MSCI - Earnings call transcript Q3 2017

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Operator

Good day, ladies and gentlemen, and welcome to the MSCI Third Quarter 2017 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time.

As a reminder, this conference call is being recorded. I would now like to turn the call over to Mr. Investor of Head Davidson, Relations. Stephen

You may begin.

Stephen C. Davidson

under for Sonya. Third call be Quarter you, we the a our release msci.com Good copy slide viewed XXXX. Earlier have day, MSCI the issued prepared results Relations announcing tab. release that to and welcome press third XXXX of may Investor the morning, quarter A and this Thank the presentation Earnings we the Call. Conference this for at

may contain Let statements. you me this call remind forward-looking that

You on are undue are on are cautioned on not to reliance presentation. as and today's language forward-looking place only speak the of statements, of second governed made, which which by the the slide date they

and other forward-looking XX-K in recent discussion Form filings. most SEC statements a additional uncertainties, of please factors For our and and risks see risk the

During expenses, results. to today's also EBITDA, measures provide for comparisons and non-GAAP measures, of results, to, the EPS a but We baseline meaningful refer period-to-period our adjusted adjusted flow. and to we adjusted call, not cash believe limited evolution addition including EBITDA facilitate GAAP in non-GAAP free

You'll explanation find how deem measures why earnings presentation. pages the reconciliation information in well this of as be XX to meaningful, we XX management materials and uses GAAP of the the as measure earnings of these to an on equivalent

the President; turn Kathleen our now Chief Winters, On the With Henry? over call Petit, let today are Henry Henry Fernandez. me Fernandez, and Baer our Financial our Chief to Executive new Officer; that, Mr. Officer. call

Henry A. Fernandez

our services. efforts across we innovative research innovation, integrate Steve, that our strong growth continued reported of quarter, on another good can applications driven driven everyone. strategy, the to continuing execution content to and We our Thanks, by our and create and day focus

for third Now please XXXX quarter to slide highlights. turn X

double-digit revenue growth in of again strong quarter. returned revenue growth, once this in terms to First, we

to revenues strong products, are all from across where respect asset-based MSCI to index-linked particularly types saw investment of this linked pleased with fees, in indices. We robust with particularly growth very we growth ETFs

early has to testament the linked that record ETF net the the potential of through net cash year to ETF this times innings indices, and growth full $XXX already cash a still XXXX, of flows linked in there indices ETFs market growth the us. continue larger into We year-to-date record than billion to is into October believe in to MSCI been market is XX, XXXX flows Year-to-date, MSCI for three levels. the

to and we make Turning initiatives I today. front, gains further continue briefly the across to and enhance free products to up and were that our services on order comment to on to efficiency operational efficiency, the the like productivity efficiency improve expense strive resources company would profitability. in to and announced entire applications

have have in segment. our us focus deployment on keenly deployment particularly our capital, shareholders. been optimize and Analytics and will today, With announcement Kathleen re-prioritizing focused with productivity the for which to you company, capital We by allowed in the efforts on provide stepping call. across efficiency the we're additional capital detail up our re-positioning

our approach all you to returning Last directors know. of of our cash there to quarter, regular change increase the XX% board has dividend, terms a been to in Finally, capital optimization, as in no quarterly capital investors. authorized

we turn we characterized expect we're and we to will time softness there have deployment We repurchasing as optimizing to to a opportunistic when before, shares continued firm, brings is strong capital. strong low. repurchase to where by And to quarter clients. gains power capital of and approach MSCI in highlight another In of third disciplined that strong the this means, productivity growth, was in said the now, volatility and market, integrated shares the our investment the when franchise being. This in stock to volatility summary, very quarter for continue very continue continued ensure follow and Please we us, deployment be efficiency, for shareholders. XXXX is more the in slide fewer revenue of X that for

$XX ESG combined Our our that rate clients of help to the key franchise Indexes important in to problems run additional the integrated not ESG rate these also franchise related part the offer indices, which of generate and powerful because result Analytics, million generate most products, to to we franchise. research a the as additional Factor of critical power very world. of services is and in of our franchise And power of and without a able is we're address be franchise. that our We million $XX able some an run because would in index and investment related integrated an

This differentiated quarter, our my of research development capabilities, content some the I of our content. they will remarks how creation and and focus drive on

a us Let this part of meeting the leverage now strategy our X, an we content. And needs turn the of changing for market. highlight of slide where MSCI's to important is strategy

throughout necessary are truly institutions witnesses us. creating changes design implement and investment to innovative, for opportunities provide and tremendous We investment – for content enormous future investment mission-critical current are these industry and strategies. We the that is

are our we example, suite For of expanding indices.

to own the expanding managers. looking and continuing for this fixed differentiated we're At all Factor to content managers time, applications, applications, delivered are coverage. operate fixed same We broader proprietary our effectively Analytics our security applications our more innovation. and efficiently. is through help third-party and achieve And ESG income client portfolio income We're deeper

all and progress our in interface goal through development the client a continue is experience. creation And of MSCI single analytical that the the to of make the content applications, our and of terms assets proprietary and platform. an that we platform create to all integrated technology, all integrated In combines the

depth those recognize help services value clients, goal and services investment we tools providing processes. use of turn Please of terms slide research in applications, our efficient provide our our In development. full and where X, and and and their content and to and help those the our become them to and breadth more content is clients to to the to effective of solutions highlight

and class various offering, now slide, content to XX our quarter, XXX insights shareholders number for through bring of countries, in provides into essential our address over differentiated presented this XX largest the help this that case portfolios, and On slide for you view one group for X, segment the clients our held alternative and case find what let of income, our development On a asset factor highlight issues valuable multi-factor the group where clients their cities owners in one, development, offering. content are addition we reflected with reporting, strategy. Our total multi-asset to our we research our them me order We study valuable spread of world. believe three about In portfolios and sciences. With have for in life custom to and XXX and to very of conferences studies. our in content responsible methodology, past strategy. fixed equity is States MSCI There In content to colleagues and XX research research they're and research diversified of eliminate better and as the in a employees growth reflect also investment but innovative the this size approached they client customization therefore, like of that X,XXX strategy. United various their our wanted factors to adjust some this weightings a they multi-factor index their essence, to content in index at across is areas development PhDs relating meetings portfolios. around and creating specific

a Over portfolios, custom fixed construction, data fixed the with manager two, model, calculate factor a construct consistent course software us conducted across a tool income management provided to of and performance methodology. simulations a a attribution, discussions one $XXX attribution index portfolio locations model year, client strategy support We globally. to portfolios income to approached implement using a through and risk large and fixed With using multiple the risk million study income allocation. the the our team performance and and designed global case them many with asset number their

across integration the ESG. the their opportunities teams asset leveraged of The three, investment extensively number ESG and with this ESG Lastly, manager ratings evaluate analytical data on use working was MSCI should and around help global case ESG MSCI clients was internally that index large already not a The study sale. and tools, but classes case for with to be the portfolios. risks asset driver main concluded

rolled These also to through ESG out client XXXX In MSCI ratings platform. of of being approach one of this application, addition, multiple has three Portfolio content client applications, the as within clients in and delivered most demonstrate via to portfolio ESG our studies analysts investment helping indices. another channels, The and pressing third-party products this such our own address ESG a application challenges. ESG decided data Barra managers MSCI our own their to case and now are research-driven client is the organization. to power hundreds launch ESG-specific using Manager, Manager,

see can why prospects so why about the excited MSCI delivering are we financial such strong are we of you growth and Now, results.

very Operating earlier Pettit Seyer appointments Baer October of appointed that of effective our we Officer. appointed has became announced these As we're Each this excited President been MSCI Chief morning, XX. Laurent has been and on

and MSCI and wishing our our structure to new client Furthermore role the approach. ahead and addition our operations Pettit. senior roles. Baer's strategy directly will project are will With contributions business in experience, that, with many a focus team as and to approach These desire Operating our broaden our our of and that me of one align opportunities Laurent advantage and to we of prepare content therefore all have see new strategy, acknowledge of Client would words product management, client on well products the appointments growth coverage over to Officer to to to relationships it management all repositioned Baer deepen reporting in we from serving the our of day-to-day of the to company from of a Baer all Seyer Chief marketing to pillars you. Chief better few join President, to to Please in become and Officer, long-term within and them to Accordingly, Operating go-to-market Baer turn to and great intended those oversee and opportunities. operating MSCI data As technology, to both say like functions, management. Officer client I management Laurent's their Chief key our client for research, operations a take

C. D. Baer Pettit

pleased Thank This as day the everyone as ahead for you, to strong us that our our growth on results. as we good communicate execute I'm before call quarters today strategy a time investors looking a financial quarter capitalize strategy is to MSCI. the we exciting very third our to firm. join speaking successes MSCI Henry, communicate analysts continue the to to we phone. of and and Furthermore, continue with as on and compelling many I'm have in and the opportunities forward the we

Henry A. Fernandez

over Thank we like you, board serve your Baer. leadership to our would shareholders. new of X. morning. of as and this November invaluable asset also Smith today, international management, our to made an This October equity be effective to another fundamental experience Marcus Director, Marcus will bring Independent investing a in XX, announcement past has attention XX appointed and and and Tuesday, to years portfolio MSCI directors I

somebody management our We the like at Kathleen. would growth. the call firm's in to this Kathleen? in time I are to pass with join have that, Marcus industry experience thrilled With to this exciting asset

Kathleen A. Winters

and year, for and $XXX were lower X.X%, growth, as call. on with as and collections, million payments well X I'll respectively. compared segments. which our Thanks, cash $XXX cash QX recurring strength higher in Fourth in the items Revenue primarily asset-based cash for flow strongest one cash fees flow the quarters the lower to income and midpoint you EBITDA to Henry, guidance EPS growth prior driven expenses growth million, of benefited payments start normalized can interest $XX for strong typically through flow items adjusted were and we the two of above quarter and diluted take substantial XX.X% X) free remains Free from line EBITDA as prior our subscription operating on strong by investments million. We're our payments. year was quarterly tax due productivity. day with $XXX respectively, free adjusted see, and to and adjusted our higher XX.X% refunds with our planning. at and EPS quarter increased generation XXXX the revenue. free and of to These was drive leverage, We growth of slide X% good $XX driven as taxes, make flow expenses our delivering across cash XX.X% in you million our continue quarter. had approximately performance tax everyone and is and by million, operating Operating as being X) the to

as was to top can you QX very adjusted fund of increase XX, was comparison quarter execute XX% slide driver which continue EPS we drivers So a our third of the On our XXXX. we EPS continue growth. strong offset partially Adjusted quarter see strategy. growth biggest the strong was increased to The growth, to the investments. line in as

by ongoing of resulted share-based count partially being other tax earnings This in aligning net was FX combined a compensation, shares diluted of of in share offset discrete operating partially the with EPS. impact lower benefit average offset Additionally, and interest profile others. the impact progress the our positive expense, down benefited with items, tax positive excess higher X%, with our $X.XX. to benefits, footprint $X.XX by The impact and by

Now results. our to let's turn segment

with and segment also for number in Index begin as growth by equity and through Let's MSCI increase which was XX% revenue both linked ETF-related XX, strong on fees, Index exchange-traded of and were one and September XXXX. XXXX. asset-based the quarter, ETFs globally, included cash revenue the in non-ETF rate indexes QX again, flows strength ranked to growth Once XX% in funds of driven products. highest options grew quarter-to-date in futures year-to-date ETFs since Revenue XX. growth this XX a slide

to driven Factor recurring leader as in XX%, X.X%, continue well ETF data market custom including benchmark products well mainly Factor including ESG as be products. sales index and newer and equity new revenue and Index products, products growth capture. products, for ESG as subscription in the grew by by demand Recurring flow indexes. we at indexes, core our cash So strong driven core growth increased in as

linked interest XX%. of double-digit very subscription There XX investments We was Starting products. another new strong fee are index-linked another quarter remains product Slide Index XX.X%. U.S. MSCI Markets for a X.X futures with presents total and indexes strong ICE to fees. with the an Revenue is and retention roughly Today, from by from higher of and index enhance open a equity total at increased on XX% products continuing futures or of XXX summary, exchange-traded strong, options existing ETFs In from largest in reflecting strong we year on benefit benchmarked growth contracts. products growth by create to that MSCI of contract and upper-left was the XX%, from run prior of record our And and the mix. track an rate, reflecting revenue contribution we increase volumes in of in made revenue have XX%, AUM fee MSCI performance line, asset-based fourth recorded up trading growth growth the high Revenue Index favorable the ETF in Emerging the driven increase the ones. asset globally was investment detail Future with our from product increased chart, equity XX% all asset-based indexes, a ETFs to listed market. across the Index million non-ETF up products. were this

net ETF end the or in record through upper-right flows. driven $XX linked appreciation. indexes captured has XX% by year-to-date market AUM XX, to equity billion the billion, billion and in chart, global October ETF MSCI $XXX of to Since net Turning flows, and quarter $XXX increased billion $XX we've of to the a XXXX,

market this driven which XXXX. year-over-year. segment, market This linked XX% MSCI The ETFs growth $XX or flows Within represented billion, versus segments. lower growth billion, index $XXX growth to was XX% linked segment grew of primarily net left into developed XX% of ex-U.S. ETFs QX global indexes strong quarter-end by As $XX particularly of this MSCI experienced flows net EAFE AUM billion all segment. strong the of shown across markets exposure reflected by chart, in

point you the average the the right at run see Lastly, on chart, fee X.XX. rate lower period can for basis

Slide ways continue revenues optimize grow. shows the through you differentiated grow expect run fee monetize providing use trade-off while we content sources to content, a the our illustrates is continue multiple to of growth XX slide strong and Our maximize average can licensing decline in see content. for the overall Index products price revenue different This the average at Index long-term. to as over our pace, volume Index the strategy fee lower Accordingly, double-digit cases to rate. and faster

every can you category As growth is double-digit. in see,

XX% grew and the content, through growth view, roughly of Factor our ESG fastest rate, XX%. content total our at representing Looking run at grower,

content and the constantly in of applications. content. XX, quarters. revenue provides higher by growth higher FX, in to our to or adding ways sales invest Run reported Analytics to On the ways as to highlight of segment drive levels. revenue Index XX drive when looking the we many research-driven and the rate with products. the was initiatives increase was Revenue favorable product our another content integration growth business. X% had we you discrete driven growth, Equity impact quarter platform for for monetize book We're Slide key new content for Analytics Analytics Class other of ex And continuing will and last we're us the other to Our with the to and metrics to Analytics growth of for gives Multi-Asset five strong we Index quarter, slide our of results growth X.X% the continue FX. for adjusted X.X% Analytics segment. additional

history. sales you half On the cancels upper of slide, the have and

at up since products. sales in in Class driven client compared segment fixed capabilities. From including by management both up trending driven QX to the increase QX. in is growth XX% year, focus to RiskManager, offering, our lower and client income a by sales our Cancels cancels, by high recurring growth XX%, continues higher prior sales With multi-asset the Analytics that in year, points new Analytics increase BarraOne Analytics basis net and due well Analytics rate maintaining XXX Equity primarily we year strong our to lower we in had XX% Equity prior across new Multi-Asset our in product by experienced year. Class sales primarily retention was in see the compared Aggregate were perspective, a the the rates. can improved up recurring to last previous as be to as subscription Multi-Asset and strength and cancels class You QX segment on compared recurring asset sales. elevated the XXX% supported were retention

on cautiously growth performance. rate cancels our Analytics the expect run Performance of have revenue an the will this over we respectively. quarter and moved and which continued diminished the X% translate increased Analytics We're segment continue lower rate indicated we see metrics, profitability costs, in key half these continue will As sales, improved time. we're trends focus growth a to increasing quarter. in on quarter, optimistic has fourth X%, of higher continues and that seeing subscription the revenue improve as at impact Both slightly managing into sales, and the and of slide, in including improvement subscription growing this to

while services doing portion positive of the our levels today and However, overall maintaining the delivering return and we profitability. greater income, flexibility managed Analytics of higher fixed reprioritize continued are leverage. and achieve platform, and the efficiency to we're us Analytics actions like key the operating an of a are still base discipline of in our giving this cost growth announced initiatives We're to repositioning initiatives These Analytics offering. ongoing middle designed and cost reposition towards

results we the XX, year-over-year show segment. a growth was slide XX% on up Revenue Other to All reported basis. Turning for

line. terms optimistic of continued asset into ESG are being also again additional teams. of principally invest of in the in in the XX% to of sales ESG, driven recurring continued we are First, will growth by were XX%, by efficiencies about existing investing growing to by are number to ratings. ESG driven And by use We're new than was integrating and up broadening managers continue clients processes their and driven strong sales, marketing very content revenue technology up who build more by product A which year-over-year, this infrastructure. ESG

approximately increase Next, Real on terms X% in in by revenue of growth basis. an Information up our was a was The on FX X% Market product. primarily revenue basis, Estate, reported adjusted in up driven and

our We the cost continued EBITDA increase the on for was the restructuring improve continue year-over-year performance structure the revenue for The the strength primary Other. of to in focus driver the All in offering and to margin ESG line. product adjusted product

at In total update average $XXX Turning our total to There we QX to slide an return for capital XX, our to on no million. of and and price approach through October settled XXXX has a XX, $X.X of activities. XX,XXX you have value an been repurchased of a approximately return. shares change capital

pace we As sheet practice end QX target line sheet deployable and by is XX% our the indicators. in to We'll was XX%, dividend the cash of purposes volatility Reported million lower was when slide EPS. repurchases market cash our the line minimum fewer shares market. balance share past lower non-U.S. repurchasing is at in in continue in cash million. of provide XXXX, XX, U.S., more a when low. On the cash increased key activity $XXX volatility for with in After The levels roughly the $XXX in the approach XX% and driven quarter. the of with our reminder, the range operating repurchase balance by share there's of softness to we adjusted [by] deducting shares on balances of

range stated X.X as of X are this leverage, our adjusted well EBITDA. a times X.X of growth in to result times, our we terms In of quarter at within

million million. EBITDA XX, to announced are guidance. of XXXX initiatives. previously the the certain the planned. Lastly be we The $X non-recurring quarter of initially efficiency million higher year include on to $X full fourth refinement end severance expenses $XXX at fourth additional This primarily We is million of expected slide to what Adjusted reflecting range in was higher have now of will guidance associated quarter base our work continually with $XXX which above be our and effectively, reinvested these these portion cycle. our determined savings. reinvested we generate a be The from our will growth, determined XXXX part we of the will Part this as to cost cost expansion. rate be are of requirements planning productivity refine actions will and to will management. manage actions extent savings continued This about complete and will savings run be growth, as assumptions revenue margin investment our severance

effective Our the year, XX% stated end XX%, the the provided net full cash the guidance. activities by year and trending year-to-date tax our year our range. remains full cash outlook operating previously rate and stated the free of We're previously given to for ranges maintaining flow but at guidance performance rest lower of for we're to

for of We for XXXX also free another million and which target. We're $XXX items. we XXXX, strategy long-term above the of adjusted very and summary, cash discrete continue cash gains to delivered our affirming million $XX expect flow In against investing execute approximately productivity and performance. to We're be free reported quarter in achieving efficiency for growth. was normalized financial flow our strong

optimistic assist needs. their address challenges of Our remainder opportunities uniquely their is them MSCI positioned evolving for our through and very our We're and transformation and clients growth XXXX meet the the and beyond. industry transforming, to help about is investment

We're that years. be sad to moments will share say another like a Before take few you. Davidson Steve I MSCI to open to with leaving for after I'd line very three questions, change the

most investment so of thank terms last manner. I'd He's MSCI transparent tell the And be Steve, thank as for line I Taking call with community been is that, the getting leadership know as and With of Steve to of your many dedication looking us story all open since to has with to clear new Development. to like you. personally role helping recently us. Business contributions Relations, for will Corporate MSCI. be speaking our Steve's Andy over Andy MSCI Investor made is the Head and on to and and Andy of of would take earnings his for tremendous contributions. on XXXX, FP&A of a this can Development eager we to Strategy team, and behalf in Wiechmann. will to questions. Steve Head I know like in this forward you hard all for and work

Operator

you. Thank

from line of the question first Alex of UBS. Kramm comes Our

open. is line Your now

Alex Kramm

Good morning, everyone. Hey.

Henry A. Fernandez

Morning.

Alex Kramm

quickly Analytics the on business. on here not – promised. inflection maybe Very we positively you got had the quickly, the well, Obviously, that point

sounds that And optimistic fairly you're like will continue. that

been et coming numbers obviously, in where color see in. And but customers, of in around particularly, So this think a of II, MiFID us you terms the seeing retention sales cetera, and themes new has in I little more give et can you're cetera? bit I of sales, of success the kind terms quarter like regions, one cycles Europe, given

you're that Thank what you particular. region, can with in maybe in us you. seeing share So

Henry A. Fernandez

the We're the our quarter-to-quarter cautiously are size So, know than line optimistic. lumpy before. And gets obviously, optimistic. Alex, we're you there as in size much based not times renewal the We've first well, I of that all, this been optimistic. are a larger is fairly on at product of said, rest company. ticket the of And the in But of we sales, – cautiously rate. right, which as

We are actually, managers. in well risk an class We've Europe, example. management as among asset in multi-asset done seeing strength

own strength, factors is and the your based seeing risk investing. logically Equity the part of It's factor also about return portfolio about (XX:XX) also of are your understanding on in so, We and Analytics portfolio. evolution. in factor Equity is Analytics. This

So across we're strength there the seeing different client segments.

global a therefore A lot renewal as of We is really this, higher the result cancellations also rates. seen the have of and right. environment, company, tapering operating and a of across the

more for companies, is a investment healing values which across the which the growth, propping global of is the investment providing you and see all barometer earnings gradually as We up world. producing of more And obviously patterns institutions are economy classes. in asset

product Our We're from types asset particularly managers risk client, functionality has in for the that as us only control are attribution, not clients to create but class and less all productivities our proposition management. portfolio of Analytics platform expense produce management as putting and and processes, slash-and-burn of the a are asset derive and opposed like, that. also them collecting their gains to models, benefit management clients and and prone terms multi-asset its management lot efficiencies of also and owner portfolio platform the technologies building that also like asset MSCI performance benefits management repositioning construction, can risk forward them cost in and investment help a and data, to and this a them outside significant efficiencies we to building

Kathleen A. Winters

So, add to up for data for this lumpy we the trend thanks can in Alex, in some metrics question. quarter-to-quarter, strength, see operating at but year. particularly right, be But of that just of good you seen of let QX points look since this terms regionally, the I couple me a the can that and mean, Henry's we've importantly, Europe. you

up really and segment basis, the fact, with XXX%. substantially, In a XX% total nice management cancels some for the Europe declining basis, sales in were perspective, over improved is year-to-date new up we've recurring strength quite asset on management quarter a client On year with in And year-to-date segment. the asset net QX. from prior a sales seen

Alex Kramm

around a the end? here? like look you're reason think or cost think percent when But that year, is the word for all Then, kind Thanks it's the new of long-term about it's of I of guidance, like part the your lot an a just shifting I talking the why quickly, cost today. maybe that X-ish cost think on next changing about Any heard of algorithm than because lot more I equation. that clarified investments Maybe side, early these into be just should I been Great. And long-term investing. color. investing you

Henry A. Fernandez

in No. There's, business. Alex, no the to change at all approach our

We bullishly investing more it's and We're being are about and talk significant dogmatic of gains, and investments obviously expansion. reprioritizing, us very, allows very about also that all gains, all margin efficiency reallocating. being of but productivity that to significantly, by disciplined amount continual self-funded about

Alex Kramm

Thank you. Excellent.

Operator

Thank you.

Warmington Wells Our comes Bill of next from Fargo. question

now is line Your open.

William A. Warmington

Good morning, everyone.

Henry A. Fernandez

morning. Good

William A. Warmington

is competitor, that platform, seem what competitive your if they just the BlackRock's correctly. And mentioning sounds you of tough pockets in response talk the see the characterizing So you Aladdin this to if it hearing product. large And and business I'm a thought to wanted like deep big, Analytics that about client. I and like and word so,

my do them? question you how guess against I So compete is

Henry A. Fernandez

than opposed More of this I clients of kind our needs competition. on response mean, is as our the to anything. any to view

we a of close clients. streamlining And Our see them on mostly period relatively models line, through product time Their business they side, other high a see do of clients global the management, which customer manager refocusing and stayed their that, huge a operations. very were we particularly what to this active the the industry things lot space cost Their the and players. in-sourcing. for And on pressures them XX transformations enormous, in is right. we only broad evolving. therefore, mostly of with are themselves we also They in to passive based big efficiencies what of in their are lot refocusing Many have and areas refocusing core from that global we their doing trend boutique what that small tremendously management XX, margins, were but it and through performance do offer that can of therefore, have are going not institutions asset to investment do how portfolio as do and can create them they ability last a functions, management transformation. is multi-national, kind to players processes. construction way grown type these attribution that And they're of basically in help of clients risk are years

that facing else same for world that of us because the believe there is kind and of these around are institutions opportunity plenty, there anybody the are plenty So problem. thousands we of there

anybody. any see a this as game of zero-sum with don't I So

William A. Warmington

it. Got

And so last is question buyback. on on slide the XX

Looking like at at that's the back XXXX, buyback, going in kind close pretty level you it's above mean, you're to where on there? were – XXXX of barely I and that. the what's

coming I end become take, to to year, so And of the will guess the kind more what of it question almost since active? see that my is we're

Henry A. Fernandez

of and as some Well, capital of the lot of cash Kathleen is that but the for that right, that is even U.S. total almost of is the for of or million, net-net aggregate of of is outside U.S., operations the amount recognize to $XXX cash first operations some the outside Bill, indicated, thing, of U.S. though $XXX total the therefore a is that, inside is sort excess million, excess

so be in shareholders, know the last value. issue. cash or a volatility selective is opportunities, and $XXX bullish the be disciplined. the And So and prospects deploy are to that company. keep long-term and very, to we see individual including softness when of volatility much stock low the tactical you million at with how presents couple in we we decided very therefore very These very we're to have want not the well, about it me, of market. And therefore, so, it way good best the opportunities deploy the valuation as with and we of significant of that. company, very believe we We jealous our associated going quarters are presented to view issues stock. our the want hasn't our us, that's we capital. those in we largest And shareholder as how And exceedingly all have It's

Kathleen A. Winters

over really more applied Bill, the see the active deployed the we've It's way in consistent, market. have us you'll and volatility, capital last Yes. be see you years. the the strategy When several more with

William A. Warmington

right. All it. Got much. Well, you very thank

Henry A. Fernandez

You're welcome.

Operator

from comes of William Chris Blair. question next Our Shutler

Your line is now open.

Andrew Owen Nicholas

in for morning. This Chris. filling Nicholas Andrew Good actually guys. is Hey,

you about little if wondering decision a Barclays a over year Just POINT ago about that talk to year a now, ago. Bloomberg's sunset and could

is expect quarter. quarters? Just wondering think over of would that And the to the you benefit so, if that to how strong from next much couple something contributed sales you

Henry A. Fernandez

Yes.

and last a always applied case in, meaningful our in a particularly significant models, pricing a been BarraOne has So we models income that from and and year all and that fixed leader of this all done at the fixed offering POINT. as and obviously of half levels, been Barclays factor to applications, or that models our to alternative of what an have all prepayment or amount make into and Analytics about so we've incorporated in income that, dialogue investments over with customers our our traditional which

have capability, and a and most more of what we of So there've of we share few clients multi-asset because risk sort that market benefited sales the the is direction, more is increased have that but performance. income that been – class fixed in in gained of whole spectrum

we but paid that managers very terms little significantly higher off see order that line. glad of all fixed the across investment. increase in that fixed POINT to emboldened paying whole yes, Analytics platform So, bit is that to has portfolio investment A made of continue that income through back replacements, to in investment plan, income in the has that because again, sales that us product to we therefore, sales of capability. see if in can self-funded, overall And continue been with

Andrew Owen Nicholas

EBITDA you. And those Okay. that focused? severance from Thank it, regarding guidance Thank apologize can the activity expect costs, And but then, talk and you if about changes? you one-time annualized I quantify you. you can where expense savings will come be missed the to I

Kathleen A. Winters

Andrew. Sure,

Analytics. primarily but in So related program, it's large a it's broad part, to

or million, plan kind going planned finalizing QX. range. be going coming forecasted savings, in and here And would to incremental in the still I weeks $X forward the $XX there's but will $X with say here, be severance, what it versus So we incremental of had originally in million we'll million some things about generate the

be redeployed, reinvested. that going is of to Some

to productivity that savings. margin the understand through rate like, consideration. expansion run importantly and need, our We're as we through some we XXXX details Some and looks all our talking line what looks what top looking growth want our growth, investment at revenue like, working of our into of still of because the working cycle, right, through planning go it generate kind it will of

Andrew Owen Nicholas

you. sense. Thank Makes

Operator

Thank you.

from Barclays. of comes question Manav next Patnaik Our

now Your line open. is

Manav Patnaik

Thank so you. the first firstly, – changes. Yeah. on all question management congratulations My is Hi.

Just out does focus priorities Henry, curiosity, your terms in or of forward? of going change this

Henry A. Fernandez

to Not XX chipper excited am. a MSCI, to years self no that as mean, day be in so I I'll as I we I I every lot. change work created when come that. continue to ago same the was am

top partnership lot of et CEO, of freed my CIO, lot expert Kathleen. and our by Laurent MSCI. benefit Baer, for subject-matter couple years the is Secondly, which the our in addition we'll levels, we up day-to-day us, of talking the and to have has users. going the me a helped cetera, managerial on half the see go-to-market in like CRO, in the holistic strategy, house the and operating of road them of about last company our clients, handled more We're to present of in C have That a decisions being C level time been with which this that a to the with the client, to visiting with spent

be lastly leaders time applications. time we I'll be strategy our even So a and unquestionable in to the our our with of spending I will terms that. technology And lot more in I think of importantly, spending industry competitive in and be very one MSCI and of position. want

universities I the and IT tend to the often. in factors performance they've do So that get have do the from to, spending things quite firm this. in division firm a at in incredible but us. of I've management incredibly bit team on partners how is of doing company. some have me And I we opportunities days even a years the early labor big we effort that, of try more to them to to been been us in of MSCI, of of some though this capitalize same the understand been leverage to It's the time went ahead this this created incredible the my a always at all – my company order America, But in have position the which hear you over to of in continue the a in lot has this of to been of

that. So we want continue to doing

Manav Patnaik

time share period at is over just that all of more side, industry. your broadly evolution cost penetration? thought of with longer to And in be our it your then about the as model active sounds least the on of business of before of the a is broader my talked particularly you a question managers. Just And like side opposed clients, as shrinkage growth helpful. your shifts And in it, on there. Got all I the curious guess a question pressures on there's Analytics terms to lot going and

Henry A. Fernandez

is be most invested. needs as society, to industry important one professionally a any of whole investment society the The savings of Look, the industries of right.

the entire best the investment that from at serving and growing the either helping MSCI the from funds ones that are models, and of And giving Factor on products modeling, wealth therefore their lot, industry wealth and tools, like. and benefit So the them by or the attracting not, are their cost a a ones the and growing and the and ESG managers, efficiencies happens deal sovereign like, of rework that and and We in secular creating whole of spectrum industry and business that industry the data, to products by through like parts investment bounds, a leaps have as technology, of are What is pressures and cyclical our their and among a with brightest particularly basis the global passive are products that models. even that management, in society. parts is that there like. benefiting like, gains creation the productivity growing there like industry and are

seeing asset of the to active all huge under only all look obviously and we we're incredible of be them. the pension A industry we focused wealth So but The And not key types, stress, global is more be of that sovereign for and funds, retransform Analytics, for at the the to like one management, Analytics that we people industry we have have it some the will active clearly managers, their that's industry. of will that Analytics addition totality whole and footprint, Analytics to brand, and wealth areas this owners and suppliers industry for of for that Analytics operations. of products, lot need opportunities. the are in And all managers investment we funds, asset investment like will that. have

Manav Patnaik

the lot color. for Got it. Thanks a

Operator

you. Thank

Our next Stanley. question Toni of comes Morgan Kaplan from

is line now open. Your

Toni M. Kaplan

Good Hi. morning.

Henry A. Fernandez

Morning.

Kathleen A. Winters

Hi.

Toni M. Kaplan

length hoping great a mentioned managers – there Have any you What that for sales. was quarter? the of you you fourth changes sort And forward any in at I catalyst the all, this this asset success for from cycle the segment. was Henry, any is quarter shortening seen in sales of the the new the to in pull And pipeline? is was real the think any reason quarter? the think there do strength

Henry A. Fernandez

and again, global It's our we're and the remains investment go-to-market our models, And strategy, of pipeline it's that new significant of a new reflection reflection robust. and innovation Analytics, top-down, of the bottom-up. all in also making new environment a to pricing products that. the as is and at said a result getting cost beginning, And as it's – least global right. models, relates that as it of operating service better, gradually I at it is management,

are nine-year we and seeing of looking talk recovery crisis optimistic. But the from are people we're and asset that hold world around cautiously trophy taking not. certain about whether the continue Obviously, to like. things or a that this financial lot the do we people classes believe is So

very good that pipeline feel our and we So reflects about that.

corrections events like that'll or Now down. there things could geopolitical that, slow market or it

pipeline, of boding is well in bigger going recovery bode like is gradual is part business the the of leading So business Obviously, of bit a of subscription it's the for and all shortening our that markets as lagging but our sale – bit, Obviously, of all business. little such right. And a a part the ABF. we're lags to cycle. all seeing little the us, it's again, global

Toni M. Kaplan

That's And a number this of, mentioned obviously, you morning. leadership changes great. appointments,

things that year guess, just I you're the over And next accomplish, the maybe, so or initial accelerate so? hoping or to of sort what are

Henry A. Fernandez

all, have Well, we for years or I so. two first said been already before, like as of operating this

Laurent point strong So And Officer, from Chief when Client be Operating very of because the is time view, or the day-to-day had of delegate that them every with a Chief and to I will incremental of they And Kathleen to appointed we part Baer came be Seyer sort the when quarter partnership. marginal, a spend of change of I decisions every lot deal through onboard, Officer every going them. a great to began month to company.

So that is already happening.

global what we take is do people ground and MSCI that the investment all all need us capitalize industry, we to growth to go only like continue opportunity. and it. is spend I I'm to to I what and to well on in these and to need And time the of And before, said to what environment the more truly to for reimagine still more profitability. company opportunities. now, bodes what them global floor of advantage shaping and all enormous it is of So environment possible believe a these reposition telling financial I'd achieve on dynamics And today I the this continue to with we're on for around company, economic going recovery I because that. you those which normalized of saying have is changes firm. the

Toni M. Kaplan

very Thanks much.

Operator

Thank you.

Macquarie. Our next of question comes Mazari from Hamzah

in of of Rahbar Your terms to revenue? I now that in sales Kayvan line is Kayvan Hamzah. - Can open. your was people exposure Inc. in Hi. region. Macquarie add an think us through you walk in for Capital is XXXX, (USA), This Asia filling there

of that of increasing asset the region up opportunity kind long-term, sophistication and the the is we're curious has what So there? just given out scaled there managers how

Henry A. Fernandez

Yes.

XXXX. for them quite managers, a created that wealth in look they're we of four for most am outside beginning out. from significant change. also fees, on them to announced And GPIF benefit, that's don't flows into managers, we increasingly region. been cover all to the them benefits a past capital. amount always them, We minute region that area, I under but has us, region make been with that global I And times the in we believe up. money deploying country, was the well asset significant a we Not goes the ESG. not of other region region. that we're only covering going a small us country us regional the term that we're And goes on the that that is sovereign of very asset money of I that the of well-positioned So since I of countries summer and Pacific It's and closed. their for, asset-based terms respect extremely in of rich now, visit will many which bullish know, were Japan Actually, with we done years Kathleen could with lot extremely owner assets funds. a it's present in that But the we there and the good the And a opportunity Clearly, a management of the is and because the that a for pension funds places. with the are what lot we've indices region. the where investing, them fees, Factor in China most. ones – Asia you we doing in is we very China. from often. been major market but because not one to XX this Korea quite cross-border give a clearly, focused some numbers I've while it's on of But lot in Japan development the

and futures also on focused industry exchange-traded development options the we're of Lastly, in Asia. the

our the about some see partners we'll futures few be launching exchange region. to going the that index our on options part announcements and months in next You're and new in

index derivatives, hopefully, trying world. So to develop franchise we're that add that around the increasing of derivatives that will to

Kathleen A. Winters

we've Typically, data there. looking Let for at seeing right. of the Rahbar in Kayvan in region. growth point (USA), Capital or been of I revenue All appreciate kind whether kind Inc. Macquarie of growth run we've me that. you just terms been add single-digit you're seeing Thank rate a - growth, it. the high-ish

Operator

Thank you.

Our Fitzgerald. of from next Foresi Joseph Cantor question comes

is now open. line Your

Joseph Foresi

add next Is is it just growth? give us on flow thoughts here? factors we quarter? indexing what Indexing? on update investing the And further special if from Factor sort the products drive Hi. the wanted maybe could an better that'll of to to factor here? contributed Or this And growth maybe I it you get from Can as into go year. your it get that what's

Henry A. Fernandez

what ESG, categories Index indication caps, emerging this a large obviously. this market one It's quite is board. active, of gives experienced is good across largest base, presentation, of is that we specialized page? best context across passive, market the It our which derivatives beta, Clearly, indices. In customized which the from growth and the has significant that in XX, weighing do, of we a part of various right. what which developed and and Factor here really the markets, and the gave Page of slides you, the you probably is a obviously across markets, different slide

we're ESG run segment at rate you combine what do in what between footprint do seeing in about indices. $XX totally they growing very the other So and the million because growing have Obviously, across indices, and base growth about from and growth. significant has some we Actually, experienced a it's board. base. growth talking the in in when the nice pace. we a are areas a XXs Factors small or lower now I'm higher segment, XX%. ESG from ESG our

an there. the you gives that growth So of indication

a obviously is well, the even market as some the cycle will market board some we continue. what the goes see across at continues. point, people really be I'm there but in down, what it's correction corrections and have in far market the next here. the may though flight So so like, seen it But and sure have that happens to we flows indices

Joseph Foresi

margins. Thanks. then you're areas out thinking I'd cutbacks try. I just for this versus year? XXXX? of Got into on figured investment you give single but early can what Maybe you preview early, the some heading it's And can versus it. know some And on I XXXX us

Henry A. Fernandez

you the need indications that be in and to in have some We'll that operating board, conclude then to we it present so quarter. next process, giving We're and on still our don't anything. probably we still the plan

options, terms been a about that the what it's management about and potential ESG futures part. indices, wealth doing. front, about there. about which of on about In Factor, we it's client lot of the indices, plan, of continuation In really it's It's it's on we've it's investment a the – see

is we ESG about at going how more it like do we've key the side, ESG, lot addition It's platform, because we're about about been On or talking to everything, On at with income. about what it's services right. The scale our up it's about. Analytics providing the a like tools. business Analytics in million solutions $XX It's application you products fixed platform, this million, right? run the it and rate, platform, if to $XXX

of hard we business. high both, we've to up fortunately, profitability, up And as revenues with trying even to in amount that. keep the So been for and scale us, that we're able growth of pace achieve good

So invest that's that. future, if we the at look toward. provide aspiring have segments, all three at all more cylinders are uptick think growth this the can continue at been And give someday you sort – three of we close of we you to of to But getting turnaround, end, we've segments there. next Real we Estate, year, the the in will hitting and we'll hopefully, that. Maybe the in us profitability and that

Joseph Foresi

you. Thank

Kathleen A. Winters

with committed we've the the long-term talked kind cycle in still smacked margin right target XXXX planning ranges clearly basis, the to previously. out a of middle that now. and On of sticking look, Yeah. we're about margin We're

So a work lot look, planning. investment how projects there's the to through fund challenge we get we to really our still that to good is of do good that that But, have have. all very of

investments how about we're we're smart in of costs. to terms capital, we're allocating and containing really being committed prioritizing our how So disciplined being

extent operating how we and want committed how working very we we're to prioritize areas top invest then, to is rate leverage. So got that. growth, to deliver run the line we've the continuing where to We're growing, which through And the that. positive

get we through cycle. you more sharing planning definitely after we'll So be with the

Joseph Foresi

Great. Thank you.

Operator

you. Thank

Anj Our of next question Credit comes from Suisse. Singh

LLC for Thanks Singh taking open. (USA) my - now Securities is Anjaneya line questions. Credit Your K. Suisse Hi.

on should driving talking it lower margin, Another realize guess the as good spend range. is I'm having I in growth But to to call? were above question what relates which this, what really thinking on you're all you've we margins investment some some about perhaps contrary your at Index fees. targeted be of your again I that been asset-based Or investments good at to period see probably products we it to remain are growth sustainably trying your ramp a in despite elevated asset-based your of you'll could get range, time, somewhat? so growth bring margins down could you some to going is targeted quite good fees? asset-based in for Index are the that where those still up some in

Henry A. Fernandez

run we Well, extent Clearly, that of drop the lot sustainable both revenue therefore, the that drop the subscription how moment to optimization for of that the in structure that have what in balance from values and the is have step asset-based we redoing markets be believe out do the in to the margin. how to flexibility a program line. want we to product let obsessed revenues and have plan markets be how of through feel and but and that that to margin is totally we and asset-based quarters algorithm just that think to may we equity significant of few end that's sustainable, within we At the the about cost not declines XX%. for event investments fees, part or that get I much to it that allow XX% down allow let the stay of we spurts lower is much fees. is And to have, the the of end by that we up of investments. we go incremental the into put at allow To the up asset higher some that continue to therefore, the a and and we

more even exploding we're line grow This that's if even in grow the trying or to can it. achieve. that no put question So world, continue is all over There to we is product investment right. and faster, this what continue

of earlier. be we Got another be the the Suisse So in - helpful. the could and efficiency investment commentary quarter-to-quarter? Anjaneya Okay. results one as would continue some That's Credit on approach Thanks. a profitability realizing hand. LLC efforts as are like the on we're we commentary trajectory, on thoughts light what (USA) and accelerating on Any run on to trying other helpful. to rates clients Analytics' expecting as themselves trend returns And increasing, to the things look then top you your repositioning in balanced follow a Singh it. efforts very could ahead? into improvement these give profitability may longer-term of sort shareholder how hand Securities and products in of and K. in line your Any Should well lumpy look manifest question this

Henry A. Fernandez

years. line of the So have margin that last growth EBITDA get couple we at and and revenue happen applications, want not been to client the this product But the in experiencing cetera. do XXs we all our innovation, strategy to et without with we'll financial products high therefore, do going we faster been say on grow top it's to has services what and of to and line distribution, that,

on to XX%, the but we the that So what beyond an until close into acceleration to target margin, it's we way to looking feel we longer-term to not effort that go revenue growth. margin feel again, put XX% XX% that XXs, all needs but And predicated we optimization, need higher is to our and are revenue be see we EBITDA to high immediately that is to growth. of another we've taken therefore, – have got that the

So the about doing the taking being us may disciplined yield of way from is into from not results give higher margin, from a money it the and taking the of not doing growth. is and and way refocusing the dogmatic lot areas cost extremely and lot we're will structure that that that shareholders we're anal that reprioritizing that and areas a it

grow single-digits to accelerate That's helpful. how margin. line us margin. and probably the I product that Thank XX% in We can how this Suisse may be dropping Securities described is you. be growth the tell drops to bit this EBITDA LLC we there there what to again, of so help that directed as it to Credit get the - to revenues of Singh a always you. of margins. in just So, revenue will want K. the things you And for savings to too But to to early balance, Anjaneya XX% is little high like the that savings, get much that majority the in method opposed (USA)

Operator

you. Thank

from comes Keith next Our question Research. Housum Northcoast of

open. now is line Your

Keith Housum

Good to And probably studies know but into non-recurring that terms in what to development for possible morning, generate everyone. a MSCI? of were I here? a And And I appreciate the more is perhaps with provide about revenue little of of but there, us of it bit it versus it understand beneficial, opportunity can't I on type bit get thought will the what fill in? buckets opportunity. detail slide lot quantification Henry, you a content is the you gave some X case can recurring? like if little you a it perspective would of this give

Henry A. Fernandez

recurring about everything Pretty much we talk is revenue.

non-recurring clearly these opposed like been We it we focus sources, always of revenue what we So but has kind like recurring one-time. to revenue. from all examples as in

structure. line, fixed in last annual Secondly, fee to asset-based example The first the to in Index the rate, an particularly drops it's subscription run income fairly line. Analytics rate meaningful our product is product in that example run

another product if ESG line, Is the I one. correctly. - think middle And the go that So remember may example I into that's

Kathleen A. Winters

ESG. is one third The

Henry A. Fernandez

No.

And will XX%-plus a which fixed obviously the one recurring into ESG example go is last second growing The Yes. product is the income. the line, year.

Keith Housum

of possible largely or they a Got to the much line? you. it are top to like Is say how how contributor

Henry A. Fernandez

you. run to potentially examples. Once of an run too individual examples, aggregate few what gives million is we're an but the to that's close a growth individual an and giving combined this or We don't are These right. get dollars rate, want that thing, we rate these client, individual all rate you run

Keith Housum

in Thank I squeak Helpful. here. more one you. I'll guess

With in the repositioning be is de-emphasis margins your about lapse investments products business, a you let going there? on are some the guys Analytics or your because you there that perhaps would them think of of investment to how the

Henry A. Fernandez

bit good name a come fund part, haven't and a but happens the services you very the small areas, sense for is areas which the majority, they And we're of are run diversified that and – with. it product growing a – area X% in because we we to impact of but we're there's and a do that. – of get bigger obviously pension those a core in to in of that, secondly, to a and of types that than and such efforts all to that's we'll and to what fund, Analytics we a a those the Analytics run we small amount the are another number and investing little they in areas while commodity that like core that's the Look, of that product hedge the risk growth management, that thing energy and it when of have the would and into good future call of we haven't because in but very question, faster manager But of on more lot negative of and different no products it's one bases, a with or all, emphasized are little lines best areas out is core vast harvesting misnomer it. type that, line of either product benefiting diversified example multi-asset up which because different Credit rate the they the we customer a is of But that order areas the tend just but areas, Analytics, manager are a lot attention, were as Yes. of bit we paying terms a a a huge example an the the break big putting they'll the like. of all small a The much, amount is, wealth management, line it – we think The maybe not it's and buying first of that, have have seeing we impacts And growth Analytics from numbers. is it's run and things and eventually not growing class in of zero, analytics bank, dragging have any be that. like risk that. Equity and we're therefore which older are rates that. areas, to are product don't, that impact canceled an it's what unfortunately that the as the the from areas

Keith Housum

Great. Thank you.

Operator

And further question-and-answer now you. over turn does back any this our session. to to call Davidson the Mr. conclude would remarks. for Thank I like Stephen

Stephen C. Davidson

and a day. you, today have Thank time your everyone, for great

Operator

concludes on and This today's thank Ladies program. participating gentlemen, you conference. for today's

You may have disconnect. all day. Everyone, great a

Stephen C. Davidson	MSCI, Inc.
Henry A. Fernandez	MSCI, Inc.
C. D. Baer Pettit	MSCI, Inc.
Kathleen A. Winters	MSCI, Inc.
Alex Kramm	UBS Securities LLC
William A. Warmington	Wells Fargo Securities LLC
Andrew Owen Nicholas	William Blair & Co. LLC
Manav Patnaik	Barclays Capital, Inc.
Toni M. Kaplan	Morgan Stanley & Co. LLC
Kayvan Rahbar	Macquarie Capital (NYSE:USA), Inc.
Joseph Foresi	Cantor Fitzgerald Securities
Anjaneya K. Singh	Credit Suisse Securities (USA) LLC
Keith Housum	Northcoast Research Partners LLC

MSCI (MSCI) 2 Nov 172017 Q3 Earnings call transcript