Segment Information

3 Months Ended

Mar. 31, 2017

Segment Reporting [Abstract]

Segment Information

9. SEGMENT INFORMATION

ASC Subtopic 280-10, “Segment Reporting,” establishes standards for reporting information about operating segments. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or CODM, in deciding how to allocate resources and assess performance. MSCI’s Chief Executive Officer and Chief Operating Officer, who are considered to be its CODM, review financial information presented on an operating segment basis for purposes of making operating decisions and assessing financial performance.

The CODM measures and evaluates reportable segments based on segment operating revenues as well as Adjusted EBITDA and other measures. The Company excludes the following items from segment Adjusted EBITDA: provision for income taxes, other expense (income), net, depreciation and amortization of property, equipment and leasehold improvements, amortization of intangible assets and certain transactions or adjustments that the CODM does not consider for the purposes of making decisions to allocate resources among segments or to assess segment performance. Although these amounts are excluded from segment Adjusted EBITDA, they are included in reported consolidated net income and are included in the reconciliation that follows.

The Company’s computation of segment Adjusted EBITDA may not be comparable to other similarly titled measures computed by other companies because all companies do not calculate segment Adjusted EBITDA in the same fashion.

Revenues and expenses directly associated with each segment are included in determining its operating results. Other expenses that are not directly attributable to a particular segment are allocated based upon allocation methodologies, including time estimates, headcount, sales targets, data center consumption and other relevant usage measures. Due to the integrated structure of our business, certain costs incurred by one segment may benefit other segments. A segment may use the content and data produced by another segment without incurring an arm’s-length intersegment charge.

The CODM does not review any information regarding total assets on an operating segment basis. Operating segments do not record intersegment revenue, and, accordingly, there is none to be reported. The accounting policies for segment reporting are the same as for MSCI as a whole.

The Company has four operating segments: Index, Analytics, ESG and Real Estate.

The Index operating segment is primarily a provider of equity indexes. The indexes are used in many areas of the investment process, including index-linked product creation and performance benchmarking, as well as portfolio construction and rebalancing and asset allocation.

The Analytics operating segment uses analytical content to create products and services which offer institutional investors an integrated view of risk and return. Its research-enhanced products and services help institutional investors understand and control for market, credit, liquidity and counterparty risk across all major asset classes, spanning short, medium and long-term time horizons. The Analytics global risk and performance platform is built for scale, enabling clients to conduct complex calculations and stress tests. Analytics offers products and services that assist institutional investors with portfolio construction, risk management, performance attribution and regulatory reporting.

The ESG operating segment offers products and services that help institutional investors understand how environmental, social and governance (“ESG”) factors can impact the long-term risk of their investments. In addition, the ESG operating segment’s data and ratings products are used in the construction of equity and fixed income indexes to help institutional investors benchmark ESG investment performance, issue index-based investment products, as well as manage, measure and report on ESG mandates.

The Real Estate operating segment is a provider of real estate performance analysis for funds, investors, managers and lenders, as well as occupiers through the disposition of the Real Estate occupiers business. This segment provides products and offers services that include research, reporting and benchmarking. During the year ended December 31, 2016, the Company disposed of the Real Estate occupiers business.

The operating segments of ESG and Real Estate do not individually meet the segment reporting thresholds and have been combined and presented as part of All Other for disclosure purposes.

The following table presents operating revenue by reportable segment for the periods indicated:

	Three Months Ended
	March 31,
	2017		2016
	(in thousands)
Operating revenues
Index	$	163,435	$	144,613
Analytics		112,420		110,263
All Other		25,352		23,952
Total	$	301,207	$	278,828

The following table presents segment profitability and a reconciliation to net income for the periods indicated:

	Three Months Ended
	March 31,
	2017		2016
	(in thousands)
Index Adjusted EBITDA	$	115,637	$	100,049
Analytics Adjusted EBITDA		29,536		30,360
All Other Adjusted EBITDA		5,518		2,740
Total operating segment profitability		150,691		133,149
Amortization of intangible assets		11,251		11,840
Depreciation and amortization of property,    equipment and leasehold improvements		8,838		8,168
Operating income		130,602		113,141
Other expense (income), net		28,977		22,364
Provision for income taxes		28,674		30,410
Net income	$	72,951	$	60,367

Revenue by geography is based on the shipping address of the ultimate customer utilizing the product. The following table presents revenue by geographic area for the periods indicated:

	Three Months Ended
	March 31,
		2017		2016
	(in thousands)
Revenues
Americas:
United States	$	144,838	$	137,645
Other		11,654		10,582
Total Americas		156,492		148,227
Europe, the Middle East and Africa ("EMEA"):
United Kingdom		47,025		42,610
Other		60,302		53,439
Total EMEA		107,327		96,049
Asia & Australia:
Japan		12,826		12,640
Other		24,562		21,912
Total Asia & Australia		37,388		34,552
Total	$	301,207	$	278,828

Long-lived assets consist of property, equipment, leasehold improvements, goodwill and intangible assets, net of accumulated depreciation and amortization. The following table presents long-lived assets by geographic area on the dates indicated:

	As of
	March 31,		December 31,
	2017		2016
	(in thousands)
Long-lived assets
Americas:
United States	$	1,864,169	$	1,876,366
Other		1,891		1,543
Total Americas		1,866,060		1,877,909
EMEA:
United Kingdom		89,468		89,466
Other		25,026		23,780
Total EMEA		114,494		113,246
Asia & Australia:
Japan		327		357
Other		7,835		7,563
Total Asia & Australia		8,162		7,920
Total	$	1,988,716	$	1,999,075