msci-10q_20190930.htm

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of October 25, 2019, there were 84,707,270 shares of the registrant’s common stock, par value $0.01, outstanding.

MSCI Inc. files annual, quarterly and current reports, proxy statements and other information with the Securities and Exchange Commission (the “SEC”). The SEC maintains a website that contains annual, quarterly and current reports, proxy and information statements and other information that issuers (including MSCI Inc.) file electronically with the SEC. MSCI Inc.’s electronic SEC filings are available to the public at the SEC’s website, www.sec.gov.

MSCI Inc.’s website is www.msci.com. You can access MSCI Inc.’s Investor Relations homepage at http://ir.msci.com. MSCI Inc. makes available free of charge, on or through its Investor Relations homepage, its proxy statements, Annual Reports on Form 10‑K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to those reports filed or furnished pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as soon as reasonably practicable after such material is electronically filed with, or furnished to, the SEC. MSCI Inc. also makes available, through its Investor Relations homepage, via a link to the SEC’s website, statements of beneficial ownership of MSCI Inc.’s equity securities filed by its directors, officers, 5% or greater shareholders and others under Section 16 of the Exchange Act.

You can access information about MSCI Inc.’s corporate governance at http://ir.msci.com/corporate-governance.cfm, including copies of the following:

MSCI Inc.’s Code of Ethics and Business Conduct applies to all directors, officers and employees, including its Chief Executive Officer and its Chief Financial Officer. MSCI Inc. will post any amendments to the Code of Ethics and Business Conduct and any waivers that are required to be disclosed by the rules of either the SEC or the New York Stock Exchange LLC on its website. You can request a copy of these documents, excluding exhibits, at no cost, by contacting Investor Relations, MSCI Inc., 7 World Trade Center, 250 Greenwich Street, 49th Floor, New York, NY 10007; (212) 804-5306. The information on MSCI Inc.’s website is not incorporated by reference into this report or any other report filed or furnished by us with the SEC.

This report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking 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 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 MSCI’s 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 the 2018 Annual Report on Form 10-K filed with the SEC on February 22, 2019 and in quarterly reports on Form 10-Q and current reports on Form 8-K filed or furnished with the SEC. If any of these risks or uncertainties materialize, or if MSCI’s underlying assumptions prove to be incorrect, actual results may vary significantly from what MSCI projected. Any forward-looking statement in this report 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.

MSCI Inc. uses its website, including its quarterly updates, blog, podcasts and social media channels, including its corporate Twitter account (@MSCI_Inc) as channels of distribution of company information. The information MSCI Inc. posts through these channels may be deemed material. Accordingly, investors should monitor these channels, in addition to following MSCI Inc.’s press releases, quarterly SEC filings and public conference calls and webcasts. In addition, you may automatically receive email alerts and other information about MSCI Inc. when you enroll your email address by visiting the “Email Alerts Subscription” section of its Investor Relations homepage at http://ir.msci.com/email-alerts. The contents of MSCI Inc.’s website, including its quarterly updates, blog, podcasts and social media channels are not, however, incorporated by reference into this report or any other report filed or furnished by us with the SEC.

	As of
	September 30,			December 31,
	2019			2018
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	881,150		$	904,176
Accounts receivable (net of allowances of $1,485 and $1,027 at September 30, 2019 and December 31, 2018, respectively)		409,519			473,433
Prepaid income taxes		55,020			19,273
Prepaid and other assets		40,399			38,207
Total current assets		1,386,088			1,435,089
Property, equipment and leasehold improvements, net		86,415			90,877
Right of use assets		164,942			—
Goodwill		1,544,078			1,545,761
Intangible assets, net		261,942			280,803
Deferred tax assets		16,584			14,903
Other non-current assets		19,693			20,519
Total assets	$	3,479,742		$	3,387,952

LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable	$	2,396		$	3,892
Income taxes payable		11,654			16,253
Accrued compensation and related benefits		122,642			137,045
Other accrued liabilities		128,458			113,841
Deferred revenue		479,371			537,977
Total current liabilities		744,521			809,008
Long-term debt		2,578,159			2,575,502
Long-term operating lease liabilities		163,567			—
Deferred tax liabilities		72,960			82,008
Other non-current liabilities		68,391			87,928
Total liabilities		3,627,598			3,554,446

Commitments and Contingencies (see Note 7 and Note 9)

Shareholders' equity (deficit):
Preferred stock (par value $0.01, 100,000,000 shares authorized; no shares issued)		—			—
Common stock (par value $0.01; 750,000,000 common shares authorized; 132,309,213 and 130,029,926 common shares issued and 84,707,245 and 84,174,138 common shares outstanding at September 30, 2019 and December 31, 2018, respectively)		1,323			1,300
Treasury shares, at cost (47,601,968 and 45,855,788 common shares held at September 30, 2019 and December 31, 2018, respectively)		(3,559,963	)		(3,272,774	)
Additional paid in capital		1,338,194			1,306,428
Retained earnings		2,134,688			1,856,951
Accumulated other comprehensive loss		(62,098	)		(58,399	)
Total shareholders' equity (deficit)		(147,856	)		(166,494	)
Total liabilities and shareholders' equity (deficit)	$	3,479,742		$	3,387,952

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2019			2018			2019			2018
	(unaudited)
Operating revenues	$	394,251		$	357,934		$	1,151,190		$	1,072,296

Operating expenses:
Cost of revenues		70,486			70,906			224,807			213,578
Selling and marketing		52,107			46,149			159,812			139,974
Research and development		24,310			20,591			71,234			61,099
General and administrative		26,559			24,751			80,434			74,974
Amortization of intangible assets		12,361			11,681			36,167			42,556
Depreciation and amortization of property, equipment and leasehold improvements		7,209			7,453			22,464			23,035
Total operating expenses		193,032			181,531			594,918			555,216

Operating income		201,219			176,403			556,272			517,080

Interest income		(3,673	)		(6,522	)		(11,104	)		(13,573	)
Interest expense		35,922			35,902			107,752			97,223
Other expense (income)		222			177			2,839			(9,177	)

Other expense (income), net		32,471			29,557			99,487			74,473

Income before provision for income taxes		168,748			146,846			456,785			442,607
Provision for income taxes		31,765			23,014			15,920			86,854
Net income	$	136,983		$	123,832		$	440,865		$	355,753

Earnings per basic common share	$	1.62		$	1.39		$	5.21		$	3.98

Earnings per diluted common share	$	1.60		$	1.36		$	5.15		$	3.87

Weighted average shares outstanding used in computing earnings per share
Basic		84,765			88,796			84,591			89,323
Diluted		85,550			91,372			85,533			91,843

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2019			2018			2019			2018
	(unaudited)
Net income	$	136,983		$	123,832		$	440,865		$	355,753
Other comprehensive (loss) income:
Foreign currency translation adjustments		(5,533	)		(3,338	)		(4,853	)		(11,860	)
Income tax effect		1,124			—			1,085			—
Foreign currency translation adjustments, net		(4,409	)		(3,338	)		(3,768	)		(11,860	)

Pension and other post-retirement adjustments		134			22			103			116
Income tax effect		(64	)		(10	)		(34	)		(55	)
Pension and other post-retirement adjustments, net		70			12			69			61

Net investment hedge adjustments		—			—			—			1,937
Income tax effect		—			—			—			—
Net investment hedge adjustments, net		—			—			—			1,937
Other comprehensive (loss) income, net of tax		(4,339	)		(3,326	)		(3,699	)		(9,862	)
Comprehensive income	$	132,644		$	120,506		$	437,166		$	345,891

											Accumulated
						Additional					Other
	Common		Treasury			Paid in		Retained			Comprehensive
	Stock		Stock			Capital		Earnings			Income (Loss)			Total
	(unaudited)
Balance at December 31, 2018	$	1,300	$	(3,272,774	)	$	1,306,428	$	1,856,951		$	(58,399	)	$	(166,494	)
Net income									178,192						178,192
Dividends declared ($0.58 per common share)									(55,339	)					(55,339	)
Dividends paid in shares							93								93
Other comprehensive income (loss), net of tax												1,197			1,197
Common stock issued		23													23
Shares withheld for tax withholding and exercises				(182,385	)										(182,385	)
Compensation payable in common stock and options							9,590								9,590
Common stock repurchased and held in treasury				(102,081	)										(102,081	)
Common stock issued to directors and held in treasury				(30	)										(30	)
Exercise of stock options							726								726

Balance at March 31, 2019		1,323		(3,557,270	)		1,316,837		1,979,804			(57,202	)		(316,508	)
Net income									125,690						125,690
Dividends declared ($0.58 per common share)									(49,613	)					(49,613	)
Dividends paid in shares							30								30
Other comprehensive income (loss), net of tax												(557	)		(557	)
Common stock issued															—
Shares withheld for tax withholding and exercises				(742	)										(742	)
Compensation payable in common stock and options							10,566								10,566
Common stock repurchased and held in treasury															—
Common stock issued to directors and held in treasury				(833	)										(833	)
Exercise of stock options							165

Delaware		13-4038723
(State or other jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification Number)

7 World Trade Center 250 Greenwich Street, 49^th Floor New York, New York		10007
(Address of Principal Executive Offices)		(Zip Code)

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common stock, par value $0.01 per share		MSCI		New York Stock Exchange

		Page
	Part I
Item 1.	Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	49
Item 4.	Controls and Procedures	50

	Part II
Item 1.	Legal Proceedings	51
Item 1A.	Risk Factors	51
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	51
Item 3.	Defaults Upon Senior Securities	51
Item 4.	Mine Safety Disclosures	52
Item 5.	Other Information	52
Item 6.	Exhibits	53


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐