MSCI - Earnings call transcript Q3 2018

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Operator

Good day, ladies and gentlemen, and welcome to the MSCI Third Quarter 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session where we will limit participants to one question and one follow-up. Further instructions will follow at that time.

As a reminder, this conference call is being recorded. to call like to now would turn over the Mr. I Strategy Head Development. of Wiechmann, and Investor Andy Relations, Corporate

You may begin.

Andrew Wiechmann

Relations Earlier under issued Thank prepared that you, results of quarter be call. the third may to for for the morning, the Imani. Good XXXX. at tab. the viewed day this XXXX and the third release earnings call A announcing and press we've release a welcome Investor quarter MSCI this msci.com our we copy conference presentation slide

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

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

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

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

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

any the of growth exclude impact the impact in or which currency run figures, will also discuss and rate organic We of changes divestitures. foreign acquisitions

Henry turn the and On that, me Officer. Winters, over Financial Chairman CEO; to our With the and Baer Pettit, call today Kathleen Fernandez. our President; Henry are our Fernandez, let call Chief

Henry A. Fernandez

that third subscription franchise exceptional the reflect The power undergoing run quarter, of the including franchise organic MSCI growth Thanks, Andy, XX% in an and industry good everyone. transformation. a highlight importance investment of results significant the growing rate, in and from day the

we the franchise in have very active factor hedges another from On these strong buy utilizing to or or the management good, or risk benefit price, low of strategies, and at criteria, market; particularly sustainable and basically frameworks. passive; hopefully favorable them, emerging that low trends, with in capitalizes when investing, and global market wide price, when top high secular passive investing asset high is Europe, buy someday risk a owners, valuations continued dollar; we in future; the adopting lots there diversified risk growth when continue MSCI in weak ESG feel low one like developed using market have all-weather basically trends, we a benefit of Asia; few done of We an sell asset we the business franchise off; volatility; regimes. months, firms; or or We MSCI MSCI, we've on or range with dollar We where U.S., when way or managers, or in in market natural most last any a secular or not; shares. high or environment. or trading we volatility businesses,

and in our clients' perspectives. clients the analysis, these their risk insight our environment, portfolios showing position shocks. market risk indices. clients to of in and increasingly our for various their market build interest factor give Let are In the into understand using from and To scenario me tools factor drivers portfolios volatile analytics run gain conditions, a you better performance now exposures, volatile example to this few are our management and elevated

such that factor our or momentum, all rates in growth and them volatility, interest with moderate as economic interest (X:XX) these in well have trade dividend portfolios and that our analytics growth, For like take inflation expect believe yield, growth gradually investors factor investors scenarios, rising build indices value, strategies tools rates, help sectors. quality, help and to and wars, will minimum strategies factor factor increasing sustained inflation, rising that Alternatively, indices and around progressing defensive hinder high that advantage use sectors. them economic performed of

markets, market clients weakness the in interest emerging a are indices showing ESG. in from risk our all content to strong our Given models to emerging

of market engage and summary, interest. that MSCI's drive tools country future our fuel ways those the look not including the We environment, and socially growing a risk of that or strength clients unacceptable single in shareholder keeping emerging attention models, or environment. understand behavior, recently market risk governed released products the in progress This Equity all constituent help are better to we seeing on Model and investment continues community to of forward ESG Recently, the we you on in markets. is our lack help trend companies posted Our successes. growth to transparency, factor China our any aligned our with In services. X, and damage in are level drivers performance and have

an year on hosting XX of to Investor are growth well and how transformation provide Day position attractive ongoing has in MSCI opportunities next the into dive transformation. is We deeper and February industry that

to me over the turn Baer now Pettit. Let call

C. D. Baer Pettit

Henry. you, Thank

help double growth our wealth subscription and represent asset seeing more which on across are Our managers, ability growth in product is clients XX% subscription dealers, consultants, asset both by to collectively shown owners, slide rate digit X, strong well managers, the broker as than run rate. reflected as we the investment run of

our easily our improvements to for have offerings ability service deliver fixed new content competition. success new introduced Analytics research a by rate to effectiveness addition ES&G platform But is out enhancements clients. new been new driven This content and engagement clients consistent As it building areas. delivering and our current in organization; markets; of latest the suite insights model; of expanding growth, the and model differentiated our our multi-asset as environments. to equity help global as go-to-market and also including insights client model, functionality, in pricing, an factor content, particularly mortgage of risk our Analytics benchmark capabilities us and the asset cutting-edge income, trends; to the in other is to noticeable client and security This for adding in increased integrate By emerging remain China portfolio testing, improved solutions our and continual is client integration These integrated and model, in of expansions driving forefront providing three, Analytics. all into this us into quarter, a differentiate into including in strategy indexes we further strong market to efforts being as amplified investment order further a analysis. and key have data, continued positioned our enhancing new as environment. clients investment two, approach, sales with construction, has selection, strategic third full execution best-in-class into class delivering solutions ourselves allowing relative three asset prepayment our well our ratings, to their at our Among the allocation; driven our flexible actionable allowing enhancing curves; well and in platform. stress mentioned, and we volatile technology, applications, enhancements execution in the better Henry One, to within ES&G

enhancements our achieve us Additionally, help to value a improving their broader effectively opportunities platforms enhanced These across across proposition efficiently ongoing objectives. our range of and us clients helping investment use of are and broad functionality Analytics cases. enables secure client more a new our range

to client team. quarter. strong our we relationship, to factor are a large equities the best-in-class our use a applications content in run and an asset their third and and Here stress for manager few in Through exposure Analytics upsell analysis models with examples testing U.S. from won global order existing

The the them of investment specific our analytics and won business ability differentiated issued deal is tailored longstanding offer to additional major test We the equity help way clients. analyze securities the derivative stress wide and already factor objectives. capabilities more of a of to we in deal the a internal their wealth offering touch institutional securities of managers a by shocks we through client planning our firm, an the and to X,XXX in a service very to very the breadth helpful advisors the WealthBench is client powered holders our way clients. risk and a use system insights portfolio allowing model provide the our In swaps uniqueness to branches a Asian of firm, those high Similarly, client's ability historical combine their contract advisory new scenario analytics risk to business bank to them license We achieve to brokerage allowing equity will to clients their European deal enable by XXX of large portfolio a firm their that license to deliver large across analytics, to number our by leverages range that won to with and API, transform quality with analytics portfolios. the their large significant to analysis. portfolios example, stress As one because a our and and our large helps our model, from analytics to a and risk derivatives the structuring another API a with won them desk of analysis won risk analytics. proposals

us content new to across the help to our continue clients. that we Analytics, and better Beyond firm position out capabilities roll

wide in asset Estate Here of new keeping that the ability call this highlights We of MSCI across owners well Involvement and analyze from for involved that, of which such offering, And And and drivers the over are to we Enterprise with Analytics several forward few review us. quarter posted their from market ex that real the about exposures look business. application across types to our performance, segments. front interactive an estate evaluate excited the remain asset With I on the designed Kathleen. product Tobacco our their ES&G opportunities progress and managers We investors to lines. portfolio value. indexes, turn companies creating tobacco launched shareholder concentrations provides our range as the are a to more in MSCI in further as you illustrate divestments and progress standardize launched client as Indexes, Real I and

Kathleen A. Winters

of great and everyone Baer, slide the on Thanks, execution. another on was quarter call. X. to start QX I'll hello

ETFs recurring revenue, in comprises approach growth ESG, disciplined results, driven respectively. our XX% equity total grew was linked to higher passive XX% strength largely which same non-ETF equity in driven subscription as year, was to business. growing ABF growth cash in of by and XX%, continues strong from our well driven by continued the by yield cash flows. Average and up and increase the XX% last in and to linked inflows linked was AUM EPS was the XX%, indexes in AUM MSCI strong period XX% up momentum ETFs Our revenue, XX% with our revenue, as Index passive our of mainly AUMs. and funds XX ABF we last delivered an exceptional over by as strong to of driven XX% strong revenue average non-ETF investment quarter Revenue months. revenue up from MSCI indexes

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the business Our was driver. subscription largest

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segment results to let's X. Now our slide on turn

off. Within subscription We as and around custom segment, well driven new cap strong datasets core faster as have specialized products, the our and market weighted Index our products. our see revenue paying investments Index growth, production by we

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our prior versus up As a All rate In reminder, the $XX run the ESG the with Other driven growth is rate run mainly impacted segment, year. XX% million. by about

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strong We continue demand in both client areas. see to

driven In In $XX passed ETF year, usage firms. indexes to billion, part by increasing factors, by over milestone. management to up ESG, AUM in factor XX% equity year grew a linked substantial wealth MSCI we in

rate, XX% in strong surpassed Our see ESG ESG ESG index asset processes. brokers subscription more their segment, ESG in segments, across with integrating mark, retail million doubling ratings three rate just combined seeing who in growth run We the rate run portfolios. managers platforms model also asset with segments and owners research ESG into building $XXX Index demand largest our We're than are run investment client all and wealth years. our focused and

ESG. sales the recurring quarter of XX% about contributed clients New in for

ratings wider as continue range We are we accelerating our investment incorporate points. and in broader ESG, data of a datasets, our to alternative including broaden coverage

on quarters. Overall, more to a the investor a run mandates On a volume Turning indexes September billion is and up our ahead. AUM institutional have to of options for from to factor slide XX, the we've factor driven equity the growth ETFs the and date, non-ETF futures total of the ETFs, by futures reduce growth XX. the remain indexes. rate liquidity. increasing ABF We growth September believe in in in are and AUM ESG XX including in detail. ESG XX was through XX%. we've basis couple these highlight depreciation cash year and strong up been of XX, XX% licensed billion, U.S., the ETFs. equity by and of our ETFs markets flows increased by products roughly drivers growing developed XX% equity while driving of emerging revenue these market term which have in as long Year-to-date moderating versus to which bringing last these ETFs, by excited options, has Year AUM of trajectory the In we And Total sequentially, prior our revenue prospects are $XX of outside volume, long about billion. confident year-to-date based more driving We seen our asset-based $XXX grown indexes. equity new is fees number relationships in and passives, we're $XX tied

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into to U.S. equity and equity additional been billion of the the and across quarterly into about flows. slide ETFs Equity the turn domestic investors strategies remainder of non-U.S. went some the global to in same, the global are about Outside QX into QX MCI overwhelming market U.S., equity listing provide cash QX. on into exposure the QX. muted heavily equity with country net where in the ETF Last in the in cash XX% spread up have relatively quarter, of of and with flows flows majority market. exposure about flows XX% favor $XX to pointing going ETFs. U.S. indexes ETFs. let's into the to about of ETFs flows about only markets U.S. across inflows the in ETFs, The these U.S. Investors concerned there were XX, is the exposure sequentially markets investing where outside $XXX developed Now and with continue geographies emerging the net linked $XX U.S. Across XX% we from was billion ETF ETFs, to detail diversified billion about landscape

line we've to linked ETFs market. indexes experienced combined to to to linked equity U.S. solid growth see our in key ESG, on based flows MSCI and roughly into continue ETFs areas, QX, and our cash continue we market with captured the flows, broad factor given our on exposure such on XX% Equity the a pressure our a share and XX% long-term levels, year-to-date flows, ESG long-term MSCI similar indexes growth basis. dynamics about to year-to-date volume On turning into and with recent basis, on confident this market. specifically momentum. capturing market rate ETFs based in equity investing basis of Equity factor on and indexes increase U.S. provider index exposure, seen growth. we share gain in flows Now total we to in ETF drive AUM ESG move additional our to ETFs In licensing remain market through of a based Despite headwinds, volatility. secular the run strategy ETF as factor

section, we update guidance, framework. liquidity, on sheet next balance XXXX the our XX, and key planning On indicators. to Turning slide provide capital, provide our our we XXXX an

and the flexibility average Year an sheet as for us balance on for allow about evaluate strong, opportunities of price date, our shares allowing uses us of this Our giving at best X.X million generate $XXX the time. right a cash. we firepower to million. repurchased returns at to shareholders, strong the capitalize total share for we've our remains about the Having to will right $XXX value flexibility

be EBITDA some at also expected severance, in the $XXX some organizational And $XXX XX, the to in additional marketing slide million high be we used expect updates our $XXX adjusted bottom to ranges. to to of indexes, coming to continue raising guidance. the likely those million. for We're have as $XXX end compensation, Operating range and we the in structure. operating costs our million, adjusted optimize investments and related to In are EBITDA of of QX million to target. expenses the we expense and end are our expenses range Turning to of widely expected

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healthy As a a margin result, we've delivered of rate expansion.

with very multiyear cliff that were performance is the in to ensuring our an capital to worked deployed billion has on based These vest has $X well and shareholder with three-year and The multiyear return. focused value creation PSU achievement program challenging in our is success three awards This shareholder increase executive and highlighting TSR has significance the value very our we're this metric. value last XXXX. market awards XXXX. the aligned The will plan and of of interests. align because optimally incentive is on to because strategic in Finally, granted driven We're company's the recognized enhance it shareholder years. a of over its CAGR compensation intended executives over QX

the XXXX. did in annual of receive three XXXX likely incentive grants XXXX granted date, is multiyear the the price is net it is PSU through a not QX but share XXXX measurement executives. of QX senior over in tax for will to the income years component benefit there compensation in that offset XXXX. award on tax a driven executives be over impact payroll will PSU The the or by and be vesting windfall long-term these While This XXXX, upon cover an by any vesting therefore, benefit. period will vesting. the be vesting dependent be PSUs period, QX actual The this on accrued And related

the payroll benefit as income in in size the the of count. we be these already accounted dilutive figures expense will uniqueness for adjusted as diluted our the excluding impact Given share of shares of our The tax well from grant, the XXXX. tax are windfall

approaching results. to XX, We're Now Growth slide our tailwind driving can through you XXXX But and we in you to And to these we've in off. benefit demand And made for capitalize meantime let's these strong our services. currently guidance we our our believe Globally, some managed the index so XXXX. we're process. what market we'll favorable. planning the the wanted doing are and around grow. professionally seeing take element with trends from how overall what areas you investment in working QX to we're a I and content turn our of that business, provide through are business report market for performance risk, generated managers. XXXX we're give drivers assets be color on also paying when to on these trends. trends. We continues based and continues key continue and value Investments subscription by Investors focused in to remain

are traction with decision investments growth investors continue areas are key like revenues investment which to ABF component the and from of Our increasingly also these strong with process. becoming a ESG, factors and in gain benefiting

near-term pricing. face revenue at challenges, flows and on ABF times depending may However,

enabled has capital quantitatively investment We and effective investments expense to base allocation, continued high and drive in continue innovation, to manage return projects. which invest us our track We've shareholder culture, to and enhanced and and returns. expect systems, our on return to improved processes,

volatility to we pace. have and by our and the share when Finally we in we excess very In more lower shares a repurchasing softness when approach line continues excess market to fewer and summary, at when have with in business more past practice, there grow low subscription continue cash, balances. repurchases healthy shares is cash is recurring

to areas line and in growth. to content, technology, around drive services expect continue top We invest to

And look the quarter Our in demonstrated consistent growth confident questions. our on we updated and has robust results We're long-term strategy forward to which shareholder to we'll take this prospects. With open keeping resulted our execution, returns. in your progress. have our that, line you

Operator

Thank you.

Kramm first Our Alex UBS. from comes question with

is now open. Your line

Alex Kramm

the Wanted to morning, the good of Hey, side everyone. subscription business. start Index on

some been non-U.S. the of in you there's mentioned think I well. in U.S., struggled, interest and Henry developed I EM more as as you, that particular I think well, and think

So flat Index a little noticed really noted I nonrecurring with XQ's sales being the or here. bit last We're year. I subscription the softer – in

wondering customers clearly having it bit harder At your So of sales get harder are is Is a just if is environment look the for that a And fourth be into fourth generally. environment core quarter to what's is given the be in particular, quarter, customers, those a Thank that big you. quarter some poor, the to supposed continues a little pretty you and pricing? tougher? time? – of there the to sales

Henry A. Fernandez

in our all on Alex. to Index categories. the clients interest and various real whatsoever subscriptions respect change No Yeah, with

way healthy. pipeline our remains is situation or abnormal There So no one another.

And, there always think considerations. timing are Kathleen? I

Kathleen A. Winters

No. just QX recurring was to out context. one, of year year couple year. some Yeah. To in things so year, prior a take to really fairly QX, importantly, year remember, the point, kind point quarter. it was related But is of Alex, that strong, a question. over Number sales your thanks being for over of really sales flat high kind comps to

fact, ever, In sales XX%. up recurring highest

And period So longer segment QX. about a performance it strong product the When and than of on year-to-date over the year Recurring quarters, you Index a feel XX%. discrete good, franchise. our and of portion the that pretty regions to EMEA look in at fact, All retention in XX%. up subscription is particularly the are date very particularly strength sales Asia-Pac. look good time, really of we we basis, seeing had rather high really at great a just

you feel context full the of pretty performance, when the it. look in good So about at year it we

Alex Kramm

Okay.

the here. hearing quarter the fourth So or usually environment about I'm what I in XQ, no worries guess big the expected is quarter

Kathleen A. Winters

mean I really. nothing Exactly.

As Henry good looks said, now. right pretty pipeline

Alex Kramm

that there right. quick you on the reaction real little asking been clearly next still the it challenges it's And commentary. like. have Then environment. the little you're appreciate side. been end seems range Clearly, the like acknowledging All heard I at coming of people I'm of a year But ABF you've your just getting shifting higher gears could And And InvestorForce. bit you're tough if expense that a be coming. surprised a in seeing rid I sounds about bit of But correctly. But it flex. side. the now on you're the all maybe a expense

flesh little out maybe it just So a bit.

on people would quicker bit have going reaction some a more for think what's in hoped I to the little marketplace.

Henry A. Fernandez

in business – So on be analytics that doesn't And focus, valuations. InvestorForce on are at it's answer always especially focus commodity to earlier strategy. sold strategy an we the sold. the we in from will And good the a high that market and anything that year, very our looking strong belong and deviates FEA, our dramatically the

that's one. So that

sort the reflected there's Clearly, of But or and that tone On the any budgets any market overall or any them been worries seen issues in of their our this robust. volatility or point. have sales around clients, cracks dialogue to them our any we recently. psychology to pretty haven't been of our in or it's or concerns at

to our revenues rate clients. base cautiously continued in of points on Look, remain basis expense above XXX about expenses – growth expense the expenses, optimistic X% view and we growth when we those with that. kept the of So the only success our range were X%

are to the given the company, We of to share bottom invested therefore do we growing And leverage. the leverage widen gets and growth were continue opportunities operating top But revenues, incremental we the operating have reflected take higher Part the and so expense operating We expensed, base be want than the to substantially a growth deliver currently to let say of do gets part expense are want with the of higher revenues and on to in if not will line available. of we want we subscription we to want we not gets to line, company. of – in on do reflected invest want huge it particularly grow in shareholders. that it expense Everything that to we the therefore that dropped basically business. increasing, growth. EBITDA advantage to Now that leverage.

Kathleen A. Winters

Yeah.

just add that So to little to a bit.

expenses. paying and line we've great to, priorities alluded factors, ability to very and are and we're confident be look, of our we've helping here. return management to track driving that high look, top got an a continues strong our execute. some projects are paying income in off, Henry growth bets And said, class. Henry As team, focus our opportunities as multi-asset got But got excellent controlling record drive We've fixed off, ESG,

at execute it that fast kind of them these return can. and as sense we high look we as projects makes So

in of ramp kind rate expense higher severance Now the side look you expected I non-recurring bit the in at marketing including year, things up the there are and referenced, from severance, in in little if of run particularly some some QX. investment level, type which the the a balance some

that's go So the and we think that we as XXXX. optimize do to of smart structure to the into kind thing cost

Operator

you. Thank

comes Our next from Wells question with Bill Warmington Fargo.

line now is Your open.

William A. Warmington

the that like Looks there so about you strongest year. was sales I Analytics to seen business. everyone. the morning, going far recurring net this subscription new we've the are Good ask

– is So then comment on this X% of the fourth quarter if also organic growth your Analytics. that. could you in And

towards of level? that sort outlook And an with you can sustain

C. D. Baer Pettit

Thank for question. Yeah. the you

asking in the that precisely script. we question of an emphasis in you're So related my because put is comments, my kind to it the on that –

the the have steadily increasing we So we basis of ability growth. feel have to increasingly built confident that

examples driving been the We that And wanted are conservative give some the way relatively have you we that. to around that we've communicated color to all. actually in to that as

very which is of value. deliver focus, the what believe much this to So of will the functionality, we would more client accretion call accretion continue I

everything our relationships, analytics is of this nature the in us rapid than client of seeing direction. terms our this story. the to pipeline, we're continue in a the will right the we're a that and story leads that But to of So steady change more believe pipeline adding

William A. Warmington

Got you very it. Thank much.

Operator

Thank you.

comes question Patnaik Manav Our next Barclays. with from

now Your open. line is

Manav Patnaik

Yeah. Thank you. Good morning.

I are that. fully like in? wanted some – up ESG, obvious obviously money the high like which wondering appreciate I what return was Kathleen, Sorry. ones, factors, that the income, just other I on fixed spending there projects. you of guys follow in of I some of to are that think the that ones outside on And comment

C. D. Baer Pettit

Yeah.

referenced And of of Index of infrastructure that, some business. significant product of as our content, index had such think the a in we the opportunities. have growth. Index lines ability our I range across types I So her in each believe in general comments in to in Kathleen that investing indexes our different custom deliver We're thematic world.

We are fixed product which income, lines. have pretty significant in investments cross

investing things referenced forward. some in them. building mostly it those is Also going is my Index. out has of are segment. I that Analytics, focused initiatives positive comments, initially content for new itself impacts where our in in some We in I platform ES&G, that were Analytics, in But where in reference as which like Analytics So

pretty in we each of would few over referenced that attractive within our think been calls I many I the of opportunities, some So lines, quarters. which product have have the say last

Manav Patnaik

it. Got

just to Okay, from that's other hear. one good question And then me.

cash over you just do remains what kind sounds buyback? like, it a But buybacks a curious like would maybe the make balance So with key M&A deal you have, priority. of

Henry A. Fernandez

return investment, the looking seeing therefore it high But and a high spent the these And focus point, former a and meantime, get coupled to we XX us not in time lot focus. terms what found being be a our we some that create conditions at focus in out. outlay the and at very will will for strong to sold last returns of better It areas. sold extremely very months that strategic opportunities at see strategic valuations. do. two on market strategic properties the with much And strong we the to of We're of sit we're unfortunately, hoping are in capital

opportunity would So better to an it. the InvestorForce. and part, the we make that to FEA, sell benefit is had them which the And people of commodities

C. D. Baer Pettit

Right.

Manav Patnaik

Thanks a Got lot. it.

Operator

Thank you.

Shutler with William next question Chris from comes Our Blair.

Your line is now open.

Chris Charles Shutler

Hey, morning. guys, good

On top that quantify driving can step implied one-time I And, to the Kathleen, that expense $X two up What top the items think items two expense, $XX you sequentially the guidance, guide? a it of adjusted million. one, implies increase? – EBITDA are QX in million sequential in that are

Kathleen A. Winters

Yeah.

XXXX. and QX, investments, around most in couple both technology bit talk So a in little some then incremental a and let Yeah. severance of got our terms first we've then go QX higher. about million dollars can indexes. I me some widely mean, we And used marketing higher into

want implications then and cost and have past about what base we've you talked in of when primarily and XXXX we I cost similar structure that the think that the ramp XXXX, being terms technology, think cost the in XX% in and up, think to in of of path and for (XX:XX) emerging that you the just we about base our XXXX people the think mean In if XXXX, to the really to about a about of it's year-over-year census Baer that merit, when when all our of market, investments being really you articulated, layer you areas that kind to do about and XXXX kind on that's will, you walk.

Henry A. Fernandez

spend business we on we'll the and a Investor significant And want, higher we opportunity very we'll that emphasize balance to on more expansion, important to on Day. have. growth. investing focused this margin like, But create between bit a that to in And time the be is continued it we on revenue continue we capitalize which highly

balancing want franchise milking investing in We out be short the the at franchise. be a We not So term. to do between all. the to want it's

shareholders. on We out, expansion. We we're plan expansion if to face that years. anything to not not margin margins increase grow to margin of obviously But the have faster. that expenses in last major been we decline faster, balancing been EBITDA planning continue want three like we doing it's And will that. we the continue or That even – to rewarded by

them feel it'll the opportunities, me but – including as keep the of big years will take a have – We will on to major feels all And that value company, come. expansion great, therefore creation not based shareholder I the investment away in flat. a margin make us

Kathleen A. Winters

Yeah.

look, is positive As Henry we're it using line towards it's important making in momentum things And the just capital smart top the quite and right, investments balancing we really growth and expenses, while there. obsessed capital because over a that use we're are our the us best there act, that are putting to allocation, able that trajectory all operating frankly. and the good And said, several and on also Controlling sure long continuing term. time. that the with being fund and And leverage absolutely to focused strong the have. cash

Henry A. Fernandez

for We're what of three This years. last by not the seeing really the change way, And this any is a change. direction. doing not been is we've

faster. growth we growth were rate same at time investing and to committed continue we lower to growing more of lower, if Now keep the had company. obviously even when doing But EBITDA rate in of we was than constrained in higher expansion we're the it for therefore, the are growth margin as the

Chris Charles Shutler

return incentive Thanks. very the it curious plan, total there near a comes to at three-year be for emphasis Okay. here the the if a least heavy new we level? And then regarding a on high like, I'm shareholder equity to at plan expect look similarly will should top term, as what in conclusion incentive execs.

Henry A. Fernandez

a complete on therefore, whatever alignment volatility in management manager like to to a TSR. one management the house, board company. objective, to that Yeah, drive top is shareholders. interest the including not in of to really obviously that RSUs little members me, and of of interest team bit we the interest focus and happens it huge share that are And share in by some company, the doing with that driven of like as time of higher. of shareholder up that that has in price be sort vested, be There the the at will of complete be end next a few alignment dampen order me driven the of the price But are alignment, and shareholder is we years focused middle in

or we is, think I annual whether second with on going question discussions that multiyear the those an plan – now are So up doing plan, board. end it's the a are

or want And And three-year We to we the incentive the interest strategy. similar, The had price. drive be that to whatever grant. high it's be to strategy manager/shareholder to of plan, last, we it's on of three-year is, a the going plan effective. very were a annual we and was have align agree of aligned with – it don't board. three-year it got that's the a front-loaded shares, the level to high if yet of share level sort But going know be alignment a

Chris Charles Shutler

All right. Thank you.

Operator

Thank you.

with question next Stanley. Toni comes Morgan from Kaplan Our

now open. line Your is

Toni M. Kaplan

trigger for the downturn Thanks Good in you any questions. severance playbook. the your – about on my severance? driving Or that. a volatility equity implement Thanks. downturn color past more the the actions Is talked to of the just you've what's markets playbook? are business? is that afternoon. Kathleen, basically XQ did course taking in Yeah, just the given that in October, And normal

Henry A. Fernandez

Yeah.

So, grow on that, understand in right with a what Toni, place, the And are service comment on we concept. actions can The the different company therefore opportunities the structure organizational the constant and clients me doing specific changes our Are we numbers. the And of have and more all trying the introduce create don't seats, the process or in taking strategy, teams. extent management we they that in the structure, to organizational see shareholder that, our our in alignment – in Kathleen then complete changing is locations? review let of also doing right to the value. franchise all been the And the of individuals. to right we that. are in of And our on

any an There in that an is what's severance different amount underlying always we've prior not years. every driving. in undercurrent, that's This of So is done year.

just This But all to is a because a quarter, higher, it those philosophy changes. be will on that lot quarter, this. and a the underlying driver fourth of bit group, little happened of

Kathleen A. Winters

thank Yeah, And that's right. you.

think the at bit always of little things kind more that this how structure, in a there's elevated and bit toward efficiently? we in better, So question QX. Toni, looking sort let's always of activity. and terms of little in about playbook cost questioning, a the to be your XXXX. downturn of always kind going about we're structure, of response So, do looking It's the to organizational But

think enhance strengthen that also we it? the as so and about we looking playbook that modify think How and we at downturn do it? do always we of are kind organization up down do in it? about market from possible how market a us condition. are or How adjust We it's And XXXX, kind and conditions that able very important nimble scenarios adjust and ensure that we to of to we we

to self-adjusting looking we're that it of and the costs go of things at want line the are about are costs kind don't of and to other impact so that you last, downturn context playbook And in that thinking always of, the what Versus kind refining words, and that growth? top things pacing in investment.

of ready kind we looking of it. to go. that's we're sure kind And to at about think So always we're it it how make and refreshing

Henry A. Fernandez

our want that. But to our things contrary, this wars potential I would are we have be been them slowdown need economic to that global something that about on significant impact questions those us the just of topic or we add them. seeing of part or kind stress a humble you, of the to else, And franchise. given opportunities on there think to business tensions, is, and to changes enhance any any on few any because present of volatility, clearly, trade kind not we market

an not whatever. problems, concerned, we're giving or of, we're we indication So you have

we franchise. our contrary, the opportunities products. about On that's – feel comments that major use that the this for all-weather the our presents We those feel were clients to

Toni M. Kaplan

on want asked before sure a very know I just this I'm And to helpful. different But clear couple in my message that's follow-up, Okay, the just here. for has make I ways. been

I XXXX. to a you we that shouldn't in the a growth think there to some think what margins expanding the result. now way was Is you margins. because Henry, you have expenses investments, will as a There as had of lower it's these be ramp-up do And pretty you're of opportunities. really Investor right that is investment this last I think about committed it? But more significant So repeat that and say, basically time heard an Day,

Henry A. Fernandez

XXXX. to of you update repeat Correct. XX of thinking. a how It's – give was, that an whenever we're not It's

can time. in that you opportunities. with done what to commensurate haven't ahead that a in top of achieve How about of the Tell that required investments the are increase And the margin? an are those opportunities line long content see one We we the we how expanding us. excited we are of growth

Toni M. Kaplan

Thank you.

Operator

Thank you.

question Fitzgerald. Joseph Cantor with next comes from Foresi Our

Your line is open. now

Joseph Foresi

about you shift and talk I wondering, the with Obviously the in Hi. environment? little of your more some some in bit maybe demand less market was more volatility be a products a maybe relevant relevant. the would can itself,

based to we sense see the get a AUMs that we're to trying some expected on and shifting seen. of have Just

C. D. Baer Pettit

a few make observations. I'll Sure,

to We As recent the some that clearly circumstances. our we're not don't can't I said, of think general gave I we a direction the have where actually and But most crystal examples And infrastructural complacent. It's sales It's processes It the the headed market way of ball. they of is we're see Henry most what their business. is dependent that It's they not clients. that of use. the on the highly do our they run they content It's is we have. levels. exposures use. the

and in kind for generally major it's the not clients' cost just be are further, push a ourselves. environment, us. I levels historically, element The pressure, on is And getting everywhere There's things in exception market difficult the times for across looking our accelerates, found So need. we've our I little to is definition clients course themselves, almost But of then occurred. through XXXX, think the cost. the consolidation that efficiency. But our going the crisis. that will And having linked the other things those – pressure finally which our we nature resilient is consolidation. margin, financial at clearly, are clearly now board. of if our of ahead even two sustainably the It's then had those cancellations in market. to puts are which linked in XXXX, will – products the come for this several been products XXXX, very need – by context that feel confident that of markets a down difficult quite clear And can well there industry cause of just the the

short in resilient and my from to vantage maybe market my of view in compared would tendency competitors. the we be of point, this rest term my current some the be a the early period past in a what's the be going on most would to our have and and think I – in to the seen of that bias correction,

Kathleen A. Winters

back And year. and each a in that period. point year it's back the we've at looked at quite decade we've to mean growth looked time – every And subscription during looked that I and every strong Baer, been

C. D. Baer Pettit

Yeah.

Joseph Foresi

one Got it. then just that. kind of And question on building

lower you're volatile larger rates? I'm back to look in gain wondering just at pricing And some in areas issue? does a switching to, in again lower price become those the market share? Thanks. pricing in coming a historically, we markets of is more trade-off bit talked core You pressure are about for to in where some feel the And environment initiatives, will coming pricing some In of market start the that volatility, of business? newer share. which the pricing assume there's your on volumes, as of is those you I

C. D. Baer Pettit

in calls, across is observation, a power the as before broad on in lower is the our spoken our as doing has some we're So an is Analytics various generally, increased or these consistent in So of pricing notably what power example. pricing headline, generally we've pricing right? coming as even not categories,

our be time. competitive – to of historically, competitive we So at are things the our my sense would would then those back competencies and if more say – I linked go

So some on – we let's weren't equity that's decade quite of in a certain going but analytics, we a competitive say, back, pricing had ago, pressure enough because areas. bit

pretty yet. tougher competition. that always think price we're to we're is for a in competitive our sense not sure leads main strongly my So But categories. market that I do feeling some

Joseph Foresi

Okay. Thank you.

Operator

you. Thank

with comes Our next Henry Chien question from BMO.

Your is line open. now

Henry Sou Chien

Good guys. morning. Hey,

of the the correctly, of the wanted a If it I that Index that And driver the asset ask dynamic of similar terms opportunity. Is there subscription sounds like wealth to case? I'm management or subscription to is about was adoption of – management meaningful sort And the passive? space? in So active sort growth hearing the business. for

C. D. Baer Pettit

Sure.

Henry Sou Chien

going what's there? And color on just kind Thanks. on of any

C. D. Baer Pettit

yeah. Sure,

way. to is management, highest increasing that the segment I the is for of It's, clearly in structure We're wealth growth et segment segment last seen me are the our risk management. than One, notably other us let growth think, growth investing Many in my significantly believe, asset Two, today the So products, of in the higher. cetera, the the there. quarter. rate following by more benchmarking, client we've try I observations trends increasing. and segments, smaller Index

will to and see our strategy be And would to our continue So in the plan quarters segment that you that forward. there. is sustained going on hope invest growth

Henry Sou Chien

Got it.

some Okay, the of great. are In And a thinking more clients to this you a your question, impact kind high level is questions. volatile of guess just environment, seeing passives? of are in more up about sort and how the prior of following I use of an

Henry A. Fernandez

really. Not

C. D. Baer Pettit

Yeah.

Henry Sou Chien

Really?

C. D. Baer Pettit

The structural that period. short very It very, volatility it's behavior. so has been short hasn't affected a

Henry Sou Chien

it. Got

Okay. Thanks Great. so much.

Operator

you. Thank

from with Macquarie comes Our next Capital. question Hamzah Mazari

know My about quarter. you afternoon. a forward lot investment. question now curious spoke go-to-market? of Mazari incremental I net you Your any Hamzah initiatives, Inc. including is efficiency, thinking you're light I Capital (USA), Thank $X.XX open. you. how productivity - Macquarie line in But is investment. MSCI just highlighted about One of the or know first productivity in going Good on

Just curious forward number on how basis? a we think about go that

Henry A. Fernandez

of head on years. increase that. to done. has our been you count very Yeah, the revenues are or on last head and two XX%, actually we've the about be, the three modest levels innovation in then have will one increased coverage XX% the client secondly, our last And the relative extremely on our look, two, examples sales – the when focused look side, probably of And count and company years, amount productivity at two the we there

Kathleen A. Winters

on... Macquarie Mazari (USA), And so Capital Hamzah just - Inc.

Okay, great. go – sorry, ahead. And

Kathleen A. Winters

we those a to look And the Capital you've leveraging can levels I'll it it. at scrutinizing you'll that - over. couple here little kind sorts very in I talent. color great just about there Inc. the of And Great. strides just Yeah, look, follow is always terms Macquarie very, a do mean, make and how I careful years add market things. terms and question, seen of us productivity continue (USA), emerging culture us of spending efficiency. we're of in see some turn Mazari last some Hamzah up And more

business years? you. that the you going it's doubling But of law in on numbers. think realize talked the is about for Just years. How do double again large growth Thank you business market forward? three to in three I ESG, big rate enough about the the

Henry A. Fernandez

the going Great. - double or Thank huge. is it's can't speculate to (USA), opportunity whether Yeah, obviously Macquarie Hamzah not, you. Mazari we Capital but Inc.

Operator

Thank you.

Our next Keith comes Northcoast question from Housum with Research.

now line Your is open.

Keith Housum

Good ESG you're how discussion you the it's Other group. that morning. terms question. what expectations could are regarding real the eyeing much going the up following Perhaps All forward? some of (X:XX:XX) And of really color on performing? estate of the that structure going segment, as to cost portion Question if I here in add Not the wonder forward?

Henry A. Fernandez

Yeah.

position real that driver making profitability. clearly, But But beginning and of uptick contributions not optimistic So that in of of ESG, that estate it significant to we're yet that right sales we're terms have – in the a big is the segment. an very it's Other segment hoping – now will. to

Keith Housum

guys that's there helping just then, quite guys you And of cash over your here. more And you. obviously an philosophy been as a of up you a your terms rate Interest has income well a on you the housekeeping sheet. have interest past interest – quarters. of that little some bit ticked well? environment. to in income Got Kathleen, for investments balance few change rising the Obviously interest got drive But has

Kathleen A. Winters

balances on just we're getting. that change strategy – really and No, in the yields just No the it's better there. execution cash and

Keith Housum

Okay.

and see quarter you last see still see to this we in just continuing? that going So quarter, should -what still

Kathleen A. Winters

Yes.

Keith Housum

you. Okay. Thank

Operator

you. Thank

Hung question Our from Vincent comes with next Autonomous.

Your open. now line is

Vincent Hung

previous on relation in Index clarification some sales. considerations timing linked wanted comments to just to Hi, your

can pushed function So the just where as environment that a out? issues get be Or signing a of worsen, signed all, that late? days contract gets the a that market at conditions few it's

Henry A. Fernandez

just compared to simply of quarters. quarter the that quarter with the future you No and respect negotiated prior little It's a number bit the the overgrowth renewals market the of to in we've environment. change gave

it's timing. just So

Vincent Hung

expect Got we from recent growth XQ to it. broadly that XQ? stronger Or in from And with is pull sales any nice more the continue bump in there should quarters, perhaps forward to XQ?

Henry A. Fernandez

haven't Well, for call we we done – can't I the mean QX.

what's to happen. So we going forecasting be can't

think to QX not So into the in this in We'll Right? appropriate happen call take us it's I of for like – say let's January. a what will at you point. end this

Vincent Hung

Thanks. it. Got

Operator

Thank you.

Our James. comes O'Shaughnessy from Patrick Raymond next with question

Your now is open. line

Patrick J. O'Shaughnessy

I now afternoon good Hey, guess.

expect as to For more a that you pricing of with over benchmark type space, the long competitors as do time? you into more pricing the business business, would business come that get ESG power? competitive matures term Or and think

Henry A. Fernandez

Look, in one hand. we're the for ESG investing standards measurement according definitely to to criteria, – trying create and

that kind absolute On be there that to following the hand, had to power right that competitors on focused a we're will our one the this. very I sure And clients pricing so. a be There I mean lot pricing across other world. But there. MSCI in on we've leads whether meaningful the few And I'm pressure think of may the just penetration now metrics. standard don't space. not or not, are of

Patrick J. O'Shaughnessy

one quick for then Kathleen. thanks. Great, a And maybe

there that sequential I a that a in you a speak can passive lag. institutional fees, kind decline that moving in was non-ETF, within that in quarter-over-quarter recorded I on category. your know is saw But the asset parts the Just bunch of $X decline of third there's and some we million think there base of to quarter?

Kathleen A. Winters

Yeah. timing I you're There mean some is one-quarter going a lag. stuff There's exactly right. on.

If you run the the XX%, good It's really continued rate part year-over-year that licenses. run here. lots the rate, up about and trajectory look business is feel at of growth we of new

Patrick J. O'Shaughnessy

you. Thank Great.

Operator

call session. Q&A today's to would Thank over like the now turn Wiechmann Andy to This you. back I for concludes closing remarks.

Andrew Wiechmann

our everyone, We any don't posted We on we please appreciate to have reach a out with day. great for thank and forward Happy always, And you, everyone really hesitate questions. to progress. us helpful MSCI look you joining belief Imani. Thanks, Thank story. you and can. wherever support today. And to as the the in be continued keeping additional

Operator

in thank the conclude and conference. participating program. does today's gentlemen, you That Ladies for

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

MSCI (MSCI) 1 Nov 182018 Q3 Earnings call transcript