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Segment Information
3 Months Ended
Mar. 31, 2019
Segment Reporting [Abstract]  
Segment Information

11. SEGMENT INFORMATION

ASC Subtopic 280-10, “Segment Reporting,” establishes standards for reporting information about operating segments. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or CODM, in deciding how to allocate resources and assess performance. MSCI’s Chief Executive Officer and its President, who are together considered to be its CODM, review financial information presented on an operating segment basis for purposes of making operating decisions and assessing financial performance.

The CODM measures and evaluates reportable segments based on segment operating revenues as well as Adjusted EBITDA and other measures. The Company excludes the following items from segment Adjusted EBITDA: provision for income taxes, other expense (income), net, depreciation and amortization of property, equipment and leasehold improvements, amortization of intangible assets and, at times, certain other transactions or adjustments, including the impact related to the vesting of the 2016 multi-year MSUs, that the CODM does not consider for the purposes of making decisions to allocate resources among segments or to assess segment performance. Although these amounts are excluded from segment Adjusted EBITDA, they are included in reported consolidated net income and are included in the reconciliation that follows.  

The Company’s computation of segment Adjusted EBITDA may not be comparable to other similarly titled measures computed by other companies because all companies do not calculate segment Adjusted EBITDA in the same fashion.

Operating revenues and expenses directly associated with each segment are included in determining its operating results. Other expenses that are not directly attributable to a particular segment are based upon allocation methodologies, including time estimates, revenue, headcount, sales targets, data center consumption and other relevant usage measures. Due to the integrated structure of its business, certain costs incurred by one segment may benefit other segments. A segment may use the content and data produced by another segment without incurring an arm’s-length intersegment charge.

The CODM does not review any information regarding total assets on an operating segment basis. Operating segments do not record intersegment revenue, and, accordingly, there is none to be reported. The accounting policies for segment reporting are the same as for MSCI as a whole.

The Company has four operating segments: Index, Analytics, ESG and Real Estate.

The Index operating segment is primarily a provider of equity indexes. The indexes are used in many areas of the investment process, including index-linked product creation and performance benchmarking, as well as portfolio construction and rebalancing and asset allocation.

The Analytics operating segment offers risk management, performance attribution and portfolio management content, applications and services that provide clients with an integrated view of risk and return and an analysis of market, credit, liquidity and counterparty risk across all major asset classes, spanning short, medium and long-term time horizons. Clients access Analytics content through MSCI’s own proprietary applications and application programming interfaces, or through third party applications or directly on their own platforms.   The Analytics operating segment also provides various managed services to help clients operate more efficiently as well as address the needs of certain specialized areas of the investment community by providing a reporting service and performance reporting tools to institutional consultants and investors in hedge funds.

The ESG operating segment offers products and services that help institutional investors understand how ESG factors can impact the long-term risk of their investments. In addition, MSCI ESG Research data and ratings are used in the construction of equity and fixed income indexes to help institutional investors more effectively benchmark ESG investment performance, issue index-based investment products, as well as manage, measure and report on ESG mandates.

The Real Estate operating segment includes research, reporting, market data and benchmarking offerings that provide real estate performance analysis for funds, investors and managers. Real Estate performance and risk analytics range from enterprise-wide to property-specific analysis. The Real Estate operating segment also provides business intelligence to real estate owners, managers, developers and brokers worldwide.

The operating segments of ESG and Real Estate do not individually meet the segment reporting thresholds and have been combined and presented as part of All Other for disclosure purposes.

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

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2019

 

 

2018

 

 

 

(in thousands)

 

Operating revenues

 

 

 

 

 

 

 

 

Index

 

$

214,773

 

 

$

201,914

 

Analytics

 

 

121,435

 

 

 

118,987

 

All Other

 

 

35,173

 

 

 

30,415

 

Total

 

$

371,381

 

 

$

351,316

 

 

The following table presents segment profitability and a reconciliation to net income for the periods indicated:

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2019

 

 

2018

 

 

 

(in thousands)

 

Index Adjusted EBITDA

 

$

152,211

 

 

$

145,930

 

Analytics Adjusted EBITDA

 

 

36,398

 

 

 

33,593

 

All Other Adjusted EBITDA

 

 

9,098

 

 

 

7,186

 

Total operating segment profitability

 

 

197,707

 

 

 

186,709

 

2016 multi-year MSUs grant payroll tax expense

 

 

15,389

 

 

 

 

Amortization of intangible assets

 

 

11,793

 

 

 

11,338

 

Depreciation and amortization of property,

   equipment and leasehold improvements

 

 

7,850

 

 

 

8,205

 

Operating income

 

 

162,675

 

 

 

167,166

 

Other expense (income), net

 

 

34,383

 

 

 

27,728

 

Provision for income taxes

 

 

(49,900

)

 

 

24,346

 

Net income

 

$

178,192

 

 

$

115,092

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue by geography is based on the shipping address of the ultimate customer utilizing the product. The following table presents revenue by geographic area for the periods indicated:

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

 

2019

 

 

 

2018

 

 

 

(in thousands)

 

Operating revenues

 

 

 

 

 

 

 

 

Americas:

 

 

 

 

 

 

 

 

United States

 

$

166,186

 

 

$

164,835

 

Other

 

 

15,983

 

 

 

14,883

 

Total Americas

 

 

182,169

 

 

 

179,718

 

 

 

 

 

 

 

 

 

 

Europe, the Middle East and Africa ("EMEA"):

 

 

 

 

 

 

 

 

United Kingdom

 

 

55,207

 

 

 

52,933

 

Other

 

 

76,635

 

 

 

72,687

 

Total EMEA

 

 

131,842

 

 

 

125,620

 

 

 

 

 

 

 

 

 

 

Asia & Australia:

 

 

 

 

 

 

 

 

Japan

 

 

17,948

 

 

 

15,182

 

Other

 

 

39,422

 

 

 

30,796

 

Total Asia & Australia

 

 

57,370

 

 

 

45,978

 

 

 

 

 

 

 

 

 

 

Total

 

$

371,381

 

 

$

351,316

 

 

Long-lived assets consist of property, equipment, leasehold improvements, goodwill and intangible assets, net of accumulated depreciation and amortization. The following table presents long-lived assets by geographic area on the dates indicated:

 

 

 

As of

 

 

 

March 31,

 

 

December 31,

 

 

 

2019

 

 

2018

 

 

 

(in thousands)

 

Long-lived assets

 

 

 

 

 

 

 

 

Americas:

 

 

 

 

 

 

 

 

United States

 

$

1,793,331

 

 

$

1,803,321

 

Other

 

 

6,144

 

 

 

6,560

 

Total Americas

 

 

1,799,475

 

 

 

1,809,881

 

 

 

 

 

 

 

 

 

 

EMEA:

 

 

 

 

 

 

 

 

United Kingdom

 

 

81,506

 

 

 

80,039

 

Other

 

 

19,028

 

 

 

19,369

 

Total EMEA

 

 

100,534

 

 

 

99,408

 

 

 

 

 

 

 

 

 

 

Asia & Australia:

 

 

 

 

 

 

 

 

Japan

 

 

405

 

 

 

411

 

Other

 

 

7,210

 

 

 

7,741

 

Total Asia & Australia

 

 

7,615

 

 

 

8,152

 

 

 

 

 

 

 

 

 

 

Total

 

$

1,907,624

 

 

$

1,917,441