Afternoon. And sorry for the slight delay, we had some technical difficulties. Welcome to the 2015 Annual Shareholder Meeting for MSCI, Inc. My name is Henry Fernandez. I'm Chairman and CEO of MSCI, Inc.
For those of you joining us virtually, the polls are now open and you may submit your vote online beginning at this time until we officially close the polls following the formal presentation of the proposal. It's now about 2:37 and this meeting is officially called to order. I'm also pleased that the following members of our Board of Directors are participating in this afternoon's meeting. Rob Hill here in person with us in our headquarters in New York and the following directors are dialed in on the phone: Rob Ash, Trent DuPont, Dwayne Edmonds, Alex Handy, Kathy Kimi, Wendy Lane, Linda Riffler, George Sigler, Attorney and Keith Vale. Keith Vale is our Lead Director and he has been in that capacity since 2010.
At our meeting today, I will present the proposals that you are voting on and then provide you with an opportunity to ask questions related to the proposals and provide the opportunity for those attending in person to vote. Then we will hear the preliminary report of the Inspector of Elections and adjourn the formal part of our meeting. I will then proceed with a brief strategic update on our 2014 results. And of Q2, our CFO, would also give us an update of our results, especially the Q1 2015 results, which we have released earlier today. After that, we have reserved time for questions not related to the proposals.
Our meeting rules require shareholders wishing to raise questions of topics other than the proposals to wait until such time. At this time, I would like to note that Abidar Singh, who is a partner at PricewaterhouseCoopers is also present and is available to answer your questions. Broadridge, the Inspector of Elections for this meeting is represented here today by Christopher Woods. Our Board of Directors states March 4, 2015 as the record date for determining the shareholders and title to vote at this meeting. An affidavit is with the Inspector of Elections, assessing to the fact that the notice of meeting, the proxy statements and the 2014 annual report to shareholders were mailed to all shareholders of record on or about March 13 this year.
Now I'll present the 3 items to be voted upon. Please note that we will give stockholders an opportunity to on the proposals themselves after all proposals have been presented. Item 1 is the election of directors. The current Board has nominated 12 directors: myself, Henry Fernandez, Rob Hale, Rob Ash, Benjamin Pond, Gwen Edmonds, Rob, Alejandy, Catherine Kenny, Wendy Lane, Linda Riffler, George Sigler, Patrick Kearney and Steve Pollock. Item 2 is the advisory vote to approve the compensation of our main executive officers as described in the process statement.
This vote, which is often called a say on pay vote, is a non binding vote, although the compensation committee of our Board and our Board itself will certainly take the results of the vote into account when making future compensation decisions. Item 3 is the ratification of price Warehouse Coopers at MSCI Independent Auditor. Please remember that if you have already submitted a proxy, it is not necessary to complete a ballot unless you wish to change your vote. Please raise your hand if you will need a ballot. All the proposals on the agenda are now before the meeting.
Are there any questions on the proposals that have come before the meeting? Since there are no additional proposals to come before the meeting or questions or comments on those proposals, it is time to vote. The polls are now open to consider all the proposals. If you are voting in person, please complete your ballot and raise your hand so that the ballot can be collected. Any shareholder who has invited or who wishes to change his or her vote may do so by following the instructions provided on the web form.
Okay. The voting has now ended and the polls are now closed. The next item is the preliminary report of the Inspector of Elections. Rick Bogdan, our Corporate Secretary, will summarize the report.
Thank you, Henry. Preliminary report of the Inspector of Election indicates that in each case, not less than 89.44 percent of the votes of common stock voted for the director nominees, representing majority of such votes having voted for against such director nominees. Approximately 93.29 percent of the votes of common stock represented at this meeting have voted to approve by non book binding vote our effective compensation. Approximately 97.09 percent of the votes of common stock have voted to ratify our Audit Committee selection of PricewaterhouseCoopers LLP as the company's independent auditor for 2015. Any balance cast before the Pulse closed and not reflected in the preliminary reports will be reflected in the final book tally, will be available in the next several days and we will file a report with the SEC containing the final tally that summarizes the preliminary report.
Thank you, counsel. This concludes the formal part of our annual shareholder Inc. Is now adjourned. Holders of MSCI Inc. Is now adjourned.
And now I will give you a brief report by the company's 2014 financial results and 2015 Q1 results disclosed earlier today. I would like to provide a strategic update of the company, review our results for 2014 and then pass the meeting to Bob Koothog, our CFO, for a review of our Q1 2015 financial results. Please turn to Slide 4 for the strategic update. In 2014, we delivered solid financial performance and significantly enhanced our business through the investments that we initiated in 2013 to drive our future growth. We are pleased with the progress of our enhanced investment program, which is now largely complete.
We made investments in products, sales, client service, marketing and many of our corporate functions. These investments, especially the ones in client service and technology, have essentially driven near term returns, principally in the form of much higher retention rates. We expect that the investments that we have made in sales, new product development and also in technology will deliver returns over the medium term as well in the form of higher sales, higher run rate and higher revenues. Over the course of the last quarter, we have won down our spending growth to more normalized levels, And we are focused on assessing how things are working to ensure that our investors are rewarded for the patience they have shown as we have executed on this investment program. Based on the early returns on our investment and our continued focus on ensuring their benefits and payoffs, we returned to positive operating leverage in the Q1 of 2015 and we expect to continue to expand our profit margins through 2015.
Moving on to capital allocation. In the Q3 of 2014, we announced an enhanced capital return policy with a commitment to return over $1,000,000,000 in capital to investors by the end of 2016, including an expanded
I'm sorry, excluding an
expected annual dividend of $0.72 per share. I am pleased to report that we returned $420,000,000 to investors in 2014 through share buybacks and regular dividends, which includes $100,000,000 that was returned prior to the enhanced capital return announcement that we made in the fall. We paid a dividend in the Q1 of 2015 and our Board just declared our Q2 2015 dividend. Finally, as part of our continued commitment to ensure that investors can accurately value our franchise, we are in the process of evaluating new ways to increase the transparency in our financial reporting. We expect to introduce new segment reporting in the second half of twenty fifteen, and we will work to make sure that this process is as smooth as possible for our investors.
Let us turn to Slide 5 for a review of full year 20 14 results. MSCI's run rate grew 8% and adjusting for the impact of foreign exchange, our subscription run rate grew 9%. Revenues grew 9%, driven by strong increases in both recurring subscription and asset based fees. Adjusted EBITDA was up only 1%, which reflects the effect of $230,000,000 in investments and costs from GMI that flow through our P and L in 2014. Finally, our adjusted EPS grew by 6%, principally due to lower income tax expense and a lower share count.
In summary, 2014 was a solid year for us. We significantly expanded our capability and we're now in a very strong position to take full advantage of the many growth opportunities that we believe lie ahead of us.
Now let me turn over
to Bob Futo for a review of the Q1 2015 results that as I said we released earlier today. Bob?
Thank you, Henry. Good afternoon. Let's turn here to Slide 6 and let me cover some highlights of our financial results for the Q1 of 20 15 that we released this morning. Our results this quarter were strong with a 10% growth in adjusted EBITDA expenses with over 10% revenue growth and adjusted EBITDA expense growth of 8%, driving 11% growth in adjusted EBITDA and a return to positive operating leverage as well in advance of our second half twenty fifteen. Our adjusted EBITDA margin increased 67 basis points from the prior year Q1 to 41%.
Adjusted EPS was up 9% to $0.50 benefiting from a 4% decline in weighted average shares outstanding year over year and stronger operating results. The increase in share count compared to the 4th quarter reflects the impact
of stock based compensation in the 1st quarter.
Moving to the next slide here. I want to provide you with a bridge of the year over year change in our revenues that we talked about this morning, where total revenues increased $23,000,000 or 10 percent to $263,000,000 The growth was driven by an increase of $18,000,000 or 9% in subscription revenues and an increase of 5,000,000 dollars or 12% in asset base fees. Now turning to the next slide here, provides you with adjusted EBITDA expense trends. Our Q1 adjusted EBITDA expense rose 8% to $155,000,000 as we continue to move to more normalized levels of cost growth.
The year over year increase was
driven by 13% in compensation expense, partially attributable to a 10% increase in headcount, but also because compensation expense includes a $2,900,000 charge of a $3,400,000 charge we took in the quarter to terminate a technology project and analytics. Employees in our emerging market centers increased to 51% in the Q1 of 2015, up from 47% in the Q1 of 2014 and in line with 51% reported in the Q4 of 2014. The increase in compensation expense was partially offset by a 3% decline in non compensation expense. Turning to the next slide here, we'll provide you a 3 run rate bridge for the quarter. Our reported run rate increased 8%, consisting of a 6% increase in subscription run rate to $840,000,000 an 18% increase in FFAC run rate to $191,000,000 Adjusting for foreign currency fluctuations, subscription run rate grew 9% year over year.
This is driven by sales in the Q1 of 29,500,000 dollars and canceled in the quarter were only $12,000,000 This resulted in aggregate retention of 94.4%. FX fluctuations had a $25,000,000 rolling 4 quarter negative impact on our subscription run rate. And GMI, we acquired in August of 2014, contributed $7,000,000 to our run rate build year over year. And finally, now turning to our asset base run rate, the $29,000,000,000 increase was driven primarily by a $77,000,000,000 period end increase in EBTF AUM linked to MSDN inflows of $75,000,000,000 as I mentioned earlier. Finally, let me close out the slide here for the presentation with some of our key balance sheet indicators as we move into the Q1 through the Q1 of 2015.
We ended the quarter with $538,000,000 of cash, includes about $84,000,000 held offshore. Gross leverage was 1.9x based on our total debt of $800,000,000 for a trailing 12 adjusted EBITDA within our stated policy to maintaining our stated leverage of 1.5 to 2.5. Also and finally, as Henry mentioned, our Board approved the 2nd quarter dividend of $0.18 per share, which is payable on May 29. Lastly, note that we're in the market right now with the current ASR, we remain committed to returning cash to our investments. Let me leave you with the following.
Our earnings results for the quarter were strong and solid execution. This reflects the effects of our enhanced investment program, which is driving growth. We're continuing to focus on analytics as we organize the product area design supply. Thank you very much.
Thank you, Bob. So we will now proceed with our questions and answer session. If you have a question, please raise your hand if you're in the room. But for those online, enter into the appropriate box on your screen in the web portal.
If
there are no questions, I'd like to conclude this session. And thank you very much everyone for your interest in