITDA as a percentage of Revenue (2) MSCI Net income is as reported in each period, with no pro forma adjustments Not for Redistribution

  8. Overview of MSCI: Diverse and Global Client Base Geographic Composition of Run Rate Breakdown of Client Type Note: Based on Q4 2011 run rate Note: Based on Q4 2011 run rate Client Concentration Employees by Location Note: Based on Q4 2011 run rate Not for Redistribution

  9. MSCI Overview 2011 Revenue of $901MM $405MM 45% Index and ESG • Global equity indices to help measure equity performance and aid in the construction of equity portfolios and environmental, social and governance (“ESG”) investment tools Risk Management Analytics $244MM 27% • Models and softwareand managed services to help asset managers and owners measure and manage risk across multiple asset classes Portfolio Management Analytics $119MM 13% Models and software to help asset managersconstruct and manage portfolios Governance $119MM 13% • Proxy advisory services including global proxy research and outsourced voting solutions as well as governance advisory services to corporations Energy and Commodity Analytics $14MM 1% Energy and commodity models and software to help measure, manage and price risk Not for Redistribution

  10. Agenda Overview of MSCI MSCI Index Products MSCI Risk Management Analytics Products Financial Overview Q&A Not for Redistribution

  11. MSCI Index and ESG Products Index & ESG Run Rate by Revenue Type • 18% Run Rate CAGR from ‘08-’11 • 9% YoY in Q1’12 • 12% growth in subscription RR • 2% growth in ABF Index and ESG Run Rate: 2008-Q1’12 Subscription Run Rate by Client Type Not for Redistribution

  12. Introduction to MSCI Indices For over 40 years, MSCI has been running a global family of benchmark indices • Over 150,000 indices, including 9,000+ real time: • Covering 76 countries in the Developed, Emerging and Frontier markets • Over 2,500 clients across more than 60 countriesand numerous segments: • Pension funds and Consultants • Asset Managers, Hedge Funds • Broker Dealers, Banks, Insurance companies, Custodians • Private Wealth managers and family offices

  13. MSCI Indices and ESG Products: Two Primary Markets Global equity indices to help measure equity performance and aid in the construction of equity portfolios Index and ESG Subscriptions Passive Portfolio Management • $7 trillion benchmarked to MSCI Indices1 • 90%+ market share of cross border mandates2 • 560 ETFs linked to MSCI indices • $350 billion in AUM linked to MSCI indices at end of April • Institutional passive funds also benchmarked to MSCI indices Traded products market offers third potential leg but will require increased liquidity in MSCI-linked futures and options 1As of June 30, 2011, based on eVestment, Lipper and Bloomberg data. 2InterSec Research 2011 – U.S. institutional funds only Not for Redistribution

  14. Index Growth Strategy • Continue to grow the core benchmark business • More modules, more users and more locations • Selective fee increases • Seek out new clients • Encourage use of MSCI ACWI as key policy benchmark for asset owners • Expand offering of MSCI Investment Strategy Indices • Supplements our core market benchmark business • Relationships with asset owners are critical • Support new ETF launches based on these products • Expand usage by non-asset management clients • Expand use case for hedge funds • Enhance focus on traded products markets Not for Redistribution

  15. Agenda Overview of MSCI MSCI Index Products MSCI Risk Management Analytics Products Financial Overview Q&A Not for Redistribution

  16. MSCI Risk Management Analytics RMA Run Rate by Geography • 9% Run Rate CAGR from ‘08-’11 • 6% YoY in Q1’12 RMA Run Rate: 2008-Q1’12 RMA Run Rate by Client Type Not for Redistribution

  17. MSCI Risk Management Analytics Risk Measurement Risk Management Risk Budgeting (Allocation) Manager Monitoring Risk-based Margin Management Regulatory Compliance Client Reporting • Multiple views of market risk across multiple asset classes for multiple client types • MSCI is amarket leader for multi-asset class risk in multiple end markets • Asset managers • pension funds and sovereign wealth funds • hedge funds • Fund-of-funds • Multi-pronged growth strategy • Fewer than 900 total clients indicates significant greenfield opportunity • Broaden risk coverage to drive upsells Use Cases Asset Managers Asset Owners Hedge Funds Fund of Funds Commercial Banks Central Banks Broker Dealers Prime Brokers Prop Trading Desk Corporates Client Segments Solutions Market Risk Hedge Fund Transparency Counterparty Risk Performance Attribution WealthBench Webservices Implementation Services Managed Services Not for Redistribution

  18. Risk Management Analytics Growth Plan • Further extend market risk franchise • More users • More views of risk • Improve mortgage and fixed income analytics • Enhances cross-sell opportunities • Continue to build on demand for increased hedge fund transparency • Enhance analytics capabilities • Drive value-added usage of our IP • Improves value of the platform • Enhance infrastructure to enable more high-volume processing 2010 New Recurring Subscription Sales Not for Redistribution

  19. Agenda Overview of MSCI MSCI Index Products MSCI Risk Management Analytics Products Financial Overview Q&A Not for Redistribution

  20. MSCI Financial Model 96% recurring revenues with 81% subscription revenues Recurring, VisibleRevenue Model Growing and Predictable Revenues + HistoricalRetention Rates Mid-80% to 90%+ + Scalable Cost Structure EBITDA margins have increased Robust Profitability + Upfront Annual Payments Favorable working capital characteristics Significant FreeCash Flow Conversion + Low Capital Expenditures Approximately $50m in 2012 Not for Redistribution

  21. Overview of MSCI Financial Performance • 10% average combined revenue growth since 2007 • 2011 revenue grew 10% YoY to $901 million from $816 million • 21% average net income growth since 2007 – 88% in 2011 • 17% average combined Adjusted EBITDA growth since 2007 • 17% pro forma growth in 2011 • 11% Diluted EPS growth since 2007 • 29% growth in Adjusted EPS since 2009 (when we began calculation) • 37% Adjusted EPS growth in 2011 Not for Redistribution

  22. Summary of First Quarter 2012 Operating Results ($ in millions) Total YoY Run Rate Growth of 6% • Q1’12 run rate (RR) grew YoY by 6% to $919 million • Subscription run rate grew by 7% • Asset-based fee (ABF) run rate grew by 2% • Total sales1 of $43 million in Q1’12 -down 11% from Q1’11 • Q1’12 sales down 3% excluding impact of a single $4.2 million non-recurring ABF sale in Q1’11 • Q1’12 Recurring subscription sales of $34 million down 3% from Q1’11 • Retention rates steady at 93% for Q1’12 • New office opened in Seoul, Korea Total Sales1 and Retention (1) Includes recurring subscription sales and non-recurring sales

  23. Q1’12 Revenue Growth ($ in millions) • Q1’12 Revenues grew 3% YoY YoY Q1’12 Revenue by Type YoY Q1’12 Revenue Growth by Product

  24. Compensation and Non-Compensation Expense ($ in millions) Comp and Non-comp expenses1,2 increased 7% to $127 million Comp and Non-Comp Expenses1,2 • Compensation expense rose 7% • 20% increase in headcount vs. Q1’11 • 60% in EMC and 40% in DMC • Non-Compensation costs rose 7% • Occupancy costs rose by $1.8 million • 1% growth ex-occupancy +7% +7% Compensation expense excludes non-recurring stock-based compensation. Please see pages 30-32 for reconciliation to operating expenses. (2) Non-compensation excludes depreciation, amortization and restructuring costs. Please see pages 30-32 for reconciliation to operating expenses.

  25. Summary of Profitability Metrics: Net Income, EPS and Adjusted EBITDA1 Net Income rose 30% Adjusted EBITDA1 was $102 million Excluding correction, Adj. EBITDA was $107 million, up 3% YoY Diluted EPS rose 30% Adjusted EPS2 rose 2% YoY to $0.44 Excluding correction, Adj. EPS was $0.47, up 9% YoY Net Income and Adj. EBITDA1 Diluted and Adjusted 2 EPS +31% +2% $ per share -2% +30% Net income before provision for income taxes, depreciation and amortization, other net expense and income, non-recurring stock-based compensation and restructuring costs. Please see pages 30-32 for reconciliation. For the purpose of calculating Adjusted EPS, the after-tax impact of non-recurring stock-based compensation, amortization of intangible assets, debt repayment expenses and restructuring costs are excluded from the calculation of EPS; see pages 30-32 for reconciliation.

  26. Summary Balance Sheet Total Cash & Investments Subsequent Change MSCI obtained $880 million Term Loan A Facility - @100 bp benefit versus prior facility Proceeds plus @$200M cash on hand used to repay 100% of the current debt outstanding Unfunded $100 million revolver also refinanced $460M Total Debt $1,074M

  27. MSCI: Who we are • Focused. MSCI is focused on providing highly scalable, mission-critical investment decision support tools to investors worldwide. • Scalable. MSCI seeks to build investment decision tools that leverage common data sources and can be used by multiple investors worldwide, generating incremental profits that MSCI can invest to develop additional tools and services. • Growth-oriented. MSCI is a growth company, committed to delivering attractive top- and bottom-line growth over cycles. We believe our growth is supported by long-term, secular trends. Not for Redistribution

  28. Agenda Overview of MSCI MSCI Index Products MSCI Risk Management Analytics Products Financial Overview Q&A Not for Redistribution

  29. Use of Non-GAAP Financial Measures • MSCI has presented supplemental non-GAAP financial measures as part of this presentation. 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 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 and the accelerated interest expense resulting from the termination of an interest rate swap and the accelerated amortization of deferred financing and debt discount costs (debt repayment expenses and refinancing expenses), as well as for any related tax effects. • We believe that adjustments related to 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 by excluding the costs incurred in connection with the acquisition of RiskMetrics. Additionally, we believe that adjusting for non-recurring stock-based compensation and amortization of intangible assets 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 non-recurring stock-based compensation and amortization of intangible assets. We believe that the non-GAAP financial measures presented in this presentation facilitate meaningful period-to-period comparisons and provide a baseline for the evaluation of future results. • Adjusted EBITDA 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. • During 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. Because the revenue that was corrected as part of this adjustment is a non-recurring charge related to prior periods, we believe that excluding it from revenue may support a more comprehensive understanding of MSCI’s underlying operating performance for the current period. Adjusted EBITDA and Adjusted EPS calculations excluding the impact of this non-recurring non-cash correction are also presented herein.

  30. Reconciliation of Adjusted Net Income and Adjusted EPS (Dollars in thousands, except per share figures)

  31. Reconciliation of Adjusted EBITDA to Net Income (Dollars in thousands, except per share figures)

  32. Reconciliation of Operating Expenses (Dollars in thousands, except per share figures)

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