MSCI (MSCI 1.84%), an investment research company, released its earnings for Q3 2024 on October 29, revealing a robust performance despite some challenges. The company's diluted earnings per share (EPS) reached $3.57, indicating a healthy 9.2% year-on-year growth. Operating revenues for the quarter soared 15.9% to $724.7 million compared to the same period last year, though the retention rate dipped slightly. Overall, MSCI delivered a strong quarter, demonstrating resilience amid rising expenses.
| Key Metric | Q3 2024 | Q3 2023 | % Change |
|---|---|---|---|
| Diluted EPS | $3.57 | $3.27 | 9.2% |
| Operating Revenues | $724.7 million | $625.4 million | 15.9% |
| ESG & Climate Revenue | $83.6 million | $73 million | 14.5% |
| Index Segment Revenue | $404.9 million | $362.1 million | 11.8% |
Source: Analyst estimates for the quarter provided by FactSet.
MSCI's Business Overview
MSCI provides essential tools and services to investors worldwide, focusing on indexes, ESG analysis, and portfolio risk and performance solutions. The Index segment is a critical revenue driver, contributing significantly to MSCI's income with its diverse range of equity indexes, including those focusing on ESG and climate. Asset-based fees from these indexes are influenced by market conditions, making them both an opportunity and a risk for MSCI.
Recently, MSCI has concentrated on enhancing ESG and climate capabilities, recognizing the increasing demand for sustainable investment options. Its strategic moves include advancing technology and product offerings, focusing on scalable innovations, which are crucial for maintaining a competitive edge and meeting client needs efficiently.
Key Developments in the Quarter
In Q3 2024, the Index segment showed an 11.8% increase in operating revenue to $404.9 million. This growth was driven by a 19.5% rise in asset-based fees, amounting to $168.6 million, due to record assets under management (AUM) in MSCI's equity indexes.
The ESG and Climate segment achieved a 14.5% revenue increase to $83.6 million, highlighting persistent strong demand in the market. The growth was primarily from recurring subscriptions related to ratings, climate, and screening products, emphasizing MSCI’s strong position in ESG analytics.
In terms of innovation, MSCI improved its adjusted EBITDA margin to 62.2%, up from 61.8%, due to effective cost controls and new tech deployments. Strategic acquisitions, such as in private asset evaluations.
Additionally, MSCI maintained a strategic partnership with The Burgiss Group, extending its reach into private assets, which is key for aligning with growth sectors and addressing long-term performance. As part of its financial strategy, MSCI also declared dividends, although the release focused more on its future growth prospects.
Looking Ahead
For 2024, MSCI reiterated its guidance with operating expenses projected between $1,305 million and $1,345 million, and adjusted EBITDA expected to range from $1,130 million to $1,160 million. These estimates confirm management's confidence in its growth strategy, focusing on solidifying its position in ESG and AI capabilities, and extending partnerships and acquisitions.
Investors should watch MSCI’s future guidance closely, especially regarding asset-based fees amid market volatility. The growth in the ESG sector will be crucial as regulatory and investor interest in sustainability continues to rise.
