MSCI Inc. - Quarter Report: 2022 June (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


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

For the quarterly period ended June 30, 2022


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

For the transition period from to

Commission file number 001-33812

MSCI INC.

(Exact Name of Registrant as Specified in its Charter)

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)

Registrant’s telephone number, including area code: (212) 804-3900

Securities registered pursuant to Section 12(b) of the Act:

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

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.

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

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 July 19, 2022, there were 80,502,940 shares of the registrant’s common stock, par value $0.01, outstanding.

FOR THE QUARTER ENDED JUNE 30, 2022

TABLE OF CONTENTS

		Page
	Part I – Financial Information
Item 1.	Financial Statements	4
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	39
Item 4.	Controls and Procedures	40

	Part II – Other Information
Item 1.	Legal Proceedings	41
Item 1A.	Risk Factors	41
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	41
Item 6.	Exhibits	42

AVAILABLE INFORMATION

Our corporate headquarters is located at 7 World Trade Center, 250 Greenwich Street, 49th Floor, New York, New York, 10007, and our telephone number is (212) 804-3900. We maintain a website on the internet at www.msci.com. The contents of our website are not a part of or incorporated by reference in this Quarterly Report on Form 10-Q.

We file 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 reports, proxy and information statements and other information that we file electronically with the SEC at www.sec.gov. We also make available free of charge, on or through our website, these reports, proxy statements and other information as soon as reasonably practicable following the time they are electronically filed with or furnished to the SEC. To access these, click on the “SEC Filings” link found on our Investor Relations homepage (http://ir.msci.com).

We also use our Investor Relations homepage, Corporate Responsibility homepage and corporate Twitter account (@MSCI_Inc) as channels of distribution of Company information. The information we post through these channels may be deemed material.

Accordingly, investors should monitor these channels, in addition to following our press releases, SEC filings and public conference calls and webcasts. In addition, you may automatically receive email alerts and other information about us when you enroll your email address by visiting the “Email Alert Subscription” section of our Investor Relations homepage at http://ir.msci.com/alerts.cfm. The contents of our website, including our Investor Relations homepage, Corporate Responsibility homepage and social media channels are not, however, a part of or incorporated by reference in this Quarterly Report on Form 10-Q.

FORWARD-LOOKING STATEMENTS

We have included in this Quarterly Report on Form 10-Q, and from time to time may make in our public filings, press releases or other public statements, certain statements that constitute forward-looking statements. In addition, our management may make forward-looking statements to analysts, investors, representatives of the media and others. These forward-looking statements are not historical facts and represent only MSCI’s beliefs regarding future events, many of which, by their nature, are inherently uncertain and beyond our control.

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. Statements concerning our financial position, business strategy and plans or objectives for future operations are forward-looking statements. 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 our actual results, levels of activity, performance or achievements. Such risks and uncertainties include those set forth under “Risk Factors” in Part I, Item 1A of the 2021 Annual Report on Form 10-K filed with the SEC on February 11, 2022. Other factors that could materially affect actual results, levels of activity, performance or achievements can be found in quarterly reports on Form 10-Q and current reports on Form 8-K filed or furnished with the SEC. The forward-looking statements in this report speak only as of the time they are made and do not necessarily reflect our outlook at any other point in time. We undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or for any other reason. Therefore, readers should carefully review the risk factors set forth in other reports or documents we file from time to time with the SEC.

PART I – FINANCIAL INFORMATION

Item 1.

Financial Statements

MSCI INC.

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(in thousands, except per share and share data)

	As of
	June 30,			December 31,
	2022			2021
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	842,300		$	1,421,449
Accounts receivable, net of allowances		586,815			664,511
Prepaid income taxes		15,900			5,951
Prepaid and other assets		44,066			51,499
Total current assets		1,489,081			2,143,410
Property, equipment and leasehold improvements, net		59,390			66,715
Right of use assets		128,122			144,584
Goodwill		2,231,154			2,236,386
Intangible assets, net		576,362			593,341
Equity method investment		216,554			218,763
Deferred tax assets		64,216			40,119
Other non-current assets		68,473			63,385
Total assets	$	4,833,352		$	5,506,703

LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Accounts payable	$	9,295		$	13,448
Income taxes payable		38,615			59,635
Accrued compensation and related benefits		106,797			207,640
Current portion of long-term debt		6,532			—
Other accrued liabilities		151,021			145,302
Deferred revenue		808,020			824,912
Total current liabilities		1,120,280			1,250,937
Long-term debt		4,505,338			4,161,422
Long-term operating lease liabilities		132,494			150,029
Deferred tax liabilities		3,841			3,650
Other non-current liabilities		97,845			104,132
Total liabilities		5,859,798			5,670,170

Commitments and Contingencies (see Note 8)

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; 133,604,132 and 133,162,178 common shares issued and 80,496,258 and 82,439,449 common shares outstanding at June 30, 2022 and December 31, 2021, respectively)		1,336			1,332
Treasury shares, at cost (53,107,874 and 50,722,729 common shares held at June 30, 2022 and December 31, 2021, respectively)		(5,699,069	)		(4,540,144	)
Additional paid in capital		1,492,334			1,457,623
Retained earnings		3,243,654			2,976,517
Accumulated other comprehensive loss		(64,701	)		(58,795	)
Total shareholders’ equity (deficit)		(1,026,446	)		(163,467	)
Total liabilities and shareholders’ equity (deficit)	$	4,833,352		$	5,506,703

See Notes to Condensed Consolidated Financial Statements (Unaudited)

MSCI INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share data)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2022			2021			2022			2021
	(unaudited)
Operating revenues	$	551,806		$	498,180		$	1,111,751		$	976,603

Operating expenses:
Cost of revenues (exclusive of depreciation and amortization)		100,768			87,327			203,539			173,107
Selling and marketing		61,073			58,191			127,126			114,658
Research and development		23,916			27,531			52,238			52,393
General and administrative		36,724			30,182			82,291			64,910
Amortization of intangible assets		22,179			30,396			43,899			45,464
Depreciation and amortization of property, equipment and leasehold improvements		6,765			7,020			13,299			14,163
Total operating expenses		251,425			240,647			522,392			464,695

Operating income		300,381			257,533			589,359			511,908

Interest income		(924	)		(347	)		(1,222	)		(733	)
Interest expense		41,085			39,557			81,799			77,141
Other expense (income)		188			22,628			(193	)		23,777

Other expense (income), net		40,349			61,838			80,384			100,185

Income before provision for income taxes		260,032			195,695			508,975			411,723
Provision for income taxes		49,445			30,272			69,965			49,481
Net income	$	210,587		$	165,423		$	439,010		$	362,242

Earnings per share:
Basic	$	2.60		$	2.01		$	5.40		$	4.39
Diluted	$	2.59		$	1.99		$	5.37		$	4.34

Weighted average shares outstanding:
Basic		80,923			82,454			81,255			82,546
Diluted		81,295			83,295			81,789			83,393

See Notes to Condensed Consolidated Financial Statements (Unaudited)

MSCI INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2022			2021			2022			2021
	(unaudited)
Net income	$	210,587		$	165,423		$	439,010		$	362,242
Other comprehensive (loss) income:
Foreign currency translation adjustments		(11,796	)		879			(14,746	)		(826	)
Income tax effect		1,606			(35	)		2,468			577
Foreign currency translation adjustments, net		(10,190	)		844			(12,278	)		(249	)

Pension and other post-retirement adjustments		7,376			(59	)		7,486			197
Income tax effect		(1,070	)		22			(1,114	)		(98	)
Pension and other post-retirement adjustments, net		6,306			(37	)		6,372			99
Other comprehensive (loss) income, net of tax		(3,884	)		807			(5,906	)		(150	)
Comprehensive income	$	206,703		$	166,230		$	433,104		$	362,092

See Notes to Condensed Consolidated Financial Statements (Unaudited)

MSCI INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT)

(in thousands)

											Accumulated
						Additional					Other
	Common		Treasury			Paid in		Retained			Comprehensive
	Stock		Stock			Capital		Earnings			Income (Loss)			Total
	(unaudited)
Balance at December 31, 2021	$	1,332	$	(4,540,144	)	$	1,457,623	$	2,976,517		$	(58,795	)	$	(163,467	)
Net income									228,423						228,423
Dividends declared ($1.04 per common share)									(87,280	)					(87,280	)
Dividends paid in shares							77								77
Other comprehensive income (loss), net of tax												(2,022	)		(2,022	)
Common stock issued		4													4
Shares withheld for tax withholding and exercises				(105,000	)										(105,000	)
Compensation payable in common stock							22,754								22,754
Common stock repurchased and held in treasury				(772,657	)										(772,657	)
Common stock issued to Directors and (held in)/released from treasury				(21	)										(21	)

Balance at March 31, 2022		1,336		(5,417,822	)		1,480,454		3,117,660			(60,817	)		(879,189	)
Net income									210,587						210,587
Dividends declared ($1.04 per common share)									(84,593	)					(84,593	)
Dividends paid in shares							22								22
Other comprehensive income (loss), net of tax												(3,884	)		(3,884	)
Common stock issued															—
Shares withheld for tax withholding and exercises				(3,862	)										(3,862	)
Compensation payable in common stock							11,858								11,858
Common stock repurchased and held in treasury				(276,994	)										(276,994	)
Common stock issued to Directors and (held in)/released from treasury				(391	)										(391	)
Balance at June 30, 2022	$	1,336	$	(5,699,069	)	$	1,492,334	$	3,243,654		$	(64,701	)	$	(1,026,446	)

Balance at December 31, 2020	$	1,328	$	(4,342,535	)	$	1,402,537	$	2,554,295		$	(58,859	)	$	(443,234	)
Net income									196,819						196,819
Dividends declared ($0.78 per common share)									(65,947	)					(65,947	)
Dividends paid in shares							66								66
Other comprehensive income (loss), net of tax												(957	)		(957	)
Common stock issued		3													3
Shares withheld for tax withholding and exercises				(52,814	)										(52,814	)
Compensation payable in common stock							18,842								18,842
Common stock repurchased and held in treasury				(134,340	)										(134,340	)
Common stock issued to Directors and (held in)/released from treasury				(20	)										(20	)

Balance at March 31, 2021		1,331		(4,529,709	)		1,421,445		2,685,167			(59,816	)		(481,582	)
Net income									165,423						165,423
Dividends declared ($0.78 per common share)									(64,863	)					(64,863	)
Dividends paid in shares							20								20
Other comprehensive income (loss), net of tax												807			807
Common stock issued															—
Shares withheld for tax withholding and exercises				(620	)										(620	)
Compensation payable in common stock							12,252								12,252
Common stock repurchased and held in treasury															—
Common stock issued to Directors and (held in)/released from treasury				756											756
Balance at June 30, 2021	$	1,331	$	(4,529,573	)	$	1,433,717	$	2,785,727		$	(59,009	)	$	(367,807	)

See Notes to Condensed Consolidated Financial Statements (Unaudited)

MSCI INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	Six Months Ended
	June 30,
	2022			2021
	(unaudited)
Cash flows from operating activities
Net income	$	439,010		$	362,242
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of intangible assets		43,899			45,464
Stock-based compensation expense		34,419			30,856
Depreciation and amortization of property, equipment and leasehold improvements		13,299			14,163
Amortization of right of use assets		12,491			12,129
Loss on impairment of right of use assets		705			—
Amortization of debt origination fees		2,607			2,340
Loss on extinguishment of debt		—			21,792
Deferred taxes		(22,826	)		(8,488	)
Other adjustments		2,511			4,036
Changes in assets and liabilities:
Accounts receivable		70,131			69,119
Prepaid income taxes		(10,686	)		(37,679	)
Prepaid and other assets		6,768			4,597
Other non-current assets		(5,726	)		354
Accounts payable		(4,906	)		(5,211	)
Accrued compensation and related benefits		(97,272	)		(50,793	)
Income taxes payable		(18,407	)		7,699
Other accrued liabilities		6,703			(10,359	)
Deferred revenue		(2,731	)		(12,668	)
Long-term operating lease liabilities		(13,085	)		(11,135	)
Other non-current liabilities		4,098			4,350
Other		(4,129	)		(2,294	)
Net cash provided by operating activities		456,873			440,514

Cash flows from investing activities
Capitalized software development costs		(29,699	)		(18,937	)
Capital expenditures		(4,737	)		(2,473	)
Other		23			(911	)
Net cash used in investing activities		(34,413	)		(22,321	)

Cash flows from financing activities
Proceeds from borrowings, inclusive of premium		355,000			1,103,750
Repayment of borrowings		(5,000	)		(518,245	)
Repurchase of common stock held in treasury		(1,158,513	)		(187,774	)
Payment of dividends		(171,936	)		(130,557	)
Payment of debt issuance costs in connection with debt		(2,277	)		(10,316	)
Payment of contingent consideration		(210	)		—
Net cash (used in) provided by financing activities		(982,936	)		256,858

Effect of exchange rate changes		(18,673	)		(3,570	)

Net (decrease) increase in cash		(579,149	)		671,481
Cash and cash equivalent, beginning of period		1,421,449			1,300,521
Cash and cash equivalent, end of period	$	842,300		$	1,972,002

Supplemental disclosure of cash flow information:
Cash paid for interest	$	78,185		$	77,076
Cash paid for income taxes, net of refunds received	$	124,034		$	83,139

Supplemental disclosure of non-cash investing activities
Property, equipment and leasehold improvements in other accrued liabilities	$	4,928		$	4,393

Supplemental disclosure of non-cash financing activities
Cash dividends declared, but not yet paid	$	2,765		$	1,582

See Notes to Condensed Consolidated Financial Statements (Unaudited)

MSCI INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1. INTRODUCTION AND BASIS OF PRESENTATION

MSCI Inc., together with its wholly owned subsidiaries (the “Company” or “MSCI”) is a leading provider of critical decision support tools and solutions for the global investment community. Our mission-critical offerings help investors address the challenges of a transforming investment landscape and power better investment decisions. Leveraging our knowledge of the global investment process and our expertise in research, data and technology, we enable our clients to understand and analyze key drivers of risk and return and confidently and efficiently build more effective portfolios. Our products and services include indexes; portfolio construction and risk management tools; environmental, social and governance (“ESG”) and climate solutions; and real estate market and transaction data and analysis.

Basis of Presentation and Use of Estimates

These unaudited condensed consolidated financial statements include the accounts of MSCI and its wholly owned subsidiaries and include all adjustments of a normal, recurring nature necessary to state fairly the financial condition as of June 30, 2022 and December 31, 2021, the results of operations, comprehensive income and shareholders’ equity (deficit) for the three and six months ended June 30, 2022 and 2021 and cash flows for the six months ended June 30, 2022 and 2021. The unaudited condensed consolidated statement of financial condition and related financial statement information as of December 31, 2021 have been derived from the 2021 audited consolidated financial statements but do not include all disclosures required by accounting principles generally accepted in the United States of America (“GAAP”). The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes included in MSCI’s Annual Report on Form 10-K for the year ended December 31, 2021. The results of operations for interim periods are not necessarily indicative of results for the entire year.

The Company’s unaudited condensed consolidated financial statements are prepared in accordance with GAAP. The Company makes certain estimates and judgments that can affect the reported amounts of assets and liabilities as of the date of the unaudited condensed consolidated financial statements, as well as the reported amounts of operating revenues and expenses during the periods presented. Significant estimates and judgments made by management include such examples as assessment of impairment of goodwill and intangible assets and income taxes. The Company believes that estimates used in the preparation of these unaudited condensed consolidated financial statements are reasonable; however, actual results could differ materially from these estimates. Inter-company balances and transactions are eliminated in consolidation.

Concentrations

For the six months ended June 30, 2022 and 2021, BlackRock, Inc. (“BlackRock”) accounted for 10.8% and 12.4% of the Company’s consolidated operating revenues, respectively. For the six months ended June 30, 2022 and 2021, BlackRock accounted for 18.0% and 19.8% of the Index segment’s operating revenues, respectively. No single customer represented 10.0% or more of operating revenues within the Analytics, ESG and Climate and All Other – Private Assets segments for the six months ended June 30, 2022 and 2021.

Allowance for Doubtful Accounts

Changes in the allowance for doubtful accounts from December 31, 2020 to June 30, 2022 were as follows:

	Amount
	(in thousands)
Balance as of December 31, 2020	$	1,583
Addition (reduction) to credit loss expense		1,210
Write-offs, net of recoveries		(456	)
Balance as of December 31, 2021	$	2,337
Addition (reduction) to credit loss expense		598
Adjustments and write-offs, net of recoveries		(470	)
Balance as of June 30, 2022	$	2,465

2. RECENT ACCOUNTING STANDARDS UPDATES

There are no pending accounting standards updates that are currently expected to have a material impact on the Company.

3. REVENUE RECOGNITION

MSCI’s operating revenues are reported by product type, which generally reflects the timing of recognition. The Company’s operating revenue types are recurring subscriptions, asset-based fees and non-recurring revenues. The Company also disaggregates operating revenues by segment.

The tables that follow present the disaggregated operating revenues for the periods indicated:

	For the Three Months ended June 30, 2022
	Segments
(in thousands)	Index		Analytics		ESG and Climate		All Other - Private Assets		Total
Operating Revenue Types
Recurring subscriptions	$	179,711	$	139,497	$	54,037	$	33,804	$	407,049
Asset-based fees		132,216		—		—		—		132,216
Non-recurring		9,022		2,187		1,091		241		12,541
Total	$	320,949	$	141,684	$	55,128	$	34,045	$	551,806

	For the Six Months ended June 30, 2022
	Segments
(in thousands)	Index		Analytics		ESG and Climate		All Other - Private Assets		Total
Operating Revenue Types
Recurring subscriptions	$	354,209	$	277,296	$	104,609	$	70,695	$	806,809
Asset-based fees		277,269		—		—		—		277,269
Non-recurring		20,230		4,185		2,548		710		27,673
Total	$	651,708	$	281,481	$	107,157	$	71,405	$	1,111,751

	For the Three Months ended June 30, 2021
	Segments
(in thousands)	Index		Analytics		ESG and Climate		All Other - Private Assets		Total
Operating Revenue Types
Recurring subscriptions	$	160,061	$	133,368	$	38,567	$	16,134	$	348,130
Asset-based fees		136,142		—		—		—		136,142
Non-recurring		9,760		2,534		741		873		13,908
Total	$	305,963	$	135,902	$	39,308	$	17,007	$	498,180

	For the Six Months ended June 30, 2021
	Segments
(in thousands)	Index		Analytics		ESG and Climate		All Other - Private Assets		Total
Operating Revenue Types
Recurring subscriptions	$	315,178	$	265,040	$	72,707	$	32,937	$	685,862
Asset-based fees		262,848		—		—		—		262,848
Non-recurring		20,428		4,879		1,351		1,235		27,893
Total	$	598,454	$	269,919	$	74,058	$	34,172	$	976,603

The tables that follow present the change in accounts receivable and current deferred revenue between the dates indicated:

	Accounts receivable			Deferred revenue
	(in thousands)
Opening (December 31, 2021)	$	664,511		$	824,912
Closing (June 30, 2022)		586,815			808,020
Increase/(decrease)	$	(77,696	)	$	(16,892	)

	Accounts receivable			Deferred revenue
	(in thousands)
Opening (December 31, 2020)	$	558,569		$	675,870
Closing (June 30, 2021)		488,570			662,168
Increase/(decrease)	$	(69,999	)	$	(13,702	)

The amounts of revenue recognized in the periods that were included in the opening current deferred revenue, which reflects contract liability amounts, were $232.9 million and $572.6 million for the three and six months ended June 30, 2022, respectively and $208.3 million and $478.6 million for the three and six months ended June 30, 2021, respectively. The difference between the opening and closing balances of the Company’s deferred revenue is primarily driven by an increase in amortization of deferred revenue to operating revenues, partially offset by an increase in billings. As of June 30, 2022 and December 31, 2021, the Company carried a long-term deferred revenue balance of $26.5 million and $23.4 million, respectively, in “Other non-current liabilities” on the Unaudited Condensed Consolidated Statement of Financial Condition.

For contracts that have a duration of one year or less, the Company has not disclosed either the remaining performance obligation as of the end of the reporting period or when the Company expects to recognize the revenue. The remaining performance obligations for contracts that have a duration of greater than one year and the periods in which they are expected to be recognized are as follows:

	As of
	June 30,
	2022
	(in thousands)
First 12-month period	$	538,308
Second 12-month period		311,282
Third 12-month period		115,464
Periods thereafter		63,060
Total	$	1,028,114

4. EARNINGS PER COMMON SHARE

Basic earnings per share (“EPS”) is computed by dividing net income by the weighted average number of common shares outstanding during the period. Diluted EPS reflects the assumed conversion of all dilutive securities, including, when applicable, restricted stock units (“RSUs”), performance stock units (“PSUs”) and performance stock options (“PSOs”).

The following table presents the computation of basic and diluted EPS:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
(in thousands, except per share data)
Net income	$	210,587	$	165,423	$	439,010	$	362,242

Basic weighted average common shares outstanding		80,923		82,454		81,255		82,546
Effect of dilutive securities:
PSUs, RSUs and PSOs		372		841		534		847
Diluted weighted average common shares outstanding		81,295		83,295		81,789		83,393

Earnings per basic common share	$	2.60	$	2.01	$	5.40	$	4.39

Earnings per diluted common share	$	2.59	$	1.99	$	5.37	$	4.34

5. ACQUISITIONS

On September 13, 2021, MSCI acquired all of the issued and outstanding preferred and common shares of Real Capital Analytics, Inc (“RCA”) for an aggregate cash purchase price of $949.0 million. This acquisition expands MSCI’s suite of real estate solutions, providing the real estate industry with data, analytics, and support tools to manage investments and understand performance and risk, including climate risk, within their portfolios. RCA has been accounted for as a business combination using the acquisition

method of accounting and has been integrated into the All Other – Private Assets reportable segment, as a component of the Real Assets operating segment. A portion of RCA’s client agreements do not have automatic renewal clauses at the end of the subscription period. Due to the historically high retention rate and expectation that a substantial portion of the client agreements will be renewed, the associated revenue is recorded as recurring subscription revenue.

The components of the preliminary purchase price allocation were as follows:


	Estimated Useful Life	Fair Value
		(in thousands)
Accounts receivable		$	9,700
Other current assets			3,721
Property, equipment and leasehold improvements, net			1,204
Right of use assets			6,441
Other non-current assets			3,408
Deferred revenue			(35,194	)
Other current liabilities			(15,312	)
Long-term operating lease liabilities			(4,849	)
Deferred tax liabilities			(85,196	)
Intangible assets:
Proprietary data	11 years		185,500
Customer relationships	20 years		175,800
Acquired technology and software	9 years		31,500
Trademarks	2 years		890
Goodwill			671,346
Purchase price, net of cash acquired		$	948,959

The purchase price allocation is based on preliminary valuations and assessments. The estimates and assumptions used may be subject to change within the measurement period, particularly for acquired intangible assets and deferred taxes. In the fourth quarter of 2021, the Company early adopted ASU 2021-08, which resulted in an increase to deferred revenue and goodwill and a decrease in deferred tax liabilities recorded as of the opening balance sheet date.

The recorded goodwill is primarily attributable to the utilization of the acquired data as well as expanded market opportunities. Goodwill attributable to the acquisition is not deductible for income tax purposes.

Revenue of RCA recognized within the condensed consolidated financial statements was $19.3 million and $38.5 million for the three and six months ended June 30, 2022, respectively.

6. PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS, NET

Property, equipment and leasehold improvements, net consisted of the following as of the dates indicated:

	As of
	June 30,			December 31,
	2022			2021
	(in thousands)
Computer & related equipment	$	180,390		$	179,557
Furniture & fixtures		14,679			14,194
Leasehold improvements		56,597			56,308
Work-in-process		2,154			2,699
Subtotal		253,820			252,758
Accumulated depreciation and amortization		(194,430	)		(186,043	)
Property, equipment and leasehold improvements, net	$	59,390		$	66,715

Depreciation and amortization expense of property, equipment and leasehold improvements was $6.8 million and $7.0 million for the three months ended June 30, 2022 and 2021, respectively. Depreciation and amortization expense of property, equipment and leasehold improvements was $13.3 million and $14.2 million for the six months ended June 30, 2022 and 2021, respectively.

7. GOODWILL AND INTANGIBLE ASSETS, NET

Goodwill

The following table presents goodwill by reportable segment:

(in thousands)	Index			Analytics		ESG and Climate		All Other - Private Assets				Total
Goodwill at December 31, 2021	$	1,205,443		$	290,976	$	48,047	$	691,920			$	2,236,386
Acquisitions⁽¹⁾		—			—		—		472		⁽¹⁾		472
Foreign exchange translation adjustment		(3,529	)		—		—		(2,175	)			(5,704	)
Goodwill at June 30, 2022	$	1,201,914		$	290,976	$	48,047	$	690,217			$	2,231,154

⁽¹⁾	Reflects the impact of measurement period adjustments associated with the acquisition of RCA.

Intangible Assets, Net

The following table presents the amount of amortization expense related to intangible assets by category for the periods indicated:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
(in thousands)	2022		2021		2022		2021
Amortization expense of acquired intangible assets	$	15,854	$	8,376	$	31,752	$	16,744
Amortization expense of internally developed capitalized software		6,325		6,007		12,147		12,707
Write-off of internally developed capitalized software		—		16,013		—		16,013
Total amortization of intangible assets expense	$	22,179	$	30,396	$	43,899	$	45,464

The gross carrying and accumulated amortization amounts related to the Company’s intangible assets were as follows:

	As of
	June 30,			December 31,
	2022			2021
	(in thousands)
Gross intangible assets:
Customer relationships	$	532,500		$	532,400
Proprietary data		220,778			220,639
Acquired technology and software		209,220			209,220
Trademarks		208,190			208,190
Internally developed capitalized software		135,824			106,181
Subtotal		1,306,512			1,276,630
Foreign exchange translation adjustment		(12,216	)		(5,782	)
Total gross intangible assets	$	1,294,296		$	1,270,848
Accumulated amortization:
Customer relationships	$	(293,163	)	$	(277,865	)
Proprietary data		(32,284	)		(22,678	)
Acquired technology and software		(177,776	)		(175,718	)
Trademarks		(157,256	)		(152,468	)
Internally developed capitalized software		(61,566	)		(49,394	)
Subtotal		(722,045	)		(678,123	)
Foreign exchange translation adjustment		4,111			616
Total accumulated amortization	$	(717,934	)	$	(677,507	)
Net intangible assets:
Customer relationships	$	239,337		$	254,535
Proprietary data		188,494			197,961
Acquired technology and software		31,444			33,502
Trademarks		50,934			55,722
Internally developed capitalized software		74,258			56,787
Subtotal		584,467			598,507
Foreign exchange translation adjustment		(8,105	)		(5,166	)
Total net intangible assets	$	576,362		$	593,341

The following table presents the estimated amortization expense for the remainder of the year ending December 31, 2022 and succeeding years:

Years Ending December 31,	Amortization Expense
	(in thousands)
Remainder of 2022	$	47,345
2023		90,144
2024		83,022
2025		57,191
2026		37,065
Thereafter		261,595
Total	$	576,362

8. COMMITMENTS AND CONTINGENCIES

As of June 30, 2022, the Company had outstanding an aggregate of $4,200.0 million in senior unsecured notes (collectively, the “Senior Notes”) and an aggregate of $350.0 million in senior unsecured tranche A term loans (the “Tranche A Term Loans”) under the term loan A facility (the “TLA Facility”), as presented in the table below:

		Principal Amount Outstanding at		Carrying Value at		Carrying Value at		Fair Value at		Fair Value at
	Maturity Date	June 30, 2022		June 30, 2022		December 31, 2021		June 30, 2022		December 31, 2021
	(in thousands)
Debt
4.000% senior unsecured notes due 2029	November 15, 2029		1,000,000		992,000		991,455		889,250		1,047,950
3.625% senior unsecured notes due 2030	September 1, 2030		900,000		894,594		894,263		753,390		924,777
3.875% senior unsecured notes due 2031	February 15, 2031		1,000,000		990,520		989,973		855,950		1,046,620
3.625% senior unsecured notes due 2031	November 1, 2031		600,000		593,867		593,538		498,282		625,536
3.250% senior unsecured notes due 2033	August 15, 2033		700,000		692,528		692,193		559,160		710,906
Variable rate Tranche A Term Loans due 2027	February 16, 2027		350,000		348,361		—		346,500		—
Total debt		$	4,550,000	$	4,511,870	$	4,161,422	$	3,902,532	$	4,355,789

Interest payments attributable to the Company’s outstanding indebtedness are due as presented in the following table:

	Interest payment frequency	First interest payment date
Senior Notes and Tranche A Term Loans
4.000% senior unsecured notes due 2029	Semi-Annual	May 15
3.625% senior unsecured notes due 2030	Semi-Annual	March 1
3.875% senior unsecured notes due 2031	Semi-Annual	June 1
3.625% senior unsecured notes due 2031	Semi-Annual	May 1
3.250% senior unsecured notes due 2033	Semi-Annual	February 15
Variable rate Tranche A Term Loans due 2027¹	Quarterly	October 15

⁽¹⁾The first payment will occur on October 15, 2022.

The fair market value of the Company’s debt obligations represent Level 2 valuations. The Company utilizes the market approach and obtains security pricing from a vendor who uses broker quotes and third-party pricing services to determine fair values.

Credit Agreement. Since November 20, 2014, the Company has maintained a revolving credit agreement with a syndicate of banks. On June 9, 2022, the Company, the guarantors party thereto and the lenders and agents party thereto, entered into an Amended and Restated Credit Agreement (the “Credit Agreement”), amending and restating in its entirety the Company’s prior revolving credit agreement (the “Prior Revolving Credit Agreement”). The Credit Agreement makes available to the Company (x) an aggregate of $500.0 million of revolving loan commitments, which may be drawn until February 16, 2027, and (y) the TLA Facility. At June 30, 2022, the revolving loan commitments were undrawn. As noted above, at June 30, 2022, the commitments under the TLA Facility were drawn in full, and the resulting Tranche A Term Loans mature on February 16, 2027. The obligations under the Credit Agreement are general unsecured obligations of the Company and the guarantors.

Interest on the Tranche A Term Loans under the TLA Facility accrues, at a variable rate, based on the secured overnight funding rate (“SOFR”) or the alternate base rate (“Base Rate”), plus, in each case, an applicable margin and will be due on each Interest Payment Date (as defined in the Credit Agreement). Until the delivery of financial statements to the administrative agent for the three months ending June 30, 2022, the applicable margin is 1.00% for Base Rate loans, and 2.00% for SOFR loans. Thereafter, the applicable margin is calculated by reference to the Company’s Consolidated Leverage Ratio (as defined in the Credit Agreement) and ranges between 1.50% to 2.00% for SOFR loans, and 0.50% to 1.00% for Base Rate loans. At June 30, 2022, the interest rate on the TLA Facility was 3.28%.

In connection with the closings of the Senior Notes offerings, entry into the Prior Revolving Credit Agreement and the subsequent amendments thereto and entry into the Credit Agreement, the Company paid certain financing fees which, together with the existing fees related to prior credit facilities, are being amortized over their related lives. At June 30, 2022, $40.5 million of the deferred financing fees and premium remain unamortized, $0.5 million of which is included in “Prepaid and other assets,” $1.9 million of which is included in “Other non-current assets” and $38.1 million of which is included in “Long-term debt” on the Unaudited Condensed Consolidated Statement of Financial Condition.

9. LEASES

The Company recognized $7.5 million of operating lease expenses for each of the three months ended June 30, 2022 and 2021. The Company recognized $15.1 million of operating lease expenses for each of the six months ended June 30, 2022 and 2021. The amounts associated with variable lease costs, short-term lease costs and sublease income were not material for any of the three and six months ended June 30, 2022 and 2021.

Maturities of the Company’s operating lease liabilities as of June 30, 2022 are as follows:

Maturity of Lease Liabilities	Operating
(in thousands)	Leases
Remainder of 2022	$	13,895
2023		29,357
2024		22,322
2025		21,153
2026		19,460
Thereafter		73,176
Total lease payments	$	179,363
Less: Interest		(22,152	)
Present value of lease liabilities	$	157,211

Other accrued liabilities	$	24,717
Long-term operating lease liabilities	$	132,494

Weighted-average remaining lease term and discount rate for the Company’s operating leases are as follows:

	As of
	June 30,			December 31,
Lease Term and Discount Rate	2022			2021
Weighted-average remaining lease term (years)		7.92			8.16
Weighted-average discount rate		3.14	%		3.09	%

Other information related to the Company’s operating leases are as follows:

	Six Months Ended
Other Information	June 30,
(in thousands)	2022		2021
Operating cash flows used for operating leases	$	14,227	$	15,239
Right of use assets obtained in exchange for new operating lease liabilities	$	2,905	$	5,074

10. SHAREHOLDERS’ EQUITY (DEFICIT)

Return of capital

On October 29, 2020, the Board of Directors authorized a stock repurchase program for the purchase of up to $1,000.0 million worth of shares of MSCI’s common stock in addition to the $804.5 million of authorization then remaining under a previously existing share repurchase program (the “2020 Repurchase Program”) for a total of $1,804.5 million of stock repurchase authorization.

Share repurchases made pursuant to the 2020 Repurchase Program may take place in the open market or in privately negotiated transactions from time to time based on market and other conditions. This authorization may be modified, suspended or terminated by the Board of Directors at any time without prior notice. As of June 30, 2022, there was $539.5 million of available authorization remaining under the 2020 Repurchase Program.

The following table provides information with respect to repurchases of the Company’s common stock made on the open market:

Six Months Ended	Average Price Paid Per Share		Total Number of Shares Repurchased		Dollar Value of Shares Repurchased
			(in thousands)
June 30, 2022	$	480.68		2,184	$	1,049,651
June 30, 2021	$	407.70		330	$	134,340

The following table presents dividends declared per common share as well as total amounts declared, distributed and deferred for the periods indicated:

	Dividends
(in thousands, except per share amounts)	Per Share		Declared		Distributed		(Released)/Deferred
2022
Three Months Ended March 31,	$	1.04	$	87,280	$	87,846	$	(566	)
Three Months Ended June 30,	1.04			84,593		84,189		404
Total	$	2.08	$	171,873	$	172,035	$	(162	)
2021
Three Months Ended March 31,	$	0.78	$	65,947	$	66,153	$	(206	)
Three Months Ended June 30,	0.78			64,863		64,489		374
Total	$	1.56	$	130,810	$	130,642	$	168

Common Stock.

The following table presents activity related to shares of common stock issued and repurchased during the six months ended June 30, 2022:

	Common Stock		Treasury			Common Stock
	Issued		Stock			Outstanding
Balance at December 31, 2021		133,162,178		(50,722,729	)		82,439,449
Dividend payable/paid		82		—			82
Common stock issued		417,508		—			417,508
Shares withheld for tax withholding		—		(190,766	)		(190,766	)
Shares repurchased under stock repurchase programs		—		(1,498,143	)		(1,498,143	)
Shares issued to directors		41		(41	)		—
Balance at March 31, 2022		133,579,809		(52,411,679	)		81,168,130
Dividend payable/paid		23		—			23
Common stock issued		20,178		—			20,178
Shares withheld for tax withholding		—		(9,749	)		(9,749	)
Shares repurchased under stock repurchase programs		—		(685,522	)		(685,522	)
Shares issued to directors		4,122		(924	)		3,198
Balance at June 30, 2022		133,604,132		(53,107,874	)		80,496,258

11. INCOME TAXES

The Company’s provision for income taxes was $70.0 million and $49.5 million for the six months ended June 30, 2022 and 2021, respectively. These amounts reflect effective tax rates of 13.7% and 12.0% for the six months ended June 30, 2022 and 2021, respectively.

The effective tax rate of 13.7% for the six months ended June 30, 2022 reflects the Company’s estimate of the effective tax rate for the period and was impacted by certain favorable discrete items totaling $27.2 million, primarily related to $28.3 million of excess tax benefits recognized on share-based compensation vested during the period.

The effective tax rate of 12.0% for the six months ended June 30, 2021 reflects the Company’s estimate of the effective tax rate for the period and was impacted by certain favorable discrete items totaling $34.2 million, primarily related to $21.4 million of excess tax benefits recognized on share-based compensation vested during the period and $5.6 million related to the tax impact of loss on debt extinguishment recognized during the period on the redemption of the Company’s 4.750% senior unsecured notes due 2026 (the “2026 Senior Notes”). Also included in the discrete items is a $2.3 million benefit related to the revaluation of deferred taxes as a result of the enactment of an increase in the UK corporate tax rate, a $2.1 million benefit related to the filing of prior year refund claims and $2.8 million of tax benefits related to other prior year items.

The Company is under or open to examination by the IRS and other tax authorities in certain jurisdictions, including foreign jurisdictions, such as the United Kingdom, Switzerland and India, and states in the United States in which the Company has significant operations, such as New York and California. The tax years currently under or open to examination vary by jurisdiction but include years ranging from 2008 onwards.

The Company regularly assesses the likelihood of additional assessments in each of the taxing jurisdictions in which it files income tax returns. The Company has established unrecognized tax benefits that the Company believes are adequate in relation to the potential for additional assessments. Once established, the Company adjusts unrecognized tax benefits only when more information is available or when an event occurs necessitating a change. Based on the current status of income tax audits, the Company believes it is reasonably possible that the total amount of unrecognized benefits may decrease by approximately $29.4 million in the next twelve months as a result of the resolution of tax examinations.

12. SEGMENT INFORMATION

The Company has five operating segments: Index, Analytics, ESG and Climate, Real Assets and The Burgiss Group, LLC (“Burgiss”), which are presented as the following four reportable segments: Index, Analytics, ESG and Climate and All Other – Private Assets. During the three months ended June 30, 2022, the Company renamed the Real Estate operating segment to Real Assets.

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., Exchange Traded Funds (“ETFs”), mutual funds, annuities, futures, options, structured products and 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 Assets 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 Assets performance and risk analytics range from enterprise-wide to property-specific analysis. The Real Assets operating segment also provides business intelligence products to real estate owners, managers, developers and brokers worldwide.

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 Chief Operating Decision Maker (“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 certain non-recurring acquisition-related integration and transaction costs, 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 following table presents operating revenues by reportable segment for the periods indicated:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
	(in thousands)
Operating revenues
Index	$	320,949	$	305,963	$	651,708	$	598,454
Analytics		141,684		135,902		281,481		269,919
ESG and Climate		55,128		39,308		107,157		74,058
All Other - Private Assets		34,045		17,007		71,405		34,172
Total	$	551,806	$	498,180	$	1,111,751	$	976,603

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

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
	(in thousands)
Index Adjusted EBITDA	$	245,170	$	233,468	$	491,045	$	453,347
Analytics Adjusted EBITDA		62,961		49,814		113,850		95,545
ESG and Climate Adjusted EBITDA		14,332		5,720		26,424		10,765
All Other - Private Assets Adjusted EBITDA		8,681		5,947		18,369		11,878
Total operating segment profitability		331,144		294,949		649,688		571,535
Amortization of intangible assets		22,179		30,396		43,899		45,464
Depreciation and amortization of property, equipment and leasehold improvements		6,765		7,020		13,299		14,163
Acquisition-related integration and transaction costs ⁽¹⁾		1,819		—		3,131		—
Operating income		300,381		257,533		589,359		511,908
Other expense (income), net		40,349		61,838		80,384		100,185
Provision for income taxes		49,445		30,272		69,965		49,481
Net income	$	210,587	$	165,423	$	439,010	$	362,242

⁽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 operating revenues by geographic area for the periods indicated:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
		2022		2021	2022		2021
	(in thousands)
Operating revenues
Americas:
United States	$	229,732	$	200,781	$	463,088	$	397,470
Other		23,642		21,026		46,109		41,199
Total Americas		253,374		221,807		509,197		438,669

Europe, the Middle East and Africa ("EMEA"):
United Kingdom		89,187		84,802		176,173		163,883
Other		122,515		113,258		254,088		219,452
Total EMEA		211,702		198,060		430,261		383,335

Asia & Australia:
Japan		22,843		22,993		46,033		44,635
Other		63,887		55,320		126,260		109,964
Total Asia & Australia		86,730		78,313		172,293		154,599

Total	$	551,806	$	498,180	$	1,111,751	$	976,603

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
	June 30,		December 31,
	2022		2021
	(in thousands)
Long-lived assets
Americas:
United States	$	176,146	$	167,870
Other		12,656		13,480
Total Americas		188,802		181,350

EMEA:
United Kingdom		19,230		19,563
Other		25,831		34,240
Total EMEA		45,061		53,803

Asia & Australia:
Japan		791		1,150
Other		26,269		31,873
Total Asia & Australia		27,060		33,023

Total	$	260,923	$	268,176

13. SUBSEQUENT EVENTS

On July 25, 2022, the Board of Directors declared a quarterly cash dividend of $1.25 per share for the three months ending September 30, 2022 (“third quarter 2022”). The third quarter 2022 dividend is payable on August 31, 2022 to shareholders of record as of the close of trading on August 12, 2022.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of the financial condition and results of operations should be read in conjunction with the condensed consolidated financial statements and related notes included elsewhere in this Form 10-Q and in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 (the “Form 10-K”). This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed in “Item 1A.—Risk Factors,” in our Form 10-K.

Except as the context otherwise indicates, the terms “MSCI,” the “Company,” “we,” “our” and “us” refer to MSCI Inc., together with its subsidiaries.

Overview

We are a leading provider of critical decision support tools and solutions for the global investment community. Our mission-critical offerings help investors address the challenges of a transforming investment landscape and power better investment decisions. Leveraging our knowledge of the global investment process and our expertise in research, data and technology, we enable our clients to understand and analyze key drivers of risk and return and confidently and efficiently build more effective portfolios. We operate in four reportable segments as follows: Index, Analytics, ESG and Climate, and All Other – Private Assets.

Our growth strategy includes: (a) extending leadership in research-enhanced content across asset classes, (b) leading the enablement of ESG and climate investment integration, (c) enhancing distribution and content-enabling technology, (d) expanding solutions that empower client customization, (e) strengthening client relationships and growing into strategic partnerships with clients and (f) executing strategic relationships and acquisitions with complementary content and technology companies. For more information about our Company’s operations, see “Item 1: Business” in our Form 10-K.

As of June 30, 2022, we served over 6,500¹ clients in more than 95 countries.

Our principal business model is generally to license annual, recurring subscriptions for the majority of our Index, Analytics and ESG and Climate products and services for a fee due in advance of the service period. Real Assets products are also licensed annually through subscriptions, which are generally recurring, for a fee which is paid in advance when products are generally delivered ratably over the subscription period or in arrears after the product is delivered. A portion of our fees comes from clients who use our indexes as the basis for index-linked investment products. Such fees are primarily based on a client’s assets under management (“AUM”), trading volumes and fee levels.

In evaluating our financial performance, we focus on revenue and profit growth, including results accounted for under generally accepted accounting principles in the United States (“GAAP”) as well as non-GAAP measures, for the Company as a whole and by operating segment.

We present revenues disaggregated by types and by segments, which represent our major product lines. We also review expenses by activity, which provides more transparency into how resources are being deployed. In addition, we utilize operating metrics including Run Rate, subscription sales and Retention Rate to manage and assess performance and to provide deeper insights into the recurring portion of our business.

In the discussion that follows, we provide certain variances excluding the impact of foreign currency exchange rate fluctuations and acquisitions. Foreign currency exchange rate fluctuations reflect the difference between the current period results as reported compared to the current period results recalculated using the foreign currency exchange rates in effect for the comparable prior period. While operating revenues adjusted for the impact of foreign currency fluctuations includes asset-based fees that have been adjusted for the impact of foreign currency fluctuations, the underlying AUM, which is the primary component of asset-based fees, is not adjusted for foreign currency fluctuations. Approximately three-fifths of the AUM is invested in securities denominated in currencies other than the U.S. dollar, and accordingly, any such impact is excluded from the disclosed foreign currency-adjusted variances.

For the six months ended June 30, 2022, our largest client organization by revenue, BlackRock, accounted for 10.8% of our total revenues, with 95.5% of the revenue from BlackRock coming from fees based on the assets in BlackRock’s ETFs that are based on our indexes.

The discussion of our results of operations for the three and six months ended June 30, 2022 and 2021 are presented below. The results of operations for interim periods may not be indicative of future results.

¹	Represents the aggregate of all related clients under their respective parent entity.

Results of Operations

Operating Revenues

Our operating revenues are grouped by the following types: recurring subscriptions, asset-based fees and non-recurring. We also group operating revenues by major product or reportable segment as follows: Index, Analytics, ESG and Climate and All Other – Private Assets, which includes the Real Assets operating segment (formerly known as the Real Estate operating segment).

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

	Three Months Ended							Six Months Ended
	June 30,							June 30,
	2022		2021		% Change			2022		2021		% Change
	(in thousands)
Recurring subscriptions	$	407,049	$	348,130		16.9	%	$	806,809	$	685,862		17.6	%
Asset-based fees		132,216		136,142		(2.9	%)		277,269		262,848		5.5	%
Non-recurring		12,541		13,908		(9.8	%)		27,673		27,893		(0.8	%)
Total operating revenues	$	551,806	$	498,180		10.8	%	$	1,111,751	$	976,603		13.8	%

Total operating revenues increased 10.8% for the three months ended June 30, 2022 compared to the three months ended June 30, 2021. Adjusting for the impact of acquisitions and foreign currency exchange rate fluctuations individually, total operating revenues would have increased 6.8% and 12.4%, respectively.

Operating revenues from recurring subscriptions increased 16.9% for the three months ended June 30, 2022 compared to the three months ended June 30, 2021, primarily driven by strong growth in Index products, which increased $19.7 million, or 12.3%, strong growth in All Other – Private Assets products, which increased $17.7 million, or 109.5%, mainly reflecting the acquisition of RCA, and strong growth in ESG and Climate products, which increased $15.5 million, or 40.1%. Adjusting for the impact of the acquisition and foreign currency exchange rate fluctuations, operating revenues from recurring subscriptions would have increased 13.4%.

Operating revenues from asset-based fees decreased 2.9% for the three months ended June 30, 2022 compared to the three months ended June 30, 2021, driven by a decline in revenues from ETFs linked to MSCI equity indexes and non-ETF indexed funds linked to MSCI indexes, partially offset by an increase in revenues from exchange traded futures and options contracts linked to MSCI indexes. Operating revenues from ETFs linked to MSCI equity indexes decreased by 5.2%, primarily driven by a decrease in average AUM and average basis point fees. Operating revenues from non-ETF indexed funds linked to MSCI indexes decreased by 7.0%, primarily driven by adjustments to revenue related to lower period over period client-reported AUM balances. Operating revenues from exchange traded futures and options contracts linked to MSCI indexes increased 26.6%, driven by volume increases.

Total operating revenues increased 13.8% for the six months ended June 30, 2022 compared to the six months ended June 30, 2021. Adjusting for the impact of acquisitions and foreign currency exchange rate fluctuations individually, total operating revenues would have increased 9.8% and 15.0%, respectively.

Operating revenues from recurring subscriptions increased 17.6% for the six months ended June 30, 2022 compared to the six months ended June 30, 2021, primarily driven by strong growth in Index products, which increased $39.0 million, or 12.4%, strong growth in All Other – Private Assets products, which increased $37.8 million, or 114.6%, mainly reflecting the acquisition of RCA, and strong growth in ESG and Climate products, which increased $31.9 million, or 43.9%. Adjusting for the impact of the acquisition and foreign currency exchange rate fluctuations, operating revenues from recurring subscriptions would have increased 13.5%.

Operating revenues from asset-based fees increased 5.5% for the six months ended June 30, 2022 compared to the six months ended June 30, 2021, driven by growth in operating revenues from all index-linked investment product categories. Operating revenues from non-ETF indexed funds linked to MSCI indexes increased by 7.7%, primarily driven by an increase in average AUM, partially offset by a decrease in average basis point fees. The increase in operating revenues from asset-based fees was also driven by a 18.1% increase in exchange traded futures and options contracts linked to MSCI indexes, driven by volume increases. Operating revenues from ETFs linked to MSCI equity indexes increased by 2.5%, primarily driven by an increase in average AUM, partially offset by a decrease in average basis point fees.

The following table presents the value of AUM in ETFs linked to MSCI equity indexes and the sequential change of such assets as of the end of each of the periods indicated:

	Period Ended
	2021									2022
(in billions)	March 31,		June 30,		September 30,			December 31,		March 31,			June 30,
AUM in ETFs linked to MSCI equity indexes⁽^{1), (2)}	$	1,209.6	$	1,336.2	$	1,336.6		$	1,451.6	$	1,389.3		$	1,189.5
Sequential Change in Value
Market Appreciation/(Depreciation)	$	43.2	$	73.7	$	(30.7	)	$	56.5	$	(89.7	)	$	(207.3	)
Cash Inflows		62.8		52.9		31.1			58.5		27.4			7.5
Total Change	$	106.0	$	126.6	$	0.4		$	115.0	$	(62.3	)	$	(199.8	)

The following table presents the average value of AUM in ETFs linked to MSCI equity indexes for the periods indicated:

	2021								2022
(in billions)	March		June		September		December		March		June
AUM in ETFs linked to MSCI equity indexes⁽^{1), (2)}
Quarterly average	$	1,169.2	$	1,292.4	$	1,361.9	$	1,414.8	$	1,392.5	$	1,285.4
Year-to-date average	$	1,169.2	$	1,230.8	$	1,274.5	$	1,309.6	$	1,392.5	$	1,338.9

⁽¹⁾

The historical values of the AUM in ETFs linked to our equity indexes as of the last day of the month and the monthly average balance can be found under the link “AUM in ETFs Linked to MSCI Equity Indexes” on our Investor Relations homepage at http://ir.msci.com. This information is updated mid-month each month. Information contained on our website is not incorporated by reference into this Quarterly Report on Form 10-Q or any other report filed with the SEC. The AUM in ETFs also includes AUM in Exchange Traded Notes, the value of which is less than 1.0% of the AUM amounts presented.

⁽²⁾	The value of AUM in ETFs linked to MSCI equity indexes is calculated by multiplying the equity ETF net asset value by the number of shares outstanding.

The average value of AUM in ETFs linked to MSCI equity indexes for the three months ended June 30, 2022, was down $7.0 billion, or 0.5%, compared to the three months ended June 30, 2021. For the six months ended June 30, 2022, it was up $108.1 billion, or 8.8%, compared to the six months ended June 30, 2021.

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

	Three Months Ended							Six Months Ended
	June 30,							June 30,
	2022		2021		% Change			2022		2021		% Change
	(in thousands)
Operating revenues:
Index
Recurring subscriptions	$	179,711	$	160,061		12.3	%	$	354,209	$	315,178		12.4	%
Asset-based fees		132,216		136,142		(2.9	%)		277,269		262,848		5.5	%
Non-recurring		9,022		9,760		(7.6	%)		20,230		20,428		(1.0	%)
Index total		320,949		305,963		4.9	%		651,708		598,454		8.9	%

Analytics
Recurring subscriptions		139,497		133,368		4.6	%		277,296		265,040		4.6	%
Non-recurring		2,187		2,534		(13.7	%)		4,185		4,879		(14.2	%)
Analytics total		141,684		135,902		4.3	%		281,481		269,919		4.3	%

ESG and Climate
Recurring subscriptions		54,037		38,567		40.1	%		104,609		72,707		43.9	%
Non-recurring		1,091		741		47.2	%		2,548		1,351		88.6	%
ESG and Climate total		55,128		39,308		40.2	%		107,157		74,058		44.7	%

All Other - Private Assets
Recurring subscriptions		33,804		16,134		109.5	%		70,695		32,937		114.6	%
Non-recurring		241		873		(72.4	%)		710		1,235		(42.5	%)
All Other - Private Assets total		34,045		17,007		100.2	%		71,405		34,172		109.0	%
Total operating revenues	$	551,806	$	498,180		10.8	%	$	1,111,751	$	976,603		13.8	%

Refer to the section titled “Segment Results” that follows for further discussion of segment revenues.

Operating Expenses

We group our operating expenses into the following activity categories:

•

Cost of revenues;

•

Selling and marketing;

•

Research and development (“R&D”);

•

General and administrative (“G&A”);

•

Amortization of intangible assets; and

•

Depreciation and amortization of property, equipment and leasehold improvements.

Costs are assigned to these activity categories based on the nature of the expense or, when not directly attributable, an estimated allocation based on the type of effort involved. Cost of revenues, selling and marketing, R&D and G&A all include both compensation as well as non-compensation related expenses.

The following table presents operating expenses by activity category for the periods indicated:

	Three Months Ended							Six Months Ended
	June 30,							June 30,
	2022		2021		% Change			2022		2021		% Change
	(in thousands)
Operating expenses:
Cost of revenues	$	100,768	$	87,327		15.4	%	$	203,539	$	173,107		17.6	%
Selling and marketing		61,073		58,191		5.0	%		127,126		114,658		10.9	%
Research and development		23,916		27,531		(13.1	%)		52,238		52,393		(0.3	%)
General and administrative		36,724		30,182		21.7	%		82,291		64,910		26.8	%
Amortization of intangible assets		22,179		30,396		(27.0	%)		43,899		45,464		(3.4	%)
Depreciation and amortization of property, equipment and leasehold improvements		6,765		7,020		(3.6	%)		13,299		14,163		(6.1	%)
Total operating expenses	$	251,425	$	240,647		4.5	%	$	522,392	$	464,695		12.4	%

Total operating expenses increased 4.5% for the three months ended June 30, 2022 compared to the three months ended June 30, 2021. Adjusting for the impact of foreign currency exchange rate fluctuations, the increase would have been 8.4%.

Total operating expenses increased 12.4% for the six months ended June 30, 2022 compared to the six months ended June 30, 2021. Adjusting for the impact of foreign currency exchange rate fluctuations, the increase would have been 15.4%.

Cost of Revenues

Cost of revenues expenses consist of costs related to the production and servicing of our products and services and primarily includes related information technology costs, including data center, cloud service, platform and infrastructure costs; costs to acquire, produce and maintain market data information; costs of research to support and maintain existing products; costs of product management teams; costs of client service and consultant teams to support customer needs; as well as other support costs directly attributable to the cost of revenues including certain human resources, finance and legal costs.

Cost of revenues increased 15.4% for the three months ended June 30, 2022 compared to the three months ended June 30, 2021, primarily driven by increases across the All Other – Private Assets, ESG and Climate, and Index reportable segments. The change was driven by increases in non-compensation costs, primarily relating to higher information technology costs, market data costs and professional fees, as well as higher compensation and benefits costs, primarily reflecting higher wages and salaries as a result of increased headcount.

Cost of revenues increased 17.6% for the six months ended June 30, 2022 compared to the six months ended June 30, 2021, reflecting increases across all reportable segments. The change was driven by increases in compensation and benefits costs, primarily relating to higher wages and salaries and benefits costs as a result of increased headcount as well as higher non-compensation costs, primarily reflecting higher information technology costs, professional fees and market data costs.

Selling and Marketing

Selling and marketing expenses consist of costs associated with acquiring new clients or selling new products or product renewals to existing clients and primarily includes the costs of our sales and marketing teams, as well as costs incurred in other departments associated with acquiring new business, including product management, research, technology and sales operations.

Selling and marketing expenses increased 5.0% for the three months ended June 30, 2022 compared to the three months ended June 30, 2021, reflecting increases across the All Other – Private Assets and ESG and Climate reportable segments, partially offset by decreases in the Analytics and Index reportable segments. The change was primarily driven by increases in non-compensation costs, primarily relating to higher marketing costs and travel and entertainment costs, as well as higher compensation and benefits costs, primarily reflecting higher wages and salaries and benefits costs driven by increased headcount, partially offset by lower incentive compensation.

Selling and marketing expenses increased 10.9% for the six months ended June 30, 2022 compared to the six months ended June 30, 2021, primarily driven by increases across the All Other – Private Assets and ESG and Climate reportable segments. The change was primarily driven by increases in compensation and benefits costs, primarily relating to higher wages and salaries and benefits costs, driven by increased headcount, partially offset by lower severance costs. The change was also driven by higher non-compensation costs, primarily reflecting higher marketing costs and travel and entertainment costs.

Research and Development

R&D expenses consist of costs to develop new or enhance existing products and the costs to develop new or enhanced technologies and service platforms for the delivery of our products and services and primarily include the costs of development, research, product management, project management and the technology support directly associated with these activities.

R&D expenses decreased 13.1% for the three months ended June 30, 2022 compared to the three months ended June 30, 2021, primarily driven by increased capitalization of expenses related to internally developed software projects and lower incentive compensation costs, partially offset by higher wages and salaries driven by headcount increases, as well as higher non-compensation costs, reflecting increased information technology costs. Taking into consideration investments eligible for capitalization, R&D spending increased across the All Other – Private Assets, Index and ESG and Climate reportable segments.

R&D expenses decreased 0.3% for the six months ended June 30, 2022 compared to the six months ended June 30, 2021, primarily driven by increased capitalization of expenses related to internally developed software projects. The decrease was partially offset by higher wages and salaries and benefits costs, driven by headcount increases, as well as higher non-compensation costs, reflecting increased information technology costs. Taking into consideration investments eligible for capitalization, R&D spending increased across the All Other– Private Assets, Index and ESG and Climate reportable segments.

General and Administrative

G&A expenses consist of costs primarily related to finance operations, human resources, office of the CEO, legal, corporate technology, corporate development and certain other administrative costs that are not directly attributed, but are instead allocated, to a product or service.

G&A expenses increased 21.7% for the three months ended June 30, 2022 compared to the three months ended June 30, 2021, primarily driven by increases in the All Other – Private Assets and Index reportable segments. The change was driven by increases in compensation and benefits costs, primarily relating to higher severance costs as well as higher benefits costs and wages and salaries driven by increased headcount. The increase was also driven by higher non-recurring transaction and integration costs related to the acquisition of RCA and non-compensation costs, primarily driven by higher professional fees.

G&A expenses increased 26.8% for the six months ended June 30, 2022 compared to the six months ended June 30, 2021, primarily driven by increases across the All Other – Private Assets, Index and ESG and Climate reportable segments. The change was driven by increases in compensation and benefits costs, primarily relating to higher stock-based compensation expense, wages and salaries and benefits costs, driven by increased headcount, and severance costs. The increase was also driven by higher non-recurring transaction and integration costs related to the acquisition of RCA and non-compensation costs, primarily driven by higher professional fees.

The following table presents operating expenses using compensation and non-compensation categories, rather than using activity categories, for the periods indicated:

	Three Months Ended							Six Months Ended
	June 30,							June 30,
	2022		2021		% Change			2022		2021		% Change
	(in thousands)
Compensation and benefits	$	154,242	$	148,180		4.1	%	$	334,080	$	299,697		11.5	%
Non-compensation expenses		68,239		55,051		24.0	%		131,114		105,371		24.4	%
Amortization of intangible assets		22,179		30,396		(27.0	%)		43,899		45,464		(3.4	%)
Depreciation and amortization of property, equipment and leasehold improvements		6,765		7,020		(3.6	%)		13,299		14,163		(6.1	%)
Total operating expenses	$	251,425	$	240,647		4.5	%	$	522,392	$	464,695		12.4	%

Compensation and Benefits

Compensation and benefits costs increased 4.1% for the three months ended June 30, 2022 compared to the three months ended June 30, 2021. For the six months ended June 30, 2022, the increase was 11.5% compared to the six months ended June 30, 2021. The increase in both the three and six months ended June 30, 2022 was primarily driven by headcount growth across all spending categories. We had 4,513 employees as of June 30, 2022, compared to 3,910 employees as of June 30, 2021, reflecting a 15.4% growth in the number of employees. Continued growth of our emerging market centers around the world is an important factor in our ability to manage and control the growth of our compensation and benefits costs. As of June 30, 2022, 64.1% of our employees were located in emerging market centers compared to 65.9% as of June 30, 2021. Adjusting for the impact of foreign currency exchange rate fluctuations, compensation and benefits costs would have increased by 9.4% and 15.4%, respectively, for the three and six months ended June 30, 2022 compared to the three and six months ended June 30, 2021.

A significant portion of the incentive compensation component of operating expenses is based on the achievement of a number of financial and operating metrics. In a scenario where operating revenue growth and profitability moderate, incentive compensation would be expected to decrease accordingly.

Non-Compensation Expenses

Non-compensation expenses increased 24.0% for the three months ended June 30, 2022 compared to the three months ended June 30, 2021, primarily driven by higher information technology costs, professional fees, market data costs and non-recurring transaction and integration costs related to the acquisition of RCA.

Non-compensation expenses increased 24.4% for the six months ended June 30, 2022 compared to the six months ended June 30, 2021, primarily driven by higher information technology costs, professional fees, market data costs and non-recurring transaction and integration costs related to the acquisition of RCA.

Fixed costs constitute a significant portion of the non-compensation component of operating expenses. The discretionary non-compensation component of operating expenses could, however, be reduced in the near-term in a scenario where operating revenue growth moderates.

Amortization of Intangible Assets

Amortization of intangible assets expense relates to definite-lived intangible assets arising from past acquisitions and capitalization of internally developed software projects recognized over their estimated useful lives. Amortization of intangible assets expense decreased 27.0% for the three months ended June 30, 2022 compared to the three months ended June 30, 2021. The decrease was primarily driven by the absence of intangible assets write-off costs, partially offset by additional amortization recognized on acquired intangible assets following the acquisition of RCA.

Amortization of intangible assets expense decreased 3.4% for the six months ended June 30, 2022 compared to the six months ended June 30, 2021, primarily driven by the absence of intangible assets write-off costs, partially offset by additional amortization recognized on acquired intangible assets following the acquisition of RCA.

Depreciation and Amortization of Property, Equipment and Leasehold Improvements

Depreciation and amortization of property, equipment and leasehold improvements consists of expenses related to depreciating or amortizing the cost of computer and related equipment, leasehold improvements, software and furniture and fixtures over the estimated useful life of the assets. Depreciation and amortization of property, equipment and leasehold improvements remained

relatively flat for the three and six months ended June 30, 2022 compared to the three and six months ended June 30, 2021, respectively.

Other Expense (Income), Net

The following table shows our other expense (income), net for the periods indicated:

	Three Months Ended									Six Months Ended
	June 30,									June 30,
	2022			2021			% Change			2022			2021			% Change
	(in thousands)
Interest income	$	(924	)	$	(347	)		(166.3	%)	$	(1,222	)	$	(733	)		(66.7	%)
Interest expense		41,085			39,557			3.9	%		81,799			77,141			6.0	%
Other expense (income)		188			22,628			(99.2	%)		(193	)		23,777			(100.8	%)
Total other expense (income), net	$	40,349		$	61,838			(34.8	%)	$	80,384		$	100,185			(19.8	%)

Other expense (income), net decreased 34.8% for the three months ended June 30, 2022 compared to the three months ended June 30, 2021 and 19.8% for the six months ended June 30, 2022 compared to the six months ended June 30, 2021. The decreases in net expenses were primarily driven by the absence of debt extinguishment costs, partially offset by higher interest expense associated with higher average outstanding debt balances.

Income Taxes

The following table shows our income tax provision and effective tax rate for the periods indicated:

	Three Months Ended									Six Months Ended
	June 30,									June 30,
	2022			2021			% Change			2022			2021			% Change
	(in thousands)
Provision for income taxes		49,445			30,272			63.3	%		69,965			49,481			41.4	%
Effective tax rate		19.0	%		15.5	%		22.6	%		13.7	%		12.0	%		14.2	%

The effective tax rate of 19.0% for the three months ended June 30, 2022 reflects the Company’s estimate of the effective tax rate for the period. The level of discrete items was not impactful to the effective tax rate for the period.

The effective tax rate of 15.5% for the three months ended June 30, 2021 reflects the Company’s estimate of the effective tax rate for the period and was impacted by certain favorable discrete items totaling $11.9 million, primarily related to the $5.6 million tax impact of loss on debt extinguishment recognized during the period with respect to the redemption of the 2026 Senior Notes. Also included in the discrete items is a $2.3 million benefit related to the revaluation of deferred taxes as a result of the enactment of an increase in the UK corporate tax rate, a $2.1 million benefit related to the filing of prior year refund claims, $1.0 million of excess tax benefits recognized on share-based compensation vested during the period and $0.9 million of tax benefits related to other prior year items.

The effective tax rate of 12.0% for the six months ended June 30, 2021 reflects the Company’s estimate of the effective tax rate for the period and was impacted by certain favorable discrete items totaling $34.2 million, primarily related to $21.4 million of excess tax benefits recognized on share-based compensation vested during the period and $5.6 million related to the tax impact of loss on debt extinguishment recognized during the period with respect to the redemption of the 2026 Senior Notes. Also included in the discrete items is a $2.3 million benefit related to the revaluation of deferred taxes as a result of the enactment of an increase in the UK corporate tax rate, a $2.1 million benefit related to the filing of prior year refund claims and $2.8 million of tax benefits related to other prior year items.

Net Income

The following table shows our net income for the periods indicated:

	Three Months Ended							Six Months Ended
	June 30,							June 30,
	2022		2021		% Change			2022		2021		% Change
	(in thousands)
Net income	$	210,587	$	165,423		27.3	%	$	439,010	$	362,242		21.2	%

As a result of the factors described above, net income increased 27.3% for the three months ended June 30, 2022 compared to the three months ended June 30, 2021, and increased 21.2% for the six months ended June 30, 2022 compared to the six months ended June 30, 2021.

Weighted Average Shares and Common Shares Outstanding

The following table shows our weighted average shares outstanding for the periods indicated:

	Three Months Ended							Six Months Ended
	June 30,							June 30,
	2022		2021		% Change			2022		2021		% Change
	(in thousands)
Weighted average shares outstanding:
Basic		80,923		82,454		(1.9	%)		81,255		82,546		(1.6	%)
Diluted		81,295		83,295		(2.4	%)		81,789		83,393		(1.9	%)

The following table shows our common shares outstanding for the periods indicated:

	As of
	June 30,		December 31,
	2022		2021		% Change
	(in thousands)
Common shares outstanding		80,496		82,439		(2.4	%)

The decrease in weighted average shares and common shares outstanding primarily reflects the impact of share repurchases made pursuant to the stock repurchase program.

Adjusted EBITDA

“Adjusted EBITDA,” a non-GAAP measure used by management to assess operating performance, is defined as net income before (1) provision for income taxes, (2) other expense (income), net, (3) depreciation and amortization of property, equipment and leasehold improvements, (4) amortization of intangible assets and, at times, (5) certain other transactions or adjustments, including, when applicable, impairment related to sublease of leased property and certain non-recurring acquisition-related integration and transaction costs.

“Adjusted EBITDA expenses,” a non-GAAP measure used by management to assess operating performance, is defined as operating expenses less depreciation and amortization of property, equipment and leasehold improvements and amortization of intangible assets and, at times, certain other transactions or adjustments, including, when applicable, impairment related to sublease of leased property and certain non-recurring acquisition-related integration and transaction costs.

Adjusted EBITDA and Adjusted EBITDA expenses are believed to be meaningful measures for management to assess the operating performance of the Company because they adjust for significant one-time, unusual or non-recurring items as well as eliminate the accounting effects of certain capital spending and acquisitions that do not directly affect what management considers to be the Company’s ongoing operating performance in the period. All companies do not calculate adjusted EBITDA and adjusted EBITDA expenses in the same way. These measures can differ significantly from company to company depending on, among other things, long-term strategic decisions regarding capital structure, the tax jurisdictions in which companies operate and capital investments. Accordingly, the Company’s computation of the Adjusted EBITDA and Adjusted EBITDA expenses measures may not be comparable to similarly titled measures computed by other companies.

The following table presents the calculation of the non-GAAP Adjusted EBITDA measure for the periods indicated:

	Three Months Ended									Six Months Ended
	June 30,									June 30,
	2022			2021			% Change			2022			2021			% Change
	(in thousands)
Operating revenues	$	551,806		$	498,180			10.8	%	$	1,111,751		$	976,603			13.8	%
Adjusted EBITDA expenses		220,662			203,231			8.6	%		462,063			405,068			14.1	%
Adjusted EBITDA	$	331,144		$	294,949			12.3	%	$	649,688		$	571,535			13.7	%
Adjusted EBITDA margin %		60.0	%		59.2	%					58.4	%		58.5	%
Operating margin %		54.4	%		51.7	%					53.0	%		52.4	%

The change in Adjusted EBITDA margin reflects changes in the rate of growth of Adjusted EBITDA expenses as compared to the rate of growth of operating revenues, driven by the factors previously described.

Reconciliation of Adjusted EBITDA to Net Income and Adjusted EBITDA Expenses to Operating Expenses

The following table presents the reconciliation of Adjusted EBITDA to net income for the periods indicated:

	Three Months Ended							Six Months Ended
	June 30,							June 30,
	2022		2021		% Change			2022		2021		% Change
	(in thousands)
Index Adjusted EBITDA	$	245,170	$	233,468		5.0	%	$	491,045	$	453,347		8.3	%
Analytics Adjusted EBITDA		62,961		49,814		26.4	%		113,850		95,545		19.2	%
ESG and Climate Adjusted EBITDA		14,332		5,720		150.6	%		26,424		10,765		145.5	%
All Other - Private Assets Adjusted EBITDA		8,681		5,947		46.0	%		18,369		11,878		54.6	%
Consolidated Adjusted EBITDA		331,144		294,949		12.3	%		649,688		571,535		13.7	%
Amortization of intangible assets		22,179		30,396		(27.0	%)		43,899		45,464		(3.4	%)
Depreciation and amortization of property, equipment and leasehold improvements		6,765		7,020		(3.6	%)		13,299		14,163		(6.1	%)
Acquisition-related integration and transaction costs ⁽¹⁾		1,819		—	n/a				3,131		—	n/a
Operating income		300,381		257,533		16.6	%		589,359		511,908		15.1	%
Other expense (income), net		40,349		61,838		(34.8	%)		80,384		100,185		(19.8	%)
Provision for income taxes		49,445		30,272		63.3	%		69,965		49,481		41.4	%
Net income	$	210,587	$	165,423		27.3	%	$	439,010	$	362,242		21.2	%

⁽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.

The following table presents the reconciliation of Adjusted EBITDA expenses to operating expenses for the periods indicated:

	Three Months Ended							Six Months Ended
	June 30,							June 30,
	2022		2021		% Change			2022		2021		% Change
	(in thousands)
Index Adjusted EBITDA expenses	$	75,779	$	72,495		4.5	%	$	160,663	$	145,107		10.7	%
Analytics Adjusted EBITDA expenses		78,723		86,088		(8.6	%)		167,631		174,374		(3.9	%)
ESG and Climate Adjusted EBITDA expenses		40,796		33,588		21.5	%		80,733		63,293		27.6	%
All Other - Private Assets Adjusted EBITDA expenses		25,364		11,060		129.3	%		53,036		22,294		137.9	%
Consolidated Adjusted EBITDA expenses		220,662		203,231		8.6	%		462,063		405,068		14.1	%
Amortization of intangible assets		22,179		30,396		(27.0	%)		43,899		45,464		(3.4	%)
Depreciation and amortization of property, equipment and leasehold improvements		6,765		7,020		(3.6	%)		13,299		14,163		(6.1	%)
Acquisition-related integration and transaction costs ⁽¹⁾		1,819		—	n/a				3,131		—	n/a
Total operating expenses	$	251,425	$	240,647		4.5	%	$	522,392	$	464,695		12.4	%

⁽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.

The discussion of the segment results is presented below.

Segment Results

Index Segment

The following table presents the results for the Index segment for the periods indicated:

	Three Months Ended									Six Months Ended
	June 30,									June 30,
	2022			2021			% Change			2022			2021			% Change
	(in thousands)
Operating revenues:
Recurring subscriptions	$	179,711		$	160,061			12.3	%	$	354,209		$	315,178			12.4	%
Asset-based fees		132,216			136,142			(2.9	%)		277,269			262,848			5.5	%
Non-recurring		9,022			9,760			(7.6	%)		20,230			20,428			(1.0	%)
Operating revenues total		320,949			305,963			4.9	%		651,708			598,454			8.9	%
Adjusted EBITDA expenses		75,779			72,495			4.5	%		160,663			145,107			10.7	%
Adjusted EBITDA	$	245,170		$	233,468			5.0	%	$	491,045		$	453,347			8.3	%
Adjusted EBITDA margin %		76.4	%		76.3	%					75.3	%		75.8	%

Index operating revenues increased 4.9% for the three months ended June 30, 2022 compared to the three months ended June 30, 2021, primarily driven by growth from recurring subscriptions, partially offset by a decline in asset-based fees. Adjusting for the impact of foreign currency exchange rate fluctuations, Index operating revenues would have increased 5.3%.

Operating revenues from recurring subscriptions increased 12.3% for the three months ended June 30, 2022 compared to the three months ended June 30, 2021, primarily driven by strong growth from both market cap-weighted and factor, ESG and climate Index products.

Index segment Adjusted EBITDA expenses increased 4.5% for the three months ended June 30, 2022 compared to the three months ended June 30, 2021, reflecting higher non-compensation expenses to support growth across all expense activity categories. Adjusting for the impact of foreign currency exchange rate fluctuations, Index segment Adjusted EBITDA expenses would have increased by 8.7%.

Index operating revenues increased 8.9% for the six months ended June 30, 2022 compared to the six months ended June 30, 2021, primarily driven by growth from recurring subscriptions and asset-based fees. Adjusting for the impact of foreign currency exchange rate fluctuations, Index operating revenues would have increased 9.2%.

Operating revenues from recurring subscriptions increased 12.4% for the six months ended June 30, 2022 compared to the six months ended June 30, 2021, primarily driven by strong growth from both market cap-weighted and factor, ESG and climate Index products.

Operating revenues from asset-based fees increased 5.5% for the six months ended June 30, 2022 compared to the six months ended June 30, 2021, driven by growth in operating revenues from all index-linked investment product categories. Operating revenues from non-ETF indexed funds linked to MSCI indexes increased by 7.7%, primarily driven by an increase in average AUM, partially offset by a decrease in average basis point fees. Operating revenues from exchange traded futures and options contracts linked to MSCI indexes increased by 18.1%, driven by volume increases. Operating revenues from ETFs linked to MSCI equity indexes increased by 2.5%, primarily driven by an increase in average AUM, partially offset by a decrease in average basis point fees.

Index segment Adjusted EBITDA expenses increased 10.7% for the six months ended June 30, 2022 compared to the six months ended June 30, 2021, reflecting higher compensation and non-compensation expenses to support growth across all expense activity categories. Adjusting for the impact of foreign currency exchange rate fluctuations, Index segment Adjusted EBITDA expenses would have increased by 13.8%.

Analytics Segment

The following table presents the results for the Analytics segment for the periods indicated:

	Three Months Ended									Six Months Ended
	June 30,									June 30,
	2022			2021			% Change			2022			2021			% Change
	(in thousands)
Operating revenues:
Recurring subscriptions	$	139,497		$	133,368			4.6	%	$	277,296		$	265,040			4.6	%
Non-recurring		2,187			2,534			(13.7	%)		4,185			4,879			(14.2	%)
Operating revenues total		141,684			135,902			4.3	%		281,481			269,919			4.3	%
Adjusted EBITDA expenses		78,723			86,088			(8.6	%)		167,631			174,374			(3.9	%)
Adjusted EBITDA	$	62,961		$	49,814			26.4	%	$	113,850		$	95,545			19.2	%
Adjusted EBITDA margin %		44.4	%		36.7	%					40.4	%		35.4	%

Analytics operating revenues increased 4.3% for the three months ended June 30, 2022 compared to the three months ended June 30, 2021, primarily driven by growth from recurring subscriptions related to Multi-Asset Class and Equity Analytics products. Adjusting for the impact of foreign currency exchange rate fluctuations, Analytics operating revenues would have increased 5.2%.

Analytics segment Adjusted EBITDA expenses decreased 8.6% for the three months ended June 30, 2022 compared to the three months ended June 30, 2021, reflecting lower compensation expenses across all expense activity categories, driven by lower incentive compensation, and increased capitalization of expenses related to internally developed software projects. Adjusting for the impact of foreign currency exchange rate fluctuations, Analytics segment Adjusted EBITDA expenses would have decreased 5.3%.

Analytics operating revenues increased 4.3% for the six months ended June 30, 2022 compared to the six months ended June 30, 2021, primarily driven by growth from recurring subscriptions related to Multi-Asset Class and Equity Analytics products. Adjusting for the impact of foreign currency exchange rate fluctuations, Analytics operating revenues would have increased 5.0%.

Analytics segment Adjusted EBITDA expenses decreased 3.9% for the six months ended June 30, 2022 compared to the six months ended June 30, 2021, reflecting increased capitalization of expenses related to internally developed software projects and lower compensation expenses across all expense activity categories, driven by lower incentive compensation. Adjusting for the impact of foreign currency exchange rate fluctuations, Analytics segment Adjusted EBITDA expenses would have decreased 1.5%.

ESG and Climate Segment

The following table presents the results for the ESG and Climate segment for the periods indicated:

	Three Months Ended									Six Months Ended
	June 30,									June 30,
	2022			2021			% Change			2022			2021			% Change
	(in thousands)
Operating revenues:
Recurring subscriptions	$	54,037		$	38,567			40.1	%	$	104,609		$	72,707			43.9	%
Non-recurring		1,091			741			47.2	%		2,548			1,351			88.6	%
Operating revenues total		55,128			39,308			40.2	%		107,157			74,058			44.7	%
Adjusted EBITDA expenses		40,796			33,588			21.5	%		80,733			63,293			27.6	%
Adjusted EBITDA	$	14,332		$	5,720			150.6	%	$	26,424		$	10,765			145.5	%
Adjusted EBITDA margin %		26.0	%		14.6	%					24.7	%		14.5	%

ESG and Climate operating revenues increased 40.2% for the three months ended June 30, 2022 compared to the three months ended June 30, 2021, primarily driven by strong growth from recurring subscriptions related to Ratings, Climate and Screening products. Adjusting for the impact of foreign currency exchange rate fluctuations, ESG and Climate operating revenues would have increased 50.0%.

ESG and Climate segment Adjusted EBITDA expenses increased 21.5% for the three months ended June 30, 2022 compared to the three months ended June 30, 2021, reflecting higher compensation and non-compensation expenses to support growth, reflected across the cost of revenues, selling and marketing and G&A expense activity categories. Adjusting for the impact of foreign currency exchange rate fluctuations, ESG and Climate segment Adjusted EBITDA expenses would have increased 26.6%.

ESG and Climate operating revenues increased 44.7% for the six months ended June 30, 2022 compared to the six months ended June 30, 2021, primarily driven by strong growth from recurring subscriptions related to Ratings, Climate and Screening products. Adjusting for the impact of foreign currency exchange rate fluctuations, ESG and Climate operating revenues would have increased 51.2%.

ESG and Climate segment Adjusted EBITDA expenses increased 27.6% for the six months ended June 30, 2022 compared to the six months ended June 30, 2021, reflecting higher compensation and non-compensation expenses to support growth, reflected across all expense activity categories. Adjusting for the impact of foreign currency exchange rate fluctuations, ESG and Climate segment Adjusted EBITDA expenses would have increased 31.6%.

All Other – Private Assets Segment

The following table presents the results for the All Other – Private Assets segment for the periods indicated:

	Three Months Ended									Six Months Ended
	June 30,									June 30,
	2022			2021			% Change			2022			2021			% Change
	(in thousands)
Operating revenues:
Recurring subscriptions	$	33,804		$	16,134			109.5	%	$	70,695		$	32,937			114.6	%
Non-recurring		241			873			(72.4	%)		710			1,235			(42.5	%)
Operating revenues total		34,045			17,007			100.2	%		71,405			34,172			109.0	%
Adjusted EBITDA expenses		25,364			11,060			129.3	%		53,036			22,294			137.9	%
Adjusted EBITDA	$	8,681		$	5,947			46.0	%	$	18,369		$	11,878			54.6	%
Adjusted EBITDA margin %		25.5	%		35.0	%					25.7	%		34.8	%

All Other – Private Assets operating revenues increased 100.2% for the three months ended June 30, 2022 compared to the three months ended June 30, 2021, primarily driven by revenues attributable to the acquisition of RCA, partially offset by decreased recurring subscriptions revenues related to Enterprise Analytics products and unfavorable foreign currency exchange rate fluctuations. Adjusting for both the impact of the acquisition and foreign currency exchange rate fluctuations, All Other – Private Assets operating revenues would have decreased 5.5%. Adjusting for the impact of the acquisition and foreign currency exchange rate fluctuations individually, All Other – Private Assets operating revenues would have decreased 13.5% and increased 111.9%, respectively.

All Other – Private Assets segment Adjusted EBITDA expenses increased 129.3% for the three months ended June 30, 2022 compared to the three months ended June 30, 2021, primarily driven by the acquisition of RCA. All Other - Private Assets segment Adjusted EBITDA expenses would have increased 1.8% when excluding the impact of acquisitions and increased 142.9% when excluding the impact of foreign currency exchange rate fluctuations.

All Other – Private Assets operating revenues increased 109.0% for the six months ended June 30, 2022 compared to the six months ended June 30, 2021, primarily driven by revenues attributable to the acquisition of RCA, partially offset by unfavorable foreign currency exchange rate fluctuations. Adjusting for both the impact of the acquisition and foreign currency exchange rate fluctuations, All Other – Private Assets operating revenues would have increased 3.1%. Adjusting for the impact of the acquisition and foreign currency exchange rate fluctuations individually, All Other – Private Assets operating revenues would have decreased 3.7% and increased 118.8%, respectively.

All Other – Private Assets segment Adjusted EBITDA expenses increased 137.9% for the six months ended June 30, 2022 compared to the six months ended June 30, 2021, primarily driven by the acquisition of RCA. All Other - Private Assets segment Adjusted EBITDA expenses would have increased 5.9% when excluding the impact of acquisitions and increased 148.4% when excluding the impact of foreign currency exchange rate fluctuations.

Run Rate

“Run Rate” estimates at a particular point in time the annualized value of the recurring revenues under our client license agreements (“Client Contracts”) for the next 12 months, assuming all Client Contracts that come up for renewal, or reach the end of the committed subscription period, are renewed and assuming then-current currency exchange rates, subject to the adjustments and exclusions described below. For any Client Contract where fees are linked to an investment product’s assets or trading volume/fees, the Run Rate calculation reflects, for ETFs, the market value on the last trading day of the period, for futures and options, the most recent quarterly volumes and/or reported exchange fees, and for other non-ETF products, the most recent client-reported assets. Run Rate does not include fees associated with “one-time” and other non-recurring transactions. In addition, we add to Run Rate the annualized fee value of recurring new sales, whether to existing or new clients, when we execute Client Contracts, even though the license start date, and associated revenue recognition, may not be effective until a later date. We remove from Run Rate the annualized fee value associated with products or services under any Client Contract with respect to which we have received a notice of termination, non-renewal or an indication the client does not intend to continue their subscription during the period and have determined that such notice evidences the client’s final decision to terminate or not renew the applicable products or services, even though such notice is not effective until a later date.

Changes in our recurring revenues typically lag changes in Run Rate. The actual amount of recurring revenues we will realize over the following 12 months will differ from Run Rate for numerous reasons, including:

•

fluctuations in revenues associated with new recurring sales;

•

modifications, cancellations and non-renewals of existing Client Contracts, subject to specified notice requirements;

•

differences between the recurring license start date and the date the Client Contract is executed due to, for example, contracts with onboarding periods or fee waiver periods;

•

fluctuations in asset-based fees, which may result from changes in certain investment products’ total expense ratios, market movements, including foreign currency exchange rates, or from investment inflows into and outflows from investment products linked to our indexes;

•

fluctuations in fees based on trading volumes of futures and options contracts linked to our indexes;

•

fluctuations in the number of hedge funds for which we provide investment information and risk analysis to hedge fund investors;

•

price changes or discounts;

•

revenue recognition differences under U.S. GAAP, including those related to the timing of implementation and report deliveries for certain of our products and services;

•

fluctuations in foreign currency exchange rates; and

•

the impact of acquisitions and divestitures.

The following table presents Run Rates by reportable segment as of the dates indicated and the growth percentages over the periods indicated:

	As of
	June 30,		June 30,		%
		2022		2021	Change
	(in thousands)
Index:
Recurring subscriptions	$	732,081	$	653,448		12.0	%
Asset-based fees		520,092		539,984		(3.7	%)
Index total		1,252,173		1,193,432		4.9	%

Analytics		592,043		563,938		5.0	%

ESG and Climate		231,222		164,092		40.9	%

All Other - Private Assets		137,713		58,088		137.1	%

Total Run Rate	$	2,213,151	$	1,979,550		11.8	%

Recurring subscriptions total	$	1,693,059	$	1,439,566		17.6	%
Asset-based fees		520,092		539,984		(3.7	%)
Total Run Rate	$	2,213,151	$	1,979,550		11.8	%

Total Run Rate increased 11.8%, driven by an 17.6% increase from recurring subscriptions, partially offset by a 3.7% decrease from asset-based fees. Adjusting for the impact of the acquisition of RCA and foreign currency exchange rate fluctuations individually, recurring subscriptions Run Rate would have increased 12.1% and 19.8%, respectively.

Run Rate from Index recurring subscriptions increased 12.0%, primarily driven by strong growth from market cap-weighted, factor, ESG and climate, and custom and specialized Index products, and the increase reflected growth across all regions and client segments.

Run Rate from Index asset-based fees decreased 3.7%, primarily driven by lower AUM in ETFs linked to MSCI equity indexes and a 0.1 average basis point fee decrease in ETFs, partially offset by higher exchange traded futures and options volume and higher AUM in non-ETF indexed funds linked to MSCI indexes.

Run Rate from Analytics products increased 5.0%, primarily driven by growth in both Multi-Asset Class and Equity Analytics products. Adjusting for the impact of foreign currency exchange rate fluctuations, Analytics Run Rate would have increased 7.4%.

Run Rate from ESG and Climate products increased 40.9%, driven by strong growth in Ratings, Climate and Screening products. Adjusting for the impact of foreign currency exchange rate fluctuations, ESG and Climate Run Rate would have increased 47.2%.

Run Rate from All Other - Private Assets increased 137.1%, primarily driven by the acquisition of RCA and growth in Climate Value-at-Risk and Global Intel products, partially offset by unfavorable foreign currency exchange rate fluctuations. Adjusting for both the impact of the acquisition and foreign currency exchange rate fluctuations, All Other - Private Assets Run Rate would have increased 8.7%. Adjusting for the impact of the acquisition and foreign currency exchange rate fluctuations individually, All Other - Private Assets Run Rate would have increased 0.8% and 149.8%, respectively.

Sales

Sales represents the annualized value of products and services clients commit to purchase from MSCI and will result in additional operating revenues. Non-recurring sales represent the actual value of the customer agreements entered into during the period and are not a component of Run Rate. New recurring subscription sales represent additional selling activities, such as new customer agreements, additions to existing agreements or increases in price that occurred during the period and are additions to Run Rate. Subscription cancellations reflect client activities during the period, such as discontinuing products and services and/or reductions in price, resulting in reductions to Run Rate. Net new recurring subscription sales represent the amount of new recurring subscription sales net of subscription cancellations during the period, which reflects the net impact to Run Rate during the period.

Total gross sales represent the sum of new recurring subscription sales and non-recurring sales. Total net sales represent the total gross sales net of the impact from subscription cancellations.

The following table presents our recurring subscription sales, cancellations and non-recurring sales by reportable segment for the periods indicated:

	Three Months Ended									Six Months Ended
	June 30,			June 30,			%			June 30,			June 30,			%
	2022			2021			Change			2022			2021			Change
	(in thousands)
New recurring subscription sales
Index	$	27,946		$	25,635			9.0	%	$	50,363		$	46,491			8.3	%
Analytics		18,754			16,282			15.2	%		32,823			28,492			15.2	%
ESG and Climate		22,205			17,756			25.1	%		41,347			29,396			40.7	%
All Other - Private Assets		5,713			1,860			207.2	%		11,272			3,544			218.1	%
New recurring subscription sales total		74,618			61,533			21.3	%		135,805			107,923			25.8	%

Subscription cancellations
Index		(7,161	)		(6,791	)		5.4	%		(13,081	)		(11,989	)		9.1	%
Analytics		(8,366	)		(10,096	)		(17.1	%)		(16,494	)		(15,975	)		3.2	%
ESG and Climate		(1,369	)		(1,246	)		9.9	%		(2,012	)		(2,298	)		(12.4	%)
All Other - Private Assets		(1,358	)		(887	)		53.1	%		(3,336	)		(1,585	)		110.5	%
Subscription cancellations total		(18,254	)		(19,020	)		(4.0	%)		(34,923	)		(31,847	)		9.7	%

Net new recurring subscription sales
Index		20,785			18,844			10.3	%		37,282			34,502			8.1	%
Analytics		10,388			6,186			67.9	%		16,329			12,517			30.5	%
ESG and Climate		20,836			16,510			26.2	%		39,335			27,098			45.2	%
All Other - Private Assets		4,355			973			347.6	%		7,936			1,959			305.1	%
Net new recurring subscription sales total		56,364			42,513			32.6	%		100,882			76,076			32.6	%

Non-recurring sales
Index		14,267			10,769			32.5	%		27,982			21,974			27.3	%
Analytics		2,418			2,773			(12.8	%)		5,907			5,746			2.8	%
ESG and Climate		870			1,140			(23.7	%)		2,178			1,837			18.6	%
All Other - Private Assets		455			185			145.9	%		607			1,071			(43.3	%)
Non-recurring sales total		18,010			14,867			21.1	%		36,674			30,628			19.7	%

Gross sales
Index	$	42,213		$	36,404			16.0	%	$	78,345		$	68,465			14.4	%
Analytics		21,172			19,055			11.1	%		38,730			34,238			13.1	%
ESG and Climate		23,075			18,896			22.1	%		43,525			31,233			39.4	%
All Other - Private Assets		6,168			2,045			201.6	%		11,879			4,615			157.4	%
Total gross sales	$	92,628		$	76,400			21.2	%	$	172,479		$	138,551			24.5	%

Net sales
Index	$	35,052		$	29,613			18.4	%	$	65,264		$	56,476			15.6	%
Analytics		12,806			8,959			42.9	%		22,236			18,263			21.8	%
ESG and Climate		21,706			17,650			23.0	%		41,513			28,935			43.5	%
All Other - Private Assets		4,810			1,158			315.4	%		8,543			3,030			181.9	%
Total net sales	$	74,374		$	57,380			29.6	%	$	137,556		$	106,704			28.9	%

A significant portion of MSCI's operating revenues are derived from subscriptions or licenses of products and services, which are provided over contractually-agreed periods of time that are subject to renewal or cancellation at the end of current contract terms.

Retention Rate

The following table presents our Retention Rate by reportable segment for the periods indicated:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
		2022		2021		2022		2021
Index	95.9%		95.6%		96.2%		96.1%
Analytics	94.3%		92.7%		94.4%		94.2%
ESG and Climate	97.3%		96.4%		98.0%		96.7%
All Other - Private Assets ⁽¹⁾	96.0%		93.7%		95.1%		94.4%

Total	95.5%		94.4%		95.7%		95.3%

⁽¹⁾	Includes RCA’s Run Rate for the current-year period. Retention rate for All Other – Private Assets excluding the impact of RCA was 97.1% and 95.8% for the three and six months ended June 30, 2022, respectively.

Retention Rate is an important metric because subscription cancellations decrease our Run Rate and ultimately our future operating revenues over time. The annual Retention Rate represents the retained subscription Run Rate (subscription Run Rate at the beginning of the fiscal year less actual cancels during the year) as a percentage of the subscription Run Rate at the beginning of the fiscal year.

The Retention Rate for a non-annual period is calculated by annualizing the cancellations for which we have received a notice of termination or for which we believe there is an intention not to renew or discontinue the subscription during the non-annual period, and we believe that such notice or intention evidences the client’s final decision to terminate or not renew the applicable agreement, even though such notice is not effective until a later date. This annualized cancellation figure is then divided by the subscription Run Rate at the beginning of the fiscal year to calculate a cancellation rate. This cancellation rate is then subtracted from 100% to derive the annualized Retention Rate for the period.

Retention Rate is computed by operating segment on a product/service-by-product/service basis. In general, if a client reduces the number of products or services to which it subscribes within a segment, or switches between products or services within a segment, we treat it as a cancellation for purposes of calculating our Retention Rate except in the case of a product or service switch that management considers to be a replacement product or service. In those replacement cases, only the net change to the client subscription, if a decrease, is reported as a cancel. In the Analytics and the ESG and Climate operating segments, substantially all product or service switches are treated as replacement products or services and netted in this manner, while in our Index and Real Assets operating segments, product or service switches that are treated as replacement products or services and receive netting treatment occur only in certain limited instances. In addition, we treat any reduction in fees resulting from a down-sell of the same product or service as a cancellation to the extent of the reduction. We do not calculate Retention Rate for that portion of our Run Rate attributable to assets in index-linked investment products or futures and options contracts, in each case, linked to our indexes.

Retention Rate is generally higher during the first three quarters and lower in the fourth quarter, as the fourth quarter is traditionally the largest renewal period in the year.

Critical Accounting Policies and Estimates

We describe our significant accounting policies in Note 1, “Introduction and Basis of Presentation,” of the Notes to Consolidated Financial Statements included in our Form 10-K. There have been no significant changes in our accounting policies since the end of the fiscal year ended December 31, 2021 or critical accounting estimates applied in the fiscal year ended December 31, 2021.

Liquidity and Capital Resources

We require capital to fund ongoing operations, internal growth initiatives and acquisitions. Our primary sources of liquidity are cash flows generated from our operations, existing cash and cash equivalents and credit capacity under our existing credit facility. In addition, we believe we have access to additional funding in the public and private markets. We intend to use these sources of liquidity to, among other things, service our existing and future debt obligations, fund our working capital requirements for capital expenditures, investments, acquisitions and dividend payments, and make repurchases of our common stock. In connection with our business strategy, we regularly evaluate acquisition and strategic partnership opportunities. We believe our liquidity, along with other financing alternatives, will provide the necessary capital to fund these transactions and achieve our planned growth.

Senior Notes and Credit Agreement

As of June 30, 2022, we had an aggregate of $4,200 million in Senior Notes outstanding. In addition, under the Credit Agreement, we had as of June 30, 2022: (i) an aggregate of $350 million in Tranche A Term Loans outstanding under the TLA Facility and (ii) $500 million of undrawn borrowing capacity under the revolving credit facility. See Note 8, “Commitments and Contingencies,” of the Notes to Condensed Consolidated Financial Statements (Unaudited) included herein for additional information on our outstanding indebtedness and revolving credit facility.

The Senior Notes and the Credit Agreement are fully and unconditionally, and jointly and severally, guaranteed by our direct or indirect wholly owned domestic subsidiaries that account for more than 5% of our and our subsidiaries’ consolidated assets, other than certain excluded subsidiaries (the “subsidiary guarantors”). Amounts due under the Credit Agreement are our and the subsidiary guarantors’ senior unsecured obligations and rank equally with the Senior Notes and any of our other unsecured, unsubordinated debt, senior to any of our subordinated debt and effectively subordinated to our secured debt to the extent of the assets securing such debt.

The indentures governing our Senior Notes (the “Indentures”) among us, each of the subsidiary guarantors, and Computershare, National Association, as trustee and successor to Wells Fargo Bank, National Association, contain covenants that limit our and certain of our subsidiaries’ ability to, among other things, incur liens, enter into sale/leaseback transactions and consolidate, merge or sell all or substantially all of our assets. In addition, the Indentures restrict our non-guarantor subsidiaries’ ability to create, assume, incur or guarantee additional indebtedness without such non-guarantor subsidiaries guaranteeing the Senior Notes on a pari passu basis.

The Credit Agreement contains affirmative and restrictive covenants that, among other things, limit our ability and/or the ability of our existing or future subsidiaries to:

•

incur liens and further negative pledges;

•

incur additional indebtedness or prepay, redeem or repurchase indebtedness;

•

make loans or hold investments;

•

merge, dissolve, liquidate, consolidate with or into another person;

•

enter into acquisition transactions;

•

enter into sale/leaseback transactions;

•

issue disqualified capital stock;

•

sell, transfer or dispose of assets;

•

pay dividends or make other distributions in respect of our capital stock or engage in stock repurchases, redemptions and other restricted payments;

•

create new subsidiaries;

•

permit certain restrictions affecting our subsidiaries;

•

change the nature of our business, accounting policies or fiscal periods;

•

enter into any transactions with affiliates other than on an arm’s-length basis; and

•

amend our organizational documents or amend, modify or change the terms of certain agreements relating to our indebtedness.

The Credit Agreement and the Indentures also contain customary events of default, including those relating to non-payment, breach of representations, warranties or covenants, cross-default and cross-acceleration, and bankruptcy and insolvency events, and, in the case of the Credit Agreement, invalidity or impairment of loan documentation, change of control and customary ERISA defaults in addition to the foregoing. None of the restrictions above are expected to impact our ability to effectively operate the business.

The Credit Agreement also requires us and our subsidiaries to achieve financial and operating results sufficient to maintain compliance with the following financial ratios on a consolidated basis through the termination of the Credit Agreement: (1) the maximum Consolidated Leverage Ratio (as defined in the Credit Agreement) measured quarterly on a rolling four-quarter basis not to exceed 4.25:1.00 (or 4.50:1.00 for two fiscal quarters following a material acquisition) and (2) the minimum Consolidated Interest Coverage Ratio (as defined in the Credit Agreement) measured quarterly on a rolling four-quarter basis of at least 4.00:1.00. As of June 30, 2022, our Consolidated Leverage Ratio was 3.23:1.00 and our Consolidated Interest Coverage Ratio was 8.74:1.00.

Our non-guarantor subsidiaries under the Senior Notes and the Credit Agreement consist of: (i) domestic subsidiaries of the Company that account for 5% or less of consolidated assets of the Company and its subsidiaries and (ii) any foreign or domestic subsidiary of the Company that is deemed to be a controlled foreign corporation within the meaning of Section 957 of the Internal Revenue Code of 1986, as amended. Our non-guarantor subsidiaries accounted for approximately $1,318.0 million, or 60.5%, of our total revenue for the trailing 12 months ended June 30, 2022, approximately $494.1 million, or 43.0%, of our consolidated operating income for the trailing 12 months ended June 30, 2022, and approximately $949.5 million, or 19.6%, of our consolidated total assets (excluding intercompany assets) and $762.0 million, or 13.0%, of our consolidated total liabilities, in each case as of June 30, 2022.

Share Repurchases

The following table provides information with respect to repurchases of the Company’s common stock pursuant to open market repurchases:

Six Months Ended	Average Price Paid Per Share		Total Number of Shares Repurchased		Dollar Value of Shares Repurchased
			(in thousands)
June 30, 2022	$	480.68		2,184	$	1,049,651
June 30, 2021	$	407.70		330	$	134,340

As of June 30, 2022, there was $539.5 million of available authorization remaining under the 2020 Repurchase Program.

Cash Dividend

On July 25, 2022, the Board of Directors declared a quarterly cash dividend of $1.25 per share for the three months ending September 30, 2022. This reflects an increase of 20.2% over the quarterly cash dividend declared for the three months ended June 30, 2022. The third quarter 2022 dividend is payable on August 31, 2022 to shareholders of record as of the close of trading on August 12, 2022.

Cash Flows

The following table presents the Company’s cash and cash equivalents as of the dates indicated:

	As of
	June 30,		December 31,
		2022		2021
	(in thousands)
Cash and cash equivalents	$	842,300	$	1,421,449

We typically seek to maintain minimum cash balances globally of approximately $200.0 million to $250.0 million for general operating purposes. As of June 30, 2022 and December 31, 2021, $319.2 million and $542.2 million, respectively, of the Company’s cash and cash equivalents were held by foreign subsidiaries. Repatriation of some foreign cash may be subject to certain withholding taxes in local jurisdictions and other distribution restrictions. We believe the global cash and cash equivalent balances that are maintained will be available to meet our global needs whether for general corporate purposes or other needs, including acquisitions or expansion of our products.

We believe that global cash flows from operations, together with existing cash and cash equivalents and funds available under our existing revolving credit facility and our ability to access the debt and capital markets for additional funds, will continue to be sufficient to fund our global operating activities and cash commitments for investing and financing activities, such as material capital expenditures and share repurchases, for at least the next 12 months and for the foreseeable future thereafter. In addition, we expect that foreign cash flows from operations, together with existing cash and cash equivalents, will continue to be sufficient to fund our foreign operating activities and cash commitments for investing activities, such as material capital expenditures, for at least the next 12 months and for the foreseeable future thereafter.

Net Cash Provided by (Used In) Operating, Investing and Financing Activities

	Six Months Ended
	June 30,
		2022		2021
	(in thousands)
Net cash provided by operating activities	$	456,873		$	440,514
Net cash used in investing activities		(34,413	)		(22,321	)
Net cash (used in) provided by financing activities		(982,936	)		256,858
Effect of exchange rate changes		(18,673	)		(3,570	)
Net (decrease) increase in cash	$	(579,149	)	$	671,481

Cash Flows From Operating Activities

Cash flows from operating activities consist of net income adjusted for certain non-cash items and changes in assets and liabilities. The year-over-year increase was primarily driven by higher cash collections from customers, partially offset by higher payments for cash expenses, mainly reflecting higher cash compensation expenses, information technology costs, professional fees and market data costs.

Our primary uses of cash from operating activities are for the payment of cash compensation expenses, interest expenses, income taxes, technology costs, professional fees, market data costs and office rent. Historically, the payment of cash for compensation and benefits is at its highest level in the first quarter when we pay discretionary employee compensation related to the previous fiscal year.

Cash Flows From Investing Activities

The year-over-year change was primarily driven by increased capitalized software development costs.

Cash Flows From Financing Activities

The year-over-year change was primarily driven by the impact of higher share repurchases and less proceeds from borrowings, partially offset by lower repayments on debt.

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

Foreign Currency Risk

We are subject to foreign currency exchange fluctuation risk. Exchange rate movements can impact the U.S. dollar-reported value of our revenues, expenses, assets and liabilities denominated in non-U.S. dollar currencies or where the currency of such items is different than the functional currency of the entity where these items were recorded.

We generally invoice our clients in U.S. dollars; however, we invoice a portion of our clients in Euros, British pounds sterling, Japanese yen and a limited number of other non-U.S. dollar currencies. For the six months ended June 30, 2022 and 2021, 15.8% and 15.3%, respectively, of our revenues are subject to foreign currency exchange rate risk and primarily included clients billed in foreign currency as well as U.S. dollar exposures on non-U.S. dollar foreign operating entities. Of the 15.8% of non-U.S. dollar exposure for the six months ended June 30, 2022, 40.5% was in Euros, 29.0% was in British pounds sterling and 19.9% was in Japanese yen. Of the 15.3% of non-U.S. dollar exposure for the six months ended June 30, 2021, 42.5% was in Euros, 25.3% was in British pounds sterling and 24.3% was in Japanese yen.

Revenues from asset-based fees represented 24.9% and 26.9% of operating revenues for the six months ended June 30, 2022 and 2021, respectively. While a substantial portion of our asset-based fees are invoiced in U.S. dollars, the fees are based on the assets in investment products, of which approximately three-fifths are invested in securities denominated in currencies other than the U.S. dollar. Accordingly, declines in such other currencies against the U.S. dollar will decrease the fees payable to us under such licenses. In addition, declines in such currencies against the U.S. dollar could impact the attractiveness of such investment products resulting in net fund outflows, which would further reduce the fees payable under such licenses.

We are exposed to additional foreign currency risk in certain of our operating costs. Approximately 43.3% and 42.0% of our operating expenses for the six months ended June 30, 2022 and 2021, respectively, were denominated in foreign currencies, the significant majority of which were denominated in British pounds sterling, Indian rupees, Euros, Hungarian forints, Swiss francs and Mexican pesos.

We have certain monetary assets and liabilities denominated in currencies other than local functional amounts and when these balances are remeasured into their local functional currency, either a gain or a loss results from the change of the value of the functional currency as compared to the originating currencies. We manage foreign currency exchange rate risk, in part, through the use of derivative financial instruments comprised principally of forward contracts on foreign currency which are not designated as hedging instruments for accounting purposes. The objective of the derivative instruments is to minimize the impact on the income statement of the volatility of amounts denominated in certain foreign currencies. We recognized total foreign currency exchange gains of $2.4 million and losses of $0.5 million for the six months ended June 30, 2022 and 2021, respectively.

Item 4.

Controls and Procedures

Our Chief Executive Officer and Chief Financial Officer have evaluated our disclosure controls and procedures, as defined in Rule 13a-15(e) or 15d-15(e) of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”), as of June 30, 2022, and have concluded that these disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time specified in the SEC’s rules and forms. These disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is accumulated and communicated to management, including the Chief Executive Officer and the Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.

There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the three months ended June 30, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1.

Legal Proceedings

Various lawsuits, claims and proceedings have been or may be instituted or asserted against the Company in the ordinary course of business. While the amounts claimed could be substantial, the ultimate liability cannot now be determined because of the considerable uncertainties that exist. Therefore, it is possible that MSCI’s business, operating results, financial condition or cash flows in a particular period could be materially affected by certain contingencies. However, based on facts currently available, management believes that the disposition of matters that are currently pending or asserted will not, individually or in the aggregate, have a material effect on MSCI’s business, operating results, financial condition or cash flows.

Item 1A.

Risk Factors

For a discussion of the risk factors affecting the Company, see “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for fiscal year ended December 31, 2021 and in Part II, Item 1A of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2022.

There have been no material changes to the significant risk factors and uncertainties known to the Company and disclosed in the Company’s Form 10-K for the fiscal year ended December 31, 2021, as amended by the revisions disclosed in the Company’s Form 10-Q for the quarter ended March 31, 2022, that, if they were to materialize or occur, would, individually or in the aggregate, have a material effect on MSCI’s business, operating results, financial condition or cash flows.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

There were no unregistered sales of equity securities during the three months ended June 30, 2022.

The table below presents information with respect to purchases made by or on behalf of the Company of its shares of common stock during the three months ended June 30, 2022.

Issuer Purchases of Equity Securities

Period	Total Number of Shares Purchased⁽¹⁾		Average Price Paid Per Share		Total Number of Shares Purchased As Part of Publicly Announced Plans or Programs		Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs⁽²⁾
April 1, 2022-April 30, 2022		45,718	$	486.73		45,455	$	794,417,000
May 1, 2022-May 31, 2022		374,392	$	401.96		364,731	$	647,722,000
June 1, 2022-June 30, 2022		276,085	$	393.01		275,336	$	539,548,000
Total		696,195	$	403.98		685,522	$	539,548,000

⁽¹⁾

Includes (i) shares purchased by the Company on the open market under the stock repurchase program; (ii) shares withheld to satisfy tax withholding obligations on behalf of employees that occur upon vesting and delivery of outstanding shares underlying restricted stock units; and (iii) shares held in treasury under the MSCI Inc. Non-Employee Directors Deferral Plan. The value of shares withheld to satisfy tax withholding obligations was determined using the fair market value of the Company’s common stock on the date of withholding, using a valuation methodology established by the Company.

⁽²⁾	See Note 10, “Shareholders’ Equity (Deficit),” of the Notes to the Unaudited Condensed Consolidated Financial Statements included herein for further information regarding our stock repurchase program.

Item 6.

Exhibits

EXHIBIT INDEX

	Exhibit Number	Description

	3.1	Third Amended and Restated Certificate of Incorporation (filed as Exhibit 3.1 to the Company’s Form 10-Q (File No. 001-33812), filed with the SEC on May 4, 2012 and incorporated by reference herein)

	3.2	Amended and Restated Bylaws (filed as Exhibit 3.1 to the Company’s Form 8-K (File No. 001-33812), filed with the SEC on January 11, 2021 and incorporated by reference herein)

	10.1*†	Form of Award Agreement for Restricted Stock Units for Directors Under the MSCI Inc. 2016 Non-Employee Directors Compensation Plan
	10.2*†	MSCI Inc. Annual Incentive Plan
	10.3	Amended and Restated Credit Agreement, dated as of June 9, 2022, among MSCI Inc., each of the subsidiary guarantors party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent and L/C Issuer and the other lenders party thereto (filed as Exhibit 10.1 to the Company’s Form 8-K (File No. 001-33812), filed with the SEC on June 14, 2022 and incorporated by reference herein)

	11	Statement Re: Computation of Earnings Per Common Share (The calculation of per share earnings is in Part I, Item 1, Note 4 to the Condensed Consolidated Financial Statements (Earnings Per Common Share) and is omitted in accordance with Section (b)(11) of Item 601 of Regulation S-K)

*	31.1	Rule 13a-14(a) Certification of the Chief Executive Officer

*	31.2	Rule 13a-14(a) Certification of the Chief Financial Officer

**	32.1	Section 1350 Certification of the Chief Executive Officer and the Chief Financial Officer

*	101.INS	Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

*	101.SCH	Inline XBRL Taxonomy Extension Schema Document

*	101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document

*	101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document

*	101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document

*	101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document

*	104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

*	Filed herewith.
**	Furnished herewith.
†	Indicates a management compensation plan, contract or arrangement.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Dated: July 26, 2022

	MSCI INC. (Registrant)

	By:	/s/ Andrew C. Wiechmann
		Andrew C. Wiechmann Chief Financial Officer (Principal Financial Officer)