Forward-Looking Statements

Transcription

1 Forward-Looking Statements The following information contains, or may be deemed to contain, forwardlooking statements. By their nature, forward-looking statements involve risks, assumptions and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. The future results of the Company may vary from the results and performance expressed in, or implied by, the following forward-looking statements, possibly to a material degree. For discussion of some of the important factors that could cause the Company s results and performance to differ from those expressed in, or implied by, the following forward-looking statements, please refer to the prospectus delivered to you, in particular the Risk Factors section thereof. The Company undertakes no obligation to update or revise any forward-looking statements. 1

2 Company Overview 2

3 A Global Leader in Helping Institutions Understand and Manage Financial Risk RiskMetrics Group RiskMetrics ISS (52% of Revenues) (48% of Revenues) The standard for measuring multi-asset class financial risk The standard in corporate governance best practices 3

4 Leading Risk and Governance Product Families RiskManager is the leading mark-to-market risk system for multi-asset class investors Risk business also includes Credit Risk, Wealth Management and Performance Attribution products ISS Governance is the largest fullyoutsourced, end-to-end proxy research and voting solution provider Most products are sold on annual, volumebased subscription models Almost no revenues from AUM or seat fees RiskMetrics revenue by product family 4

5 We Serve the World s Financial Community We Primarily Serve Global Asset Managers Public Pension Funds Banks Alternative Investment Funds Insurers Clients Look to Us For Risk measurement, modeling and reporting Transparency, expertise and market-accepted best practices Satisfying regulation and compliance requirements Outsourced technology solutions for non-investment-related functions 5

6 Blue Chip Customer Base/No Concentration 2,200 financial institutions and over 950 corporations and professional service organizations Strong penetration in specific segments with significant opportunity remaining Over 25% of the top 100 US hedge funds use RiskManager Average RiskManager hedge fund client has $5.5 billion in AUM 53% of US asset managers and 31% of European asset managers over $10 billion in AUM use our Governance Services Market penetration for our Risk products among asset managers in the US and Europe is below 20% Revenue by Client Type No client contract represents more than 1.0% of total ACV Top 20 clients represent 12.5% of total ACV Over half of new ACV comes from existing clients *As of 6/30/09 Our clients represent over $35 trillion in invested assets 6

7 Global Reach Americas 61% of revenues (1) Asia/Australia 5% of revenues (1) Europe/Middle East/Africa 34% of revenues (1) Revenue by Geography (1) Risk Governance 20 offices - New York headquarters Americas 45%76% Over 1,100 full-time employees in 11 countries EMEA 48%20% Asia / Australia 7% 4% Research and operations centers on each continent covering securities in 200 countries 184 sales people and account managers across key financial markets, including New York, Boston, Chicago, San Francisco, London, Paris, Frankfurt, Tokyo, Singapore and Melbourne International revenues grew 10% in six months ended 09 over 08, faster than domestic growth. (1) Based on revenue for the six months ended June 30,

8 Significant Scale and Leading Brands Brand Market-Defining Brands Technology Services RiskMetrics analytics are common standard of measurement ISS is the global leader in proxy services, including proxy research and voting Data Research Analytics Significant Scale and Coverage Model over 4 million global securities daily spanning 750,000 time series Proxy research coverage spans 42,000 shareholder meetings across 100 countries Over 999 million shares voted via our voting platform Sustainability ratings and analyses on over 2,000 companies worldwide Forensic accounting research on 10,000+global companies Provide compensation modeling and governance tools to over 74% of S&P500 8

9 Opportunities for Growth Sales of Existing Products to Existing Clients Over half of new sales is to existing clients Over $7 million in 2008 sales generated by cross selling of solutions to both Risk and ISS existing client base Opportunity to sell ISS products to international Risk clients and Risk products to domestic ISS asset management clients Continue to Expand Client Base Very early in the development of a separate risk management function at most institutions Largest competitor is in-house departments Significant international expansion opportunities Enhance and Extend Products and Services Broader outsourced solutions (performance attribution) Integrated Risk products Selectively pursue acquisitions 9

10 Investing in Our Businesses New Proxy Voting Platform New technology solution will drive significant operating efficiencies Platform to grow ISS margins Scheduled to launch in early December Environmental, Social & Governance (ESG) Acquired Innovest, a leading provider of sustainability research and ratings to the institutional investment community (Feb 09) Approximately $14.8 million in net cash use Developing scale and leadership in the business Performance Attribution Acquired Applied4, a specialist provider of performance measurement and attribution solutions (Oct. 08) Building capabilities on top of our existing technology architecture, working with several large beta clients this year No significant revenues expected in

11 Second Quarter 2009 Market Environment 11

12 2009 Market Dynamics Asset Management and Banking Segments Remained Stable Segments represent 74% of total revenue and are stickiest due to regulatory regimes in U.S. and Europe Stable renewal rates of 88.5% as of June 30, 2009 versus 92.0% in the comparable 2008 period Renewal rate for Risk business was 91.5% and Governance business was 87.3% as of June 30, 2009 Year-to-Date Business Challenges Hedge Funds, CFRA and Proxy Pricing Higher than historical non-renewal rates for Risk business due to difficulties with start-up hedge funds and increased consolidations Hedge fund segment represents 15% of total revenues Governance business experiencing price pressures as a result of client budget constraints, lower AUM and bundled ballots Experiencing significantly lower than normal renewal rates in CFRA business due to hedge fund industry exposure and more discretionary nature of CFRA research Appreciation of the dollar versus the euro *As of 6/30/09 12

13 Market Impact on Renewal Rates Renewal Rate Excluding: 1. Risk Hedge Funds 2. CFRA 3. Proxy Down Sells H H H 2009 Renewal Rate Impact From: 1. Risk Hedge Funds 2. CFRA 3. Proxy Down Sells -1.0% -2.0% -4.3% -2.7% -5.0% -8.0% Actual Renewal Rate 88.2% 91.4% 86.3% 89.9% 84.4% 80.8% 13

14 Slowing New Sales Due to Market Conditions

15 Resulting in Flattening ACV 22% Growth from 2006 to % Decrease last year

16 Remaining 2009 Outlook Key Business Factors Q3 renewal rate similar to year-to-date levels with improved renewal rate expected in Q4 Growing new sales pipeline, especially in Risk, expected to improve second half 2009 sales Scalable business model and effective cost control has enabled EBITDA growth and expanding margins Risk Business Growing new sales pipeline with new sales accelerating in Q3 and Q4 Renewal rate bottoms in Q2 and Q3 with pick-up in Q4 due to less hedge fund and consolidation risks Continue to see increased importance placed on risk management and transparency Governance Business Budget constraints are easing, resulting in more stable renewal rates Anticipate a return to more historical proxy business renewal rates next year Launch of ProxyExchange voting platform and relocation of voting operations in Q4 expected to help further grow margins and improve operational efficiencies CFRA and Corporate renewal rates have already begun to improve and we expect that trend to continue in Q4 and into 2010 given exit of smaller customers and less price pressure 16

17 Financial Summary 17

18 Attractive Financial Model Subscription-Based Revenue Model 92-94% + Long-Term Renewal Rates Mid-80% to 90% + Leveragable Cost Structure EBITDA margins growing between bp per year + Upfront Annual Payments Favorable working capital characteristics + Low Capital Expenditures Approx. 3% of revenues Predictable Revenue Growth Expanding EBITDA Margins Significant Free Cash Flow Conversion 18

19 Visible Revenue Model (4) ($ in millions) % of 2009 Revenue 94.7% 84.9% + 6.1% + 7.0% + 2.0% = 100.0% (1) 82-83% renewal rate; backward weighted distribution; currency effected (2) $41 million new ACV sales; ~45% revenue creation (3) Non-recurring 2009 revenues (4) This is an illustrative case *As of 6/30/09 19

20 History of Proven Revenue Growth ($ in millions) Annual Revenue 18% Growth Six Months 2009 Revenue 5% Growth Note: Combined results of RiskMetrics, ISS and CFRA, excluding JPMorgan Online. 20

21 Revenue Growth by Segment ($ in millions) Risk Segment Annual Revenue 24% Growth ISS Segment Annual Revenue 9% Growth Risk Segment Six Months 2009 Revenue 9% Growth ISS Segment Six Months 2009 Revenue 2% Growth Note: Combined results of RiskMetrics, ISS and CFRA 21

22 Strong EBITDA Growth and Margin Expansion ($ in millions) Annual EBITDA 27 % Growth Economies of scale drive margin expansion Common platform and global technology infrastructure globally Margin 28.3% 30.3% 34.1% Margin Expansion 200 bp 380 bp Six Months 2009 EBITDA 20% Growth Increased automation of position/ report processing and voting Leveraging off-shore data gathering and processing Controllable compensation expenses: 67-70% of total EBITDA expenses growing significantly less then revenue growth Margin 32.3% 36.9% Margin Expansion 460 bp Note: Combined results of RiskMetrics, ISS and CFRA. Represents Adjusted EBITDA, which excludes the impact of stock-based compensation. 22

23 Adjusted EBITDA Growth by Segment ($ in millions) Risk Segment Annual EBITDA ISS Segment Annual EBITDA 39% Growth 5% Growth Margin 32.4% 37.5% Margin Expansion 510 bp Risk Segment Six Months 2009 EBITDA $ % Growth $33.3 Margin 28.3% 30.5% Margin Expansion 220 bp ISS Segment Six Months 2009 EBITDA $ % Growth $23.1 Six Months 2008 Six Months 2009 Six Months 2008 Six Months 2009 Margin 35.6% 41.9% Margin Expansion 630 bp Margin 29.0% Combined results of RiskMetrics, ISS and CFRA 31.5% Margin Expansion 250 bp Note: 23

24 Conservative Leverage ($ in millions) 30-Jun-2009 Cash and Cash Equivalents $ Mar-2009 $159.3 Total Debt Net Debt $105.1 Net Debt / LTM Adjusted EBITDA 1.0x $ x 24

25 1H 09 & 1H 08 Results Metric 1H H 2008 Revenue $ 152.9mm $ 145.3mm Revenue Growth 5.2% Adjusted EBITDA $ 56.5mm $ 46.9mm Adjusted EBITDA Growth 20.3% Adjusted EBITDA Margin 36.9% 32.3% Margin Expansion 460bp Free Cash Flow $ 23.8mm $ 14.5mm Adjusted EPS $0.23 $0.09 ACV $ 279.2mm $ 281.8mm New ACV $ 17.1mm $ 41.7mm Renewal Rate 80.8% 89.9% 25

26 Operating Targets Metric 2009 Guidance Revenue Growth Between $300 to $305 Million Adjusted EBITDA $107 to $112 Million Adjusted EBITDA Margin Growth 150 to 200 bp Free Cash Flow $70 to $80 Million Tax Rate 36% to 38% Fully Diluted Share Count 68 to 70 Million 26

27 Summary Investment Highlights Industry Leader Within Growing Market Global, Blue-Chip Client Base with No Concentration Highly Visible Financial Model with Multiple Growth Drivers Leading Product and Service Offerings Global Scale and Leading Brands Our People 27