Item 8. Financial Statements and Supplementary Data

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Item 8. Financial Statements and Supplementary Data

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


			Page
Report of Independent Registered Public Accounting Firm (PCAOB ID 238)			56
Consolidated Statements of Financial Condition as of December 31, 202 2 and December 31, 20 21			58
Consolidated Statements of Income for the Years Ended December 31, 202 2 , December 31, 202 1 , and December 31, 20 20			59
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 202 2 , December 31, 202 1 , and December 31, 20 20			60
Consolidated Statements of Shareholders’ Equity (Deficit) for the Years Ended December 31, 202 2 , December 31, 202 1 , and December 31, 20 20			61
Consolidated Statements of Cash Flows for the Years Ended December 31, 202 2 , December 31, 202 1 , and December 31, 20 20			62
Notes to Consolidated Financial Statements			63

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, 2022 and 2021, 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, 2022, 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, 2022, 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, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022 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, 2022, 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.

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.

Revenue Recognition - Recurring Subscriptions, Asset-Based Fees, and Non-Recurring Revenues

As described in Notes 1 and 3 to the consolidated financial statements, the Company recognized operating revenues of $2.1 billion for the year ended December 31, 2022, related to recurring subscriptions, asset-based fees, or non-recurring revenues from the Index, Analytics, and ESG and Climate segments. Recurring subscription revenues represent fees earned from clients primarily under renewable contracts or agreements and are generally paid annually in advance and recognized in most cases ratably over the term of the license or service pursuant to the contract terms. Asset-based fees are principally recognized based on the estimated assets under management (AUM) linked to the Company's 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 the Company’s 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 the Company typically does not have renewal clauses within the contract. Examples of such products and services include one-time license fees, certain derivative financial products, certain implementation services and historical data sets. Based on the nature of the services provided, non-recurring revenues are generally billed either in advance or after delivery and recognized point in time or over the service period.

The principal considerations for our determination that performing procedures relating to revenue recognition for recurring subscriptions, asset-based fees, and non-recurring revenues is a critical audit matter are the significant audit effort in performing procedures and evaluating audit evidence related to management’s assessment of revenue recognition.

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 revenue recognition, including controls over revenue transactions recognized as recurring subscriptions, asset-based fees, and non-recurring revenues. These procedures also included, among others, evaluating revenue transactions by testing a sample of revenue transactions by obtaining and inspecting source documents which included (i) sales contracts or agreements, invoices, and cash receipts, where applicable, for recurring subscriptions and non-recurring revenues and (ii) sales contracts or agreements, invoices, and cash receipts, where applicable, and AUM data from independent third-party sources or information provided by the Company’s customers, where applicable, to calculate revenue recognized for asset-based fees.

/s/ PricewaterhouseCoopers LLP

New York, New York

February 10, 2023

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

MSCI INC.

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION


	As of
(In thousands, except per share and share data)	December 31, 2022		December 31, 2021
ASSETS
Current assets:
Cash and cash equivalents	$	993,564	$	1,421,449
Accounts receivable, net of allowances	663,236		664,511
Prepaid income taxes	36,654		5,951
Prepaid and other assets	54,520		51,499
Total current assets	1,747,974		2,143,410

Property, equipment and leasehold improvements, net	53,853		66,715
Right of use assets	126,584		144,584
Goodwill	2,229,670		2,236,386
Intangible assets, net	558,517		593,341
Equity method investment	214,389		218,763
Deferred tax assets	29,207		40,119
Other non-current assets	37,341		63,385
Total assets	$	4,997,535	$	5,506,703


LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable	$	15,039	$	13,448
Income taxes payable	8,058		59,635
Accrued compensation and related benefits	182,370		207,640
Current portion of long-term debt	8,713		—
Other accrued liabilities	153,461		145,302
Deferred revenue	882,886		824,912
Total current liabilities	1,250,527		1,250,937

Long-term debt	4,503,233		4,161,422
Long-term operating lease liabilities	131,575		150,029
Deferred tax liabilities	29,098		3,650
Other non-current liabilities	91,027		104,132
Total liabilities	6,005,460		5,670,170


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; 133,623,005 and 133,162,178 common shares issued and 79,959,989 and 82,439,449 common shares outstanding at December 31, 2022 and December 31, 2021, respectively)	1,336		1,332
Treasury shares, at cost (53,663,016 and 50,722,729 common shares held at December 31, 2022 and December 31, 2021, respectively)	(5,938,116)		(4,540,144)
Additional paid in capital	1,515,874		1,457,623
Retained earnings	3,473,192		2,976,517
Accumulated other comprehensive loss	(60,211)		(58,795)
Total shareholders' equity (deficit)	(1,007,925)		(163,467)

Total liabilities and shareholders' equity (deficit)	$	4,997,535	$	5,506,703

See Notes to Consolidated Financial Statements.

MSCI INC.

CONSOLIDATED STATEMENTS OF INCOME


	Years Ended
(In thousands, except per share data)	December 31, 2022		December 31, 2021		December 31, 2020
Operating revenues	$	2,248,598	$	2,043,544	$	1,695,390

Operating expenses:
Cost of revenues (exclusive of depreciation and amortization)	404,341		358,684		291,704
Selling and marketing	264,583		243,185		216,496
Research and development	107,205		111,564		101,053
General and administrative	146,857		147,893		114,627
Amortization of intangible assets	91,079		80,592		56,941
Depreciation and amortization of property, equipment and leasehold improvements	26,893		28,901		29,805
Total operating expenses	1,040,958		970,819		810,626


Operating income	1,207,640		1,072,725		884,764


Interest income	(11,769)		(1,497)		(5,030)
Interest expense	171,571		159,614		156,324
Other expense (income)	3,997		56,472		47,245

Other expense (income), net	163,799		214,589		198,539


Income before provision for income taxes	1,043,841		858,136		686,225
Provision for income taxes	173,268		132,153		84,403
Net income	$	870,573	$	725,983	$	601,822


Earnings per share:
Basic	$	10.78	$	8.80	$	7.19
Diluted	$	10.72	$	8.70	$	7.12

Weighted average shares outstanding:
Basic	80,746		82,508		83,716
Diluted	81,215		83,479		84,517

See Notes to Consolidated Financial Statements.

MSCI INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME


	Years Ended
(In thousands)	December 31, 2022		December 31, 2021		December 31, 2020
Net income	$	870,573	$	725,983	$	601,822
Other comprehensive (loss) income:
Foreign currency translation adjustments	(16,016)		(3,624)		4,771
Income tax effect	2,722		943		(62)
Foreign currency translation adjustments, net	(13,294)		(2,681)		4,709


Pension and other post-retirement adjustments	15,593		3,546		(1,675)
Income tax effect	(3,715)		(801)		686
Pension and other post-retirement adjustments, net	11,878		2,745		(989)

Other comprehensive (loss) income, net of tax	(1,416)		64		3,720

Comprehensive income	$	869,157	$	726,047	$	605,542

See Notes to Consolidated Financial Statements.

MSCI INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT)


(in thousands)	Common Stock		Treasury Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total
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)

Net income							870,573				870,573
Dividends declared ($4.58 per common share)							(373,898)				(373,898)
Dividends paid in shares					162						162
Other comprehensive income (loss), net of tax									(1,416)		(1,416)
Shares withheld for tax withholding and exercises			(112,681)								(112,681)
Common stock issued	4										4
Compensation payable in common stock					58,089						58,089
Common stock repurchased and held in treasury			(1,284,825)								(1,284,825)
Common stock issued to Directors and (held in)/released from treasury			(466)								(466)

Balance at December 31, 2022	$	1,336	$	(5,938,116)	$	1,515,874	$	3,473,192	$	(60,211)	$	(1,007,925)

See Notes to Consolidated Financial Statements.

MSCI INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS


	Years Ended
(in thousands)	December 31, 2022		December 31, 2021		December 31, 2020
Cash flows from operating activities
Net income	$	870,573	$	725,983	$	601,822
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of intangible assets	91,079		80,592		56,941
Stock-based compensation expense	58,094		54,917		51,094
Depreciation and amortization of property, equipment and leasehold improvements	26,893		28,901		29,805
Amortization of right of use assets	24,524		24,632		24,049
Loss on impairment of right of use assets, net	705		8,385		—
Amortization of debt origination fees	5,132		4,923		4,445
Loss on extinguishment of debt	—		59,103		44,930
Deferred taxes	36,436		(111,369)		(55,645)
Other adjustments	1,361		(146)		1,744
Changes in assets and liabilities, net of the effect of acquisitions and dispositions:
Accounts receivable	(6,624)		(99,203)		(57,606)
Prepaid income taxes	(31,684)		15,264		11,608
Prepaid and other assets	(3,781)		(4,240)		(410)
Other non-current assets	31,448		(35,445)		(3,792)
Accounts payable	1,337		(2,195)		7,482
Income taxes payable	(49,296)		33,903		9,576
Accrued compensation and related benefits	(22,432)		42,719		(2,641)
Other accrued liabilities	10,654		(9,249)		1,674
Deferred revenue	72,752		116,863		98,330
Long-term operating lease liabilities	(25,467)		(22,078)		(22,497)
Other non-current liabilities	4,106		21,536		6,536
Other	(441)		2,273		3,664
Net cash provided by operating activities	1,095,369		936,069		811,109


Cash flows from investing activities
Acquisition of a business, net of cash acquired	—		(948,989)		—
Acquisition of equity method investment	(5)		(26,361)		(190,816)
Acquisition of assets, net of cash acquired	—		(6,512)		—
Capital expenditures	(13,617)		(13,509)		(21,826)
Capitalized software development costs	(59,278)		(39,285)		(29,149)
Other	(6,435)		(1,057)		—
Net cash used in investing activities	(79,335)		(1,035,713)		(241,791)


Cash flows from financing activities
Proceeds from borrowings, inclusive of premium	355,000		1,803,750		1,405,000
Repayment of borrowings	(7,188)		(1,051,810)		(1,142,382)
Repurchase of common stock held in treasury	(1,397,506)		(198,374)		(778,519)
Payment of dividends	(372,915)		(302,449)		(246,444)
Payment of debt issuance costs in connection with debt	(2,560)		(21,612)		(16,693)
Payment of contingent consideration	(211)		—		—
Net cash provided by (used in) financing activities	(1,425,380)		229,505		(779,038)


Effect of exchange rate changes	(18,539)		(8,933)		3,674

Net (decrease) increase in cash	(427,885)		120,928		(206,046)

Cash and cash equivalent, beginning of period	1,421,449		1,300,521		1,506,567
Cash and cash equivalent, end of period	$	993,564	$	1,421,449	$	1,300,521


Supplemental disclosure of cash flow information:
Cash paid for interest	$	165,116	$	151,335	$	163,391
Cash paid for income taxes, net of refunds received	$	180,686	$	222,620	$	113,646
Supplemental disclosure of non-cash investing activities
Property, equipment and leasehold improvements in other accrued liabilities	$	1,849	$	3,498	$	3,061
Supplemental disclosure of non-cash financing activities
Cash dividends declared, but not yet paid	$	3,748	$	2,599	$	1,438

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 Assets 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, 2022, the Company had an approximately $214.4 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 such as based upon assets under management (“AUM”), volume of trades or fee levels, 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 in advance and recognized in most cases ratably over the term of the license or service pursuant to the contract terms.

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 typically do not have renewal clauses within the contract. Examples of such products and services include one-time license fees, certain derivative financial products, certain implementation services and historical data sets. Based on the nature of the services provided, non-recurring revenues are generally billed either in advance or after delivery and recognized point in time 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 primarily measured based on AUM, volume of trades or fee levels. 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 as MSCI's performance obligations to provide publications, analysis, insights and data to clients are satisfied. The majority of these performance obligations are satisfied over the term of the license period, with operating revenues recognized ratably. Certain other Real Assets 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.”

Stock-based compensation awards include restricted stock units (“RSUs”), performance stock units (“PSUs”) and performance stock options (“PSOs”). PSUs are subject to market conditions based on the achievement of multi-year total shareholder return targets and PSOs are subject to performance conditions based on the cumulative results of financial targets.

The fair value of RSUs at grant date is measured using the price of MSCI’s common stock. The fair value of PSUs at grant date 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. The fair value of PSOs at grant date is determined using the Black-Scholes option pricing model. For PSOs, the grant-date fair value is adjusted for any changes in the probability of achievement of (i) a cumulative revenue performance goal and (ii) a cumulative adjusted EPS performance goal (each weighted at 50%).

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 Credit Losses

The Company’s clients generally pay subscription fees annually 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 is included in Accounts Receivable on the Company’s Consolidated Statement of Financial Condition.

The Company recognizes an allowance for credit losses 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 credit losses from December 31, 2019 to December 31, 2022 were as follows:


(in thousands)	Amount
Balance as of December 31, 2019	$	1,715
Addition (reduction) to credit loss expense	1,712
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

Addition (reduction) to credit loss expense	910
Adjustments and write-offs, net of recoveries	(595)
Balance as of December 31, 2022	$	2,652

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, 2022 on its Index, Analytics, ESG and Climate, and Real Assets reporting units, which are also the Company’s operating segments, and no impairments were noted. The Company performed a qualitative test for impairment and determined that it was not more likely than not that the fair value of its reporting units is less than their respective carrying values. See Note 13, “Segment Information,” for further descriptions of the operating segments.

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, 2022, 2021 and 2020.

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, 2022 and 2021.

The Company had no indefinite-lived intangible assets during the years ended December 31, 2022 and 2021.

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, 2022, 2021 and 2020, BlackRock, Inc. accounted for 10.3%, 12.7%, and 11.0% of the Company’s consolidated operating revenues, respectively. For the years ended December 31, 2022, 2021 and 2020, BlackRock, Inc. accounted for 17.4%, 20.4% and 18.0% 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, 2022, 2021 and 2020.

2. RECENT ACCOUNTING STANDARDS UPDATES

There are no pending accounting standards updates that are currently expected to have a material impact on the Company's consolidated financial statements.

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, 2022
	Segments
(in thousands)	Index		Analytics		ESG and Climate		All Other - Private Assets		Total
Operating Revenues Types
Recurring subscriptions	$	729,710	$	567,004	$	223,160	$	139,649	$	1,659,523
Asset-based fees	528,127		—		—		—		528,127
Non-recurring	45,372		9,103		5,151		1,322		60,948
Total	$	1,303,209	$	576,107	$	228,311	$	140,971	$	2,248,598


	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

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


(in thousands)	Accounts receivable, net of allowances		Deferred revenue
Opening (December 31, 2021)	$	664,511	$	824,912
Closing (December 31, 2022)	663,236		882,886
Increase/(decrease)	$	(1,275)	$	57,974


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

The amount of revenue recognized in the period that was included in the opening current deferred revenue, which reflects the contract liability amounts, was $819.9 million, $672.5 million and $555.8 million for the years ended December 31, 2022, 2021 and 2020 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, 2022, 2021 and 2020, the Company carried a long-term deferred revenue balance of $29.4 million, $23.4 million and $7.1 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
(in thousands)	December 31, 2022
First 12-month period	$	629,912
Second 12-month period	373,832
Third 12-month period	169,341
Periods thereafter	124,869
Total	$	1,297,954

4. EARNINGS PER COMMON SHARE

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

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


	Years Ended
(in thousands, except per share data)	December 31, 2022		December 31, 2021		December 31, 2020
Net income	$	870,573	$	725,983	$	601,822

Basic weighted average common shares outstanding	80,746		82,508		83,716
Effect of dilutive securities:
PSUs, RSUs, and PSOs	469		971		801
Diluted weighted average common shares outstanding	81,215		83,479		84,517


Earnings per common share:
Basic	$	10.78	$	8.80	$	7.19
Diluted	$	10.72	$	8.70	$	7.12

5. ACQUISITIONS

On September 13, 2021, MSCI acquired all of the issued and outstanding preferred and common shares of Real Capital Analytics, Inc (“RCA”) for an aggregate cash purchase price of $949.0 million. This acquisition expands MSCI’s suite of real estate solutions, providing the real estate industry with data, analytics and support tools to manage investments and understand performance and risk, including climate risk, within their portfolios. RCA has been accounted for as a business combination using the acquisition method of accounting and has been integrated into the All Other – Private Assets reportable segment, as a component of the Real Assets operating segment. A portion of RCA’s client agreements do not have automatic renewal clauses at the end of the subscription period. Due to the historically high retention rate and expectation that a substantial portion of the client agreements will be renewed, the associated revenue is recorded as recurring subscription revenue.

The table below represents the final purchase price allocation to total assets acquired and liabilities assumed and the associated estimated useful lives as of the acquisition date. In the fourth quarter of 2021, the Company early adopted ASU 2021-08, which resulted in an increase to deferred revenue and goodwill and a decrease in deferred tax liabilities recorded as of the opening balance sheet date.


(in thousands)	Estimated Useful Life	Fair Value
Accounts receivable		$	9,700
Other current assets		3,721
Property, equipment and leasehold improvements, net		1,204
Right of use assets		6,441
Other non-current assets		3,398
Deferred revenue		(35,194)
Other current liabilities		(15,525)
Long-term operating lease liabilities		(4,849)
Deferred tax liabilities		(83,737)
Other non-current liabilities		(223)
Intangible assets:
Proprietary data	11 years	185,500
Customer relationships	20 years	175,800
Acquired technology and software	9 years	31,500
Trademarks	2 years	890
Goodwill		670,333
Purchase price, net of cash acquired		$	948,959

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.

The weighted average amortization period for the acquired intangible assets approximates the estimated useful life.

Revenue of RCA recognized within the consolidated financial statements was $79.7 million and $22.1 million for the years ended December 31, 2022 and 2021, respectively.

6. COMMITMENTS AND CONTINGENCIES

As of December 31, 2022, the Company had outstanding an aggregate of $4,200.0 million in senior unsecured notes (collectively, the “Senior Notes”) and an aggregate of $347.8 million in senior unsecured tranche A term loans (the “Tranche A Term Loans”) under the term loan A facility (the “TLA Facility”), as presented in the table below:


(in thousands)	Maturity Date	Principal amount outstanding at December 31, 2022		Carrying value at December 31, 2022		Carrying value at December 31, 2021		Fair Value at December 31, 2022		Fair Value at December 31, 2021
Debt
4.000% senior unsecured notes due 2029	November 15, 2029	$	1,000,000	$	992,546	$	991,455	$	876,240	$	1,047,950
3.625% senior unsecured notes due 2030	September 1, 2030	900,000		894,925		894,263		751,113		924,777
3.875% senior unsecured notes due 2031	February 15, 2031	1,000,000		991,067		989,973		833,130		1,046,620
3.625% senior unsecured notes due 2031	November 1, 2031	600,000		594,195		593,538		500,880		625,536
3.250% senior unsecured notes due 2033	August 15, 2033	700,000		692,862		692,193		542,696		710,906
Variable rate Tranche A Term Loans due 2027	February 16, 2027	347,813		346,352		—		346,073		—
Total debt(1)		$	4,547,813	$	4,511,947	$	4,161,422	$	3,850,132	$	4,355,789

(1) Includes $8.7 million of current-portion of long-term debt.

Maturities of the Company’s principal debt payments as of December 31, 2022 are as follows:


Maturity of Principal Debt Payments (in thousands)	Amounts
2023	$	8,750
2024	10,938
2025	19,688
2026	26,250
2027	282,187
Thereafter	4,200,000
Total debt	$	4,547,813

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


	Interest payment frequency	First interest payment date
Senior Notes and Tranche A Term Loans
4.000% senior unsecured notes due 2029	Semi-Annual	May 15
3.625% senior unsecured notes due 2030	Semi-Annual	March 1
3.875% senior unsecured notes due 2031	Semi-Annual	June 1
3.625% senior unsecured notes due 2031	Semi-Annual	May 1
3.250% senior unsecured notes due 2033	Semi-Annual	February 15
Variable rate Tranche A Term Loans due 2027(1)	Variable	July 11

(1) The first payment occurred on July 11, 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.

Senior Notes. The $1,000.0 million aggregate principal amount of 4.000% senior unsecured notes due 2029 (the “2029 Senior Notes”) are scheduled to mature 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.

The $900.0 million aggregate principal amount of 3.625% senior unsecured notes due 2030 (the “2030 Senior Notes”) are scheduled to mature 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.

The $1,000.0 million aggregate principal amount of 3.875% senior unsecured notes due 2031 (the “2031A Senior Notes”) are scheduled to mature 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.

The $600.0 million aggregate principal amount of 3.625% Senior Unsecured Notes due 2031 (the “2031B Senior Notes”) are scheduled to mature 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.

The $700.0 million aggregate principal amount of 3.250% Senior Unsecured Notes due 2033 (the “2033 Senior Notes”) are scheduled to mature 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.

Credit Agreement. Since November 20, 2014, the Company has maintained a revolving credit agreement with a syndicate of banks. On June 9, 2022, the Company, the guarantors party thereto and the lenders and agents party thereto, entered into an Amended and Restated Credit Agreement (the “Credit Agreement”), amending and restating in its entirety the Company’s prior revolving credit agreement (the “Prior Revolving Credit Agreement”). The Credit Agreement makes available to the Company an aggregate of $500.0 million of revolving loan commitments, which may be drawn until February 16, 2027, and the TLA Facility. At December 31, 2022, the revolving loan commitments were undrawn. As noted above, at December 31, 2022, the commitments under the TLA Facility were drawn in full, and the resulting Tranche A Term Loans mature on February 16, 2027. The obligations under the Credit Agreement are general unsecured obligations of the Company and the guarantors.

Interest on the Tranche A Term Loans under the TLA Facility accrues, at a variable rate, based on the secured overnight funding rate (“SOFR”) or the alternate base rate (“Base Rate”), plus, in each case, an applicable margin and will be due on each Interest Payment Date (as defined in the Credit Agreement). The applicable margin is calculated by reference to the Company’s Consolidated Leverage Ratio (as defined in the Credit Agreement) and ranges between 1.50% to 2.00% for SOFR loans, and 0.50% to 1.00% for Base Rate loans. At December 31, 2022, the interest rate on the TLA Facility was 6.42%.

In connection with the closings of the Senior Notes offerings, entry into the Prior Revolving Credit Agreement and the subsequent amendments thereto and entry into the Credit Agreement, the Company paid certain financing fees which, together with the existing fees related to prior credit facilities, are being amortized over their related lives. At December 31, 2022, $38.0 million of the deferred financing fees and premium remain unamortized, $0.6 million of which is included in “Prepaid and other assets,” $1.6 million of which is included in “Other non-current assets” and $35.8 million of which is included in “Long-term debt” on the Consolidated Statement of Financial Condition.

7. LEASES

The Company recognized $29.7 million, $30.6 million and $32.8 million of operating lease expenses for the years ended December 31, 2022, 2021 and 2020, 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, 2022, 2021 and 2020.

The Company’s leases have remaining lease terms of up to approximately 10 years. Some of these leases have options to extend which, if exercised, would extend the maximum remaining term to approximately 24 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.

Maturities of the Company’s operating lease liabilities, interest and other relevant line items in the Consolidated Statement of Financial Condition as of December 31, 2022 are as follows:


Maturity of Lease Liabilities (in thousands)	Operating Leases
2023	$	28,063
2024	23,890
2025	22,673
2026	21,142
2027	16,708
Thereafter	65,758
Total lease payments	$	178,234

Less: Interest	(23,413)
Present value of lease liabilities	$	154,821


Other accrued liabilities	$	23,246
Long-term operating lease liabilities	$	131,575

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


	As of
Lease Term and Discount Rate	December 31, 2022		December 31, 2021
Weighted-average remaining lease term (years)	7.86		8.16
Weighted-average discount rate	3.40	%	3.09	%

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


	Years Ended
Other Information (in thousands)	December 31, 2022		December 31, 2021		December 31, 2020
Operating cash flows used for operating leases	$	29,385	$	30,972	$	30,061
Right of use assets obtained in exchange for new operating lease liabilities	$	15,979	$	26,004	$	11,472

8. PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS, NET

Property, equipment and leasehold improvements, net at December 31, 2022 and 2021 consisted of the following:


	As of
(in thousands)	Estimated Useful Lives	December 31, 2022		December 31, 2021
Computer & related equipment	2 to 5 years	$	181,710	$	179,557
Furniture & fixtures	7 years	14,078		14,194
Leasehold improvements	1 to 21 years	54,040		56,308
Work-in-process	—	2,373		2,699
Subtotal		252,201		252,758

Accumulated depreciation and amortization		(198,348)		(186,043)
Property, equipment and leasehold improvements, net		$	53,853	$	66,715

Depreciation and amortization expense of property, equipment and leasehold improvements was $26.9 million, $28.9 million and $29.8 million for the years ended December 31, 2022, 2021 and 2020, 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, 2020	$	1,205,758	$	290,976	$	48,047	$	21,241	$	1,566,022
Acquisitions⁽¹⁾	—		—		—		670,874		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

Acquisitions⁽¹⁾	—		—		—		(541)		(541)
Foreign exchange translation adjustment	(3,821)		—		—		(2,354)		(6,175)
Goodwill at December 31, 2022	$	1,201,622	$	290,976	$	48,047	$	689,025	$	2,229,670

(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
(in thousands)	December 31, 2022		December 31, 2021		December 31, 2020
Amortization expense of acquired intangible assets	$	63,370	$	42,242	$	34,049
Amortization expense of internally developed capitalized software	27,709		22,337		22,892
Write-off of internally developed capitalized software	—		16,013		—
Total amortization of intangible assets expense	$	91,079	$	80,592	$	56,941

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
(in thousands)	Estimated Useful Lives	December 31, 2022		December 31, 2021
Gross intangible assets:
Customer relationships	13 to 21 years	$	532,500	$	532,400
Proprietary data	11 to 13 years	220,778		220,639
Acquired technology and software	8 to 9 years	209,220		209,220
Trademarks	2 to 21.5 years	208,190		208,190
Internally developed capitalized software	3 to 5 years	165,928		106,181
Subtotal		1,336,616		1,276,630

Foreign exchange translation adjustment		(13,214)		(5,782)
Total gross intangible assets		$	1,323,402	$	1,270,848

Accumulated amortization:
Customer relationships		$	(308,437)	$	(277,865)
Proprietary data		(41,783)		(22,678)
Acquired technology and software		(179,833)		(175,718)
Trademarks		(162,044)		(152,468)
Internally developed capitalized software		(77,259)		(49,394)
Subtotal		(769,356)		(678,123)

Foreign exchange translation adjustment		4,471		616
Total accumulated amortization		$	(764,885)	$	(677,507)

Net intangible assets:
Customer relationships		$	224,063	$	254,535
Proprietary data		178,995		197,961
Acquired technology and software		29,387		33,502
Trademarks		46,146		55,722
Internally developed capitalized software		88,670		56,787
Subtotal		567,260		598,507

Foreign exchange translation adjustment		(8,743)		(5,166)
Total net intangible assets		$	558,517	$	593,341

Estimated amortization expense for succeeding years is presented below:


Years Ending December 31, (in thousands)	Amortization Expense
2023	$	99,520
2024	92,091
2025	66,765
2026	37,944
2027	36,012
Thereafter	226,185
Total	$	558,517

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.

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


	Years Ended
(in thousands)	December 31, 2022		December 31, 2021		December 31, 2020
Employee benefit cost type
401(k) and other defined contribution plans	30,263		25,740		21,804
Pension related net period benefit expense	6,241		5,785		4,671
Total	$	36,504	$	31,525	$	26,475


Location in the Statement of Income
Cost of revenues	$	14,269	$	12,231	$	9,913
Selling and marketing	10,775		9,489		7,910
Research and development	7,453		6,271		5,328
General and administrative	3,027		2,620		2,289
Other expense (income)	980		914		1,035
Total	$	36,504	$	31,525	$	26,475

The Company uses a measurement date of December 31st to calculate obligations under its pension and postretirement plans. As of December 31, 2022 and 2021, the Company carried a net liability of $20.1 million and $34.5 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 $29.8 million and $30.2 million at December 31, 2022 and 2021, 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, 2022, 2021 and 2020. 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, 2022 and 2021, the Switzerland defined benefit plans had a gross pension liability of $26.5 million and $34.0 million, respectively, and plan assets that totaled $26.3 million and $26.1 million, respectively. In the years ended December 31, 2022, 2021 and 2020, we recognized net periodic benefit expense of $0.4 million, $0.3 million and $0.5 million, respectively, related to our Switzerland plans. The discount rate for the Switzerland defined benefit pension plan was 2.40% and 0.30%, respectively, as of December 31, 2022 and 2021.

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 July 28, 2022, the Board of Directors authorized a stock repurchase program (the “2022 Repurchase Program”) for the purchase of up to $1,000.0 million worth of shares of MSCI’s common stock in addition to the $539.1 million of authorization then remaining under a previously existing share repurchase program that was replaced by, and incorporated into, the 2022 Repurchase Program for a total of $1,539.1 million of stock repurchase authorization.

Share repurchases made pursuant to the 2022 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, 2022, there was $1,304.4 million of available authorization remaining under the 2022 Repurchase Program.

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


Year Ended (in thousands, except per share data)	Average Price Paid Per Share		Total Number of Shares Repurchased	Dollar Value of Shares Repurchased
December 31, 2022	$	470.68	2,730	$	1,284,825
December 31, 2021	$	412.25	339	$	139,580
December 31, 2020	$	291.76	2,493	$	727,344

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


	Dividends
(in thousands, except per share data)	Per Share		Declared		Distributed		(Released)/ Deferred
2022
Three Months Ended March 31,	$	1.04	$	87,280	$	87,846	$	(566)
Three Months Ended June 30,	1.04		84,593		84,189		404
Three Months Ended September 30,	1.25		101,354		100,849		505
Three Months Ended December 31,	1.25		100,671		100,192		479
Year Ended December 31,	$	4.58	$	373,898	$	373,076	$	822

2021
Three Months Ended March 31,	$	0.78	$	65,947	$	66,153	$	(206)
Three Months Ended June 30,	0.78		64,863		64,489		374
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

Common Stock

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


	Common Stock Issued	Treasury Stock	Common Stock Outstanding
Balance At December 31, 2019	132,419,412	(47,624,482)	84,794,930
Dividend payable/paid	553	(337)	216
Common stock issued and exercise of stock options	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

Dividend payable/paid	124	—	124
Common stock issued	456,425	—	456,425
Shares withheld for tax withholding	—	(209,492)	(209,492)
Shares repurchased under stock repurchase programs	—	(2,729,715)	(2,729,715)
Shares issued to Directors	4,278	(1,080)	3,198
Balance At December 31, 2022	133,623,005	(53,663,016)	79,959,989

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 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.

In February 2023, the Company granted a portion of its employees awards in the form of RSUs, PSUs and PSOs. The total number of units and options granted was 228,488. The aggregate fair value of the awards was $89.2 million. The RSUs granted in 2023 vest at the end of a three-year service period. The PSUs granted in 2023 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 2023 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.

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


	Years Ended
(in thousands)	December 31, 2022		December 31, 2021		December 31, 2020
Cost of revenues	$	15,404	$	17,285	$	14,523
Selling and marketing	14,218		14,411		13,545
Research and development	6,857		7,913		7,344
General and administrative	20,826		17,463		19,826
Other expense (income)	738		1,416		379
Total share-based compensation expense	$	58,043	$	58,488	$	55,617

The windfall tax benefits for share-based compensation expense related to RSUs and PSUs (together, the “Share-based Awards”) granted to Company employees and to directors who are not employees of the Company were $28.4 million, $22.3 million and $20.9 million for the years ended December 31, 2022, 2021 and 2020, respectively.

As of December 31, 2022, $59.8 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 four 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, 2022, 3.4 million shares of common stock were available for future grants under these plans.

Share-based Awards

Certain Company employees have been granted Share-based Awards pursuant to a share-based compensation plan. Outstanding Share-based Awards include RSUs and PSUs. 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 weighted average assumptions:


	Years Ended
	December 31, 2022		December 31, 2021		December 31, 2020
Risk free interest rate	1.42	%	0.33	%	1.28	%
Historical stock price volatility	37.29	%	34.13	%	25.42	%
Term (in years)	3.0		4.0		3.8
Discount of Lack of Marketability	8.0	%	4.0	%	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:


For the Year Ended December 31, 2022 (in thousands, except fair value data)	Number of Shares	Weighted Average Grant Date Fair Value
Vested and unvested Share-based Awards at December 31, 2021	697	$	217.05
Granted	349	$	271.43
Conversion to common stock	(465)	$	169.52
Canceled	(27)	$	373.71
Vested and unvested Share-based Awards at December 31, 2022	554	$	283.66

Vested and unvested Share-based Awards expected to vest	527	$	279.31

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, 2022, 2021 and 2020 was $250.4 million, $152.6 million and $133.6 million, respectively.

Stock Option Awards

Certain Company employees have also been granted stock option awards in the form of PSOs. The fair value of PSOs on the award dates were estimated under the Black-Scholes pricing model using the following weighted average assumptions:


	Year Ended
	December 31, 2022
Risk-free interest rate	1.71	%
Expected stock volatility	30.37	%
Expected life (in years)	6.5
Expected dividend yield	0.76	%

The risk-free interest rate was determined based on the yields available on the U.S. Constant Maturity Treasury yield curve as of the valuation dates with a term commensurate with the expected life of the stock option award. The expected stock price volatility was calculated using historical volatility. As we do not have sufficient historical data, we utilized the simplified method provided by the SEC to calculate the expected life as the average of the contractual term and vesting period. The expected dividend yield was calculated by annualizing the most recent cash dividend declared by the Company's Board of Directors at grant date and dividing by the closing stock price on the grant date.

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


For the Year Ended December 31, 2022 (in thousands, except fair value data)	Number of Option Awards	Weighted Average Exercise Price		Weighted Average Remaining Life (Years)	Aggregate Intrinsic Value(1)
Vested and unvested stock option awards at December 31, 2021	—	$	—
Granted	122	$	549.83
Conversion to stock options	—	$	—
Canceled	(3)	$	549.83
Vested and unvested stock option awards at December 31, 2022	119	$	549.83	9.1	$	—


Unvested stock option awards expected to vest	111	$	549.83	9.1	$	—


(1)			Calculated using the closing stock price on the last trading day of fiscal 2022, less the option exercise price, multiplied by the number of PSOs multiplied by expected payout %.

There were no stock option awards issued or outstanding for the years ended December 31, 2021 and 2020. Additionally, there were no stock options outstanding that could be exercised during any of the years ended December 31, 2022, 2021 or 2020.

12. INCOME TAXES

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


	Years Ended
(in thousands)	December 31, 2022		December 31, 2021		December 31, 2020
Current
U.S. federal	$	53,517	$	133,281	$	39,665
U.S. state and local	15,300		49,475		29,942
Non U.S.	68,015		60,766		70,441
	136,832		243,522		140,048

Deferred
U.S. federal	25,878		(79,812)		(44,507)
U.S. state and local	14,634		(25,981)		(8,911)
Non U.S.	(4,076)		(5,576)		(2,227)
	36,436		(111,369)		(55,645)


Provision for income taxes	$	173,268	$	132,153	$	84,403

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


	Years Ended
	December 31, 2022		December 31, 2021		December 31, 2020
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	2.71	%	2.90	%	3.14	%
Change in tax rates applicable to non-U.S. earnings	(3.96	%)	(5.09	%)	(3.30	%)
Foreign Derived Intangible Income (FDII), net of GILTI(1)	(0.50	%)	(1.09	%)	(3.84	%)
Domestic tax credits and incentives	(0.46	%)	(0.59	%)	(0.59	%)
Valuation allowance	—	%	—	%	—	%
Excess share-based compensation	(2.72	%)	(2.65	%)	(3.24	%)
Other	0.53	%	0.92	%	(0.87	%)
Effective income tax rate	16.60	%	15.40	%	12.30	%


(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, 2022 and 2021, were as follows:


	As of
(in thousands)	December 31, 2022		December 31, 2021
Deferred tax assets:
Capitalized expenses	$	41,176	$	94,265
Unearned revenue	54,263		56,810
Lease liabilities	35,425		39,507
Employee compensation and benefit plans	24,318		20,216
Loss carryforwards	13,128		18,173
Interest expense carryforwards	11,283		11,215
Pension	—		2,229
Other	18		3,509
Subtotal	179,611		245,924

Less: valuation allowance	(31)		(36)
Total deferred tax assets	$	179,580	$	245,888

Deferred tax liabilities:
Intangible assets	$	(132,705)	$	(147,118)
Right of use assets	(28,213)		(32,106)
Property, equipment and leasehold improvements, net	(15,169)		(27,136)
Unremitted foreign earnings	(2,162)		(3,059)
Pension	(1,222)		—
Total deferred tax liabilities	$	(179,471)	$	(209,419)

Net deferred tax assets	$	109	$	36,469

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 as of December 31, 2022 and December 31, 2021. The tax value of the non-U.S. portion of the interest carryforward was $11.3 million and $11.2 million as of December 31, 2022 and December 31, 2021, respectively. This carryforward is subject to an annual limitation on utilization over an indefinite life.

Net operating loss carryforwards in the U.S. were $48.7 million with a tax value of $10.9 million and $69.7 million with a tax value of $17.9 million as of December 31, 2022 and December 31, 2021, respectively. 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 $2.2 million and $0.3 million as of December 31, 2022 and December 31, 2021 respectively. These carryforwards are subject to annual limitations and will begin to expire in 2025.

The Company believes the majority of the deferred tax assets at December 31, 2022 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 $0.03 million.

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


	Years Ended
(in thousands)	December 31, 2022		December 31, 2021		December 31, 2020
Beginning balance	$	36	$	—	$	—
Additions charged to cost and expenses	—		36		—
Deductions	(5)		—		—
Ending balance	$	31	$	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
(in thousands)	December 31, 2022		December 31, 2021		December 31, 2020
Domestic	$	525,328	$	417,679	$	353,049
Foreign (1)	518,513		440,457		333,176
Total income before provision for income taxes	$	1,043,841	$	858,136	$	686,225


(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, 2022, 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 $27.9 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, 2022, 2021 and 2020:


	Years Ended
Gross unrecognized tax benefits (in thousands)	December 31, 2022		December 31, 2021		December 31, 2020
Beginning balance	$	33,039	$	16,621	$	15,841
Increases based on tax positions related to the current period	640		511		292
Increases based on tax positions related to prior periods	3,807		20,321		2,099
Decreases based on tax positions related to prior periods	(597)		—		—
Decreases related to settlements with taxing authorities	(4,366)		—		—
Decreases related to a lapse of applicable statute of limitations	—		(4,414)		(1,611)
Ending balance	$	32,523	$	33,039	$	16,621

The total amount of unrecognized tax benefits was $32.5 million, $33.0 million and $16.6 million as of December 31, 2022, 2021 and 2020, respectively, which, if recognized, would favorably affect the effective tax rate in future periods. 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 year ended December 31, 2022, the Company recognized $(0.5) million and for the years ended December 31, 2021 and 2020, the Company recognized zero interest in the Consolidated Statement of Income with respect to unrecognized tax benefits. Penalties of $(0.3) million, $0.3 million and $0.4 million were recognized in the Consolidated Statement of Income and the Consolidated Statement of Financial Position for the years ended December 31, 2022, 2021 and 2020, 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, 2022 was $0.4 million and for the years ended December 31, 2021 and 2020 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 onwards.

The Inflation Reduction Act of 2022 (“IRA”), enacted on August 16, 2022, is not currently anticipated to have a material impact on the Company’s provision for income taxes.

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 (“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 and certain non-recurring acquisition-related integration and transaction costs, that the CODM does not consider for the purposes of making decisions to allocate resources among segments or to assess segment performance. Although these amounts are excluded from segment Adjusted EBITDA, they are included in reported consolidated net income and are included in the reconciliation that follows.

The 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 Assets and Burgiss, which are presented as the following four reportable segments: Index, Analytics, ESG and Climate and All Other – Private Assets. During the year ended December 31, 2022, the Company renamed the Real Estate operating segment to Real 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. Prior period amounts have been recast to reflect the current presentation. The operating segments of Real Assets 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.

The Index operating segment offers equity and fixed income indexes. The indexes are used in many areas of the investment process, including for developing indexed financial products (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 Assets operating segment offers data, benchmarks, return-analytics, climate assessments and market insights for tangible assets such as real estate and infrastructure. In addition, Real Assets performance and risk analytics range from enterprise-wide to property-specific analysis. The Real Assets operating segment also provides business intelligence products to real estate owners, managers, developers and brokers worldwide.

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

The change in reportable segments referred to above did not result in any changes to MSCI’s 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
(in thousands)	December 31, 2022		December 31, 2021		December 31, 2020
Operating revenues
Index	$	1,303,209	$	1,251,764	$	1,016,495
Analytics	576,107		544,299		513,808
ESG and Climate	228,311		166,192		111,364
All Other - Private Assets	140,971		81,289		53,723
Total	$	2,248,598	$	2,043,544	$	1,695,390

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


	Years Ended
(in thousands)	December 31, 2022		December 31, 2021		December 31, 2020
Index Adjusted EBITDA	$	985,407	$	951,312	$	766,493
Analytics Adjusted EBITDA	247,895		198,799		172,924
ESG and Climate Adjusted EBITDA	61,094		29,748		22,851
All Other - Private Assets Adjusted EBITDA	35,275		16,931		9,242
Total operating segment profitability	1,329,671		1,196,790		971,510

Amortization of intangible assets	91,079		80,592		56,941
Depreciation and amortization of property, equipment and leasehold improvements	26,893		28,901		29,805
Impairment related to sublease of leased property	—		7,702		—
Acquisition-related integration and transaction costs (1)	4,059		6,870		—
Operating income	1,207,640		1,072,725		884,764

Other expense (income), net	163,799		214,589		198,539
Provision for income taxes	173,268		132,153		84,403
Net income	$	870,573	$	725,983	$	601,822


(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 primarily 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
(in thousands)	December 31, 2022		December 31, 2021		December 31, 2020
Operating revenues
Americas:
United States	$	934,462	$	836,880	$	723,962
Other	96,023		85,744		71,408
Total Americas	1,030,485		922,624		795,370

Europe, the Middle East and Africa (“EMEA”):
United Kingdom	351,225		344,976		262,188
Other	512,018		454,239		364,547
Total EMEA	863,243		799,215		626,735

Asia & Australia:
Japan	91,263		91,419		80,591
Other	263,607		230,286		192,694
Total Asia & Australia	354,870		321,705		273,285

Total	$	2,248,598	$	2,043,544	$	1,695,390

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
(in thousands)	December 31, 2022		December 31, 2021
Long-lived assets
Americas:
United States	$	179,453	$	167,870
Other	11,971		13,480
Total Americas	191,424		181,350

EMEA:
United Kingdom	19,674		19,563
Other	23,099		34,240
Total EMEA	42,773		53,803

Asia & Australia:
Japan	652		1,150
Other	32,962		31,873
Total Asia & Australia	33,614		33,023

Total	$	267,811	$	268,176

14. SUBSEQUENT EVENTS

On January 30, 2023, the Board of Directors of the Company declared a quarterly dividend of $1.38 per share of common stock to be paid on February 28, 2023 to shareholders of record as of the close of trading on February 17, 2023.

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