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

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

The following discussion and analysis of the financial condition and results of operations should be read in conjunction with the condensed consolidated financial statements and related notes included elsewhere in this Form 10-Q and in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 (the “Form 10-K”). This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed in “Item 1A.—Risk Factors,” in our Form 10-K.

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

Overview

We are a leading provider of critical decision support tools and solutions for the global investment community. Our mission-critical offerings help investors address the challenges of a transforming investment landscape and power better investment decisions. Leveraging our knowledge of the global investment process and our expertise in research, data and technology, we enable our clients to understand and analyze key drivers of risk and return and confidently and efficiently build more effective portfolios. The Company has five operating segments: Index, Analytics, ESG and Climate, Real Assets and Private Capital Solutions (formerly 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, 2023, we renamed the The Burgiss Group, LLC (“Burgiss”) operating segment to Private Capital Solutions. The operating segments of Real Assets and Private Capital Solutions do not individually meet the segment reporting thresholds and have been combined and presented as part of the All Other – Private Assets reportable segment.

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

As of June 30, 2024, we served approximately 7,0001 clients in more than 95 countries.

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

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

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

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

1(1) Represents the aggregate of all related clients under their respective parent entity. At acquisition, we align an acquired Company’s client count to our methodology.

For the six months ended June 30, 2024, our largest client organization by revenue, BlackRock, accounted for 10.1% of our consolidated operating revenues, with 95.8% of the operating revenues from BlackRock coming from fees based on the assets in BlackRock’s ETFs and non-ETF products that are based on our indexes.

The discussion of our results of operations for the three and six months ended June 30, 2024 and 2023 are presented below. The results of operations for interim periods may not be indicative of future results.

Factors Affecting the Comparability of Results

Acquisitions of Burgiss, Trove, Fabric and Foxberry

On October 2, 2023, the Company acquired the remaining 66.4% interest in Burgiss for $696.8 million in cash. The Company’s existing 33.6% interest had a fair value at acquisition date of $353.2 million which resulted in a non-taxable gain of $143.0 million for the three months ending December 31, 2023.

Prior to the acquisition, the Company’s ownership interest in Burgiss was classified as an equity-method investment. Therefore, the All Other – Private Assets segment did 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 was reported as a component of other (expense) income, net.

Following the acquisition, the consolidated results of Burgiss are included in the Company’s Private Capital Solutions operating segment (formerly known as Burgiss), which is combined and presented as part of the All Other – Private Assets reportable segment. See Note 5, “Acquisitions,” and Note 12, “Segment Information” of the Notes to the Consolidated Financial Statements included herein for additional information on the acquisition of Burgiss.

On November 1, 2023, MSCI completed the acquisition of Trove Research Ltd (“Trove”), a carbon markets intelligence provider for approximately $37.5 million in cash. Trove is a part of the ESG and Climate operating segment.

On January 2, 2024, MSCI completed the acquisition of Fabric RQ, Inc. (“Fabric”), a wealth technology platform specializing in portfolio design, customization and analytics for wealth managers and advisors for approximately $8.0 million in cash and contingent consideration with an acquisition date fair value of $8.1 million that is payable based on future sales of Fabric’s products. Fabric is a part of the Analytics operating segment.

On April 16, 2024, MSCI completed the acquisition of Foxberry Ltd. (“Foxberry”), a front-office index technology platform for approximately $23.5 million in cash and contingent consideration with an acquisition date fair value of $19.1 million that is payable based upon the achievement of metrics related to the operation of the platform. Foxberry is a part of the Index operating segment. We collectively refer to the acquisitions of Burgiss, Trove, Fabric and Foxberry as the “recent acquisitions”.

Results of Operations

Operating Revenues

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

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

Three Months Ended June 30,% ChangeSix Months Ended June 30,% Change
(in thousands)2024202320242023
Recurring subscriptions$521,469$455,69214.4%$1,034,524$900,93914.8%
Asset-based fees163,281138,16218.2%313,540271,28815.6%
Non-recurring23,19927,303(15.0%)39,85041,148(3.2%)
Total operating revenues$707,949$621,15714.0%$1,387,914$1,213,37514.4%

Total operating revenues increased 14.0% for the three months ended June 30, 2024. Adjusting for the impact of foreign currency exchange rate fluctuations and recent acquisitions, total operating revenues would have increased 9.7%.

Operating revenues from recurring subscriptions increased 14.4% for the three months ended June 30, 2024, driven by growth in All Other - Private Assets products, which increased $26.9 million, or 71.8%, which included $26.8 million of Burgiss

revenue; Index products, which increased $16.3 million, or 8.1%; Analytics products, which increased $14.6 million, or 9.9%, and ESG and Climate products, which increased $8.0 million, or 11.4%. Adjusting for the impact of foreign currency exchange rate fluctuations and recent acquisitions, operating revenues from recurring subscriptions would have increased 8.6%.

Operating revenues from asset-based fees increased 18.2% for the three months ended June 30, 2024, mainly driven by growth in revenues from ETFs linked to MSCI equity indexes and non-ETF indexed funds linked to MSCI indexes. Operating revenues from ETFs linked to MSCI equity indexes increased by 19.0%, primarily driven by an increase in average AUM. Operating revenues from non-ETF indexed funds linked to MSCI indexes increased by 22.2%, primarily driven by an increase in average AUM. Operating revenues from exchange traded futures and options contracts linked to MSCI indexes increased by 4.6%, driven by volume increases.

Operating revenues from non-recurring revenues decreased 15.0% for the three months ended June 30, 2024, as the three months ended June 30, 2023 included one-time fees related to unlicensed usage of our content in historical periods.

Total operating revenues increased 14.4% for the six months ended June 30, 2024. Adjusting for the impact of foreign currency exchange rate fluctuations and recent acquisitions, total operating revenues would have increased 10.0%.

Operating revenues from recurring subscriptions increased 14.8% for the six months ended June 30, 2024, driven by growth in All Other - Private Assets products, which increased $51.7 million, or 68.2%, which included $51.0 million of Burgiss revenue; Index products, which increased $32.6 million, or 8.2%; Analytics products, which increased $30.7 million, or 10.5%; and ESG and Climate products, which increased $18.6 million, or 13.7%. Adjusting for the impact of foreign currency exchange rate fluctuations and recent acquisitions, operating revenues from recurring subscriptions would have increased 8.9%.

Operating revenues from asset-based fees increased 15.6% for the six months ended June 30, 2024, mainly driven by growth in revenues from ETFs linked to MSCI equity indexes and non-ETF indexed funds linked to MSCI equity indexes. Operating revenues from ETFs linked to MSCI equity indexes increased by 17.0%, primarily driven by an increase in average AUM, partially offset by a decrease in average basis point fees. Operating revenues from non-ETF indexed funds linked to MSCI indexes increased by 18.5%, primarily driven by increases in average AUM, partially offset by a decrease in average basis point fees. Operating revenues from exchange traded futures and options contracts linked to MSCI indexes remained flat.

Operating revenues from non-recurring revenues decreased 3.2% for the six months ended June 30, 2024, as the six months ended June 30, 2023 included one-time fees related to unlicensed usage of our content in historical periods.

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

Period Ended
20232024
(in billions)March 31,June 30,September 30,December 31,March 31,June 30,
AUM in ETFs linked to MSCI equity indexes(1), (2)$1,305.4$1,372.5$1,322.8$1,468.9$1,582.6$1,631.9
Sequential Change in Value
Market Appreciation/(Depreciation)$75.1$48.4$(56.1)$130.5$92.8$21.2
Cash Inflows7.418.76.415.620.928.1
Total Change$82.5$67.1$(49.7)$146.1$113.7$49.3

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

20232024
(in billions)MarchJuneSeptemberDecemberMarchJune
AUM in ETFs linked to MSCI equity indexes(1), (2)
Quarterly average$1,287.5$1,333.8$1,376.5$1,364.9$1,508.8$1,590.6
Year-to-date average$1,287.5$1,310.7$1,332.6$1,340.7$1,508.8$1,549.7

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

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

The average value of AUM in ETFs linked to MSCI equity indexes for the three months ended June 30, 2024, was up $256.8 billion, or 19.3%. For the six months ended June 30, 2024, the average value of AUM in ETFs linked to MSCI equity indexes was up $239.0 billion, or 18.2%.

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

Three Months Ended June 30,% ChangeSix Months Ended June 30,% Change
(in thousands)2024202320242023
Operating revenues:
Index
Recurring subscriptions$217,032$200,7148.1%$429,984$397,3928.2%
Asset-based fees163,281138,16218.2%313,540271,28815.6%
Non-recurring16,87923,440(28.0%)27,54033,018(16.6%)
Index total397,192362,3169.6%771,064701,6989.9%
Analytics
Recurring subscriptions162,128147,5049.9%322,679292,00710.5%
Non-recurring3,8672,37762.7%7,2824,94447.3%
Analytics total165,995149,88110.8%329,961296,95111.1%
ESG and Climate
Recurring subscriptions78,00070,04711.4%154,418135,77913.7%
Non-recurring1,8551,17258.3%3,3212,49832.9%
ESG and Climate total79,85571,21912.1%157,739138,27714.1%
All Other - Private Assets
Recurring subscriptions64,30937,42771.8%127,44375,76168.2%
Non-recurring59831490.4%1,707688148.1%
All Other - Private Assets total64,90737,74172.0%129,15076,44968.9%
Total operating revenues$707,949$621,15714.0%$1,387,914$1,213,37514.4%

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

Operating Expenses

We group our operating expenses into the following activity categories:

  • Cost of revenues;

  • Selling and marketing;

  • Research and development (“R&D”);

  • General and administrative (“G&A”);

  • Amortization of intangible assets; and

  • Depreciation and amortization of property, equipment and leasehold improvements.

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

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

Three Months Ended June 30,% ChangeSix Months Ended June 30,% Change
(in thousands)2024202320242023
Operating expenses:
Cost of revenues$128,109$110,06616.4%$256,623$218,71317.3%
Selling and marketing71,45467,9885.1%143,622134,4636.8%
Research and development41,07330,14036.3%81,59861,46332.8%
General and administrative39,70635,65711.4%96,39776,70125.7%
Amortization of intangible assets40,77326,15455.9%79,37750,82156.2%
Depreciation and amortization of property, equipment and leasehold improvements4,2265,199(18.7%)8,30710,659(22.1%)
Total operating expenses$325,341$275,20418.2%$665,924$552,82020.5%

Total operating expenses increased 18.2% for the three months ended June 30, 2024. Adjusting for the impact of foreign currency exchange rate fluctuations, the increase would have been 18.8%.

Total operating expenses increased 20.5% for the six months ended June 30, 2024. Adjusting for the impact of foreign currency exchange rate fluctuations, the increase would have been 20.4%.

Cost of Revenues

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

Cost of revenues increased 16.4% for the three months ended June 30, 2024, reflecting increases across the All Other - Private Assets, Index and ESG and Climate reportable segments, partially offset by decreases in the Analytics reportable segment. The change was driven by increases in compensation and benefits costs, primarily relating to higher wages and salaries, incentive compensation and benefits costs as a result of increased headcount, as well as increases in non-compensation costs, primarily reflecting higher information technology, professional fees and market data costs.

Cost of revenues increased 17.3% for the six months ended June 30, 2024, reflecting increases across all reportable segments. The change was driven by increases in compensation and benefits costs, primarily relating to higher wages and salaries, incentive compensation and benefits costs as a result of increased headcount, as well as increases in non-compensation costs, primarily reflecting higher information technology, professional fees and market data costs.

Selling and Marketing

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

Selling and marketing expenses increased 5.1% for the three months ended June 30, 2024, reflecting increases across the All Other - Private Assets, Index and Analytics reportable segments, partially offset by decreases in the ESG and Climate reportable segment. The change was driven by increases in compensation and benefits costs, primarily relating to higher incentive compensation and wages and salaries as a result of increased headcount.

Selling and marketing expenses increased 6.8% for the six months ended June 30, 2024, reflecting increases across the All Other - Private Assets, Index and Analytics reportable segments, partially offset by decreases in the ESG and Climate reportable segment. The change was driven by increases in compensation and benefits costs, primarily relating to higher incentive compensation and wages and salaries as a result of increased headcount.

Research and Development

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

R&D expenses increased 36.3% for the three months ended June 30, 2024, reflecting increases across all reportable segments. The change was driven by increases in compensation and benefits costs, relating to higher wages and salaries, incentive compensation and benefits costs as a result of increased headcount.

R&D expenses increased 32.8% for the six months ended June 30, 2024, reflecting increases across all reportable segments. The change was driven by increases in compensation and benefits costs, relating to higher wages and salaries, incentive compensation and benefits costs as a result of increased headcount, partially offset by increased capitalization of costs related to internally developed software projects.

General and Administrative

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

G&A expenses increased 11.4% for the three months ended June 30, 2024, reflecting increases across the All Other - Private Assets and ESG and Climate reportable segments, partially offset by decreases in the Index and Analytics reportable segments. The increase was driven by higher transaction and integration costs related to recent acquisitions, as well as increased compensation and benefits costs, relating to higher wages and salaries as a result of increased headcount. The increase was also driven by higher non-compensation costs, reflecting higher information technology and insurance costs.

G&A expenses increased 25.7% for the six months ended June 30, 2024, reflecting increases across all reportable segments. The change was driven by increases in compensation and benefits costs, relating to higher incentive compensation, wages and salaries and benefits costs as a result of increased headcount, as well as increases in non-compensation costs, reflecting higher transaction related expenses due to recent acquisitions, professional fees and information technology costs.

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

Three Months Ended June 30,% ChangeSix Months Ended June 30,% Change
(in thousands)2024202320242023
Compensation and benefits$200,618$174,17215.2%$423,612$355,75119.1%
Non-compensation expenses79,72469,67914.4%154,628135,58914.0%
Amortization of intangible assets40,77326,15455.9%79,37750,82156.2%
Depreciation and amortization of property, equipment and leasehold improvements4,2265,199(18.7%)8,30710,659(22.1%)
Total operating expenses$325,341$275,20418.2%$665,924$552,82020.5%

Compensation and Benefits

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

We had 6,059 employees as of June 30, 2024, compared to 4,980 employees as of June 30, 2023, reflecting a 21.7% growth in the number of employees which is primarily related to recent acquisitions. Continued growth of our emerging market centers around the world is an important factor in our ability to manage and control the growth of our compensation and benefits costs. As of June 30, 2024, 68.5% of our employees were located in emerging market centers compared to 66.2% as of June 30, 2023.

Compensation and benefits costs increased 15.2% and 19.1%, for the three and six months ended June 30, 2024, driven by an increase in wages and salaries, incentive compensation and benefits costs due to headcount growth, partially offset by increased capitalization of expenses related to internally developed software projects. Adjusting for the impact of foreign currency exchange rate fluctuations and recent acquisitions, compensation and benefits costs would have increased by 4.2% and increased by 7.7%, respectively, for the three and six months ended June 30, 2024.

Non-Compensation Expenses

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

Non-compensation expenses increased 14.4% for the three months ended June 30, 2024, driven by higher professional fees, transaction and integration costs related to recent acquisitions, information technology and market data costs.

Non-compensation expenses increased 14.0% for the six months ended June 30, 2024, driven by higher professional fees, information technology, transaction and integration costs related to recent acquisitions, as well as market data costs. Adjusting for the impact of foreign currency exchange rate fluctuations and recent acquisitions, non-compensation expenses would have increased by 5.5% and increased by 4.9%, respectively, for the three and six months ended June 30, 2024.

Amortization of Intangible Assets

Amortization of intangible assets expense relates to definite-lived intangible assets arising from past acquisitions and capitalization of internally developed software projects recognized over their estimated useful lives.

Amortization of intangible assets expense increased 55.9% and 56.2% for the three and six months ended June 30, 2024, respectively, primarily driven by higher amortization recognized on acquired intangible assets from recent acquisitions

and higher amortization of internal use software.

Depreciation and Amortization of Property, Equipment and Leasehold Improvements

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

Depreciation and amortization of property, equipment and leasehold improvements decreased 18.7% and 22.1% for the three and six months ended June 30, 2024, respectively, primarily driven by lower depreciation on computer and related equipment.

Total Other Expense (Income), Net

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

Three Months Ended June 30,% ChangeSix Months Ended June 30,% Change
(in thousands)2024202320242023
Interest income$(6,110)$(10,403)(41.3%)$(12,158)$(20,765)(41.4%)
Interest expense46,63346,617—%93,30792,8230.5%
Other expense (income)2,0912,581(19.0%)4,9544,967(0.3%)
Total other expense (income), net$42,614$38,7959.8%$86,103$77,02511.8%

Total other expense (income), net increased 9.8% for the three months ended June 30, 2024, primarily driven by lower interest income reflecting lower average cash balances.

Total other expense (income), net increased 11.8% for the six months ended June 30, 2024, primarily driven by lower interest income, reflecting lower average cash balances as well as loss on extinguishment related to unamortized debt issuance costs associated with the prepayment of the Tranche A Term Loans and the entry into the Credit Agreement, partially offset by the impact of foreign currency exchange rate fluctuations.

Income Taxes

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

Three Months Ended June 30,% ChangeSix Months Ended June 30,% Change
(in thousands)2024202320242023
Provision for income taxes$73,236$60,33321.4%$113,175$97,97715.5%
Effective tax rate21.5%19.6%9.7%17.8%16.8%6.0%

The effective tax rate of 21.5% for the three months ended June 30, 2024 reflects the Company’s estimate of the effective tax rate for the period and was impacted by certain unfavorable discrete items totaling $4.2 million, primarily related to prior-year items.

The effective tax rate of 19.6% for the three months ended June 30, 2023 reflects the Company’s estimate of the effective tax rate for the period. The level of discrete items was not impactful to the effective tax rate for the period.

The effective tax rate of 17.8% for the six months ended June 30, 2024 reflects the Company’s estimate of the effective tax rate for the period and was impacted by certain favorable discrete items totaling $16.0 million, related to $15.7 million of excess tax benefits recognized on share-based compensation vested during the period and $0.3 million related to prior-year items.

The effective tax rate of 16.8% for the six months ended June 30, 2023 reflects the Company’s estimate of the effective tax rate for the period and was impacted by certain favorable discrete items totaling $16.4 million, primarily related to $11.2 million of excess tax benefits recognized on share-based compensation vested during the period and $5.2 million related to prior-year items.

Net Income

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

Three Months Ended June 30,% ChangeSix Months Ended June 30,% Change
(in thousands)2024202320242023
Net income$266,758$246,8258.1%$522,712$485,5537.7%

As a result of the factors described above, net income increased 8.1% for the three months ended June 30, 2024, and increased 7.7% for the six months ended June 30, 2024.

Weighted Average Shares and Common Shares Outstanding

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

Three Months Ended June 30,% ChangeSix Months Ended June 30,% Change
(in thousands)2024202320242023
Weighted average shares outstanding:
Basic79,08579,592(0.6%)79,14079,815(0.8%)
Diluted79,24579,905(0.8%)79,37780,193(1.0%)

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

As of% Change
(in thousands)June 30, 2024December 31, 2023
Common shares outstanding78,75079,091(0.4%)

The decrease in weighted average shares and common shares outstanding for the three and six months ended June 30, 2024 primarily reflects the impact of share repurchases made pursuant to the Company’s stock repurchase program.

Adjusted EBITDA

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

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

“Adjusted EBITDA margin” is defined as Adjusted EBITDA divided by operating revenues.

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

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

Three Months Ended June 30,% ChangeSix Months Ended June 30,% Change
(in thousands)2024202320242023
Operating revenues$707,949$621,15714.0%$1,387,914$1,213,37514.4%
Adjusted EBITDA expenses277,994243,85114.0%574,386491,34016.9%
Adjusted EBITDA$429,955$377,30614.0%$813,528$722,03512.7%
Operating margin %54.0%55.7%52.0%54.4%
Adjusted EBITDA margin %60.7%60.7%58.6%59.5%

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

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

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

Three Months Ended June 30,% ChangeSix Months Ended June 30,% Change
(in thousands)2024202320242023
Net income$266,758$246,8258.1%$522,712$485,5537.7%
Provision for income taxes73,23660,33321.4%113,17597,97715.5%
Other expense (income), net42,61438,7959.8%86,10377,02511.8%
Operating income382,608345,95310.6%721,990660,5559.3%
Amortization of intangible assets40,77326,15455.9%79,37750,82156.2%
Depreciation and amortization of property, equipment and leasehold improvements4,2265,199(18.7%)8,30710,659(22.1%)
Acquisition-related integration and transaction costs (1)2,348—100%3,854—100%
Consolidated Adjusted EBITDA$429,955$377,30614.0%$813,528$722,03512.7%
Index Adjusted EBITDA306,990277,07010.8%584,750530,75210.2%
Analytics Adjusted EBITDA81,67265,14925.4%153,884125,92922.2%
ESG and Climate Adjusted EBITDA23,93022,7985.0%45,02140,67410.7%
All Other - Private Assets Adjusted EBITDA17,36312,28941.3%29,87324,68021.0%
Consolidated Adjusted EBITDA$429,955$377,30614.0%$813,528$722,03512.7%

(1)Represents transaction expenses and other costs directly related to the acquisition and integration of acquired businesses, including professional fees, severance expenses, regulatory filing fees and other costs, in each case that are incurred no later than 12 months after the close of the relevant acquisition.

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

Three Months Ended June 30,% ChangeSix Months Ended June 30,% Change
(in thousands)2024202320242023
Total operating expenses$325,341$275,20418.2%$665,924$552,82020.5%
Amortization of intangible assets40,77326,15455.9%79,37750,82156.2%
Depreciation and amortization of property, equipment and leasehold improvements4,2265,199(18.7%)8,30710,659(22.1%)
Acquisition-related integration and transaction costs (1)2,348—100%3,854—100%
Consolidated Adjusted EBITDA expenses$277,994$243,85114.0%$574,386$491,34016.9%
Index Adjusted EBITDA expenses90,20285,2465.8%186,314170,9469.0%
Analytics Adjusted EBITDA expenses84,32384,732(0.5%)176,077171,0223.0%
ESG and Climate Adjusted EBITDA expenses55,92548,42115.5%112,71897,60315.5%
All Other - Private Assets Adjusted EBITDA expenses47,54425,45286.8%99,27751,76991.8%
Consolidated Adjusted EBITDA expenses$277,994$243,85114.0%$574,386$491,34016.9%

(1)Represents transaction expenses and other costs directly related to the acquisition and integration of acquired businesses, including professional fees, severance expenses, regulatory filing fees and other costs, in each case that are incurred no later than 12 months after the close of the relevant acquisition.

Segment Results

Index Segment

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

Three Months Ended June 30,% ChangeSix Months Ended June 30,% Change
(in thousands)2024202320242023
Operating revenues:
Recurring subscriptions$217,032$200,7148.1%$429,984$397,3928.2%
Asset-based fees163,281138,16218.2%313,540271,28815.6%
Non-recurring16,87923,440(28.0%)27,54033,018(16.6%)
Operating revenues total397,192362,3169.6%771,064701,6989.9%
Adjusted EBITDA expenses90,20285,2465.8%186,314170,9469.0%
Adjusted EBITDA$306,990$277,07010.8%$584,750$530,75210.2%
Adjusted EBITDA margin %77.3%76.5%75.8%75.6%

Index operating revenues increased 9.6% for the three months ended June 30, 2024, primarily driven by strong growth from asset-based fees as well as growth from recurring subscriptions, partially offset by a decrease in non-recurring revenues. Adjusting for the impact of the acquisition of Foxberry and foreign currency exchange rate fluctuations, Index operating revenues would have increased 9.8%.

Operating revenues from recurring subscriptions increased 8.1% for the three months ended June 30, 2024, primarily driven by growth from market cap-weighted Index products.

Operating revenues from asset-based fees increased 18.2% for the three months ended June 30, 2024, mainly driven by growth in revenues from ETFs linked to MSCI equity indexes and non-ETF indexed funds linked to MSCI indexes. Operating revenues from ETFs linked to MSCI equity indexes increased by 19.0%, primarily driven by an increase in average AUM. Operating revenues from non-ETF indexed funds linked to MSCI indexes increased by 22.2%, primarily driven by increases in average AUM

and average basis point fees. Operating revenues from exchange traded futures and options contracts linked to MSCI indexes increased by 4.6%, driven by volume increases.

Operating revenues from non-recurring revenues decreased 28.0% for the three months ended June 30, 2024, as the three months ended June 30, 2023 included one-time fees related to unlicensed usage of our content in historical periods.

Index segment Adjusted EBITDA expenses increased 5.8% for the three months ended June 30, 2024, primarily driven by higher compensation costs in R&D, selling and marketing and cost of revenues expense activity categories, partially offset by decreases in compensation costs in the G&A expense activity category. The increase in compensation costs was driven by higher wages and salaries and incentive compensation costs. The increase was also driven by higher non-compensation expenses across cost of revenues, G&A and R&D expense activity categories, partially offset by a decrease in the selling and marketing expense activity category. This increase was primarily driven by higher professional fees. Adjusting for the impact of the acquisition of Foxberry and foreign currency exchange rate fluctuations, Index segment Adjusted EBITDA expenses would have increased by 5.1%.

Index operating revenues increased 9.9% for the six months ended June 30, 2024, primarily driven by strong growth from asset-based fees as well as growth from recurring subscriptions, partially offset by a decrease in non-recurring revenue. Adjusting for the impact of the acquisition of Foxberry and foreign currency exchange rate fluctuations, Index operating revenues would have increased 10.1%.

Operating revenues from recurring subscriptions increased 8.2% for the six months ended June 30, 2024, primarily driven by growth from market cap-weighted Index products.

Operating revenues from asset-based fees increased 15.6% for the six months ended June 30, 2024, mainly driven by strong growth in revenues from ETFs linked to MSCI equity indexes and non-ETF indexed funds linked to MSCI equity indexes. Operating revenues from ETFs linked to MSCI equity indexes increased by 17.0%, primarily driven by an increase in average AUM, partially offset by a decrease in average basis point fees. Operating revenues from non-ETF indexed funds linked to MSCI indexes increased by 18.5%, primarily driven by an increases in average AUM, partially offset by a decrease in average basis point fees. Operating revenues from exchange traded futures and options contracts linked to MSCI indexes remained flat.

Operating revenues from non-recurring revenues decreased 16.6% for the six months ended June 30, 2024, as the six months ended June 30, 2023 included one-time fees related to unlicensed usage of our content in historical periods.

Index segment Adjusted EBITDA expenses increased 9.0% for the six months ended June 30, 2024, primarily driven by higher compensation expenses across all expense activity categories. The increase reflects higher incentive compensation, wages and salaries and benefits costs. The increase was also driven by higher non-compensation expenses across cost of revenues, G&A and R&D expense activity categories, partially offset by lower non-compensation expenses in the selling and marketing expense activity category. This increase is primarily due to higher professional fees and transaction fees related to the acquisition of Foxberry. Adjusting for the impact of the acquisition of Foxberry and foreign currency exchange rate fluctuations, Index segment Adjusted EBITDA expenses would have increased by 8.1%.

Analytics Segment

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

Three Months Ended June 30,% ChangeSix Months Ended June 30,% Change
(in thousands)2024202320242023
Operating revenues:
Recurring subscriptions$162,128$147,5049.9%$322,679$292,00710.5%
Non-recurring3,8672,37762.7%7,2824,94447.3%
Operating revenues total165,995149,88110.8%329,961296,95111.1%
Adjusted EBITDA expenses84,32384,732(0.5%)176,077171,0223.0%
Adjusted EBITDA$81,672$65,14925.4%$153,884$125,92922.2%
Adjusted EBITDA margin %49.2%43.5%46.6%42.4%

Analytics operating revenues increased 10.8% for the three months ended June 30, 2024, primarily driven by growth from recurring subscriptions related to both Multi-Asset Class and Equity Analytics products. The increase was also driven by an increase

in non-recurring revenues driven by one-time sales related to both Multi-Asset Class and Equity products as well as a number of implementations which were completed in the three months ended June 30, 2024. Adjusting for the impact of the acquisition of Fabric and foreign currency exchange rate fluctuations, Analytics operating revenues would have increased 11.2%.

Analytics segment Adjusted EBITDA expenses decreased 0.5% for the three months ended June 30, 2024, primarily driven by lower compensation expenses across the cost of revenues, G&A and selling and marketing expense activity categories, partially offset by higher compensation expense in the R&D expense activity category. The decrease was primarily driven by increased capitalization of expenses related to internally developed software projects. The decrease was partially offset by an increase in non-compensation costs in the cost of revenues and selling and marketing expense activity categories. The increase was primarily driven by higher information technology costs. Adjusting for the impact of the acquisition of Fabric and foreign currency exchange rate fluctuations, Analytics segment Adjusted EBITDA expenses would have decreased 1.0%.

Analytics operating revenues increased 11.1% for the six months ended June 30, 2024, primarily driven by growth from recurring subscriptions related to both Multi-Asset Class and Equity Analytics products. The increase was also driven by an increase in non-recurring revenues driven by one-time sales related to both Multi-Asset Class and Equity products as well as a number of implementations which were completed in six months ended June 30, 2024. Adjusting for the impact of the acquisition of Fabric and foreign currency exchange rate fluctuations, Analytics operating revenues would have increased 11.6%.

Analytics segment Adjusted EBITDA expenses increased 3.0% for the six months ended June 30, 2024, primarily driven by higher non-compensation expense across all expense activity categories. The increase reflects higher information technology costs. The increase was also driven by higher compensation expenses across the R&D, G&A and cost of revenues expense activity categories, partially offset by lower compensation expenses in the selling and marketing expense activity category. The increase reflects higher incentive compensation costs, partially offset by increased capitalization of expenses related to internally developed software projects. Adjusting for the impact of the acquisition of Fabric and foreign currency exchange rate fluctuations, Analytics segment Adjusted EBITDA expenses would have increased 1.9%.

ESG and Climate Segment

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

Three Months Ended June 30,% ChangeSix Months Ended June 30,% Change
(in thousands)2024202320242023
Operating revenues:
Recurring subscriptions$78,000$70,04711.4%$154,418$135,77913.7%
Non-recurring1,8551,17258.3%3,3212,49832.9%
Operating revenues total79,85571,21912.1%157,739138,27714.1%
Adjusted EBITDA expenses55,92548,42115.5%112,71897,60315.5%
Adjusted EBITDA$23,930$22,7985.0%$45,021$40,67410.7%
Adjusted EBITDA margin %30.0%32.0%28.5%29.4%

ESG and Climate operating revenues increased 12.1% for the three months ended June 30, 2024, primarily driven by growth from recurring subscriptions related to Climate, Screening and Ratings products. Adjusting for the impact of the acquisition of Trove and foreign currency exchange rate fluctuations, ESG and Climate operating revenues would have increased 10.0%.

ESG and Climate segment Adjusted EBITDA expenses increased 15.5% for the three months ended June 30, 2024, primarily driven by higher compensation expenses across R&D, cost of revenues and G&A expense activity categories, partially offset by lower compensation expenses in the selling and marketing expense activity category. The increase reflects higher wages and salaries and incentive compensation costs. Adjusting for the impact of the acquisition of Trove and foreign currency exchange rate fluctuations, ESG and Climate segment Adjusted EBITDA expenses would have increased 7.0%.

ESG and Climate operating revenues increased 14.1% for the six months ended June 30, 2024, primarily driven by growth from recurring subscriptions related to Ratings, Climate and Screening products. Adjusting for the impact of the acquisition of Trove and foreign currency exchange rate fluctuations, ESG and Climate operating revenues would have increased 10.5%.

ESG and Climate segment Adjusted EBITDA expenses increased 15.5% for the six months ended June 30, 2024, primarily driven by higher compensation expense across R&D, cost of revenues and G&A expense activity categories, partially offset by lower compensation expense in the selling and marketing expense activity category. The increase reflects higher incentive compensation,

wages and salaries and benefits costs. Adjusting for the impact of the acquisition of Trove and foreign currency exchange rate fluctuations, ESG and Climate segment Adjusted EBITDA expenses would have increased 7.0%.

All Other – Private Assets Segment

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

Three Months Ended June 30,% ChangeSix Months Ended June 30,% Change
(in thousands)2024202320242023
Operating revenues:
Recurring subscriptions$64,309$37,42771.8%$127,443$75,76168.2%
Non-recurring59831490.4%1,707688148.1%
Operating revenues total64,90737,74172.0%129,15076,44968.9%
Adjusted EBITDA expenses47,54425,45286.8%99,27751,76991.8%
Adjusted EBITDA$17,363$12,28941.3%$29,873$24,68021.0%
Adjusted EBITDA margin %26.8%32.6%23.1%32.3%

All Other – Private Assets operating revenues increased 72.0% for the three months ended June 30, 2024, primarily driven by revenues attributable to the step acquisition of Burgiss as well as growth in recurring subscriptions related to Performance Insights products. Adjusting for the impact of the step acquisition of Burgiss and foreign currency exchange rate fluctuations, All Other – Private Assets operating revenues would have increased 1.3%.

All Other – Private Assets segment Adjusted EBITDA expenses increased 86.8% for the three months ended June 30, 2024, driven by higher compensation and non-compensation expenses across all expense activity categories primarily due to the step acquisition of Burgiss. Adjusting for the impact of the step acquisition of Burgiss and foreign currency exchange rate fluctuations, All Other - Private Assets segment Adjusted EBITDA expenses would have decreased 6.3%.

All Other – Private Assets operating revenues increased 68.9% for the six months ended June 30, 2024, primarily driven by revenues attributable to the step acquisition of Burgiss as well as growth in recurring subscriptions from Index Intel and RCA products. Adjusting for the impact of the step acquisition of Burgiss and foreign currency exchange rate fluctuations, All Other – Private Assets operating revenues would have increased 2.0%.

All Other – Private Assets segment Adjusted EBITDA expenses increased 91.8% for the six months ended June 30, 2024, driven by higher compensation and non-compensation expenses across all expense activity categories, primarily due to the step acquisition of Burgiss. Adjusting for the impact of the step acquisition of Burgiss and foreign currency exchange rate fluctuations, All Other - Private Assets segment Adjusted EBITDA expenses would have decreased 4.9%.

Operating Metrics

Run Rate

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

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

  • fluctuations in revenues associated with new recurring sales;

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

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

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

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

  • price changes or discounts;

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

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

  • fluctuations in foreign currency exchange rates; and

  • the impact of acquisitions and divestitures.

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

As of% Change
(in thousands)June 30, 2024June 30, 2023
Index:
Recurring subscriptions$891,633$818,7808.9%
Asset-based fees646,811557,41416.0%
Index total1,538,4441,376,19411.8%
Analytics674,609631,2186.9%
ESG and Climate333,683291,80214.4%
All Other - Private Assets260,556150,58773.0%
Total Run Rate$2,807,292$2,449,80114.6%
Recurring subscriptions total$2,160,481$1,892,38714.2%
Asset-based fees646,811557,41416.0%
Total Run Rate$2,807,292$2,449,80114.6%

Total Run Rate increased 14.6%, driven by a 14.2% increase from recurring subscriptions and a 16.0% increase from asset-based fees. Adjusting for the impact of recent acquisitions and foreign currency exchange rate fluctuations, recurring subscriptions Run Rate would have increased 8.6%.

Run Rate from Index recurring subscriptions increased 8.9%, primarily driven by growth from market cap-weighted and custom Index products and special packages. The increase reflected growth across all regions. Adjusting for the impact of the acquisition of Foxberry and foreign currency exchange rate fluctuations, Index Run Rate would have increased 8.8%.

Run Rate from Index asset-based fees increased 16.0%, primarily driven by higher AUM in both ETFs linked to MSCI equity indexes and non-ETF indexed funds linked to MSCI indexes.

Run Rate from Analytics products increased 6.9%, primarily driven by growth in both Multi-Asset Class and Equity Analytics products, and reflected growth across all regions and client segments. Adjusting for the impact of the acquisition of Fabric and foreign currency exchange rate fluctuations, Analytics Run Rate would have increased 7.4%.

Run Rate from ESG and Climate products increased 14.4%, driven by strong growth in Ratings, Climate and Screening products with contributions across all regions and client segments. Adjusting for the impact of the acquisition of Trove and foreign currency exchange rate fluctuations, ESG and Climate Run Rate would have increased 13.4%.

Run Rate from All Other - Private Assets increased 73.0%, and included $105.6 million associated with Burgiss. Excluding the impact of the step acquisition of Burgiss, the growth was primarily driven by Index Intel and RCA products. Adjusting for the impact of the step acquisition of Burgiss and foreign currency exchange rate fluctuations, All Other - Private Assets Run Rate would have increased 3.0%.

Sales

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

reductions in price, resulting in reductions to Run Rate. Net new recurring subscription sales represent the amount of new recurring subscription sales net of subscription cancellations during the period, which reflects the net impact to Run Rate during the period.

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

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

Three Months Ended% ChangeSix Months Ended% Change
(in thousands)June 30, 2024June 30, 2023June 30, 2024June 30, 2023
New recurring subscription sales
Index$31,297$31,0880.7%$54,810$56,178(2.4%)
Analytics21,26918,29016.3%35,35731,96410.6%
ESG and Climate18,55713,88733.6%30,02826,37313.9%
All Other - Private Assets11,6544,815142.0%19,9189,958100.0%
New recurring subscription sales total82,77768,08021.6%140,113124,47312.6%
Subscription cancellations
Index(10,312)(8,133)26.8%(25,014)(15,215)64.4%
Analytics(6,900)(7,368)(6.4%)(17,694)(16,551)6.9%
ESG and Climate(4,570)(2,057)122.2%(11,921)(4,692)154.1%
All Other - Private Assets(5,580)(2,625)112.6%(10,502)(5,481)91.6%
Subscription cancellations total(27,362)(20,183)35.6%(65,131)(41,939)55.3%
Net new recurring subscription sales
Index20,98522,955(8.6%)29,79640,963(27.3%)
Analytics14,36910,92231.6%17,66315,41314.6%
ESG and Climate13,98711,83018.2%18,10721,681(16.5%)
All Other - Private Assets6,0742,190177.4%9,4164,477110.3%
Net new recurring subscription sales total55,41547,89715.7%74,98282,534(9.2%)
Non-recurring sales
Index17,99326,904(33.1%)30,80439,686(22.4%)
Analytics4,0574,158(2.4%)6,5195,52817.9%
ESG and Climate2,8351,315115.6%4,5072,53477.9%
All Other - Private Assets75259426.6%1,841807128.1%
Non-recurring sales total25,63732,971(22.2%)43,67148,555(10.1%)
Gross sales
Index$49,290$57,992(15.0%)$85,614$95,864(10.7%)
Analytics25,32622,44812.8%41,87637,49211.7%
ESG and Climate21,39215,20240.7%34,53528,90719.5%
All Other - Private Assets12,4065,409129.4%21,75910,765102.1%
Total gross sales$108,414$101,0517.3%$183,784$173,0286.2%
Net sales
Index$38,978$49,859(21.8%)$60,600$80,649(24.9%)
Analytics18,42615,08022.2%24,18220,94115.5%
ESG and Climate16,82213,14528.0%22,61424,215(6.6%)
All Other - Private Assets6,8262,784145.2%11,2575,284113.0%
Total net sales$81,052$80,8680.2%$118,653$131,089(9.5%)

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

Retention Rate

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

Three Months Ended June 30,Six Months Ended June 30,
2024202320242023
Index(1)95.2%95.8%94.2%96.1%
Analytics(1)95.8%95.2%94.7%94.6%
ESG and Climate(1)94.3%96.9%92.5%96.5%
All Other - Private Assets(1)91.2%92.8%91.7%92.5%
Total(1)94.8%95.5%93.8%95.4%

(1)Retention rate for Index excluding the impact of the acquisition of Foxberry was 95.2% and 94.2% for the three and six months ended June 30, 2024, respectively. Retention rate for Analytics excluding the impact of the acquisition of Fabric was 95.8% and 94.7% for the three and six months ended June 30, 2024, respectively. Retention rate for ESG and Climate excluding the impact of the acquisition of Trove was 94.5% and 92.6% for the three and six months ended June 30, 2024, respectively. Retention rate for All Other – Private Assets excluding the impact of the step acquisition of Burgiss was 90.1% and 90.0% for the three and six months and year ended June 30, 2024, respectively. Total retention rate excluding the impact of the acquisitions of Foxberry, Fabric, Trove, and Burgiss was 94.9% and 93.8% for three and six months and year ended June 30, 2024, respectively.

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

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

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

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

Critical Accounting Policies and Estimates

We describe our significant accounting policies in Note 1, “Introduction and Basis of Presentation,” of the Notes to Consolidated Financial Statements included in our Form 10-K. There have been no significant changes in our accounting policies since the end of the fiscal year ended December 31, 2023 or critical accounting estimates applied in the fiscal year ended December 31, 2023.

Liquidity and Capital Resources

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

Senior Notes and Credit Agreement

As of June 30, 2024, we had an aggregate of $4,200.0 million in Senior Notes outstanding. In addition, under the Credit Agreement, we had as of June 30, 2024 an aggregate of $336.9 million in outstanding borrowings under the revolving credit facility. See Note 8, “Debt,” of the Notes to Condensed Consolidated Financial Statements (Unaudited) included herein for additional information on our outstanding indebtedness and revolving credit facility.

On January 26, 2024, we entered into a Second Amended and Restated Credit Agreement (the “Credit Agreement”) amending and restating in its entirety the Prior Credit Agreement. The Credit Agreement makes available an aggregate of $1,250.0 million of revolving loan commitments under the Revolving Credit Facility, which may be drawn until January 26, 2029. The Revolving Credit Facility under the Credit Agreement was drawn at closing in an amount sufficient to prepay all term loans outstanding under the TLA Facility under the Prior Credit Agreement. The obligations under the Credit Agreement are general unsecured obligations of the Company.

The Senior Notes and the Prior Credit Agreement were previously fully and unconditionally, and jointly and severally, guaranteed by our direct or indirect wholly owned domestic subsidiaries that account for more than 5% of our and our subsidiaries’ consolidated assets, other than certain excluded subsidiaries (the “subsidiary guarantors”). Upon the closing of the Credit Agreement on January 26, 2024, the subsidiary guarantors’ were released from their guarantees under the Prior Credit Agreement and the indentures governing our Senior Notes (the “Indentures”).

The Indentures among us and Computershare, National Association, as trustee and successor to Wells Fargo Bank, National Association, contain covenants that limit our and our subsidiaries’ ability to, among other things, incur liens, enter into sale/leaseback transactions and consolidate, merge or sell all or substantially all of our assets, and that limit the ability of our subsidiaries to incur certain indebtedness. The Credit Agreement also contains covenants that limit our and our subsidiaries’ ability to, among other things, incur liens, enter into sale/leaseback transactions and consolidate, merge or sell all or substantially all of our assets, and that limit the ability of our subsidiaries to incur certain indebtedness.

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

The Credit Agreement also requires us and our subsidiaries to achieve financial and operating results sufficient to maintain compliance with the following financial ratios on a consolidated basis through the termination of the Credit Agreement: (1) the maximum Consolidated Leverage Ratio (as defined in the Credit Agreement) measured quarterly on a rolling four-quarter basis not to exceed 4.25:1.00 (or 4.50:1.00 for four fiscal quarters following a material acquisition) and (2) the minimum Consolidated Interest Coverage Ratio (as defined in the Credit Agreement) measured quarterly on a rolling four-quarter basis of at least 4.00:1.00. As of June 30, 2024, our Consolidated Leverage Ratio was 2.49:1.00 and our Consolidated Interest Coverage Ratio was 9.45:1.00.

Share Repurchases

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

six months ended (in thousands except per share data)Average Price Paid Per ShareTotal Number of Shares RepurchasedDollar Value of Shares Repurchased**(1)**
June 30, 2024$483.79499$241,518
June 30, 2023$468.31941$440,847

(1)The values in this column exclude the 1% excise tax incurred on share repurchases. Any excise tax incurred is recognized as part of the cost of the shares acquired in the Unaudited Condensed Consolidated Statement of Shareholders’ Equity (Deficit).

As of June 30, 2024, there was $604.2 million of available authorization remaining under the 2022 Repurchase Program. This authorization may be modified, suspended or terminated by the Board of Directors at any time without prior notice.

Cash Dividends

On July 22, 2024, the Board of Directors declared a quarterly cash dividend of $1.60 per share for the three months ending September 30, 2024. The third quarter 2024 dividend is payable on August 30, 2024 to shareholders of record as of the close of trading on August 16, 2024.

Cash Flows

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

As of
(in thousands)June 30, 2024December 31, 2023
Cash and cash equivalents (includes restricted cash of $3,883 and $3,878 at June 30, 2024 and December 31, 2023, respectively)$451,401$461,693

We typically seek to maintain minimum cash balances globally of approximately $225.0 million to $275.0 million for general operating purposes. As of June 30, 2024 and December 31, 2023, $210.1 million and $285.2 million, respectively, of the Company’s cash and cash equivalents were held by foreign subsidiaries. Repatriation of some foreign cash may be subject to certain withholding taxes in local jurisdictions and other distribution restrictions. We believe the global cash and cash equivalent balances that are maintained will be available to meet our global needs whether for general corporate purposes or other needs, including acquisitions or expansion of our products.

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

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

Six Months Ended June 30,
(in thousands)20242023
Net cash provided by operating activities$649,385$555,945
Net cash (used in) investing activities(79,458)(48,430)
Net cash (used in) provided by financing activities(575,859)(712,052)
Effect of exchange rate changes(4,360)3,302
Net (decrease) increase in cash, cash equivalents and restricted cash$(10,292)$(201,235)

Cash Flows From Operating Activities

Cash flows from operating activities consist of net income adjusted for certain non-cash items and changes in assets and liabilities. The year-over-year change was primarily driven by higher cash collections from customers and lower cash paid for income taxes, partially offset by higher payments for cash expenses.

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

Cash Flows From Investing Activities

The year-over-year change was primarily driven by the acquisitions of Fabric and Foxberry and higher capitalized software development costs.

Cash Flows From Financing Activities

The year-over-year change was primarily driven by the impact of lower share repurchases, partially offset by higher dividend payments.

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