MSCI’s stock price plummeted by 13.2% in late morning trading on Tuesday after the company reported higher-than-expected expenses that weighed on its overall profitability for the first quarter of 2024. Despite beating analyst estimates for adjusted earnings per share (EPS), MSCI’s overall financial performance fell short of expectations. The company’s adjusted EPS of $3.52 surpassed the average analyst estimate of $3.47, but it declined from $3.68 in the previous quarter and $3.14 a year ago. Operating revenue of $680 million missed the $685.9 million consensus estimate and decreased from $690.1 million in the fourth quarter of 2023, although it still represented a 14.8% increase year-over-year. Total operating expenses surged by 22.7% year-over-year to $340.6 million, compared to $319.4 million in the prior quarter. Adjusted EBITDA declined to $383.6 million from $414.6 million in the fourth quarter of 2023, but it increased from $344.7 million in the first quarter of 2023. Total run rate at the end of March 2024 was $2.73 billion, up 14.6% year-over-year. Recurring subscription run rate rose by $262.4 million, while asset-based fees run rate increased by $84.9 million. Organic recurring subscription run rate growth was 8.7%. The company’s retention rate was 92.8%, compared to 95.2% in the first quarter of 2023.
MSCI’s Chairman and CEO, Henry A. Fernandez, attributed the elevated expenses to a concentration of unusual client events, including a large merger among banking clients, and expressed confidence that this level of expenses is not expected to continue. Despite the challenges in the first quarter, MSCI reaffirmed its outlook for fiscal year 2024.
