MSCI - Earnings call transcript Q4 2018

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Operator

Good day, ladies and gentlemen, and welcome to the MSCI fourth Quarter and Full-year 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. [Operator Instructions] As a reminder, this call is being recorded. to call like to now would turn over the Mr. I Strategy Head Development. of Wiechmann, and Investor Andrew Relations, Corporate

You may begin.

Andrew Wiechmann

viewed conference call this Thank the release you, release and quarter have earnings full-year fourth we to announcing Slide the Earlier may Victor. Good the the for Investor at copy prepared day, presentation and everyone. our results tab. XXXX. msci.com full-year that fourth a A we under and issued morning, Welcome be for MSCI call. this press in quarter XXXX the of Relations

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

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

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

presented non-GAAP adjusted and addition flow. meaningful today's but our the adjusted of to believe refer measures, EBITDA, foreign financial results call, impact free and comparisons EPS, facilitate US expenses, in non-GAAP We also provide excluding of operating on period-to-period currency, insights During measures, our into limited core measures the to adjusted we basis EBITDA to not cash performance. including GAAP,

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

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

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

Henry Fernandez

all us months on everyone over of would spend managed how of warm diversified today. effectiveness business demonstrate the light of model volatility. shown last US several I the a market and the have this to resiliency you shedding for staying which capital allocation market recent the joining I few our the some minutes The in we have all tremendous strategy, you, weather. opportunity us this gave through to that strength. of are our hope frigid volatility Thank like

our importantly, we First the and all Despite to noticeable seen elevated impact. have client very no with over highest market behavior, sales. both one-time seen reflected as across second we client uncertainty, almost in across is trends areas MSCI, changes which fact index for of no net sales continuous new selling quarter recurring to quarter have sales environment segments the little ever by and our and we drove recurring sales well that the ever highest as

XX. in with rate operate. coupled QX In market to into QX record the cash Furthermore, period witnessed world QX and payment cancels sustained many been AUM inflows healthy indices. $XXX been clients, relatively $XX.X from There collection ETFs a indices fairly markets all addition, equity linked flow. linked since long cash our MSCI we pullback QX, aimed accelerated last volatility retention ETFs has and after of which back in through have our Even strength seen Friday, in ever, as our of the equity XX-months. billion was billion. are across highest regions fairly and our soft for free now generated resiliency though, consistent This receivables which strong international we to inflows behavior in of inflows have low over efforts as total and to we relatively about January

in indices, movement the has contract which volume. saw in environment market and in contracts to tremendous market In of on linked XX% growth US in dollar. compounded nearly we With saw XX based of MSCI quarter-over-quarter pressure QX tremendous sell-off volatile evaluation AUM a options listed and put appreciation ETFs on volumes billion this by driven we indices. the negative was linked hand, of the to ETFs Conversely, futures the other on the the by level our On our indices.

As and franchise and shares of belief October the earlier we the business front, the financing have of significant year of this months of continued this in through us market and level U.S. the May the MSCI we have repurchases is an since transaction indicated modest allowed the advantage area and that our our January to of only recent a in million in take in is discipline $XXX the beginning tremendous This model clear particular the the in the opportunistic did Well, X we company. benign and on into about and XXth. are of demonstration focus potential. a environment On of choppiness of we past, during period capital by note, confidence full including volatility repurchased the our

us outside been the ourselves Let the most have XXXX. significant for sure markets for remind emerging markets U.S. of of and pressure developed under

our of XXth. XXXX. also insights strength additional Thursday, the confident the franchise ahead our highlight The feel healthy, perspectives our pretty and of pretty successes remains look opportunities of nature and significant us are year The looks business that and and Our QX strong model to the looks getting all propelling critical we rest our MSCI Day pipeline We resiliency strong our healthy. as solutions providing franchise of secular our of mission tailwinds recent and stronger. differentiate many on prospects incredibly parts into and The February well during our forward as the about business. outstanding franchise the of the pipeline Investor in

call more growth continuing we to Baer about have. now, talk Baer? of how and are significant how that the some turn we executing me opportunities to over to Let that are fund we

Baer Pettit

strategy has and high-return am us speed on for our for new franchise. last achieved we over technology. supported our large with growth of some several us in processes by you existing resources internal business share market weather to allow increasing Thank with A years enhancing been QX, allocate accomplishments our consistent and and in capital Henry. are I the the products, diversified products, you, our by focus improvements pleased initiatives, execution key driven to all effectively concentrated to allocation to enhancements ensure to we

We strategic and have most established systems Which the and to highest track drive enabled investments. rigorously to return our to our resources by processes us measure allocating the has areas. and growth

base. and our efficiencies driving on continuous the recent focused utilizing of talent have technologies expansion in cost base, market most scalability our emerging and We

the and with provide allocated value portfolios the these during tools the to enhance proposition our our expenses Additionally, manage to volatile we of to right affording us our clients been portion expanding have growth ability their times. initiatives

front sales of time balanced rate success a as have this We on we quarter, evidence growth, ensuring in have markets is horizons. as in longer-term been the we that will for and on XX.X% bets quarter, different recent growth had well clearly short-term XX.X% the where XX.X% subscription we projects return recurring most that The for index full-year. within fourth in high run keen and delivered fuel strategic a the have portfolio growth

the marked growth. run-rate quarter XXth quarter subscription This of double-digit consecutive

of run-rate been of increasingly new compared growth the factor approximately for indexes drive XXXX full-year, flows and to our the or ability subscription into within wealth ESNG the growth. investing in these of index and fourth billion acceleration QX segment. for XX% modules custom on full-year growth some modules the ETFs to sales based and total showing helping based was XXXX generate sales is represented areas of the or close managers on Furthermore, have new index at sales Our full-year sales compared in subscription specialized at. we run-rate to our of $XX fuelled XX% Similarly, our were the XX% into XX% broker-dealers to as by quarter, In our for factor half sales XX% indexes. XXXX, the of funds and to ESNG the

of with client the index entire coverage required targeted growth new and and segments. With are as the cases, continuous key resources All built ESNG content, investments MSCI offerings client strategic the were to through have engagement our across scalability. and clients segments, in from these were geographies, research accessibility new areas continued such deliberate of and proactive build improvements to our benefiting and very factor out investments quality been Enhancements team areas data clear and franchise, use in of have and infrastructure our our our these the industry areas of and enabled in products participants. index multiple investments technology beneficiary across and analytics, bets

Some recent key areas. of are we highlight seeing in the success client and new launches these wins our

and index as to cyber efficient such well During as exposures. investors has of USA additional been classification our The new XX standard targeting well trends MSCI new including to which ESNG factor by security, China module had as the XXXX, a aging already robotics, XX , box, specific society, thematic exposure such range as modules, our Index and number significant factor data clients. products, adopted series, wide and several launched products we new indexes of a allow energy, that a get

are a and to seeing future launches, and key it driver unique all across index these capabilities data I is to the parts we access providing into not addition continual release business. an on is In look of call to the to reinvention model that content we calls. platform. that of over has improves the I and integrated continue evolution our with production our delivery With forward of and growth updates which API product our This further to to important turn analytics fully the strong technology improvements and Kathleen. our been index, to enhance

Kathleen Winters

quarter, FX impact start and by the Baer, in in key very Recurring EPS respectively. XX%. hello strong across of resulting X% the and results call. all continued a expansion the up revenue and XX% in and will We everyone strength ex points, adjusted QX growth driven growth the and impact of grew full-year XX% finish XX.X%, index the subscription on divestitures, Slide delivered adjusted solid on In revenue QX, margin ex EBITDA to had of XXX to XX% basis X. in of FX over XXXX Thanks of year our ESG metrics. of and we I

primarily types, As ETF geographies, custom resulting modules index process in adoption and across to by and driven to equity our modules the particularly across and non-ETF linked fee cash futures was in on fee such ABF growth average asset the of indexes investment strength into we slightly increases volume the and indexes, based revenue and the to client into the our from strong exchange-traded factor newer product and offset particular grew levels linked as ESG contracts the the in classes. of X% inflows This continue declines by and AUM our ETF increasing of, options basis decline in our point and was from mix. year-over-year indexes. the higher market passive funds, and products AUM a see

in and were line expectations expenses XXXX guidance. our Our with

to We take to and a very disciplined approach expenses prioritizing continue investments.

double our expenses XXXX. in position average. us resources reallocate coverage such to in We organization the better QX as $X our streamline optimize activities to well actions the than and of management. took segments to our we some wealth fastest growing team quarter Our better includes as which discretionary our additional of quarterly client reflect is our business client serve type well severance, as as run spend normal as million executed for This about more

to productivity. infrastructure product activities. to and We IT such to benefits made of productivity. and new expected investments and infrastructure migrated to IT more as newer marketing parts market advanced our strategic technologies These increase faster in and are yield time features We back-office with XXXX in also our systems increased investments legacy upgraded

severance, discretionary to FX. expense QX incremental of investments been excluding compared about would impact our XXXX adjusted these QX Excluding X.X% and growth the have EBITDA

volatility EPS our me the in the be benefited not up exceptionally we seen elevated share count any in rate, changes of Slide from of ramped advantage activity subscription to continues Adjusted core strong adjusted as and to drivers our Moving to business X, key retention also and repurchase sales highlight share take driven we EPS our price. our have buying lower the to by behavior. our let Growth clients' growth.

growth specialized as well Now, segment of of our particularly and was and indexes strong the for revenue subscription across their strategies demand let's our results increasingly portfolio ESG all custom with number Starting turn sub Slide as and mainstream factor driven and on basis products, X. our growing investment a indexes indexes investment institutions factor construction. considerations we well the within as ESG our by of of to index using as see as adoption segment,

FX businesses. of class this XX% divestiture the strength key number large Our of as driver in the quarter. excluding were to FEA growth and was FX the in and that excluding implementations and of segment A grew the a X% impact analytics analytics due of IF of well the our impact equity as completed & multi-asset client

we about the In with was sales we risk solutions Additionally, our class in segments, are other to area. management. the of result direct as for on are our a excited momentum by our multi-asset growth investments and focused liquidity ratings, in very ESG all analytics, heavily risk this strong continue see clients sophisticated driven demand our increasingly

number all Also, Real our two-thirds was subscription We factor rate time enhancing respectively. types and offering, of up also factor was In Organic summary growth modules across client growth managers, client for XX% in data and contributed and our and a revenue demand segments about owners strides and continue and our versus This on-boarding XX% by subscription XX% their investment and into segment. a as improvements were new $XXX provides segment,XX XX real our with and operating estate new XX% modules driven quality, growing the Slide subscription by of ESG run-rate by regions; and estate experiences in FX. asset run continue of enterprise ESG processes. impact rates XX% product together the to growing the rates make up each crossed incorporate which metrics strong of run-rate client run key prior a process. major custom with client was was to index, respectively, and considerations clients the excluding for grew million up asset analytics first for specialized mark run XX%. X%. year

rate, subscription run grew content. enhanced broader help Within largest performance managers with client them the we segment XX% index measure our asset and as

rate of great had and and growth asset XX% managers respectively. also with have wealth run We XX% with owners success subscription

of and used first time We drive our X% growth had strategies. quarterly indexes in continue Index with Within class $XX increasingly strength our on adoption in are quarters multi-asset to a at highest of the investment recorded being X% more basis. equity as develop ever million sales driven growth. respectively sales XX% recurring by was was up indexes resulting inorganic sales benchmarks recurring to analytics, we full-year XXXX than both two and in run-rate and products,

to construction the them help with overall management efficiencies have largest Recurring deals year-over-year quarter net record drive tremendous in , and turning research-driven multi-asset to quarter Our with the new closing. coupled portfolio some given strength close down and have second and We us competitive with as analytics growth content our several but organizations. their for to our new industry X% well their for under risk advantage client in saw business. in solutions pressures we factor efforts of our with fastest organically, asset last analytics was largest XXXX's large are been managers up a decade tremendous the QX risk asset analytics managers segments within

healthy, at remained was On XX% XX%. ESG Factors in provide on by strong Our ESG. new XXXX over we an In Slide to and and retention XX, clients driven update ESG. new of pipeline remains sales

asset have growth seen content largest managers segments, all QX was to regions, clients. run-rate ESG owners success in great We XX% up-selling asset and segments strong XX% also with and subscription was client our in respectively. geographic existing demand across and

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

driving equity XX in decline of indexes. efforts this a seen last strong indexes have depreciation On by new number linked detail. versus ETFs options, our basis, highlight demand XX% grown $XX XX our total XXX asset-based indexes shortly. a the to liquidity. are as licensed bringing In in December and Slide drivers few Total non-ETF ESG in the XX. and and key in are coverage cash in flows prospects ETFs, for ETF. has confident remain AUM a We long-term our In by Turning revenue of driven billion, broke in billion. detail indexes increased the based the and as the year, more outside full-year rate which market partners we Overall, work we XXX with on volumes in and passives, about growth prior XXXX, I'll of quarters. been while the to U.S., investor growing AUM equity improve equity institutional futures we reduce in emerging growth to factor indexes. of run factor ESG QX, XX, these developed and the increasing in relationships cover drive are by excited fees ABF $XXX and through In mandates million billion our equity markets linked more we to have tied we AUM of by moderate to our our ETFs to

expect While values significantly XXXX intact, fees favorable due points, X.XX In remain ABF half by to primarily sequentially due on year. compared average long-term in revenues XXXX equity saw secular last basis of increase we first QX, mix. basis higher to trends to point headwinds we

Although, products. exposure coupled a flows we in exposure average increase as factor U.S. point result saw strong a by fees modest market into basis funds international declines in in of

share products to capture fee disproportionate a expect equity flows continue to into of lower ETFs. We new

our in We growth. expect levels run-rate to basis capture volume part as continued achieved a efforts of point average further decline fee and our

of are and new optimal partners their as market continually and ETF the positioning existing as for those pricing evaluating products Our well opportunities products.

key of our and about discussions As ongoing basis. with fees fee our an on constructs have partners such, we all

the XXXX. net ETF was into in this particularly Earlier markets, across with geographies. remainder investors yearly ETFs significant outside indexes. net compared markets emerging into there equity indexes the benefited developed year, the favored emerging in and our U.S. well and to ETFs inflows and and XX% in strategies inflows to moving turn Equity additional on We developed flows. global shift U.S. U.S., where about flows and of in some we flows market. XXX let's XXXX, markets XX% the about Slide landscape, billion QX from exposure ETFs QX the to to into About equity cash have markets XX, increase quarterly detail the down U.S. diversified exposed ETFs saw Now, cash in to outside and the to linked MSCI these shifted provide in this nearly are XX% QX; Across and back QX linked to

market's see confident to on indexes ETFs indexes linked well are strength we cash factor that continue into ESG, strength the which factor factors our indexes contributed ESG XX% investing. We of we Well, over ETFs; saw remain cash to quarter inflows strong XX% in ETFs ETFs. of ETFs equity to across believe inflows positioned full-year. index-based the to and toward In and roughly trends to our in market the in equity long-term ESG We our the into and the the captured for capitalize linked equity linked our inflows XXXX, to and the captured

a dividends Turning $XXX million and Since through both $XXX to total at indicators. the our of next XXXX, shares an price session, billion about have share X.X sheet of XXXX key nearly repurchases. capital for we Slide we and guidance. to four repurchased of we shareholders provide capital about million. provide an In returned we average a update XXXX, on XX, liquidity our On balance

the you tax and our The multiyear discussed we in our awards in points impact price QX price and XXXX XX.X%. XX.X% substantial in vesting be me about first to QX stock with this XXXX the remind we Between XXXX is over the our which payroll a QX benefit prices, range These period is over our that PSU I like executives the period between share payroll expect $XX be measurement to would This best(ph) income let and to Earnings of will is actual X.X% the awards X.X% benefit on XX, granted the will expected between award benefit. rate, $XX vesting tax QX guidance. the end performance which to vesting $XXX by of provide dependent share, Slide to tax clip also the to while to ETR Turning in upon everyone share QX million. There XXXX. $XXX At vesting tax offset be our stock will a Call. accrued guidance result related between windfall per on effective of in net tax on will in is cash the of per XXXX. impact date. to assumed to

the range expected we slightly XXX the uniqueness figures as XXXX, increase of XXXX. the the of be quarter, driven year-over-year discussed awards tax the that be in to for the of million, new count. impact second for given carryover from timing note impact XXXX. expense half the of made and be of diluted in of an multi-year million our tax growth excluding share investments expenses Please already versus X% rates by last of primarily accounted half hires XXXX, to The payroll versus dilutive to as the these to income Adjusted adjusted first in XXXX, size the expense As higher expect X% our $XXX will windfall we in benefit shares EBITDA well is these in of grant. are of our

approach substantial is off expansion margin and and a subscription expansion has few reflection funding growth and with the This years. to have disciplined paid of we guidance higher as Our margin for growth. rates approach last over balanced our seen

last see high projects with growth, We top-line years. seen may continue the we of term, few to slower than pace to growth near margin possibly over return in expect expansion we the ABF lower and a fund have accelerate to

our end collections as end of performance XXXX. tail cash of at cash strong the XXXX Turning as was to the well by flow driven at collections flow, of XXXX lower some exceptional free the

cash benefit the double-digit summary, year MSCI, related outstanding top-line awards XXXX. cash reflects expansion, Our growth, to delivering XXXX record therefore cash the was granted multiyear guidance In another PSU the healthy the for attractive of XXXX timing margin of tax in expected capital. return flows, of and and vesting collections

and full-year execution deliver track record substantial value. demonstrate Our shareholder ability of our QX to results and our

Our to that approach high the drive trends continue market growth remain favorable. and return very disciplined expect beyond. we invest and paid XXXX growth and to in long-term capital off, managing projects have believe to funding to in We top-line

We are look in With our updated and to confident lines prospects, open to your long-term growth forward progress. we take that, our on we questions. the will you keeping

Operator

Instructions] line question [Operator of Kramm Alex from first comes from UBS. the Our

You may begin.

Alex Kramm

Yes. some already because Hey, good morning, of opportunities we AUM everyone. date. Maybe are trend. just you and little start on year-to- I if you a the volatility performance, terms you now seen helpful in the expense if bit of to and we market more asking guide ABS how in a takes, to, I'm can the be back in little what right have really if X% to is the bit, what of kind the markets guess will put so be clearly terms year fees, out this you expecting work of more up puts should is, the against the actually this need what assuming than are flush

little or just bad you environment. in about a bit So, are talk a good how expenses thinking

Henry Fernandez

and we you of think general any. continue direction the can Yes, numbers, first and in our to and - opportunities the evidenced growth. our franchise Look, if as all been found we them so that line top them and growth heavily, very enormous even specifically looking ago the years let Kathleen in growing we in expected I we see comment on give me see, funding many more three you are opportunities many, in you if [indiscernible] more have know, started We business.

XXXX to and for expected part ETFs the we to With So, passive to to management from a in going the in markets and is you with want may the the cash not has management or year; can that, do but therefore of and market, of there, AUM into also not AUM depressed least Can put a because AUM. levels bear XXXX. not, volatility much highly up markets correct there so lot be be bear U.S. in significant than lot a that of know, the of kind respect go lower, but think expect outlook U.S. options volatility a developed inflows Remember, the emerging they we the amount is of slight bear this will that expect down, for expect they lower? point the XXXX have and already to not continue mind the estimated the a but Sure, what passive be respect we the of they they outside market. more you at futures have that. at were we reason beaming may but flattish of do We to that. a maybe market, be sustained - know, we AUM, and part the market, that this

on reaction around further market the there market assumptions years than, changing be bear on thoughts or amount AUM. U.S. market know, conclusion a any you flat will since a guidance little our we with impact of global and so, on are in that, you do not giving outside of in of you give to is you assume into inflows of bear know, that don't a positive the that either increasing a that's expense those a So level is the we a the as over processes anticipate volatility projection expenses the what an based markets. our bit of embedded numbers U.S., they Therefore, and we or

before that a bear total year, a of our the change not, a recession assume should expenses. up expenses. adjusting wait now, you for know, per and assumptions down if you we will there see evidence we impacting we our will Now, of will is market those we But our adjust we if, that that be not throughout quarter, are that see volatility and we is that bit is and coming,

Kathleen Winters

Yes, so to important little add you. thank let a that really me just bit. It's Alex; so, question,

think uncertainty in but You time planning at than year, environment potentially know, the the know, we you kind can needed. growth, to year have challenging of of guidance that more first end on down think opportunities. half market in the in about about more of last you year. it the if higher point as also and the this of the X% of closer slowing of the end somewhat up the the had confident I guidance we are that during global course opportunities and with at of to are at and and in planning you shared the range the we asking the growth guidance with X%, we half those look that in fund challenging how range expense closer lower think the second I you focused so to top-line The Henry flex and growth very to how to X% very in X%, terms the about year continuing

conditions right know, our planning expecting you of, terms In here. should now, flexibility I are different be key the mean is than certainly we

a ready are that's needed. as direction, ratcheting And franchise, make downturn we on have of flexibility in, things where to but or got down. kind looking go up have we in to constantly and our strong the We comes either at to we are go that the and ready; certainly downside, need sure either we playbook

of We of a granularity different and know, numerous, tiers have to. couple we in the that downturn of go you got lots playbook levers can

Alex Kramm

environment, must wait lot curious of was fourth how anything but quarter little Henry the environment. you somewhat sales a if was, quarter sales have very gave that and maybe there bit, just could clearly good was I the a you. then Thank a mean know, the helpful. was right, - maybe tougher and around performance the a you been detail highlight surprised just actually And of All fourth positively secondly, I

the know, you the at down were anything different? discussions of slightly, So, on sort really you index client saw pushed did I that, getting was all, the where saw mean year. hard I or get some weakness same anything throughout it almost almost just pushed was be like anything or retention to but negative as

Henry Fernandez

was it Alex, Really, consistent. very

affected is the I by with thing type volatility. of of momentary you are are making our infrastructural. You know, know, think, so the They're us not market clients fairly that type investments typically,

we did people or business any normal that freezing know, see of we you pattern in didn't of nor kind. were anything So, see that evidence anything the changes

see know, So, you know, in and you reflected you with quarters, exactly previous the very numbers. as consistent

Alex Kramm

right, All very you. Thank good.

Operator

Manav And of from our Barclays. question the line from comes next Patnaik

may You begin.

Manav Patnaik

I you. on in wanted little cost I hone to a bit guess the Thank more. Yes. just

what I to into breakout if think and investments; those you You kind expands that, - them? that you fixed know, to know, you should like don't I cost, know - top where you levels call you playbook of you on out to I want variable cost, just ongoing your just think guess downturn expenses, of talked need of the about break an can have space address to about what pull have are,

Henry Fernandez

the of freeing is last go what run to significant we expanses a So I in business versus expanses, versus know the run way the change investments, resource expenses up the internally it about been business have just changed has run think or the so the business. business are and able And business the achieve squeezing into we the years business. think of obviously change you to not expenses three the

the like So our the when for as example. you at at in our prior look XX% - year plans look to compared is up business know, also investment our, XXXX change you the an new

requests at returns know, are at order that ones still operate operate mean to forth, area, that's the in money equities initiatives ESG we about know, are ESG want in so an to going and XX,XXX between on do of of cannot We efficiently. are there of spend some issuers as number; - that; we of and ESG, expansion some there But the a have there. internally we in in put estate by the income; significant ratings in creating technology obviously, and want We obviously, of data terms some we to go have clients equity above to we in and factor of amount hammering You think ratings so of equity that's into runway to you know are so it that the ways fixed currently sets point, the and better; a and and we keep getting of change you diminishing and that and universe in those expansion I the fixed the investing. to that business. the business - private of running still productivity continuation efficiency increase - real we income we enough and the we continue on lot

cap We on portfolios lot but into them, into indices that factors of investing ESG you know, we market portfolios fund have combining are in getting there substantially. to so investing factor need in requests for sell between, and - to in a in we not only - factor demand also

put the We on pushing We do our are expand that or than more at of there. cannot, increasing - MSCI enables - into demand lot is can development to that hard accelerate can demand are know, in and you of afford analytics moment getting platform, a content. analytics us the there which we the of we lot or

there on. going a So tension there is

of actually even We troubled in about are EMEA our world want us. the for the doing now region probably exceedingly well right of to is think context EMEA, you it, in the best if region

could that reorganized are We I terms all a an are expansion high in the that's new higher leadership, cover the trying with we client base hires, growth growth so Asia, the and did of to Kathleen lot for to of these you - comments area was note mean have that our the hopeful funding again, margin -- lot which a made or very even are the between balance of area comment we be organization want the and dramatically giving - opportunities of strike and of growth therefore, I new we good we Asia-Pacific like, and a margin the and that why a know you you we not are year giving the really in lower expansion - the which accelerate, if AUM we but to and you the we need of letting doing EBITDA we second on unexpectedly, and the the are up that that growth more down intend probably coming of projects we a margin there, guidance fund for expense of know the we in in on range because first focused time you, know obviously is the are this it up half, significant in higher are which fund to but but have half so in AUM playbook the goes having the lot areas. goes a growth, a expansion

to you continue less therefore, So in the indicated as acceleration an Kathleen see of margin should pace expansion. a of

Kathleen Winters

really we It's mentioned terms less of, are in more spend. really to do you Henry hard that Just know, type change business you it we the the little type how spend working the what know bit. a spend run can adding say on - business spend, to in important know, the so really, in we of you

of so we the so the kind looking stop So eliminating things, continuous and productivity, we of and we every up whether on keep the we more how doing side and back do the front business. the reallocated as change OK, run to drive How continue to really looking what have a waste and devoted automate culture opportunities and amping constantly doing opportunities this office cost office we dedicated the focus process. or to from bring are day; down automation, to at really improvement on we great find business for say, do house we it's more of our are to Right, we

Manav Patnaik

Okay, got it.

change that is, be trying talked the about; next say I So, ESG would I'm was know, could factor. ESG you the to guess you the what quick understand most a XX% expose. what business you of the maybe just follow-up; increase and in in still the

Henry Fernandez

amount It's amounts a were in. running know, you across. investing know, We always meaningful amount platform meaningful is a also, ESG, a are you factors analytics we that of balance, a meaningful of the

rapidly segment more of on growing people into Day, We including about lot the MSCI think we we more and haven't you for the a at this we estate, classes. a us the asset tell are moment, it we and of that's to put to need putting story the asset is lot waiting we of lot way, some Real us, to growth about talked MSCI effort lot just built of money a that will private coming but a asset about; our do more we in Investor classes into classes; the their encouraging Wealth client is that build are Management, to which is a there the therefore, want public nicely; have the a overtime. private really

there the happening is are So lot there that - that's an of a area, is so in company.

Operator

the line Toni Kaplan from And Morgan Stanley. from our of next comes question

may You begin.

Toni Kaplan

could help them us for over sales, new could or a harder active through about this environment How you maybe new is outlook year. about but your it's know, of the help grow times Hi, active them the challenging same lot on at and that if to management good environment, asset Thanks. products it products revenue, so year. have think time, morning. the challenging next to just you budgets see Do things you do tie-in help, drive your you harder clients, getting get think you new a know,

Henry Fernandez

Sure.

our lot a so main within investment software, ways more focus would range the streamlined. our both of and their tools I looking in the investment you on use that of our I think processes thematically efficient finding helping at clients say of know, making clients our, efficient; is more within helping are and be etc., their process of and more information, infrastructure they our that

doing levels that of manner. And at holistic fits So a kind that and I or that think et are one in done I is but another, we into taking, that notably, a our CIOs, at are the category, on CEOs, more just cetera., we senior that clients the about the think way approach historically and do everything we have with main working we that

where that think challenges other help and then our while more may in I a that's also it So, of lot and into our volatile be market create clients. question comes and is management a providing that etc., the active research, opportunities

Toni Kaplan

over mentioned you Can content. call last the maybe how asset next opportunity private investing you few years. about on And Great. class in non-traditional the the you are talk and that areas view you

Henry Fernandez

classes. private than asset or you you Okay, know, it that and of them, I what clearly question the think is is a bigger earlier, our even one next was know, that, ESG

in credit classes private and a private and we know, real about but are infrastructure well, world, around know, we dramatically. private haven't and we that have already and lot estate bulk that as estate; you asset effort mean private know clearly want the classes, estate aspects particularly we private share is As those lion's is were which equities talked we real reengineering one of the of equities. are that other asset private I expand private and real we private to of the you

equities our into our a clients getting account into We are in risk asset their private ways into investing; it take for multi-asset obviously owner equity find models private our in risk. obviously, using our to class we clients trying way see much occasionally bigger

clients pension looking that about into need understandings to achieve need of XX to into benchmarks, to have you year XX%, want that things they organically XX% will performance Hopefully, that of what that and around a believe an to understanding to we to an needs but attribution, aggregate at of where need well, basis, that, if models, management many really we they classes; So, we know, as the they in for be know, that's location the they global allocation world area. pricing period easily industry area are and inorganically, need want risk funds number that; in and to in the need fees you MSCI asset you look they private of be to big markets, provide. be they we our want need XX% can be and but the that because - they order the be on that's

Toni Kaplan

you. Thank great. That's

Operator

from comes question from of Blair. Chris William next our line And Shutler the

begin. may You

Chris Shutler

to continue a Question, base, your post represent are particularly is subscription get which when in perspective. good so index your frequently Hey pressure, (ph) you morning. client can are to growth guys, majority clients, MSCI how curious just active of double-digit investors from the manager pretty too under

Henry Fernandez

have being expanding client of to clients. is a either which in are is world, in it remind need way of this know, sort asked index for and license focus developer of about management indices, which only active markets is is of they the emerging that we one think us when our market our particular region think capping, fast is sometimes segment people the that franchise one is factor that, or franchise, a you on I clients, gets to our in aspect this sort in question know, on an you business growing think and they we that focused

know, you in you equities active to, of should of we explosion will We of around building therefore exposures have underlying less basis speak for the to portfolios, large portfolios, you world, indices overseas, less so management world unless you have so indices, as growth basis the that there ESG an of know, think then know, benchmark is and believe portfolios delight. - on

Asia, are know, clients income The it's bid equities it job clients building our factors and what this whether all other or know, passive the to their a but the for say it's building whatever. you a you is doing kitchen, is on whatever based we and this or own or And not, Europe, fixed you or thing we infrastructure are is is ESG another, Latin of sorts, that, and whether to benchmark is is this U.S., rented we what actively one or going on your help way portfolios, America whether on it and know, also we are to infrastructure, or use. are build you

coming expansion little in a have our a that way, we of So that but bit as see huge money franchise. we of

very franchise why that this a and generate growth. a of double-digit our multifaceted thing lot is benefit clients can that's So

Chris Shutler

much do of XXXX pricing compare. in the related then growth how and of And was kind to XXXX expect Henry. index you subscription how thanks, Okay

Kathleen Winters

been has it's of pretty consistent look XXXX, pricing XXXX; consistent. the Yes, years couple if XXXX, last pretty at been you

we are - driver. sales, consistent new XX% New quite as it's a seeing so, each year around to of sales XX% about Yes, that

Chris Shutler

at pretty then flow sounds fair? or midpoint, is the timers guidance asset assume one pretty, flat Okay, Kathleen. do tax And on cash average for cash free ETF be was it any the levels, without And benefits? AUM what to thanks, lastly, XXX XXX, free like the you what that the flow guide

Kathleen Winters

there be timers would only the one benefit. tax So the

huge seeing pretty substantial flat it's free the a XXXX. guidance right, in XXXX about and so but number. you you to is a large, had We it's guys why it You know, at that's look not midpoint; when are some flow XXXX, good cash

XXXX So in cash had XXXX, in that helped we us weaker XXXX.

quite so not frankly XXXX. in level going quite some substantially same good also DSO and made really DSO change I'm that just We counting into XXXX, in improved on process so improvements of

Chris Shutler

like ETF the midpoint, Down side, --. sounds pretty Kathleen, the flat at pretty,

Henry Fernandez

and offline Chris, with you we will then. follow-up

Chris Shutler

you. thank Okay,

Operator

Warmington And our comes from question from line Fargo. of Bill Wells next

begin. may You

William Warmington

Good morning, everyone.

for cancellations about but to were tough the Is the that So, better, change environment, that more about net I to XX%. the were going competitive sales any like it you in you the down analytics wanted a XX%, piece becoming down on is question difficult ask comp, the referenced there clients, win sales being - on? the and gross anything

Kathleen Winters

quarter. you at so had look longer time probably know, and Yes, I a think big looking we last year. a to couple period at deals QX you than isolate really comparisons are particular QX of to better again just

in You importantly it about Analytics during XXXX, know, year-over-year of a strong improvement of steady XXXX. sales the each in though was couple course and really quarter percentage points flat,

William Warmington

in of just qualitative terms maybe And some observations. Yes. further

the is to on. we be different steady that Where today capitalize the know, on see of breadth distribution solutions rate we and product-oriented that that You it. need run investment mentioned. have need are of you in versus you solutions, make it carry also that's are wealth it's effectively know, and different clients very that we which into compete to just to where do we going management to you opportunity. - product opportunity feel to And think Got today, the really kind then been on what say the is across seeing, would you everything so than we bringing I is you what very the consistent in client been - the are greater types, ever to increase we

Henry Fernandez

wealth ESG, opportunities So we we the the opportunities put biggest U.S. place; ratings Day see license, in you Investor portfolios to to stages We reports into know, to just clients. of we in of kind talk are summarizing, their there the order build is still more at are model managers the very ESG on it, over early in the can all of of and some one portfolios. index

not they may our all you entire allocation of started. in calculations MSCI firm to and the management it risk an management, we decisions terms only associated if wealth out are know, you make front-end that becomes the we wealth framework firms analytics it find of getting have use use, and we sort the a in feel , about with we all but use platform is in of So management shop, providing, really the so multifaceted wealth assets

William Warmington

you very Thank much.

Operator

question the Fitzgerald. Foresi line Joseph And Cantor from our next of from comes

may You begin.

Joseph Foresi

can targeting. and Hi. front I wanted the guess initiatives to the about to the all those it, be could talk and ask flow volatility. healthy dial. anything on ESG, extent you you M&A have you factor, the around opportunities you commentary looking I wealth, you move areas that about Obviously, some been anything new cash private review in feel might then do about given the and has Are got fixed, or at M&A, how

Henry Fernandez

click last has in everything know, discipline carefully a and look, So draconian, years. we have and always fairly obviously intensely you been the and frothy two-three

have business. if selling on we have the opposite parts we anything little So been of non-strategic our side, done very

obviously and financially going strategic be and know, very value We added you to it's for are, us.

become ringing our and there continues may we point the and them make hands obviously are that volatility at things we that a know, that decisions time. and if at be at bit that more some look increases, actionable certain You right may little will

too with in it's to only had we opportunities few volatility are right; of volatility. So, maybe a months themselves, that mentioning, increase present tell, you but early

Joseph Foresi

sort earlier out Thanks. of the of you Can really I And time. is about, reducing, it talk pointed how about where adjustments into some fit that those made million think guess, largest, talked or it. I you just Got and were was plans and I you maybe adjustments five efforts which where strategically they being think made investments. the you you quite

Kathleen Winters

I reorganize efficient streamline functions, and particular, analytics would and and to in some part and the $X of think at so in organization of I know, referring in part you so in just frankly coverage say really somewhat but to looking kind million resources looking single - of are QX, it's, every Yes, we broad-based, for in reallocate and at it we and most reductions was severance the most the quite the can. how you

Joseph Foresi

Okay. Thank you.

Operator

BMO. And you. of Thank the Henry comes from question from Shein line next our

You may begin.

Henry Shein

Hey guys, just. Thanks.

been Just for quite factor some you sort used curious - ESG; a the being something this at of data like active it level, is beyond the a data spoke and this the question on about side. on of that has how an of on spoke is are I seeing use demand process high despite going you investment or challenges is informative just passive in about source terms how - sounds I'm robust the there that just management. being most as or like in questions guess

Henry Fernandez

managers the companies for indices of the issuers. in creation is of a controls it really - list basis to about in the unknown or understand portfolios think know, billion the from I I an right know you are to billion and of know the The of XX% XX investors know. across, you AUM them they of and those plus the social as on dollars obviously have know factors portfolios, give and way funds all total the have been portfolios; allocating we with factor more active you on factors, invest directly company example, pretty on so benchmarks similarly, risk plus on of the what you showing report risk it's is the to factors is the lot factors ESG and lines; governance factors, investing of of for exclusions, of allocations and per the creation are society the ESG, focused equity unknown make know comp across as norms report owners for into to of we asset been we to institutional hedge at think to passive the certain mean want lines companies, companies, well and or sustainable one information XX don't and them of to passive service know know, investment incorporate factors how decisions ETF about and MSCI have as funds fundamental. being criteria bond clients on board. issuers, you a demands so their and in big lot ETF clients; ESG we ratings a long-short them to their to do among by now active than a areas working shrinking or environmental and is have based asked the of you factor either factor No, of inclusion you is dollars world you that helped

Henry Shein

Okay, got it.

Okay that sense. makes

Thank that's you. Okay, very helpful.

Operator

And our next question comes from the line of Hamzah Mazari, Macquarie Capital.

begin. may You

Hamzah Mazari

is that unfavorable certain where either below favorable you. that's you My to now, willing on pressure question but is Thank first point it there right becomes trade-off; margin not that are volume or a for it know Good versus go a it mentioned just fee you you any morning. basis look Is you have we or there changes. just as it's trigger to, thoughts visibility there. trade-off tough when sort a is any know, points that of should at; to

Henry Fernandez

we on know, calls over think time. topic this you I have the been, on very consistent

natural know, time. seen manifested anything we you We all pattern numbers don't that's You really see that know, itself different, what call the this a, in at have we has over quarter.

that it's dramatic said it's before; see and it's don't of really, steady, evidence a now. of just right repetition change we that afraid - changing, so, no just in have directional, what We any we I'm

Hamzah Mazari

bets. your spend size you Got large it. remarks, around strategic just mentioned strategic were what And you. you prepared had or organic. just you certain a is investment of you talking bigger part up and consider follow-up; Would in M&A Thank bets that specifically

Henry Fernandez

around so much about organic; to it or referring this doesn't, was it or know, comes it plan cannot opportunistic; point, of, at either it totally M&A sort you I organically. talk that is you

on be of will that should enabling the that's for funding platform our the analytics funding, know, we over look, needed are content, area you know, their You so require an that more time.

ESG more order coverage our of in Given be on getting to we clients, people ratings by consultants a more sales lot as a universe more are is, to ESG with the more clients on we said, equity the good put could spending request to have I have to level of issuers.

funding, getting private opportunity you are assets you real on estate that's fixed low we so that succeed and there. we need the estate and on itself real on know know to that the still up, income we the likes, to needs ramp are big given demand are a and that We needs funding; side; companies beginning

done in growth well lot we want it there to I opportunity But but we punching at why reiterate that expansion is enormous is we EBITDA So, margin four-five could is to over bigger recognize growth still the have we lot additional what over we it of very for strike above growth opportunities; we growth of last plan and doing are balance example, a of that's or going the we to be seen see that do. to margin. incremental time, growth in decelerate guidance is geography, to to because on give this fund to Asia, that what weight, not funding a huge the you the we years and important are trying you the and that that punch want we're the have that's or area of know are that rate

I of on want funding. to think opportunities for former us do those you goal the will

Hamzah Mazari

Okay. Thank you so much.

Operator

question Partners. our comes the from Craig Huber And of line from Research Huber next

begin. may You

Craig Huber

on have wanted this growth a I dig X.X% analytics questions, bit First organic Yes, a morning. good here. impressive little the in of you have in to deeper couple

at for to two differently area. you growth rate level? there three If what the growth you drive times out obviously adjust us flush historical for foreign to exchange doing that is Can your in help just you that are

Baer Pettit

Sure.

or which in multi-year created one of you story of really has content, know, in you So, notably us. sort long-term income, opportunities is story for our fixed enhancements it has know, analytics all been,

The other know, manager their at of gave greater of et in have consistent you I tools, the better cetera. to looking clients we the find removement question duplication, would that risk I related and active which return, infrastructure, is need make our for to answer is, efficiency way point enormous

asset precisely is it's consistent want at for theme environment what that challenging managers them their be have this high growth. a degree this parts to firm, to leads are to investment other for and driving that of and So process can the quality tools the really least that this is main across

Kathleen Winters

saying add so to was just Yes, me what Baer here. let on

prepared may mentioned addition to completion that quarter, a revenue growth we coming recall that well. in lot helped In had the of comments, you that, in we to the the rate as so implementation

So you been running which has that's row than quarters for in see, higher run bit can now. organic a the a little at about five rate, X%

Craig Huber

for quarters, you of the Thank two the third Also, up, it's took severance, $X that. much out the been if similar million, you would could business and versus pretty index second, roughly first versus and how I ask quarter. was that; know, sequentially if part in growth the cost have severance you costs first, the up obviously you index

Kathleen Winters

the have really little I product of and a technology. development for growth, particularly for there's number that's as we investment severance, I bit mean, fund bit Yes, specific a funding it’s don't and little - continued from ex-severance,

Craig Huber

I in, question, would like to last sneak My -- Okay. historically this

Henry Fernandez

to you Can limit apologize. know… we Actually, you it questions, two

Craig Huber

you. guys. Alright, Thank

Henry Fernandez

with follow up will you, We appreciate it.

Craig Huber

you. Thank

Operator

Thank Keith you. of our Northcoast And comes next question from from line Housum Research.

may begin. You

Keith Housum

I'm for thanks real afternoon, of question opportunity in Good quick the just to terms here. ask personnel.

still past Is have to of the Over opportunity taken markets. from itself opportunity the guys further years, to move that or out. played there kind markets there advantage personnel of has several emerging developed you

Henry Fernandez

a higher. moving is we to that No, for There keep oversee want you start diminishing sure point returns. that reaching

our inside drives company we and in in running that know mentioned in But people internally developed into before talent you the the of continue like. in are our data this markets. and cost emerging front to clients the the business - and would centers markets run efficiency sales, in to allow increase need investing us the into and business, of example, the ratio technology for be productivity to to in still lower You to as

five be will on of it was, but the there basis that ago. you same know, not more years So

Keith Housum

Okay, And follow-up. Kathleen, thank is a this you. quick then

the much the of stock in you cash expect that's guys originate. expect cash In do terms net options you guys basis first quarter and how

Kathleen Winters

the of vesting. the mean you cash vesting the of impact Do

Keith Housum

Correct. payroll the No taxes.

Kathleen Winters

said, if but $XX million, you tax include net impact $XXX the windfall. payroll at about tax look know, to $XX the to from when I cash is as it's a you benefit share you the you benefit Yes, $XXX the SBC

Keith Housum

thank you. right, All

Operator

Okay. you And may our next Miller Buckingham, comes begin. Hugh from from question of line the

Hugh Miller

over be running I quick. will so are your time, just know I Hi,

in First, confirm the remarks in that mentioned from you of that had change is just wanted XXXX. one prepared expected PSUs share housekeeping a the vesting count to no guys for the the there

Kathleen Winters

already diluted share in It's correct. reflected count. That's the

Hugh Miller

in should this basis investments to know about near for terms accelerating growth, for that line business. you margin slower you Yes. the to growth have as and of then could get we the business or you you Great. top go-forward - thinking And we compression in growth are just there trying the strategic just be second that and potential term order acceleration see the or you on of question the the this are know, you is be know, about on you thinking making; a get kind about to that in think the up targets analytics

Henry Fernandez

No, happening to our order line the fund the would of like significantly. efforts growth although in to increase growth needed been it to margin, we the for sure not despite accelerate has product

Hugh Miller

it. Got

Henry Fernandez

awards one Just share multi-year those vest. will when your on be decline clarification the prior count a There question. modest in

the that and withholdings We shares will withhold will of shares, lately. counts those issue share awards, reduce we the and

Hugh Miller

you. thanks Perfect, for clarification. Thank the

Operator

to Wiechmann back Andrew you. turn remarks. closing for I call Thank would And like to the

Andrew Wiechmann

us Thank you today. for all joining

always, of posted month. and Investor any As We with have many feel on additional at you free keeping great day. please and look our to Thank to our again to you forward out look reach seeing you in progress a a Day questions. forward

MSCI (MSCI) 31 Jan 192018 Q4 Earnings call transcript