MSCI - Earnings call transcript Q1 2020

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Operator

Good day ladies and gentlemen and welcome to the MSCI First Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session. [Operator Instructions] As a reminder, this conference call is being recorded.

I would now like to turn the call over to Salli Schwartz, Head of Investor Relations and Treasurer.

begin. may You

Salli Schwartz

earnings along first first reference brief on we Good quarter release operator. the are update we welcome the for to a Thank earnings available day conference as press website presentation first as the Investor results our XXXX release morning msci.com tab. XXXX. call under well call. will an MSCI with This a quarter this press on you our announcing and quarter Earlier issued this Relations

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

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

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

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

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

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

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

our Officer of the join Officer. Wiechmann, portion Fernandez, the for and Linda President our COO; CEO; Financial Chairman Baer Q&A call. the Andy Huber, our On and Strategy us today will are Pettit, and our Chief also Henry call Chief

like appreciate this the media we members are would listen-only patience morning today. various And your point quality be mode. Like as we issues If on out call we may many a finally, of locations work I we the have to them. that any audio through of remote in you, in

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

Henry Fernandez

and everyone and you joining difficult everyone you, hope environment. thank for staying today. safe Hello I us Thank Salli. healthy in this is

call few and Before actions I acknowledge environment. the our results, I our related to a and through times share have this successfully our to over first challenging that turn quarter of this unprecedented would shareholders to clients taken to our our we manage like people

Across around countries right force. work productive and MSCI's with the currently full we of engaged effectively to in business the remain XX all XX our employees deployed working of tools continuity the plans XXX% have across globe, They our XXXX are in locations Almost remotely. company. functions

our processing challenges over on and Our XX.X%. businesses. with extremely supporting transition focused remains have we to been this have reliable in to their environment, that stayed of resilient uptime keenly data an they're facing able and seamlessly working we Because production new the managing environment clients, portfolios

home. consultants client services coverage clients from provided sales restrictions products location One our example services. by access our to of removing and to immediate they as our Our and expanded and our products support is representatives work have

delivered in content few more product frequent that our and an across trials offered suite have last weeks. widely We been updates free the in has unpraised effort select

crucial at dedicated research we has analysis. insight The have social wide rapidly clients of create coronavirus support this team media, from market delivered variety page. mobilized through we're received the that to right research to podcast, allocates things timely them web tell our us And has a and time. the to This our doing been and

market mission critical keeping help conditions. their to insights portfolios, needs regardless build may incredibly faithfully clients our I my serve tools our proud providing of resilient way to the to am colleagues have clients to stepped of with of up work be, whatever and

to well-positioned of ensure actions And their financially shareholders of company. to that the finally, our and support we have MSCI continue from taken remains concrete series benefit a

will during how turn to and QX to continue Let navigate focus this me crisis. our now we

operating During and growth XX% per the in first in year-over-year quarter, adjusted XX% we delivered strong earnings revenues, nearly financial franchise in our adjusted performance EBITDA share. XX% of across with

year Since the MSCI of back through beginning April a an of of of average XX, the million shares, and shares at million $XXX bought we total X.X $XXX.XX. price

in actions with quarter our paid shareholders. business approximately stated to also quarter. with dividend objectives our upcoming per approved of capital second capital most payment possible returning excess shareholders And These and our of the of our We to million structure the are $XX consistent dividends has Board $X.XX managing the optimized during share.

start share stock of since our consistent of price. is consistent taking quarterly program policy of XX% declaration dividend And paying advantage of form our the of practice our Our with with periods XX% adjusted the volatility our to dividends. in is repurchase EPS of year the in of

and company of stress of strategically economic stewards uncertainty these ongoing we to carefully for regardless stakeholders drive innovate as our to As our an your of shareholders capital driven market and times and business the benefits keen the manage important of are with market through grow highly ourselves, conditions.

are to compensation financial As performance areas. part flexed base. significant down up of is expense the our made most are part significant Currently, of on we be our place in freeze only have or company. meant critical few and headcount hiring flexed expense very compensation costs you and being of the depending in A variable additions a know the

ever for that than scaled focused our us improvements year. are challenges productivity in operations driving more we and appropriately on of opportunities ensuring and see front the are We this

our franchise. clients, environment, add that more resiliency our must-have shareholders. and this navigate secular The our also our of As technology value in tools ability confidence create analytics supporting our our to drivers remain applications confident trends underpinning and we are for we continue business propel to the enduring evolving value to clients content, MSCI's and to and and belief our significant unprecedented

as more ongoing our will innovation. color Baer, on clients hearing what will are call who as turn of provide over Baer? the we and seeing I now examples well to from

Baer Pettit

this. clients your I Henry. in even you, durable to our business Thank for significant model in environments in our and share our value colleague's like abilities deliver confidence

Our focus in tightly investments ship clients therefore businesses and ensure about own integrity. detail to to engage and total their with to run operational our our remains

We rely our pandemic the to the time, continue for of create particularly headcount reviewing every additional request non-compensation continue and in of to effects. our uncertainty the to ongoing expenses. personally prudence depth clients am us. manage around I expenditure for and to closely the on to the same duration ensure and entrusted resources economic using catalysts At context its in the we want to tools

several views intensified our clients on help their their identify achieve to with rebalance we portfolios to perform that have engagement and insights providing portfolios, them research past reflect factors objectives. Over their investment and weeks, the their tools tests stress key

strategies. performance We and classes other are research including on various factors delivering daily content and the of risk hedging asset pieces exposures liquidity,

Responding quickly recent to in upgraded constraints. we clients certain tools events more modeling have closely the of monitor our enable liquidity market, to to

our shocks. multi-asset tools, to simulate model risk access class commodity users oil, we equity, currency to provided have outcomes and portfolio foreign credit, For of across stress tests

when management even services economies more Many products become capabilities important this during under features these stress. risk like periods and critical have of markets are and and MSCI's

to in to One first ETFs the at which year-over-year equity the spots Year-to-date, quarter. billion assets in ETFs continued management linked linked ESG end ESG billion several reached We MSCI we've MSCI in observed of adoption was observed cash inflows first indexes. under investing. $XX ESG quarter. the into the had Indexes bright increase We XXX% $XX.X of of equity

research continue more indicates demonstrating a investors sustainable expect we implement the the kinds quarter Indexes so an this to approach far. has forward, even this MSCI ESG first these in been of long-term of Looking And appetite resilience notably strategies. successful shown our during year. to have crisis investing

I which asset-based licensing futures to growth would within highlight is spot, revenue fees bright rate run in our our our is Index Another and options part like and segment. for index of

The first volatility, multi-time in and XX% With dynamically market reaching zone XX quarter million to utilizing indexes. indexes clients and derivative will futures the contracts. approximately to ongoing believe trading linked over we multicurrency, options unique year-over-year grew products MSCI linked volume our continue

rate which fastest-growing nearly results now annualizing year options one run doubled last be since Our on indexes end; our based million than quarter opportunities. to totals our of our futures more and continues linked for has and $XX to from

growth continuous In fact benefit the innovation company. ongoing our efforts in will the facets of a of variety

factors indexes ranging from approach client variety economies of our within to technology. index creating and to As one we products franchise focused a just classes. example This indexes working tailored wide demand partner example, on on the suite a add innovation thematic existing in one currently of of our of are series robotics. with will exposures to potential a our This thematic areas disruptive asset genomics of and across to important is new digital

outcome we and Value-at-Risk existing Climate This only has Delta change an clients. for XXXX of our Most our and but product in for in remains growth be a Carbon real topic Climate important investors. in with another MSCI will recently, direct new driver successful late not our estate of ESG. clients acquisition expect front-of-mind also we effort ESG, launched for been

and turn I our how to Before going are even or clients hearing like that translate I'd and call the share might headwinds from opportunities over what forward. into we to seeing Linda,

management catalyze ESG clients resilient tools franchise. continues trend their embracing integration even in environment. to upgrading of our investing owner insourcing and them be asset The ongoing to Our part of are risk factor assets and proving into this

generally will broker-dealers areas and going remain tools improve for index a liquidity and crisis to derivatives the of have MSCI. in all bearing capitalized strength related Clearly ESG and of on and the breadth this Banks well depth forward. areas eager their risk

have I'm new more managers. wealth opportunity we transparency also for management, had analytics the The response, within heightened use have we our cases wealth sell and growth. by among area crisis for demand encouraged that value to advisers. to In across bring has an progress targeted

and greatly have of our platforms integrate hedge as into measure their been to reporting we expertise Thematics. content working from where onset outflows have are as the such by reported. factors crisis strategies the large regard to We in widely funds, areas driven suffered and has ESG some With and experienced

and navigate selected better. acquire have Established in and crisis. other the analytics the MSCI have can provide to firms to content fared of These technology order been players better more keen strategies applications,

seen than operating far, aware more We to have become this have could deals may sales processes cancellations. tighter environment new avoiding Procurement pushed and later generating Thus and we pulled out challenges so. are rather evolve completely. in that acutely become create

sales see more product some Additionally, lumpiness of even larger our in we ticket notably in analytics. could

of the remains holds this nature At rates indicate that pipeline the must-have products our fast. and point, retention quite healthy

to strength highlight progress client our of level continues and through client engagement doing We and are of certainly as everything variety focused maintain continued problems the the to we strong we this the The can of of on we strength are position opportunities franchise. year. addressing

Let outlook. specifics performance me who turn will discuss our the over of Linda? call more as to first well quarter Linda, now our current the of as

Linda Huber

hello Thank to the and everyone you, on call. Baer,

the Let's downturn start our quarter's our a and capital on of with first then current review results playbook. to guidance and our position, move

$XXX quarter nearly prior from For recorded operating on million, MSCI focusing up the XX% first revenue, the year.

each year-over-year. first operating fees grew of XX%. Index asset-based at in contributor was segments a in revenue our XX.X% Looking Growth meaningful business approximately of

a recurring double-digit by saw close momentum subscription revenue we continued addition, In driven across in growth modules. to

we equity see Second, continue remind saw Baer's the business. higher increased class we of to you in and comments, noting also more We in products. than revenue But analytics this our subscription X%. Analytics operating lumpiness multi-asset revenue would

$XXX.X robust operating revenue decline equity and growth quarter screening of of ETFs ended under management segment, in all nearly revenue the estate. grew from assets with Finally, reflecting in fourth linked across We our real billion, subscription other to and offerings of ESG first XX%, the XXXX for higher a XXXX. indexes ratings billion $XXX MSCI the quarter

the to important only note driven sequential in The markets, and impact is cash is was of by was than March. outflows. notably more of of driven market XX% by international part severe decrease it However, in decrease the most declines this that X% last

MSCI be few indexes. equity recovery a have AUM to what all potential linked levels last seen across to initial ETFs In in we appears weeks, the

under Thursday, had approximately management April these XX, $XXX billion. of increased As assets to

downward we XX% prior ETFs to record nearly trend fees, revenue AUM were levels fees asset-based quarterly we the grew to indexes. in linked Because MSCI from March the higher earlier the in asset-based able we In drive equity year. with quarter, saw from even

quarter. approximately to more quarterly As and linked indexes, grew million asset-based options record the see options for more contracts. than to Baer volumes excited and were which linked in fee double was noted, XX% XX our to revenue to our which helped MSCI $XX million from futures to approximately futures we indexes, than This

point a the basis our funds This ratios contract in the mix with average fee included shift MSCI of expense the decreased expectations. with lower line indexes phase X.XX by on significant continued equity reflected Sequentially, most our also points. total into ETFs renewal among to items linked decline It basis implementation of BlackRock. other with

linked at quarter exposures by our management geography indexes. to end under MSCI Looking ETF assets across

more turbulent pandemic as As U.S. I the prices market markets observed markets in we greater resiliency mid in severe outside noted and the earlier, markets oil well U.S. emerging we the to to compared as volatility This happened by developed in triggered exposures. declines saw

earnings the from the XX% year-over-year earnings our growth tax in of impact of increase per was adjusted to The regard per approximately adjusted share our With lower our rate. growth of came drivers our balance adjusted largely business. share $X.XX

a balance our We the recall notes, refinance we that due remaining XXXX approximately to to turn coupon coupon of issued of first of notes $XXX you'll with cash XXXX a February, and million In quarter balance X.XXX% used sheet. million X.XX%. a that of $XXX And our now, at proceeds had of the ended billion. $X.X I'll outstanding

As to XX debt ratio gross latest ratio months the end to debt while latest quarter, times. was EBITDA our net XX the EBITDA times, adjusted X.X adjusted X.X our was of first of months

notice we million quarter. in We revolver solely business that, part in may in continuity drew a of our You XX-Q as our on the borrowed filing $X and it approximately repaid testing. then April also our

affords strategically us our both continue to opportunity businesses our to shareholders. strong capital in to to and and We have selectively capital a invest return that position the

dividends. the As $XXX year XX, returned of through and Henry beginning through since approximately and noted, we've of a combination capital the share April million of repurchases

as the our including current based for year select environment I'll full on of of metrics, XXXX, the view revised today. Now, best review our we guidance outlook have

$XXX $XXX range in of $XX in to cash expenditures of and $XXX year now the million $XX $XX our expenses the range $XX our expect the range versus to morning, website call. of million to guidance of prior presentation XXXX, earnings million, included of guidance $XXX in $XXX are of million for at million $XXX million. prior versus of the our Investor earnings we of million full published For million full in is this as $XXX our the this adjusted available million Both in $XXX guidance A EBITDA flow our as to release msci.com. to guidance section million, our list prior well our to in million free capital versus million Relations

that this these It's reflect our emphasize estimates important best to numbers time. at

our information As and impact implications assess able will global the we of economies, be gain and to the additional its further and experience, clients business. on pandemic our we

we updated reflects closely guidance our our finally continue the operating to monitor playbook, a review as thorough environment. And of downturn

the Henry expenditures highly to and both critical long-term both As earlier, most Baer focus on franchise. our remain areas non-compensation and support headcount-related spending we with referenced thoughtful regarding a

$XX to cut of we needed. if up identified can million expenses have We adjusted EBITDA

proactive we fact, already actions. certain have taken In

hiring also have and previously, freeze we are as bonuses very being additions a adjust economic in a have few critical conditions. And we place said, only areas. for noted depending headcount Henry made As on could

We as reduced will spending expect near-term. travel, marketing and discretionary have significantly such return that spending, in not this entertainment the and generally

with various amount spending And innovate, of will as initiatives true cautiously dollars more expenditures. to cadence much the And to of continuously changes the while Baer are we noted, and/or investment we capital same timing, we continue is commit. seeing spend

Despite in actions, I Baer's our nonetheless confidence and share business. these Henry

at we to like that would with Investor long-term by our to last I Day. back pointing fact, year close shared In you targets

our will of team's drivers said earlier, we these execution business that targets. As these believe support to continue our and propel trends Henry and

operator, line that open questions. with the And for please

Operator

open question Stanley. The you. first for Morgan from will line Thank come Toni [Operator is ahead. now go questions. Instructions] from Our Please Kaplan

Toni Kaplan

Thanks hear much the you're and very and congrats quarter to glad safe. on that all

seeing color Just front. ask us on some the what in to terms you're give in wanted on of ESG April new if could you sales about,

up Thanks. the well? if sales building really been market has or more wondering the new it's slowly if period held Just volatility pipeline of in

Baer Pettit

here. Hi, Baer Toni.

haven't a particularly in dramatic So of look, we we've bit in little procurement the really process. slowness, change. board, seen products all Across seen the a

expect I signatures, to current go extra that step an would et that to need in think you environment people the cetera. get

not different very that's and And degrees we're clear it's seeing has a in But ESG certainly pattern. up well. held

say in with no activity So high I clients right headline that change we've would levels the continued be would simplest in ESG direction. moving seen the and of really dramatic

Toni Kaplan

expect impacts you And current great. for any strategic meaningfully the terms COVID-XX. that's think or to in your industry with changes That's aftermath the just the all of situation? just long-term you then business just to company Would trends on gone change anything follow-up, about my in trying as think within about of on

Henry Fernandez

for the see – one have stay at a So, franchise over changes very think XX our the I we have and over where years, Baer negative with stronger to a come innovate our close come XX able no and result faster, up Toni these if with business. anything we the of franchise it anything location has every time at in I or to had to we significant each changes, trends this – faster. and been out to to crisis, crisis. If products so, working long-term we least interface last clients, the our together much as have been no underpinning the of circumstances And and or clients drivers to way years the

investing, product our lines case their anticipate in from be we stronger. one much private particularly on back come because in particularly investing, equity out to forth. will and environment class asset a the in win risk have analytics, investing that that And I to to and which of passive So and will so would factor risk investing, to management every here, private volatile pretty like and the this sustainable so

know incredible as and well, another; one predicated data, or huge our And underpinnings also business form of are amounts an of the obviously, three analytics, things: technology. you of of data; amount on lot

we even clients of we as an remotely a our therefore rely clients. work more a interpersonal uptick don't with So issues on should what see lot on and of lot do

Toni Kaplan

Sure of it. Thank you.

Operator

you. Thank

question will with Alex from go Kramm next ahead. come UBS. Our Please

Alex Kramm

hello, everyone. Hey, Yes.

back to to come wanted this updated Just for guidance year. the

down sound taken guidance et terms your and comments taken your and also in all positive still pretty more. expense here of you've you've retention So your flow time, same guidance At cash the cetera. down, resilience,

guess just you are is, I base So asset you what side my Or you're observe are question that if building that you real term? revenues? can the of reduction the areas can and near negative most time? your I in any sort lowering for And subscription so, are in guess change expectations Thanks. obviously the

Henry Fernandez

asset-based some future largely business and mentioning which a No, I although transaction clearly at on futures, know fee, is so part those And which we the based, out two is lags point as sticky. have, about is XX% we breaking in asset-based you that start see the as down intend think resilient business that look, of I Alex, is way always options we way people as between XX% areas. the can based, subscription that part, fees the to difference have been a well the up. going of be it to the the It -- which as is very very lags think on and

during reacting as ETF markets passive up can definitely order now what to the is have the protect to right flexed of in be profitability. on -- well so That management they we if fees to April. do other under decline forms continue of we're assets and largely far So

to cautious. sure heroic. -- this, pay be that in So be make to to like it doesn't It It pays you're sober. environments pays but

continues. know how in evaluation We've come will the don't belt. have the the on down that to the crisis, terms of relative that it We various this see surprised out. global if equity prepared state by been But we to to and around of will we'll economy markets economies be in come economic continue how world out, that we and out draft the particularly doesn't the pleasantly tighten the hope another world

innovate. at are the thing we're and that, of from will we can that resources Baer weak that detail that projects through thing are that and to I that important to projects right? this go are before say and is more important us the other that One addition is, more The also continue were crisis exercises crisis to last invest to would looking now, -- in reallocating doing very like out hands, will allow in throwing

that on create that. intensely else be we MSCI force at crisis invest to should you anything also this question? and therefore, to cognizant add But, to Linda focused for that efficiency do that us also we're to So productivity, need And because you on want like Alex to more. savings

Linda Huber

that Alex, cut. through move seeing me down move we're just more flows -- cash let walk than ABF. And with Sure. more what flows right cash you're cost free

So little you just take a me bit let that. through

ABF, Henry subscription think to we've As but about got revenue said, business, revenue. then total the about XX% of is which XX%

So the million. of March XX $XXX ABF as rate was for run

three lag, another So think somewhat comes too a and million sticky, one $XX the million so it reported about less is that's from And quarter options. passive. move or very remaining, $XXX doesn't $XXX from ETFs, if buckets, non-ETF And million is remember much. roughly you in futures on than

of by on passives, So, what's said, billion decline happening stable, that this and from entirely is ETF I run script was market saw in lag commented as depreciation. pretty we market that quarter the reporting. those rate, Non-ETF depreciation, with on few driven XX% the $XXX each outflows almost we

that seen we've in we And before, about to there. rate one think the then some continue of talked that pickup. So, up that the futures make to we decline but that not And of will options run from all ABF are and hangs that able it.

asset-based doing kind of got is we've that's really chunk and which options well. So, Passives there. hang down Futures one fees. in

couple factors. Now lay you've on to a top in cash that flow of of

stock-based We off XXXX, significant we account. that have which And taken year. collection. see vested. into We of have had this coming don't year slowdown very we may some compensation, in last So

part as conservative bit, down on a Henry's our planning, we hit little slowing comment So also that which cash would flow. of thought about

we're very with in line sales it's that we keep to make hard what our working However, sure day been.

conservative planning just mainly that you. it's and helps hope So,

Alex Kramm

quick maybe Yes. And so I a heard right. make just very sure just No, that's I great. one, Thank you. you

On the the ABF that on ETF basis point rate. side, the the said renegotiation BlackRock now you in fees, fees, is fully run on

So, more thinking basically, now contracts all else the around Or are point as downs any cetera? floors, about, then step is is there basically there -- the all you equal, some that be of we should change it et maybe now?

Linda Huber

and may after Baer to me. this Sure, want comment on

we Of impact behind now said deeply But to as go passed not may add. and forward. will into that chunk of some the that's as said reset this. us to piece. on going think biggest But has we're course, we biggest go the that wish Baer, I that script the have Alex, we

Baer Pettit

to nothing have I add. No,

that's pretty clear. think I

Alex Kramm

again. Thank All you right.

Linda Huber

Alex. Thanks,

Operator

Thank you.

go Our next ahead. come with from will question Please Manav Patnaik Barclays.

Manav Patnaik

Baer, I remarks don't clients? you around if management I this, your Thank remind you just asset Could from clients. core us base, if those by feedback And hearing the I but -- mix think what you. you're addressed know opening is don't what customer missed there. from your

Baer Pettit

Sure.

Okay.

across all asset clearly, out range clients board, reaching had and free the segment, roughly out trials an to I broadly. think, rounding high of at product this managers exact we which been an breakdown. regions. had, uptick very e-mail number the and can with error, are sent excellent we're all we I a a across more I products, a lines have stage. on very of So We've response. we've laid you think largest the broadly, client XX%-ish really But our But, give at

We've Our average. research reactions, et the topical stress clients. to that, testing, remotely. course, is great very XX% And, deliverables of amounts research something starting given to putting like before of I even XX-month of lot working our in all resiliency market related cetera. a clients over point, of out we've enormous as to readership shown support think up been We've a related

remotely of clients, say have client engagement, to working outstanding client So, done I our out would continuing etcetera, terms do of in been our great. that, to that levels job the coverage software has reaching products, teams the demos of and

really a sure view At Henry very bit that of has the a it's bit month earlier, sales the which the this cycle out conclusions ones that stage, got beyond only for hard to we're fact the quarter, a is, in much laid slower. draw into

are seeing bit. We things being certain a pushed out

We seeing likelihood continue. in little organizations more approval. And are will pushed being bit things a that senior to is the get

under from And reading to strain. but of the deal great economic would seen that is, be a are clients we're just pressure cancellations be haven't our clear, expectation that we evidence if certain those expectation although, this, that of of the some likely about will as our every come logical is pandemic that it day, consequences we likely see

say, pattern. is without you the sort healthy marginal that engagement, the tensions pipeline expect clear would dramatic at of a still I that's anything or anything, stage, client great So, would and this

Manav Patnaik

sure just an as this be, base how draw impact of a feel Because just XXXX? willing the flexible And it. philosophical lag. the somewhat question, Got tied not customer maybe XXXX, to I'm to are to from you analogy guys question. this at presumably Like,

we get change does at does So there, philosophy once your giving them and et cetera, pricing all? working concessions, them around with that

Baer Pettit

stage seriously at of this in need we're adjustments. consider to to Yes. position Look, a structural sort not

right in to to we've make as out things that clients for the example, tools such That's things our that's pressure. not giving sure to So, easier immediately, order stage trials, just shorter-dated is make economic right? have first to free of our easier, The access for models. make done that they

most in the of see, to have We've fact equity almost our fixed we the clients as governments. some have trough, things initial progress, degree, markets we various in all had after support and as So, resilience in will from in I and of think, you've been. clients our markets lockdown, the some been a -- income

simplest situation way speculate that happen difficult or as to answer But be what So we've to we're seen changes is, we will any it the fundamental of as would now in where going anything -- the kind. operate no have not I in our pricing today to of question think this your forward. we

Manav Patnaik

Thanks. Okay.

Operator

Thank you.

come Our from Chris Shutler with will William next question Blair.

Chris Shutler

Everyone, good morning.

outperformance You of growth ESG the and parsed understand to year. how team mentioned so the the what factors driving to data much extent outperformance of underlying like your just of it specifically how quality types the much is versus other has curious I'm this of that that -- far factors, ESG like indexes wondering factors?

Baer Pettit

Yes.

finance relevant in following capital here there it quantitative I in the high is appreciate more research. is there's think it simply likely of the strategies the trend tilting say of to I sure this a two an companies But I -- so ESG element is, would are -- money that are way rating. the things, of the One larger way ESG have and look of likely So there's structural you the all I amounts better right? and many be on you that so and hope -- experts we a understand you much But send we'll get a as don't sure have I'm trap is for happy would too building. me level. -- toward

certain a degree a link done, in a analytics. in there's to some link certain surprisingly momentum. of But sometimes of some those the terms is of factor with and to been analysis to clearly In -- there quality we've cases companies, actually

research And ESG that. you they the I believe around that. resilience an main exposure of -- the companies a to parsing time But -- been and think not exact longer-term returns. I companies So think said, it's the wanting I will people or right to that we're of continued headlines of place as happy it's lot other are to give data give the drive

Chris Shutler

Okay. Thanks.

Linda Huber

Linda. It's Yes.

flows. Just than interestingly market growth. X exposures across on of regions, but ESG, saw factor helps ESG, and a other a global geographic from And that inflows all quick perspective, markets. ETF and linked of bit. ETFs MSCI-linked a hope MSCI I XX% that's flows ETF saw and cash ETFs share Again update drove value to that. factors inflows and X in value growth you global XXX% emerging all

Baer Pettit

those manager owner on client a about one sure, to at and be -- do very ESG clear two company, American weeks going large equipped evidence full of one are the better see performance, with And calls, the for remains an focus question few in conversation that those I've changing been breakdown. which asset back all. center certainly one look a -- leaving the no large ESG to final Look the the seeing point. earlier client pipeline, and North to asset linked may we intense Even front and owner. asset this. again we just And on very aside the insurance last large with the there a But much senior --

Chris Shutler

your that One passive Thanks Okay. with allocations whether active anecdotal super from any But and for days. little on of conversations? clients a evidence it's based may early all the shift conversations color. more the your certainly appreciate I around bit kind

Baer Pettit

volatility the haven't of just frame extrapolating time of Look comfortable relatively think. is, I no. but heard from. anything I like No, think that -- or amount we've the really sure, I'd we seen feel I to with I and I'd for short seen answer simplest -- -- think markets the don't

Chris Shutler

Thank enough. Fair Okay. you.

Operator

you. Thank

next question Fargo. will Our from come go with Wells Please Warmington Bill ahead.

Bill Warmington

Good morning, everyone.

first Meaning color X% outflows. of downtick, your – could $XXX on a I the ESG ask color asset level could explained retain billion very in the seems able So like wanted little think of a to wanted to to for basically, by on I high be of the And probably such just get explain that? I you. for but that, That you're how question sticky. some a that, that AUM? only

Henry Fernandez

-- is that think So different I three you trends. what here two, have Bill, the

sort periods is who volatility that in and prefer equitized decline remain first want significant go their put indexed have market not and cash seen investors we The to of one strategies. general, simply of into to money in to

and And in -- of the that there of supports So no always -- market supported for institutional for sure from is significant in magnitude passive has the withdrawals ETF. management. itself any

factor -- a are allude mix on like a We've that. shift we from benefited there respect ESG with to investing. would there to benefited There's from shift going MSCI, that. There investing that to. a is is towards towards and Secondly I

this U.S. as flock has Volatility of Index markets. USA USA the volatility in period gathered MSCI the the such the into been money ETFs world our know as for in -- indices to you Minimum And U.S. in U.S. Our example assets. there's license

beneficiary a been have we that. of So

that in a some that But obviously a compared flow Not assets is allowed large indices and more others, more license developed been -- do to to the and ETF MSCI exposure has because which past. extent has we for markets in other to world. that USA developed have market, have sure into emerging negative them and we as managers around the more to

of relative to why a clients So relative other those we relative managers. ETF outperformed are and believe we ETF other have to providers to few outperformed index are have who managers examples our

Bill Warmington

Well, for follow-up question. my

for I a in hedge the look the noticed the and retention retention tick for on be But rates mentioned down rate had the end fine. end should of fund we for QX, QX? of ourselves they You outflows bracing

Henry Fernandez

Not really.

following few of week in which a is Baer -- the were quarter, that as our think fear that will markets, so major the March we last of of uncertainty the the a were the in to the two and quarter, cadence in of And last quarter we what to last majority meaningful quarter. vast happen. of those. of scare even and normal being the midst amount weeks -- last up the the to able week or I huge with week I'd said, end the like which two happens. what slip towards is pleased close volatility And reinforce sales A of of the or amount very March

so Sometimes to next all quarter. slips the cannot the approvals the get sales you

we sales to And far, and are Baer like. in so not cycles of the lower that month bracing of evidence have elongated we we yet. and But indicated, clearly and sales cancels higher ourselves as the to yet but Again of that to we about of significant you seen have and we to all not ourselves one. that it want is evidence openly talk prepare for we are want that, bracing something and significant April seen

Bill Warmington

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

Operator

Thank you.

Partners. question next with Huber Research ahead. from Huber Please comes Our Craig go

Craig Huber

you. Thank

you follow-up. obviously analytics? low for Can a the think of brought And guidance, just it the that major broken sort help I'll at segments? cost range your down think about two -- down of Your it $XX there. Linda by us million end indexes, have XX/XX you between Is

Linda Huber

we we amount is probably Craig, reiterate $XX focus that first what is toggle do $XX we when. toward Sure. have the want And cut it and to The if we won't crisis fond to deeply. the our that to worse, thing on can If to that said million. up not be more we depends million may on gets that much. and actual too hope

process. Some in of the flexibility is already embedded our

playbook. downturn You've our seen

metrics-based incentive The first plans. self-adjusting is bucket the

So, obviously, much. as do as we well, if we out pay don't don't

So that happens automatically.

people. of We do the expenses with the majority the have

And so a meaningful compensation. it is amount of

heard freeze it to in any we place. That's hiring have a You the doesn't specifically. and relate across of the board businesses

very So the could just hires. economic making adjust on based And a few bonuses again critical conditions. the

talk Then that we some in discretionary downturn spending have we playbook. about also the

allowed can our and has So us T&E marketing fees, this we largely things to those that pretty point. cost frozen at quickly it professional on of pull base. limit Training, has kinds

last an difficult, if to if year. continue not, to back And with expense go of again will less are really having cut. we expenses So flat being we can things

businesses. going to to point. through have stresses And really We're time, not moment. to at rest percentage the our holding all the by do be very as we're the go intend out We But Henry to it's this But of see prepared. of have specifically to high at we a things dollars year. this broken how to invest on continue investment

So outside see are how conditions difficult. are and $XX But quite we prepared we move. things the if million is will

hope you. I helps So that

Henry Fernandez

not view we is environment a the bullish way I'd same our the do at to view to that don't add on What the have bearish necessarily like of moment Linda's necessarily comment environment. we that have a

at about, If in we have or doing that which ensure are done What MSCI recovers, tighten up flex we investment up prepared if the the to we we putting the at to get going meaning some benefit will the and that Flex back to are things longer-term. belt. us down. is we always will are we spending AUM more be of difficult, talked flex have

those conditions, short-term in in market we're even out difficult much return this scenarios doing crisis us. of projects And benefit will come meaningful better. investing still And particularly will a of of that amount

anything prepared will interpretation The not that thing have last I to continue to and in is is be say said innovate we to any invest business. not MSCI should there our that, that

during even the relevant. it, in what crisis. just It's is we that is doing this be manner which do will We

Craig Huber

a question of bit out is is futures final derivatives one or My competitors and quite than major options obviously your your smaller your business there.

just you. you're going to on work drive help you innovation some -- this Thank doing of Just the the if forward touch could there some of please.

Henry Fernandez

product So, is lot around a development of lot in partners the lot happening. a discussions We U.S. and of world. and definitely of lot ICE of West Eurex. a partners Europe with the innovation -- occurring, A new the our our

a with launch. them discussions had we've what new products number And about of to

Eurex So to emphasis for example a launch both and in ESG been ICE there's big Index futures.

optimizing single country. of in up and working do a there been options in big with has also Right what terms now discussion Taiwan partners we're another franchise, our MSCI Asia, ramping Singapore of the our and on So that. on in We're part Asia. futures we

We're pushing as Index And great Emerging pretty on contracts like this Asia Markets to revenue for to this see all to sure. it be in the so on hard in futures continue our order on the we to -- environment, the a base. as in front quite lot of time particular that diversify and able push activity further a of

Craig Huber

Thank you.

Operator

you. Thank

go Chien BMO. question come Our Please ahead. Henry with from next will

Henry Chien

reaction, downturn a longer and that Obviously, to had market ask this an question. economic Thanks. understanding environment but recessionary Hey sales the more event big year, playbook Thanks everybody. like is cycles. taking the broadly. volatility in for we this wanted my I type

recessionary in an Thanks. lot the And your MSCI -- also asset history the there. the percentage like industry is downturn. like of How management economic do love you passive about prior thoughts fact hear on and clients, industry? a given impact to that kind think that, asset I'm just management higher of the your given

Henry Fernandez

market, in hand, our more happens, downturns of in essential that important is a typically have of success much variables tug a a clients. more you to this. market our two like much all in -- On of become pretty down what products think I the one

of need risk understand -- management sure sure multi-asset because factor For to that. portfolios its income portfolio management fixed they investing, analytics class whether risk portfolios, equity risk for

We in talked outperformance ESG. crisis of the about a lot this

to a there's going investing. more that's huge active this become So like benefits, equitized, environment passive. important yes, passive amount of an gets hand, in money picking On but one cash stock that in and

benefit. a gets passive the So,

an So the become underlying that's business this. like -- trends environment in much important behind our more

clients. the is, side, budgets our currently flip there On of the

for business room where that try how can try them budget And need have. out in that's what ways cetera. We with they et to We art they to their to the do they essential add And to be in. easier absolutely those figure make tools to more flexible. us, for much comes

are there of tug So, big times all the positive. what those as But -- a there between the this. think which I I negatives of little which negatives never a positives downturn in outweigh bit end happens outweigh in in there's the two the it's a in as and and variables. said the And are there times

was the passive, Now obviously what is the financial it dependence point more the investing crisis, to on our respect passive probably at of is -- crisis. the last triple double triple compared -- financial to time on or probably

even markets a repression. markets investing compared in in low like assets. financial we're risk remain very very that to resilient. the equity is will The Why? There But of confident crisis of is also bonds this alternative

under So, our of in management some environment. the context to terms in even to of we those remain fairly recapture assets recessionary a fees confident in of fees come ability quarters on

Henry Chien

Got it.

Okay. you so much. Thank

Operator

today go from Northcoast Housum Please Keith ahead. come with last question our And you. Research. Thank will

Keith Housum

morning, Good guys.

implement much a your solutions to when us First the question you're how Is remotely of with can your at solutions going on done of then remind guys it e-access possible you all is site? not be can customer work-at-home now?

Baer Pettit

extremely Almost clients answer, bar really are installed are at we longer products which our worth Yeah. locally going very what is typically small the is no some So right? not percentages, into. our entirely – have

a new terms strong our offices the right? access outcome all been that continuously and own to do. that producing home day-to-day throughout continue of So normally all to continue crisis, we cetera versions our think able business of to everyone of been clients the our fact bugs and to and it's continuity our able So I – et both their content, our operational clients move very planning launching and have been to stuff. the correcting locations been doing in data, equally, And everything have the out and they software and to able have move continue do analytics

we're do. that well for So we as we continue very pretty we feel confident continue operate should set in regard, that can environment up – to of this normally would type

Keith Housum

just then the And as changed the Okay. a past follow-up. Obviously, bit months. over environment few has a quite

appetite sheet. a easier it result great as happening? for Has does harder done? it And become any currently or got a what's guys M&A changed of your to balance You get

Henry Fernandez

do opportunities in this around themselves we we like is of rates – situations very We premium return appropriate definitely case will It's opportunities M&A we disciplined be our are little And a valuation by, given we they it's definitely valuation we And companies that that – and or to analyzing That's become six to totally following So criteria of months as in stay risk and even world, action. even environment strategic and more like and remain interest us we like the can it right? random, this. pursue but present on year – are happening ago, to in an in a the into will environment available of enhanced turn meet become this, happens us. were them. the rates – than whatever in value of are time close goes keep strategic significant this. that return keen those and we more them they if financially – a in values action an

Keith Housum

Thank you. Great.

Andy Wiechmann

Wiechmann. Andy It's Keith.

you in little crisis healthy like put of get a Typically, this add processes companies see is color. a what more environment to normal Just bit on hold.

outcome, to don't that and their process hesitant don't be very have tend knowing usually to there's into bake expectations. They So, sell. uncertainty when around buyers the to want sellers valuation that

we're that as to much right more seeing those have of So what sellers now result is a sell.

them So We're very start-ups our an early in -- to dependent open which niche negative cost our space, are cash close base, And as extent capital more us as be said. we're with have at are raise. we really the and the their those engaging next in very opportunity that are Henry companies. to active these transacting. and these drawback. to advantage large tend on take event the stage said, looking is tend much to They to But environment for be Henry flow relatively there to a staying to

Keith Housum

Great. Thanks, Andy.

Linda Huber

to minute we It's as to want matter investment Linda. that I remind that Andy we're of housekeeping, made. might to accounting And the the just a wanted everyone on update equity take thought, for I on Burgiss call of a the using just method Burgiss.

net see Burgiss on want up won't lag. quarter show So and investment for thought And revenues any going. a you is of it's that impact the recorded if comment looking will in to from it. expense just you're because might Andy how income the one on Burgiss quarter That this other

Andy Wiechmann

Linda. Thanks, Sure. Sure.

subscription portion are MSCI business is would in these And their which revenue. are content overall call the largest their almost performance is providing owners we standpoint, an that their pretty them from Their by I LPs of or mission-critical they're base to stable nature client just highlight entirely They would relatively So environments. stable. clients. as generally services business asset like

what they've are invested in have funds trying capital they cash. focused the to understand those invested risk when might funds trying they have call distribute might exposures acutely trying understand -- what their in when might on understand funds in are the to they then And all and where to

Burgiss this. those environment mission-critical important an helping is much with like areas clients so more that all those And that in are

reasonably in they're good So shape.

a underscore than lag. recognize standpoint, underscore on Linda to from of closing their we to said because to their ours, what choosing here; one points Just share is two a one little are that quarter our earnings reporting financial a is cycle longer

in Burgiss. in the And not quarter first in investment is record portion you see the first quarter. will earnings what we so the our And the did second of from earnings had we the any that quarter for period

Linda As in that flow highlighted through will line. income other the

point amortize share will is excess the that's to to around value other book above assets. attributable the that intangible value the just of the underscore portion then we of our Burgiss And company's

some and line. And in net through we intangible like there other so be net flowing me, adjusted do income very we our excuse acquisitions But small. that EPS. amortization will with in will in amortization income our that adjusted It's income exclude expense our --

Operator

you. Thank Okay.

As like the and this remarks. now Mr. to Henry Fernandez, time, back no closing call questions Chairman for would further CEO I'm over I showing to turn at

Henry Fernandez

and to interest again, you today progress. families We and you us our you hope on your difficult during Once that thank for MSCI. pandemic continued everyone safe this for joining look in sincerely updated your keeping stay and forward

So operator, call. this concludes today's

Operator

for participation. your you call. conference and Ladies concludes Thank gentlemen, this today's

disconnect. now may You

MSCI (MSCI) 28 Apr 202020 Q1 Earnings call transcript