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    MSCI   US55354G1004

MSCI INC.

(MSCI)
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MSCI : Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-K)

02/12/2021 | 05:32pm EDT
The following discussion and analysis of the financial condition and results of
our operations for the year ended December 31, 2020 should be read in
conjunction with the consolidated financial statements and related notes
included elsewhere in this Annual Report on Form 10-K. The discussion
summarizing the significant factors affecting the results of operations and
financial condition of MSCI for the year ended December 31, 2019 can be found in
Part II, "Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations" of our Annual Report on Form 10-K for the year ended
December 31, 2019 (the "2019 Annual Report"), which was filed with the
Securities and Exchange Commission on February 18, 2020.

Overview




We are a leading provider of critical decision support tools and services for
the global investment community. Leveraging our knowledge of the global
investment process and our expertise in research, data and technology, our
actionable solutions power better investment decisions by enabling our clients
to understand and analyze key drivers of risk and return and confidently and
efficiently build more effective portfolios.



Investors all over the world use our tools and services to gain insight and
improve transparency throughout their investment processes, including to help
define their investment universe, inform and analyze their asset allocation and
portfolio construction decisions, measure and manage portfolio performance and
risk, conduct performance attribution, implement sustainable and other
investment strategies, design and issue ETFs and other indexed financial
products, and facilitate reporting to stakeholders.



Our leading, research-enhanced products and services include indexes; portfolio
construction and risk management analytics; ESG research and ratings, as well as
climate solutions; and real estate benchmarks, return-analytics and market
insights. Through our integrated franchise we provide solutions across our
products and services to support our clients' dynamic and complex needs. Our
content and capabilities can be accessed by our clients through multiple
channels and platforms.



We are focused on product innovation to address the evolving needs of our
clients in light of changing investment trends and an increasingly complex
industry. In order to most effectively serve our clients, we are committed to
driving an integrated solutions-based approach, achieving service excellence,
enhancing our differentiated research and content, and delivering flexible,
cutting-edge technology and platforms.



Our clients comprise a wide spectrum of the global investment industry and include the following key client types:

• Asset owners (pension funds, endowments, foundations, central banks,

sovereign wealth funds, family offices and insurance companies)

• Asset managers (institutional funds and accounts, mutual funds, hedge

funds, ETFs, insurance products, private banks and real estate investment

trusts)

• Financial intermediaries (banks, broker-dealers, exchanges, custodians,

trust companies and investment consultants)

• Wealth managers (including robo-advisors and self-directed brokerages)


  • Corporates




As of December 31, 2020, we had offices in more than 30 cities across more than
20 countries to help serve our diverse client base, with 46.9% of our revenues
coming from clients in the Americas, 37.0% in Europe, the Middle East and Africa
("EMEA") and 16.1% in Asia and Australia.

In evaluating our financial performance, we focus on revenue and profit growth,
including results accounted for under accounting principles generally accepted
in the United States ("GAAP") as well as non-GAAP measures, for the Company as a
whole and by operating segment. In addition, we focus on operating metrics,
including Run Rate, subscription sales and Retention Rate, to manage the
business. Our business is not highly capital intensive and, as such, we expect
to continue to convert a high percentage of our profits into excess cash in the
future. Our growth strategy includes: (a) extending leadership in
research-enhanced content across asset classes, (b) enhancing distribution and
content-enabling technology, (c) expanding solutions that empower client
customization, (d) strengthening existing client relationships and growing by
developing new ones and (e) executing strategic relationships and acquisitions
with complementary content and technology companies.

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Key Financial Metrics and Drivers


As discussed in the previous section, we utilize a portfolio of key financial
metrics to manage the Company, including GAAP and non-GAAP measures. As detailed
below, we review revenues by type and by segment, or by major product line. 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 analyze past
performance and to provide insight into our latest reported recurring business.

In the discussion that follows, we provide certain variances excluding the
impact of foreign currency exchange rate fluctuations. 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. More than
three-fifths of the AUM are 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.

Revenues


Our 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 and provide the revenue type within each segment.

Recurring subscription revenues represent fees earned from clients primarily
under renewable contracts and are generally recognized ratably over the term of
the license or service pursuant to the contract terms. The fees are recognized
as we provide the product and service to the client over the license period and
are generally billed in advance, prior to the license start date.

Asset-based fees represent fees earned on the 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.

Non-recurring revenues primarily represent fees earned on products and services
where we do not have renewal contracts and primarily include revenues for
providing historical data, certain implementation services and other special
client requests, which are generally recognized at a point in time.

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.


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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, 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.

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 groups associated with acquiring new business, including
product management, research, technology and sales operations.

Research and Development


R&D expenses consist of costs to develop new or enhance existing products and
costs to develop new or improved technology 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 associated with these efforts.

General and Administrative


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

Amortization of Intangible Assets


Amortization of intangible assets expense relates to definite-lived intangible
assets arising from past acquisitions and internal capitalized software
projects. Intangibles arising from past acquisitions consist of customer
relationships, trademarks and trade names, technology and software, proprietary
processes and data and non-competition agreements. We amortize definite-lived
intangible assets over their estimated useful lives. Definite-lived intangible
assets are tested for impairment when impairment indicators are present, and, if
impaired, written down to fair value based on either discounted cash flows or
appraised values. We have no indefinite-lived intangible assets.

Depreciation and Amortization of Property, Equipment and Leasehold Improvements


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

Other Expense (Income), Net


This category consists primarily of interest we pay on our outstanding
indebtedness, interest we collect on cash and short-term investments, foreign
currency exchange rate gains and losses as well as other non-operating income
and expense items, such as losses on early extinguishment of debt and income and
losses associated with our equity method investment.

                                       38

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Non-GAAP Financial Measures

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 the impact
related to the vesting of multi-year restricted stock units granted in 2016 to
certain senior executives that are subject to the achievement of multi-year
total shareholder return targets, which are performance targets with a market
condition (the "2016 Multi-Year PSUs").

"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 the impact related to the vesting of the 2016 Multi-Year PSUs.

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

Run Rate


Run Rate is a key operating metric and is important because an increase or
decrease in our Run Rate ultimately impacts our operating revenues over time. At
the end of any period, we generally have subscription and investment product
license agreements in place for a large portion of total revenues for the
following 12 months. We measure the fees related to these agreements and refer
to this as "Run Rate." See "-Operating Metrics-Run Rate" below for additional
information on the calculation of this metric.

Subscription Sales

Subscription sales is a key operating metric and is important because new subscription sales increase our Run Rate and ultimately our operating revenues over time. See "-Operating Metrics- Sales" below for additional information.

Retention Rate


Another key operating metric is Retention Rate which is important because
subscription cancellations decrease our Run Rate and ultimately our operating
revenues over time. See "-Operating Metrics-Retention Rate" below for additional
information on the calculation of this metric.





Critical Accounting Policies and Estimates


Our consolidated financial statements are prepared in accordance with GAAP.
These accounting principles require us to make 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
revenues and expenses during the periods presented. We believe the estimates and
judgments upon which we rely are reasonable based upon information available to
us at the time these estimates and judgments are made. To the extent there are
material differences between these estimates and actual results, our
consolidated financial statements will be affected. See Note 1, "Introduction
And Basis Of Presentation-Significant Accounting Policies," and Note 2, "Recent
Accounting Standards Updates," of the Notes to the Consolidated Financial
Statements included herein for a listing of our accounting policies.



                                       39

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Factors Affecting the Comparability of Results

Share Repurchases


The Board of Directors has approved a stock repurchase program for the purchase
of the Company's common stock. See Note 10, "Shareholders' Equity (Deficit)," of
the Notes to Consolidated Financial Statements included herein for additional
information on our stock repurchase program.

The weighted average shares outstanding used to calculate our diluted earnings
per share for the year ended December 31, 2020 decreased by 1.2% compared to the
year ended December 31, 2019. The decrease primarily reflects the impact of
share repurchases made pursuant to the stock repurchase program and the vesting
of the restricted stock units that were included in the dilutive share count in
the prior year.

Senior Notes

We have an aggregate $3,400.0 million of Senior Notes outstanding as of December
31, 2020. See "-Liquidity and Capital Resources-Senior Notes and Credit
Agreement" below and Note 5, "Commitments and Contingencies," of the Notes to
Consolidated Financial Statements included herein for additional information on
our Senior Notes and Revolving Credit Agreement.

Tax Cuts and Jobs Act of 2017


Tax Reform which was enacted on December 22, 2017, significantly revised the
U.S. corporate income tax by, among other things, lowering U.S. corporate income
tax rates, implementing a territorial tax system and imposing a one-time tax on
deemed repatriation of historic earnings of foreign subsidiaries (the "Toll
Charge").



Results of Operations

Year Ended December 31, 2020 Compared to Year Ended December 31, 2019


The following table presents the results of operations for the years indicated:



                                                        Years Ended
                                              December 31,       December 31,
                                                  2020               2019             Increase/(Decrease)
                                                   (in thousands, except per share data)
Operating revenues                           $    1,695,390$    1,557,796$    137,594           8.8 %
Operating expenses:
Cost of revenues                                    291,704            294,961           (3,257 )        (1.1 %)
Selling and marketing                               216,496            219,298           (2,802 )        (1.3 %)
Research and development                            101,053             98,334            2,719           2.8 %
General and administrative                          114,627            110,093            4,534           4.1 %
Amortization of intangible assets                    56,941             49,410            7,531          15.2 %

Depreciation and amortization of property,

  equipment and leasehold improvements               29,805             29,999             (194 )        (0.6 %)
Total operating expenses                            810,626            802,095            8,531           1.1 %
Operating income                                    884,764            755,701          129,063          17.1 %
Other expense (income), net                         198,539            152,383           46,156          30.3 %
Income before provision for income taxes            686,225            603,318           82,907          13.7 %
Provision for income taxes                           84,403             39,670           44,733         112.8 %
Net income                                   $      601,822$      563,648$     38,174           6.8 %

Earnings per basic common share              $         7.19     $         6.66     $       0.53           8.0 %

Earnings per diluted common share            $         7.12     $         6.59     $       0.53           8.0 %

Operating margin                                       52.2 %             48.5 %




                                       40
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Operating Revenues

Our revenues are grouped by the following types: recurring subscriptions, asset-based fees and non-recurring. We also group revenues by major product lines or reportable segment as follows: Index, Analytics and All Other, which includes the ESG and Real Estate product lines.


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



                                      Years Ended
                            December 31,       December 31,
                                2020                2019           Increase/(Decrease)
                                             (in thousands)
Recurring subscriptions    $    1,248,175$    1,154,040$     94,135         8.2 %
Asset-based fees                  399,771            361,927           37,844        10.5 %
Non-recurring                      47,444             41,829            5,615        13.4 %
Total operating revenues   $    1,695,390$    1,557,796$    137,594         8.8 %




Total operating revenues grew 8.8% to $1,695.4 million for the year ended
December 31, 2020 compared to $1,557.8 million for the year ended December 31,
2019. Adjusting for the impact of foreign currency exchange rate fluctuations,
total operating revenues would have increased 8.7% for the year ended December
31, 2020 compared to the year ended December 31, 2019.

Revenues from recurring subscriptions increased 8.2% to $1,248.2 million for the
year ended December 31, 2020 compared to $1,154.0 million for the year ended
December 31, 2019, primarily driven by growth in Index products, which increased
$49.4 million, or 9.3%, growth in ESG products, which increased $20.4 million,
or 22.8%, and growth in Analytics products, which increased $20.0 million, or
4.1%. Adjusting for the impact of foreign currency exchange rate fluctuations,
recurring subscriptions would have increased 8.1% for the year ended December
31, 2020 compared to the year ended December 31, 2019.

Revenues from asset-based fees increased 10.5% to $399.8 million for the year
ended December 31, 2020 compared to $361.9 million for the year ended December
31, 2019. The increase in asset-based fees was driven by growth in revenues from
all of our indexed investment product categories, including an increase in
revenues from exchange traded futures and options contracts linked to MSCI
indexes that were primarily driven by price increases. The increase in revenues
from asset-based fees was also driven by higher revenues from non-ETF indexed
funds linked to MSCI indexes, which was driven by price increases and an
increase in average AUM. Revenues from ETFs linked to MSCI indexes also
increased, driven by an 8.9% increase in average AUM in equity ETFs linked to
MSCI indexes, partially offset by lower fees resulting from the impact of a
change in product mix. The impact of foreign currency exchange rate fluctuations
on revenues from asset-based fees was negligible.

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



                                                                                                     Period Ended
                                                                     2019                                                                   2020
(in billions)                           March 31,       June 30,        September 30,      December 31,       March 31,       June 30,        September 30,       December 31,
AUM in equity ETFs linked to MSCI
indexes(1), (2), (3)                   $     802.2$     819.3     $         815.0     $       934.4$     709.5$     825.4     $         908.9     $      1,103.6
Sequential Change in Value
Market Appreciation/(Depreciation)     $      78.3$      14.9     $          (9.2 )   $        63.5$    (216.5 )$     117.4     $          57.0     $        135.7
Cash Inflows                                  28.3             2.2                 4.9              55.9            (8.4 )          (1.5 )              26.5               59.0
Total Change                           $     106.6$      17.1     $          (4.3 )   $       119.4$    (224.9 )$     115.9     $          83.5     $        194.7




                                       41
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The following table presents the average value of AUM in equity ETFs linked to MSCI indexes for the periods indicated:



                                                                    Year-to-Date Average
                                                 2019                                                   2020
                           March       June        September       December       March       June        September       December
AUM in equity ETFs
linked to MSCI
indexes(1), (2), (3)      $ 766.0$ 788.7$     796.1     $   
814.4     $ 877.1$ 827.0$     849.1$    886.7

(1) The historical values of the AUM in equity ETFs linked to our indexes as of

the last day of the month and the monthly average balance can be found under

the link "AUM in equity ETFs Linked to MSCI Indexes" on our Investor

Relations homepage at http://ir.msci.com. This information is updated

mid-month each month. Information contained on our website is not

incorporated by reference into this Annual Report on Form 10-K or any other

     report filed with the SEC. The AUM in equity ETFs also includes AUM in
     Exchange Traded Notes, the value of which is less than 1.0% of the AUM
     amounts presented.

(2) The values for periods prior to April 26, 2019 were based on data from

Bloomberg and MSCI, while the values for periods on or after April 26, 2019

were based on data from Refinitiv and MSCI. De minimis amounts of data are

reported on a delayed basis.

(3) The value of AUM in equity ETFs linked to MSCI indexes is calculated by

multiplying the equity ETF net asset value by the number of shares

outstanding.



For the year ended December 31, 2020, the average value of AUM in equity ETFs
linked to MSCI equity indexes was $886.7 billion, up $72.3 billion, or 8.9%,
from $814.4 billion for the year ended December 31, 2019.

Non-recurring revenues increased 13.4% to $47.4 million for the year ended
December 31, 2020, compared to $41.8 million for the year ended December 31,
2019, primarily driven by growth in Index products, which increased $8.3
million, or 29.6%, partially offset by a $3.1 million, or 29.5%, decrease in
Analytics products.

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



                                      Years Ended
                            December 31,       December 31,
                                2020                2019           Increase/(Decrease)
                                             (in thousands)
Operating revenues:
Index
Recurring subscriptions    $      580,393$      530,968$     49,425         9.3 %
Asset-based fees                  399,771            361,927           37,844        10.5 %
Non-recurring                      36,331             28,042            8,289        29.6 %
Index total                     1,016,495            920,937           95,558        10.4 %
Analytics
Recurring subscriptions           506,301            486,282           20,019         4.1 %
Non-recurring                       7,507             10,643           (3,136 )     (29.5 %)
Analytics total                   513,808            496,925           16,883         3.4 %
All Other
Recurring subscriptions           161,481            136,790           24,691        18.1 %
Non-recurring                       3,606              3,144              462        14.7 %
All Other total                   165,087            139,934           25,153        18.0 %
Total operating revenues   $    1,695,390$    1,557,796$    137,594         8.8 %



Refer to the section titled, "Segment Results of Operations" for an explanation of the results.






Operating Expenses

Total operating expenses increased 1.1% to $810.6 million for the year ended
December 31, 2020 compared to $802.1 million for the year ended December 31,
2019. Adjusting for the impact of foreign currency exchange rate fluctuations,
total operating expenses would have increased 1.6% for the year ended December
31, 2020 compared to the year ended December 31, 2019.

                                       42

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



                                                        Years Ended
                                              December 31,       December 31,
                                                  2020               2019              Increase/(Decrease)
                                                               (in thousands)
Operating expenses:
Cost of revenues                             $      291,704$      294,961$     (3,257 )         (1.1 %)
Selling and marketing                               216,496            219,298           (2,802 )         (1.3 %)
Research and development                            101,053             98,334            2,719            2.8 %
General and administrative                          114,627            110,093            4,534            4.1 %
Amortization of intangible assets                    56,941             49,410            7,531           15.2 %

Depreciation and amortization of property,

  equipment and leasehold improvements               29,805             29,999             (194 )         (0.6 %)
Total operating expenses                     $      810,626$      802,095$      8,531            1.1 %




Cost of Revenues

Cost of revenues for the year ended December 31, 2020 decreased 1.1% to $291.7
million compared to $295.0 million for the year ended December 31, 2019. The
change was driven by the absence of $7.0 million of payroll tax expense
associated with the vesting of the 2016 Multi-Year PSUs recognized during the
year ended December 31, 2019, partially offset by increases in other
compensation and benefits costs, primarily relating to higher wages and
salaries, as well as higher non-compensation costs, reflecting higher
information technology costs, partially offset by lower travel and entertainment
costs. Cost of revenues reflects increases across the All Other and Index
reportable segments, partially offset by a decrease in the Analytics reportable
segment.

Selling and Marketing

Selling and marketing expenses for the year ended December 31, 2020 decreased
1.3% to $216.5 million compared to $219.3 million for the year ended December
31, 2019. The change was driven by lower non-compensation costs, including
travel and entertainment costs, and the absence of $4.5 million of payroll tax
expense associated with the vesting of the 2016 Multi-Year PSUs recognized
during the year ended December 31, 2019, partially offset by increases in
compensation and benefits costs, primarily relating to higher wages and
salaries. Selling and marketing expenses reflect increases across the All Other
and Analytics reportable segments, partially offset by a decrease in the Index
reportable segment.

Research and Development

R&D expenses for the year ended December 31, 2020 increased 2.8% to $101.1
million compared to $98.3 million for the year ended December 31, 2019. The
change was driven by increases in compensation and benefits costs, including
wages and salaries and benefits costs. R&D expenses reflect higher investments
in the All Other and Index reportable segments, partially offset by lower
investment in the Analytics reportable segment.

General and Administrative


G&A expenses for the year ended December 31, 2020 increased 4.1% to $114.6
million compared to $110.1 million for the year ended December 31, 2019. The
change was driven by increases in compensation and benefits costs, primarily
relating to higher incentive compensation and wages and salaries, partially
offset by the absence of $3.5 million of payroll tax expense associated with the
vesting of the 2016 Multi-Year PSUs recognized during the year ended December
31, 2019 and lower non-compensation costs. G&A expenses reflect increases across
all three reportable segments.

                                       43

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



                                                        Years Ended
                                              December 31,       December 31,
                                                  2020               2019              Increase/(Decrease)
                                                               (in thousands)
Compensation and benefits                    $      527,641$      518,730$      8,911            1.7 %
Non-compensation expenses                           196,239            203,956           (7,717 )         (3.8 %)
Amortization of intangible assets                    56,941             49,410            7,531           15.2 %

Depreciation and amortization of property,

  equipment and leasehold improvements               29,805             29,999             (194 )         (0.6 %)
Total operating expenses                     $      810,626$      802,095$      8,531            1.1 %




Compensation and benefits costs are our most significant expense and typically
represent approximately 65% of operating expenses or more than 70% of Adjusted
EBITDA expenses. We had 3,633 employees as of December 31, 2020 compared to
3,396 employees as of December 31, 2019, reflecting a 7.0% growth in the number
of employees. Continued growth of our emerging market centers around the world
is an important factor in our ability to manage and control the growth of our
compensation and benefits costs. As of December 31, 2020, 64.6% of our employees
were located in emerging market centers compared to 62.9% as of December 31,
2019.

Compensation and benefits costs for the year ended December 31, 2020 increased
1.7% to $527.6 million compared to $518.7 million for the year ended
December 31, 2019, driven by higher wages and salaries, incentive compensation
and benefits costs, partially offset by the absence of $15.4 million of payroll
tax expense associated with the vesting of the 2016 Multi-Year PSUs recognized
during the year ended December 31, 2019.

Non-compensation expenses for the year ended December 31, 2020 decreased 3.8% to
$196.2 million compared to $204.0 million for the year ended December 31, 2019,
primarily driven by lower travel and entertainment and marketing costs,
partially offset by higher information technology costs.

Amortization of Intangible Assets


Amortization of intangible assets expense for the year ended December 31, 2020
increased 15.2% to $56.9 million compared to $49.4 million for the year ended
December 31, 2019, primarily driven by higher amortization of
internally-developed capitalized software.

Depreciation and Amortization of Property, Equipment and Leasehold Improvements

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

Other Expense (Income), Net


Other expense (income), net for the year ended December 31, 2020 increased 30.3%
to $198.5 million compared to $152.4 million for the year ended December 31,
2019. The increase in net expenses was primarily driven by the $35.0 million and
$10.0 million loss on debt extinguishment associated with the redemption of all
of the outstanding $800.0 million aggregate principal amount of the 2025 Senior
Notes ("2025 Senior Notes Redemption") and the redemption of all of the
remaining $300.0 million of the 2024 Senior Notes ("2024 Senior Notes
Redemption"), respectively. The loss on debt extinguishment associated with the
2025 Senior Notes included an applicable premium of approximately $29.5 million
(as defined in the indenture governing the terms of the 2025 Senior Notes) and
the write-off of approximately $5.5 million of unamortized debt issuance costs.
The loss on debt extinguishment associated with the 2024 Senior Notes Redemption
included a redemption price of approximately $7.9 million (as set forth in the
indenture governing the terms of the 2024 Senior Notes) and the write-off of
approximately $2.1 million of unamortized debt issuance costs. In addition, the
increase reflects higher interest expense associated with the higher outstanding
debt and lower interest income due to lower rates earned on cash balances,
offset by the absence of the $16.8 million loss on extinguishment associated
with the partial pre-maturity redemption of the 2024 Senior Notes recognized
during the year ended December 31, 2019.

                                       44

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Income Taxes

The provision for income tax is $84.4 million for the year ended December 31, 2020 compared to $39.7 million for the year ended December 31, 2019. These amounts reflect effective tax rates of 12.3% and 6.6% for the years ended December 31, 2020 and 2019, respectively.


The effective tax rate of 12.3% for the year ended December 31, 2020 reflects
the impact of certain discrete items totaling $47.9 million. These discrete
items primarily relate to $22.2 million of excess tax benefits recognized on the
vesting of equity awards during the period and $20.8 million released during the
year related to the favorable impact on prior years from final regulations
clarifying certain provisions of Tax Reform. Also included in the discrete items
is a $6.3 million benefit related to the revaluation of the cost of deemed
repatriation of foreign earnings.

The effective tax rate of 6.6% for the year ended December 31, 2019 reflects the
impact of certain favorable discrete items totaling $85.7 million. These
discrete items primarily relate to $66.6 million of excess tax benefits
recognized upon vesting of the 2016 Multi-Year PSUs and $16.1 million of excess
tax benefits on other share-based compensation recognized during the period. In
addition, the effective tax rate was impacted by a beneficial geographic mix of
earnings.

Net Income

As a result of the factors described above, net income for the year ended December 31, 2020 increased 6.8% to $601.8 million compared to $563.6 million for the year ended December 31, 2019.

Adjusted EBITDA

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




                                      Years Ended
                            December 31,       December 31,
                                2020               2019            Increase/(Decrease)
                                             (in thousands)
Operating revenues:        $    1,695,390$    1,557,796$    137,594         8.8 %
Adjusted EBITDA expenses          723,880            707,297           16,583         2.3 %
Adjusted EBITDA            $      971,510$      850,499$    121,011        14.2 %
Adjusted EBITDA margin %             57.3 %             54.6 %
Operating margin %                   52.2 %             48.5 %




Adjusted EBITDA increased 14.2% to $971.5 million for the year ended December
31, 2020 compared to $850.5 million for the year ended December 31, 2019.
Adjusted EBITDA margin increased to 57.3% for the year ended December 31, 2020
compared to 54.6% for the year ended December 31, 2019. The increase in Adjusted
EBITDA margin reflects a higher rate of growth in operating revenues as compared
to the rate of growth of Adjusted EBITDA expenses.

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


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



                                                      Years Ended
                                            December 31,       December 31,
                                                2020               2019             Increase/(Decrease)
                                                            (in thousands)
Index Adjusted EBITDA                      $      766,493$      670,188$    96,305          14.4 %
Analytics Adjusted EBITDA                         172,924            152,113          20,811          13.7 %
All Other Adjusted EBITDA                          32,093             28,198           3,895          13.8 %
Consolidated Adjusted EBITDA                      971,510            850,499         121,011          14.2 %
2016 Multi-Year PSUs grant payroll tax
expense                                                 -             15,389         (15,389 )      (100.0 %)
Amortization of intangible assets                  56,941             49,410           7,531          15.2 %
Depreciation and amortization of
property,
  equipment and leasehold improvements             29,805             29,999            (194 )        (0.6 %)
Operating income                                  884,764            755,701         129,063          17.1 %
Other expense (income), net                       198,539            152,383          46,156          30.3 %
Provision for income taxes                         84,403             39,670          44,733         112.8 %
Net income                                 $      601,822$      563,648$    38,174           6.8 %



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



                                                      Years Ended
                                            December 31,       December 31,
                                                2020               2019             Increase/(Decrease)
                                                            (in thousands)
Index Adjusted EBITDA expenses             $      250,002$      250,749$      (747 )        (0.3 %)
Analytics Adjusted EBITDA expenses                340,884            344,812          (3,928 )        (1.1 %)
All Other Adjusted EBITDA expenses                132,994            111,736          21,258          19.0 %
Consolidated Adjusted EBITDA expenses             723,880            707,297          16,583           2.3 %
2016 Multi-Year PSUs grant payroll tax
expense                                                 -             15,389         (15,389 )      (100.0 %)
Amortization of intangible assets                  56,941             49,410           7,531          15.2 %
Depreciation and amortization of
property,
  equipment and leasehold improvements             29,805             29,999            (194 )        (0.6 %)
Total operating expenses                   $      810,626$      802,095$     8,531           1.1 %





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Segment Results

The results for each of our three reportable segments for the years ended December 31, 2020 and 2019 are presented below:

Index Segment


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



                                      Years Ended
                            December 31,       December 31,
                                2020               2019            Increase/(Decrease)
                                             (in thousands)
Operating revenues:
Recurring subscriptions    $      580,393$      530,968$     49,425         9.3 %
Asset-based fees                  399,771            361,927           37,844        10.5 %
Non-recurring                      36,331             28,042            8,289        29.6 %
Operating revenues total        1,016,495            920,937           95,558        10.4 %
Adjusted EBITDA expenses          250,002            250,749             (747 )      (0.3 %)
Adjusted EBITDA            $      766,493$      670,188$     96,305        14.4 %
Adjusted EBITDA margin %             75.4 %             72.8 %



Revenues related to Index products increased 10.4% to $1,016.5 million for the year ended December 31, 2020 compared to $920.9 million for the year ended December 31, 2019.


Revenues from recurring subscriptions were up 9.3% to $580.4 million for the
year ended December 31, 2020 compared to $531.0 million for the year ended
December 31, 2019. The increase was primarily driven by growth in market
cap-weighted index products, strong growth in factor, ESG and climate and in
custom index products. The impact of foreign currency exchange rate fluctuations
on revenues from recurring subscriptions was negligible.

Revenues from asset-based fees increased 10.5% to $399.8 million for the year
ended December 31, 2020 compared to $361.9 million for the year ended December
31, 2019. The increase in asset-based fees was driven by growth in revenues from
all of our indexed investment product categories, including an increase in
revenues from exchange traded futures and options contracts linked to MSCI
indexes that were primarily driven by price increases. The increase in revenues
from asset-based fees was also driven by higher revenues from non-ETF indexed
funds linked to MSCI indexes, which was driven by price increases and an
increase in average AUM. Revenues from ETFs linked to MSCI indexes also
increased, driven by an 8.9% increase in average AUM in equity ETFs linked to
MSCI indexes, partially offset by a change in fee levels of certain products as
well as change in product mix. The impact of foreign currency exchange rate
fluctuations on revenues from asset-based fees was negligible.

Index segment Adjusted EBITDA expenses decreased 0.3% to $250.0 million for the
year ended December 31, 2020 compared to $250.7 million for the year ended
December 31, 2019, reflecting lower expenses across selling and marketing
expense activity category, partially offset by higher expenses across the G&A,
cost of revenues and R&D expense activity categories. Adjusting for the impact
of foreign currency exchange rate fluctuations, Adjusted EBITDA expenses would
have increased 0.2% for the year ended December 31, 2020 compared to the year
ended December 31, 2019.

                                       47
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Analytics Segment


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



                                      Years Ended
                            December 31,       December 31,
                                2020               2019            Increase/(Decrease)
                                            (in thousands)
Operating revenues:
Recurring subscriptions    $      506,301$      486,282$    20,019          4.1 %
Non-recurring                       7,507             10,643          (3,136 )      (29.5 %)
Operating revenues total          513,808            496,925          16,883          3.4 %
Adjusted EBITDA expenses          340,884            344,812          (3,928 )       (1.1 %)
Adjusted EBITDA            $      172,924$      152,113$    20,811         13.7 %
Adjusted EBITDA margin %             33.7 %             30.6 %




Analytics segment revenues increased 3.4% to $513.8 million for the year ended
December 31, 2020 compared to $496.9 million for the year ended December 31,
2019, primarily driven by growth in Multi-Asset Class Analytics products.
Adjusting for the impact of foreign currency exchange rate fluctuations,
Analytics segment revenues would have increased 3.3% for the year ended
December 31, 2020 compared to the year ended December 31, 2019.

Analytics segment Adjusted EBITDA expenses decreased 1.1% to $340.9 million for
the year ended December 31, 2020 compared to $344.8 million for the year ended
December 31, 2019, primarily driven by lower expenses across the cost of
revenues and R&D expense activity categories, partially offset by higher
expenses across the selling and marketing and G&A expense activity categories.
Adjusting for the impact of foreign currency exchange rate fluctuations,
Adjusted EBITDA expenses would have decreased 0.4% for the year ended
December 31, 2020 compared to the year ended December 31, 2019.

All Other Segment

The following table presents the results for the All Other segment, which consists of the ESG and Real Estate product lines, for the years indicated:



                                      Years Ended
                            December 31,       December 31,
                                2020               2019            Increase/(Decrease)
                                             (in thousands)
Operating revenues:
Recurring subscriptions    $      161,481$      136,790$     24,691        18.1 %
Non-recurring                       3,606              3,144              462        14.7 %
Operating revenues total          165,087            139,934           25,153        18.0 %
Adjusted EBITDA expenses          132,994            111,736           21,258        19.0 %
Adjusted EBITDA            $       32,093$       28,198$      3,895        13.8 %
Adjusted EBITDA margin %             19.4 %             20.2 %




All Other segment revenues increased 18.0% to $165.1 million for the year ended
December 31, 2020 compared to $139.9 million for the year ended December 31,
2019. The increase in All Other revenues was driven by a $20.7 million, or
22.8%, increase in ESG revenues to $111.4 million and by a $4.5 million, or
9.0%, increase in Real Estate revenues to $53.7 million. The increase in ESG
revenues was driven by strong growth in the Ratings, Climate and Screening
products. The increase in Real Estate revenues was driven by growth in
Enterprise Analytics and Global Intel products. Adjusting for the impact of
foreign currency exchange rate fluctuations, All Other operating revenues would
have increased 17.7%, ESG revenues would have increased 22.3% and Real Estate
revenues would have increased 9.2% for the year ended December 31, 2020 compared
to the year ended December 31, 2019.

All Other segment Adjusted EBITDA expenses increased 19.0% to $133.0 million for
the year ended December 31, 2020 compared to $111.7 million for the year ended
December 31, 2019, driven by higher expenses attributable mostly to ESG
operations. Adjusting for the impact of foreign currency exchange rate
fluctuations,

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Adjusted EBITDA expenses would have increased 19.3% for the year ended December 31, 2020 compared to the year ended December 31, 2019.



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

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

  • fluctuations in revenues associated with new recurring sales;


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

• differences between the recurring license start date and the date the

         Client Contract is executed due to, for example, contracts with
         onboarding periods or fee waiver periods;


     •   fluctuations in asset-based fees, which may result from changes in

certain investment products' total expense ratios, market movements,

including foreign currency exchange rates, or from investment inflows

into and outflows from investment products linked to our indexes;

• fluctuations in fees based on trading volumes of futures and options

contracts linked to our indexes;

• fluctuations in the number of hedge funds for which we provide investment

         information and risk analysis to hedge fund investors;


  • price changes or discounts;

• revenue recognition differences under U.S. GAAP, including those related

to the timing of implementation and report deliveries for certain of our

         products and services;


  • fluctuations in foreign currency exchange rates; and


  • the impact of acquisitions and divestitures.


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



                                                              As of
                                                 December 31,       December 31,
                                                      2020

2019 Increase/(Decrease)

                                                           (in thousands)
Index:
Recurring subscriptions                         $      618,391$      559,257                      10.6 %
Asset-based fees                                       464,108            396,140                      17.2 %
Index total                                          1,082,499            955,397                      13.3 %
Analytics                                              555,145            526,845                       5.4 %
All Other                                              194,816            152,247                      28.0 %
Total Run Rate                                  $    1,832,460$    1,634,489                      12.1 %

Recurring subscriptions total                   $    1,368,352$    1,238,349                      10.5 %
Asset-based fees                                       464,108            396,140                      17.2 %
Total Run Rate                                  $    1,832,460$    1,634,489                      12.1 %




Total Run Rate grew 12.1% to $1,832.5 million as of December 31, 2020 compared
to $1,634.5 million as of December 31, 2019. Recurring subscription Run Rate
grew 10.5% to $1,368.4 million as of December 31, 2020 compared to $1,238.3
million as of December 31, 2019. Adjusting for the impact of foreign currency
exchange rate fluctuations, recurring subscription Run Rate would have increased
9.4% as of December 31, 2020 compared to December 31, 2019.

Run Rate from asset-based fees increased 17.2% to $464.1 million as of
December 31, 2020, from $396.1 million as of December 31, 2019, driven by higher
AUM in equity ETFs linked to MSCI indexes, higher prices in futures and options
and higher prices in non-ETF indexed funds linked to MSCI indexes. Partially
offsetting the impact of the increase in AUM in equity ETFs linked to MSCI
indexes was a change in fee levels of certain products as well as change in
product mix, which was the primary driver of a decline in average basis point
fees to 2.67 at December 31, 2020 from 2.82 at December 31, 2019. As of
December 31, 2020, the value of AUM in equity ETFs linked to MSCI indexes was
$1,103.6 billion, up $169.2 billion, or 18.1%, from $934.4 billion as of
December 31, 2019. The increase of $169.2 billion consisted of market
appreciation of $93.6 billion and net inflows of $75.6 billion.

Index recurring subscription Run Rate grew 10.6% to $618.4 million as of December 31, 2020 compared to $559.3 million as of December 31, 2019, primarily driven by strong growth in market cap-weighted index products, custom and specialized index products and factor and ESG and climate index products.


Run Rate from Analytics products increased 5.4% to $555.1 million as of
December 31, 2020 compared to $526.8 million as of December 31, 2019, driven by
growth in both Multi-Asset Class and Equity Analytics products. Adjusting for
the impact of foreign currency exchange rate fluctuations, Analytics Run Rate
would have increased 4.0% as of December 31, 2020 compared to December 31, 2019.

Run Rate from All Other products increased 28.0% to $194.8 million as of
December 31, 2020 compared to $152.2 million as of December 31, 2019. The $42.6
million increase was primarily driven by a $36.9 million, or 36.4%, increase in
ESG Run Rate to $138.3 million, and a $5.7 million, or 11.2%, increase in Real
Estate Run Rate to $56.5 million. The increase in ESG Run Rate was primarily
driven by strong growth in Ratings and Climate products. The increase in Real
Estate Run Rate was driven by growth in both Enterprise Analytics and Global
Intel products. Adjusting for the impact of foreign currency exchange rate
fluctuations, All Other Run Rate would have increased 23.9%, ESG Run Rate would
have increased 32.6% and Real Estate Run Rate would have increased 6.6% as of
December 31, 2020 compared to December 31, 2019.



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

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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 years indicated:



                                                           Years Ended
                                                 December 31,       December 31,
                                                     2020               2019           Increase/(Decrease)
                                                           (in thousands)
New recurring subscription sales
Index                                           $       85,411$       78,325                       9.0 %
Analytics                                               61,538             66,992                      (8.1 %)
All Other                                               46,907             32,552                      44.1 %
New recurring subscription sales total                 193,856            177,869                       9.0 %
Subscription cancellations
Index                                                  (27,398 )          (21,767 )                    25.9 %
Analytics                                              (40,003 )          (31,623 )                    26.5 %
All Other                                               (8,380 )           (6,468 )                    29.6 %
Subscription cancellations total                       (75,781 )          (59,858 )                    26.6 %
Net new recurring subscription sales
Index                                                   58,013             56,558                       2.6 %
Analytics                                               21,535             35,369                     (39.1 %)
All Other                                               38,527             26,084                      47.7 %
Net new recurring subscription sales total             118,075            118,011                       0.1 %
Non-recurring sales
Index                                                   41,463             30,262                      37.0 %
Analytics                                               10,996             15,947                     (31.0 %)
All Other                                                2,576              2,890                     (10.9 %)
Non-recurring sales total                               55,035             49,099                      12.1 %
Gross sales
Index                                           $      126,874$      108,587                      16.8 %
Analytics                                               72,534             82,939                     (12.5 %)
All Other                                               49,483             35,442                      39.6 %
Total gross sales                               $      248,891$      226,968                       9.7 %
Net sales
Index                                           $       99,476$       86,820                      14.6 %
Analytics                                               32,531             51,316                     (36.6 %)
All Other                                               41,103             28,974                      41.9 %
Total net sales                                 $      173,110$      167,110                       3.6 %


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Retention Rate

Another key metric is our "Retention Rate." The following table presents our Retention Rate by reportable segment and product category for the periods indicated for the years ended December 31, 2020 and 2019:



                                   Index       Analytics       All Other      Total
2020

Three Months Ended March 31, 96.3 % 93.7 % 94.6 %

     95.0 %
Three Months Ended June 30,          94.7 %          92.0 %          94.1 %     93.5 %
Three Months Ended September 30,     95.0 %          93.8 %          95.1 %     94.5 %
Three Months Ended December 31,      94.4 %          90.1 %          94.2 %     92.6 %
Year Ended December 31,              95.1 %          92.4 %          94.5 %     93.9 %
2019
Three Months Ended March 31,         96.5 %          93.7 %          95.9 %     95.2 %
Three Months Ended June 30,          97.1 %          94.2 %          93.9 %     95.5 %
Three Months Ended September 30,     96.0 %          93.6 %          96.8 %     95.0 %
Three Months Ended December 31,      93.0 %          92.8 %          92.7 %     92.9 %
Year Ended December 31,              95.7 %          93.6 %          94.8 %     94.7 %




Retention Rate is an important metric because subscription cancellations
decrease our Run Rate and ultimately our 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 during the non-annual period, and we
believe that such notice or intention evidences the client's final decision to
terminate or not renew the applicable agreement, even though such notice is not
effective until a later date. This annualized cancellation figure is then
divided by the subscription Run Rate at the beginning of the fiscal year to
calculate a cancellation rate. This cancellation rate is then subtracted from
100% to derive the annualized Retention Rate for the period.

For example, in the fourth quarter of 2020, we recorded cancellations of $23.0
million. To derive the Retention Rate for the fourth quarter, we annualized the
actual cancellations during the quarter of $23.0 million to derive $92.1 million
of annualized cancellations. This $92.1 million was then divided by the $1,238.3
million subscription Run Rate at the beginning of the year to derive a
cancellation rate of 7.4%. The 7.4% was then subtracted from 100.0% to derive a
Retention Rate of 92.6% for the fourth quarter.

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 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 Estate 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-sale 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 indexed investment
products or futures and options contracts, in each case, linked to our indexes.

For the year ended December 31, 2020, 30.4% of our cancellations occurred in the
fourth quarter. In our product lines, 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.



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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 facilities. 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, dividend payments and 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


We have an aggregate of $3,400.0 million in senior unsecured notes
(collectively, the "Senior Notes") outstanding and a $400.0 million undrawn
Revolving Credit Agreement with a syndicate of banks as of December 31, 2020.
See Note 5, "Commitments and Contingencies," of the Notes to Consolidated
Financial Statements included herein for additional information on our Senior
Notes and Revolving Credit Agreement.

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

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

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

• incur liens and further negative pledges;

• incur additional indebtedness or prepay, redeem or repurchase indebtedness;


  • make loans or hold investments;


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


  • enter into acquisition transactions;


  • enter into sale/leaseback transactions;


  • issue disqualified capital stock;


  • sell, transfer or dispose of assets;

• pay dividends or make other distributions in respect of our capital stock

         or engage in stock repurchases, redemptions and other restricted
         payments;


  • create new subsidiaries;


  • permit certain restrictions affecting our subsidiaries;

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



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• enter into any transactions with affiliates other than on an arm's-length

basis; and

• amend our organizational documents or amend, modify or change the terms

of certain agreements relating to our indebtedness.



The Revolving 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, bankruptcy and
insolvency events, invalidity or impairment of loan documentation or collateral,
change of control and customary ERISA defaults. None of the restrictions above
are expected to impact our ability to effectively operate the business.

The Revolving 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 Revolving Credit Agreement: (1) the maximum Consolidated Leverage Ratio (as
defined in the Revolving Credit Agreement) measured quarterly on a rolling
four-quarter basis shall not exceed 4.25:1.00 and (2) the minimum Consolidated
Interest Coverage Ratio (as defined in the Revolving Credit Agreement) measured
quarterly on a rolling four-quarter basis shall be at least 4.00:1.00. As of
December 31, 2020, our Consolidated Leverage Ratio was 3.21:1.00 and our
Consolidated Interest Coverage Ratio was 6.29:1.00. As of December 31, 2020,
there were no amounts drawn and outstanding under the Revolving Credit
Agreement.

Our non-guarantor subsidiaries under the Senior Notes consist of: (i) domestic
subsidiaries of the Company that account for 5% or less of consolidated assets
of the Company and its subsidiaries and (ii) any foreign or domestic subsidiary
of the Company that is deemed to be a controlled foreign corporation within the
meaning of Section 957 of the Internal Revenue Code of 1986, as amended. Our
non-guarantor subsidiaries accounted for approximately $989.3 million, or 58.4%,
of our total revenue for the 12 months ended December 31, 2020, approximately
$351.7 million, or 39.8%, of our consolidated operating income for the 12 months
ended December 31, 2020, and approximately $1,065.4 million, or 25.3%, of our
consolidated total assets (excluding intercompany assets) and $756.9 million, or
16.3%, of our consolidated total liabilities, in each case as of December 31,
2020.

Share Repurchases

The Board of Directors has approved a stock repurchase program for the purchase
of the Company's common stock in the open market. See Note 10, "Shareholders'
Equity (Deficit)," of the Notes to Consolidated Financial Statements included
herein for additional information on our stock repurchase program.

As of February 5, 2021, a total of $1,728.8 million remained available on the
share repurchase authorization. This authorization may be modified, suspended or
terminated by the Board of Directors at any time without prior notice.

Cash Dividends


On September 17, 2014, our Board of Directors approved a plan to initiate a
regular quarterly cash dividend to our shareholders. On October 30, 2014, we
began paying regular quarterly cash dividends and have paid such dividends each
quarter thereafter.

On January 25, 2021, the Board of Directors declared a quarterly dividend of
$0.78 per share of common stock to be paid on February 26, 2021 to shareholders
of record as of the close of trading on February 19, 2021.

Cash Flows


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



                                          As of
                             December 31,       December 31,
                                  2020               2019
                                     (in thousands)
Cash and cash equivalents   $    1,300,521$    1,506,567




                                       54
--------------------------------------------------------------------------------




The following table presents the breakdown of the Company's cash flows for the
periods indicated:



                                                       Years Ended
                                             December 31,       December 31,
                                                  2020              2019
                                                     (in thousands)

Net cash provided by operating activities $ 811,109$ 709,523 Net cash used in investing activities

             (241,791 )          (71,937 )
Net cash used in financing activities             (779,038 )          (36,667 )
Effect of exchange rate changes                      3,674              

1,472

Net (decrease) increase in cash             $     (206,046 )$      602,391




Cash and Cash Equivalents

Cash and cash equivalents were $1,300.5 million and $1,506.6 million as of
December 31, 2020 and 2019, respectively. We typically seek to maintain minimum
cash balances globally of approximately $200.0 million to $250.0 million for
general operating purposes but may maintain higher minimum cash balances while
the COVID-19 pandemic continues to impact global economic markets. As of
December 31, 2020 and 2019, $423.4 million and $321.2 million, respectively, of
the cash and cash equivalents were held by foreign subsidiaries. As a result of
Tax Reform, we can now more efficiently access a significant portion of our cash
held outside of the U.S. in the short-term without being subject to U.S. income
taxes. Repatriation of some foreign cash may be subject to certain withholding
taxes in local jurisdictions and other distribution restrictions. The global
cash and cash equivalent balances that are maintained will be available to meet
our global needs whether for general corporate purpose or other needs, including
acquisitions or expansion of our products.

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. Cash provided by operating
activities was $811.1 million and $709.5 million for the years ended
December 31, 2020 and 2019, respectively. The year-over-year increase was
primarily driven by higher cash collections from customers, partially offset by
higher payments for income taxes, interest and cash expenses.

Our primary uses of cash from operating activities are for the payment of cash
compensation expenses, office rent, technology costs, market data costs,
interest expenses and income taxes. 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

Cash used in investing activities was $241.8 million for the year ended December 31, 2020 compared to $71.9 million for the year ended December 31, 2019. The year-over-year change was primarily driven by the $190.8 million investment in Burgiss.

Cash Flows From Financing Activities


Cash used in financing activities was $779.0 million for the year ended
December 31, 2020 compared to $36.7 million for the year ended December 31,
2019. The year-over-year change was primarily driven by higher share
repurchases, the impact of the 2024 Senior Notes Redemption and the 2025 Senior
Notes Redemption, partially offset by the impact of new senior notes offerings
made during the periods.

We believe that global cash flows from operations, together with existing cash
and cash equivalents and funds available under our existing credit facility and
our ability to access the debt and capital markets for additional funds, will
continue to be sufficient to fund our global operating activities and cash
commitments for investing and financing activities, such as material capital
expenditures and share repurchases, for at least the 12 months following
issuance of this Form 10-K 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 12 months following issuance
of this Form 10-K and for the foreseeable future thereafter.

                                       55

--------------------------------------------------------------------------------

Contractual Obligations


Our contractual obligations consist primarily of our debt obligations arising
from the issuance of the Senior Notes, leases for office space, leases for
equipment and other operating leases and obligations to vendors arising out of
market data contracts. The following table summarizes our contractual
obligations for the periods indicated as of December 31, 2020:



                                                                     Years Ending December 31,
(in thousands)                      Total          2021          2022          2023          2024          2025        Thereafter
Senior Notes (1)                   4,617,760       143,875       143,875       143,875       143,875       143,875       3,898,385
Operating leases                     204,602        28,201        26,188        25,022        19,659        19,170          86,362
Vendor obligations                   158,800        54,457        28,650        25,998        23,982        12,797          12,916
Other obligations (2)                 19,391             -             -             -         1,465         7,967           9,959

Total contractual obligations $ 5,000,553$ 226,533$ 198,713

 $ 194,895$ 188,981$ 183,809$ 4,007,622

(1) Includes the impact of payments for the principal amount on the $500.0

million aggregate principal amount of 4.750% senior unsecured notes due 2026

(the "2026 Senior Notes"), the 2027 Senior Notes, the 2029 Senior Notes, the

2030 Senior Notes and the 2031 Senior Notes plus interest based on the

4.75%, 5.375%, 4.00%, 3.625% and 3.875% coupon interest rates, respectively.

(2) Primarily includes amounts payable related to the estimated Toll Charge. The

Toll Charge is included within "Other non-current liabilities" in our

Consolidated Statements of Financial Condition.



The obligations related to our uncertain tax positions, which are not considered
material, have been excluded from the table above because of the uncertainty
surrounding the timing and final amounts of any settlement.

Off-Balance Sheet Arrangements


At December 31, 2020 and 2019, we did not have any relationships with
unconsolidated entities or financial partnerships, such as entities often
referred to as structured finance or special purpose entities, which would have
been established for the purpose of facilitating off-balance sheet arrangements
or other contractually narrow or limited purposes.

Recent Accounting Standards Updates

See Note 2, "Recent Accounting Standards Updates," of the Notes to the Consolidated Financial Statements included herein for further information.

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