MSCI - Earnings call transcript Q2 2019

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Operator

Good day, ladies and gentlemen, and welcome to the MSCI's Second Quarter 2019 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would like to now turn the call over to Mr. Andrew Wiechmann, Chief Strategy Officer.

You may begin.

Andrew Wiechmann

Shannon. you, Thank welcome Conference and MSCI's Quarter Second Good to Earnings Call. XXXX day, the morning, press on Earlier results issued and we this a update. quarter second with earnings which a along second for release quarter, is website available our our presentation the our announcing copy release, tab. msci.com at update under Investor Relations second A and that presentation viewed slide of may prepared have be the we for quarter a this call the

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

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

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

addition EBITDA adjusted During measures, to refer results operating revenue adjusted today's we the growth limited organic presented free non-GAAP GAAP, U.S. basis to, expenses, in rates, to EPS adjusted call, and of cash also flow. including not but on EBITDA,

our believe into period-to-period comparisons performance. facilitate non-GAAP meaningful insight operating core our and provide measures We

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

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

Officer. our are Fernandez, Huber, today with Chairman CEO; Financial the On and me our Henry Linda Baer and call our Chief Pettit, President;

the Fernandez. me Mr. With Henry turn now to over let that, call Henry?

Henry Fernandez

thank you and joining Andy. today. Hello, us you, everyone, Thank for

her on quarterly to say and hope to treat MSCI. report does her job, have like to would Linda we're in that new from I a right? offerings. all we good start, momentum range peers. very a I being incredibly she of you well I strength you all continued in pleased first do by and driven performance growth Accelerated broad opportunities see of is the across our quarter by strong the our So Before attractive

year, Board During for the and detail dynamics, where an away the this is MSCI sense the possible areas the we of with only most firm. all MSCI, overwhelming focus strategic we annual the relevant our planning goal attractive franchise. great came in reaffirm with first conduct of excitement a and developments surface an with team management our year, of we industry scratching our the future half that from This capabilities achieve about belief we and process prioritizing of process of the of plan each explore are to what

With the is data value management, advanced become, margins. we sophisticated An and important analytical every role the profit the single MSCI we to pursue necessary investments the many the fuel technology becoming to then investment industry while opportunities critical growing how day. and models high discussion have internally and our increasingly has the of preserving

we have past, we our a allocation through As to allocating highest-returning on capital internal projects focus capital have our very rigorous discussed process. the the in

profitable. continue by change to us investments even and priority and the for run-the-business the expenses do activities. we top investments. business across be more allocate This business internal can growth expenses relate to for and activities. the to investments efficiency creating to the grow the products and our expenses reducing A productivity and, increase supporting X to is spending projects their existing the broad in improving and run to consequently, across highest-returning and the enhancing form, Run of business business therefore, way, areas think this new categories: change faster and us. the change current business even system while We We investments squeezing more business relate capabilities importantly, allocated

see all of potential for a of little our growth extremely We of opportunities a the growth current about Day. run-the-business the and talking about activities. also But We long activities. excited bit at we're runway Investor change-the-business time spent this for the

example second is areas factors exchanges income issued listed these Key private and estate Some as First, futures such both of creation wealth fixed Asia, classes. as content dealers. and for asset ESG are: example management. by client obviously, and as and real Fixed broker Analytics income. or indices equity licensing opportunities and options, derivatives and geographies new new of index banks and new on such such as such high-growth and, other A areas

all to the channels, third content their attractive distribution enabling that those These right. investment example are very areas a new in And prosper. channels is technology own for distribution new allows

value complementing to franchises. addition In Analytics index to and more existing driving our even

reinforce the last the that our Over change conviction areas. we developments business notable had around this have investment several several months,

me a developments. these Let highlight of few

First, billion which across half fixed In inflow within across into ETFs equity framework, went series In all fixed into $X by capabilities. the content Factor dimension. within to new from the inflows of XX% Indices MSCI of quarter first we of driven primarily creation exposure have allows income and their asset clients U.S. a year, into of linked class and cohesive and which in seamlessly ETFs a a model, Factor income was X to the analyze curves, of inflows highest out a to way indices. into credit there class corporate our rolled all to framework. linked enhanced level multi-asset -- cutting-edge Analytics, our brought we a and total most granular this of factors income portfolios the our linked tier this fixed our billion class new multi-asset down any the any Globally, ones of factor EPS leveraging ETFs indices. Factor to $XX By tier

our we example In highlight about conviction launched developments and income plan. looking give new content is investment the release in dimensions, of series as fixed Factor have this later the let creating a client a this to internally few have product year. Well, that that expect indices at we me market that category us of to

within have and XX% run XX% to rate We double-digit for areas growth in XX% our Asia, in the growth to investments recent of driven organic in XX% of cited ESG run-the-business and addition and areas innovation long-term managers trajectory respectively. indices wealth the and where have cases are across sold to areas. continue our deliver subscription products new Realty, relatively existing All that of profitable, good [Indiscernible] I growth highly examples

to In Let index will focus in do our excited me which of role index-linked call now that will of mentioned, can growth that I briefly turn the be quarter, play derivatives a Baer, on over dive extremely this the ecosystem who one about. this we're and critical into Baer the specific deeper that. areas

Baer Pettit

Henry. you, Thank

there an X important the our to past, we around and we've or pillars reinforce call what trading X investment interconnected. Active management management, index These franchise: of each and in As are ecosystem creating activity derivatives. our talked other that areas passive indexes is about indexed globally

products manage Asset benchmarks our cash will use to investible exposure owners to and advertise indexes as the relative their benchmark. use who

These products sell-side OTC active equity over derivatives managers created relative market carrying larger investments, index-linked to transition these participants. manage to asset their costs. reduce customized high indexes owners and the but and derivative the will exposures risks and have benchmark. hedge markets for use from achieve markets helps for exchange cost have listed to become years, The OTC OTC The

derivatives, benefiting market. and the and the volume facilitates ecosystem in community, the participation OTC these trading grows increased of liquidity liquidity the ETFs As the of

in any ecosystem in a success one others. of helps drive circle virtuous creates that our pillars So these the demand of

be Within were underlying index over entirely we almost this hours a relatively same. derivatives time. that the the is developed the pillar securities has us a market, trading where index-linked that was substantial of MSCI on for This least could believe currency new ecosystem, area the is been for Historically, single currencies market single derivatives focused derivatives. and the all growth listed

last in multicurrency multimarket, individuals help listed and invested of our indexes key building have progressed, a nature. team of and partners decade, success opportunity, on accelerate global licensing which in how trading OTC comprised listed have futures are our at to several heavily on for indexes, community out the focused the Over the based derivatives. have in technology we this exchange mostly trade growth increasingly trading on To educating our has

generating our index-linked who index-linked new relationships promoting focus this This Investments and have already payback. elevated an broadening building with a are on of derivatives. pipeline exchanges launches in healthy and team product team deepening quick provided a and is derivative and broker-dealers returns

partners our exchange foster liquidity seeing coverage, sell-side market maker in are marketing, and partnerships aim which invest We sales formation. to programs,

our growth as product products on and Within the index-linked ES&G and in interest over increasingly long like should The serve existing market X at that XX% sematic has and of based leverage Factor attractive indexes tilts. a a on also $X.X broker-dealers, XX% revenue indexes as and high-margin cap overlays structured on profitability. from options. of swaps notional new was $XX.X million IT. and based of are we but notes, opportunities used be licensing MSCI lower numerous see clients based our The are as clients Most with these cost institutional time with of their from our well this in incremental indexes to revenue finding to we at trajectory In million last of could this options believe having our grown features options on value growth retail CAGR We listed grown open XXXX. futures listed over XXXX, CAGR years. the area have from our for

on based have in market, to to of potential single ETF currency of providers the other linked AUM higher indexes measure indexes futures their contracts single notional many than those meaningfully MSCI. this As one traded from values relative opportunity area, those

just one of wide the to on new on Our investing index-linked in example capitalize we frontiers derivatives active of range us. are how focus highlights of strong front growth

iShares I renewal update terms short-term year be pillars are relationship. current subject discussing While to ETF a in are the on of our next would licenses relatively we our scheduled evergreen growth, March important to it to expire provide thought The of index brief provisions. of

now new agreement. discussions with iShares are engaged advance We long-term constructive the around in

growth. balancing we negotiations not Our or And able a which until final objective order expand next questions revenue by our that within volume to to with in note few agreement, about to successful partnership to occur maximize long-term we'll the the information have more continue expect answer we is months. price be provide to Please that, mix the

Linda to the take financial turn to highlights remainder for and through the call guidance I'll the year. us discuss of the over

Linda?

Linda Huber

quarter another everyone was second of to the MSCI's strong hello and Baer, quarter Thanks, performance. financial call. on

across our the On the client was quarter driven lap but strength growth run given a double-digit by segments. rate exceptional was organic solid major performance subscription in XXXX. second And of and side regions tough operating

up Specifically, the Asia was XX%. EMEA X%, up and was up Americas XX% were

asset subscription respectively. XX%, organic owners, broker-dealers, our rate which and more managers run run XX% than XX% of subscription rate, and X%, saw growth collectively Asset comprise of

level highest continually on retention the a clients value to in focus rate last achieve our decade. strong the of us Our adding in XX.X% helped has QX,

high consistently run drive for have subscription Our growth consecutive last retention of rate XX% quarters. approximately the organic rates helped X

with net sales, For was X%. up first recurring the QX XX% new half down

was product the result rate a QX momentum in previously, segments. the mentioned XXXX. the in lower I As second very QX, growth of strong we continued saw quarter Also lapping across

of lines. I'll product each now the discuss specifics for

for First ESG.

geographies, exceptional We of was terms more rate hedge run run It Within EMEA new and XX% than sales ESG. ever of continued in which the for sales our in client and asset run segment, for for by larger growth quarter managers, recurring and XX% segments, second Asia, segments net our XX% Across and funds growth across was also growth complemented our highest broker-dealers. both XX% in was client geographies. we exceptional in XX% recurring had rate of Americas.

growth at XX%. specialized And core we Second, at XX%, our Factors XX% of in quarter XX% modules ESG and Index continue market performance growth. rate cap subscription with delivered to growing and growing run products, double-digit had which custom another consistent at see growing

Additionally, we of have strong XX%. retention rate

larger we Third, as for quarter-over-quarter. can so as being more This lumpy previous closed. in operating seeing complex is calls, deals and repeatedly Analytics, be increasingly metrics mentioned we're

sales was a XXXX, quarter second was recurring the 'XX of for Our million, tough for itself QX quarter lower comparison. making than up which $XX over XX%

to compared of quarter sales XXXX. recurring X% the were up However, first

strength continued have We rate retention positive and growth had fixed run of strong continue and with a X%. multi-asset collectively rate income class in which Analytics, to momentum XX% of

finally, growth was And our run strong Real XX% traction for in with Estate, our information offering. organic rate market

onetime or million nonrecurring up our in primarily by product to increased index X% period the driven sales offerings. year prior $X our derivatives spotlight to like were and RiskManager we'd which sale, versus Finally,

Next, ETF. turning to our in performance

average a growing was modest revenue XX%. to XX% from under and increase revenue products derivatives and MSCI's with by benefit into together X% continued our market prior in XX% the points. all options exposure linked linked volume AUM listed ended Most U.S. flows appreciation ETFs offset on ETF grew at growth. up focus quarter continued MSCI ABF and equity MSCI futures billion, average down across from Equity Indices about by year exposures. with outflows We listed notably, XX% and linked year-over-year decline in $XXX versus to management by assets offset basis emerging by driven driven Indices to into in ETF ESA year-over-year futures volume indices EM market year-over-year geographies

Overall, ETFs based billion inflows Indexes. of into on we Factor saw more $X ESG than in our

increase Additionally, than to there's XX% our returning $X.XX while in an our in ESG quarterly on were indexes And to turning of were Factor primarily to capital flows inflow were dividend $X.XX We're now with where an on more exposure commitment of or of continuing our the shareholders These allocation. to Indexes. volatility products into in a funds U.S. our indexes. into increase $X.X capital half share. from billion per directed based inflows the low ETFs on flows X/X ETFs based based

consistently shareholders, which repurchase X of dividends our XX% it quarter, have is years. last CAGR We to has the as We policy repurchases increased had at share during the our no to opportunistically. grown for a

have As of more $X a however, returned than repurchases beginning the share through billion we reminder, since XXXX.

at balance. Looking our cash

cash Our $XXX maintain is a policy globally the of operating was of $XXX general purposes. our million. end approximately for And at of to million minimum million QX $XXX to cash that balance

decline million were million, cash collections, The from timing expenses This interest Turning payments offset drivers the particularly payments this higher flow lower down QX. from for payments. primary of free of was to and by cash XXXX. benefits QX for $XX $XXX tax

policy, provide the on or our for the guidance to leverage to dividend with capital update our approach Our to allocation an same remains like changes no approach And target lastly, our repurchases. to year. our I'd

are $XXX continue we growth our to our to drive expenses opportunities. With our our for rate will expect high and range growth, adjusted EBITDA we year the focus performance tax a million strong EBITDA $XXX million expected our and our with the These business on Given on plan invest driving million investments and guidance or high-returning of number to X% regards $XX full CapEx. $XX to CapEx and to be million tax of to XX%. effective guidance, for to between expenses end

points, the approximately divesting of the multiyear income EPS. PSUs excluded benefit of which from tax to been has includes This adjusted certain quarter related in first XX percentage

we benefit, used effective this rate adjusted be expect to in Excluding XX% our for XX%. the to tax EPS the range of

your And line with take that, we'll the to open questions.

Operator

Instructions] first comes line Manav [Operator of from with Patnaik Barclays. Our question

line Your is open.

Manav Patnaik

My that first broadly, together has there other the of an growth just white opportunity of spaces space acquisitions, put just lot at impressive here. guys it. of is be around may called around was maybe just their Obviously, initiatives, a seen due make look own But you I like competitive to PR rates some And if just we've more there tuck-in how in landscape? initiatives. bunch the wondering everybody question out. lot a names ESG some that is you

Henry Fernandez

fiduciary Purely thanks, world or their enormous. or ESG Manav, So base will taking time, the sustainable that for investing all if opportunity mainstream the integrated account somebody it's a is sustainable be the ESG investing investing, we in space. So not as into into Over duties, and it question. investing be may get be not white factors ESG sustainability huge will is which talking about on investing, in right?

lot this significant an propelled We've have and do that area of success had had so. into growth. to investments We a incredible continue have

across-the-board ESG to that indices, models. a risk screening as to in research a ESG from exclusions is Factor to ESG for have ESG set ratings, and We cut product

our taking the ESG putting and We are and like. now distribution that it of content all into platform technology channels

this indices indices well, large have So own internally, and that fixed amounts also our expanding ratings is on some income, area lunched on. from also we -- are we mentioned fixed have as indices, ratings focus Factor want of that we an ESG to working the team the income is equity, into I into This but of that like. which to

So we we of good feel are. pretty where

growth. A is were organic lot what of doing

to We will right in at value-added And I'm and of feel themselves targeted opportunities very that position have for area this maintaining good a the leadership the financial returns. present and be acquisition lot we space. look about the and us providers also but will with we're they sure competitors, we but attract pretty have that

Manav Patnaik

Linda, sales. for maybe quarter. is to little welcome a was if I contract that enough. be of was that there could And just then comments out? specific analytic wondering just the you on a to the Okay. the Fair guess, bunch and that the around implying call. lumpiness pushed may I just and bit that more got The elaborate

Linda Huber

this. times And in Baer I'll the is made, already the said that Sure, a quite and lumpiness as Manav. business. add Analytics mentioned we've factor But of let few to a prepared we've we comments

if couple days, to Specifically, we had moved found bit few deals be have would the of a results a different. a

unusual anything So if and else wants he on Baer particularly I'll see has nothing to going add. there,

Baer Pettit

The health year-on-year. Analytics an retention of XXX No. us the make I the always for be rate, only the is business. comment important about other indicator basis would been points for That's would which

our there's previous the change And comments so carrying on there's normal. change trend, think overall, I no and in no in as we're

Operator

from Our Kaplan next Toni with Morgan question Stanley. comes

open. is Your line

Toni Kaplan

to of asset-based now competitor in there. traded you increasingly get Henry, like historically, largest And opportunity bigger have business there. And their and a sort they've of profile space the a basically, products. different a piece real seems and had traded your fees it Index you've had and product your larger in business

MSCI's down there you component how the time? changing an that's my add subscription going but guess, opportunity products Like traded And the be of the because over area? question see I business would could helpful. do model so see anything bigger is, observation in you And you do

Henry Fernandez

active grew lot products, X that of XX%, right, And active we stool which grow with agent clients and new of management management. management, subscription or management lot keeps started, the the new stool index together, passive exposure continue and lot XX% -- use management is is cases, Baer subscription new as Yes, enormously. with traditionally active in that etc. that so management management, our a a is derivatives we of growth all indicated, legs of to and the a this and That part, right, obviously,

way obviously, indices Stanley, with domestic ETF of of and we're the many we mentioned indices that. in enormously ESG the areas we not and back, U.S. to inventors through now also -- Then domestic licensing Morgan exposure by were that we're international and the border them factors all business but grown international across has and about only like

the that third continue so will there. growth in And is to big grow obviously, part we runway another And that and be our derivatives.

been a the over-the-counter always license options derivatives -- difficulty explosion have of was slowdown, the in but future was absence listed over-the-counter We growth a broker-dealers derivatives. of potential multicurrency and multi-country, in indices and or about the futures

maybe all futures multicountry, now trade in our years the are index the to EAFA the emerging futures X, underlines find model in So a able broken world the back, contract, in with the change X multicurrency partners open contract, zone time and, this that. X, the of market interest, a we to which few in success is were years sleeping for contract back, largest path futures was of sometimes which in third and that a therefore, MSCI the sense the

-- currency, be which the logical have is and regional. process, and not forward is investment has a whole the would country, for growth this single that investment single So the to path industry, global more this because of created

been should why that. derivatives So not

the anticipating that multi-country, indices we want of years become XX multicurrency larger leading We years time leading one are in time, national of actually be derivatives the that may providers than XX to area. And ones. --

place. this more have, the you is more an and, management and ecosystem all and takes in active in the derivatives hopefully, the ETFs So that Baer over-the-counter that the indicated, trading trading more more as

world. an So liquidity of it's across reinforcing all one and the ecosystem another

Toni Kaplan

helpful. indices. investing an Congratulations. in time. that very some Factor mentioned you Obviously, That's fixed been launching income for income has And you've been area and fixed focusing

Because question little enabled haven't The gotten my be changed has to you changed what And you Street. now? so it, to has what has a internally I I than able this it's has that this guess, provide seen that different Like is to place?

Baer Pettit

were in really Sure. or Yes, cap the Toni, about you income global indexes, they equity the is currency what's different market so if issuance from think very weighted. fixed and outset, weighted

with a strategy fixed start which differentiated. to So income, what clearly in different taken we've quite is

indexes, could You them serve very client needs. will which and call more needs specialized particular product

Analytics that leadership also we use in this felt have the and have thought content -- of some we the could fixed our that there. space, the we So we and from infrastructure that income

And business be has the this kind year. really having this. this but will a be market the a sell later in becomes line exciting be to major business, venture so income run, exciting through market finance then -- this -- we to -- it major about the financing for then and from licensing we the discussions it of an this hope from licensing this entrepreneurial venture firm, early that little the to So will within short model income bringing stages. it should develop to We're counterparties very think said with self not been sure, some using a we driving we we pretty as of in

will to I we will it and hope think innovative bring that's innovative, but and what be something small, new this it's I different, space. it be do think to So to

Toni Kaplan

you. Thank

look like lot have a to you to. forward Sounds

Baer Pettit

Thank you.

Operator

Our with next Alex from question comes Kramm UBS.

open. is line Your

Alex Kramm

the lumpiness on Appreciate thoughts hear but the broadly. to love guess, from sales I in coming updated just environment the would Analytics question more back to the business earlier.

the sell-side industry. other space Some but of struggles consolidation your in have players the the on the competitors acknowledged -- certainly not competitors some Obviously, in in areas.

what tougher? so immune out are there? environment the So far been you just I getting the have Or you how but is -- very all know experiencing curious

Baer Pettit

look. Alex, So

deal the are sales most our -- For all and in pillar various expenses their that actually our of the offering better with them of allocating efficiency creating firms analytical a efficiency That and Analytics use not you're go to operating their and sure all we more to but manner. bases better has their humans, to in management of strategy. central etc. on actually an through data aware been efficient so that client merely their on organizations understanding they It focused give as portfolios, with fewer -- the work can technology

would been that our to to So I And Analytics very say response to that much that referred the we to. or you our the environment with is be had consequently, catering result story. strategy continue that confident

to and given and trajectory big sometimes is before described growth, present, quarter. a our be how in progression unchanged. guidance that the make growth that as though there's a we've on we continue lumpiness, deal managing a area steady in there's product that the said, Fundamentally, matter even this of doesn't we're and We this we at in confident given

Henry Fernandez

are -- add would this. Also be the very alarm one first we we're time, you. important the or whatever, comfortable tell all, we of it's one trajectory Alex, you're going the we bells I saw where more to say if of very first And that to in any to that. that

So and all of that.

over that because that, is described, the Secondly, of having about this client the we're Baer lines all is that all we're pretty along very optimistic positive.

you this to subject that have of this example. proof rates therefore, not about in which levels retention level in retention to and, people sometimes another are are questions offering almost area past pressures, our high The is of all that sticky for record competitive the rates

we but we going lot unleash So that's that's the area. technology, hands enabling we more the because it's in clients X every third of our value effort in content space a area handicap our the only our content that putting lot the content improve the technology not into make that a it second a a as And for that should be but to we're to always been improve as is and use has we there or cases believe that lot work. unit selling a of our more technology the area of

Alex Kramm

you then have This enough. your first X shifting months to first you. to But this to call. to And become what been welcome very question you've of Linda, well is all, on? on picture Fair a last semi-personal very, over you've of hear organization? gears for been call. make machine as your in What earnings actually from your just few kind MSCI oiled focused mark obviously, here has Great curious now. but a bigger years. there perspective Would particular first seeing be earnings very you're the

improvement. -- room So like seems there's not much room a not of it lot for

So curious what you do think you you've your can time? and where been spending

Linda Huber

Alex, keep growth trajectory opportunities thanks of internal colleagues Fernandez and Henry Mr. Working traveling, first here, my on my of and which moving improvement, capital the is XX us. is advantage room forward, been with time these for days. here always It's big learning Been a incredible the and take allocation focus as kind business, the think for ahead question. our for really would spending that to great to said. process very the agree I is theres statement. Alex, here real challenge the

make payoffs they We where are that most have investments the returns, by we focus want strong the right, put we get areas, and sure to right these on which them the shareholders. valued places that relatively highly in short we

well-run but move a operating part place always cycle. the So look is opportunity and plan as we forward to machine the a of into for that I there's this quite improvement

Henry Fernandez

internal which Linda capital is name is allocation. middle Aycock Linda's Huber, So ICAAP.

Operator

with question comes Joseph Cantor Foresi next Fitzgerald. from Our

Your line open. is

Drew Kootman

Drew is Joe. on Kootman This for

to Just on wanted touch the M&A front.

the You guys have expand talked new continuing about initiatives. to

for looks pipeline the how seeing just that? So

Henry Fernandez

MSCI very platform investments, our content about organic the and that, focus we the on the margin and of last years, made number that virtuous investments and the especially incremental mean, -- top in on the organic of margin. think to The and I build of X produce. higher proud return more want question. every traditionally And grows the that investments they technology are dramatically. on data franchise rate the unit in research, that expands platform of revenue the we costs continue the on grows, gets and and because those circle of organic as infrastructure has been, the Good of because we therefore, that our lower that at the a we're growth, revenue of more can for and

have very do, one at imperative return said proved internal our allocation are high these last to buying not growth, are of and have high marketplace. in going extremely out return mostly pretty there Having those and great looking the as as putting high those of areas extremely back to going capital they strategic in they organic that's work to why as capital our is to because are that we're but to So field is the are the we and add great find because it's to of always that year, to else shares we the cost but a capabilities, not returns rates look to the few we be have reason ones an at returns that, anywhere rates as acquisition of what of therefore, projects organic returns high. not extensions

at everything, do focused on why we this So area. our obviously, to so because it's that's so. fiduciary look we're duty But

Drew Kootman

how you'd wondering Got moving And forward? just shifts in What expect shifting? environment? it. AUMs you're talk the seeing if demand And about are any then you

Henry Fernandez

done around shifts held and up well. levels with 'XX So U.S. continue the the of to so end ETFs a part I but run-up of extraordinarily pleasantly very The world. of right, been AUM course, market high There's the in emerging has as that done after an so incredibly some and of of have do look, having well. AUM think surprised 'XX, 'XX volatility obviously, we in at lot been and incredibly we -- have

well there, -- all the If coming lot cahuna ETFs. into markets in and [indiscernible] right? flows we're some the Some we we market all a but weaker, developed have ones in very markets And lot these a indices the U.S. factor well, that, in and. other stronger, of of emerging do are areas market have are of doing if developed big and these of we proud we well, diversification we're the if do have is because

think block great diversify and and indices a the why on So constantly is income to that and that. the big that's it to this factor key fixed a building it I the and reason ESG into franchise feed continue innovate is is

Drew Kootman

Perfect, thank you.

Operator

next Fargo. Our with question Bill from Wells comes Warmington

open. Your line is

Bill Warmington

Asia And geography, in wanted generate as years? do and growth how X Asia generate to highlighted just revenue ask, do you from Asia today? revenue from you much So I much think you'll a you how

Henry Fernandez

at -- So we area of institutional growing even are going but amount healthy in asset a with enormous the happy look, the was at that not enormous during been Asia pace being and it though can into And savings of wealth we we're amount Asia, is owners wealth have creation an and before, individuals that growing in or that the say and look we we've an today. that growth in not all been double growing of why region, triple what management Asian something of is the be always we house.

the presence countries. I Asia Asia in been years for in visiting had all we always for a one and X consistently big now

that in So if put Asia, there. most anything employees of are today, just to in our

So did months whole of client in with a XX for of Manager change of sort the team therefore, the the in coverage appointment last the a Asia wholesale region. we Senior

Some heads were country of changed. the

So reorganized region. the we

And the that all even surprised that's are of product that. Asia just highlights impact putting fast last heads are these the have reports has though quarterly actually, and few been in how had of the in some the quarters. growth We so managers arrived -- presently we in why

that So will great. be I think

let's of million $XXX right about now, is minute, a subscription about in ETF of or have of I for when $X.X that billion at so split, Asia including the -- a not subscription think XX%. about and rate, the we total in look terms say you run of the

to next lot the to that to now attack XX a of rate the to be in and are be happen Asia because years, number the bigger has America Over that and we bigger be very big growth a It has won't than of way. and is down. other well positioned a going lot needs EMEA it because regions

of time statistics in clearly, thing XX% linked the Asian large ETF the zone. purchased U.S., that -- but be of look U.S. investors. are some the minority highlight sometimes those the I vast of listed that order is the other Asian investors a in are are There ETFs XX%, sometimes ETF majority in a when The to the at may XX%, market, are to by XX% XX%, of MSCI would those you ETFs by purchased the Indices

maybe, So going this it's number, a number. meaningful of big not but the ETFs. high it's a all enough to It's hard underneath analyze

Bill Warmington

how other to it some long discussing we got that ESG was I question the came derivatives? was, the Well, all been as going was be wondering mind derivatives you've before to

Baer Pettit

we're of Very grow. see recent coming category, sure shortly. We've more launches We've for up got launches confident which so those. the and and some got some you'll very will

Bill Warmington

then saying out Linda of course, just congratulations And welcome. to and a shout

Linda Huber

number, there's much, region million. Asian coverage, Thanks, looking improve more Bill. to that. on the it's investments We're come We and to $XXX very particularly up making we Thanks there. rate Asia some we're the Obviously, run up dug in again, think Bill. in

Bill Warmington

Thank you.

Operator

Buckingham. Hugh from comes Miller question with next Our

open. line is Your

Hugh Miller

a you just I displacement competitors had really business the with benchmark sense Wanted the enjoy in to expertise benefits name that win just standard helping win name factors solidifying kind about your being of noted risk one about with I and how And reduce think to kind from out several of there? get MSCI think guys of also areas moat geographies. very here mitigating displacing brand U.S.A. how that. displacement with you a have guys you regard benchmark to, nice your some think you Index. risk to in? just recognition a the Obviously, strong noted any And you brand of

Henry Fernandez

few so comments. Yes, a

terms an if through moat remarks pension went at MSCI sovereign benchmarks. a because wealth indices all your that the that our asset huge you're Baer your I think an with in ecosystem fund fund of around to allocater or the or respect create shop policy

managers, like the benchmark. deviating be do you options, can can taking overlays and you to from do over-the-counter active through therefore, don't do passive, futures have you give swaps your and can like, and derivatives you could You basic risk from

So around a huge that. that's moat big

The on in second worked Malaysia. we is big that area

process we and don't see country included. which product And we the and And who's productivity is various go important of our in closely countries and opening hugely with to security a market around cap like work and continued inclusion new underestimate to inclusion how is indices the and go in that to investors to up. the development world the those be countries

and builds the all the in portfolio we're different ESG as factors that a is represents, well. Secondly, innovation way, all that, and of in a of doing

And second is part. part third the the that's services. So

we own about clients as to clients them so for indices in manager talked own our helping our especially that can The processes people their services index self internally provide being asset to a have build some opportunity their internal infrastructure threat. -- It's of terms managing sometimes do a that for entire big they clients rent themselves they own to want portfolios, to their build can our us do because that. that actually indices can

So profitability of there in drivers space. are continued of growth lot and this

Hugh Miller

that be to equities demand demand will U.S. of products though and momentum, guys is just as U.S. guess, a I just shift in the investing helpful think kind continue for very a you drivers color. in for AUM international? and skewed in we're the that you very And I seeing for that long-term to as That's term about your I relative toward ETFs appreciate follow-up it. near are factor etc, they expecting and toward your a outlook likely the noted favorable services. equities a the that expertise

Baer Pettit

a new it's relatively We're it. a -- excited historical clearly it's really at look context, if been category for it's a -- you by us. Well, the

been it of kind as more this flanking mandates MSCI expectations. than we're see to an a in asset down the more sure, we've of strategy be the this their bottom-up, based top have a some That's kind content U.S. down U.S.A. And seeing content, at what I end successes look we focus think give of then the when with ours, and portfolio going you For incumbents. owners, if present and they rather drill it's on specialized of out driven mandates benchmarks we product like of equities. then seen a equity probably at -- have and total and more innovative high our been but -- as view to

They we think So not may few years are making see space trend where the that a this is perceptions decisions are and they we that a people's ago, have made continuing. altering.

seeing excited ETFs the many in of pretty I and increasing of about partners type areas interest to support because we're or change got think well. help that. derivatives So that love this from our we've And innovation they whether as it's

we good will and a on continue. trend, we're think believe I So it

Operator

Our question Chris comes Blair. William with next from Shutler

open. Your is line

Chris Shutler

M&A return just little to periods? a getting more thinking of opportunities. of would types about the regarding spending about your Maybe and specific like more be say likely of think time deal? inorganic Sounds fair little stuff would you And more that payback you rates the tuck-in consider and how variety

Henry Fernandez

No, more time we're Chris. spending will say I not on it.

open is many, same to partnerships. I time. spending business. the that many is an though MSCI changing want architecture think amount we're is We What develop of more

-- do to to want many So partnership obviously, partnership, of more have we distribution we We partnership XXX clients. we want with to data. have with certain and great our we have channels want partnership with suppliers

the class in use We that the we buy data example, to We're go in indices. do a base, or So data, fixed can indices. fixed have the for the company, we'll vertically integrated example. asset private income have to partnership buy not income in for

have technology in like. that in We right? help terms the and with want institutions conditions and deals in the and like, prices new partnerships So order we providers, models of partnerships academic and to valuated to terms sideways build

to the because and is exploding to don't those have partnership you've effort property area they is you the of are the into and put and like? and look is the is have you the area that -- how time the M&A got which are and they understand partnerships, and So venture the outlays components returns agreement what of what activity in have in the them where we But of the what kind them royalties money at you and like. to the structure do the of meaningful really

low is to If So a price. you fishing we're of us there and But somebody at for no, transformative and going buy extremely We're us to any strategic in right? not not out say we're looking those. not actively say comes big can deals.

Chris Shutler

of with on provide high good any just or kind you and transformative to X speaking MSCI that then big can this announced deal? there And morning, was impacts Okay. from deals, LSE comments bad level Refinitiv,

Henry Fernandez

and continue both parties them, first, the because We've that great indication various in of relationship, areas, look, sounds will for like them with and some thing, and a example. them owners obviously, and every spread had extensive pretty to for deal some been positive. in both their So is partnership has kudos reaction cases market

-- week, came in Obviously, when it, about so there's us, obviously, had all Board strategy. we've talked a implications change the that's to up, earnings we earlier at because this to meeting our this that, the So no of release.

strategy. we to So no talked the our And in Board. change there's

disruption that, we our are those. We that good we of buy. -- partake that But happened some a to want do of nothing deals, be of any we as there's is deals some or There as a go There shareholder result say that, course. have to some don't staying in result may deals.

Chris Shutler

Thank you.

Operator

next Our with Tsai Henry comes question BMO. from

is open. line Your

Henry Tsai

made that there are around and you question it's after that? the was off kind ROI you the what's exciting lot framework different you returns ease of you markets how think you're about like of so a return market your how or are think size around whether which guys like products comments for or beyond to -- data it's do about products metrics, the how based about, how actually you do the very Just factors. a of, of investments, you ESG building quantitative are I creation? whether or of just on -- kind just do the going that of -- the wanted had some I all prioritizing ask cool the

Henry Fernandez

Sure.

opportunity, and all, of our reviews, a financial constantly can our a our typically content existing and we substantive look returns at, or investment when that -- developing let's some existing content return. broad infrastructure. there the allowing of the operating about clearly our through investments, the We have on if and for for of a infrastructure, all So the market of mix, relatively that all process, a for Board, expenses at competition, the methodologies ones, our pretty a etc. so We're looking those. market strategy our those both we monthly tweaking looking it's -- of we're There's with variation in more discussions at of have where good are clearly track top we're we make all them, fast or range, projects, If broader the type broad new etc, we're etc. we'll technology the judgment modest meetings categories of clearly, first business certain of are say, ongoing

scale recent So observations? fit I and the on other Linda, purpose observations of kind think for depending it's from time any your the really horizon.

Linda Huber

investments heard can advantage. getting is we return make. in just And Henry, Sure. array pretty with a continue I extraordinary lot appropriate we with is high products, doing There remarkable really things really that first to think new around it's because forward. about you've to index and the that market the will of what this me think this, go we're a few about huge the more let discipline is a year say as rigor and a

the to in great. which expansion made exciting approaching were for that then didn't very and area. in us looking new just investments, to of thinking in wealth We've which run say about We're Asia, and shows as I looking payoff, exploring in capabilities has quickly. been investments some returning to And technology up and about coverage ESG, that in the we're had lastly, that, XX% enhancements and the in investments very to our very a technology obviously, income think to strategy. the I technology, team hires fixed for we enough help great on in lately our We're drive really spoken index, and quarter in we're touched go-to-market drive Asia, doing factors. that's We probably there. it's about, rate think management and about really our make of heard well quality area, You've the starting In we're period at technology area. including drive of particularly, Henry capability appropriate our which have things some all coverage We in that. year-over-year, the is

So everything and tone It's good. the a cautious feels market we relatively going pretty there's to great appropriately here think fact anything, we Henry if are to now. is good missed about we feel but I've do. lot stuff We're forward the And underpinned and add. by tenor leaning that of

Henry Fernandez

since investments company. is in an in this area and we've point last is emphasized this the important such One

or we All more be profits. more have or want not people have revenues or more bigger because of even have to our even investments are

to an of All means those end. are

that payback. every return, those. the returns create doesn't our that that Not dollar or to -- EBITDA quicker on Importantly, you're has beyond We have going All value. to to have anywhere. investments results the which the strategy, same why have on of the be The go that, shareholder out want what we not, focus that's got if the is are the multiples. of what clearly value, better. is therefore, you to first make on it once of -- the to investments high here shareholder that's what's something investment investment. bring the in of And the is to And the profit and in are to focus the go that brought And we we payback valuation but value

that's are, here we what and to what very we're So we're that's because that about materialistic do.

Operator

Huber question Research with comes next Our Partners. from Huber Craig

Your line is open.

Craig Huber

I if you, could. with start I'll Henry, Maybe,

What's your put broad macro the CEO market you? the most obvious and a now? of Is What's a aside most here. road, question right taking down it -- you the of bear worrying company Just now as worrying potential issue. right

Henry Fernandez

that night enormous up? for me not the an make people I And create has and the our consistently much fortunate at privileged value the enough And by to aspect A clients enough, amount be feel how way. every it world and is worries that ask is to of do keeps the I company our of me question, and change investment that across shareholders -- I'm pretty opportunity answer what give a lot and working that that create I of to me Craig up at and like.

Craig Huber

quick. was that. That Okay. Appreciate

Henry Fernandez

Very short and up. mess sweet. Don't it

Craig Huber

mess it Probably Congratulations, Don't that up. Linda. tell Linda when you as to her. hired well, right,

you growth about It's number I what high-single just of It's you could. if to growth obviously ask me help Let you to last stuff. there a of above us there. see have mid-single I and digits. to The How from guess, your growth organic been quarters, X come? change end that? do sustainable tell digits a briefly accelerate to Can is the there years good coming think it to sort for while Analytics

Baer Pettit

Yes, alluded better continues as for to be are their happier Analytics a but Then which working, that nature clients, and themselves points. really, an indicator a we that strategy, so. important Again, it them us to innovation, helping with communicate us in the seller be data retention lot think offering up helping which both our again, clients do clients is also critical the roughly extremely with look, both the A our services our XXX is them Analytics we're of is part reporting repeating I helping element the shows is the an I of that we with and importantly, because part earlier, what rate That management. and is quality of of stress build is them them. portfolios, efficient the increasing basis to earlier, the from we're is much, offering them goal products. That that critical this more point are service of that form to run a our of as is that, of means the help that right? rate what their Analytics in is another

we every we're And in or this continue. executing to we consistent that's continue we to where over say, be we steady progression, is I that a, but continue and to should market, communication would solid, this said give. focused think, that I'm and time in and dramatic So should pleased so the you that been, rapid that exchange, i.e., have we to same never every we day, be it on continue, would was particularly deliver, message it the I called do said and to week, this a going if our would right we trajectory

Operator

Our next Keith from Housum Northcoast with question comes Research.

Your open. line is

Keith Housum

want so. look you able a history, question going have just understand, a guys, at over EPS out that been you. is we to after year the from been? have guys of or over years or critical markets. your for you to to I forward I I'm two, move first If trying understand X? to the employees that next much lot year next X opportunity past growth the markets to And the look has How or as you developed EPS X more how emerging

Henry Fernandez

and ability of capabilities. So and look, flexibility quality more and operating centers been cost, of I like. these a a people expansion it's emerging more not products new in of think cost lot by create and about with terms location have in of new to places and it's lot people these of expandability that of overall we has in the that importantly, great had our the move services the just about to critical the major structure the and the the company, But market

So when operate that high lower top importantly would that the line, XX-plus driven, to of the all the you of than emerging though relative even is it's lot percent has aggregate centers more say, a in. because I the markets employees cost we just cost line cost much

Clearly, of major leverage obviously in few growing think over the -- expansion last I the by the of EPS has years seen leverage, rate in of growth, the in we've the the and significant operating by the the the the been drop the by margin increase revenue shares the tax the that expansion company, EBITDA significantly so the answers. of years. specific that's buyback

Linda Huber

And of market the It's the well-oiled I've by our been company that, we integrated let X market incredibly bit past that the people Having the number well them the centers. of we quality. our already in me to have done. of employees centers. is the centers give structure color. market impressed a really have all just developing more over with of is it XX% emerging it and Linda. it's said, isn't this The but is a that has well that help This emerging you change traveled out where already case as obviously, market remarkable months, Henry costs, in and to the emerging a And to thought about does go have quality many centers,

have, U.S. this what wind weaken done final bit terms of the strokes EPS, announced our that we but changes, beginning think see as forward touched in driver with little of as we'll changes the those tax I Going of on companies, backs year, most as from happens on, a other been forward. Henry law at beneficiary the of at are implementation that may move we were

opportunistically of shares fade may as more into we're because the on -- optimistic move we part but We will that as operational keep turbocharging will continue bit back we heavily forward, heavy obviously, tax the particularly. we and to little buy things, discipline, move but a focus we're going to a XXXX,

Jeffrey Silber

Earlier you. in another Got the the sales obviously focused analytical were just color. question. Thank Appreciate Yes. it. quarter. more And on quick questions the

how like average us your analytical was remind the size of typical Just sales?

Baer Pettit

us. front that quite in answer. We broad simplest Look, number a is -- have of It's range, the it it's

a firmwide very millions, So the dig multi-asset end low numbers, right? simple $XX,XXX, then the typically of typically, good you broad solutions, can revenue cases detail from for the comes the a class but give short offline. bigger have And can it's end deals, and a we the multiple of sort part part for We're lot good pipeline the a is into the of broad solutions. more pretty type we answer So some -- large like but with is, the $XX,XXX of range. the really of we different some and use at higher out is them range equity

Henry Fernandez

is increased. important a high-end of then of is high that part end those the And many big time has that size dramatically multimillion. deal $XXX,XXX, years other the today therefore, sales strong. if as -- A the week ago, by, happened to are question used one to or quarter, of so X you slips second last -- the -- gone deal be, of the the in $XXX,XXX, those quarter of are first every the why say, quarter, single those big next The sales, has sales, of what from from to they of are the of week the they weaker they analytic

so going a at on basis, best our picture Analytics otherwise happening. get sales what's of quarter And the to look you're rolling a because way is to distorted

Operator

back further over closing no like questions I time. turn Wiechmann Andrew showing at I'm for to would the this to call remarks.

Andrew Wiechmann

you, joining everyone, us today. for Thank

Thank do additional great to out reach you We much. a forward As if all always, so engage questions. hesitate happy of posted our not to you please progress, do keep on have Always you. to day. have look you and with

Operator

Ladies today's and for Thank wonderful you have concludes conference. this joining gentlemen, and day. a

MSCI (MSCI) 2 Aug 192019 Q2 Earnings call transcript