MSCI (MSCI) 28 Jul 202020 Q2 Earnings call transcript

Company Profile

Participants

Salli Schwartz	Head of Investor Relations & Treasurer
Henry Fernandez	Chairman & Chief Executive Officer
Baer Pettit	President & Chief Operating Officer
Linda Huber	Chief Financial Officer
Andy Wiechmann	Chief Strategy Officer
Toni Kaplan	Morgan Stanley
Manav Patnaik	Barclays
Alex Kramm	UBS
Bill Warmington	Wells Fargo
Craig Huber	Huber Research
Chris Shutler	William Blair
Henry Chien	BMO
Keith Housum	Northcoast Research

Call transcript

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Operator

Good day, ladies and gentlemen, and welcome to the MSCI Second 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, where we will limit participants to one question and one follow-up.

We will have further instructions for you at that time.

As a reminder, this conference call is being recorded. to Investor call Relations like Schwartz, to now of Head and would turn over the Salli I Treasurer.

You may begin.

Salli Schwartz

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

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

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

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

results today's into of to During core measures to the we EPS, non-GAAP adjusted operating not revenue but measures organic in period-to-period flow. GAAP, meaningful EBITDA, and refer limited comparisons operating basis cash expenses, believe growth We U.S. call to and adjusted insight EBITDA including, facilitate our rates, non-GAAP addition presented adjusted provide on free performance. also our

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

client in XX exclusions of to the recurring filings. and in that variety rate, agreements We our will of SEC the at time, adjustments we discuss annualized which a estimates under next a value detail months, the for point our run organic subject also revenues particular

rate. rate estimate revenues As a run recurring and following or on will run revenue. not undue XX of adjustments months those the will to differ recurring exclusions, from therefore, to result place We, caution reliance over amount realize we the you actual of forecast

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

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

Finally, I would call point the members Fernandez. a may this listen-only call on Henry to that like mode. the morning in to let that, the of Henry? out With now be turn over me media

Henry Fernandez

second demonstrates thank content, Thank you, particularly everyone, the investors, MSCI's performance once joining nature times of franchise the for of market today. and uncertainty. Hello, Salli. resilience again applications and and technology of us quarter these critical analytics our our you during for mission

solid our tightly reported growth expenses; earnings strong strong to operating adjusted share per growth adjusted and revenue XX.X%, ability we today, EBITDA of Specifically, reflecting of of X.X%; growth manage XX%. nearly

are of have we you a discussed calls, underway in and these have aware MSCI. strategic As initiatives at we number

fixed assets. expanding our and asset coverage to First, income in we areas include are private classes of

climate across in just multiple name risk creating apply classes. a to new are and specific content asset can include we products class or options few. Second, a and change, new thematics These to futures ESG, that products asset models, factors,

benefit our enable wealth manager’s, operate reach our also and fourth, technological are our even in. segments transforming to we Third, but newer broadening in to virtual employees world client we not to we're And clients capabilities, our effectively like are corporates. more living insurance to the companies only

I'm to in initiatives these investments report investments have that and made significant very strong yielding these are We pleased results.

areas. this our would morning, to like three During I call highlight

the whole strongly, ever in equity run linked itself and And and franchise key very including ESG quarter. our quarter, the ESG significant year-over-year subscription Indices, ESG new and indices income, almost variables. sales. are and integrate risk quarterly and our continued the expand additional billion These equity of In change research solutions AUM in company our its reaching have at $XXX performed and in end climate coverage ESG providing across and second ESG on research ESG climate both content, in investments change ETFs reported a highest double million. rate topics, First, to returns. climate ESG reaching $XX in the models fixed we indices of that climate ratings change, to

integrate our many of of market additional adoption ESG effectively component and the a We are participants. And benefit criteria transparency we tools resilient have our of encouraged driving creating and solutions believe change climate ESG by investors' core increasing to building as for portfolios. standards

you too part sustainable of all the a investing we know critical long process. investment believed is well, long-term As have

moves given and area in area leadership index, to advantage, we and competitive A will have highlight which to early us Our continue I like is options. this substantial second would capitalize. futures

fitting And and like investors, zone non-listed and an a base, and important of global We experience. initiative, and more as products will We a of liquidity, our ecosystem our the one options, into structured significantly a of third with MSCI range strengthen Kong all our liquid only our not believe Asia part deeper leader and benefiting on our we client we financial market and listed that and aligning time of week, transformation. Kong markets an elements and and build and large with on this partnership for expanded our Last various further exchange in infrastructure, significant options, the liquidity products Hong pool deep enabling and from a another. and ETFs, MSCI Clearing Exchanges are China relationship of exposures. helping Recently, the This clients with swaps with of is, provides would entered in to OTC includes Mainland an I wide continuously also futures scale benefits Hong of MSCI-linked ecosystem -- listed technological the to ecosystem investment improve Microsoft including that but a area highlight and access options. client derivatives. futures both

provide Our Microsoft, will we of will MSCI. invest efficiencies. to transformation efficiently scale drivers uncertainty, help capabilities. the the massive advantage further MSCI swiftly more network in in and full Despite growth Microsoft return position take intend their includes portfolios. of investors and the and to and for advanced the product artificial manage be this by highest-returning able infrastructure We processing and to macroeconomic selectively through both delivery, of partnership a this and can bring our to better we cloud and continue ongoing benefits with global business to language to understand Azure operating areas of centers, intelligence all to fully data data national drive an Facilitated that sophisticated integrated partnership risk

well the to to over continue to areas As discern from you call to in we're in strategic Baer in. investments now the my and returns go remarks, our significant over Baer? obtain like can turn I making detail. more we execute efforts would

Baer Pettit

you, remotely past Henry. in clients working quarter. our this effectiveness completely Thank I'm quite team's pleased with with high

clearly demonstrate virtual model. a our results to in adapting success Our engagement

across provides We Value-at-Risk, and portfolios. also managers Real to and content the Estate and continue In we tool to roll evaluate forward-looking firm. out Climate the with ability exposures concentrations estate their that investors real June, capabilities review climate and a new launched across

investors and a with on a indexes. iOS Metrics, and to MSCI evaluate, information launched Index mobile ESG access indexes. available support metrics We investors launched tool ESG real-time to ability app provide monitor performance linked we service both for to to compare and non-ESG for also ESG MSCI May, And to Profile introduced publicly We access better XX,XXX the fund MSCI on strategies made to in and ratings Index msci.com the provide Indexes.

in clients. an non-recurring subscription MSCI the we backdrop. was XX% reported OTC growth against of recorded year. sales sales highest quarter, indexes. products growth ESG bank some new featuring from from XX% strong increasing growth year sales, in particularly over current level particular Index growth, new demand of and its the the fund Offsetting quarterly and During for XX%. second also structured in subscription subscription macroeconomic recurring strong last drove record linked derivatives prior strength broker-dealer hedge sales sales quarter a Analytics uncertain the were bank amid higher on over sales from and elevated with XX% of to and certain bespoke of benefited strong clients growing cancellations, which

While a COVID, be Estate cancellations approximately our to was outcome restructuring in ongoing MSCI's weaker of the businesses. particularly of result basis number strong sales. a the are could at retention notably allowing offset respectable was quarter context. XXX attributed business of retention within the Overall, some modest most second points among the for for hedge XX.X%, helped The Real clients' which funds our the rate lower rate year-over-year,

quarter, XX trend in products. the In MSCI our on near subject second I'd is and this spend minutes any have could indication future while were with a HKEX, an ETFs elevated forward, of Looking and do In ESG our cancellations MSCI to climate to July, began the a at XX the clients these additional approximately to pipeline indexes. to in XX contracts that The launched we trading vast segment. linked new Index are index expected launch majority future. unpredictable on be present like change. few not environment

also and our grew the both on of the options listing futures Singapore rate extended and for Index. run the We futures with Year-over-year agreement options Exchange MSCI Singapore XX%.

levels sequentially as and futures volatility market a we contracts versus of the of indexes and to options for observed beginning MSCI created the reversion volumes normal However, year. to declined at linked

in are this in we our very quarter, expense have this you our remained can As and management aware, in results see environment. disciplined

business continued nonetheless in as have our investing Henry We noted.

against continue XXXX, ESG, to sophisticated and investment support enable program targeted key we to have improving million build investments across of executing functionality timely in to infrastructure global made our investments opportunities select and growth business been span the example and These efficiency. team; enable climate leadership we operational where For and Index, a hires other high-return more a change get and our our where for we select we $XXX where clients greater our have client that to to range coverage, indexes, business. capabilities;

Before commentary update be call from last thought provide quarter. I client Linda, it turn to an my I the segment on might over to helpful

targeted Asset active new continued rate past to sales and of managers across where XX.X% retention including to for facing we beginning quarter where subscription coverage. a in doubled despite continue both managers year-over-year put and We're we wealth upsell of opportunities, growth, largest had client traction this pressures example have more mix dedicated for new the sales seeing sales drive managers. industry through new subscription and MSCI have than segments we're ongoing corporates

increasing our solutions. footprint had with across strategies, active owners, We attractive climate providing are classes our with asset asset also climate implementing MSCI have particularly in for success who opportunities

cancellations to The seeing some we MSCI. to performed funds, restructure sales leading are and hedge also pressured higher and different Others instances to and/or significant have for exit content, more two some Hedge MSCI's well, been Finally, strategies funds cohorts. therefore with exceedingly crisis are their sometimes cancellations, in acquire funds source growth. of inclined recurring both subscription but of have analytics of technology has a applications.

transaction the tighter As clients, from while overall we second we in and XXXX, trajectory half remain observe franchise. procurement continue confident the controls enter long-term of to of we our certain

turn to, Let me quarterly our of over call the specifics performance. who Linda more now Linda? will discuss

Linda Huber

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

strength Operating modest The and as recurring over quarter XX%, ESG asset-based solid of and well subscriptions more quarter Estate. run reflecting nearly another Analytics Index X%. rate growth execution fees, subscription And grew Real in revenue second recurring grew MSCI. for as just was in

assets management, under assets from billion, to ended and quarter indexes, billion, ETFs quarter. MSCI at to $XXX.X the nearly now second management of first $XXX the recovering linked under the equity Turning end

from market of rebound came in All exposures. a levels across AUM improvement this all

billion, sequential into positive inflows indexes were we cash $X.X quarter linked exposures. of to exposures climate MSCI equity and billion. offset Notably, $XX.X net U.S. international inflows that saw into linked second partially with to ETFs totaled ESG ETFs, the by driven ETFs, outflows indexes with During by only MSCI cash

MSCI Additionally, quarter. inflows Indexes equity Factor the ETFs linked saw to from first $X.X of billion

XX% fees asset-based slightly linked MSCI XXnd year-over-year million has Indexes than management to substantially asset-based in to were higher to $X.X July at and of improved I'll more assets turn billion. quarter. now linked $XXX MSCI which in the further recorded grew which to to indexes, than up futures We X.X%. As fees more under options,

equity basis point ended Year-over-year, approximately ETFs, points. Asset-based resulted flat non-exchange-traded in the asset-based indexes ETFs indexes. were Sequentially, linked the from million, basis MSCI decline $XX.X reflecting quarter points, fees X.XX second the basis relatively growing lower in equity and levels on We MSCI X%. funds from levels, a a shift with to lower total at indexes AUM fee to into MSCI to linked X.XX linked point predominantly ratios. mix decreased funds fee expense basis fees

exposures MSCI and AUM quarter-end higher indexes was linked year-over-year. to sequentially ETF among Our U.S.

in down I'll exposures in growth international to increased developed adjusted have quarter-over-quarter. of Higher markets outside Our share revenue per our but and And per were growth, largest market U.S. driver both emerging year-over-year, the the earnings subscription grew earnings now year-over-year. share. adjusted markets our turn almost XX% was

our including second expenses travel slightly. adjusted expense per by the of and the the of impact X.XXX% in businesses driven The as redeem increased our and at May, invest expenses. remain enable notes coupon a $XXX well coupon tighter This and continues of notes that call, the Excluding was including to last our non-compensation of amortization, $X FX and to other We management to position, due our we confident during our noted capital entertainment million associated earnings yesterday, of lower stock the in to million significantly return and our our XXXX with was billion And quarter MSCI which our we target of of to offset had for earnings payout quarter, shareholders. to and quarter, freeze strategically, And in we share issued and very the EPS. proceeds the impacts hiring balance well to total capital to billion. used of lower in depreciation higher dividends ended in XX% as our approximately selectively balance growth share currency and us XXXX, on $XX a of a X.XX%. dividend, shareholders. were of also a $XX Board as line cash second approximately the approved cash by balance count. And This $X.XX XX% balance interest repurchased expense paid lower to higher as debt offset quarter, increase These second sheet, a foreign during of interest income in quarter. XX% In per we the adjusted the with now balances. turning $X.X million share and tax with our and favorable is by third

flow, of the earnings range to well on we expect moving tax end do lower year a million, million. of full of be XX% reiterating for as announced and for still XXXX, to upper interest to be effective tax lower in range our of is we guidance Now stronger of toward year expect in XX%. $XXX our most And XXXX our we to as earlier are business, range continue approximately the for we to to free our now release today, as cash effective collections. cash now rate outlook operating lines million for expected $XXX our Full growth invest as We the guidance primarily $XXX rate efficiencies. in expense reflecting

want However, operations and at Baer's people, closing, confidence also I business and is income the be in drive In for reiterate to to interest the current low-rate foreseeable our to opportunities. environment balances quarterly model, on similar likely as this quarter, cash levels future. earned Henry

solid ample a have liquidity. sheet and We balance

range the our Session interest macroeconomic proactive remained and outlooks will economic that, please And employees, Question-and-Answer other stakeholders. the continue clients the management take for and While decisions to we of with best shareholders, in operator, of open line questions. broad,

Operator

Thank with comes you. Kaplan question from first Toni Morgan Stanley. [Operator Instructions] Our

question. with You may your proceed

Toni Kaplan

ESG this bit current quarter but opposite down think sales Thank would especially just little you. Analytics. were I the the environment. a I rate of retention that's expected in and stepped what have new very strong, The in And the

sales businesses, you the extra client retention quarter sort seeing are you and on color just quarter, continuing. continue seeing drivers Thanks. those you're of and that if of that mentioned, So third were this and within any wondering just the new if restructuring into

Baer Pettit

here. Toni, Hi, Baer

quarter client the So strongly look, continue that sales up were I to up reflect the think that running really actions and cetera. and able et able that we the – very to numbers the positive fact activities, we in our take were outreach get and

pipeline longer. items the is the of – some clearly, it So was for

one. So the tail strong we overall, business that we're we activity and we that the a the sales was it. end really had But see found and previous quarter this – originated within continue I'm of for or pleased suggesting pretty all not pretty about to quarter that

were a similar things had as the certain percentage few market look There COVID the we were sell-side medium over things. on allude mentioned happening business. we in removing – then a and at the as we've cases. to are as funds. few a circumstances percentage its of clients, that typically or with – and sell-side normal notably not funds would things. few of bit the had a both example themselves client certain the restructuring the lines kind a bit of that lot were firm of our equities cancels, a when there additionally, from And were amount time. were earlier environment business of So reduced had side more and of unlike necessarily that was on other were little those related structural that asset things fund of a things competitive a current comments of those were perhaps And – larger you longer-term those small to – hedge occurred type There a I in cases activities manager because notably categories. hedge always of But the and say, a the some One smaller sort of or there's thought, hedge that short-term

but other I forward, which entirely. not are little our a are two each things to So in say – looking contradiction would there bit that

don't unfortunately I and in States. to view evidence do that a a continue have will cease of somewhat have end number of world The We of but we're that cancels include companies not the could pipeline, which just want not other and indicators in bad recur. in evidence pandemic year. reinforce poor certainly it the of it strong the view very is the are the extraordinary macroeconomic macroeconomic for of that our will we over first And fact point. towards current United in the better Equally, is individuals appears parts that these – support the of And while direction. in, the the the circumstances sort based supporting on clearly tail

So those the where that said likely from cancels to that know but at view We're we the of reiterate we come expect we what a continue don't will things continue stage. last to we quarter mean that be that challenge environment. this just cautious being in will

a kind you a there. little of for bit that's So summary of

Toni Kaplan

That's very give brighter helpful. a the note, Is a some on And color to hopefully way with you on there alliance additional quantify… Microsoft? could strategic

Baer Pettit

Sure.

Toni Kaplan

talked speed about you new development. know to market I quicker some on product

And quantification so of Thank be sort any you. helpful. would

Baer Pettit

Sure.

way, brighter happy do did during as we the with pretty in note that. the really a extraordinary positive. view also went view the that sales, quarter, were how to the by changes So of right – we reiterate look, We through we the about include And just outcome.

So time Thakkar, look on our Microsoft, fair Jigar I'm personal very excited. along of my with Spent amount this on CTO. a

want the standards certain started that. different – are notably that the to because market, to has bringing there's than few just categories as our amounts of were in DevOps, this terms such ago, if which company, are element, already seeing the Microsoft there's and we're speed even relationship the in areas across cloud market with enormous months can because So element history things in software us more a already quickly of do in mechanical to much of Microsoft we that with we six where both migration, creating efficiency of on call you

AI things typically they corporate our and think help Microsoft's people a of a We lot ESG. technology, efficiencies also additionally can two a operations on of way technologies call view which is in of can think more lot have also gain. with is technologies, corporations a there's those lot us language corporations global processing, And advanced we're internal We bring using think on there advanced cetera where And in there's with touch finally value. can natural by area some that then but they one focus then ESG. et huge of categories, really lot ESG, one that do with in the interesting what as such data other the we we

great been really have We've So deal with thing. partnership discussions on and And MSCI time great with quite Microsoft. think we're a for it's and delighted the we will this these -- some holistic a outcome. a for going be

Toni Kaplan

Baer. Thanks,

Sounds great.

Operator

comes next from Our Barclays. Manav with question Patnaik

your with proceed question. may You

Manav Patnaik

Thank technology out that you. can And know, just on I maybe question. transformation. the let just if called Maybe us guys you could morning. refresh ongoing Good follow-up you and

kind heading So transformation today or maybe and actually us could just MSCI means that of give a you towards? of technology where where snapshot what is you're

Baer Pettit

Sure.

Okay.

my So just on from observations. carrying previous

look one is major creating this innovation theme in efficiency across both and So MSCI.

of much I more is first much other. as the operate applications year the in various the we're of commonality we've the then our experience terms have those of think one can the greater experience more where way in is be in is and third even three of And uniform, progress we a years, creating applications internally. in so of where -- we even and we're a client data some said, think the that but So made forward. MSCI progress underpinnings user-friendly. history also years where We're going The because few lot make with we data and we I two done more of seeing last one. lot let's over of -- clients front those the let feel In the path a -- the already -- client much think more now look or from I client had environment both technology we've in, the of will say, we've a standard in much time, that our of the acquisitions alone different

organization are All client also an -- the those efficiency link processes through where of a of coverage coming. finance area which see client we to lot the our through from

back four and MSCI So factors. a that number both of going years we with started with shown unified ago One years said we've was that just segments, as five think to we've ESG ago the a the I story or by even client-focused create and story

we're of second a huge wave is think I enabler forward a kind that. on of So that technology a of going and

Manav Patnaik

you it. what corporates, just maybe I that. your Is question flavor called insurance traditional? into entry it And to that out. just example? I wanted the get the for client a quick Thank Got there. segments some around company is typically mean get or for expanding sale you an to different from the

Henry Fernandez

Yes.

So have broker-dealers. Plan we very and long/short the terms clearly -- in and forms managers, asset segments, strong and in long-only asset of managers our traditionally funds, been of all banks pension

So swaps in asset management. percentage been And past their for bit our in their but principal their a you in not the very expand have and products. these all assets OTC we in necessarily companies and options as -- accounts our portfolio of were create large a products the large and of we especially, license create with listed want insurance on options help OTC to variety penetrating companies like. own variety the strong banks have and principal their fixed income futures structured as not because the to companies of know, own we -- only large to the insurance and broker-dealers, income further insurance to heels challenged On them indices fixed account a a managers, in

income from significant right a big ESG. overlays overlays On climate As models, their change, terms for that us the on and are review fixed ESG factor with analyze. we opportunity amount income and them to our into about specifically as risk the product fixed back in We line. ESG collecting to of disclosures meaningful launching data insurance send already well impetus indices of we expand to and presents as life is companies have a and corporates, now with been Real corporates Estate which like

participants sets So the to them we're ongoing data own other see and each on alike. their be series understand now looking will we're an industry benefit climate if to we themselves developing Microsoft in with them create And this ratings change. with investors that partnership relationships of ESG for can them. for to a and that data another ESG will on their of a compare direction of corporates bit platform and Eventually sell there's to operational in

Manav Patnaik

you. Thank

Operator

Thank you.

with next from Our comes question Alex UBS. Kramm

question. your with proceed may You

Alex Kramm

Yes, Quick from ones I everyone. me think. hey

didn't Linda, change guidance On the fairly quarter expenses, much is did but it's doing ago. better than ABF still wide. it your you a

So, I cetera, you a of in remainder business up bit right comp performance assume do push given shaking is out too year little expenses see the how where to terms the or et of doing now?

Linda Huber

Sure Alex.

noted you As we've of expense pretty management. done job good a

on into able maintaining expense in a do forecast. is number make have been today investments talked the the already We at we're to to that things including about the about planning And company baked call of the $XXX million. everything that we've

performance the incremental. Part wider facing. that of a why bit everything that's the range solid the little has is this leaving and on toward that year rest given hinge nothing might we're be So, looks a pretty will and been how of we're side

selective very hiring. about continue we be to So,

to that given sort continue of right we're T&E on focused staying our expense largely now. a quarter course around of very million We is reduced in base. place be $X

I So, the comes everything together. about the that business range that think and how see now. running half good of we'll keep back pretty done we've we the feel way the is But right we'll year and

Alex Kramm

Okay.

point at or higher just like early not that it's So, sort end too this end of lower any something right? to

Linda Huber

so. think I Yes,

Alex Kramm

maybe you Baer sales strong I ESG And quarter. mean first then noted for the

of just kind of force-rank kind of like particularly in products? from like I And the the the think you on talked what you subscription where not sales obviously things. side of side. terms about new can a Index different But variety -- sales came the of largest buckets that's maybe

Baer Pettit

Yes.

has been consistent. the of sales pretty the So, pattern

have on we last pickup client So, ratings -- during see very increased sales. continue And is climate. continue driver say the the we they including months the types. in heavily have discussions a I data really that the focused main six -- in area. would with in to the fairly significantly That's where to climate all area -- of The

large And a time the the But going asset And that are main is infrastructure and become important I also very you mostly that you ratings element of you during linked the products traditionally heavily probably with deal so and having all structured the of was Because a that and with they look creating those need I sometimes And I is I -- the all, about one ETFs those continued of -- who more deeper owners. that of data -- all that for take the turn lot of turn to would more that the they asked that it subscriptions have -- do -- their more question through those as various sell material. issuance. products to say we had I'm need with broader that say I think in creating a things those to as generally products the the they but we well. first their with is financial own going to of turn that come mentioned with deal asset a it's people little side for on be in know bit and that -- highlight clients. that note the broadly the that managers the discussions remains and the would broad one course quarter. And would well in sell-side as we're story and where saw

in and kind would putting very client there and focus and hope the more the of of pattern we the and say still we're more resources coming coverage that's but putting the across in from we're year. And broad see And on we'll there. So, Asia the board. seeing primarily Europe I half that heavily that more second Americas in

Alex Kramm

Thank good. Sounds you.

Operator

Thank you.

Our next from with question Wells comes Fargo. Warmington Bill

You may question. proceed with your

Bill Warmington

Index for Thank environment? how success finding has of subscriptions -- you're historically continuing Price you. that revenue success to in important if finding you're been Good I trend part morning everyone. and an this in ask in the wanted or growth

Henry Fernandez

coming there. from really price of volume so additional additional No or at the report new it's think to nothing The difference point. the be I same. in versus revenues to mix, same that's this pattern the continues sales source

Bill Warmington

Okay.

So, retention disconnect. was -- that strong the for ask down was ask XX%, wanted like organic to growth to you'd perhaps was I follow-up model. revenue a estate the question about there wanted but seems if I to my rate the component XX%. on a real what at mentioned just volume the

Baer Pettit

Yeah.

and like, So challenge remedied be look, somewhat people you almost come Real we've a We've coverage. trained, take understaffed Estate those We've client et now one on been entirely cetera. that. sort if mechanical in I of, think board while to And there's had.

have but all I have are them of entirely open much count Most we're not think still of board. them have selling Estate we of head most but Real pretty may got them yet, those roles. for productive transitioned sales, -- one into on all people out now

So, for major sure, side, we sales create that would that on hope change movement positive the there. would that the would be

research outreach our and an Estate excellent many interest enormous leadership team a positive year, let's a clients. that efforts I thought panels, research last think overall say, the And the with really in clients. Research of and Real rate we've particularly a the quarter retention a of out Estate I person think, has made to is, client actually in good I and pretty had, think, reaching lot to all client -- so the did reflection a MSCI that. of for, Real job

So, I is think client we're in satisfaction retention that Estate rate. the seeing that in the general reflected Real

asset as the bit there of Real a one in staffing and point-in-time just finally, timing due was And the Estate just then we'll marginal some bit of retention more they're short in more little longer But and sales. -- be environment, a the other is business. soundness a term. the And was So, then thing. some efforts, But drivers. slight drop the little challenged is that's to look, more of The could One see. we a was different think little FX longer had term stuff. deliveries technically rate I this a revenue more bit. in class quite a Clearly an

Bill Warmington

very you much. Thank it. Got

Operator

you. Thank

Our Huber Research. Craig next Huber with question comes from

with proceed may question. You your

Craig Huber

I run revenues than ask income. less fixed past guys you. X%. and described In income the Thank wanted rate your have being to fixed on of you

of income a fixed Thank it be aspirationally Could number thinking area what there you years, is example, well view XX%? percent is hear could, in revenues? as industry X%, to both if five your mind analytics I want business as guys follow-up. the a revenues of the be opportunity of you sort could sort what How you. as there, I've of mean, Just are in about I for your got that? long-term.

Henry Fernandez

Yeah.

a our indices, wide cap-weighted into we been about -- So, structured and pipeline strong an issuance-weighted management, in indices on a I risk and the products notice with there indices say, that begin office, foray we licenses of And the traditionally fixed fixed that, significant because good fixed the income say, income not passive management, in other we're an attribution a variety a opportunities performance portfolio of portfolio or areas of six sense of with, fixed are but fairly last, index. income months. excited factors and for our And risk clients. very income traditional ESG ESG for in is and ETFs income that's nine launched that of and And analytics the to overlay area just The management and lot products eight, or is those like. but market the more many indices, we factors. see middle central of have in of and fixed of them office combination

liquidity it. and that's Analytics into that fixed of and obviously lot we're in income, the factor very fixed of fixed Also into -- a we fixed new a of generation up that obviously a time effort. We're think the an excited area revenue that. I takes which excited have always large about metrics income. driver source, component that factor quite but So, analytics, particularly income feed income has we're build launched the And also a indices associated models putting big to that in about very that has with been sales

income workflow the fixed Lastly, the the analytics also itself, models, tools not but of models, only on and like. factor terms content, the in

another that think is largest not think client providers one have, MSCI, not base we there tools that's the fixed and company the lot of great. income quite that clearly, a like indices with of of footprint area. that therefore, that So, have to is, a that and be we We world in We the the analytics runway direction. in

Craig Huber

expanded you guess on relationships, opportunity various to upon options business. can as options there, on touch want exchanges Can with on the the But, I on around futures of about your as you futures you Thank you opportunity sort and various in world also investing the particular, touch you. and you just ask there? in out the that here think forward just term? I side, long-

Henry Fernandez

immediate obviously and volatility fairly in Well, you importantly much opportunity. it's the the lot meaning based a re-pricing By volumes we a have the our run-up the very, normal licenses. saw, large not run more that immediate seen on very and of but as rate the only of

year So about North America. we reported in the and a agreement started on first ago last we year that done was this

is in the done third was this Europe and now agreement in Asia. second The agreement

the the sort major have complete world. three now we So of regions of

going equity multicurrency developing market but futures not big ones And smaller smaller the market. We index multi-country, significantly, place. products options to only with structured because exchanges agreements the big in but are the that's markets is in for be have also and emerging

clearly the said these cost -- -- to and so associated here that indices as our profitable sold structure speak. profitable. coverage goods do already. options highly is has in team, growth cost obviously client is there's over-the-counter but team is products team and created The in the with I it's the And broker-dealer the this to our the extremely all all we of and of the futures other licenses license that structured team growth of all benefit this all been no because IP is that It's

would right? So in XX years millions of in next the dollars be hundreds of revenue X, this

Craig Huber

Great. Thank you.

Operator

Thank you.

Shutler Our your from Chris next with William Blair. with question Please question. comes go ahead

Chris Shutler

growth employees year-over-year slower expenses are about of impact -- I a about Linda Hi everyone, did you which On mentioned but than in expense per X% good lower like markets' less you help quarter. the year. hiring, T&E still that they the quarter grew year-over-year. X% by X% reduce morning. developed it would looks slowing know $X up you're the million

you maybe So about where talk are finding where efficiencies. have back and expenses cut you just

Linda Huber

much The as in markets see can very, you located most we've very this we the balance our very markets. are versus is, probably emerging said selective important of that Sure. employees been with of part developed And hiring. still

Henry And thinking everything things through still approved to has that. are addition projects we discretionary So headcount to about we're for generally to like the on and in Baer expenditures closely. very be managing fees which run hiring, consulting

we're a been same flat with cash all we've very manage our At the expenses able hard pretty the focusing quarter So great of achievement. has last our same on to that, year pretty to which time been flow.

the toward thing. guidance. and working collections, You'll our really very about with on in as And capital rate note then, to we've which we flow we're talked about lower the we're That's our end of up high guidance a tax our also range being collections. being the able our well particularly been fact doing that that careful is the move good cash dependent

helpful. So that's been very, very

we've we're expense to able you but what quite quarter. hopefully on enough been gives management color, of particularly this So that proud do

Chris Shutler

Okay. comparing ETF for hand, the a that's Thanks I to clearly Henry increasingly but -- kind fee on rates, your And about a good think back days. back the a then for I your in if because window. takes talked indexing or your it potentially but different indexes average so MSCI. these for direct today, assets the versus would from understand it on come want if the fee better mean topical rates of And kind I past, just puts just I against topic and that topical I is you've are to to to want come know this more negative of be other indexed would thing. and

is of just for volume? So trading this potentially price example another

Henry Fernandez

earlier, was and -- we that have it's -- Chris sorry Look, asking Chris. -- Chris thought it was I now but Bill. to Bill the it I'm question

our we're it's like, whether indexing the or MSCI the the is and it's if or whether the which is, able indices direct -- the of own will purpose the indexing of answer the build clients the in to So their indices. licensing COS. clients portfolios, to infrastructure. a to in make philosophy they comes which branded We that portfolios the probably proprietary business helping building same think build it's whether self-indexing infrastructure of happens overriding that third-party there if not lot to for to going entire their At entire the portfolios. that, them indices. rent we is build want look be And direction end I of just of business the be end But that wide therefore than to rent infrastructure. a of to own infrastructure We're money do better that achieve of out creating with our be the happy more they're will variety renting wanted to entire product than they more our is same is that

pushing that direction, and more clients it's that as Baer, going. on that but think actually other see big you muted. already some that don't as they're And So don't I number I threat. we that we've been a have -- that in well? Baer, comments a slow We doing clients see a as of we have you're opportunity. actually

Baer Pettit

Yes.

them. of -- direct the people that involve The other benchmarks that additionally, need lot typically not doesn't point actually the involved I And who does are it a tools. like indexing is other would need add opportunity to the MSCI

actually interesting very we opportunities. were So looking at some

in portfolio -- a lot use quantitative, people we're this type a models, said, build are software. the people involved heavily of Henry in portfolio As And different of helping the precisely of different use we're lot portfolios. better

view really also firm. we that Index other view So in a big to it as a it opportunity typically threat as we don't

Henry Fernandez

helping the one way transformation talked factory factory talking to do about upon through one portfolios itself we're use to of better going just index index the back the earlier our the our to by embark that of technological beginning call lends things cases we're clients that the is, generation create next of how similar in we an what indices. build the about we And we sorts is that all to

Chris Shutler

a lot, Henry. Thanks right. All

Henry Fernandez

Thank you, Chris.

Operator

you. Thank

comes from Our with BMO. next Henry question Chien

You may your with question. proceed

Henry Chien

planned a if can wanted more talked about you if kind bit areas? ask investments. update focused I in so Hi, to on areas just an about I'm before, the it the any and on $XXX but those you that progress sure give not of everybody, million far you're wondering good morning. key little in

Henry Fernandez

the broad haven't me landscape and investing. we comment then in start mentioned the the let will numbers. traditionally Yes, with Baer So some of areas of specific

our of sizable out an million $XXX-plus to allocated expense about you million think that you of part a expenses pretty if $XXX this. of So base million gives $XXX to

and baked -- So $XXX the guidance $XXX at you expenses XX% those that expenditures More and all this compared operating -- gave that in million the to into million. capital are or expenses can be year. we beginning XX% divided of the less, the of the the are XXX expenditures. are up. And capital expenses ones are is And capital

in investments of course three a years. meaning priority, that of models, from When so change risk as with period ESG in or many our it's many The fixed really are areas, So one of our enormous to the opportunities whether variety very indices, win private -- whether it's I've flavors company whether is different classes for shorter any time returns when our asset climate up more triple-digit it's enormous a We back high-return income before. a we of clients. mentioned in these more tally change, investments you of -- many over see different really, of them investments in that. on more are in no

So payoff return. already long And are investments for and are infrastructure. significant. of about a the on that of is these reason lot made low we're relatively These talking not existing an top because

it. we out in for increasingly dollars get So that dollar we incremental associated investment, can of put every revenue cost of incremental with this less to have

qualitatively? bit virtuous investments. much a a breakdown success do want very Baer, And through you of it's little in these the walk So to circle of of

Baer Pettit

Yes.

-- Henry think I fairly there. was so So comprehensive

the as just sort slight cat few So skin to other of ways maybe a it were.

we well all but we in And some briefly kind the investments. observation slowed one is our So alluded this beginning crisis, of overriding disciplined started of extremely this premises we is of actually yet period this, expected through which on first of not to at of and when all down refreshed actually the had the returns beginning paused investing the reexamined -- things the looking of an first and we and them Henry those are all at in.

functionally clients, about things when I confident It's ESG said at buckets indexes and again, I made we if relates it sales is category, and invest the what have And is all through earlier including, and content. areas fairly overlap it and In product a and -- we're in build about particular think and income fixed that. typically a of Henry customized X.X, trying to where profile. critical Microsoft this in in we're client we client other of a large technology as both big functions are more think pretty about when building world direct for is in we turn, indexes, such a new we infrastructure Index like talk experience jargon significant complex which we discussed be new better for it linking to about to -- cold-blooded feature looking the I some some to analytics. portfolios. such we're And that the technology. kind earlier, to we thematics what three turn think to those the the ESG that analytics process of investments which with as, in our you that return to about talked have infrastructure earlier of and content indexing, whole making greater of Index both it Index those the coverage, continue partnership market The technology context, comments, helping we and of Clearly, for in in alluded we internally, as can some earlier so additional at speed alluded a in of drive efficiency, and technology.

and we I least will a have about don't board, allocating at crystal big fairly what think some returning we've to look be the hopefully -- across we clearly ball. the And been we're the buckets confident But capital process to are strong through that so very those ensure believe of investments. we're

Henry Chien

it. Got

Okay. Great. much. so Thanks

Operator

you. Thank

Housum question. proceed Keith Research. from comes with with Northcoast question next your Please Our

Keith Housum

everyone. morning Thanks Good Great. the for question.

the arrangement, that is several guess, net a this terms flow Microsoft the a terms going I cost, In can it how net the conceptualize you you the in is you over to are of savings, or perhaps of back it's be reinvesting next savings does if net line? it bottom business, or years? in about thinking are And to a

Henry Fernandez

Yes.

So you think are partnership. want of of if three about parts there parts they -- are or Microsoft it two to the the --

The to and with first moving production our -- our clearly the and and part going Index to other product Analytics, is cloud environment subsequently production starting and of delivery then lines. all

cost-neutral -- that's So to that's going savings. to be cost definitely

to the over to be that's cost-neutral caveat there caveat three will expenses, obviously glad next all with two from I'm because expenses, investing that will what and in asking the Microsoft that centers the though, be years, that, with we'll paying With cost the operating capital and be switch expenditures amortization right? will for not operating us you're question data be we and savings. technology our associated So to server and a

to ability example for to to natural of for Microsoft And new Index be into in and technology, is our and learning The more processing obviously production products, capture order on to such their for AI the third the drive our build us quality volume for to an machine intent the in able production for work to processes. data capture the second as in ESG like more and clearly client-facing together data is models part data addition factor. language help part is use example as -- and an And of ESG, to that newer capture technologies platform.

Keith Housum

you I the for part be second hope third So this net that's… then will and guys? cost

Henry Fernandez

obviously, second to the them. lot and a call expenses. third quite with be the to will the will business surpass risk-adjusted high very we that short returns; It need criteria have what their will multiples. have that But revenue of have high subjected which the we and associated plans Triple-Crown then with is Well, own our inside the MSCI, the areas business paybacks; secondly, that in three, investment

Keith Housum

the just compare, would circling highlighted, million that what events the it. on this $XXX with appreciate if you first I today I does not you. quarter then of for investments that And And how back the guess, year? carry guys that have Got all COVID? to in been that to prior year

Henry Fernandez

the about higher It's year focus. as XX% at the exactly did We minor certain given a certain products the same adjustments in us in change could order amount beginning in higher had What it's payback. areas other areas of that de-emphasized return COVID last was and than we money the faster dollar and the year. a second put to quarter in were more relevant in the and give some

Keith Housum

Great. Thank you.

Operator

you. Thank

Alex Our with next question UBS. Kramm comes from

your with proceed may You question.

Alex Kramm

again. hey, Oh,

drag it to quick multipart. out. but Sorry One follow-up, it's

end region? that ongoing I component then better a you're rate assume And in Asia, fair already of about at think China the stuff. volume-driven, kind for run from the not then couple to the your how the than is Hong it know of is purely or the in potential relationship of that regular prior relationship? it are and excited -- economics also I is any Thanks. partner gateway are And quarter Kong obviously, that of, Exchange big guess, One, in that fees partnership with lastly, But I that the secondarily, volume-driven? to anything that's all On and things.

Henry Fernandez

better The -- definitely for economics sure. that's much

yet XX and options in to the has quarter. obviously, China but this in minimum the case ability then through thresholds. desire in launch some mostly obviously volume Hong They'll some options more, to only Secondly, with goes MSCI current it's rate fees it particularly futures hit And launch P&L. addition at start And that futures of it's three, contract, volume-driven the none run A not and and Kong. point to certain the the the

Alex Kramm

you. Excellent. Thank Super vision answer.

Operator

you. Thank

Chris from Blair. William question Shutler next with Our comes

You may proceed with your question.

Chris Shutler

Thanks.

Just you Microsoft mentioned ESG working with one follow-up. platform. on an Henry,

eventually Just look what like road? that curious, you down could envision the

Henry Fernandez

understand into they all that. and capitals by a be can platform the ratings both users and the and by that how And tell. but can very do But to of providers early and only of the supplied models on companies to investors still early and understanding ESG, recognize use capital discussions. climate are too and our basically data we be it's change it's of keen the obviously that used connect in both -- not we Well, and

so So to strong -- early we'll impression more be a both like but to intent that discussions And again, is to reporting very on is any work the on, days, something I its want try but this out. the that. as anything don't of cooked go there sides give or

Chris Shutler

All right. you. Thank

Operator

Fernandez Thank for time. at like I turn would to now this showing questions the any call you. I'm remarks. closing to further back not any over Henry

Linda Huber

asked Henry, questions just we items. few some to a a ended call. about of the the second, matters had we wanted housekeeping below-the-line do before A you number

That's been in that's for fact our previous we the new bit old everybody by waited had balances we're before. a that per per the and we interest we're expense we XX about to a quarter, higher a now year notes our income, million less And note earning On guidance expense period. to the rate -- have interest like in a And that $X close, out we interest at just higher. quarters on we of less. take cash than of days, earning in look low right bit environment, maybe the the interest So, quarter our redemption for for before the million while notes slightly XXXX our costs second $X.X we maintained just was wanted duplicate rest year. XXXX

everyone So a look income. should interest and take interest at expense

tax got questions rate on to debt financials. on quarter that extinguishment, XX.X% XX rate. of largely And Note for the tax the other see our loss were can we was our due The which the in you

we to mix earnings. tax And benefit had equity of favorable Secondly, a third, higher awards some had a related which income vested. we

to look everyone at to set make our we'd a of has that So models been increased was Also, it that take increased. which $X.XX, like the to And now correctly that. to I just everyone's call sure forward attention everybody wanted can going $X.XX dividend yesterday.

I it So we'll that, Henry. to over think turn back with

Henry Fernandez

great us us for that And can. for continued hesitate you to you hope to if us best thank your I again, joining today once and and for So, answer lot interest A reach able out we're we of in MSCI. as we them had October. look this questions as have obviously, we don't better. could have comments stay earnings forward doing have -- for hope great third and safe a we the about be our today. Operator, to I you we of other updating summer. what in concludes quarter call questions call rest you or to our all And

Operator

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

disconnect. now may You

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