MSCI Inc. Achieves Strong Growth Through Client Expansion
Key Financial Highlights of MSCI
MSCI Inc. (NYSE: MSCI) recently reported its fiscal 2025 second-quarter results, revealing remarkable financial growth. With total revenue reaching $772.7 million, MSCI experienced a year-over-year increase of 9.1%, exceeding the analyst consensus estimate of $763.5 million. The company's adjusted earnings per share (EPS) stood at $4.17, surpassing the expected $4.11.
Growth Metrics and Trends
As of June 30, 2025, MSCI's total annualized recurring revenue run rate reached $3.11 billion, reflecting a 10.7% year-over-year growth. The organic recurring subscription run rate also saw an increase of 7.4%. The client retention rate remains impressively high at 94.4%, although this is a slight decline from 94.8% the previous year.
Segment Performance Insights
MSCI's Index operating revenues saw a 9.5% increase year-over-year, amounting to $434.8 million, a testament to the rising demand for recurring subscriptions and asset-based fees. Meanwhile, Analytics operating revenues rose by 7.1% to $177.7 million, driven primarily by increased subscriptions for equity and mult-asset class analytics. Furthermore, revenues from sustainability and climate operations grew by 11.3% to $88.9 million, bolstered by strong demand for ratings and climate products. The private assets segment also reported a 9.7% revenue rise to $71.2 million.
Financial Health and Sustainable Growth
MSCI's operating margin improved from 54.0% to 55.0%, and the adjusted EBITDA margin increased from 60.7% to 61.4%. The company generated an impressive $301.6 million in free cash flow during the quarter and held $347.3 million in cash and equivalents as of the end of June.
In terms of capital allocation, MSCI invested $34.6 million in capital expenditures. They returned significant value to shareholders through $131.2 million in share repurchases, acquiring 250,818 shares at an average price of $523.20. Additionally, dividends paid totaled approximately $139.3 million.
CEO Perspectives and Future Directions
Henry A. Fernandez, the Chair and CEO, remarked on the strong financial results, attributing the growth mainly to a remarkable 17% increase in asset-based fee (ABF) run rate. MSCI led the industry in equity ETF cash inflows, and subscription growth was substantial across various client segments, including banks, broker-dealers, and asset managers. The firm continues to broaden its solutions to address diverse client needs and is committed to developing innovative products that advance client strategies.
Looking Ahead: MSCI's Fiscal Year 2025 Outlook
For fiscal 2025, MSCI reaffirmed its operating expenses guidance of $1.405 billion to $1.445 billion, capital expenditures expectations of $115 million to $125 million, and a projected free cash flow range of $1.4 billion to $1.46 billion. As of the last check, MSCI shares were trading lower, indicating a slight decline of 3.46% to $557.95.
Frequently Asked Questions
What were MSCI's reported earnings for the second quarter?
MSCI reported earnings of $772.7 million for the second quarter, exceeding analyst expectations.
How did MSCI's client retention rate change?
The client retention rate decreased slightly to 94.4%, down from 94.8% the previous year.
What is MSCI's outlook for fiscal year 2025?
MSCI projects operating expenses of $1.405 billion to $1.445 billion, with free cash flow anticipated between $1.4 billion and $1.46 billion.
Which segment performed the best for MSCI?
The Index segment performed notably well, with revenues increasing by 9.5% year-over-year.
What influenced MSCI's revenue growth?
The growth was influenced by higher recurring subscription revenues and a strong run rate in asset-based fees.
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