MSCI - Earnings call transcript Q2 2021

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Operator

Welcome to the MSCI Second Quarter 2021 Earnings Conference Call. [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.

You may begin.

Sallilyn Schwartz

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

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

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

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

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

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

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

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

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

our President Baer and our Financial are Wiechmann, On our Chief Chairman COO; Henry Officer. today and Andy Fernandez, the and Pettit, CEO; call

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

Henry Fernandez

Thank Salli. our are was today. and delivered joining our investors direct mission in vision result help the making MSCI This results exceptional Triple-Crown you portfolios thank quarter. better us and for to second world, to Hello, the the efforts. change for a a for investments to you, industry, investment everyone, these outcome we build better of agent the support be

EPS XX%, Board XX% our we EBITDA total quarter, adjusted Last strategy annual of the Directors. revenue of and achieved held growth XX%. of month, with growth For session adjusted growth we our of

like about and assets, including our management private so, even thesis solutions many climate. more incredibly we of and our opportunities are investment the Board team in income, accelerate growth, significantly to Our ESG. fixed indices, course, have excited now, And

technology and are to making the newer to and and continue clients' needs. expand segments with our data capabilities, companies We including with highlighted infrastructure managers, we to previously our And corporates. insurance have you, client to that we great respect wealth transform with align progress

Celsius climate climate me transform XXX solutions, investment to Institutional rise under of that intends operations. to MSCI now are those segments in investors some to Revolution believe since enormous Let the models a the area of influence largest from solutions, that change of exerting lead pools We their the investment economy decarbonizing will business that ago. portfolios not too all global their within away their track participants or world carbon addressing reconstruction require keep and in and management X.X-degree will Investors of capital and in reallocate highlight slowly companies need the on acting companies stakeholders to their in the already on all. client teams are and the years to impact capabilities. emissions. business moving Industrial their companies to ecosystem one each addressing reduce at are intensity Within and the and carbon change

massively need repriced, around and occur will more believe be will company faster spectacular than of will revolution And revolution Moreover, some and net-zero coming, produce losers. this and will and matter, touch societies a every of appreciate. see than market Assets transformation the we may part the believe investors our every the decisively may companies world. they world. participants much sooner to number We in this and that winners act for

MSCI for imagine, regulators, near you provider its Alliance and Financial Zero lay organizing the market term, and that tracks can new net-zero to with of in to and to net-zero to constituents join This and play this galvanize expect ahead want index will service part premier alliance. more world's the extensive portfolio COPXX the to tools providers, look the participants, involved all agencies, push And a credit will rating a firms other climate-related opportunities. will accounting we disclosures. with for to be Net providers related in world. We financial take alliance enormous data in In investors companies MSCI Glasgow and we climate. As the policymakers, this presents to held conference later year. Glasgow can be the various decisions

aggressively issuers fast to advisors and we private estate, developing and public contribute will are can drive debt. our and private and We're of to class with and or capital segments, success their the climate a spotlight investing where also strategy capabilities This Within products the of are securities. private in suite are We public corporate that with TCFD for broader ongoing real standards. providing climate climate, is multi-asset client and reporting within models even climate coverage our corporates, benchmarking. market equity strategy solutions and include reaching pursuing beyond reporting provide with which ESG

insurance managers Our our companies, greenfield directly client only coverage offerings, wealth reflects our and success organization. product in in have but in also in we and that as this the others, client investments made not segment such

of value with client our very managers asset also Our largest proposition which the base. asset remains owners, part still strong and represents

been are selected primary to All California exposures. provide from away prior CalSTRS weighted industry. of target State benchmark. simplifies MSCI their X to was World displacing analysis, in critical block focus and and another and custom calculation our building CalSTRS' better process MSCI. is The U.S. core Using System to the policy performance Teachers on role domestic goal We Retirement capabilities, active Investable benchmark. their how reporting, non-U.S. playing index its have investment the moving competitive Country also by Market adopted of honored a reason of by Index, simplify benchmarking a advantage for revolutionizing would manage like a to I and vision Within risk. investment data is attribution reflects processes to Data separate the a

easily of variety their massive liquidity data many operations. for They metrics including among for MSCI a factor data artificial and underlying custom of many Data Data. For of reporting, and natural clients' harness to appetite Clients manipulate cases, language machine develop want data to volumes use others. address expose, SFDR recently, want like strong Explorer analysis, Lake made and More Big learning aim ESG to rich leverage and to also years, technologies processing, indices, the our to climate our we and various models. intelligence, use MSCI ratings, Data download our of have in power extensive to investments ingest

turn Baer I to to I our few Before the operating like current would over take call the moments on to Andy, global note a views and environment.

global be by economic We recovery the continue underway. encouraged to

its see that, is over company. underlying let positive the markets will in a we Triple-Crown pass MSCI may the opportunities, the our Baer. many positioned of our continue aggressively are trend increase me advantage oscillate of day-to-day, With take to areas While level Accordingly, we Baer? we for floor to and one. investment to

Baer Pettit

everyone. Thank you, Henry, and greetings,

I modular I are We have On a of technology pursuing and our X: areas will market's our that exciting and platform strategy here quite cover needs climate focus and comments is are accelerating; One, and two, number three, we strategy that, flexibility could on paramount, focus open across transition from MSCI. technology, where the but my a Beon; within data. today,

As delivered from through analytics components, moving allows part access of client This clients experience. integrated are enterprise-wide modular our infrastructure. we a on and consistent into across offer integrated Solutions-as-a-Service MSCI to offerings our a or to offerings, ISaaS through us APIs, Investment products common

this distribute our clients. we earlier Given as discontinuing and announced Beon with progress Beon. a initiative, way analytics originally morning, we applications unified are our our conceived to was plans to content in for this investment in consolidate and

to experiences around existing consumption, data services. will we With over we enrich the of distribution and models production, as the time, range integration On a technologies and ISaaS industry through and climate, offer increasingly converging of Henry noted, content continue our the use for suite cloud-based investment instead, of climate planned new of tools.

transition measure risk clients, with more up investors seen and physical metrics and against totals rate tools value million, portfolio year-over-year. climate strongly decarbonization climate X.Xx with uptake nearly at their MSCI's emissions our of and goals, and now help solutions, climate have the and companies temperature are of indexes. minimize MSCI's climate assets risks and solutions run change we than with climate robust offerings identify $XX associated portfolios. Our resonating opportunities their risks, alignment

warming an Investable in change we helping tool target. temperature We products of the tracker. is quickly data to gauges Coming progress and in soon, assets. MSCI targets. companies investors Market comprising universe We tool, provides This a investment to introducing climate Country rise how landscape. published of also the continue launch align indication implied currently It global of meeting MSCI level quarterly covers recently the portfolios are which existing public their address in evolving All Index. tools climate address with X.X-degree gaps companies in World new to net-zero an temperature the the private MSCI also

clients tools and to data how Burgiss, increasing lower-carbon clients' for markets. see to high-quality private that of opportunities as on other SFDR-related investors X imposes market serve collaborating these SFDR including examples for or transparency can and standards participants. SFDR, We all asset assets. estimates of capabilities provides or managers are address needs, obligations MSCI Scope than to mandatory good contributes issuer-level to reallocate to Each reporting companies, access to X have need partner, metrics and and of disclosure These carbon data applications respond in Henry outside its these tools more and referenced with directly to ESG which intended that investors XX,XXX expanded issuers. XXX and various platforms for been our financial footprint source toolkit sovereign Scope MSCI MSCI companies via the has of and sets MSCI. climate through is significant capital

enable of their benchmarks metrics the indicators also that products. to We index-level investors financial for report SFDR provide easily

such as backdrop income have market and increased coverage. our data strong the as upturn Given enhance well climate, research, investments and performance areas fixed ESG as financial we markets our to year-to-date, capabilities, and in private client our technology playbook and our and our

As framework. investments always, context we in these make our rigorous the Triple-Crown of will

Let turn call now Andy? to me the over Andy.

Andrew Wiechmann

Thank you, hi, and everyone. Baer,

operating net massive noted, footprint and us our As our of subscription regions. front for coverage quarter client environment have had and made franchises. of quarter and Henry double-digit performance record and recorded quarter new recurring best our of subregions continued have and APAC and we products growth had The targeted on second best subscription for second record we the XX%, EMEA, execute. quarter on recurring our quarter highest rate the in subscription strategic for also business We The momentum quarter ever momentum. Baer growth. in in marking our sales investments remains had opportunities yielding sales, to healthy for In in key its pipeline subscription strong recurring the we've are subscription remains sales sales. continue constructive, ever recurring to across highlighted exceptional see XXth sales. strong run Index the ability best And consecutive over

managers, growth management also We all of expanding second funds, successfully adoption benefited revenue and and we half into new from benefited subscription real cases and in and both clients, subscription relative would first growth private run experience climate and while FX assets, new In versus growth index continue rate sales within the and recognizes outsized approximately the in growth upon clients over level In ESG continue half hedge of to service segment, of X% broker a the acceleration more broaden and last deliveries year. to clients wealth sales growing climate. half the collectively of note within an I that existing ESG to as with growth steady around to portion and delivery elevated estate our we dealers within witnessed sees segment, revenue of from business a XX%. new typically client of quarter the revenue further service of use coming rate growth tailwinds, solid asset run from complemented revenue other by year.

deliveries Although between growth revenue the year-over-year quarters, in shift timing of resulting swings can the rates. some in

Turning continued the U.S. as to markets the year-over-year, product U.S. strength XX% strong quarter, flows. asset-based developed ETFs continuing with and equity climate fees, ESG market inflows On of cash exposures. level, MSCI where drove outside share healthy leading and revenue cash equity well represent grew as levels record in within AUM experienced the nearly inflows both a the rally $XX to climate and linked of ESG to ETF billion indexes during market global

after a in million balance the billion ended quarter issuing Turning approximately of May. to $XXX sheet. We our notes $X.XX with of balance cash

strong business both It other return, including capital Board with This includes flexibility shareholder includes adjusted per organic to opportunities. affords us areas. share. to approved sheet in MSCI's in grow growth dividends, dividend and $X.XX a our key also potential XX% and continue Our to strategic quarterly pursuing actively Yesterday, support both increase capital balance allocation which EPS. our acquisitions investments to partnerships

see would like do we As forward, may if and raise continue debt, we monitor I an market so. to highlight we go to to additional opportunity attractive that the

the Before of included the impact to was I guidance, write-down, review amortization assets. turn which I'll of intangible in Beon

pretax a from been As a $XX reminder, has excluded noncash that EPS. was adjusted million this charge

impact not for digit high for Investor see you target with Day analytics February. single revenue that at business we does we Importantly, our growth opportunities our the nor shared in it long-term our

to Turning our guidance.

confidence fees Investor of pace this As down half of we asset-based the broadly. and Day, year based and of mentioned at our trajectory throughout first may the business more the on investment and line flex our equity up The our ETF in opportunities on us and AUM, backdrop markets playbook drive upturn strong exceptional and to and macro year-to-date growth. give improvement trajectory further the top ongoing growth in to continue execute

led remain and in leverage however, driving We modest has operating expense performance therefore range. business that our incentive increased would committed strong to margin the accruals. to note, Additionally, increases positive We've compensation guidance we expansion.

associated in XXXX. noncash from the guidance into expense by We $XXX of notes of write-off and range reflects offset in partially quarter, account $XX into removal from this in rate guidance, Beon the of Our our the increased interest benefit takes amortization depreciation tax And million. reduced of second million May our expense account projected offering Beon expense our guidance half amortization on with quarter taking and the second the in of half by from our taxes. cash our higher as and operating encouraged improving the discrete asset-based guidance continue our well flow expense, offset are as backdrop. interest fees by cash we items, lower and monitor economic expenses In to risks partially latest to pandemic, summary, but we free view reflect year, increased a number collections first the strong primarily the of the

we with to our We and And questions. the growing see delivered, we the in quarter we investments please us. many line make operator, that, open pleased the ahead the continue strong of opportunities for with franchise, are

Operator

[Operator Instructions].

first with Our comes from question Barclays. Manav Patnaik

Manav Patnaik

double is you past. question I My on was low supposed I analytics digits question now on the just and single-digit pieces can that initiative. Do But I the think between rate, to difference curious the the the first the low stays Beon stop that guess, long-term decision business? think for there. same. moving appreciate growth Beon the think is double I high be the Just digits to in of the out

Baer Pettit

Manav, Baer here.

to more as the MSCI fact, one that on we path I look, no, analytics. whole in So is likely stronger to in that across we're much and results think lead is a now --

and in So if siloed time, technology applications you view. Jigar a look we a CTO, of in back developed environment point a before joined as rather way product-specific very from in

used, where in launch are we So were created more bringing index parallel, a launching our common the a in standard example, subsequent had that be industry basically or manager. used to process Beon. in will position we for new But standard, in and architecture to his various we creating and new infrastructure be ESG that for of leadership, much in were ready joining and will builder our MSCI

the to had our than it's previously forward, that that It's for clients is and will doing So very analytics. going And a for idiosyncratic. can the industry experience opportunities be much much more infrastructure common use MSCI. It or in we're standard. And for we analytics user we're less that more greater so, assumed. we one great going same confident create

Manav Patnaik

I the good understand role keep business partnerships going? a But pretty a just tool M&A can focus press about, where talked the I obviously, is on as Or the you the have growth you follow-up do climate And set that given will out Okay. all some maybe to and that mean, growth, well? there. quick and play

Baer Pettit

M&A look, really organic the in corrected. we of models, in so, to category. months thing if certainly flies. want do Well, XX lot climate ahead to the the play I again, to in attractive an of happen. partnerships everything infrastructure right make -- on that this you we people, we very we but do, Time key roughly, invest this here. believe, have a thing acquisition our is talent can our know, coverage. in made top had that, But data we in data, We we do our are key And believe field a be ago. investments in we opportunity and We absolutely and the have a role as our

Operator

next with Kramm UBS. comes Alex from question Our

Alexander Kramm

like already, the regulations which it of you having quarter not on previously, you and last having is definitely kind talking I asked regs SFDR the about impact little said new I cetera. ESG et but ask new a in I want growth. on is maybe When asked new to bit climate But clearly, past, a more. that that an sales, question you've of impact think asked started I've have

So drive the helping game some maybe acceleration regulation expect they're regulations acknowledging I not question guess you to definitely is from high And yet, my When do your changer. competitors, of growth talk helping? is, could if they're that future? we that, a that in these are rates

can you maybe So on comment that.

Baer Pettit

Sure, Yes. Alex.

changing look, in that sure, emphasis. reporting So from regulatory we So we you're by demands management And maybe made is managers. asset when a point changing right. right? that maybe statement, transparency this the We're corporations. of it it are rapidly, understated from from somewhat But it's banks, a rapidly absolutely for uptake I don't know past look, last for And was from or environment. the way, and increasing the risk driving banks from amounts reporting of

climate. think it's we area a going both been opportunity risk to reporting together lot the it's both reporting the you this the that and regulatory in many models, new for know, definitely as that new And we is new say, So an I we that an for information, the other growth years. it data brings But because -- is have would exciting us. have drive of in

think So really those both to us plays of I bring for risk together with traditional new climate emphasis, management opportunity the strengths. which capabilities it's great a our to

Alexander Kramm

guess. it for finally, I Thanks Okay. acknowledging

sell network asset CalSTRS But that of And doesn't like how as just some sales is highlighted kind of the something maybe a don't maybe their, good trying I'm is quick hand, know network a there does could primary on win, CalSTRS switching Maybe But effect one or some this flesh incremental guess. Secondarily, but benchmark drive out that's competitors, not. bit. you're somebody replacing this? really I the little like now that I a But much curious, small one, -- investments. to outsources CalSTRS them? and have you I for effect? managers are it one-off a Or like a to or guess, of you some the like and

Henry Fernandez

the reasons little or has we wins, of there bit us futures importantly fairly It active the either when focus investment this network we But owner And a do why them, benchmark definitely energy on the associated or they more passive effect, displacements. the asset the cetera. much much of managers, of with call that's and out as large so and that revenue ETFs, this. a is by options, all is one come products et benchmark to that

world, itself, in you they pension XXth as largest world CalSTRS they fund pension the And know, the as well. largest case fund the of pension -- United fund teachers' the States, they're about second that. in So in the largest we benchmarked of billion $XXX $XXX a run out I'm equities management under of were internationally assets. -- billion sorry, billion, total that assets of half of $XXX-or-so billion And already on of of in $XXX in over

of to index and is MSCI benchmark. an by managed direct lot half that will in therefore, to And be money effect manager, about of a displacing managers, a our other revenues benchmark, coming The domestic asset-based passively by $XX asset a billion have fees, now right? will it

Alexander Kramm

sales coming right? Right. But new guess, custom point, custom this it's So index, That was that. my right? of is out I a

Henry Fernandez

Yes, yes. index asset a the benchmark the creation the or the it's a asset of custom owner described level. the across this benchmark a manager revenues ESG But of on I the level, concept from the at off there, thematic is not shelf the a benchmark, largely applies benchmark is direct monetization an whether board. but custom that or or standard just Obviously,

Operator

comes question next from Kaplan with Toni Our Morgan Stanley.

Toni Kaplan

been to I $X cash opportunistic you've haven't many billion. balance been repurchases. repurchase with roughly up Your to there And opportunities historically, too guess, stock. is And,

probably led increase. the to XX% dividend So that

be sort So your were assets just just cash M&A, us what would of looking be just and at? more update understand, the balance, of capital tuck-in type help look if large And on you'd us deployment to at priorities. it you given

Andrew Wiechmann

approach broadly. capital Andy. to change more I to allocation major It's Sure. no would our say

MP&A. cash capital. repurchases dividend, continue And to of excess return a which balance steady regular opportunistic pay of for a then opportunistic we and generates the We share use

factor in firstly, is, X know, share in really we the the volatility components. as repurchase On front, shares. One you

in shares. value is cash. the And thirdly availability is of Secondly

discipline our the that we continue use so to And which pace at we shares. around repurchase

we question, active be and I partnerships. our the areas on say is intensely the continue And both really focus On for to acquisitions strategic firm. MP&A growth would in pursuing

it's so within real in areas equity, in you've that about ESG as and the have climate, applications. estate, fixed data areas categories, like us software as talk And And generally those looking as private workflow income. as at areas like and analytics well heard proprietary well assets and unique

And strategic but so no kind acquisitions. I'd focused of not we on acquisitions which them endeavors, current it's -- accelerators, we're be generally, call major our changes. that say, to you bolt-ons, further might call going transformative-type strategic are

Toni Kaplan

-- wanted Or or Great. quarters. caps over on that your factors just Also little is it U.S. this to the funds moved any other element? fee ask a business quarters ETF the more about a of matter down Is hitting the past rate few that? explain bit the mix X would

Andrew Wiechmann

changes. combination this either that Yes. can in drive mix really the mix both that decline shift There complex your bps is area moves factors dynamic. Toni, quarter and think, say, a quite shifts. fee it's equation, can be point, product To there's geographical was or I really, would the up the of And down. shift I equation

be can shifts you then levels. So can products AUM also broader influence is are areas certain adjust that on and as varied can it's can blend changes just changes then in rate. a the have it fee said, ESG overall there into a just do and fees. And of based usually range -- disproportionate if that contractual of case, that sometimes big And factor be the the

to And products just sometimes, the better position are our adjusting market. partners fees in

quarter. factored So this the I'd considerations say all move of into those

Operator

Our Oppenheimer. next with Owen question Lau from comes

Owen Lau

is Day, billion. estimated Investor ESG that of So at the $X.X TAM MSCI about

trend the and also expanded, us climate please estimate especially remind has ESG given do in recent mix, the we being somehow TAM? TAM And start from the how separate ESG? talking think client MSCI you So about when

Henry Fernandez

increasing is It increasing and rapidly. certainly

addressable that think ESG needs in evidence Every XX of see is active cetera. in the have could market to been far? of account. but into ESG made we management, and of therefore, of to a are investing the such seen any there's performance linked as be passive how investing some As world, the one of taking the And ultimately, institutional the investment as ESG have that you I huge ESG to in been time, ETFs people example, all MSCI the last us months, that indices continue thing embrace ESG decision there to increase. that et investing. the won't ask be Well, And is going and

ESG, start and discounting have markets mechanisms, and they're companies. a is addressable process. it's and XX, entire the to So to putting bigger are they to the in even to carbonizing solved XX clean next the it market existential we know and global already started be threat and less will is more climate, money respect could same, energy them, years into important and lot of needs than going the to climate be needs investing world penalizing and the carbonizing technology, solving be and front-ended, companies With as but an be ESG. because clearly, green it very to world, the discounting

needs public; the for bond; make, every tools investment to coastal the company that going in market, climate everything. estate TAM the is into especially that account; be every real same. invest you to you every cities; take investment in So climate real emissions in, Every estate private,

addressable market extremely the think I is large. So

goings that. terms of that just penetration the early of measure and will a don't deal in Now time it's of the very to trying just huge, of of early, useful comments exercise. sort all the MSCI, of It's and time great We that. stages at we, think and report on of a spend we're at and

Andrew Wiechmann

Yes.

that, how the a TAM to on Owen, put that referenced, very was point much addressable finer call market. what a Just we to came with your about I like up you it to tangible question

to, at point, types, cohorts, each And for to that that each in to what types that in we the any if Henry's we type just based are be. what client potential client even gauge can that single products big we issue. with generate big on to is, cohorts extrapolate willing looking the can of we're they today and opportunity To continue each largest that those issue ultimately and then new to can in pay new new not how across products we the clients of climate use is client those where then all client sales cases, sell within as So would that given misses those within able starting to the how how -- categories. client the be then and we were products we new it scenario, have

Owen Lau

it. very talk cryptocurrency please index. any follow-up the think interest MSCI about very, relaunching in Could you quick you Got Do on MSCI's That's A impacts? helpful. [indiscernible] cryptocurrency

Henry Fernandez

good Yes. question. Very

me that invested us to Let start not a therefore, at intermediaries. you all nexus, are leading the lot investment with the at MSCI, managers asset know, at And edge first ideas, in. the we, of of even as by process to just our between always concepts clients be and owners, that beginning are come saying financial new new

all with Examples our clients are talking leading to obviously exploring every investing. opportunity are and of type investments And where the market services of and our about single about investment over products emerging that that. and enhancing decades we So investing. always tools edge taking thematic obviously, of we're for

about cryptocurrency this? What who cryptocurrencies. could example? one carbon to us a investment had is blockchain with an losers? the climate, with underlying What I that. I to Et and lot associated is cetera. is winners emission us mean, implications more and there of of That in associated we've for So are clients the the disruption come number the are the And say, technology? mining How institutional of potential make tell of this? example of a this

So that's and of ecosystem cryptocurrency. it's universe a just broader sort

of evaluating So few of per about for a analyzing se are and models looking lot that. of launch talking experts. experts data and to order come We're more with then months as well, a those that, over next all variety to we and in of that. all We're indices to some partnerships the

Operator

Our comes with Equities. Simon from next question Atlantic Clinch

Simon Clinch

your uses customers capital, of get of particular, -- ESG providers data are to in already of grips it, right how on climate actual the the are actually of how terms touch follow-up business kind split -- really corporate the in But and financial many to with for as the of how me, delivering is collecting Could and you of love there? reporting climate information? climate reporting on I in capital, do where what that is just you I'd the well. the your of split that starting think what intermediaries the between companies of the actually those companies the side, market remind is and side And -- of share. now of only and word sort think the I terms

Baer Pettit

Yes.

we So further. the of front out Simon, but and picture don't that then have the of me, all take data can in I we flex

balance the the asset between opportunities... And new of main asset would relationship the -- the asset the benchmarks the say roughly to adoption play. and roughly managers I portfolios. the the -- is historic we managers So [indiscernible] and And revenues and is owners the And information asset that the of same. owners both that that create between is

Henry Fernandez

mind, me broken. you, don't let you interrupt your is call Baer, -- line if your because is -- me Let

If do question you want that. you to and while in let the answer me dial back

thing recognize corporates asset the first managers, the apply that banks the So and tools to to everyone: owners, climate and obviously, is like.

entire spectrum. are across the present So we

of lot that. of they research there. do that benchmarks measure we -- need impact the the owner, are as to therefore, starts, do to sovereign asset what wealth what with how the the pension fund, have especially, their intend of the policy -- portfolios. helping are do to going obviously, a the fund, decarbonize And work, understand a foundation, kind going lot they the endowment, And of how they it to So to

a is of indices asset -- not we looking So owner for it then terms are portfolios similarly that into of way in that's example, like. to that But the the the win, talked in context run benchmark that this significant managers at the benchmark And we're but climate, to therefore, then, by and what doesn't Paris that. going asset for generate aligned, of gets operation monetizing general. amount the in a climate according to And point. but revenue that transition, the CalSTRS in about

managers a like incorporating there's had banks they revenues, of the creating green bonds, are of And majority also years, area. and large lot great that growing variety asset -- that. a we've incorporating come with into investment months, deal are IPOs research and They're couple rapidly asset a the banks all owners of helping the of of markets climate of from our that. been of So majority their revenue -- portfolios. last and and currently, presence all last clearly, example, climate-aligned In swaps climate the equity vehicles options particularly the terms into XX which run their capital a for are of in in

probably way summary, the revenue second the they're banks growing beyond right And the the rapidly. food this. the second the the revenue then asset -- and that now, in importance imposing best thirdly owner managers, because of But started is is owner. number asset So majority of the is in one asset chain

because have revenue is an own measure data, their temperature coming also need their helping can that they like. how understand we're amount their of and how corporates the they We alignment disclose that corporates from footprint, is carbon it it to carbon increasing

Andrew Wiechmann

that. asset the -- climate portion, asset nature, coming it as give is Of of figures is earlier, Henry managers the And well. is, is that $X-and-change And balance, the of managers. rate $XX coming some about largest you said, run fees, to asset-based almost as mentioned on subscription just majority its entirely from from Baer which then by that of the the million million

Simon Clinch

one I That's just might very And just fit Great. if question. in useful. Okay.

going rate market I'm dynamics -- on retention that in volatility retention in, there a analytics rates the or the on overall. changes quickly wondering, just seen? Just causing bit say, that's any any anything more is you've

Andrew Wiechmann

Yes. quarter. I'd say changes no notable this

will it across no around. said of any a past, bit indicators we, segment here. the lumpier client say were to cancellations certain note we've there little specific periods, large other As where segments may tend be bounce can I'd in and in or of the have analytics within analytics

Operator

question comes from Our RBC Capital. with next Sabadra Ashish

Ashish Sabadra

a I I'll on on upfront. two ESG. ask both solid Congrats questions had quarter. them

space. on presence there, but consolidation S&P increasing First one lot have ESG. Markit there's their happening in Obviously, IHS environment also with the acquisition more the you on competitive just is just of a

do do evolve And IOSCO, is we looking regulate how -- So to second MSCI forward? the that any global one. And And that that's much expect do how providers, is better? have that to as the So -- there competitive to you rating on that help market you going you environment ESG influence forward? was acquisition going the regulator, does or expect to -- expect

Henry Fernandez

Yes.

So in is whole across spectrum. terms our extremely it's positioning, of offering, ESG the competitive advantageous because

models. tools of only that the goes ESG ESG spectrum. factor across incorporation ESG are of all ratings, provider doing of ESG indices, screening, ESG that the equity from We're We into

income Bloomberg significantly capabilities -- have for We our expanded ESG, like. and the with as well sector funds partnership in whole especially in index fixed for Barclays the for and us the

broad So of in quite have a that the is we competition of terms competition, category. And sectors. lot in a the various

and the other there in are certain competitors on ratings, part, the there So competitors screening are like.

income. of We largest and ESG provider, equity are indices, far, fixed the by both

example. a factor in incorporating risk reporting one, part, but there is if among for and as analytics are And and not that not only to the portfolios. few, screening compared is we as So ESG much ESG a the for model competition,

believe is that believe terms some and see the in included way. gets of of Clearly, going will our is of us. investment the indices lot more especially world competition there all to our be these given leadership that completeness all securities us trying The given line, But competitors tools to coming are the an the the we in these a product over of make commissioned and our of regulation that of There are of So summation in products. this we that over will and the time. win be around advantage coming. to what ESG availability

there's will being indirect meaning started -- that regulated, regulation regulation, it So our I to indices has regulated. and with license think clients been we direct the regulation. have It are indirect

always there shrinks the So ability entities. report winner Regulation And a the is for and competitors business they the it in to index to help us create of regulation efficiencies them direct need and the deal in regulation with up that. be our certain rating doing we because to or because need may things, then providers ESG that. the scale number we the dramatically, have with market of

competitive don't necessarily us. something for it it. that for is But we a ask push that when it's advantage or So for comes,

Operator

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

Craig Huber

maybe globally? you with exchanges going the there touch a can further out maybe see some on futures My And And the there on options just and have I some partnerships here? the area opportunity first and touch you follow-up. forward more question, of

Henry Fernandez

Yes.

So extremely of area this is an space. and a focused lot we on It's are that growing white building.

are know, is you listed the the with like world futures currency, And that index euro. As single multi-country in domestic, exposures. in exposure, options and they're country Eurozone the around the meaning that, largely cases

been developing So multi-country, and options futures added and the exchanges index the our are market with have we partners for of for multi-currency a time. bit

we in past. as the We very been futures, reported in successful have

not is so change in are very market our small with but in equities, and only with -- in We're incipient, options. and indices, is that The think to because forth. now continue multi-country small. very expand indices, the the that, the and especially market that for We so area U.S. we're looking on market. listed The indices steps can is it's huge multi-currency-listed, strengthen climate be which to We very on, very, ESG taking options for cap focused developing it in index-listed partnerships example, a

cash up to that also market the other in bull definitely futures and a therefore, and the that the and making index products. in ETF we less way if But that dramatically to volatility, have derivatives highly the be or focused to this from these in you will goes is volume and -- a countercyclical a you area bearish -- volatile one have AUM happen when fees index licensing money more because and we're we index a you -- compared be lot products, and have quarter, AUM the lot as around that noticed AUM are markets, markets levels, options we As lot the going a the lower other there on is may areas. generate

also to that revenue, growth great something a only we're diversify and in because we it doing great that's order at this So but that have MSCI. it's franchise not area all-weather

Andrew Wiechmann

as which growth in volatility point mind keep encouraging our in based interest open us in one given alluded indexes, But low to, continued XX% is futures Henry there, have to contracts trend in for one light is market very up generally. volumes been on the the Craig, And year-over-year. the

So continue the products use the and to lower of we healthy volatility. adoption despite see of kind

Craig Huber

you well hedge quick that question, just on your ask, business. I how fund on How of your adopting could My products? touch Can feel that doing? do other if And health that's I about we appreciate market? are they that. the

Baer Pettit

Yes.

ESG. There's more little nothing there So -- a we really say, say and I has have from analytics. spoke. not it growth been would fundamental dramatically we change There's there's quarters. that in growth -- patchy last I a index. since environment It's that previous It's to would a changed been in is been change -- good the in relates good not as

last no headline is we since change spoke. the main time the think dramatic I So

Operator

next Housum with Our Research. Keith from Northcoast comes question

Keith Housum

that up question you guys is and on in How technology? more playbook turn upturn us investments? we think on are should the And guess, quickly it the down the for in these those about several how investments next people, I and you business. just A investments remind over there, turn or can the quarters?

Andrew Wiechmann

Yes. Sure.

in here. some typically bit is up non-comp comp while time fees, time. the we some period driver expenses some up is a which the in namely when a upturn can the a little to of significantly asset-based take And expenses, there short lag, of So can ramp quite expenses, especially bring move of

know, you as are, now. we our going playbook to upturn actively so And

rate, in we've be health said continue continues the business rapid As broader strong. the at to grow and asset-based past, quite fees a growth the to very

to accruals where started as that we areas franchise year, we that's that happens business where better seeing as when I we people all-weather areas. highlight that the to the performance and compensation, on guidance go just based relative And that have. relate the turning non-comp key highlight to enter both upturn naturally going X opposite technology so up and where we it's of would driver the well challenging period. I in here, up. other would One the is around compensation other a we're and our factors are investing the

And on so nice that's FX similarly, franchise side. a of the kind all-weather hedge. And

on seen have some side we currencies. as depreciated FX So expense the headwinds has the against several dollar

into factored pressure And about side. sometimes. put nice on The as direction opposite year-to-date revenue offset expenses guidance. the some the the on as also so that's And the thing that is something moves well that's we that in an get

bit on a of spend growth just the highlighting benefited have can going, firm. depreciation. we really a the revenue the dollar So U.S. around areas the from are If are side key these the I minute where investments

to areas very are much and Triple-Crown we our incremental those for to are dollars the going putting that to So us. growth framework drive sticking

areas ESG. development. platform, in new are it's In see to on index, significant index business an growth we ESG rate, performance new improved where down using product the just you double investments, which So this innovative ESG, based the can really some like of index, expense

like invest area, on like our go more in market side. sourcing as continuing generally, platform, technology areas alluded as platform, Baer earlier, well, migration to and we're areas So data in investing data the manager sales then in DevOps. and ESG to ESG then cloud in quality new the our to And

past, we've that similar enacting messages the we're to a it's to now extent. in right higher delivered just what So

Keith Housum

I And a if question, just Great. may. follow-up

before or in line how back customers your do go back to there there back does you come year? guys over office, back you -- the that the go because come do new a that we opportunity the to anything assuming you affect able of year in weren't gives work and work, people past weren't weren't perhaps businesses to Is that end employees business? Assuming the

Henry Fernandez

Yes.

deals C and the the large in So a in last in more require levels that was year, organization client the large that the we had for mid lockdown junior between the coordination enterprise the analytics levels. the example, impact fairly level and

up dried we us. the for level it's So of a but it the that seen returning, that gradually have at in not past. lot It's

Overall, the implementation of implementation that will we very a slowed is benefit come all receptive. we significantly. virtual are for enterprise those normally sale by as general, work, world. the down and to has fees, the done of exceptionally the -- we a our that deals, people put when to general, putting the in all deals, be office. that. of well when in We've recognize back been which Once In large So that except being the clients we're have way, done,

internally, we've summarize enterprise those with great and So the the been a working relating large of loss virtually through the clients, in has general, that disruption and areas that X very were levels were that, lives and productivity fees. after recognition horrible gone the of the with lives experience people our the context effective roof. of been sales therefore, at lot quite communicating to employment. hurt in implementation, people's It's in to of of a and we pandemic the But clients, just and a analytics in

Operator

UBS. Alex is next Our a Kramm from follow-up with question

Alexander Kramm

Sorry call. out for dragging the

of margin One, about operating couple expansion. quick and Andy, you leverage a follow-ups. Just preserving talked

like you think and but out you when margin where us, remind you margin does of actually laid growth just expansion basis? longer about? terms have in know I cost you can term, growth, So you've arrive annual on in an range that a do think of EBITDA subscription expansion that terms

Andrew Wiechmann

dynamic very Yes. And it's equation. a

modest objective about the market be to to in direction, as couple last might And it's what going down future. that significantly, said, not the at Similarly, see where like there leverage. and be But some to pace we we a margin runs in of likely keep There positive have in and we've up to will prescriptive the opposite at we seen periods periods. just margin drive see and seen or go you'll with operating the ABF in we it, our up. is at the times of And up than the be been continue goes point go pace operating invest. expansion. quarters, we've we've more are periods, adjust our to margin targeted longer-term So leverage can't going where investment

we Our core invest continue focus to a here that, And to want to is at driving long-term rate. healthy do growth.

Alexander Kramm

from it right? not to around willing I So perspective? means Am long-term modest put a what getting numbers

Andrew Wiechmann

Yes.

seen You've I targets yes, than said prescriptive on the haven't side. our we've And expense that. more long-term what been and

Alexander Kramm

talking quick one just single a lot on on climate, in And also Aladdin Like viewing of Fair. maybe areas. particular, cetera. are Or these it out are to a climate lot they climate when one and you And products, not then them it I ESG the question modeling? and when but a climate firm to is you more opportunities that to as a follow-up about to with et competitor relates of big know particularly And competition and comes in BlackRock climate. I relationship a think partnership? have the

Henry Fernandez

all and index into the tools, all the models in as with is, all which of BlackRock, hand, same the climate on tools it's we're relationship So partners of strong indices. overall that, the go construction one that and and

and On business, a business analytics analytics tools analytics number the that. are their all reporting and and and of other hand, in with there our clearly, competes of models embedded and

available of our with content even platforms. bit obviously all MSCI an to own the that, open software platform competition in architecture wants is more a with company. those And emphasize in work So is But are competitive. that if that platforms any said therefore, having things our is of is to us, one

of all their number ESG that, partnership vein, So their content, and in lot in climate and in a with have that content climate in a of we terms of BlackRock content, business collaborations analytics and of putting platform. models Aladdin our

So competition overall well the on in software there and the workflow element there partnership context of of as the is platforms. an

Operator

further Fernandez, for no like There remarks. are I'd over Chairman, questions. to back Henry CEO to the call and turn closing

Henry Fernandez

today. joining for you thank Well, us

As even enormous opportunities revenue like that investing, you and and at we and performance, of time, achieved we're modest invest more growth. even the obviously, like we levels we're the same to at if growth it in our Therefore, have more front us to achieve up of going the revenue of try achieve have margin some stepping MSCI. heard, we've to expansion. We higher pace

to enjoy look In you your please summer, stay we and further. safe. forward speaking So the meantime, with

Operator

conference. concludes This the

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

MSCI (MSCI) 27 Jul 212021 Q2 Earnings call transcript