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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-Q)

07/27/2021 | 02:37pm EDT
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, 2020
(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 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 and 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 June 30, 2021, we served over 4,4001 clients in more than 90 countries. As of June 30, 2021, we had offices in more than 30 cities across more than 20 countries to help serve our diverse client base, with 44.9% of our revenues coming from clients in the Americas, 39.3% in EMEA and 15.8% in Asia and Australia.


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. We also
license annual recurring subscriptions for the majority of our Real Estate
products for a fee which is primarily paid in arrears after the product is
delivered, with the exception of the Market Information product for which the
fees are generally paid in advance. 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.



1 Represents the aggregate of all related clients under their respective parent

   entity.


                                       21
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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 and developing new client
relationships and (e) executing strategic relationships and acquisitions with
complementary content and technology companies.

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 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.



The discussion of our results of operations for the three and six months ended June 30, 2021 and 2020 are presented below. The results of operations for interim periods may not be indicative of future results.





Results of Operations

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



                                      Three Months Ended                        Six Months Ended
                                           June 30,                                 June 30,
                                      2021          2020                       2021          2020         % Change
                                                         (in thousands, except per share data)
Operating revenues                  $ 498,180$ 409,616        21.6 %    $ 976,603$ 826,396           18.2 %
Operating expenses:
Cost of revenues                       87,327        70,456        23.9 %      173,107       145,065           19.3 %
Selling and marketing                  58,191        51,617        12.7 %      114,658       107,166            7.0 %
Research and development               27,531        22,534        22.2 %       52,393        49,096            6.7 %
General and administrative             30,182        28,309         6.6 %       64,910        59,142            9.8 %

Amortization of intangible assets 30,396 14,062 116.2 %

     45,464        27,838           63.3 %
Depreciation and amortization of
property,
  equipment and leasehold
improvements                            7,020         7,463        (5.9 %)      14,163        15,030           (5.8 %)
Total operating expenses              240,647       194,441        23.8 %      464,695       403,337           15.2 %
Operating income                      257,533       215,175        19.7 %      511,908       423,059           21.0 %
Other expense (income), net            61,838        76,008       (18.6 %)     100,185       121,043          (17.2 %)
Income before provision for income
taxes                                 195,695       139,167        40.6 %      411,723       302,016           36.3 %
Provision for income taxes             30,272        24,044        25.9 %       49,481        38,768           27.6 %
Net income                          $ 165,423$ 115,123        43.7 %    $ 362,242$ 263,248           37.6 %

Earnings per basic common share $ 2.01$ 1.38 45.7 %

  $    4.39$    3.12           40.7 %

Earnings per diluted common share $ 1.99$ 1.36 46.3 %

 $    4.34$    3.10           40.0 %

Operating margin                         51.7 %        52.5 %                     52.4 %        51.2 %




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 or
reportable segment as follows: Index, Analytics, ESG and Climate and All Other -
Private Assets, which includes the Real Estate product line.

                                       22

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


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



                                     Three Months Ended                          Six Months Ended
                                          June 30,                                   June 30,
                                     2021          2020         % Change        2021          2020         % Change
                                                                     (in thousands)
Recurring subscriptions            $ 348,130$ 309,884           12.3 %   $ 685,862$ 614,309           11.6 %
Asset-based fees                     136,142        88,075           54.6 %     262,848       188,271           39.6 %
Non-recurring                         13,908        11,657           19.3 %      27,893        23,816           17.1 %

Total operating revenues           $ 498,180$ 409,616           21.6 %   $ 976,603$ 826,396           18.2 %




Total operating revenues for the three months ended June 30, 2021 increased
21.6% to $498.2 million compared to $409.6 million for the three months ended
June 30, 2020. Adjusting for the impact of foreign currency exchange rate
fluctuations, the increase would have been 20.6% for the three months ended June
30, 2021 compared to the three months ended June 30, 2020.



For the six months ended June 30, 2021, the increase was 18.2%, growing to $976.6 million compared to $826.4 million for the six months ended June 30, 2020. Adjusting for the impact of foreign currency exchange rate fluctuations, the increase would have been 17.3% for the six months ended June 30, 2021 compared to the six months ended June 30, 2020.


Operating revenues from recurring subscriptions for the three months ended
June 30, 2021 increased 12.3% to $348.1 million compared to $309.9 million for
the three months ended June 30, 2020, primarily driven by growth in Index
products, which increased $14.7 million, or 10.1%, strong growth in ESG and
Climate products, which increased $12.7 million, or 48.9%, and growth in
Analytics products, which increased $7.2 million, or 5.7%. Adjusting for the
impact of foreign currency exchange rate fluctuations, the increase would have
been 11.0% for the three months ended June 30, 2021 compared to the three months
ended June 30, 2020.

For the six months ended June 30, 2021, the increase was 11.6%, growing to
$685.9 million compared to $614.3 million for the six months ended June 30,
2020, primarily driven by growth in Index products, which increased $29.9
million, or 10.5%, strong growth in ESG and Climate products, which increased
$21.9 million, or 43.1%, and growth in Analytics products, which increased $14.8
million, or 5.9%. Adjusting for the impact of foreign currency exchange rate
fluctuations, the increase would have been 10.5% for the six months ended June
30, 2021 compared to the six months ended June 30, 2020.

Operating revenues from asset-based fees for the three months ended June 30,
2021 increased 54.6% to $136.1 million compared to $88.1 million for the three
months ended June 30, 2020. The increase in asset-based fees was driven by
growth in revenues from all our index-linked investment product categories,
including an increase in revenues from ETFs linked to MSCI equity indexes that
was primarily driven by a 66.4% increase in average AUM in ETFs, partially
offset by a decline in average basis point fees. The increase in revenues from
asset-based fees was also driven by higher revenues from non-ETF indexed funds
linked to MSCI indexes, primarily driven by an increase in average AUM. Revenues
from exchange traded futures and options contracts linked to MSCI indexes also
increased, primarily driven by fee increases, partially offset by lower volume.
The impact of foreign currency exchange rate fluctuations on revenues from
asset-based fees was negligible.

For the six months ended June 30, 2021, revenues from asset-based fees increased
39.6% to $262.8 million compared to $188.3 million for the six months ended
June 30, 2020. The increase in asset-based fees was driven by growth in revenues
from all our index-linked investment product categories, including an increase
in revenues from ETFs linked to MSCI equity indexes that was primarily driven by
a 48.8% increase in average AUM in ETFs, partially offset by a decline in
average basis point fees. The increase in revenues from asset-based fees was
also driven by higher revenues from non-ETF indexed funds linked to MSCI indexes
primarily driven by an increase in average AUM. Revenues from exchange traded
futures and options contracts linked to MSCI indexes also increased, primarily
driven by fee increases, partially offset by lower volume. 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 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
                                                            2020                                     2021
                                      March        June        September      December        March         June
(in billions)                          31,          30,           30,            31,           31,           30,
AUM in ETFs linked to MSCI equity
indexes(1), (2)                      $  709.5$ 825.4$     908.9

$ 1,103.6$ 1,209.6$ 1,336.2


Sequential Change in Value
Market Appreciation/(Depreciation)   $ (216.5 )$ 117.4$      57.0$   135.7$    43.2$    73.7
Cash Inflows                             (8.4 )      (1.5 )          26.5          59.0          62.8          52.9
Total Change                         $ (224.9 )$ 115.9$      83.5$   194.7$   106.0$   126.6


                                       23
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The following table presents the average value of AUM in ETFs linked to MSCI equity indexes for the periods indicated:



                                                          2020                                     2021
(in billions)                       March       June        September       December        March         June
AUM in ETFs linked to MSCI
equity indexes(1), (2)
Quarterly average                  $ 877.1$ 776.9$     893.4$    999.2$ 1,169.2$ 1,292.4
Year-to-date average               $ 877.1$ 827.0$     849.1$    886.7$ 1,169.2$ 1,230.8

(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

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, 2021 was $1,292.4 billion, up $515.5 billion, or 66.4%,
from $776.9 billion for the three months ended June 30, 2020. For the six months
ended June 30, 2021, it was $1,230.8 billion, up $403.8 billion, or 48.8%, from
$827.0 billion for the six months ended June 30, 2020.

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



                                     Three Months Ended                          Six Months Ended
                                          June 30,                                   June 30,
                                     2021          2020         % Change        2021          2020         % Change
                                                                    (in thousands)
Operating revenues:
Index
Recurring subscriptions            $ 160,061$ 145,404           10.1 %   $ 315,178$ 285,244           10.5 %
Asset-based fees                     136,142        88,075           54.6 %     262,848       188,271           39.6 %
Non-recurring                          9,760         9,429            3.5 %      20,428        18,649            9.5 %
Index total                          305,963       242,908           26.0 %     598,454       492,164           21.6 %

Analytics
Recurring subscriptions              133,368       126,189            5.7 %     265,040       250,254            5.9 %
Non-recurring                          2,534         1,374           84.4 %       4,879         2,817           73.2 %
Analytics total                      135,902       127,563            6.5 %     269,919       253,071            6.7 %

ESG and Climate
Recurring subscriptions               38,567        25,908           48.9 %      72,707        50,809           43.1 %
Non-recurring                            741           394           88.1 %       1,351           726           86.1 %
ESG and Climate total                 39,308        26,302           49.4 %      74,058        51,535           43.7 %

All Other - Private Assets
Recurring subscriptions               16,134        12,383           30.3 %      32,937        28,002           17.6 %
Non-recurring                            873           460           89.8 %       1,235         1,624          (24.0 %)
All Other - Private Assets total      17,007        12,843           32.4 %      34,172        29,626           15.3 %
Total operating revenues           $ 498,180$ 409,616           21.6 %   $ 976,603$ 826,396           18.2 %



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");


                                       24
--------------------------------------------------------------------------------



  • 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.


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



                                       Three Months Ended                           Six Months Ended
                                            June 30,                                    June 30,
                                       2021          2020         % Change         2021          2020         % Change
                                                                       (in thousands)
Operating expenses:
Cost of revenues                     $  87,327$  70,456           23.9 %    $ 173,107$ 145,065           19.3 %
Selling and marketing                   58,191        51,617           12.7 %      114,658       107,166            7.0 %
Research and development                27,531        22,534           22.2 %       52,393        49,096            6.7 %
General and administrative              30,182        28,309            6.6 %       64,910        59,142            9.8 %

Amortization of intangible assets 30,396 14,062 116.2 % 45,464 27,838

           63.3 %
Depreciation and amortization of
property,
  equipment and leasehold
improvements                             7,020         7,463           (5.9 %)      14,163        15,030           (5.8 %)
Total operating expenses             $ 240,647$ 194,441           23.8 %    $ 464,695$ 403,337           15.2 %



Total operating expenses for the three months ended June 30, 2021 increased 23.8% to $240.6 million compared to $194.4 million for the three months ended June 30, 2020. Adjusting for the impact of foreign currency exchange rate fluctuations, the increase would have been 20.0% for the three months ended June 30, 2021 compared to the three months ended June 30, 2020.

For the six months ended June 30, 2021, the increase was 15.2%, growing to $464.7 million compared to $403.3 million for the six months ended June 30, 2020. Adjusting for the impact of foreign currency exchange rate fluctuations, the increase would have been 12.4% for the six months ended June 30, 2021 compared to the six months ended June 30, 2020.

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 for the three months ended June 30, 2021 increased 23.9% to
$87.3 million compared to $70.5 million for the three months ended June 30,
2020, reflecting increases across all four 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 well as
higher non-compensation costs, reflecting higher professional fees, information
technology costs and market data costs.

For the six months ended June 30, 2021, the increase was 19.3%, growing to
$173.1 million compared to $145.1 million for the six months ended June 30,
2020, reflecting increases across all four reportable segments. The change was
driven by increases in compensation and benefits costs, primarily relating to
higher wages and salaries and incentive compensation, as well as higher
non-compensation costs, reflecting higher professional fees, information
technology costs 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 groups associated with acquiring new business, including
product management, research, technology and sales operations.

Selling and marketing expenses for the three months ended June 30, 2021
increased 12.7% to $58.2 million compared to $51.6 million for the three months
ended June 30, 2020, primarily driven by higher costs in the Index, ESG and
Climate and Analytics reportable segments. The change was driven by increases in
compensation and benefits costs, including higher incentive compensation and
wages and salaries, as well as higher non-compensation costs, primarily relating
to higher information technology costs and recruiting costs.

                                       25

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For the six months ended June 30, 2021, the increase was 7.0%, growing to $114.7
million compared to $107.2 million for the six months ended June 30, 2020,
primarily driven by higher costs in the ESG and Climate and Index reportable
segments. The change was driven by increases in compensation and benefits costs,
including incentive compensation, wages and salaries and benefits costs,
partially offset by decreases in non-compensation costs, primarily relating to
lower travel and entertainment costs and marketing costs.

Research and Development


R&D expenses consist of the costs to develop new or enhance existing products
and the 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.

R&D expenses for the three months ended June 30, 2021 increased 22.2% to $27.5
million compared to $22.5 million for the three months ended June 30, 2020,
reflecting higher investment in the ESG and Climate and Index reportable
segments. The change was driven by increases in compensation and benefits costs,
primarily relating to higher incentive compensation, benefits costs and wages
and salaries.

For the six months ended June 30, 2021, the increase was 6.7%, growing to $52.4
million compared to $49.1 million for the six months ended June 30, 2020,
reflecting higher investment in the ESG and Climate and Index reportable
segments. The change was driven by increases in compensation and benefits costs,
primarily relating to higher incentive compensation and benefits costs,
partially offset by lower wages and salaries.

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.

G&A expenses for the three months ended June 30, 2021 increased 6.6% to $30.2
million compared to $28.3 million for the three months ended June 30, 2020,
reflecting increases across all four reportable segments. The change was driven
by increases in non-compensation costs, primarily relating to higher information
technology costs, recruiting costs, other tax expenses, insurance costs and
personnel related costs.

For the six months ended June 30, 2021, the increase was 9.8%, growing to $64.9
million compared to $59.1 million for the six months ended June 30, 2020,
reflecting increases across all four reportable segments. The change was driven
by increases in compensation and benefits costs, primarily relating to higher
wages and salaries and incentive compensation, as well as higher
non-compensation costs, including information technology costs and insurance
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                           Six Months Ended
                                            June 30,                                    June 30,
                                       2021          2020         % Change         2021          2020         % Change
                                                                       (in thousands)
Compensation and benefits            $ 148,180$ 128,803           15.0 %    $ 299,697$ 266,065           12.6 %
Non-compensation expenses               55,051        44,113           24.8 %      105,371        94,404           11.6 %

Amortization of intangible assets 30,396 14,062 116.2 % 45,464 27,838

           63.3 %
Depreciation and amortization of
property,
  equipment and leasehold
improvements                             7,020         7,463           (5.9 %)      14,163        15,030           (5.8 %)
Total operating expenses             $ 240,647$ 194,441           23.8 %    $ 464,695$ 403,337           15.2 %




Compensation and Benefits

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 3,910 and 3,513 employees as of June 30, 2021 and 2020,
respectively, reflecting a 11.3% 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 benefit
expenses. As of June 30, 2021, 65.9% of our employees were located in emerging
market centers compared to 63.7% as of June 30, 2020.

                                       26

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Compensation and benefits costs for the three months ended June 30, 2021 increased 15.0% to $148.2 million compared to $128.8 million for the three months ended June 30, 2020, driven by higher wages and salaries, incentive compensation and benefits costs, partially offset by lower severance costs.

For the six months ended June 30, 2021, the increase was 12.6%, growing to $299.7 million compared to $266.1 million for the six months ended June 30, 2020, driven by higher incentive compensation, wages and salaries and benefits costs, partially offset by lower severance costs.

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.

Non-Compensation Expenses

Non-compensation expenses for the three months ended June 30, 2021 increased 24.8% to $55.1 million compared to $44.1 million for the three months ended June 30, 2020, primarily driven by higher information technology costs, professional fees, market data costs and recruiting costs.


For the six months ended June 30, 2021, the increase was 11.6%, growing to
$105.4 million compared to $94.4 million for the six months ended June 30, 2020,
primarily driven by higher information technology costs, professional fees and
market data costs, partially offset by lower travel and entertainment costs.

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.

Amortization of Intangible Assets


Amortization of intangible assets expense relates to definite-lived intangible
assets arising from past acquisitions and internal capitalized software projects
recognized over their estimated useful lives. Amortization of intangible assets
expense for the three months ended June 30, 2021 increased 116.2% to $30.4
million compared to $14.1 million for the three months ended June 30, 2020. For
the six months ended June 30, 2021, amortization of intangible assets expense
increased 63.3% to $45.5 million compared to $27.8 million for the six months
ended June 30, 2020. The increase in both the three and six months ended June
30, 2021, was primarily driven by a write-off of $16.0 million of certain
internally developed capitalized software intangible assets as a result of
management's decision during the three months ended June 30, 2021 to discontinue
development and cease related sales activities of certain Analytics segment
products and transition existing customers to other product offerings.

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 furniture
and fixtures, computer and related equipment and leasehold improvements over the
estimated useful life of the assets. Depreciation and amortization of property,
equipment and leasehold improvements for the three months ended June 30, 2021
decreased 5.9% to $7.0 million compared to $7.5 million for the three months
ended June 30, 2020. For the six months ended June 30, 2021, depreciation and
amortization of property, equipment and leasehold improvements decreased 5.8% to
$14.2 million compared to $15.0 million for the six months ended June 30, 2020.
The decrease in both the three and six months ended June 30, 2021, was primarily
the result of lower depreciation on software, computer and related equipment and
leasehold improvements.

Other Expense (Income), Net

Other expense (income), net for the three months ended June 30, 2021 decreased
18.6% to $61.8 million compared to $76.0 million for the three months ended
June 30, 2020. The decrease in net expenses was primarily driven by the absence
of the $35.0 million loss on debt extinguishment associated with the redemption
of all of the $800.0 million aggregate principal amount of 5.75% senior
unsecured notes due 2025 that remained outstanding (the "2025 Senior Notes
Redemption") during the three months ended June 30, 2020. This was partially
offset by the $21.8 million loss on debt extinguishment associated with the
redemption of all of the $500.0 million aggregate principal amount of the 2026
Senior Notes that remained outstanding (the "2026 Senior Notes Redemption")
during the three months ended June 30, 2021. The loss on debt extinguishment
associated with the 2026 Senior Notes Redemption included an applicable premium
of approximately $18.2 million (as set forth in the indenture governing the
terms of the 2026 Senior Notes) and the write-off of approximately $3.6 million
of unamortized debt issuance costs associated with the 2026 Senior Notes.

For the six months ended June 30, 2021, it decreased 17.2% to $100.2 million
compared to $121.0 million for the six months ended June 30, 2020. The decrease
in net expenses was primarily driven by the absence of the $35.0 million and
$10.0 million loss on debt extinguishment associated with the 2025 Senior Notes
Redemption and the redemption of all of the $300.0 million aggregate principal
amount of 5.250% senior unsecured notes due 2024 that remained outstanding (the
"2024 Senior Notes Redemption") during

                                       27

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the six months ended June 30, 2020, respectively. This was partially offset by
the $21.8 million loss on debt extinguishment associated with the 2026 Senior
Notes Redemption during the six months ended June 30, 2021.

Income Taxes


The Company's provision for income taxes for the three months ended June 30,
2021 and 2020 was $30.3 million and $24.0 million, respectively. These amounts
reflect effective tax rates of 15.5% and 17.3% for the three months ended
June 30, 2021 and 2020, respectively.

The effective tax rate of 15.5% for the three months ended June 30, 2021
reflects the Company's estimate of the effective tax rate for the period which
was impacted by certain favorable discrete items totaling $11.9 million. For the
three months ended June 30, 2021, these discrete items primarily related to the
$5.6 million tax impact of loss on debt extinguishment recognized during the
period on the 2026 Senior Notes Redemption. Also included in the discrete items
is a $2.3 million benefit related to the revaluation of deferred taxes as a
result of the enactment of an increase in the UK corporate tax rate, a $2.1
million benefit related to the filing of prior year refund claims, $1.0 million
of excess tax benefits recognized on share-based compensation vested during the
period and $0.9 million of tax benefits related to other prior year items. In
addition, the effective tax rate was impacted by the level of earnings.

The effective tax rate of 17.3% for the three months ended June 30, 2020
reflects the Company's estimate of the effective tax rate for the period which
was impacted by certain favorable discrete items totaling $11.7 million. For the
three months ended June 30, 2020, these discrete items primarily related to the
$9.0 million tax impact of loss on debt extinguishment recognized during the
period on the 2025 Senior Notes Redemption and $2.3 million of excess tax
benefits recognized on share-based compensation vested during the period. In
addition, the effective tax rate was impacted by a beneficial geographic mix of
earnings.

The Company's provision for income taxes for the six months ended June 30, 2021
and 2020 was $49.5 million and $38.8 million, respectively. These amounts
reflect effective tax rates of 12.0% and 12.8% for the six months ended June 30,
2021 and 2020, respectively.

The effective tax rate of 12.0% for the six months ended June 30, 2021 reflects
the Company's estimate of the effective tax rate for the period which was
impacted by certain favorable discrete items totaling $34.2 million, in relation
to pretax income. For the six months ended June 30, 2021, these discrete items
primarily related to $21.4 million of excess tax benefits recognized on
share-based compensation vested during the period and $5.6 million related to
the tax impact of loss on debt extinguishment recognized during the period on
the 2026 Senior Notes Redemption. Also included in the discrete items is a $2.3
million benefit related to the revaluation of deferred taxes as a result of the
enactment of an increase in the UK corporate tax rate, a $2.1 million benefit
related to the filing of prior year refund claims and $2.8 million of tax
benefits related to other prior year items. In addition, the effective tax rate
was impacted by the level of earnings.

The effective tax rate of 12.8% for the six months ended June 30, 2020 reflects
the Company's estimate of the effective tax rate for the period which was
impacted by certain favorable discrete items totaling $34.1 million. For the six
months ended June 30, 2020, these discrete items primarily related to $21.5
million of excess tax benefits recognized on share-based compensation vested
during the period and $11.5 million related to the tax impact of loss on debt
extinguishment recognized during the period on the 2024 Senior Notes Redemption
and 2025 Senior Notes Redemption. The discrete items also included a $0.8
million benefit related to the revaluation of the cost of deemed repatriation of
foreign earnings. 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 three months
ended June 30, 2021 increased 43.7% to $165.4 million compared to $115.1 million
for the three months ended June 30, 2020 and for the six months ended June 30,
2021, it increased 37.6% to $362.2 million compared to $263.2 million for the
six months ended June 30, 2020.

Weighted Average Shares


The weighted average shares outstanding used to calculate basic and diluted
earnings per share for the three months ended June 30, 2021 compared to the
three months ended June 30, 2020 decreased by 1.4% and 1.2%, respectively. For
the six months ended June 30, 2021, the weighted average shares outstanding used
to calculate basic and diluted earnings per share compared to the six months
ended June 30, 2020 decreased by 2.0% and 1.8%, respectively. The decrease in
both the three and six months ended June 30, 2021, primarily reflect the impact
of share repurchases made pursuant to the 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.

                                       28

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"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.

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.

The following table presents the calculation of Adjusted EBITDA for the periods
indicated:



                                      Three Months Ended                          Six Months Ended
                                           June 30,                                   June 30,
                                      2021          2020         % Change        2021          2020         % Change
                                                                     (in thousands)
Operating revenues                  $ 498,180$ 409,616           21.6 %   $ 976,603$ 826,396           18.2 %
Adjusted EBITDA expenses              203,231       172,916           17.5 %     405,068       360,469           12.4 %
Adjusted EBITDA                     $ 294,949$ 236,700           24.6 %   $ 571,535$ 465,927           22.7 %
Adjusted EBITDA margin %                 59.2 %        57.8 %                       58.5 %        56.4 %
Operating margin %                       51.7 %        52.5 %                       52.4 %        51.2 %




Adjusted EBITDA for the three months ended June 30, 2021 increased 24.6% to
$294.9 million compared to $236.7 million for the three months ended June 30,
2020. Adjusted EBITDA margin for the three months ended June 30, 2021 increased
to 59.2% compared to 57.8% for the three months ended June 30, 2020. For the six
months ended June 30, 2021, Adjusted EBITDA increased 22.7% to $571.5 million
compared to $465.9 million for the six months ended June 30, 2020. For the six
months ended June 30, 2021, Adjusted EBITDA margin increased to 58.5% compared
to 56.4% for the six months ended June 30, 2020. The increase in Adjusted EBITDA
margin for both the three and six months ended June 30, 2021, reflects a higher
rate of growth in operating revenues as compared to the rate of growth of
Adjusted EBITDA expenses.

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 periods indicated:



                                     Three Months Ended               Six Months Ended
                                          June 30,                        June 30,
                                    2021            2020            2021            2020
                                                       (in thousands)
Index Adjusted EBITDA            $   233,468$   183,256$   453,347$   366,843
Analytics Adjusted EBITDA             49,814          46,167          95,545          82,484
ESG and Climate Adjusted
EBITDA                                 5,720           5,499          10,765           9,125
All Other - Private Assets
Adjusted EBITDA                        5,947           1,778          11,878           7,475
Consolidated Adjusted EBITDA         294,949         236,700         571,535         465,927
Amortization of intangible
assets                                30,396          14,062          45,464          27,838
Depreciation and amortization
of property,
  equipment and leasehold
improvements                           7,020           7,463          14,163          15,030
Operating income                     257,533         215,175         511,908         423,059
Other expense (income), net           61,838          76,008         100,185         121,043
Provision for income taxes            30,272          24,044          49,481          38,768
Net income                       $   165,423$   115,123$   362,242$   263,248




                                       29
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The following table presents the reconciliation of Adjusted EBITDA expenses to operating expenses for the periods indicated:



                                     Three Months Ended               Six Months Ended
                                          June 30,                        June 30,
                                    2021            2020            2021            2020
                                                       (in thousands)
Index Adjusted EBITDA expenses   $    72,495$    59,652$   145,107$   125,321
Analytics Adjusted EBITDA
expenses                              86,088          81,396         174,374         170,587
ESG and Climate Adjusted
EBITDA
 expenses                             33,588          20,803          63,293          42,410
All Other - Private Assets
Adjusted EBITDA
 expenses                             11,060          11,065          22,294          22,151
Consolidated Adjusted EBITDA
expenses                             203,231         172,916         405,068         360,469
Amortization of intangible
assets                                30,396          14,062          45,464          27,838
Depreciation and amortization
of property,
  equipment and leasehold
improvements                           7,020           7,463          14,163          15,030
Total operating expenses         $   240,647$   194,441$   464,695$   403,337

The discussion of the segment results is presented below.





Segment Results

Index Segment

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



                                      Three Months Ended                          Six Months Ended
                                           June 30,                                   June 30,
                                      2021          2020         % Change        2021          2020         % Change
                                                                     (in thousands)
Operating revenues:
Recurring subscriptions             $ 160,061$ 145,404           10.1 %   $ 315,178$ 285,244           10.5 %
Asset-based fees                      136,142        88,075           54.6 %     262,848       188,271           39.6 %
Non-recurring                           9,760         9,429            3.5 %      20,428        18,649            9.5 %
Operating revenues total              305,963       242,908           26.0 %     598,454       492,164           21.6 %
Adjusted EBITDA expenses               72,495        59,652           21.5 %     145,107       125,321           15.8 %
Adjusted EBITDA                     $ 233,468$ 183,256           27.4 %   $ 453,347$ 366,843           23.6 %
Adjusted EBITDA margin %                 76.3 %        75.4 %                       75.8 %        74.5 %



Revenues related to Index products for the three months ended June 30, 2021 increased 26.0% to $306.0 million compared to $242.9 million for the three months ended June 30, 2020 and for the six months ended June 30, 2021, the increase was 21.6%, growing to $598.5 million compared to $492.2 million for the six months ended June 30, 2020


Recurring subscriptions for the three months ended June 30, 2021 increased 10.1%
to $160.1 million compared to $145.4 million for the three months ended June 30,
2020. The increase was primarily driven by strong contributions from factors,
ESG and climate index products and continued contribution from market
cap-weighted index products. The impact of foreign currency exchange rate
fluctuations on revenues from recurring subscriptions was negligible.

For the six months ended June 30, 2021, the increase was 10.5%, growing to $315.2 million compared to $285.2 million for the six months ended June 30, 2020. The increase was primarily driven by continued contribution from market cap-weighted index products and strong contributions from factors, ESG and climate index products. The impact of foreign currency exchange rate fluctuations on revenues from recurring subscriptions was negligible.


Revenues from asset-based fees for the three months ended June 30, 2021
increased 54.6% to $136.1 million compared to $88.1 million for the three months
ended June 30, 2020. The increase in asset-based fees was driven by growth in
revenues from all our index-linked investment product categories, including an
increase in revenues from ETFs linked to MSCI equity indexes that was primarily
driven by a 66.4% increase in average AUM in ETFs, partially offset by a decline
in average basis point fees. The increase in revenues from asset-based fees was
also driven by higher revenues from non-ETF indexed funds linked to MSCI
indexes, primarily driven by an increase in average AUM. Revenues from exchange
traded futures and options contracts linked to MSCI indexes also increased,
primarily driven by fee increases, partially offset by lower volume. The impact
of foreign currency exchange rate fluctuations on revenues from asset-based fees
was negligible.

                                       30
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For the six months ended June 30, 2021, the increase was 39.6%, growing to
$262.8 million compared to $188.3 million for the six months ended June 30,
2020. The increase in asset-based fees was driven by growth in revenues from all
our index-linked investment product categories, including an increase in
revenues from ETFs linked to MSCI equity indexes that was primarily driven by a
48.8% increase in average AUM in ETFs, partially offset by a decline in average
basis point fees. The increase in revenues from asset-based fees was also driven
by higher revenues from non-ETF indexed funds linked to MSCI indexes, primarily
driven by an increase in average AUM. Revenues from exchange traded futures and
options contracts linked to MSCI indexes also increased, primarily driven by fee
increases, partially offset by lower volume. The impact of foreign currency
exchange rate fluctuations on revenues from asset-based fees was negligible.

Index segment Adjusted EBITDA expenses for the three months ended June 30, 2021
increased 21.5% to $72.5 million compared to $59.7 million for the three months
ended June 30, 2020, reflecting higher expenses across all expense activity
categories. Adjusting for the impact of foreign currency exchange rate
fluctuations, the increase would have been 17.3% for the three months ended
June 30, 2021 compared to the three months ended June 30, 2020.

For the six months ended June 30, 2021, the increase was 15.8%, growing to
$145.1 million compared to $125.3 million for the six months ended June 30,
2020, reflecting higher expenses across all expense activity categories.
Adjusting for the impact of foreign currency exchange rate fluctuations, the
increase would have been 12.6% for the six months ended June 30, 2021 compared
to the six months ended June 30, 2020.

Analytics Segment


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



                                      Three Months Ended                          Six Months Ended
                                           June 30,                                   June 30,
                                      2021          2020         % Change        2021          2020         % Change
                                                                     (in thousands)
Operating revenues:
Recurring subscriptions             $ 133,368$ 126,189            5.7 %   $ 265,040$ 250,254            5.9 %
Non-recurring                           2,534         1,374           84.4 %       4,879         2,817           73.2 %
Operating revenues total              135,902       127,563            6.5 %     269,919       253,071            6.7 %
Adjusted EBITDA expenses               86,088        81,396            5.8 %     174,374       170,587            2.2 %
Adjusted EBITDA                     $  49,814$  46,167            7.9 %   $  95,545$  82,484           15.8 %
Adjusted EBITDA margin %                 36.7 %        36.2 %                       35.4 %        32.6 %




Analytics segment revenues for the three months ended June 30, 2021 increased
6.5% to $135.9 million compared to $127.6 million for the three months ended
June 30, 2020, primarily driven by growth in Equity and Multi-Asset Class
Analytics products. The impact of foreign currency exchange rate fluctuations on
Analytics segment revenues was negligible.

For the six months ended June 30, 2021, the increase was 6.7%, growing to $269.9
million compared to $253.1 million for the six months ended June 30, 2020,
primarily driven by growth in Multi-Asset Class and Equity Analytics products.
The impact of foreign currency exchange rate fluctuations on Analytics segment
revenues was negligible.

Analytics segment Adjusted EBITDA expenses for the three months ended June 30,
2021 increased 5.8% to $86.1 million compared to $81.4 million for the three
months ended June 30, 2020, reflecting higher expenses across all expense
activity categories. Adjusting for the impact of foreign currency exchange rate
fluctuations, the increase would have been 2.6% for the three months ended
June 30, 2021 compared to the three months ended June 30, 2020.

For the six months ended June 30, 2021, the increase was 2.2%, growing to $174.4
million compared to $170.6 million for the six months ended June 30, 2020,
primarily driven by higher expenses across the cost of revenues and G&A expense
activity categories, partially offset by lower expense across the R&D expense
activity category. Adjusting for the impact of foreign currency exchange rate
fluctuations, it would have been flat for the six months ended June 30, 2021
compared to the six months ended June 30, 2020.

                                       31

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ESG and Climate Segment


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



                                      Three Months Ended                         Six Months Ended
                                           June 30,                                  June 30,
                                       2021          2020        % Change        2021         2020        % Change
                                                                    (in thousands)
Operating revenues:
Recurring subscriptions             $   38,567$ 25,908           48.9 %   $ 72,707$ 50,809           43.1 %
Non-recurring                              741          394           88.1 %      1,351          726           86.1 %
Operating revenues total                39,308       26,302           49.4 %     74,058       51,535           43.7 %
Adjusted EBITDA expenses                33,588       20,803           61.5 %     63,293       42,410           49.2 %
Adjusted EBITDA                     $    5,720$  5,499            4.0 %   $ 10,765$  9,125           18.0 %
Adjusted EBITDA margin %                  14.6 %       20.9 %                      14.5 %       17.7 %




ESG and Climate segment revenues for the three months ended June 30, 2021
increased 49.4% to $39.3 million compared to $26.3 million for the three months
ended June 30, 2020. The increase in ESG and Climate revenues was primarily
driven by strong growth from Ratings and Climate products. Adjusting for the
impact of foreign currency exchange rate fluctuations, ESG and Climate operating
revenues would have increased 38.9%, for the three months ended June 30, 2021
compared to the three months ended June 30, 2020.



For the six months ended June 30, 2021, the increase was 43.7%, growing to $74.1
million compared to $51.5 million for the six months ended June 30, 2020. The
increase in ESG and Climate revenues was primarily driven by strong growth from
Ratings and Climate products. Adjusting for the impact of foreign currency
exchange rate fluctuations, ESG and Climate operating revenues would have
increased 35.4%, for the six months ended June 30, 2021 compared to the six
months ended June 30, 2020.

ESG and Climate segment Adjusted EBITDA expenses for the three months ended
June 30, 2021 increased 61.5% to $33.6 million compared to $20.8 million for the
three months ended June 30, 2020, reflecting higher expenses across all expense
activity categories. Adjusting for the impact of foreign currency exchange rate
fluctuations, the increase would have been 55.4% for the three months ended
June 30, 2021 compared to the three months ended June 30, 2020.

For the six months ended June 30, 2021, the increase was 49.2%, growing to $63.3
million compared to $42.4 million for the six months ended June 30, 2020,
reflecting higher expenses across all expense activity categories. Adjusting for
the impact of foreign currency exchange rate fluctuations, the increase would
have been 44.5% for the six months ended June 30, 2021 compared to the six
months ended June 30, 2020.

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                          Six Months Ended
                                           June 30,                                   June 30,
                                       2021          2020        % Change         2021         2020        % Change
                                                                     (in thousands)
Operating revenues:
Recurring subscriptions             $   16,134$ 12,383           30.3 %    $ 32,937$ 28,002           17.6 %
Non-recurring                              873          460           89.8 %       1,235        1,624          (24.0 %)
Operating revenues total                17,007       12,843           32.4 %      34,172       29,626           15.3 %
Adjusted EBITDA expenses                11,060       11,065           (0.0 %)     22,294       22,151            0.6 %
Adjusted EBITDA                     $    5,947$  1,778          234.5 %    $ 11,878$  7,475           58.9 %
Adjusted EBITDA margin %                  35.0 %       13.8 %                       34.8 %       25.2 %




All Other - Private Assets segment revenues for the three months ended June 30,
2021 increased 32.4% to $17.0 million compared to $12.8 million for the three
months ended June 30, 2020. The increase in All Other - Private Assets revenues
was primarily driven by strong growth in Enterprise Analytics products and
favorable foreign currency exchange rate fluctuations. Adjusting for the impact
of foreign currency exchange rate fluctuations, All Other - Private Assets
operating revenues would have increased 20.3% for the three months ended
June 30, 2021 compared to the three months ended June 30, 2020.

For the six months ended June 30, 2021, the increase was 15.3%, growing to $34.2
million compared to $29.6 million for the six months ended June 30, 2020. The
increase in All Other - Private Assets revenues was primarily driven by
favorable foreign currency exchange rate fluctuations and strong growth in
Enterprise Analytics products. Adjusting for the impact of foreign currency
exchange rate fluctuations, All Other - Private Assets operating revenues would
have increased 5.6% for the six months ended June 30, 2021 compared to the six
months ended June 30, 2020.

                                       32
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All Other - Private Assets segment Adjusted EBITDA expenses for the three months
ended June 30, 2021 remained flat at $11.1 million compared to the three months
ended June 30, 2020, driven by lower expenses across the R&D and selling and
marketing expense activity categories, offset by higher expenses across the cost
of revenues and G&A expense activity categories. Adjusting for the impact of
foreign currency exchange rate fluctuations, All Other - Private Assets segment
Adjusted EBITDA expenses would have decreased 6.3% for the three months ended
June 30, 2021 compared to the three months ended June 30, 2020.

For the six months ended June 30, 2021, the increase was 0.6%, growing to $22.3
million compared to $22.2 million for the six months ended June 30, 2020, driven
by higher expenses across the cost of revenues and G&A expense activity
categories, partially offset by lower expenses across the R&D and selling and
marketing expense activity categories. Adjusting for the impact of foreign
currency exchange rate fluctuations, All Other - Private Assets segment Adjusted
EBITDA expenses would have decreased 4.2% for the six months ended June 30, 2021
compared to the six months ended June 30, 2020.





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.


                                       33
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The following table presents the Run Rates as of the dates indicated and the growth percentages over the periods indicated:



                                         As of
                               June 30,        June 30,          %
                                  2021            2020        Change
                                      (in thousands)
Index:
Recurring subscriptions       $   653,448$   586,846        11.3 %
Asset-based fees                  539,984         362,049        49.1 %
Index total                     1,193,432         948,895        25.8 %

Analytics                         563,938         534,039         5.6 %

ESG and Climate                   164,092         113,662        44.4 %

All Other - Private Assets 58,088 50,715 14.5 %


Total Run Rate                $ 1,979,550$ 1,647,311        20.2 %

Recurring subscriptions total $ 1,439,566$ 1,285,262        12.0 %
Asset-based fees                  539,984         362,049        49.1 %
Total Run Rate                $ 1,979,550$ 1,647,311        20.2 %




Total Run Rate grew 20.2% to $1,979.6 million as of June 30, 2021 compared to
$1,647.3 million as of June 30, 2020. Recurring subscriptions Run Rate grew
12.0% to $1,439.6 million as of June 30, 2021 compared to $1,285.3 million as of
June 30, 2020. Adjusting for the impact of foreign currency exchange rate
fluctuations, recurring subscriptions Run Rate would have increased 11.3% as of
June 30, 2021 compared to June 30, 2020.

Run Rate from asset-based fees increased 49.1% to $540.0 million as of June 30,
2021 from $362.0 million as of June 30, 2020, primarily driven by higher AUM in
ETFs linked to MSCI equity indexes, higher AUM and new client agreements in
non-ETF indexed funds linked to MSCI indexes and higher fees in exchange traded
futures and options contracts linked to MSCI indexes. Partially offsetting the
impact of the increase in AUM in ETFs linked to MSCI equity indexes was a change
in fee levels of certain products, which was the primary driver of a decline in
average basis point fees to 2.58 as of June 30, 2021 from 2.67 as of June 30,
2020. As of June 30, 2021, the value of AUM in ETFs linked to MSCI equity
indexes was $1,336.2 billion, up $510.8 billion, or 61.9%, from $825.4 billion
as of June 30, 2020. The increase of $510.8 billion consisted of market
appreciation of $309.6 billion and net inflows of $201.2 billion.

Index recurring subscriptions Run Rate grew 11.3% to $653.4 million as of
June 30, 2021 compared to $586.8 million as of June 30, 2020, primarily driven
by growth in market cap-weighted index products and reflected growth across all
regions and all client segments.

Run Rate from Analytics products increased 5.6% to $563.9 million as of June 30,
2021 compared to $534.0 million as of June 30, 2020, primarily 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 5.0% as of June 30, 2021.

Run Rate from ESG and Climate products increased 44.4% to $164.1 million as of
June 30, 2021 compared to $113.7 million as of June 30, 2020, primarily driven
by strong growth in both Ratings and Climate products. Adjusting for the impact
of foreign currency exchange rate fluctuations, ESG and Climate Run Rate would
have increased 41.7% as of June 30, 2021 compared to June 30, 2020.

Run Rate from All Other - Private Assets products increased 14.5% to $58.1
million as of June 30, 2021 compared to $50.7 million as of June 30, 2020,
primarily driven by strong growth in both Enterprise Analytics and Global Intel
products and growth from new sales of Real Estate Climate Value-at-Risk
products. Adjusting for the impact of foreign currency exchange rate
fluctuations, All Other - Private Assets Run Rate would have increased 7.9% as
of June 30, 2021 compared to June 30, 2020.

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

                                       34
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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                          Six Months Ended
                                June 30,      June 30,         %           June 30,      June 30,         %
                                  2021          2020        Change           2021          2020        Change
                                                                (in thousands)
New recurring subscription
sales
Index                           $  25,635$  20,276        26.4 %      $  46,491$  39,330        18.2 %
Analytics                          16,282        14,979         8.7 %         28,492        26,197         8.8 %
ESG and Climate                    17,756        11,202        58.5 %         29,396        18,196        61.6 %
All Other - Private Assets          1,860         1,146        62.3 %          3,544         2,321        52.7 %
New recurring subscription
sales total                        61,533        47,603        29.3 %        107,923        86,044        25.4 %

Subscription cancellations
Index                              (6,791 )      (7,423 )      (8.5 %)       (11,989 )     (12,539 )      (4.4 %)
Analytics                         (10,096 )     (10,553 )      (4.3 %)       (15,975 )     (18,797 )     (15.0 %)
ESG and Climate                    (1,246 )      (1,755 )     (29.0 %)        (2,298 )      (3,258 )     (29.5 %)
All Other - Private Assets           (887 )        (488 )      81.8 %         (1,585 )      (1,038 )      52.7 %
Subscription cancellations
total                             (19,020 )     (20,219 )      (5.9 %)       (31,847 )     (35,632 )     (10.6 %)

Net new recurring subscription
sales
Index                              18,844        12,853        46.6 %         34,502        26,791        28.8 %
Analytics                           6,186         4,426        39.8 %         12,517         7,400        69.1 %
ESG and Climate                    16,510         9,447        74.8 %         27,098        14,938        81.4 %
All Other - Private Assets            973           658        47.9 %          1,959         1,283        52.7 %
Net new recurring subscription
sales total                        42,513        27,384        55.2 %         76,076        50,412        50.9 %

Non-recurring sales
Index                              10,769        10,450         3.1 %         21,974        20,733         6.0 %
Analytics                           2,773         1,659        67.1 %          5,746         4,924        16.7 %
ESG and Climate                     1,140           416       174.0 %          1,837           567       224.0 %
All Other - Private Assets            185           158        17.1 %          1,071         1,038         3.2 %
Non-recurring sales total          14,867        12,683        17.2 %         30,628        27,262        12.3 %

Gross sales
Index                           $  36,404$  30,726        18.5 %      $  68,465$  60,063        14.0 %
Analytics                          19,055        16,638        14.5 %         34,238        31,121        10.0 %
ESG and Climate                    18,896        11,618        62.6 %         31,233        18,763        66.5 %
All Other - Private Assets          2,045         1,304        56.8 %          4,615         3,359        37.4 %
Total gross sales               $  76,400$  60,286        26.7 %      $ 138,551$ 113,306        22.3 %

Net sales
Index                           $  29,613$  23,303        27.1 %      $  56,476$  47,524        18.8 %
Analytics                           8,959         6,085        47.2 %         18,263        12,324        48.2 %
ESG and Climate                    17,650         9,863        79.0 %         28,935        15,505        86.6 %
All Other - Private Assets          1,158           816        41.9 %          3,030         2,321        30.5 %
Total net sales                 $  57,380$  40,067        43.2 %      $ 106,704$  77,674        37.4 %




                                       35
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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          Six Months Ended
                                  June 30,                   June 30,
                               2021           2020         2021         2020
Index                        95.6%          94.7%        96.1%        95.5%
Analytics                    92.7%          92.0%        94.2%        92.9%
ESG and Climate              96.4%          93.1%        96.7%        93.6%
All Other - Private Assets   93.7%          96.2%        94.4%        95.9%

Total                        94.4%          93.5%        95.3%        94.2%


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. Retention Rate is an important metric because subscription
cancellations decrease our Run Rate and ultimately our future operating revenues
over time.

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.

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 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-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 or critical accounting estimates since the end of the fiscal
year ended December 31, 2020.

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 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.

                                       36

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

Senior Notes and Credit Agreement


We have an aggregate of $4,000.0 million in Senior Notes outstanding and a
$500.0 million undrawn Revolving Credit Agreement with a syndicate of banks. See
Note 7, "Commitments and Contingencies," of the Notes to Condensed Consolidated
Financial Statements (Unaudited) 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;


    •   in the case of our subsidiaries that are not guarantors under the
        Revolving Credit Agreement, incur additional indebtedness;

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

sell all or substantially all assets of the Company and its subsidiaries

        on a consolidated basis;


  • enter into sale/leaseback transactions;

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

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

        or


  • change the nature of our business.


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, and bankruptcy
and insolvency events, and, in the case of the Revolving Credit Agreement,
invalidity or impairment of loan documentation, change of control and customary
ERISA defaults in addition to the foregoing. 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 (or 4.50:1.00 for two fiscal
quarters following a material acquisition) 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
June 30, 2021, our Consolidated Leverage Ratio was 3.45:1.00 and our
Consolidated Interest Coverage Ratio was 7.55:1.00. As of June 30, 2021, 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 $1,109.3 million, or
60.1%, of our total revenue for the trailing 12 months ended June 30, 2021,
approximately $407.9 million, or 41.9%, of our consolidated operating income for
the trailing 12 months ended June 30, 2021, and approximately $1,064.8 million,
or 22.2%, of our consolidated total assets (excluding intercompany assets) and
$717.6 million, or 13.9%, of our consolidated total liabilities, in each case as
of June 30, 2021.

                                       37
--------------------------------------------------------------------------------

Share Repurchases

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



                    Average          Total            Dollar
                     Price         Number of         Value of
                   Paid Per         Shares            Shares
Six Months Ended     Share        Repurchased       Repurchased
                                         (in thousands)
June 30, 2021      $  407.70               330     $     134,340
June 30, 2020      $  250.65             1,423     $     356,770

As of June 30, 2021, there was $1,594.4 million of available authorization remaining under the 2020 Repurchase Program.

Cash Dividend


On July 26, 2021, the Board of Directors declared a quarterly cash dividend of
$1.04 per share for the three months ending September 30, 2021. This reflects an
increase of 33.3% over the quarterly cash dividend declared for the three months
ended June 30, 2021. The third quarter 2021 dividend is payable on August 31,
2021 to shareholders of record as of the close of trading on August 13, 2021.



Cash Flows



                                        As of
                             June 30,        December 31,
                                2021              2020
                                    (in thousands)
Cash and cash equivalents   $ 1,972,002$    1,300,521




Cash and cash equivalents were $1,972.0 million and $1,300.5 million as of
June 30, 2021 and December 31, 2020, respectively. We typically seek to maintain
minimum cash balances globally of approximately $200.0 million to $250.0 million
for general operating purposes. As of June 30, 2021 and December 31, 2020,
$491.3 million and $423.4 million, respectively, of the 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. 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 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 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,
                                                         2021          2020
                                                           (in thousands)
Net cash provided by operating activities             $ 440,514     $  

375,386

Net cash used in investing activities                   (22,321 )     (213,174 )
Net cash provided by (used in) financing activities     256,858       (275,051 )
Effect of exchange rate changes                          (3,570 )       (8,751 )
Net increase (decrease) in cash                       $ 671,481$ (121,590 )




                                       38
--------------------------------------------------------------------------------

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 $440.5 million and $375.4 million for the six months ended
June 30, 2021 and 2020, respectively. The year-over-year increase was driven by
higher cash collections from customers and lower interest payments, partially
offset by higher payments for income taxes 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 $22.3 million for the six months ended
June 30, 2021 compared to $213.2 million for the six months ended June 30, 2020.
The year-over-year change was primarily driven by the absence of the $190.8
million equity method investment in Burgiss.

Cash Flows From Financing Activities


Cash provided by financing activities was $256.9 million for the six months
ended June 30, 2021 compared to cash used in financing activities of $275.1
million for the six months ended June 30, 2020. The year-over-year change was
primarily driven by the impact of lower repayment on borrowings and lower share
repurchases, partially offset by the impact of lower proceeds from the new
senior notes offerings made during the six months ended June 30, 2021.

Off-Balance Sheet Arrangements


We do 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.

© Edgar Online, source Glimpses

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