MSCI Inc. Reports Third Quarter 2013 Financial Results

  MSCI Inc. Reports Third Quarter 2013 Financial Results

           Exploring Strategic Alternatives for Governance Business

Business Wire

NEW YORK -- October 31, 2013

MSCI Inc. (NYSE:MSCI), a leading global provider of investment decision
support tools, including indices, portfolio risk and performance analytics and
corporate governance services, today announced results for the third quarter
and nine months ended September 30, 2013.

(Note: Percentage changes are referenced to the comparable period in 2012,
unless otherwise noted.)

  *Operating revenues increased 9.7% to $258.2 million in third quarter 2013
    and 9.2% to $768.0 million for nine months 2013.
  *Net income increased 14.6% to $55.3 million in third quarter 2013 and net
    income grew 35.1% to $175.3 million for nine months 2013.
  *Diluted EPS for third quarter 2013 rose 17.9% to $0.46 and nine months
    2013 Diluted EPS increased 37.1% to $1.44.
  *Adjusted EBITDA^1 grew by 4.4% to $112.8 million in third quarter 2013.
    For nine months 2013, Adjusted EBITDA^1 grew by 6.8% to $339.5 million.
    Third quarter 2013 Adjusted EBITDA^1 margin fell to 43.7% from 45.9% and
    nine months 2013 Adjusted EBITDA^1 margin fell to 44.2% from 45.2%.
  *Third quarter 2013 Adjusted EPS^2 rose 8.2% to $0.53. Nine months 2013
    Adjusted EPS^2 rose 17.5% to $1.68.
  *MSCI’s Run Rate grew by 12.1% to $1,025.8 million in third quarter 2013,
    driven by organic^3 subscription growth of 4.4%, asset-based fee growth of
    28.3% and the acquisitions of IPD and InvestorForce.
  *MSCI repurchased a total of 2.7 million shares in third quarter 2013 as
    part of the conclusion of its December 2012 accelerated share repurchase
    (“ASR”) agreement and the commencement of its August 2013 ASR.
  *MSCI has engaged Morgan Stanley to explore strategic alternatives for its
    Governance business.

Table 1: MSCI Inc. Selected Financial Information (unaudited)

                                                                         
                 Three Months Ended          Change       Nine Months Ended           Change
                                             from                                      From
                 September     September     September     September     September     September
                 30,           30,           30,           30,           30,           30,
In
thousands,    2013          2012          2012          2013          2012          2012
except per
share data
Operating        $ 258,238     $ 235,444     9.7%          $ 768,045     $ 703,061     9.2%
revenues
Operating          165,802       151,915     9.1%            487,910       451,432     8.1%
expenses
Net income         55,310        48,274      14.6%           175,300       129,786     35.1%
% Margin           21.4%         20.5%                       22.8%         18.5%
Diluted          $ 0.46        $ 0.39        17.9%         $ 1.44        $ 1.05        37.1%
EPS
                                                                                       
Adjusted         $ 0.53        $ 0.49        8.2%          $ 1.68        $ 1.43        17.5%
EPS^2
Adjusted         $ 112,818     $ 108,074     4.4%          $ 339,473     $ 317,893     6.8%
EBITDA^1
% Margin           43.7%         45.9%                       44.2%         45.2%
                                                                                       

^1 Net Income before income taxes, other net expense and income, depreciation,
amortization, non-recurring stock-based compensation, lease exit charge and
restructuring costs. See Table 13 titled "Reconciliation of Adjusted EBITDA to
Net Income (unaudited)" and information about the use of non-GAAP financial
information provided under "Notes Regarding the Use of Non-GAAP Financial
Measures."
^2 Per share net income before after-tax impact of amortization of
intangibles, non-recurring stock-based compensation, restructuring costs,
lease exit charge and debt repayment and refinancing expenses. See Table 14
titled "Reconciliation of Adjusted Net Income and Adjusted EPS to Net Income
and EPS (unaudited)" and information about the use of non-GAAP financial
information provided under "Notes Regarding the Use of Non-GAAP Financial
Measures."
^3 For the purposes of calculating organic Run Rate growth, comparisons
exclude the Run Rate from the acquisitions of IPD and InvestorForce as well as
the Run Rate of the CFRA product line, which was sold.


“MSCI’s revenues, Adjusted EBITDA and Adjusted EPS continued to grow in the
third quarter. Our Run Rate grew 12%, driven by 10% growth in subscriptions
and 28% growth in asset-based fees. The growth in our asset-based fees
highlights the strong demand for MSCI-linked ETF products as well as the value
that MSCI indices deliver to our clients. During the third quarter, MSCI
repurchased a total of 2.7 million shares, underscoring our commitment to
return capital to shareholders while we continue to invest in our organic
growth,” Henry A. Fernandez, Chairman and CEO, said.

“We announced today that MSCI has engaged Morgan Stanley to help us explore
strategic alternatives for our Governance business. Over the past three years,
MSCI has worked hard to return that business to a growth track. We have
launched new products, most notably executive compensation data and analytics
and Quickscore, grown our salesforce, reached out to new clients and invested
in the technology platform. We also strengthened the senior management team,
which we expect will remain in place. In the third quarter of 2013, the
Governance business reported organic revenue growth of 7% and Adjusted EBITDA
growth of 12%. We believe the time is right to explore our strategic
alternatives,” added Mr. Fernandez.

Summary of Results for Third Quarter 2013 Compared to Third Quarter 2012

Operating Revenues – See Table 4

Operating revenues for the three months ended September 30, 2013 (“third
quarter 2013”) increased $22.8 million, or 9.7%, to $258.2 million compared to
$235.4 million for the three months ended September 30, 2012 (“third quarter
2012”). For the purposes of analyzing revenue trends, organic growth
comparisons exclude the impact of the acquisitions of IPD Group Limited
(“IPD”) and Investor Force Holdings, Inc. (“InvestorForce”), acquired on
November 30, 2012 and January 29, 2013, respectively, as well as the sale of
the CFRA product line on March 31, 2013. On an organic basis, operating
revenues grew by 4.8%.

Third quarter 2013 recurring subscription revenues rose $19.3 million, or
9.8%, to $216.9 million and 4.1% on an organic basis. Asset-based fees
increased $2.8 million, or 8.1%, to $36.8 million and non-recurring revenues
rose $0.7 million to $4.5 million.

Performance and Risk segment revenues rose $23.2 million to $228.6 million, an
increase of 11.3% and 4.5% on an organic basis. The increase was primarily
driven by higher revenues from index and environmental, social and governance
(“ESG”) products.

        Index and ESG products: Index and ESG product revenues increased $21.7
        million, or 20.1%, to $129.6 million. Subscription revenues grew by
  •  $18.9 million, or 25.6%, to $92.8 million, driven by the acquisition
        of IPD and growth in revenues from equity index benchmark products. On
        an organic basis, index and ESG subscription revenue growth was 10.1%.
    
        Revenues attributable to equity index asset-based fees rose $2.8
        million, or 8.1%, to $36.8 million, largely as a result of higher
        revenues from non-ETF passive funds. In addition, a change in the mix
        of ETFs linked to MSCI indices more than offset a decline of $58.5
        billion, or 17.0%, in average assets under management (“AUM”) in ETFs
        linked to MSCI indices. Excluding $5.6 million in asset-based fees
        linked to certain Vanguard ETFs that transitioned from third quarter
        2012, asset-based fees would have grown by 29.3%.
    
        Risk management analytics: Revenues related to risk management
    •   analytics products increased $4.7 million, or 7.2%, to $69.7 million.
        On an organic basis, revenues grew by 3.2%, driven by higher revenues
        from our RiskManager and hedge fund transparency products.
    
        Portfolio management analytics: Revenues related to portfolio
        management analytics products declined $2.9 million, or 10.0%, to
    •   $26.2 million as a result of lower sales and elevated cancellations of
        equity analytics products in prior periods as well as lower fixed
        income analytics revenues.
    
    •   Energy and commodity analytics: Revenues from energy and commodity
        analytics products were $3.1 million, a decline of $0.2 million.

Governance segment revenues fell $0.4 million, or 1.4%, to $29.6 million in
third quarter 2013, as the loss of revenues resulting from the sale of the
CFRA product line more than offset organic growth. On an organic basis,
Governance revenues rose 7.4%, driven by higher revenues from executive
compensation data and analytics products.

Operating Expenses – See Table 6

Total operating expenses rose $13.9 million, or 9.1%, to $165.8 million.

        Compensation costs: Total compensation costs rose $10.2 million, or
        11.0%, to $103.2 million in third quarter 2013, driven primarily by
  •  increased costs from the acquisitions of IPD and InvestorForce and
        increased hiring, offset by lower severance costs and the sale of the
        CFRA product line.
    
        Non-compensation costs excluding depreciation and amortization, the
        lease exit charge and restructuring costs: Non-compensation costs rose
    •   $7.2 million, or 20.6%, to $42.2 million in third quarter 2013. The
        increase in non-compensation costs reflects the acquisitions of IPD
        and InvestorForce, and increases in travel and entertainment costs,
        marketing expenses and recruiting costs, among other items.
    
        Depreciation and amortization: Amortization of intangibles expense
        totaled $14.4 million compared to $16.0 million in third quarter 2012,
        a decline of 9.5%, primarily due to certain intangibles becoming fully
    •   amortized since the prior period, partially offset by additional
        amortization related to the IPD and InvestorForce acquisitions.
        Depreciation and amortization of property, equipment and leasehold
        improvements rose $1.3 million, or 28.1%, to $5.9 million.

Other Expense (Income), Net

Other expense (income), net for third quarter 2013 was $6.2 million, a decline
of $1.7 million from third quarter 2012 driven by lower interest rates and
lower indebtedness.

Provision for Income Taxes

Income tax expense was $30.9 million in third quarter 2013, up $3.6 million
from third quarter 2012. The effective tax rate in third quarter 2013 fell to
35.9% from 36.1% a year ago.

Net Income and Earnings per Share – See Table 14

Net income rose $7.0 million, or 14.6%, to $55.3 million for third quarter
2013. The net income margin increased to 21.4% from 20.5% as a result of the
higher operating profit margin, lower interest costs and lower tax rate.
Diluted EPS rose by $0.07, or 17.9%, to $0.46, driven by higher net income and
a 2.3% decline in the weighted average diluted shares outstanding in third
quarter 2013. Adjusted net income, which excludes the after-tax impact of
amortization of intangibles, non-recurring stock-based compensation expense,
the lease exit charge and restructuring costs rose $3.7 million, or 6.0%, to
$64.6 million. Adjusted EPS, which excludes the after-tax, per diluted share
impact of amortization of intangibles and restructuring costs, non-recurring
stock-based compensation expense, the lease exit charge and restructuring
costs totaling $0.07, rose $0.04, or 8.2%, to $0.53.

See Table 14 titled “Reconciliation of Adjusted Net Income and Adjusted EPS to
Net Income and EPS (unaudited)” and “Notes Regarding the Use of Non-GAAP
Financial Measures” below.

Adjusted EBITDA – See Table 13

Adjusted EBITDA, which excludes income taxes, other net expense and income,
depreciation, amortization, non-recurring stock-based compensation, the lease
exit charge and restructuring costs was $112.8 million, up $4.7 million, or
4.4%, from third quarter 2012. The Adjusted EBITDA margin declined to 43.7%
from 45.9%.

By segment, Adjusted EBITDA for the Performance and Risk segment increased
$3.8 million, or 3.8%, to $104.2 million in third quarter 2013. The Adjusted
EBITDA margin for this segment fell to 45.6% from 48.9%. Adjusted EBITDA for
the Governance segment increased $0.9 million, or 11.6%, to $8.6 million and
the Adjusted EBITDA margin rose to 29.1% from 25.7% on improved operating
results. The increase in Governance segment Adjusted EBITDA was driven by a
reduction in severance, occupancy and information technology costs compared to
third quarter 2012.

See Table 13 titled “Reconciliation of Adjusted EBITDA to Net Income
(unaudited)” and “Notes Regarding the Use of Non-GAAP Financial Measures”
below.

Summary of Results for Nine Months Ended September 30, 2013 compared to Nine
Months Ended September 30, 2012

Operating Revenues – See Table 5

Total operating revenues for the nine months ended September 30, 2013 (“nine
months 2013”) increased $65.0 million, or 9.2%, to $768.0 million compared to
$703.1 million for the nine months ended September 30, 2012 (“nine months
2012”). Subscription revenues rose $56.7 million, or 9.7%, to $639.0 million,
while asset-based fees rose $7.5 million, or 7.3%, to $110.3 million.
Non-recurring revenues rose $0.7 million to $18.7 million. On an organic
basis, total operating revenues grew by 3.9%.

Performance and Risk segment revenues rose $65.4 million, or 10.7%, to $676.5
million for nine months 2013, and 3.7% on an organic basis. Index and ESG
products and risk management analytics revenues grew 18.2% and 5.4%,
respectively, in nine months 2013, or organically by 7.0% and 2.1%,
respectively. Portfolio management analytics revenues fell 8.7%. Energy and
other commodity analytics revenues increased $3.5 million, or 60.8%, primarily
as a result of a $5.2 million non-cash cumulative revenue reduction to correct
an error that was recorded in first quarter 2012. Excluding the impact of that
error, energy and commodity analytics revenues declined 15.2%.

Governance revenues were $91.5 million, down slightly versus nine months 2012.
On an organic basis, revenue grew by 5.1%.

Operating Expenses – See Table 7

Total operating expenses increased $36.5 million, or 8.1%, to $487.9 million
in nine months 2013 compared to nine months 2012 driven primarily by the
acquisitions of IPD and InvestorForce. The increase largely reflects increases
of $32.3 million, or 11.6%, in total compensation expenses and $6.0 million,
or 5.4%, in non-compensation expenses including the lease exit charge of $3.3
million incurred in third quarter 2012, and offset by a decline of $1.9
million, or 3.1%, in total depreciation and amortization expenses.

Other Expense (Income), Net

Other expense (income), net for nine months 2013 was $19.1 million, a decline
of $31.5 million from nine months 2012. Other expense (income), net includes
debt repayment and refinancing expenses of $20.6 million in nine months 2012.
Excluding the change in debt repayment and refinancing expenses, other expense
(income), net declined by $10.9 million in nine months 2013 primarily as a
result of a combination of a lower cost of debt and lower levels of
indebtedness.

Provision for Income Taxes

The provision for income tax expense was $85.8 million in nine months 2013, up
$14.4 million from nine months 2012. Year to date 2013 income tax expense
benefited from discrete items of $3.3 million primarily related to a reduction
in state taxes and the 2012 reinstatement of the research and development tax
credit. The effective tax rate was 32.8% in nine months 2013, versus 35.5% a
year ago.

Net Income and Earnings per Share – See Table 14

Net income increased $45.5 million, or 35.1%, to $175.3 million and the net
income margin increased to 22.8% from 18.5%. Diluted EPS rose 37.1% to $1.44
from $1.05.

Adjusted net income, which excludes the after-tax impact of amortization of
intangibles, non-recurring stock-based compensation expense, debt repayment
and refinancing expenses, the lease exit charge and restructuring costs
totaling $28.9 million, rose $27.2 million, or 15.4%, to $204.2 million.
Adjusted EPS, which excludes the after-tax, per diluted share impact of
amortization of intangibles, non-recurring stock-based compensation expense,
debt repayment and refinancing expenses, the lease exit charge and
restructuring costs totaling $0.24, rose 17.5% to $1.68 in nine months 2013.

See Table 14 titled “Reconciliation of Adjusted Net Income and Adjusted EPS to
Net Income and EPS (unaudited)” and “Notes Regarding the Use of Non-GAAP
Financial Measures” below.

Adjusted EBITDA – See Table 13

Adjusted EBITDA was $339.5 million, an increase of $21.6 million, or 6.8%,
from nine months 2012. Adjusted EBITDA margin fell to 44.2% from 45.2%.

By segment, Adjusted EBITDA for the Performance and Risk segment increased
$17.8 million, or 6.0%, to $315.0 million from nine months 2012. Adjusted
EBITDA margin declined to 46.6% in nine months 2013 from 48.6% in nine months
2012. Adjusted EBITDA for the Governance segment rose $3.7 million, or 18.0%,
to $24.5 million in nine months 2013. The Adjusted EBITDA margin for the
Governance segment was 26.8%, up from 22.6% in nine months 2012.

See Table 13 titled “Reconciliation of Adjusted EBITDA to Net Income
(unaudited)” and “Notes Regarding the Use of Non-GAAP Financial Measures”
below.

Key Operating Metrics – See Tables 10, 11, 12

Total Run Rate grew by $110.8 million, or 12.1%, to $1,025.8 million as of
September 30, 2013 compared to September 30, 2012. Total subscription Run Rate
grew by $78.4 million, or 9.8%, to $878.8 million as of September 30, 2013
compared to September 30, 2012. Changes in foreign currency rates over the
past twelve months negatively impacted subscription Run Rate by $2.0 million.
Relative to second quarter 2013, changes in foreign currency rates lifted
subscription Run Rate by $6.2 million. On an organic basis, total subscription
Run Rate grew by 4.4%.

Performance and Risk segment Run Rate grew by $113.8 million, or 14.2%, to
$912.9 million. On an organic basis, Performance and Risk Run Rate grew by
7.7%.

        Index and ESG products: Index and ESG subscription Run Rate grew by
        $67.3 million, or 23.0%, to $360.0 million. On an organic basis, index
  •  and ESG subscription Run Rate grew by 8.5%, driven by growth in equity
        index benchmark and data products. Changes in foreign currency rates
        increased Run Rate by $2.3 million on a sequential basis but had only
        a very modest negative effect versus third quarter 2012.
    
        Run Rate attributable to asset-based fees rose $32.4 million, or
        28.3%, to $147.0 million. The increase was primarily driven by inflows
        and higher market performance in ETFs linked to MSCI indices. The
        third quarter 2012 asset-based fee Run Rate excludes those Vanguard
        ETFs that later switched benchmarks.
    
        As of September 30, 2013, AUM in ETFs linked to MSCI indices were
        $302.6 billion, down $61.1 billion, or 16.8%, from September 30, 2012
        but up $32.9 billion, or 12.2%, from June 30, 2013. Of that $32.9
        billion sequential increase, market gains accounted for $20.2 billion
        and net inflows added an additional $12.7 billion.
    
        If the AUM in those Vanguard ETFs which transitioned earlier in 2013
        were excluded from the September 30, 2012 balance, AUM in MSCI-linked
        ETFs would have risen $70.0 billion, or 30.1%, compared to September
        30, 2012.
    
        Risk management analytics: Run Rate related to risk management
        analytics products increased $26.7 million, or 10.2%, to $288.5
        million. On an organic basis, risk management analytics Run Rate grew
    •   by 6.3%. MSCI benefited from solid growth in Run Rate from BarraOne,
        RiskManager, and Hedge Platform. Changes in foreign currency
        positively benefited Run Rate by $1.3 million versus third quarter
        2012 and by $2.5 million versus second quarter 2013.
    
        Portfolio management analytics: Run Rate related to portfolio
        management analytics products declined $11.0 million, or 9.5%, to
        $104.9 million. Year-over-year Run Rate was negatively impacted, in
    •   part, by product swaps totaling $2.4 million and by changes in foreign
        currency rates which lowered Run Rate by an additional $3.4 million.
        On a sequential basis, changes in foreign currency rates benefited
        portfolio management analytics Run Rate by $0.5 million.
    
        Energy and commodity analytics: Run Rate from energy and commodity
    •   analytics products declined to $12.5 million, down $1.5 million, or
        11.0%, from third quarter 2012.

Governance

Run Rate declined by $2.9 million, or 2.5%, to $112.9 million. On an organic
basis, Run Rate grew by 5.5%, reflecting strong growth in the Run Rate of
executive compensation data and analytics products and services. Changes in
foreign currency rates raised Governance Run Rate by $0.9 million versus
second quarter 2013.

Accelerated Share Repurchase Agreements

During third quarter 2013, MSCI settled the $100.0 million ASR it had entered
into on December 14, 2012, taking delivery of 0.8 million shares at that time.
In addition, MSCI entered into a second $100.0 million agreement on August 2,
2013 and received 1.9 million shares at that time. The repurchased shares will
be held in treasury. Additional shares may be delivered to MSCI at or prior to
maturity of the second ASR agreement, which MSCI anticipates will be no later
than December 2013.

Both of the ASR agreements were authorized pursuant to a $300.0 million share
repurchase program approved by MSCI’s Board of Directors in 2012. The
remaining $100.0 million balance of the authorization will be available for
utilization from time to time through 2014 atmanagement’s discretion.

Governance Update

MSCI has engaged Morgan Stanley to explore strategic alternatives for its
Governance business, including the potential divestiture or other separation
of the entire business. The products and services offered by MSCI’s Governance
business include governance research and recommendations, as well as
end-to-end proxy voting and distribution solutions, securities class-action
claims management, and reliable governance data, analysis and modeling tools.
The financial results of the Governance business are reported as the
Governance segment.

There can be no assurance that the process of exploring strategic alternatives
will result in a transaction or that any transaction will ultimately be
consummated. MSCI does not intend to disclose further developments with
respect to the process unless and until a definitive decision is reached with
respect to a specific transaction or the process is otherwise terminated or
concluded.

Conference Call Information

Investors will have the opportunity to listen to MSCI Inc.’s senior management
review third quarter 2013 results on Thursday, October 31, 2013 at 11:00 am
Eastern Time. To listen to the live event, visit the investor relations
section of MSCI's website, http://ir.msci.com/events.cfm, or dial
1-877-312-9206 within the United States. International callers dial
1-408-774-4001.

An audio recording of the conference call will be available on our website
approximately two hours after the conclusion of the live event and will be
accessible through November 2, 2013. To listen to the recording, visit
http://ir.msci.com/events.cfm, or dial 1-855-859-2056 (passcode: 75611658)
within the United States. International callers dial 1-404-537-3406 (passcode:
75611658).

About MSCI

MSCI Inc. is a leading provider of investment decision support tools to
investors globally, including asset managers, banks, hedge funds and pension
funds. MSCI products and services include indices, portfolio risk and
performance analytics, and governance tools.

The company’s flagship product offerings are: the MSCI indices with
approximately $7.5 trillion estimated to be benchmarked to them on a worldwide
basis^1; Barra multi-asset class factor models, portfolio risk and performance
analytics; RiskMetrics multi-asset class market and credit risk analytics; IPD
real estate information, indices and analytics; MSCI ESG (environmental,
social and governance) Research screening, analysis and ratings; ISS
governance research and outsourced proxy voting and reporting services; and
FEA valuation models and risk management software for the energy and
commodities markets. MSCI is headquartered in New York, with research and
commercial offices around the world. MSCI#IR

^1 As of March 31, 2013, as published by eVestment, Lipper and Bloomberg on
July 31, 2013

For further information on MSCI, please visit our website at www.msci.com.

Forward-Looking Statements

This earnings release may contain forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. These
statements relate to future events or to future financial performance and
involve known and unknown risks, uncertainties and other factors that may
cause our actual results, levels of activity, performance, or achievements to
be materially different from any future results, levels of activity,
performance, or achievements expressed or implied by these forward-looking
statements. In some cases, you can identify forward-looking statements by the
use of words such as “may,” “could,” “expect,” “intend,” “plan,” “seek,”
“anticipate,” “believe,” “estimate,” “predict,” “potential,” or “continue,” or
the negative of these terms or other comparable terminology. You should not
place undue reliance on forward-looking statements because they involve known
and unknown risks, uncertainties and other factors that are, in some cases,
beyond our control and that could materially affect actual results, levels of
activity, performance, or achievements.

Other factors that could materially affect actual results, levels of activity,
performance or achievements can be found in MSCI’s Annual Report on Form 10-K
for the fiscal year ended December 31, 2012 filed with the Securities and
Exchange Commission (“SEC”) on March 1, 2013, and in quarterly reports on Form
10-Q and current reports on Form 8-K filed with the SEC, and may also include
the risks and uncertainties associated with the process of evaluating
strategic alternatives, including whether any appropriate alternatives will be
identified and, if identified, whether any such alternative will result in a
consummated transaction. If any of these risks or uncertainties materialize,
or if our underlying assumptions prove to be incorrect, actual results may
vary significantly from what MSCI projected. Any forward-looking statement in
this release reflects MSCI’s current views with respect to future events and
is subject to these and other risks, uncertainties and assumptions relating to
MSCI’s operations, results of operations, growth strategy and liquidity. MSCI
assumes no obligation to publicly update or revise these forward-looking
statements for any reason, whether as a result of new information, future
events, or otherwise, except as required by law.

Website and Social Media Disclosure

MSCI uses its website and corporate Twitter account (@MSCI_Inc) as channels of
distribution of company information. The information we post through these
channels may be deemed material. Accordingly, investors should monitor these
channels, in addition to following our press releases, SEC filings and public
conference calls and webcasts. In addition, you may automatically receive
email alerts and other information about MSCI when you enroll your email
address by visiting the “Email Alert Subscription” section at
http://ir.msci.com/alerts.cfm?. The contents of MSCI’s website and social
media channels are not, however, incorporated by reference into this earnings
release.

Notes Regarding the Use of Non-GAAP Financial Measures

MSCI has presented supplemental non-GAAP financial measures as part of this
earnings release. A reconciliation is provided that reconciles each non-GAAP
financial measure with the most comparable GAAP measure. The presentation of
non-GAAP financial measures should not be considered as alternative measures
for the most directly comparable GAAP financial measures. These measures are
used by management to monitor the financial performance of the business,
inform business decision making and forecast future results.

Adjusted EBITDA is defined as net income before provision for income taxes,
other net expense and income, depreciation and amortization, non-recurring
stock-based compensation expense, the lease exit charge and restructuring
costs.

Adjusted net income and Adjusted EPS are defined as net income and EPS,
respectively, before provision for non-recurring stock-based compensation
expenses, amortization of intangible assets, restructuring costs, the lease
exit charge and the accelerated amortization or write-off of deferred
financing and debt discount costs as a result of debt repayment (debt
repayment and refinancing expenses), as well as for any related tax effects.

We believe that adjusting for the lease exit charge, restructuring costs and
debt repayment and refinancing expenses is useful to management and investors
because it allows for an evaluation of MSCI’s underlying operating
performance. Additionally, we believe that adjusting for non-recurring
stock-based compensation expenses, debt repayment and refinancing expenses and
depreciation and amortization may help investors compare our performance to
that of other companies in our industry as we do not believe that other
companies in our industry have as significant a portion of their operating
expenses represented by these items. We believe that the non-GAAP financial
measures presented in this earnings release facilitate meaningful
period-to-period comparisons and provide a baseline for the evaluation of
future results.

Adjusted EBITDA, Adjusted net income and Adjusted EPS are not defined in the
same manner by all companies and may not be comparable to other similarly
titled measures of other companies.

Table 2: MSCI Inc. Condensed Consolidated Statements of Income (unaudited)

                                                                         
                     Three Months Ended                              Nine Months Ended
                     September       September       June 30,        September       September
                     30,             30,                             30,             30,
In thousands,
except per         2013          2012          2013          2013          2012    
share data
                                                                                     
Operating            $ 258,238       $ 235,444       $ 257,898       $ 768,045       $ 703,061
revenues
                                                                                     
Operating
expenses
Cost of                80,040          68,350          83,359          243,584         213,884
services
Selling,
general and            65,380          62,973          57,612          184,623         176,011
administrative
Restructuring          -               -               -               -               (51     )
costs
Amortization
of intangible          14,448          15,959          14,509          43,443          47,877
assets
Depreciation
and
amortization
of property,
equipment and
leasehold             5,934         4,633         5,246         16,260        13,711  
improvements
Total
operating            $ 165,802      $ 151,915      $ 160,726      $ 487,910      $ 451,432 
expenses
                                                                                     
Operating            $ 92,436        $ 83,529        $ 97,172        $ 280,135       $ 251,629
income
Operating              35.8    %       35.5    %       37.7    %       36.5    %       35.8    %
margin
                                                                                     
Interest               (265    )       (252    )       (237    )       (770    )       (712    )
income
Interest               5,827           7,314           6,504           19,351          49,250
expense
Other expense         627           873           (354    )      497           1,997   
(income)
Other expenses       $ 6,189        $ 7,935        $ 5,913        $ 19,078       $ 50,535  
(income), net
                                                                                     
Income before          86,247          75,594          91,259          261,057         201,094
taxes
                                                                                     
Provision for         30,937        27,320        30,206        85,757        71,308  
income taxes
Net income           $ 55,310       $ 48,274       $ 61,053       $ 175,300      $ 129,786 
Net income             21.4    %       20.5    %       23.7    %       22.8    %       18.5    %
margin
                                                                                     
Earnings per
basic common         $ 0.46         $ 0.39         $ 0.50         $ 1.45         $ 1.06    
share
Earnings per
diluted common       $ 0.46         $ 0.39         $ 0.50         $ 1.44         $ 1.05    
share
                                                                                     
Weighted
average shares
outstanding
used
in computing
earnings per
share
                                                                                     
Basic                 119,607       122,261       121,149       120,497       122,016 
Diluted               120,578       123,450       122,069       121,446       123,287 
                                                                                     

Table 3: MSCI Inc. Selected Balance Sheet Items (unaudited)

                                                          
                                  As of
                                  September 30,     June 30,      December 31,
In thousands                   2013             2013          2012
                                                                  
Cash and cash equivalents         $   283,750       $ 334,701     $   183,309
Short-term investments                -               -               70,898
Accounts receivable, net of           179,920         160,101         153,557
allowances
                                                                  
Deferred revenue                  $   334,094       $ 347,470     $   308,022
Current maturities of                 54,130          43,118          43,093
long-term debt
Long-term debt, net of                753,285         775,072         811,623
current maturities
                                                                  

Table 4: Quarterly Operating Revenues by Product Category and Revenue Type
(unaudited)

                                                                 
                    Three Months Ended                        %Change from
                    September    September     June 30,      September     June 30,
                    30,           30,                         30,
In thousands     2013          2012          2013          2012          2013
Index and ESG
products
Subscriptions       $ 92,815      $ 73,894      $ 95,200      25.6   %      (2.5  %)
Asset-based          36,801       34,042       36,970      8.1    %      (0.5  %)
fees
Index and ESG
products              129,616       107,936       132,170     20.1   %      (1.9  %)
total
Risk
management            69,666        64,998        67,099      7.2    %      3.8   %
analytics
Portfolio
management            26,213        29,138        26,089      (10.0  %)     0.5   %
analytics
Energy and
commodity            3,113        3,317        3,065       (6.2   %)     1.6   %
analytics
                                                                            
Total
Performance         $ 228,608     $ 205,389     $ 228,423     11.3   %      0.1   %
and Risk
revenues
                                                                            
Total
Governance           29,630       30,055       29,475      (1.4   %)     0.5   %
revenues
                                                                            
Total
operating           $ 258,238     $ 235,444     $ 257,898     9.7    %      0.1   %
revenues
                                                                            
Recurring           $ 216,905     $ 197,591     $ 213,502     9.8    %      1.6   %
subscriptions
Asset-based           36,801        34,042        36,970      8.1    %      (0.5  %)
fees
Non-recurring        4,532        3,811        7,426       18.9   %      (39.0 %)
revenue
Total
operating           $ 258,238     $ 235,444     $ 257,898     9.7    %      0.1   %
revenues
                                                                            

Table 5: Nine Months Operating Revenues by Product Category and Revenue Type
(unaudited)

                                                          
                             Nine Months Ended                   % Change from
                             September 30,    September 30,     September 30,
In thousands              2013              2012             2012
Index and ESG products
Subscriptions                $   272,903       $  221,362        23.3     %
Asset-based fees                110,286         102,745       7.3      %
Index and ESG products           383,189          324,107        18.2     %
total
Risk management                  204,039          193,622        5.4      %
analytics
Portfolio management             79,948           87,527         (8.7     %)
analytics
Energy and commodity
analytics
Recurring Energy and             9,324            11,001         (15.2    %)
commodity analytics
Correction^1                    -               (5,203   )     n/m
Net energy and                  9,324           5,798         60.8     %
commodity analytics
                                                                 
Total Performance and        $   676,500       $  611,054        10.7     %
Risk revenues
                                                                 
Total Governance                91,545          92,007        (0.5     %)
revenues
                                                                 
Total operating              $   768,045       $  703,061       9.2      %
revenues
                                                                 
Recurring                    $   639,032       $  582,330        9.7      %
subscriptions
Asset-based fees                 110,286          102,745        7.3      %
Non-recurring revenue           18,727          17,986        4.1      %
Total operating              $   768,045       $  703,061       9.2      %
revenues
                                                                 

^1 In first quarter 2012, MSCI recorded a non-cash $5.2 million cumulative
revenue reduction to correct an error related to energy and commodity
analytics revenues previously reported prior to January 1, 2012. MSCI’s
previous policy had resulted in the immediate recognition of a substantial
portion of the revenue related to a majority of its contracts rather than
amortizing that revenue over the life of that contract, which is now the
method of recognition.

n/m = not meaningful


Table 6: Quarterly Operating Expense Detail (unaudited)

                                                                     
                       Three Months Ended                          % Change from
                       September     September     June 30,        September     June
                       30,           30,                           30,           30,
In thousands         2013          2012           2013         2012          2013
Cost of services
Compensation           $ 58,751      $ 50,111      $ 61,768        17.2  %       (4.9 %)
Non-recurring
stock based             -            267          -            n/m           n/m
compensation
Total                  $ 58,751      $ 50,378      $ 61,768        16.6  %       (4.9 %)
compensation
Non-compensation         21,289        16,448        21,734        29.4  %       (2.0 %)
Lease exit              -            1,524        (143    )     n/m           n/m
charge^1
Total                   21,289       17,972       21,591       18.5  %       (1.4 %)
non-compensation
Total cost of          $ 80,040      $ 68,350      $ 83,359        17.1  %       (4.0 %)
services
                                                                                 
Selling, general
and
administrative
Compensation           $ 44,495      $ 42,296      $ 39,890        5.2   %       11.5 %
Non-recurring
stock based             -            359          -            n/m           n/m
compensation
Total                  $ 44,495      $ 42,655      $ 39,890        4.3   %       11.5 %
compensation
Non-compensation         20,885        18,515        17,944        12.8  %       16.4 %
Lease exit              -            1,803        (222    )     n/m           n/m
charge^1
Total                   20,885       20,318       17,722       2.8   %       17.8 %
non-compensation
Total selling,
general and            $ 65,380      $ 62,973      $ 57,612        3.8   %       13.5 %
administrative
                                                                                 
Restructuring            -             -             -             n/m           n/m
costs
Amortization of
intangible               14,448        15,959        14,509        (9.5  %)      (0.4 %)
assets
Depreciation and
amortization of
property,
equipment and
leasehold               5,934        4,633        5,246        28.1  %       13.1 %
improvements
Total operating        $ 165,802     $ 151,915     $ 160,726      9.1   %       3.2  %
expenses
                                                                                 
                                                                          
Compensation           $ 103,246     $ 92,407      $ 101,658       11.7  %       1.6  %
Non-recurring
stock-based              -             626           -             n/m           n/m
compensation
Non-compensation         42,174        34,963        39,678        20.6  %       6.3  %
expenses
Lease exit               -             3,327         (365    )     n/m           n/m
charge^1
Restructuring            -             -             -             n/m           n/m
costs
Amortization of
intangible               14,448        15,959        14,509        (9.5  %)      (0.4 %)
assets
Depreciation and
amortization of
property,
equipment and
leasehold               5,934        4,633        5,246        28.1  %       13.1 %
improvements
Total operation        $ 165,802     $ 151,915     $ 160,726      9.1   %       3.2  %
expenses
                                                                                      

^1 Second quarter 2013 and third quarter 2012 included benefits of $0.4
million and charges of $3.3 million, respectively, associated with an
occupancy lease exit charge resulting from the consolidation of our New York
offices.

n/m = not meaningful


Table 7: Nine Months Operating Expense Detail (unaudited)

                                                         
                             Nine Months Ended                   % Change from
                             September 30,     September 30,     September 30,
In thousands                 2013            2012          2012
Cost of services
Compensation                 $  181,668        $  159,152        14.1     %
Non-recurring stock            -               629           (100.0   %)
based compensation
Total compensation           $  181,668        $  159,781        13.7     %
Non-compensation                62,059            52,579         18.0     %
Lease exit charge^1            (143     )       1,524         n/m
Total non-compensation         61,916          54,103        14.4     %
Total cost of services       $  243,584        $  213,884        13.9     %
                                                                 
Selling, general and
administrative
Compensation                 $  130,041        $  118,813        9.5      %
Non-recurring stock            -               771           (100.0   %)
based compensation
Total compensation           $  130,041        $  119,584        8.7      %
Non-compensation                54,804            54,624         0.3      %
Lease exit charge^1            (222     )       1,803         n/m
Total non-compensation         54,582          56,427        (3.3     %)
Total selling, general       $  184,623        $  176,011        4.9      %
and administrative
                                                                 
Restructuring costs             -                 (51      )     (100.0   %)
Amortization of                 43,443            47,877         (9.3     %)
intangible assets
Depreciation and
amortization of
property,
equipment and                  16,260          13,711        18.6     %
leasehold improvements
Total operating              $  487,910       $  451,432       8.1      %
expenses
                                                                 
                                                            
Compensation                 $  311,709        $  277,965        12.1     %
Non-recurring
stock-based                     -                 1,400          (100.0   %)
compensation
Non-compensation                116,863           107,203        9.0      %
expenses
Lease exit charge^1             (365     )        3,327          n/m
Restructuring costs             -                 (51      )     (100.0   %)
Amortization of                 43,443            47,877         (9.3     %)
intangible assets
Depreciation and
amortization of
property,
equipment and                  16,260          13,711        18.6     %
leasehold improvements
Total operation             $  487,910       $  451,432       8.1      %
expenses
                                                                          

^1 Nine months ended 2013 and 2012 included benefits of $0.4 million and
charges of $3.3 million, respectively, associated with an occupancy lease exit
resulting from the consolidation of our New York offices.

n/m = not meaningful


Table 8: Summary Quarterly Segment Information (unaudited)

                                                                    
                  Three Months Ended                              % Change from
                  September       September       June 30,        September     June
                  30,             30,                             30,           30,
In               2013          2012          2013         2012         2013
thousands
                                                                                
Revenues:
Performance       $ 228,608       $ 205,389       $ 228,423       11.3  %       0.1  %
and Risk
Governance         29,630        30,055        29,475       (1.4  %)      0.5  %
Total
Operating         $ 258,238       $ 235,444       $ 257,898       9.7   %       0.1  %
revenues
                                                                                
Operating
Income:
Performance         88,172          80,472          93,574        9.6   %       (5.8 %)
and Risk
Margin              38.6    %       39.2    %       41.0    %
Governance          4,264           3,057           3,598         39.5  %       18.5 %
Margin              14.4    %       10.2    %       12.2    %
Total
Operating         $ 92,436        $ 83,529        $ 97,172        10.7  %       (4.9 %)
Income
Margin              35.8    %       35.5    %       37.7    %
                                                                                
Adjusted
EBITDA:
Performance         104,210         100,362         108,816       3.8   %       (4.2 %)
and Risk
Margin              45.6    %       48.9    %       47.6    %
Governance          8,608           7,712           7,746         11.6  %       11.1 %
Margin              29.1    %       25.7    %       26.3    %
Total
Adjusted          $ 112,818       $ 108,074       $ 116,562       4.4   %       (3.2 %)
EBITDA
Margin              43.7    %       45.9    %       45.2    %
                                                                                

Table 9: Summary Nine Months Segment Information (unaudited)

                                                         
                             Nine Months Ended                   % Change from
                             September 30,     September 30,     September 30,
In thousands                 2013            2012          2012
                                                                 
Revenues:
Performance and Risk         $  676,500        $  611,054        10.7    %
Governance                     91,545          92,007        (0.5    %)
Total Operating              $  768,045        $  703,061        9.2     %
revenues
                                                                 
Operating Income:
Performance and Risk            268,445           243,927        10.1    %
Margin                          39.7     %        39.9     %
Governance                      11,690            7,702          51.8    %
Margin                          12.8     %        8.4      %
Total Operating Income       $  280,135        $  251,629        11.3    %
Margin                          36.5     %        35.8     %
                                                                 
Adjusted EBITDA:
Performance and Risk            314,980           297,142        6.0     %
Margin                          46.6     %        48.6     %
Governance                      24,493            20,751         18.0    %
Margin                          26.8     %        22.6     %
Total Adjusted EBITDA        $  339,473        $  317,893        6.8     %
Margin                          44.2     %        45.2     %
                                                                 

Table 10: Key Operating Metrics ^  (unaudited)

                                                                        
                     As of                                             % Change from
                     September 30,     September       June 30,        September     June 30,
                                       30,                             30,
Dollars in          2013            2012          2013         2012          2013
thousands
                                                                                     
Run Rates^1
Index and ESG
products
  Subscription       $ 360,042         $ 292,787       $ 350,833       23.0   %      2.6   %
  Asset-based         146,979         114,576       131,716      28.3   %      11.6  %
  fees
Index and ESG          507,021           407,363         482,549       24.5   %      5.1   %
products total
Risk
management             288,452           261,776         281,022       10.2   %      2.6   %
analytics
Portfolio
management             104,938           115,958         104,524       (9.5   %)     0.4   %
analytics
Energy and
commodity             12,493          14,040        12,794       (11.0  %)     (2.4  %)
analytics
  Total
  Performance          912,904           799,137         880,889       14.2   %      3.6   %
  and Risk
                                                                                     
  Governance          112,911         115,840       111,686      (2.5   %)     1.1   %
Total Run Rate       $ 1,025,815      $ 914,977      $ 992,575      12.1   %      3.3   %
                                                                                     
Subscription         $ 878,836         $ 800,401       $ 860,859       9.8    %      2.1   %
total
Asset-based           146,979         114,576       131,716      28.3   %      11.6  %
fees total
Total Run Rate       $ 1,025,815      $ 914,977      $ 992,575      12.1   %      3.3   %
                                                                                     
New Recurring
Subscription         $ 30,157          $ 27,164        $ 31,133        11.0   %      (3.1  %)
Sales
Subscription          (16,458   )      (19,134 )      (16,082 )     (14.0  %)     2.3   %
Cancellations
  Net New
  Recurring          $ 13,699         $ 8,030        $ 15,051       70.6   %      (9.0  %)
  Subscription
  Sales
Non-recurring        $ 4,359          $ 3,878        $ 6,664        12.4   %      (34.6 %)
sales
                                                                                     
Employees              3,123             2,416           2,957         29.3   %      5.6   %
% Employees by
location
Developed              55        %       56      %       56      %
Market Centers
Emerging               45        %       44      %       44      %
Market Centers
                                                                                     

^1 The Run Rate at a particular point in time represents the forward-looking
revenues for the next 12 months from all subscriptions and investment product
licenses we currently provide to our clients under renewable contracts or
agreements assuming all contracts or agreements that come up for renewal are
renewed and assuming then-current currency exchange rates. For any license
where fees are linked to an investment product’s assets or trading volume, the
Run Rate calculation reflects an annualization of the most recent periodic fee
earned under such license or subscription. The Run Rate for IPD products was
approximated using the trailing 12 months of revenues primarily adjusted for
estimates for non-recurring sales, new sales and cancellations. The Run Rate
does not include fees associated with “one-time” and other non-recurring
transactions. In addition, we remove from the Run Rate the fees associated
with any subscription or investment product license agreement with respect to
which we have received a notice of termination or non-renewal during the
period and determined that such notice evidences the client’s final decision
to terminate or not renew the applicable subscription or agreement, even
though such notice is not effective until a later date.


Table 11: ETF Assets Linked to MSCI Indices^1 (unaudited)

                                                                                                                       
                                Three Months Ended 2012                              Three Months Ended 2013                   Nine Months Ended
In Billions                   March     June        September   December     March       June        September     September   September
                                                                                                                               2012          2013
                                                                                                                                
Beginning Period AUM in
ETFs linked to MSCI             $ 301.6     $ 354.7       $  327.4      $  363.7     $ 402.3       $ 357.3       $  269.7      $  301.6      $ 402.3
Indices
Cash Inflow/Outflow^2             15.2        0.3            15.2          25.9        (61.0 )       (74.4 )        12.7          30.7         (122.7 )
Appreciation/Depreciation        37.9     (27.6 )     21.1       12.7       16.0      (13.2 )     20.2         31.4      23.0   
Period End AUM in ETFs
linked to
MSCI Indices                    $ 354.7     $ 327.4       $  363.7      $  402.3     $ 357.3       $ 269.7       $  302.6      $  363.7      $ 302.6
                                                                                                                                             
Period Average AUM in
ETFs linked to
MSCI Indices                    $ 341.0     $ 331.6       $  344.7      $  376.6     $ 369.0       $ 324.1       $  286.2      $  339.2      $ 326.4
                                                                                                                                                      

^1 ETF assets under management calculation methodology is ETF net asset value
multiplied by shares outstanding. Source: Bloomberg and MSCI
^2 Cash Inflow/Outflow for the first and second quarter of 2013 includes the
migration of $82.8 billion of AUM in 9 Vanguard ETFs and $74.8 billion of AUM
in 13 Vanguard ETFs, respectively, that transitioned to other indices during
each quarter.


Table 12: Supplemental Operating Metrics (unaudited)

                                                                                                                                
Sales & Cancellations
                    Three Months Ended 2012                                         Three Months Ended 2013                         Nine Months Ended
In thousands      March         June          September     December        March         June          September       September     September
                                                                                                                                    2012            2013
New Recurring
Subscription        $ 33,506        $ 28,453        $ 27,164        $ 29,742        $ 30,928        $ 31,133        $ 30,157        $ 89,123        $ 92,218
Sales
Subscription         (13,498 )    (17,229 )    (19,134 )    (28,725 )      (16,691 )    (16,082 )    (16,458 )      (49,861 )    (49,231 )
Cancellations
Net New
Recurring           $ 20,008     $ 11,224     $ 8,030      $ 1,017        $ 14,237     $ 15,051     $ 13,699       $ 39,262     $ 42,987  
Subscription
Sales
                                                                                                                                                    
Non-recurring        9,338       5,099       3,878       7,443         8,935       6,664       4,359         18,315      19,958  
sales
Total Sales         $ 42,844     $ 33,552     $ 31,042     $ 37,185       $ 39,863     $ 37,797     $ 34,516       $ 107,438    $ 112,176 
                                                                                                                                                    
                                                                                                                                                    
Aggregate & Core Retention Rates
                    Three Months Ended 2012                                         Three Months Ended 2013                         Nine Months Ended
                 March         June          September     December        March         June          September       September     September
                                                                                                                                    2012            2013
Aggregate
Retention
Rate^1
Index and ESG         94.5    %       94.9    %       94.0    %       90.4    %       95.0    %       94.0    %       94.7    %       94.4    %       94.6    %
products
Risk
management            93.9    %       90.0    %       88.5    %       84.4    %       93.5    %       92.5    %       92.3    %       90.7    %       92.8    %
analytics
Portfolio
management            91.9    %       84.2    %       84.9    %       78.0    %       81.7    %       87.0    %       89.1    %       87.0    %       85.9    %
analytics
Energy &
commodity             90.2    %       85.5    %       76.6    %       60.4    %       90.1    %       86.0    %       80.2    %       84.1    %       85.4    %
analytics
                                                                                                                                                    
Total
Performance           93.7    %       90.9    %       89.8    %       85.2    %       92.4    %       92.3    %       92.7    %       91.4    %       92.4    %
and Risk
                                                                                                                                                    
Total                88.7    %    92.1    %    91.1    %    83.6    %      90.0    %    92.9    %    88.5    %      90.7    %    90.5    %
Governance
                                                                                                                                                    
Total
Aggregate            93.0    %    91.0    %    90.0    %    84.9    %      92.1    %    92.3    %    92.2    %      91.3    %    92.2    %
Retention
Rate
                                                                                                                                                    
Core
Retention
Rate^1
Index and ESG         94.6    %       95.0    %       94.0    %       90.5    %       95.0    %       94.1    %       94.8    %       94.5    %       94.7    %
products
Risk
management            94.0    %       92.0    %       89.3    %       84.4    %       93.9    %       93.1    %       92.3    %       91.6    %       93.1    %
analytics
Portfolio
management            92.2    %       87.0    %       86.5    %       83.6    %       82.8    %       87.5    %       90.3    %       88.5    %       86.9    %
analytics
Energy &
commodity             90.7    %       85.5    %       77.1    %       60.4    %       90.1    %       86.0    %       80.2    %       84.4    %       85.4    %
analytics
                                                                                                                                                    
Total
Performance           93.8    %       92.2    %       90.5    %       86.2    %       92.7    %       92.6    %       92.9    %       92.1    %       92.7    %
and Risk
                                                                                                                                                    
Total                88.7    %    92.2    %    91.2    %    83.8    %      90.2    %    92.9    %    88.5    %      90.7    %    90.5    %
Governance
                                                                                                                                                    
Total Core
Retention            93.1    %    92.2    %    90.6    %    85.9    %      92.4    %    92.6    %    92.4    %      91.9    %    92.5    %
Rate
                                                                                                                                                              

^1 The Aggregate Retention Rates are calculated by annualizing the
cancellations for which we have received a notice of termination or
non-renewal during the quarter and we have determined that such notice
evidences the client’s final decision to terminate or not renew the applicable
subscription or 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 year to calculate a cancellation
rate. This cancellation rate is then subtracted from 100% to derive the
annualized Retention Rate for the quarter. The Aggregate Retention Rate is
computed on a product-by-product basis. Therefore, if a client reduces the
number of products to which it subscribes or switches between our products, we
treat it as a cancellation. In addition, we treat any reduction in fees
resulting from renegotiated contracts as a cancellation in the calculation to
the extent of the reduction. For the calculation of the Core Retention Rates
the same methodology is used except the amount of cancellations in the quarter
is reduced by the amount of product swaps.


Table 13: Reconciliation of Adjusted EBITDA to Net Income (unaudited)

                                                                                            
                              Three Months Ended September 30, 2013          Three Months Ended September 30, 2012
In thousands                Performance   Governance   Total           Performance   Governance   Total
                              and Risk                                       and Risk
Net Income                                                   $ 55,310                                       $ 48,274
Plus:     Provision for                                        30,937                                         27,320
          income taxes
Plus:     Other expense                                 6,189                                  7,935   
          (income), net
Operating income              $ 88,172     $ 4,264     $ 92,436       $ 80,472     $ 3,057     $ 83,529  
          Non-recurring
Plus:     stock-based           -               -              -               572             54             626
          compensation
          Depreciation
          and
          amortization
Plus:     of property,          4,845           1,089          5,934           3,755           878            4,633
          equipment and
          leasehold
          improvements
          Amortization
Plus:     of intangible         11,193          3,255          14,448          12,638          3,321          15,959
          assets
Plus:     Lease exit            -               -              -               2,925           402            3,327
          charge
Plus:     Restructuring        -           -          -             -           -          -       
          costs
Adjusted EBITDA               $ 104,210    $ 8,608     $ 112,818      $ 100,362    $ 7,712     $ 108,074 
                                                                                                            
                                                                                                            
                                                                                                            
                              Nine Months Ended September 30, 2013           Nine Months Ended September 30, 2012
In thousands                Performance   Governance   Total           Performance   Governance   Total
                              and Risk                                       and Risk
Net Income                                                   $ 175,300                                      $ 129,786
Plus:     Provision for                                        85,757                                         71,308
          income taxes
Plus:     Other expense                                 19,078                                 50,535  
          (income), net
Operating income              $ 268,445    $ 11,690    $ 280,135      $ 243,927    $ 7,702     $ 251,629 
          Non-recurring
Plus:     stock-based           -               -              -               1,269           131            1,400
          compensation
          Depreciation
          and
          amortization
Plus:     of property,          13,263          2,997          16,260          11,137          2,574          13,711
          equipment and
          leasehold
          improvements
          Amortization
Plus:     of intangible         33,580          9,863          43,443          37,916          9,961          47,877
          assets
Plus:     Lease exit            (308    )       (57    )       (365    )       2,925           402            3,327
          charge
Plus:     Restructuring        -           -          -             (32     )    (19    )    (51     )
          costs
Adjusted EBITDA               $ 314,980    $ 24,493    $ 339,473      $ 297,142    $ 20,751    $ 317,893 
                                                                                                            

Table 14: Reconciliation of Adjusted Net Income and Adjusted EPS to Net Income
and EPS (unaudited)

                                                                 
                              Three Months Ended                           Nine Months Ended
                              September    September      June 30,       September     September
                              30,            30,                           30,             30,
In thousands, except         2013         2012         2013         2013          2012    
per share data
Net Income                    $ 55,310       $ 48,274       $ 61,053       $ 175,300       $ 129,786
          Non-recurring
Plus:     stock-based           -              626            -              -               1,400
          compensation
          Amortization
Plus:     of intangible         14,448         15,959         14,509         43,443          47,877
          assets
          Debt
Plus:     repayment and         -              -              -              -               20,639
          refinancing
          expenses
Plus:     Lease exit            -              3,327          (365   )       (365    )       3,327
          charge
Plus:     Restructuring         -              -              -              -               (51     )
          costs
Less:     Income tax            (5,172 )       (7,280 )       (4,711 )       (14,151 )       (25,954 )
          effect
                                                                                       
Adjusted net income           $ 64,586      $ 60,906      $ 70,486      $ 204,227      $ 177,024 
                                                                                           
Diluted EPS                   $ 0.46         $ 0.39         $ 0.50         $ 1.44          $ 1.05
          Non-recurring
Plus:     stock-based           -              0.01           -              -               0.01
          compensation
          Amortization
Plus:     of intangible         0.12           0.13           0.12           0.36            0.39
          assets
          Debt
Plus:     repayment and         -              -              -              -               0.17
          refinancing
          expenses
Plus:     Lease exit            -              0.03           -              -               0.03
          charge
Plus:     Restructuring         -              -              -              -               -
          costs
Less:     Income tax           (0.05  )      (0.07  )      (0.04  )      (0.12   )      (0.22   )
          effect
Adjusted EPS                  $ 0.53        $ 0.49        $ 0.58        $ 1.68         $ 1.43    

Contact:

MSCI Inc.:
W. Edings Thibault, MSCI, New York +1-212-804-5273
or
Media Inquiries:
Jo Morgan, MSCI, London +44.20.7618.2224
W. Edings Thibault, MSCI, New York +1-212-804-5273
Sally Todd | Christian Pickel, MHP Communications, London +44.20.3128.8100
 
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