MSCI Q1 revenue misses estimates due to subscription cancellations

(Reuters) -MSCI's first-quarter revenue fell short of market expectations on Tuesday, hit by subscription cancellations and a contraction in margins due to one-time expenses, sending shares of the investment tools provider down 8%.

The company's operating revenue rose nearly 15% to $680 million for the three months ended March 31, lower than analysts' estimate of $684 million, according to LSEG data.

"Elevated cancels reflected a concentration of unusual client events, including a large merger among our banking clients," CEO Henry A. Fernandez said.

The majority of cancellations in the first quarter of 2024 were due to corporate events, including closure of organizations, funds being shut and restructuring or downsizing, the company said.

"We are managing through these pressures and do not expect this level of cancels to continue," Fernandez added.

Still, MSCI earned $3.52 a share excluding one-off charges, higher than estimates of $3.45.

Recurring subscriptions in its index segment -- agreements where clients pay regular fees to access MSCI's products over a specified period -- rose 8% to $213 million, primarily due to strong growth from market-cap weighted and custom index products and special packages.

Companies such as MSCI benefit from market swings as investors rush to rebalance portfolios and hedge against risks.

Asset-based fees in the segment rose about 13% to $150.3 million.

The global index provider also offers clients subscriptions for information, data and tools to help them evaluate and invest in diverse global markets.

Meanwhile, new recurring sales in analytics led to the unit's highest first quarter in a decade with nearly 12% growth in operating revenue.

(Reporting by Mehnaz Yasmin in Bengaluru; Editing by Krishna Chandra Eluri)