Segment Information

12 Months Ended

Dec. 31, 2021

Segment Reporting [Abstract]

Segment Information

13. 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 its President and Chief Operating Officer, who are together 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, at times, certain other transactions or adjustments, including impairment related to sublease of leased property, certain non-recurring acquisition-related integration and transaction costs and the impact related to the vesting of multi-year restricted stock units granted in 2016 to certain senior executives that are subject to the achievement of multi-year total shareholder return targets, which are performance targets with a market condition (the “2016 Multi-Year PSUs”), 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.

Operating 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 based upon allocation methodologies, including time estimates, revenue, headcount, sales targets, data center consumption and other relevant usage measures. Due to the integrated structure of MSCI’s 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 revenues, 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 five operating segments: Index, Analytics, ESG and Climate, Real Estate and Burgiss, which are presented as the following four reportable segments: Index, Analytics, ESG and Climate and All Other – Private Assets.

Effective January 1, 2021, the Company began presenting four reportable segments with the ESG and Climate operating segment being presented as a separate reportable segment. The operating segments of Real Estate and Burgiss do not individually meet the segment reporting thresholds and have been combined and presented as part of All Other – Private Assets reportable segment. The Company’s ownership interest in Burgiss is classified as an equity-method investment. Therefore, the All Other – Private Assets segment does not include the Company’s proportionate share of operating revenues and Adjusted EBITDA related to Burgiss. The Company’s proportionate share of the income or loss from its equity-method investment in Burgiss is not a component of Adjusted EBITDA as it is reported as a component of other (expense) income, net. Prior period amounts have been recast to reflect the current presentation.

The Index operating segment offers equity and fixed income indexes. The indexes are used in many areas of the investment process, including indexed product creation (e.g., ETFs, mutual funds, annuities, futures, options, structured products, over-the-counter derivatives), performance benchmarking, portfolio construction and rebalancing, and asset allocation.

The Analytics operating segment offers risk management, performance attribution and portfolio management content, applications and services that provide clients with an integrated view of risk and return and tools for analyzing market, credit, liquidity, counterparty and climate risk across all major asset classes, spanning short-, medium- and long-term time horizons. Clients access Analytics tools and content through MSCI’s proprietary applications and application programming interfaces, third-party applications or directly through their own platforms. Additionally, the Analytics operating segment also provides various managed services to help clients operate more efficiently, including consolidation of client portfolio data from various sources, review and reconciliation of input data and results, and customized reporting.

The ESG and Climate operating segment offers products and services that help institutional investors understand how ESG and climate considerations can impact the long-term risk and return of their portfolio and individual security-level investments. In addition, the ESG and Climate operating segment provides data, ratings, research and tools to help investors navigate increasing regulation, meet new client demands and better integrate ESG and climate elements into their investment processes.

The Real Estate operating segment offers real estate market and transaction data, benchmarks, return-analytics, climate assessments and market insights for funds, investors, managers and other real estate market participants. In addition, Real Estate performance and risk analytics range from enterprise-wide to property-specific analysis. The Real Estate operating segment also provides business intelligence products to real estate owners, managers, developers and brokers worldwide. Financial results related to the acquisition of RCA have been included prospectively as a component of the Real Estate operating segment, presented as a component of the All Other – Private Assets reportable segment, as of September 13, 2021.

The Burgiss operating segment represents the Company’s equity method investment in Burgiss, a global provider of investment decision support tools for private capital.

The change in reportable segments has not resulted in any changes to MSCI’s Chief Operating Decision Maker (“CODM”) or the basis for segment profitability. The CODM continues to measure and evaluate reportable segments based on segment operating revenues as well as Adjusted EBITDA and other measures.

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

		Years Ended
		December 31,		December 31,		December 31,
		2021		2020		2019
	(in thousands)
Operating revenues
Index		$	1,251,764	$	1,016,495	$	920,937
Analytics			544,299		513,808		496,925
ESG and Climate			166,192		111,364		90,659
All Other - Private Assets			81,289		53,723		49,275
Total		$	2,043,544	$	1,695,390	$	1,557,796

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

		Years Ended
		December 31,		December 31,		December 31,
		2021		2020		2019
	(in thousands)
Index Adjusted EBITDA		$	951,312	$	766,493	$	670,188
Analytics Adjusted EBITDA			198,799		172,924		152,113
ESG and Climate Adjusted EBITDA			29,748		22,851		21,813
All Other - Private Assets Adjusted EBITDA			16,931		9,242		6,385
Total operating segment profitability			1,196,790		971,510		850,499
Amortization of intangible assets			80,592		56,941		49,410
Depreciation and amortization of property,    equipment and leasehold improvements			28,901		29,805		29,999
Impairment related to sublease of leased property			7,702		—		—
Acquisition-related integration and   transaction costs (1)			6,870		—		—
2016 Multi-Year PSUs grant payroll tax expense			—		—		15,389
Operating income			1,072,725		884,764		755,701
Other expense (income), net			214,589		198,539		152,383
Provision for income taxes			132,153		84,403		39,670
Net income		$	725,983	$	601,822	$	563,648

⁽¹⁾ Incremental and non-recurring costs attributable to acquisitions directly related to the execution of the transaction and integration of the acquired business that have occurred no later than 12 months after the close of the transaction.

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

	Years Ended
	December 31,		December 31,		December 31,
(in thousands)	2021			2020	2019
Operating revenues
Americas:
United States	$	836,880	$	723,962	$	698,105
Other		85,744		71,408		65,997
Total Americas		922,624		795,370		764,102
Europe, the Middle East and Africa ("EMEA"):
United Kingdom		344,976		262,188		234,926
Other		454,239		364,547		325,221
Total EMEA		799,215		626,735		560,147
Asia & Australia:
Japan		91,419		80,591		71,629
Other		230,286		192,694		161,918
Total Asia & Australia		321,705		273,285		233,547
Total	$	2,043,544	$	1,695,390	$	1,557,796

Long-lived assets consist of property, equipment and leasehold improvements, right of use assets and internally developed capitalized software, net of accumulated depreciation and amortization. The following table presents long-lived assets by geographic area on the dates indicated:

	As of
	December 31,		December 31,
	2021		2020
	(in thousands)
Long-lived assets
Americas:
United States	$	167,870	$	182,776
Other		13,480		13,949
Total Americas		181,350		196,725
EMEA:
United Kingdom		19,563		19,678
Other		34,240		33,561
Total EMEA		53,803		53,239
Asia & Australia:
Japan		1,150		1,896
Other		31,873		37,946
Total Asia & Australia		33,023		39,842
Total	$	268,176	$	289,806