Item 8. Financial Statements and Supplementary Data

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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page
Report of Independent Registered Public Accounting Firm (PCAOB ID 238)		63
Consolidated Statements of Financial Condition as of December 31, 2021 and December 31, 2020		65
Consolidated Statements of Income for the Years Ended December 31, 2021, December 31, 2020, and December 31, 2019		66
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2021, December 31, 2020, and December 31, 2019		67
Consolidated Statements of Shareholders’ Equity (Deficit) for the Years Ended December 31, 2021, December 31, 2020, and December 31, 2019		68
Consolidated Statements of Cash Flows for the Years Ended December 31, 2021, December 31, 2020, and December 31, 2019		69
Notes to Consolidated Financial Statements		70

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of MSCI Inc.

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated statements of financial condition of MSCI Inc. and its subsidiaries (the “Company”) as of December 31, 2021 and 2020, and the related consolidated statements of income, of comprehensive income, of shareholders' equity (deficit) and of cash flows for each of the three years in the period ended December 31, 2021, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Basis for Opinions

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management's Annual Report On Internal Control Over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

As described in Management’s Annual Report On Internal Control Over Financial Reporting, management has excluded Real Capital Analytics, Inc. from its assessment of internal control over financial reporting as of December 31, 2021, because it was acquired by the Company in a purchase business combination during 2021. We have also excluded Real Capital Analytics, Inc. from our audit of internal control over financial reporting. Real Capital Analytics, Inc. is a wholly-owned subsidiary whose total assets and total operating revenues excluded from management’s assessment and our audit of internal control over financial reporting represent 0.9% and 1.1%, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2021.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Acquisition of Real Capital Analytics, Inc. - Valuation of Customer Relationships and Proprietary Data Intangible Assets

As described in Note 5 to the consolidated financial statements, the Company completed the acquisition of Real Capital Analytics, Inc. for an aggregate cash purchase price of $949 million in 2021, which resulted in $394 million of acquired intangible assets, including customer relationships of $176 million and proprietary data of $186 million, being recorded. The fair values of acquired intangible assets were determined using the relief from royalty method, the replacement cost method and multi-period excess earnings method. The significant assumptions used to estimate the fair value of the acquired intangible assets included, forecasted cash flows which were determined based on certain assumptions which included, among others, projected future revenues, and expected market royalty rate, technology obsolescence rates, and discount rates.

The principal considerations for our determination that performing procedures relating to the valuation of customer relationships and proprietary data intangible assets acquired in the Real Capital Analytics, Inc. acquisition is a critical audit matter are (i) the significant judgment by management when developing the fair value of the customer relationships and proprietary data intangible assets acquired; (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s aforementioned significant assumptions related to forecasted cash flows, expected market royalty rate, technology obsolescence rates, and discount rates; and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the acquisition accounting, including controls over management’s valuation of the customer relationships and proprietary data intangible assets and controls over the development of the aforementioned significant assumptions related to forecasted cash flows, expected market royalty rate, technology obsolescence rates, and discount rates. These procedures also included, among others (i) reading the purchase agreement and (ii) testing management’s process for developing the fair value of the customer relationships and proprietary data intangible assets. Testing management’s process included (i) evaluating the appropriateness of the valuation methods; (ii) testing the completeness and accuracy of data provided by management; and (iii) evaluating the reasonableness of the aforementioned significant assumptions related to forecasted cash flows, expected market royalty rate, technology obsolescence rates, and discount rates for the customer relationships and proprietary data intangible assets. Evaluating the reasonableness of the forecasted cash flows involved considering company specific factors and the past performance of the acquired business and comparable businesses. Professionals with specialized skill and knowledge were used to assist in the evaluation of the appropriateness of the valuation methods and in the evaluation of the reasonableness of certain significant assumptions related to the forecasted cash flows as well as the expected market royalty rate, technology obsolescence rates, and discount rates.

/s/ PricewaterhouseCoopers LLP

New York, New York

February 11, 2022

We have served as the Company’s auditor since 2014.

MSCI INC.

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

		As of
		December 31,				December 31,
		2021				2020
		(In thousands, except per share and share data)
ASSETS
Current assets:
Cash and cash equivalents		$	1,421,449			$	1,300,521
Accounts receivable, net of allowances			664,511				558,569
Prepaid income taxes			5,951				20,097
Prepaid and other assets			51,499				46,411
Total current assets			2,143,410				1,925,598
Property, equipment and leasehold improvements, net			66,715				80,446
Right of use assets			144,584				153,330
Goodwill			2,236,386				1,566,022
Intangible assets, net			593,341				234,748
Equity method investment			218,763				190,898
Deferred tax assets			40,119				23,627
Other non-current assets			63,385				23,978
Total assets		$	5,506,703			$	4,198,647
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable		$	13,448			$	14,253
Income taxes payable			59,635				26,195
Accrued compensation and related benefits			207,640				161,557
Other accrued liabilities			145,302				143,894
Deferred revenue			824,912				675,870
Total current liabilities			1,250,937				1,021,769
Long-term debt			4,161,422				3,366,777
Long-term operating lease liabilities			150,029				152,342
Deferred tax liabilities			3,650				12,774
Other non-current liabilities			104,132				88,219
Total liabilities			5,670,170				4,641,881
Commitments and Contingencies (see Note 6 and Note 10)
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; 133,162,178 and 132,829,175 common shares issued and 82,439,449 and 82,573,407 common shares outstanding at December 31, 2021 and December 31, 2020, respectively)			1,332				1,328
Treasury shares, at cost (50,722,729 and 50,255,768 common shares held at December 31, 2021 and December 31, 2020, respectively)			(4,540,144	)			(4,342,535	)
Additional paid-in capital			1,457,623				1,402,537
Retained earnings			2,976,517				2,554,295
Accumulated other comprehensive loss			(58,795	)			(58,859	)
Total shareholders' equity (deficit)			(163,467	)			(443,234	)
Total liabilities and shareholders' equity (deficit)		$	5,506,703			$	4,198,647

See Notes to Consolidated Financial Statements.

MSCI INC.

CONSOLIDATED STATEMENTS OF INCOME

		Years Ended
		December 31,				December 31,				December 31,
		2021					2020			2019
		(In thousands, except per share data)
Operating revenues		$	2,043,544			$	1,695,390			$	1,557,796
Operating expenses:
Cost of revenues (exclusive of depreciation and amortization)			358,684				291,704				294,961
Selling and marketing			243,185				216,496				219,298
Research and development			111,564				101,053				98,334
General and administrative			147,893				114,627				110,093
Amortization of intangible assets			80,592				56,941				49,410
Depreciation and amortization of property, equipment and leasehold improvements			28,901				29,805				29,999
Total operating expenses			970,819				810,626				802,095
Operating income			1,072,725				884,764				755,701
Interest income			(1,497	)			(5,030	)			(16,403	)
Interest expense			159,614				156,324				148,041
Other expense (income)			56,472				47,245				20,745
Other expense (income), net			214,589				198,539				152,383
Income before provision for income taxes			858,136				686,225				603,318
Provision for income taxes			132,153				84,403				39,670
Net income		$	725,983			$	601,822			$	563,648
Earnings per share:
Basic		$	8.80			$	7.19			$	6.66
Diluted		$	8.70			$	7.12			$	6.59
Weighted average shares outstanding:
Basic			82,508				83,716				84,644
Diluted			83,479				84,517				85,536

See Notes to Consolidated Financial Statements.

MSCI INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

		Years Ended
		December 31,				December 31,				December 31,
		2021				2020				2019
		(in thousands)
Net income		$	725,983			$	601,822			$	563,648
Other comprehensive income (loss):
Foreign currency translation adjustments			(3,624	)			4,771				2,037
Income tax effect			943				(62	)			(776	)
Foreign currency translation adjustments, net			(2,681	)			4,709				1,261
Pension and other post-retirement adjustments			3,546				(1,675	)			(6,477	)
Income tax effect			(801	)			686				1,036
Pension and other post-retirement adjustments, net			2,745				(989	)			(5,441	)
Other comprehensive income (loss), net of tax			64				3,720				(4,180	)
Comprehensive income		$	726,047			$	605,542			$	559,468

See Notes to Consolidated Financial Statements.

MSCI INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT)

																		Accumulated
										Additional								Other
		Common				Treasury				Paid-in				Retained				Comprehensive
		Stock				Stock				Capital				Earnings				Income (Loss)				Total
		(in thousands)
Balance at December 31, 2018		$	1,300			$	(3,272,774	)		$	1,306,428			$	1,856,951			$	(58,399	)		$	(166,494	)
Net income															563,648								563,648
Dividends declared ($2.52 per common share)											230				(221,305	)							(221,075	)
Other comprehensive income (loss), net of tax																			(4,180	)			(4,180	)
Shares withheld for tax withholding and exercises							(189,994	)															(189,994	)
Common stock issued			23																				23
Compensation payable in common stock and options											41,138												41,138
Common stock repurchased and held in treasury							(102,081	)															(102,081	)
Common stock issued to Directors and (held in)/released from treasury							(935	)															(935	)
Exercise of stock options			1								3,235												3,236
Balance at December 31, 2019		$	1,324			$	(3,565,784	)		$	1,351,031			$	2,199,294			$	(62,579	)		$	(76,714	)
Net income															601,822								601,822
Cumulative-effect adjustment															631								631
Dividends declared ($2.92 per common share)															(247,452	)							(247,452	)
Dividends paid in shares											186												186
Other comprehensive income (loss), net of tax																			3,720				3,720
Shares withheld for tax withholding and exercises							(51,176	)															(51,176	)
Common stock issued			4																				4
Compensation payable in common stock											51,320												51,320
Common stock repurchased and held in treasury							(727,343	)															(727,343	)
Common stock issued to Directors and (held in)/released from treasury							1,768																1,768
Balance at December 31, 2020		$	1,328			$	(4,342,535	)		$	1,402,537			$	2,554,295			$	(58,859	)		$	(443,234	)
Net income															725,983								725,983
Dividends declared ($3.64 per common share)															(303,761	)							(303,761	)
Dividends paid in shares											128												128
Other comprehensive income (loss), net of tax																			64				64
Shares withheld for tax withholding and exercises							(58,794	)															(58,794	)
Common stock issued			4																				4
Compensation payable in common stock											54,958												54,958
Common stock repurchased and held in treasury							(139,580	)															(139,580	)
Common stock issued to Directors and (held in)/released from treasury							765																765
Balance at December 31, 2021		$	1,332			$	(4,540,144	)		$	1,457,623			$	2,976,517			$	(58,795	)		$	(163,467	)

See Notes to Consolidated Financial Statements.

MSCI INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

		Years Ended
		December 31,				December 31,				December 31,
		2021				2020				2019
		(in thousands)
Cash flows from operating activities
Net income		$	725,983			$	601,822			$	563,648
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of intangible assets			80,592				56,941				49,410
Stock-based compensation expense			54,917				51,094				41,199
Depreciation and amortization of property, equipment and leasehold improvements			28,901				29,805				29,999
Amortization of right of use assets			24,632				24,049				22,489
Loss on impairment of right of use assets			8,385				—				—
Amortization of debt origination fees			4,923				4,445				4,073
Loss on extinguishment of debt			59,103				44,930				16,794
Deferred taxes			(111,369	)			(55,645	)			(20,767	)
Other adjustments			(146	)			1,744				1,093
Changes in assets and liabilities, net of the effect of acquisitions and dispositions:
Accounts receivable			(99,203	)			(57,606	)			(25,923	)
Prepaid income taxes			15,264				11,608				(13,200	)
Prepaid and other assets			(4,240	)			(410	)			(7,698	)
Other non-current assets			(35,445	)			(3,792	)			(239	)
Accounts payable			(2,195	)			7,482				2,584
Income taxes payable			33,903				9,576				(2,240	)
Accrued compensation and related benefits			42,719				(2,641	)			25,217
Other accrued liabilities			(9,249	)			1,674				3,664
Deferred revenue			116,863				98,330				35,366
Long-term operating lease liabilities			(22,078	)			(22,497	)			(20,244	)
Other non-current liabilities			21,536				6,536				3,851
Other			2,273				3,664				447
Net cash provided by operating activities			936,069				811,109				709,523
Cash flows from investing activities
Acquisition of a business, net of cash acquired			(948,989	)			-				(18,177	)
Acquisition of equity method investment			(26,361	)			(190,816	)			—
Acquisition of assets, net of cash acquired			(6,512	)			—				—
Capital expenditures			(13,509	)			(21,826	)			(29,116	)
Capitalized software development costs			(39,285	)			(29,149	)			(24,654	)
Other			(1,057	)			—				10
Net cash used in investing activities			(1,035,713	)			(241,791	)			(71,937	)
Cash flows from financing activities
Proceeds from borrowings, inclusive of premium			1,803,750				1,405,000				1,000,000
Repayment of borrowings			(1,051,810	)			(1,142,382	)			(513,125	)
Repurchase of common stock held in treasury			(198,374	)			(778,519	)			(292,075	)
Payment of dividends			(302,449	)			(246,444	)			(222,922	)
Payment of debt issuance costs in connection with debt			(21,612	)			(16,693	)			(11,781	)
Proceeds from exercise of stock options			-				-				3,236
Net cash provided by (used in) financing activities			229,505				(779,038	)			(36,667	)
Effect of exchange rate changes			(8,933	)			3,674				1,472
Net (decrease) increase in cash			120,928				(206,046	)			602,391
Cash and cash equivalent, beginning of period			1,300,521				1,506,567				904,176
Cash and cash equivalent, end of period		$	1,421,449			$	1,300,521			$	1,506,567
Supplemental disclosure of cash flow information:
Cash paid for interest		$	151,335			$	163,391			$	141,484
Cash paid for income taxes, net of refunds received		$	222,620			$	113,646			$	72,935
Supplemental disclosure of non-cash investing activities
Property, equipment and leasehold improvements in other accrued liabilities		$	3,498			$	3,061			$	3,690
Supplemental disclosure of non-cash financing activities
Cash dividends declared, but not yet paid		$	2,599			$	1,438			$	1,039

See Notes to Consolidated Financial Statements.

MSCI INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. INTRODUCTION AND BASIS OF PRESENTATION

Organization

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

The consolidated financial statements and accompanying notes to financial statements, which include the accounts of MSCI Inc. and its wholly owned subsidiaries, are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

Certain prior period amounts have been reclassified to conform to the current period presentation. Effective January 1, 2021, the ESG and Climate operating segment is being presented as a separate reportable segment. The operating segments of Real Estate and The Burgiss Group, LLC (“Burgiss”) do not individually meet the segment reporting thresholds and have been combined and presented as part of the All Other – Private Assets reportable segment. As of December 31, 2021, the Company had an approximately $218.8 million equity method investment in Burgiss, representing a 33.6% equity ownership.

Significant Accounting Policies

Basis of Financial Statements and Use of Estimates

The Company makes certain estimates and judgments that can affect the reported amounts of assets and liabilities as of the date of the 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 consolidated financial statements are reasonable; however, actual results could differ materially from these estimates. Inter-company balances and transactions are eliminated in consolidation.

Revenue Recognition

Performance Obligations and Transaction Price

The Company recognizes revenues for products and services when performance obligations are satisfied. For revenue arrangements containing multiple products or services, the Company accounts for the individual products or services as a separate performance obligation if they are distinct. A product or service is distinct if a client can benefit from it either on its own or together with other resources that are readily available to the client, and the Company’s promise to transfer the product or service to the client is separately identifiable from other promises in the contract. If both criteria are not met, the promised products or services are accounted for as a combined performance obligation.

The transaction price is the amount of consideration to which an entity expects to be entitled in exchange for transferring products or services to the client. The Company allocates the transaction price to each performance obligation identified in the contract based on the best estimate of a relative standalone selling price of each distinct product or service in the contract. To allocate the transaction price to each performance obligation on a relative standalone selling price basis, at contract inception the Company determines the standalone selling prices of the distinct products or services underlying each performance obligation in proportion to the total transaction price. This standalone selling price may be the contract price but is more often than not the best estimate of the price the

Company would receive for selling the product or service separately in similar circumstances and to other similar customers. A client can receive a discount for purchasing a bundle of products or services if the sum of the standalone selling price of those promised products or services in the contract exceeds the promised consideration in the contract.

For services where the transaction price is variable based upon assets under management (“AUM”), volume of trades, fee levels or number of investments linked to MSCI’s indexes, the transaction price is based upon pricing models and is not allocated at the inception of the contract but rather falls within the sales and usage-based royalty exception under which the price and associated revenue are based upon actual known performance or best estimates of actual performance during the performance period.

Revenue is recognized when a client obtains control of promised products or services in an amount that reflects the consideration the entity expects to receive in exchange for those products or services. Determining when control has transferred can sometimes require management’s judgment (e.g., implementation services), which could affect the timing of revenue recognition. Revenue is recognized exclusive of any applicable sales or other indirect taxes.

Disaggregation of Revenue

Revenues are characterized by type, which broadly reflects the nature of how they are recognized or earned. Our revenue types are recurring subscriptions, asset-based fees and non-recurring revenues. We also group our revenues by segment.

Revenues By Type

Recurring subscription revenues represent fees earned from clients primarily under renewable contracts or agreements and are generally paid annually or quarterly in advance and recognized in most cases ratably over the term of the license or service pursuant to the contract terms. Revenues from subscription agreements for the receipt of periodic benchmark reports, digests and other publications, which are most often associated with our real estate offerings, are generally billed and recognized upon delivery of such reports or data updates.

Asset-based fees are principally recognized based on the estimated AUM linked to our indexes from independent third-party sources or the most recently reported information provided by the client. Asset-based fees also include revenues related to futures and options contracts linked to our indexes, which are primarily based on trading volumes and fee levels. Asset-based fees are generally variable based upon AUM or the volume of trades or fee levels and are generally billed quarterly in arrears.

Non-recurring revenues primarily represent fees earned on products and services where we do not have renewal clauses within the contract and revenues for providing customized reports, historical data sets, certain derivative financial products and certain implementation and consulting services. Based on the nature of the services provided, non-recurring revenues are generally billed upon delivery and recognized upon delivery or over the service period.

Revenues By Segment

Index segment operating revenues consist of fees earned for licenses of index data subscriptions, performance obligations to deliver the data are satisfied over time and, accordingly, revenue is recognized ratably over the term of the agreement pursuant to the contract terms. With respect to licenses to create indexed investment products, such as ETFs, passively managed funds, or licenses which allow certain exchanges to use MSCI’s indexes as the basis for futures and options contracts, MSCI’s performance obligation allows customers to use the Company’s intellectual property (e.g., the indexes) as the basis of the funds or other investment products the customers create over the term of the agreement. The fees earned for these rights are typically variable, in which case they are accrued under the sales and usage-based royalty exception pursuant to the level of performance achieved, which is measured based on AUM, volume of trades or other variable factors. The level of performance achieved is based on information obtained from independent third-party sources or best estimates taking into account the most recently reported information from the client.

Analytics segment operating revenues are recognized as MSCI satisfies performance obligations through providing access to its proprietary models or hosted applications and, in some cases, delivery of managed services, which are typically satisfied over time, and accordingly, operating revenues are recognized ratably over the term of the service period. For implementation services, MSCI meets its performance obligation once the implementation is

complete and the related service is available for the client to use. Operating revenues are recognized at the point in time when the implementation service is completed.

ESG and Climate segment operating revenues are recognized as MSCI’s performance obligations to provide data to or update data for clients are satisfied. The majority of these performance obligations are satisfied over the term of the license period, with operating revenues recognized ratably. For custom ESG research data, the performance obligation is typically satisfied, and revenue is recognized, at the point in time when the data is updated and available to the client.

All Other – Private Assets segment operating revenues are recognized based on performance obligations satisfied over time and at a point in time. Operating revenues for many Real Estate products including Market Information products and publications, subscriptions to Enterprise Analytics, Global Intel, and Income Analytics, Climate Value-at-Risk solutions and licenses to transaction and market insights data, are recognized over time as publications, analysis, insights and data are updated and made available to clients throughout the year. Operating revenues for select Real Estate products, including benchmark reports, are recognized at the point in time when the Company satisfies the performance obligation through delivery to the client.

Share-Based Compensation

Certain of the Company’s employees have received share-based compensation under various compensation programs. The Company’s compensation expense reflects the fair value method of accounting for share-based payments under ASC Subtopic 718-10, “Compensation—Stock Compensation.” ASC Subtopic 718-10 requires measurement of compensation cost for equity-based awards at fair value and recognition of compensation cost over the service period, net of estimated forfeitures per the Company’s policy.

The fair value of MSCI restricted stock units (“RSUs”) is measured using the price of MSCI’s common stock. Restricted stock units that are subject to the achievement of multi-year total shareholder return targets (“PSUs”) are performance awards with a market condition. The fair value of PSUs is determined using a Monte Carlo simulation model that creates a normal distribution of future stock prices, which is then used to value the awards based on their individual terms. From time to time, the Company awards restricted stock units subject to performance conditions that are not linked to a market condition but are based on performance measures that impact the amount of shares that each recipient will receive upon vesting. The fair value of such awards is measured using the price of MSCI’s common stock.

Research and Development

The Company accounts for research and development costs in accordance with several accounting pronouncements, including ASC Subtopic 730-10, “Research and Development.” ASC Subtopic 730-10 requires that research and development costs generally be expensed as incurred. The majority of the Company’s research and development costs are incurred in developing, reviewing and enhancing the methodologies and data models offered within its product portfolio by monitoring investment trends and drivers globally, as well as analyzing product-specific needs in areas such as capitalization-weighted, factor and specialized indexes, and instrument valuation, risk modeling, portfolio construction, asset allocation and value-at-risk simulation.

Internal Use Software

The Company applies the provisions of ASC Subtopic 350-40, “Internal Use Software,” and accounts for the cost of computer software developed for internal use by capitalizing qualifying costs, which are substantially incurred during the application development stage. The amounts capitalized are included in Intangible Assets on the Consolidated Statement of Financial Condition and include external direct costs of services used in developing internal-use software and payroll and payroll-related costs of employees directly associated with the development activities. Additionally, costs incurred relating to upgrades and enhancements to the software are capitalized if it is determined that these upgrades or enhancements provide additional functionality to the software.

Capitalized software development costs are typically amortized on a straight-line basis over the estimated useful life of the related product, which is typically three to five years, beginning with the date the software is placed into service.

Costs incurred in the preliminary and post-implementation stages of MSCI’s products are expensed as incurred.

Income Taxes

Provision for income taxes is provided for using the asset and liability method, under which deferred tax assets and deferred tax liabilities are determined based on the temporary differences between the financial statement and income tax bases of assets and liabilities using currently enacted tax rates. The Company elects to account for Global Intangible Low-Taxed Income (“GILTI”) in the year the tax is incurred. The Company recognizes interest and penalties related to income tax matters within “Provision for income taxes” in the Consolidated Statement of Income.

The Company regularly evaluates the likelihood of additional assessments in each of the taxing jurisdictions in which it is required to file income tax returns. The Company has recorded additional tax expense related to open tax years, which the Company’s management believes is adequate in relation to the potential for assessments. These amounts have been recorded in “Other non-current liabilities” on the Consolidated Statement of Financial Condition. The Company’s management believes the resolution of tax matters will not have a material effect on the Company’s consolidated financial condition. However, to the extent the Company is required to pay amounts in excess of its reserves, a resolution could have a material impact on its Consolidated Statement of Income for a particular future period. In addition, an unfavorable tax settlement could require use of cash and result in an increase in the effective tax rate in the period in which such resolution occurs.

Deferred Revenue

Deferred revenues represent both cash received and the amounts billed to clients for products and services in advance of satisfying performance obligations. Deferred revenue generally results in ratable recognition of operating revenues over the license or subscription period, as the performance obligations are satisfied.

Accounts Receivable and Allowance for Doubtful Accounts

The Company’s clients generally pay subscription fees annually or quarterly in advance. MSCI’s policy is to record to a receivable when a client is billed. For products and services that are provided in advance of billing, such as for our asset-based fee products, unbilled revenue (or a “contract asset”) is included in Accounts Receivable on the Company’s Consolidated Statement of Financial Condition.

The Company recognizes an allowance for doubtful accounts at the time invoices are sent to clients by applying an estimate of the uncollectable amount based on client profiles, credit considerations and historical write-offs. The Company does not require collateral from clients to mitigate credit risk.

Changes in the allowance for doubtful accounts from December 31, 2018 to December 31, 2021 were as follows:

		Amount
		(in thousands)
Balance as of December 31, 2018		$	1,027
Addition (reduction) to credit loss expense			1,024
Write-offs, net of recoveries			(336	)
Balance as of December 31, 2019		$	1,715
Addition (reduction) to credit loss expense			1,712
Adjustments and write-offs, net of recoveries			(1,844	)
Balance as of December 31, 2020		$	1,583
Addition (reduction) to credit loss expense			1,210
Adjustments and write-offs, net of recoveries			(456	)
Balance as of December 31, 2021		$	2,337

Goodwill

Goodwill is recorded as part of the Company’s acquisitions of businesses when the purchase price exceeds the fair value of the net tangible and separately identifiable intangible assets acquired. The Company’s goodwill is not amortized, but rather is subject to an impairment test each year, or more often if conditions indicate impairment may have occurred, pursuant to ASC Subtopic 350-10, “Intangibles—Goodwill and Other.”

The Company tests goodwill for impairment on an annual basis on July 1st and on an interim basis when certain events and circumstances exist. The test for impairment is performed at the reporting unit level. Goodwill impairment is determined by comparing the fair value of a reporting unit with its carrying value. If the estimated fair value exceeds the carrying value, goodwill at the reporting unit level is not deemed to be impaired. If the estimated fair value is below carrying value, an impairment charge will be recorded up to, but not more than, the total amount of goodwill allocated to the reporting unit.

The Company completed its annual goodwill impairment test as of July 1, 2021 on its Index, Analytics, ESG and Climate and Real Estate reporting units, and no impairments were noted. The Company performed a quantitative test for impairment and determined that the estimated fair value of the Company’s reporting units substantially exceeded their respective carrying values.

Based on the results of the annual goodwill impairment testing performed and given there were no impairment triggers identified as part of interim assessments, no impairment of goodwill was recorded during the years ended December 31, 2021, 2020 and 2019.

Intangible Assets

The Company amortizes definite-lived intangible assets over their estimated useful lives. Definite-lived intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable. The Company also reviews the useful lives on a quarterly basis to determine if the period of economic benefit has changed. If the carrying value of an intangible asset exceeds its fair value, an impairment charge would be recognized in an amount equal to the amount by which the carrying value of the intangible asset exceeds its fair value. There were no events or changes in circumstances that would indicate that the carrying value of the definite-lived intangible assets may not be recoverable during the years ended December 31, 2021 and 2020.

The Company had no indefinite-lived intangible assets.

Foreign Currency Translation

Assets and liabilities of operations having non-U.S. dollar functional currencies are translated at year-end exchange rates, and income statement accounts are translated at weighted average exchange rates for the year. Gains or losses resulting from translating foreign currency financial statements, net of any related tax effects, are reflected in accumulated other comprehensive loss, a separate component of shareholders’ equity (deficit). Gains or losses resulting from foreign currency transactions incurred in currencies other than the local functional currency are included in non-operating “Other expense (income)” on the Consolidated Statement of Income.

Leases

MSCI leases office space, data centers and certain equipment under non-cancellable operating lease agreements and determines if an arrangement is a lease at inception. The Company does not currently have any financing lease arrangements.

Right of use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Right of use assets are recognized on the commencement date based on the present value of lease payments over the lease term adjusted for initial direct costs and lease incentives received or deemed probable of being received. MSCI uses its incremental borrowing rate based on the information available on the commencement date in determining the present value of lease payments. The lease terms include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option.

Right of use assets and associated leasehold improvements are tested for impairment when there is a trigger for impairment testing at the appropriate asset group level. When a trigger exists, the asset group is tested for recoverability by comparing the estimated undiscounted cash flows to the asset group’s carrying value. If the asset group fails the recoverability test, the Company will measure impairment loss as the difference between the fair value and carrying value of the asset group.

Lease expense is recognized on a straight-line basis over the lease term and is included in “Operating expenses” in the Consolidated Statement of Income. In situations where a right of use asset has been impaired, the subsequent amortization of the right of use asset is then recorded on a straight-line basis over the remaining lease term and is combined with accretion expense on the lease liability to result in single operating lease cost.

Some of the Company’s lease agreements include rental payments adjusted periodically for inflation which are accounted for as variable lease amounts but are not reflected as a component of the Company’s lease liability. Certain leases also require the Company to pay real estate taxes, insurance, maintenance and other operating expenses associated with the leased premises or equipment which are also not reflected as a component of the Company’s lease liability. The Company also subleases a small portion of its leased office space to third parties and thereby applies sublessor accounting. Sublease income is presented in “Operating expenses” as an offset.

Property, Equipment and Leasehold Improvements

Property, equipment and leasehold improvements are stated at cost less accumulated depreciation and amortization. Depreciation and amortization of furniture and fixtures, and computer and communications equipment are accounted for using the straight-line method over the estimated useful life, and for leasehold improvements, over the shorter of the estimated useful life or the lease term.

Treasury Stock

The Company holds repurchased shares of common stock as treasury stock. The Company accounts for treasury stock under the cost method and includes treasury stock as a component of shareholders’ equity (deficit).

Accrued Compensation

A significant portion of the Company’s employee incentive compensation programs are discretionary. The Company makes significant estimates in determining its accrued compensation and benefits expenses. Accrued cash incentive estimates reflect an assessment of performance versus targets and other key performance indicators at the Company, operating segment and employee level. The Company also reviews compensation and benefits expenses throughout the year to determine how overall performance compares to management’s expectations. These and other factors, including historical performance, are taken into account in accruing discretionary cash compensation estimates quarterly.

Concentrations

For the years ended December 31, 2021, 2020 and 2019, BlackRock, Inc. accounted for 12.7%, 11.0%, and 11.5% of the Company’s consolidated operating revenues, respectively. For the years ended December 31, 2021, 2020 and 2019, BlackRock, Inc. accounted for 20.4%, 18.0% and 18.9% of the Index segment’s operating revenues, respectively. No single customer accounted for 10.0% or more of operating revenues within the Analytics, ESG and Climate and All Other – Private Assets segments for the years ended December 31, 2021, 2020 and 2019.

2. RECENT ACCOUNTING STANDARDS UPDATES

In October 2021, the FASB issued Accounting Standards Update No. 2021-08, “Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers,” or ASU 2021-08, which requires contract assets and contract liabilities acquired in a business combination to be recognized in accordance with ASC Topic 606. The Company early adopted ASU 2021-08 as of the issuance date and is therefore required to retrospectively apply the standard to business combinations which occurred this fiscal year. The Company’s adoption of the standard resulted in recognition of an additional $7.0 million in deferred revenue and a reduction in deferred tax liabilities of $1.8 million as of September 13, 2021, associated with the acquisition of Real Capital Analytics, Inc. (“RCA”).

3. REVENUE RECOGNITION

MSCI’s operating revenues are reported by product type, which generally reflects the timing of recognition. The Company’s operating revenues 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 Year Ended December 31, 2021
		Segments
(in thousands)		Index				Analytics				ESG and Climate				All Other - Private Assets				Total
Operating Revenues Types
Recurring subscriptions		$	650,629			$	533,178			$	162,609			$	79,624			$	1,426,040
Asset-based fees			553,991				—				—				—				553,991
Non-recurring			47,144				11,121				3,583				1,665				63,513
Total		$	1,251,764			$	544,299			$	166,192			$	81,289			$	2,043,544

		For the Year Ended December 31, 2020
		Segments
(in thousands)		Index				Analytics				ESG and Climate				All Other - Private Assets				Total
Operating Revenues Types
Recurring subscriptions		$	580,393			$	506,301			$	109,945			$	51,536			$	1,248,175
Asset-based fees			399,771				—				—				—				399,771
Non-recurring			36,331				7,507				1,419				2,187				47,444
Total		$	1,016,495			$	513,808			$	111,364			$	53,723			$	1,695,390

		For the Year Ended December 31, 2019
		Segments
(in thousands)		Index				Analytics				ESG and Climate				All Other - Private Assets				Total
Operating Revenues Types
Recurring subscriptions		$	530,968			$	486,282			$	89,563			$	47,227			$	1,154,040
Asset-based fees			361,927				—				—				—				361,927
Non-recurring			28,042				10,643				1,096				2,048				41,829
Total		$	920,937			$	496,925			$	90,659			$	49,275			$	1,557,796

The table that follows presents the change in accounts receivable and deferred revenue between the dates indicated:

		Accounts receivable				Deferred revenue
		(in thousands)
Opening (December 31, 2020)		$	558,569			$	675,870
Closing (December 31, 2021)			664,511				824,912
Increase/(decrease)		$	105,942			$	149,042

		Accounts receivable				Deferred revenue
		(in thousands)
Opening (December 31, 2019)		$	499,268			$	574,656
Closing (December 31, 2020)			558,569				675,870
Increase/(decrease)		$	59,301			$	101,214

The amount of revenue recognized in the period that was included in the opening current deferred revenue, which reflects the contract liability amounts, was $672.5 million, $555.8 million and $522.7 million for the years ended December 31, 2021, 2020 and 2019 respectively. The difference between the opening and closing balances of the Company’s deferred revenue was primarily driven by an increase in billings, partially offset by an increase in amortization of deferred revenue to operating revenues. As of December 31, 2021, 2020 and 2019, the Company carried a long-term deferred revenue balance of $23.4 million, $7.1 million and $4.3 million, respectively, in “Other non-current liabilities” on the 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
		December 31,
		2021
		(in thousands)
First 12-month period		$	476,131
Second 12-month period			273,355
Third 12-month period			96,332
Periods thereafter			40,901
Total		$	886,719

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. Common shares outstanding include common stock and vested restricted stock unit awards where recipients have satisfied the explicit vesting terms. Diluted EPS reflects the assumed conversion of all dilutive securities.

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

		Years Ended
		December 31,				December 31,				December 31,
		2021				2020				2019
(in thousands, except per share data)
Net income		$	725,983			$	601,822			$	563,648
Basic weighted average common shares outstanding			82,508				83,716				84,644
Effect of dilutive securities:
Stock options, RSUs and PSUs			971				801				892
Diluted weighted average common shares outstanding			83,479				84,517				85,536
Earnings per basic common share		$	8.80			$	7.19			$	6.66
Earnings per diluted common share		$	8.70			$	7.12			$	6.59

5. ACQUISITIONS

On September 13, 2021, MSCI acquired all of the issued and outstanding preferred and common shares of 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 Estate 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				$	9,645
Other current assets					3,721
Property, equipment and leasehold improvements, net					1,205
Right of use assets					6,441
Other non-current assets					3,270
Deferred revenue					(35,194	)
Other current liabilities					(14,518	)
Long-term operating lease liabilities					(4,849	)
Deferred tax liabilities					(85,196	)
Intangible assets:
Proprietary data		11 Years			185,500
Customer relationships		20 Years			175,700
Acquired technology and software		9 Years			31,500
Trademarks		2 Years			890
Goodwill					670,874
Purchase price, net of cash acquired				$	948,989

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. As discussed in Note 2, 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 Company, with the assistance of third-party valuation experts, utilized the following methodologies to estimate the fair values of acquired intangible assets: the relief from royalty method, the replacement cost method and the multi-period excess earnings method. The significant assumptions used to estimate the fair value of the acquired intangible assets included, forecasted cash flows which were determined based on certain assumptions which included, among others, projected future revenues, and expected market royalty rate, technology obsolescence rates and discount rates.

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 consolidated financial statements subsequent to the acquisition date was $22.1 million.

6**. COMMITMENTS AND CONTINGENCIES**

Senior Unsecured Notes. The Company had an aggregate of $4,200.0 million in senior unsecured notes (collectively, the “Senior Notes”) outstanding at December 31, 2021, as presented in the table below:

				Principal amount outstanding at				Carrying value at				Carrying value at				Fair Value at				Fair Value at
		Maturity Date		December 31, 2021				December 31, 2021				December 31, 2020				December 31, 2021				December 31, 2020
		(in thousands)
Long-term debt
4.750% senior unsecured notes due 2026		August 1, 2026			-				-				496,257				-				522,325
5.375% senior unsecured notes due 2027		May 15, 2027			-				-				495,819				-				538,100
4.000% senior unsecured notes due 2029		November 15, 2029			1,000,000				991,455				990,364				1,047,950				1,073,040
3.625% senior unsecured notes due 2030		September 1, 2030			900,000				894,263				395,458				924,777				419,428
3.875% senior unsecured notes due 2031		February 15, 2031			1,000,000				989,973				988,879				1,046,620				1,063,430
3.625% senior unsecured notes due 2031		November 1, 2031			600,000				593,538				-				625,536				-
3.250% senior unsecured notes due 2033		August 15, 2033			700,000				692,193				-				710,906				-
Total long-term debt				$	4,200,000			$	4,161,422			$	3,366,777			$	4,355,789			$	3,616,323

Interest payments attributable to the Senior Notes are due as presented in the following table:

		First semi-annual interest payment date		Second semi- annual interest payment date
Senior Notes
4.000% senior unsecured notes due 2029		May 15		November 15
3.625% senior unsecured notes due 2030		March 1		September 1
3.875% senior unsecured notes due 2031		June 1		December 1
3.625% senior unsecured notes due 2031(1)		May 1		November 1
3.250% senior unsecured notes due 2033(2)		February 15		August 15

(1)The first payment occurred on November 1, 2021.

(2)The first payment occuring on February 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.

The $1,000.0 million aggregate principal amount of 4.000% senior unsecured notes due 2029 (the “2029 Senior Notes”) are scheduled to mature and be paid in full on November 15, 2029. At any time prior to November 15, 2024, the Company may redeem all or part of the 2029 Senior Notes at a redemption price equal to the sum of (i) 100% of the principal amount thereof, plus (ii) a make-whole premium as of the date of redemption, plus (iii) accrued and unpaid interest and additional interest, if any, thereon, to the date of redemption. In addition, the Company may redeem all or part of the 2029 Senior Notes, together with accrued and unpaid interest, on or after November 15, 2024, at redemption prices set forth in the indenture governing the 2029 Senior Notes. At any time prior to November 15, 2022, the Company may use the proceeds of certain equity offerings to redeem up to 35% of the aggregate principal amount of the 2029 Senior Notes, including any permitted additional notes, at a redemption price equal to 104.000% of the principal amount plus accrued and unpaid interest, if any, to the redemption date, so long as at least 50% of the aggregate principal amount of all notes (excluding any additional notes, if any) issued under the indenture governing the 2029 Senior Notes remain outstanding after each such redemption occurs.

The $1,000.0 million aggregate principal amount of 3.875% senior unsecured notes due 2031 (the “2031A Senior Notes”) are scheduled to mature and be paid in full on February 15, 2031. At any time prior to June 1, 2025, the Company may redeem all or part of the 2031A Senior Notes at a redemption price equal to the sum of (i) 100% of the principal amount thereof, plus (ii) a make-whole premium as of the date of redemption, plus (iii) accrued and unpaid interest, if any, to, but excluding, the redemption date. In addition, the Company may redeem all or part of the 2031A Senior Notes, together with accrued and unpaid interest, on or after June 1, 2025, at redemption prices set forth in the indenture governing the 2031A Senior Notes. At any time prior to June 1, 2023, the Company may use the proceeds of certain equity offerings to redeem up to 35% of the aggregate principal amount of the 2031A Senior Notes, including any permitted additional notes, at a redemption price equal to 103.875% of the principal amount plus accrued and unpaid interest, if any, to, but excluding, the redemption date, so long as at least 50% of the aggregate principal amount of all notes (excluding any additional notes, if any) issued under the indenture governing the 2031A Senior Notes remain outstanding after each such redemption occurs.

On March 26, 2021, the Company issued $500.0 million aggregate principal amount of 3.625% senior unsecured notes due 2030 (the “Additional 2030 Senior Notes”) in a private offering that was exempt from the registration requirements of the Securities Act. The Additional 2030 Senior Notes constitute a further issuance of, are fully fungible with, rank equally with and form a single series with the $400.0 million aggregate principal amount of the 3.625% senior unsecured notes due 2030 issued by the Company on March 4, 2020 (the “Initial 2030 Senior Notes,” and together with the Additional 2030 Senior Notes, the “2030 Senior Notes”). In connection with the completion of the offering of the Additional 2030 Senior Notes, the Company announced that it intended to use a portion of the net proceeds from the offering, together with available cash, for the pre-maturity redemption of all $500.0 million aggregate principal amount outstanding of its 4.750% senior unsecured notes due 2026 (the “2026 Senior Notes”). On April 12, 2021 the Company completed the pre-maturity redemption of all of its 2026 Senior Notes. The pre-maturity redemption of the 2026 Senior Notes resulted in an approximately $21.8 million loss on extinguishment that was recorded in other expense (income), which includes an applicable premium of approximately $18.2 million (as set forth in the indenture governing the terms of the 2026 Senior Notes) and the write-off of approximately $3.6 million of unamortized debt issuance costs associated with the 2026 Senior Notes.

The 2030 Senior Notes are scheduled to mature and be paid in full on September 1, 2030. At any time prior to March 1, 2025, the Company may redeem all or part of the 2030 Senior Notes at a redemption price equal to the sum of (i) 100% of the principal amount thereof, plus (ii) a make-whole premium as of the date of redemption, plus (iii) accrued and unpaid interest and additional interest, if any, thereon, to the date of redemption. In addition, the Company may redeem all or part of the 2030 Senior Notes, together with accrued and unpaid interest, on or after March 1, 2025, at redemption prices set forth in the indenture governing the 2030 Senior Notes. At any time prior to March 1, 2023, the Company may use the proceeds of certain equity offerings to redeem up to 35% of the aggregate principal amount of the 2030 Senior Notes, including any permitted additional notes, at a redemption price equal to 103.625% of the principal amount plus accrued and unpaid interest, if any, to the redemption date, so long as at least 50% of the aggregate principal amount of the Initial 2030 Senior Notes (excluding the Additional 2030 Senior Notes and any additional notes, if any) issued under the indenture governing the 2030 Senior Notes remain outstanding after each such redemption occurs.

On May 14, 2021, the Company issued $600.0 million aggregate principal amount of 3.625% Senior Unsecured Notes due 2031 (the “2031B Senior Notes”) in a private offering that was exempt from the registration requirements of the Securities Act. The 2031B Senior Notes are scheduled to mature and be paid in full on November 1, 2031. At any time prior to November 1, 2026, the Company may redeem all or part of the 2031B Senior Notes at a redemption price equal to the sum of (i) 100% of the principal amount thereof, plus (ii) a make-whole premium as of the date of redemption, plus (iii) accrued and unpaid interest, if any, thereon, to the date of redemption. In addition, the Company may redeem all or part of the 2031B Senior Notes, together with accrued and unpaid interest, on or after November 1, 2026, at redemption prices set forth in the indenture governing the 2031B Senior Notes. At any time prior to November 1, 2024, the Company may use the proceeds of certain equity offerings to redeem up to 35% of the aggregate principal amount of the 2031B Senior Notes, including any permitted additional notes, at a redemption price equal to 103.625% of the principal amount plus accrued and unpaid interest, if any, to the redemption date, so long as at least 50% of the aggregate principal amount of all notes (excluding any additional notes, if any) issued under the indenture governing the 2031B Senior Notes remain outstanding after each such redemption occurs.

On August 17, 2021, the Company issued $700.0 million aggregate principal amount of 3.250% Senior Unsecured Notes due 2033 (the “2033 Senior Notes”) in a private offering that was exempt from the registration requirements of the Securities Act. In connection with the completion of the offering, the Company announced that it intended to use a portion of the net proceeds from the offering for the pre-maturity redemption of all $500.0 million aggregate principal amount outstanding of its 5.375% senior unsecured notes due 2027 (the “2027 Senior Notes”). On September 2, 2021 the Company completed the pre-maturity redemption of all of its 2027 Senior Notes. The pre-maturity redemption of the 2027 Senior Notes resulted in an approximately $37.3 million loss on extinguishment that was recorded in other expense (income), which includes an applicable premium of approximately $33.6 million (as set forth in the indenture governing the terms of the 2027 Senior Notes) and the write-off of approximately $3.7 million of unamortized debt issuance costs associated with the 2027 Senior Notes.

The 2033 Senior Notes are scheduled to mature and be paid in full on August 15, 2033. At any time prior to August 15, 2027, the Company may redeem all or part of the 2033 Senior Notes at a redemption price equal to the sum of (i) 100% of the principal amount thereof, plus (ii) a make-whole premium as of the date of redemption, plus (iii) accrued and unpaid interest and additional interest, if any, thereon, to the date of redemption. In addition, the

Company may redeem all or part of the 2033 Senior Notes, together with accrued and unpaid interest, on or after August 15, 2027, at redemption prices set forth in the indenture governing the 2033 Senior Notes. At any time prior to August 15, 2024, the Company may use the proceeds of certain equity offerings to redeem up to 35% of the aggregate principal amount of the 2033 Senior Notes, including any permitted additional notes, at a redemption price equal to 103.250% of the principal amount plus accrued and unpaid interest, if any, to the redemption date, so long as at least 50% of the aggregate principal amount of all notes (excluding any additional notes, if any) issued under the indenture governing the 2033 Senior Notes remain outstanding after each such redemption occurs.

Revolver. Since November 20, 2014, the Company has maintained a revolving credit agreement with a syndicate of banks (as amended, the “Revolving Credit Agreement”). On March 29, 2021, the Company entered into Amendment No. 4 (the “Fourth Amendment”) to the Revolving Credit Agreement. The Fourth Amendment, among other things, (i) increased aggregate commitments available to be borrowed by $100.0 million to an aggregate of $500.0 million of availability thereunder until November 2024, at which point the aggregate commitments will be $467.5 million, and (ii) extended the term to March 2026. At December 31, 2021, the Revolving Credit Agreement was undrawn.

In connection with the closings of the Senior Notes offerings, entry into the Revolving Credit Agreement and the subsequent amendments, 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 December 31, 2021, $40.6 million of the deferred financing fees and premium remain unamortized, $0.5 million of which is included in “Prepaid and other assets,” $1.5 million of which is included in “Other non-current assets” and $38.6 million of which is included in “Long-term debt” on the Consolidated Statement of Financial Condition.

7. LEASES

The Company recognized $30.6 million, $32.8 million and $35.6 million of operating lease expenses for the years ended December 31, 2021, 2020 and 2019, respectively. The amounts associated with variable lease costs, short-term lease costs and sublease income were not material for any of the years ended December 31, 2021, 2020 and 2019.

The Company’s leases have remaining lease terms of up to approximately 11 years. Some of these leases have options to extend which, if exercised, would extend the maximum term to approximately 25 years. Some of the leases also provide for early termination, the exercise of which would shorten the term of those leases by up to 5 years.

The Company recorded pre-tax impairment charges for the year ended December 31, 2021 of $8.4 million associated with right of use assets. The impairment charges are included in General and administrative expenses within the consolidated statements of income.

Future minimum commitments for the Company’s operating leases in place as of December 31, 2021, the interest and other relevant line items in the Consolidated Statement of Financial Condition are as follows:

Maturity of Lease Liabilities		Operating
(in thousands)		Leases
2022		$	28,271
2023			29,427
2024			23,924
2025			22,717
2026			20,447
Thereafter			73,539
Total lease payments		$	198,325
Less: Interest			(24,972	)
Present value of lease liabilities		$	173,353
Other accrued liabilities		$	23,324
Long-term operating lease liabilities		$	150,029

The following table presents the lease term and discount rate for the Company’s operating leases in place as of the periods indicated:

		As of
		December 31,				December 31,
Lease Term and Discount Rate		2021				2020
Weighted-average remaining lease term (years)			8.16				8.93
Weighted-average discount rate			3.09	%			3.34	%

The following table presents other information for the Company’s operating leases in place for the periods indicated:

		Years Ended
Other Information		December 31,				December 31,				December 31,
(in thousands)		2021				2020				2019
Operating cash flows used for operating leases		$	30,972			$	30,061			$	29,886
Right of use assets obtained in exchange for new operating lease liabilities		$	26,004			$	11,472			$	210,784

8. PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS, NET

Property, equipment and leasehold improvements, net at December 31, 2021 and 2020 consisted of the following:

				As of
		Estimated		December 31,				December 31,
		Useful Lives		2021				2020
				(in thousands)
Computer & related equipment		2 to 5 years		$	179,557			$	186,786
Furniture & fixtures		7 years			14,194				15,276
Leasehold improvements		1 to 21 years			56,308				56,537
Work-in-process		—			2,699				2,996
Subtotal					252,758				261,595
Accumulated depreciation and amortization					(186,043	)			(181,149	)
Property, equipment and leasehold improvements, net				$	66,715			$	80,446

Depreciation and amortization expense of property, equipment and leasehold improvements was $28.9 million, $29.8 million and $30.0 million for the years ended December 31, 2021, 2020 and 2019, respectively.

9. 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, 2019		$	1,204,694			$	290,976			$	46,612			$	20,586				$	1,562,868
Foreign exchange translation adjustment			1,064				—				1,435				655					3,154
Goodwill at December 31, 2020		$	1,205,758			$	290,976			$	48,047			$	21,241				$	1,566,022
Acquisitions			—				—				—				670,874		(1)			670,874
Foreign exchange translation adjustment			(315	)			—				—				(195	)				(510	)
Goodwill at December 31, 2021		$	1,205,443			$	290,976			$	48,047			$	691,920				$	2,236,386

(1)	Reflects the impact of 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:

		Years Ended
		December 31,				December 31,				December 31,
(in thousands)		2021				2020				2019
Amortization expense of acquired intangible assets		$	42,242			$	34,049			$	34,773
Amortization expense of internally developed capitalized software			22,337				22,892				14,637
Write-off of internally developed capitalized software			16,013				—				—
Total amortization of intangible assets expense		$	80,592			$	56,941			$	49,410

Following management’s decision to discontinue development and cease related sales activities of certain Analytics segment products and transition existing customers to other product offerings, the Company wrote off $16.0 million of certain internally developed capitalized software intangible assets (consisting of $46.3 million of gross intangible assets less $30.3 million of accumulated amortization) during the year ended December 31, 2021. The non-cash charge is recorded as a component of “Amortization of intangible assets” on the Consolidated Statement of Income.

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

				As of
		Estimated		December 31,				December 31,
		Useful Lives		2021				2020
				(in thousands)
Gross intangible assets:
Customer relationships		13 to 21 years		$	532,400			$	356,700
Proprietary data		11 to 13 years			220,639				28,627
Acquired technology and software		8 to 9 years			209,220				177,720
Trademarks		2 to 21.5 years			208,190				207,300
Internally developed capitalized software		3 to 5 years			106,181				113,188
Subtotal					1,276,630				883,535
Foreign exchange translation adjustment					(5,782	)			(5,262	)
Total gross intangible assets				$	1,270,848			$	878,273
Accumulated amortization:
Customer relationships				$	(277,865	)		$	(253,465	)
Proprietary data					(22,678	)			(15,730	)
Acquired technology and software					(175,718	)			(174,032	)
Trademarks					(152,468	)			(143,207	)
Internally developed capitalized software					(49,394	)			(57,464	)
Subtotal					(678,123	)			(643,898	)
Foreign exchange translation adjustment					616				373
Total accumulated amortization				$	(677,507	)		$	(643,525	)
Net intangible assets:
Customer relationships				$	254,535			$	103,235
Proprietary data					197,961				12,897
Acquired technology and software					33,502				3,688
Trademarks					55,722				64,093
Internally developed capitalized software					56,787				55,724
Subtotal					598,507				239,637
Foreign exchange translation adjustment					(5,166	)			(4,889	)
Total net intangible assets				$	593,341			$	234,748

Estimated amortization expense for succeeding years is presented below:

Years Ending December 31,		Amortization Expense
		(in thousands)
2022		$	87,438
2023			81,532
2024			74,370
2025			51,800
2026			36,175
Thereafter			262,026
Total		$	593,341

10. EMPLOYEE BENEFITS

The Company sponsors a 401(k) plan for eligible U.S. employees and defined contribution and defined benefit pension plans that cover substantially all of its non-U.S. employees. Eligible employees may participate in the MSCI 401(k) plan (or any other regional defined contribution plan sponsored by MSCI) immediately upon hire. Eligible employees receive 401(k) and other defined contribution plan matching contributions, which are subject to vesting and certain other limitations. Additionally, some non-US employees are eligible to participate in and receive contributions to defined benefit plans.

The following table reflects the employee benefits expense by cost, type and location in the Statement of Income for the periods indicated:

		Years Ended
		December 31,				December 31,				December 31,
(in thousands)		2021				2020				2019
Employee benefit cost type
401(k) and other defined contribution plans			25,740				21,804				19,909
Pension related net period benefit expense			5,785				4,671				4,135
Total		$	31,525			$	26,475			$	24,044
Location in the Statement of Income
Cost of revenues		$	12,231			$	9,913			$	9,387
Selling and marketing			9,489				7,910				7,368
Research and development			6,271				5,328				4,705
General and administrative			2,620				2,289				1,844
Other expense (income)			914				1,035				740
Total		$	31,525			$	26,475			$	24,044

The Company uses a measurement date of December 31st to calculate obligations under its pension and postretirement plans. As of December 31, 2021 and 2020, the Company carried a net liability of $34.5 million and $36.1 million, respectively, in “Other non-current liabilities” on the Consolidated Statement of Financial Condition related to its future pension obligations. The fair value of the defined benefit plan assets was $30.2 million and $28.5 million at December 31, 2021 and 2020, respectively.

The Company’s retiree benefit plans include defined benefit plans for employees in Switzerland, as well as other countries where MSCI maintains an operating presence.

Our Switzerland plans are government-mandated retirement funds that provide employees with a minimum investment return, which is determined annually by the Swiss government and was 1.0% in the years ended December 31, 2021, 2020 and 2019. Under the Switzerland plans, the Company and our employees are required to make contributions into a fund managed by an independent investment fiduciary. Employer contributions must be in an amount at least equal to the employee’s contribution. Employee contributions are based on the respective employee’s age, salary and chosen contribution scale. As of December 31, 2021 and 2020, the Switzerland plans had a gross pension liability of $34.0 million and $34.8 million, respectively, and plan assets that totaled $26.1 million and $24.6 million, respectively. In the years ended December 31, 2021, 2020 and 2019, we recognized net periodic benefit expense of $0.3 million, $0.5 million and $1.0 million, respectively, related to our Switzerland plans. The discount rate for the Switzerland defined benefit pension plan was 0.30% and 0.10%, respectively, as of December 31, 2021 and 2020.

The investment strategies of the non-U.S. defined benefit plans vary according to the plan provisions and local laws. The majority of the assets in the non-U.S. plans are in the Switzerland plans. The Switzerland plans are associated with an insured collective retirement foundation, whereby assets are held in trust and the assets are comingled with those of other participating companies. Investment decisions are made by a board of the collective retirement foundation, comprised of participating company representatives and representatives from the insurer. The overall strategy is to manage risk while maximizing total returns.

11. SHAREHOLDERS’ EQUITY (DEFICIT)

This note reflects the share repurchases and related activity as well as share-based compensation activity recognized by the Company, for all periods referenced.

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 December 31, 2021, there was $1,589.2 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:

Year Ended		Average Price Paid Per Share				Total Number of Shares Repurchased				Dollar Value of Shares Repurchased
		(in thousands, except per share data)
December 31, 2021		$	412.25				339			$	139,580
December 31, 2020		$	291.76				2,493			$	727,344
December 31, 2019		$	147.97				690			$	102,081

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

		Dividends
		Per Share				Declared				Distributed				(Released)/ Deferred
2021		(in thousands, except per share data)
Three Months Ended March 31,		$	0.78			$	65,947			$	66,153			$	(206	)
Three Months Ended June 30,			0.78				64,863				64,489				374
Three Months Ended September 30,			1.04				86,476				85,961				515
Three Months Ended December 31,			1.04				86,475				85,973				502
Year Ended December 31,		$	3.64			$	303,761			$	302,576			$	1,185
2020
Three Months Ended March 31,		$	0.68			$	59,233			$	59,455			$	(222	)
Three Months Ended June 30,			0.68				57,360				57,068				292
Three Months Ended September 30,			0.78				65,830				65,454				376
Three Months Ended December 31,			0.78				65,029				64,653				376
Year Ended December 31,		$	2.92			$	247,452			$	246,630			$	822
2019
Three Months Ended March 31,		$	0.58			$	55,339			$	57,988			$	(2,649	)
Three Months Ended June 30,		0.58					49,613				49,365				248
Three Months Ended September 30,		0.68					58,176				57,882				294
Three Months Ended December 31,		0.68					58,176				57,916				260
Year Ended December 31,		$	2.52			$	221,304			$	223,151			$	(1,847	)

Common Stock

The following table presents activity related to shares of common stock issued and repurchased for the periods indicated:

		Common				Treasury				Common Stock
		Stock Issued				Stock				Outstanding
Balance At December 31, 2018			130,029,926				(45,855,788	)			84,174,138
Dividend payable/paid			1,064				(585	)			479
Common stock issued and exercise of stock options			2,387,145				—				2,387,145
Shares withheld for tax withholding			—				(1,077,815	)			(1,077,815	)
Shares repurchased under stock repurchase programs			—				(689,891	)			(689,891	)
Shares issued to Directors			1,277				(403	)			874
Balance At December 31, 2019			132,419,412				(47,624,482	)			84,794,930
Dividend payable/paid			553				(337	)			216
Common stock issued			406,960				—				406,960
Shares withheld for tax withholding			—				(165,239	)			(165,239	)
Shares repurchased under stock repurchase programs			—				(2,492,994	)			(2,492,994	)
Shares issued to Directors			2,250				27,284				29,534
Balance At December 31, 2020			132,829,175				(50,255,768	)			82,573,407
Dividend payable/paid			268				(156	)			112
Common stock issued			331,427				—				331,427
Shares withheld for tax withholding			—				(133,431	)			(133,431	)
Shares repurchased under stock repurchase programs			—				(338,577	)			(338,577	)
Shares issued to Directors			1,308				5,203				6,511
Balance At December 31, 2021			133,162,178				(50,722,729	)			82,439,449

Share-Based Compensation

The Company regularly issues share-based compensation to its employees and directors who are not employees of the Company. The accounting guidance for share-based compensation requires measurement of

compensation cost for share-based awards at fair value and recognition of compensation cost over the service period, net of estimated forfeitures.

In February 2022, the Company granted a portion of its employees awards in the form of RSUs, PSUs and performance stock options (“PSOs”). The total number of units and options granted was 227,684. The aggregate fair value of the awards was $79.6 million. The RSUs granted in 2022 vest at the end of a three-year service period. The PSUs granted in 2022 vest at the end of a three-year service period, are subject to a one-year sale restriction and are also subject to the achievement of an absolute total shareholder return compounded annual growth rate, measured over a three-year period. The PSOs granted in 2022 vest and become exercisable at the end of a three-year service period and are subject to a performance condition based on the combined level of achievement of a cumulative revenue performance goal and a cumulative adjusted EPS performance goal, measured over a three-year period. All of these awards are subject to forfeiture under specific criteria set in the award agreements.

In connection with awards under its equity-based compensation and benefit plans, the Company is authorized to use newly-issued shares or certain shares of common stock held in treasury.

The following table presents the amount of share-based compensation expense by category for the periods indicated:

		Years Ended
		December 31,				December 31,				December 31,
(in thousands)		2021				2020				2019
Cost of revenues		$	17,285			$	14,523			$	11,190
Selling and marketing			14,411				13,545				14,943
Research and development			7,913				7,344				5,966
General and administrative			17,463				19,826				11,991
Other expense (income)			1,416				379				—
Total share-based compensation expense		$	58,488			$	55,617			$	44,090

The windfall tax benefits for share-based compensation expense related to RSUs, PSUs and other restricted stock unit awards (together, the “Share-based Awards”) as well as stock options granted to Company employees and to directors who are not employees of the Company were $22.3 million, $20.9 million and $82.5 million for the years ended December 31, 2021, 2020 and 2019, respectively.

As of December 31, 2021, $52.3 million of compensation cost related to MSCI unvested share-based awards granted to the Company’s employees and to directors who are not employees of the Company had not yet been recognized. The unrecognized compensation cost relating to unvested stock-based awards expected to vest will be recognized primarily over the next one to five years.

In connection with awards under its equity-based compensation and benefit plans, the Company is authorized to issue shares of common stock. As of December 31, 2021, 3.8 million shares of common stock were available for future grants under these plans.

Certain Company employees have been granted Share-based Awards pursuant to a share-based compensation plan. The plan provides for the deferral of a portion of certain employees’ discretionary compensation with awards made in the form of Share-based Awards. Recipients of Share-based Awards generally have rights to receive dividend equivalents that are subject to vesting. The Company reports the target number of PSUs granted unless it has determined, based on the actual achievement of performance measures, that an employee will receive a different amount of shares underlying the PSUs, in which case the Company reports the amount of shares employees are likely to receive.

The fair value of the PSUs on the award dates were estimated under the Monte Carlo method using the following assumptions:

		Years Ended
		December 31,				December 31,				December 31,
		2021				2020				2019
Risk free interest rate			0.33	%			1.28	%			2.46	%
Historical stock price volatility			34.13	%			25.42	%			21.98	%
Term (in years)			4.0				3.8				3.7
Discount of Lack of Marketability			4.0	%			0.0	%			0.0	%

The risk-free interest rate was determined based on the yields available on U.S. Constant Maturity Treasury yield curve as of the valuation dates with a maturity commensurate with the terms. The expected stock price volatility was determined using historical volatility. Since the PSU awards are dividend-protected, the assumed dividend yield applied in the valuation was 0.0%.

The following table presents activity concerning the Company’s vested and unvested Share-based Awards applicable to its employees (share data in thousands) for the period indicated:

						Weighted
						Average
						Grant
		Number of				Date Fair
For the Year Ended December 31, 2021		Shares				Value
Vested and unvested Share-based Awards at December 31, 2020			739			$	163.99
Granted			330			$	265.99
Conversion to common stock			(340	)		$	153.66
Canceled			(32	)		$	274.66
Vested and unvested Share-based Awards at December 31, 2021 (1)			697			$	217.05

(1)	As of December 31, 2021, 639 Share-based Awards, with a weighted average grant date fair value of $213.70, were vested or expected to vest.

The total fair value of Share-based Awards held by the Company’s employees that converted to MSCI common stock during the years ended December 31, 2021, 2020 and 2019 was $152.6 million, $133.6 million and $401.7 million, respectively.

The following table presents activity concerning the Company’s unvested Share-based Awards related to its employees (share data in thousands):

						Weighted
						Average
						Grant
		Number of				Date Fair
For the Year Ended December 31, 2021		Shares				Value
Unvested Share-based Awards at December 31, 2020			727			$	164.58
Granted			293			$	268.91
Vested			(318	)		$	156.41
Canceled			(32	)		$	274.66
Unvested Share-based Awards at December 31, 2021			670			$	217.05
Unvested Share-based Awards expected to vest			612			$	210.15

There were no remaining stock options outstanding that could be exercised during any of the years ended December 31, 2021 and 2020. The intrinsic value of the stock options exercised by the Company’s employees during the year ended December 31, 2019 was $22.1 million.

12. INCOME TAXES

The provision for income taxes (benefits) by taxing jurisdiction consisted of:

		Years Ended
		December 31,				December 31,				December 31,
		2021				2020				2019
		(in thousands)
Current
U.S. federal		$	133,281			$	39,665			$	31,493
U.S. state and local			49,475				29,942				6,841
Non U.S.			60,766				70,441				22,103
			243,522				140,048				60,437
Deferred
U.S. federal			(79,812	)			(44,507	)			(11,941	)
U.S. state and local			(25,981	)			(8,911	)			(4,001	)
Non U.S.			(5,576	)			(2,227	)			(4,825	)
			(111,369	)			(55,645	)			(20,767	)
Provision for income taxes		$	132,153			$	84,403			$	39,670

The following table reconciles the U.S. federal statutory income tax rate to the effective income tax rate:

		Years Ended
		December 31,				December 31,				December 31,
		2021				2020				2019
U.S. federal statutory income tax rate			21.00	%			21.00	%			21.00	%
U.S. state and local income taxes, net of U.S. federal income tax benefits			2.90	%			3.14	%			2.51	%
Change in tax rates applicable to non-U.S. earnings			(5.09	%)			(3.30	%)			(3.74	%)
Foreign Derived Intangible Income (FDII), net of GILTI (1)			(1.09	%)			(3.84	%)			1.05	%
Domestic tax credits and incentives			(0.59	%)			(0.59	%)			(0.31	%)
Valuation allowance			—	%			—	%			(0.10	%)
Excess share-based compensation			(2.65	%)			(3.24	%)			(13.94	%)
Other			0.92	%			(0.87	%)			0.11	%
Effective income tax rate			15.40	%			12.30	%			6.58	%

(1)	The year ended December 31, 2020 includes (3.00%) released during the year related to the favorable impact on prior years from final regulations clarifying certain provisions of the Tax Cuts and Jobs Act (“Tax Reform”).

Deferred income taxes reflect the net tax effects of temporary differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when such differences are expected to reverse. Significant components of the Company’s deferred tax assets and liabilities as of December 31, 2021 and 2020, were as follows:

		As of
		December 31,				December 31,
		2021				2020
		(in thousands)
Deferred tax assets:
Capitalized expenses		$	94,265			$	—
Unearned revenue			56,810				46,530
Lease liabilities			39,507				40,786
Employee compensation and benefit plans			20,216				20,602
Interest expense carryforwards			11,215				7,901
Loss carryforwards			18,173				3,071
Pension			2,229				3,066
Other			3,509				—
Subtotal			245,924				121,956
Less: valuation allowance			(36	)			—
Total deferred tax assets		$	245,888			$	121,956
Deferred tax liabilities:
Intangible assets		$	(147,118	)		$	(51,862	)
Right of use assets			(32,106	)			(35,634	)
Property, equipment and leasehold improvements, net			(27,136	)			(20,197	)
Unremitted foreign earnings			(3,059	)			(1,279	)
Unearned revenue			—				—
Other			—				(2,131	)
Total deferred tax liabilities		$	(209,419	)		$	(111,103	)
Net deferred tax assets		$	36,469			$	10,853

As presented in the table above, the Company has certain loss and interest carryforward items. The tax value of the U.S. portion of the interest carryforward was zero and $0.7 million as of December 31, 2021 and December 31, 2020, respectively. The tax value of the non-U.S. portion of the interest carryforward was $11.2 million and $7.2 million as of December 31, 2021 and December 31, 2020, respectively. These carryforwards are subject to annual limitations on utilization over an indefinite life.

Net operating loss carryforwards in the U.S. were $69.7 million with a tax value of $17.9 million and $8.7 million with a tax value of $1.8 million as of December 31, 2021 and December 31, 2020, respectively. The increase in the net operating loss carryforward in the U.S. is primarily attributable to the September 13, 2021 acquisition of RCA. These carryforwards are subject to annual limitations and will begin to expire in 2026. The tax value of the non-U.S. portion of the net operating loss was $0.3 million and $1.2 million as of December 31, 2021 and December 31, 2020 respectively. These carryforwards are subject to annual limitations and will begin to expire in 2023.

The Company believes the majority of the deferred tax assets at December 31, 2021 are more likely than not to be realized based on expectations as to future taxable income in the jurisdictions in which it operates with the exception of a loss carryforward in one jurisdiction where it has established a valuation allowance of $0.04 million.

As of December 31, 2021, the Company has recorded prepayments of taxes in the amount of $36.5 million in “Other non-current assets” on the Consolidated Statements of Financial Condition, as the amounts are not anticipated to be received until after December 31, 2022.

The following table presents changes in the Company’s deferred tax asset valuation allowance for the periods indicated:

		Years Ended
		December 31,				December 31,				December 31,
		2021				2020				2019
		(in thousands)
Beginning balance		$	—			$	—			$	632
Additions charged to cost and expenses			36				—				—
Deductions			—				—				(632	)
Ending balance		$	36			$	—			$	—

The following table presents the components of income before provision for income taxes generated by domestic or foreign operations for the periods indicated:

		Years Ended
		December 31,				December 31,				December 31,
		2021				2020				2019
		(in thousands)
Domestic		$	417,679			$	353,049			$	351,177
Foreign (1)			440,457				333,176				252,141
Total income before provision for income taxes		$	858,136			$	686,225			$	603,318

(1)	Foreign income before provision for income taxes is defined as income generated from operations located outside the U.S., which includes income from foreign branches of U.S. companies.

As of December 31, 2021, the Company has provided for applicable state income and foreign withholding taxes on all undistributed earnings of its foreign subsidiaries.

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 $31.6 million in the next twelve months as a result of the resolution of tax examinations.

The Company believes the resolution of tax matters will not have a material effect on the Consolidated Statement of Financial Condition of the Company, although a resolution could have a material impact on the Company’s Consolidated Statement of Income for a particular future period and on the Company’s effective tax rate for any period in which such resolution occurs.

The following table presents a reconciliation of the beginning and ending amount of the gross unrecognized tax benefits, excluding interest and penalties, for the years ended December 31, 2021, 2020 and 2019:

		Years Ended
Gross unrecognized tax benefits		December 31,				December 31,				December 31,
(in thousands)		2021				2020				2019
Beginning balance		$	16,621			$	15,841			$	14,091
Increases based on tax positions related to the current period			511				292				2,413
Increases based on tax positions related to prior periods			20,321				2,099				—
Decreases based on tax positions related to prior periods			—				—				—
Decreases related to settlements with taxing authorities			—				—				—
Decreases related to a lapse of applicable statute of limitations			(4,414	)			(1,611	)			(663	)
Ending balance		$	33,039			$	16,621			$	15,841

The total amount of unrecognized tax benefits was $33.0 million, $16.6 million and $15.8 million as of December 31, 2021, 2020 and 2019, respectively, which, if recognized, would favorably affect the effective tax rate in future periods. The increase in unrecognized tax benefits in the year ended December 31, 2021 is principally due to the filing of prior year refund claims. The Company recognizes the accrual of interest and penalties related to unrecognized tax benefits in the “Provision for income taxes” in the Consolidated Statement of Income. For the years ended December 31, 2021 and 2020, the Company recognized zero and for the year ended December 31, 2019, the Company recognized $0.4 million of interest in the Consolidated Statement of Income with respect to unrecognized tax benefits. Penalties of $0.3 million, $0.4 million and zero were recognized in the Consolidated Statement of Income and the Consolidated Statement of Financial Position for the years ended December 31, 2021, 2020 and 2019, respectively. The amount of accrued interest, which includes interest related to uncertain tax positions and accrued income tax expense, recorded on the Consolidated Statement of Financial Condition as of December 31, 2021, 2020 and 2019 was $0.9 million.

The Company is under examination by tax authorities in certain jurisdictions, including foreign jurisdictions, such as the United Kingdom, Switzerland and India, and states in the U.S. in which the Company has significant operations, such as New York and California. The tax years currently under examination vary by jurisdiction but include years ranging from 2008 through 2020.

13. SEGMENT INFORMATION

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

The CODM measures and evaluates reportable segments based on segment operating revenues as well as Adjusted EBITDA and other measures. The Company excludes the following items from segment Adjusted EBITDA: provision for income taxes, other expense (income), net, depreciation and amortization of property, equipment and leasehold improvements, amortization of intangible assets and, at times, certain other transactions or adjustments, including impairment related to sublease of leased property, certain non-recurring acquisition-related integration and transaction costs and the impact related to the vesting of multi-year restricted stock units granted in 2016 to certain senior executives that are subject to the achievement of multi-year total shareholder return targets, which are performance targets with a market condition (the “2016 Multi-Year PSUs”), that the CODM does not consider for the purposes of making decisions to allocate resources among segments or to assess segment performance. Although these amounts are excluded from segment Adjusted EBITDA, they are included in reported consolidated net income and are included in the reconciliation that follows.

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

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

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

The Company has five operating segments: Index, Analytics, ESG and Climate, Real Estate and Burgiss, which are presented as the following four reportable segments: Index, Analytics, ESG and Climate and All Other – Private Assets.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

14. QUARTERLY RESULTS OF OPERATIONS (unaudited):

		2021																2020
		First				Second				Third				Fourth				First				Second				Third				Fourth
		Quarter				Quarter				Quarter				Quarter				Quarter				Quarter				Quarter				Quarter
		(in thousands, except per share data)
Operating revenues		$	478,423			$	498,180			$	517,099			$	549,842			$	416,780			$	409,616			$	425,333			$	443,661
Cost of revenues			85,780				87,327				89,674				95,903				74,609				70,456				70,704				75,935
Selling and marketing			56,467				58,191				59,819				68,708				55,549				51,617				52,668				56,662
Research and development			24,862				27,531				28,352				30,819				26,562				22,534				24,901				27,056
General and administrative			34,728				30,182				38,110				44,873				30,833				28,309				27,613				27,872
Amortization of intangible assets			15,068				30,396				14,105				21,023				13,776				14,062				14,333				14,770
Depreciation and amortization of property, equipment and leasehold improvements			7,143				7,020				6,809				7,929				7,567				7,463				7,494				7,281
Total operating expenses			224,048				240,647				236,869				269,255				208,896				194,441				197,713				209,576
Operating income			254,375				257,533				280,230				280,587				207,884				215,175				227,620				234,085
Interest income			(386	)			(347	)			(396	)			(368	)			(3,483	)			(771	)			(475	)			(301	)
Interest expense			37,584				39,557				42,137				40,336				40,231				41,227				37,536				37,330
Other expense (income)			1,149				22,628				37,839				(5,144	)			8,287				35,552				1,516				1,890
Other expense (income), net			38,347				61,838				79,580				34,824				45,035				76,008				38,577				38,919
Income before provision for income taxes			216,028				195,695				200,650				245,763				162,849				139,167				189,043				195,166
Provision for income taxes			19,209				30,272				30,774				51,898				14,724				24,044				6,685				38,950
Net income		$	196,819			$	165,423			$	169,876			$	193,865			$	148,125			$	115,123			$	182,358			$	156,216
Earnings per basic common share		$	2.38			$	2.01			$	2.06			$	2.35			$	1.75			$	1.38			$	2.18			$	1.89
Earnings per diluted common share		$	2.36			$	1.99			$	2.03			$	2.32			$	1.73			$	1.36			$	2.16			$	1.87
Weighted average shares outstanding used in computing per share data
Basic			82,640				82,454				82,470				82,473				84,870				83,666				83,602				82,737
Diluted			83,493				83,295				83,554				83,578				85,548				84,349				84,479				83,707

15. SUBSEQUENT EVENTS

Subsequent to the year ended December 31, 2021 and through trade date of February 10, 2022, the Company repurchased an additional 1.2 million shares of common stock at an average price of $515.83 per share for a total value of $634.1 million.

On January 24, 2022, the Board of Directors of the Company declared a quarterly dividend of $1.04 per share of common stock to be paid on February 28, 2022 to shareholders of record as of the close of trading on February 18, 2022.