Earnings call transcript Q1 2023

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Operator

Good day, ladies and gentlemen and welcome to the MSCI First Quarter 2023 Earnings Conference Call.

As a reminder, this call is being recorded. [Operator Instructions] I would now like to turn the call over to Jeremy Ulan, Head of Investor Relations and Treasurer.

You may begin.

Jeremy Ulan

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

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

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

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

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

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

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

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

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

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

to mode. point the like the would listen-only may I be members this of media out Finally, a that call in on morning

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

Henry Fernandez

and our Welcome, solid everyone, a of environment, Jeremy. underlying financial first the management. and strength in proactive joining confirming our you, challenging us Thank MSCI franchise you external thank quarter delivered today. results for

double-digit We immune resilience to in the turmoil, of but market the have headline not quarter, retention On stand continues which subscription organic over we a posted rate growth EPS recurring segment been growth adjusted numbers subscriptions. as run-rate XX%. of index a XX% run rate over to our include the from our level, of and seen in X%, quarter consecutive out growth of XXth

especially such behavior The among We some of managers growth budgets segments, although remains run and also rate of growth analytics, uncertainty for and by tightened retail investors steady. investor been cycles managers affected and larger healthy our have the sales In environment wealth affected lengthened, and in United client ESG slowdown areas, certainly a also and demand buying States, have Europe has difficult by have purchases. sales banks, lines our client of in a clients. Meanwhile, including wide regulatory institutional rate climate climate range portfolio retention with MSCI to our XX% opportunities, and many rate across a in run emerging momentum insurance companies. achieving continued drive XX%. XX%. growth equity product over of wealth over delivered maintain as climate

our lagging in need tough changing a competitive to environment, landscape. effect. to recent cycles, revenue models, remains Still, our quarters, an we have and investment market tends navigate revenue advantages for and rapidly to products demand Clients unique endure. research levels analytics continue tends mover find to engagement our a data, be Even see our AUM-linked steady we very noted and in a MSCI’s our in client healthy, subscription As while early services.

that expense can overall we very fuel With continue while rigorous growth mind, investments we maintaining believe core discipline. we prioritizing areas in in

recognize also the years, cycle can have spur as persists. M&A this especially of we turmoil in We market attractive opportunistic periods seen prior at valuations than more

potential our strategy. actively accelerate acquisitions that We’re bolt-on could exploring

strategy ahead, Looking key be network will ecosystem. One by a our the produced driver of that MSCI effects

are and interoperable content across already Our IP throughout investment product process. lines the highly

rising wins, can For it. portfolio, portfolio market segments. cycle continue see a analytics to themselves. a example, yet or for an competitive powerful secular that All tools face market, In In on to tailwinds index-based client remains companies run MSCI. ESG this overlays This that to bear boats. and/or clients all MSCI like at lines, bull market, use can on this companies product differentiate our true then design use MSCI and implement confident times our climate short-term is across strengthen tide advantages. increase we asset client relationships lift opportunity, and can a classes MSCI we

let turn that, call With to Baer. over me the

Baer Pettit

My today commitment our what on to focus our of more our from of quarter, dual agenda continuing comments while business seeing to hearing everyone. this results Thank we and and clients the namely capture of profitability company. the how execution deliver growth we’re you, long-term greetings, our on the will addressable Henry, shareholders, are markets maintaining and to our

metrics, organic sales recurring recurring XX% has the $X.XX million $XX subscription an of environment the sales client with closing longer billion slower continue to closing from comparisons tighter during run-rate and We new than operating our It a see year-over-year rate sales as quarter. you after cycles. budgets for finished of as growth subscription see in more we new of been can March with

nature conviction and we research in environment, macro tools. our the models, control cannot mission-critical the data we of MSCI’s While maintain

some the and and working client pipeline are products larger deals the remain that in of teams quarter. steady, have regions promising engagement to depth across and hard close sales we Our second

in reporting products is XX% of only Retention in a but and index climate and XX% and firm the rates and in the Analytics servicing holding Private investments Assets, This making our our respectively. well capabilities. tough been retention also retention with client across XX% reflection not environment up the ESG are over both and in we’ve

broad-based recurring I’ll emerging run rate few lines. product subscription segments additional lines. growth a both In client and and XX% review drove most index, across strength established with organic our now in well product highlights we

and market our during cap almost grew index subscription rate quarter. million, their using to Investors in are indexes and the are global market an customized now understand sizes and set express to modules, thesis. strategies. rules-based to implement example, investment it turning our For our cap-weighted sectors, $XXX run styles, to They opportunity XX% is across still geographies strategies to also investment implement indexes

and during the modules million XX% quarter. $XXX specialized index now run of custom and Our are rate our subscription grew

rate Our have managers areas market by asset existing expanded XX% over as quarter index modules. including subscription with such run from cap core index strength our this where we

managers with has indexing use cases. year-over-year, rate by our expanded run by model licensing subscription supported of XX% the custom indexes Our and direct wealth portfolios for

subscription we run excluding FX. growth, rate Analytics, drove In X%

almost and equity were close million environment both sales performance of quarter, roughly subscription period for level in recurring for sales our enterprise year. performance risk several mission-critical New analytics models The we’re $XX emphasizes tools. our the capabilities nature current with risk and new our same the institutional during to able strategic and last the investors,

$X their market model dislocation risk. portfolios to nearly volatility downside Specifically, million and in risk we funds benefit also and sales closed hedge use driven by actively to from portfolio who management, models while tools equity recurring of position equity managing sales our new to

their recent within heavily instability, and analytics, significantly risks period their and During platforms, them portfolios. our potential usage on our models, understand the market tools, exposures associated our of clients better helping increasing research on relied to

assess Stress and testing, grew and sentiment. Across factor run risk market-risk rate performance, remain now spotlight liquidity million, exposure their risk year-over-year. try manage and our counterparty climate is the in all $XXX lines, potential according in to clients and counterparty to product swings which XX% all as ESG market

most to Our firm-wide grew of rate run for attractive XX% one continues us. and million, $XX growth is engines which be climate the now

continue tools better understand our portfolios. the opportunities of for their climate and equip manage We investment launch context and new them in to clients risks to to

quarter, we probability introduced In have and climate default. well as biodiversity the screens of as past multi-horizon insights

continued coverage number growing and assets keep asset rise set meet public the which be regulatory will them, helps requirements network of financial which we and and our impacting believe our institutions help navigate temperature evolving the will private investments effectively climate growth. both clients of implied our We with targets. clients to expanded for location universe database invested a are Additionally, pace in, incorporation the catalyst our long-term

some are However, short new slowing in or clients to understand better down proposed order the regulations. potential in term, decisions buying

we preserving new stated, secure capacity are investment have we to previously growth. As

client experience. fixed Our intention is we returns, client preserve design with aligned attractive investment ongoing client we income key deliver demand in the areas as can ESG, such indexes, as the climate, where of much and modernization and as believe possible to

us In focused important creating the to parallel, company to we these are efficiencies investments. equally greater fund on across allow

to As executing outset, I commitment profitability continue we will long-term the shareholders, dual the stated at company. which while of our deliver maintaining agenda means on growth the to our on

will the that, Andy? With turn over to call I Andy.

Andy Wiechmann

effectiveness organic the revenue, Thanks, Baer with with showcase is steady actions. our we X%. declines and revenue to in and quarter growth which financial from financial results continue attractiveness revenue, in while our of year-over-year total the The the remained down of model revenue ABF hi XX% everyone. XX% the Subscription feel pressure of AUM-related

quarter lower sales. be to While the seasonally first tends new for

pronounced level and the not some factors. lengthening discretionary details clarified cases. macro the Relative and year, pressures to quarter or sales higher more of or our cycles were were larger fully in the impact there deals. and in climate of likely the In and is where results saw Americas regulations of constrained climate, within a where released client segment. reflecting year had ticket interpreted of more in impact Our and These last a been we purchases budgets pronounced a particularly softer pending dynamics and ESG use have fewer ago, certain ESG several than recently

Additionally, in rates overall broker line firm-wide we in retention, and from funds, most and saw developers, importantly, in remain firm, strong the with decline coming fairly dealers notably some a real retention although modest of and brokers estate averages. hedge smaller historical areas

some steady, and and to expect across the longer ESG in to client we persist pipeline healthy While from we operate position continue our engagement short-term. strength base. strong demand cyclical the term dynamics with overall, these subscription momentum of of But a remain

strategies areas to strength run heavily which strong saw remained and saw to ecosystem. their a flows In We where we balances index ETFs active continue billion, U.S. fees Client index, outside have integrate our including of both processes, healthy. continue the again inflows, was into $X rate as into had growing share rebounded year-end. improved modules strong notable and clients for ETFs XX% emerging Since capture. of MSCI developed quarter. market cash over from indexes and on within the end passive We subscription MSCI-linked investment benefit AUM cap the in over billion market asset-based based demand more indexes both growth December, since market helped markets X% by and $XX funds, by trading

one cyclical the last MSCI’s in the and futures the listed the Recently, our continue indexes, of listed index indexes clients growing Traded and dynamics, to indexes. those build around slightly largest AUM, growth to futures relative drive financial and linked MSCI and secular trading liquidity history Within based derivatives but growing broader volumes which of launch on the saw franchise. Climate elevated year. from is have of of normalization products see options in to high Action linked market remained environment volumes resulting to completed some to ETF linked helped ecosystem volatility volumes the options we our

healthy data. to appetite and rate was firms index trading In to client These products MSCI X%, FX. for as onetime as derivatives OTC Analytics, for and run demand subscription sales help linked growth support strong see structured to our hedge excluding well both and continue recurring funds areas from We indexes volumes.

equity buy our continue to management models equity broader our portfolio and risk from tools. strong the see We demand side for

XX% of tools growth and to growth. region in ESG Despite slowdown segment, in mentioned decisions our with organic ESG mission-critical related climate slowed Coinciding in growth subscription the some in provide and at steady XX%, In the rate overall while a the to XX%. environments of of of EMEA saw the run with we mentioned growth launches these factors. in some to nature Americas fund previously pressures, client previously the in our path analytics slowdown new the continues buying

ESG impact good momentum also continue engaging although smaller across see factors In climate climate, discussions impacting of to and to segments, sales. we a client some did, very the sales degree,

organic some around our although assets, climate highly subscription clients dynamic In XX%, cancels look run including we We deliver real Our run the growth products we insights climate income from in see the subscription the rate rate. in growth they same into did of roughly which market, all strong Climate see quarter. XX%. the engagement ABF was to clients and as across smaller risk, rate continued for double-digit as was from pickup growth

over I’ll now the in in the and growth takes EPS puts adjusted first of go our quarter. X%

While year, of revenues The from a $X.XX asset-based increase, last last growth was fees the repurchases $X.XX than opportunistic share year-over-year expansion driver significant the year-on-year. adjusted executed drove benefiting level count EPS share in were lower year. subscription of the of we significant lower

note cash capitalized remain and we of of $XX items a million ended compensation comp-related some and had although slightly anticipated million we expenses $XXX $X.X with nearly previously, higher would to QX did billion. well and about non-comp I We favorable were that of that balance expenses March accruals more included expected. than EBITDA and that our have adjusted you indicated benefits-related seasonally

we prior in repurchases consistent we be focused opportunity repurchase of to On for potentially see the slightly continue compelling bolt-on believe, M&A quarter, cycles were during we a with due poised payment cost opportunities. although There the and actively comments to and attractive on client longer continue no collections, share to high-rate part, environment. our

could We continue result and/or opportunities. acquisition some this previously environment unavailable to believe unlocking of repricing in

I would turn XXXX to our to Lastly, guidance. like

the all on of gradually the to categories balances second ETF assumption levels important across our and year. ranges rebound slightly unchanged. guidance declined Our half based we It in have that in note quarter remain the current is AUM from second that the guidance

While financial and compelling opportunities in caution delivering very financial or forward industry. on be while from two, opportunities, next our model the progress. engagement attractive strong we the investment to levers performance. We long-term We keeping the very and quarter have we look long-term management trends growth may the environment across continue some aligned in remain numerous drive to proactive you with result the growth the encouraged client transforming to posted closely in clients the the investment all by

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

Operator

first [Operator ahead. Instructions] with question go Our Barclays. comes Manav from Patnaik Please

Manav Patnaik

rates regulatory specifically, Thank waiting. that just the you. you Good around people to just the impact then of growth out about versus wanted guys how And understand ESG dynamic that the just to the sales delay, could mean, the that just being or comments I have and why you is just talk I is understand like of to or not. pricing, morning. I data break upselling that is cross-selling new whether strong hoping much that slowdown would impacted the help want needed just they in most? ESG, just part which is

Henry Fernandez

for you thank the Manav, question.

let all, bit. set level just little of First a me

revenues lower a ESG despite we given se the that And in rate had As the EMEA, and in had run decline in per a – Andy growth climate segment ESG values around the had the XX% AUM-linked indicated, XX% world. growth in percent and Americas. run over we climate, XX% with equity the in firm-wide XX-plus rate the we have

environment, all. they’re than past, too not the numbers any in with, bad but recent definitely shabby are not lower begin at So to these

pleased So about we’re very that.

point that ESG before I is The answer, will to go second that new directly launching very products of we’re excited climate. in make your about that I a and we’re number Manav,

fixed equities private sales. coverage income additional that we all, rating bode of assets well will for our and are more into ESG more expansion and First continuing other

for offering, on for We’re and banks. carbon very includes bonds, portfolio, excited the about includes that the corporate assets service private and footprinting uptake total which public we’re example,

climate bank We for regulatory in risk. which European have product launched a –

that’s important. So

products excited the of about Enterprise. On Lab climate partnership a risk, with the data very a with launching Climate set we’re firm. We’re and biodiversity

default, to that In of the analytics the of will probability like. risk and a be future we the major climate driver believe climate addition risk in

say So about now, there is a lot can that we that.

retail are discussions seen going the geopolitical with, and subscribe And now are due and the continuing into and to what about is seen happening are we the mutual of of political managers, to your to They they in climate that. in we in being ESG in Americas, the all managers, line climate portfolios. have two the in and trying in not answer landscape and low components issues ESG product institutions there where of that get that Americas ESG. And integrate of they a and definitely wealth involved a sales they we on are major again, trying to because stay whole to question the to fund especially that to the system. crossfire a so and slowdown there clearly are – cautious the middle their U.S., continuing the meaningful deal the launches demand, EMEA. two our So political regions sales assess slowdown the the political are to asset some are caught And don’t are is direct get like slowdown, have on key lot the

obviously, the We maybe that’s year and integral are persist or a for ESG an But what because more, it’s reduction new investment In pretty held as elections revive given up. point, is to system with no to our sales. have have that, EMEA, universe. to some come climate of at part in sales not. But and what going coming prior from is going regulators EMEA, the believe to the ESG meaningful an a up steady have up quarters, in fund

is little to to institutional an demand article an robust. So saying pretty what X as in was retail of what very The the article fund, adjustment and is Americas, going is a X demand bit what similarly remains I steady the fund. an through

up to because funds launching of once that ESG they to very of – product that. finish And lot sorting out they are and climate demand that to sort the continues lines are start fundamental believe process, a EMEA in going strong. clients be So our we their how

continue a a and in bit excited budget these that has in to So political down situation regulatory things, the we the in about the addition because growth little nutshell, exists is EMEA. to The segment. U.S. fundamental plus and that. in the the slowed and to world here impact the other question cautionary in very product just a This this we situation of of aspects, growth there. especially it’s see the rates. – a actually, to is all return is the the And investing a all in begin integration higher stay that when of demand But

Andy Wiechmann

very on composition breakdown recurring strong your new clients. between to just new Manav, even. clients of the continue I’d roughly the is those services recurring say, sales quickly of the come new And sales new our the and existing or upselling majority question, from to

So and past roughly new contributing new we’ve even contribution than would clients is to price I in seen from higher services. what slightly highlight the sales? percentage new a

Manav Patnaik

Okay. That’s you. very helpful. Thank

would of tuck-ins hoping just more terms midsize on Just guys times mentioned data of of that. more and small it coming forth? little down few think bit there. be elaborate in I the in valuations you Or series was obvious exploring so and a the hoping could and that you sounds to the like areas and on M&A, ESG bolt-ons. a I color bit just give you It a it could a

Henry Fernandez

nothing at are we any happening. There can change these can we we So see smaller on transformational don’t that is point, the see that but Manav, that sizable bolt-on obviously horizon or as said, acquisitions. all

to levels has acquisition financial the to muted We to not strategic, of we lot Even been our underpinning a has seen, very in in last our past. asset buyers. make bidding to It few stores. we as an as very sense saw in, been is past disciplined participate have the that would we’re you in want competitors if relatively So assets it up – we’ve years because have financially. have

the that to we’re valuations So that environment see we’re if brings in waiting lot interested make sense this a more down in. obviously areas those only and strategic

opportunities of that amount of preserve a for and when lack of repurchases huge that’s we these in have and come. the the especially context wanted cash emphasize they if wanted don’t cash, because So we we why to and have to

Manav Patnaik

you. fair Okay, enough. Thank

Operator

from Toni comes with Stanley. Morgan go Please ahead. question next Kaplan The

Toni Kaplan

much. Thanks so

Just see should understand mentioned getting do for I wanted guess to year? etcetera. worse you you better? sort – on I next questions. follow-up modest and just of the retail, just we I ESG on Or is guess gets environment a ESG political expect definitely before it what maybe environment

Henry Fernandez

you that, for Toni. Thank

let ESG client it’s – use money versus customers across – call an me that diversified investor all, as is or our banks – manager very an of reiterate wealth money cases. individual of franchise we ESG of franchise what is institutional manager and First managing regions, the very across and diversified types whether said, segments, institution and a just climate across I across, managing of world, regions institution that

like. the So very this is varied and

to want sure driver to on retail is who we down are marketplace have funds So versus different one. important going money the people U.S. within the and you’ve are is into banks money that hedge what with it is a with that. versus the a But marketplace, of all the clearly break I versus make U.S. the got managing recognize managing all who – institutional who managers what

need lot areas therefore, it’s So of we to look at. that a different

that or mutual for fund as to the of sense is going them product that what ETF are views segment, money managing area subdued sense or of client asset blue half be. have it couple MSCI of stay My this reasons. our of wealth red to managers is half money at a to is some line the going – the them and market different and and should them One, are are of money

be to so they launching, – asset lot are making below to to are managers new be radar fanfare of don’t about stay lot attacked, of a the lot a of want They screen don’t trying political of a these etcetera. wins. launches they Secondly, want products,

months, be EMEA, for funds others. for on for of the of I banks, example, market, climate it’s it risk little this subdued and on that U.S., quarters, stay and not territory things, for the of climate lot the it’s and is virgin – banks reclassifying a operating process in us. pick going the to segment environment. traction a think take market, when reordering few few obviously, client all then total In in will going of that will but context, in And beginning up the to institutional may segments again Asia a not to in will still and we’re a on So be and bit a see it demand

Toni Kaplan

Great. thinking environment, Very helpful. ask of I about this you’re products. also to in how just in wanted ESG investment sort current

So I know long-term in your have Thanks. you view other or as the trends near-term, are shifting going positive investment on? but other you do just areas areas of been I towards your guess in shift maybe what’s towards light investment been

Baer Pettit

Baer Toni, Hi, here.

continue require segments, the opportunity can’t maybe just – run amount that a I in using if etcetera. attractive and that rate as lot and growth have, every remains quarter, to climate rate, pointed across run That’s sure, XX% dollars very in client of still continuous right? control will Look, So tone, significant in sort rate sure, slightly rate adding has variety the Henry this a out, ESG for And a we and myself. grew can a that look, have we we geographies, sustain for very quarter, different demand growth a investment. of on of

our a It environment. a But if of our and the Henry client is And a So strains, which right? certainly, opportunity. this to view this So you quarter to there lot it last changes growth that continued in call opportunity, structurally with certain structurally balance certainly from alluded anything is to important is between and the the we it this perspective, and for demand we product isn’t data improvements want have have line. that. so

Henry Fernandez

else something you ESG ESG component, me of is category climate climate obviously that which is use. has that add look and a category, Let Within climate. just to that we the at – is part one have and that here, also

all you. the So to – tools themselves that look disclosures of a been able we’ve began on about create more and you at for we stand-alone climate basis, have to to

going So to be the about climate next side, XX% the the that run-rate. next XX years years, rate world of climate the to million of world on risk run probably insurance industry with to the opportunity to the finance $XX the to out in us the portfolios $XX their their and and are climate with needs biggest going markets, believe of the like. whole figure decarbonization the X investment and whole will industry need grew to million, the We be portfolio, faced deal in few – is capital that all in and

investment on climate consequent So we of creation. in can make one in to leaders and that undisputed to a that want because area we growth be the the continue we steady see value

Toni Kaplan

Makes you. sense. Thank

Operator

The from Please UBS. Kramm go with Alex next question comes ahead.

Alex Kramm

everyone. Yes. Hey, good morning,

some in wanted the bank first of what happened issues. sales Just particular, with volatile environment the quarter. of to about talk in the Clearly, second half March the very got

can at the sales salespeople, of the I sometimes right knowing end those quarter. happen know So

headwind things somewhat look at is get a at So be a from XQ second near-term of the if think some may or time, just come was first the actually you at to quarter, saw if on actually wondering opportunities if quarter just that got you big into and pushed the actually, just here the the the what end worse side. sales of

Henry Fernandez

sales that was you’re time, smaller Alex, close right. but that And around some time. the on delaying in a making we took it at the crisis absolutely banking spend and some place time a Definitely, probably the that – budgetary happens and impact trying to sales. of The anything banking weeks of lot There on. wasn’t scare clients lot of in terms of stress X and the decisions, quarter system last we’re a in in

But of the in direct the a sort has that Suisse, of you quarter. because the bigger crisis It se, are banks, tells bit obviously, already are it in and concentrated crisis think I per the not on well extremely within in huge some our us the about so it that that financial exception adds which closing So banking to capitalized, risk was of system. sales with as pretty Credit them. It to little they doesn’t have aversion. the regulated, And which to clients are smaller a in uncertainty. banking as of add stress the effect overall difficulties. we’re to cautiousness add banks, does the overall been serious of extremely concerned the The will

– likely big-ticket a the it depicted variable It we we larger one pretty pretty and pipeline here. to slowed the caveat pretty to remains the have with solid. down. call down add So respect what We remains that items that sales, our healthy that’s environment to slowed more remain deals have with have

Secondly, we’re maybe bit and cycles is way. future coming the little have a our into not sales near the of problem in longer we But that and looking cancellations. are pickup thinking big a there

Alex Kramm

secondarily, And some growing Great. you Okay. about comments made profitability on and very focused profitability. still then

over much the in profitability months, little per margin. a think EPS, margins you bit heard last terms I on I’ve to of earnings share, as speak when and EBITDA comes few more not it or

you So profitability? holistically? about, Or profitability still just on a what’s when very you your Or growing margin, of comes thinking about about margins? you latest care us thinking lot are committed EBITDA talk curious, when it which are core more to

Henry Fernandez

in know, That’s a great question I’m shareholder a as because, large MSCI. you

and growth as shareholder, with of at the what’s multiples healthy So and years going have growth the reward of myself like, and valuation. we what good EPS. adjusted margins that’s when a end, I care the line us good long-term and market top EBITDA the healthy if healthy very over adjusted – is I with years, about look of will the at to And sort EPS

problem that, EBITDA of what so exclusion because big beginning up not the that’s us of has not it’s at company, elected of It’s for value focused eat that’s the to eat. bit and growth. little little – just of of but just other shareholders growth a on the clearly focus more EBITDA a our thought wrong EBITDA are that That’s variables. our past an and is of They the on not were there the margin exclusion It’s growth. bit I they margin. The so emphasis. when things a EPS obsessed Obviously, of a but the in lot pivoting the our basis So a we’re EPS what mixing that, a that. times so make been exclusion. they company lot EBITDA at we line of top the with it’s at not was that that a It’s and I

Alex Kramm

clarifying for Thanks you. Thank me.

Operator

The next RBC Sabadra question comes ahead. with from Markets. Ashish Please Capital go

Ashish Sabadra

deals, the ESG? uncertain which provide was color for deals currently taking wondering color believe on second I more Is to some are on I remarks, prepared analytics markets. you quarter. teams promising the working could Baer, those question. there if it your that you or close in are index end Thanks more are those some fronts? Any larger the focused in on mentioned my just on Thanks.

Baer Pettit

Sure. any it. that think No, look, I normal in Analytics. Ashish. There there I particular think some don’t is we it’s color for the important stuff to mix, is have, sure,

some deals index. large and We have ESG

decline that and in haven’t was we the a So the more cycle a thought, we that than seen and Henry’s We’ve we picking few also – a observations sales again, longer got from slightly question. Alex’s broader larger our referencing had had deals referencing pipeline. up point a things to make observation

of – So a more going to say close. the focused we’ve it pipeline was healthy we’re got trying next observation quarter. some very on And into got we’ve to a just general

Ashish Sabadra

a helpful very follow-up. quick color. That’s And maybe just

headwind as should been about these of subscription improve. obviously, growth. we the But on growth, also macro think subscription despite improving has XX% side, some As on slowdown ABF the fund think really robust on the slowdown growth we sales the flows challenges, AUM but other about subscription sales we have the how

and the on as forward? think any line So Thanks. about top takes we going puts

Andy Wiechmann

Yes.

to his remarks. alluded this Henry and prepared in – Ashish

ABF remain in and balance nice but line, And quite want quite tends is are be that index lagging XX% overemphasize diverse ESG it’s averages and top where in historical the our seeing subscription it healthy, line with in that revenue plus. this retention even to base to analytics, rates important book tends cycle now, probably and it, to don’t business. a right there a impacted lead is to might some although particularly of on here, our impacting impacts basis. lagging the the on we have a some We revenue I be subscription underscore

is it, index outlook analytics, fronts. biggest and strong here. okay on And pieces the the And two remaining are actually those of quite

which subscription recovery, I the comments impacts the in the I’d about so mentioned underscore, in impacts we of asset-based we resilient a the And resilience continue But metrics, and overall, franchise. I the short-term, as the there a momentum market your sustained just in short-term. business. be to a quite the some that growth. in operating the on to have have that to say, business point to we’ve extent outlook some could And got would in fees, recover the to guidance cautious has we adds and the starts have

then second based invest us gradually capacity on AUMs is that declined the half us the ETF guidance our and obviously back the is But and year. rebound any So to quarter the beneficial upside of assumption there to in for more. creates in

Ashish Sabadra

Thanks, color. Andy. helpful Very

Operator

ahead. The next comes Alexander Hess from JPMorgan. question go with Please

Alexander Hess

just retention that want believe from to seasonal the was somewhat client that quarter-on-quarter good much was any driven was sequential Or how touch improvements improvement by environment? that XQ. maybe briefly, the just Can factors sort XX.X%. morning, in changes I there? up rate Hi, all. of or again you on of I comment

Andy Wiechmann

aspects a say would the play I Yes. role. meaningful seasonal do

of Given renewals that quarter, fourth place rates retention in a have portion to we the drop taking the tend bit there. largest

too I the sequential So dynamics. read much wouldn’t into

in overall line averages. encouraged in As – with I line the historical that is just retentions are are mentioned, rate overall retention we

Baer position. pickup we seen mentioned, seeing it’s and saw the estate in levels areas really just from we’ve are so, standpoint, and are a year agents real And some in real cancels a and And a within ago. clients banks, pullback with as pretty is But showing like and And developers. really we client where funds, up overall, ESG assets. high the hedge in from good smaller broker-dealers climate they and

stuff in we some environments. of would of these structural So see of around edges events it’s types and the that kind and client typically the

Alexander Hess

a maybe Thanks, Andy. as And follow-up, you briefly mentioned assets. real

to an Burgiss there RCA. gone get anything with that’s with on maybe Just wanted the on update group

of else couple you spend those update maybe get out We’re now can and would a those It some us to on from be market with large an anything on provide in on traction nice pretty just years the businesses. areas.

Baer Pettit

Sure, I’ll make a few comments.

we is real if run to FX. rate first that, have actually So we environment or been look view were in rate estate, X% pleased very all, the just overwhelming across challenging at clearly XX% a of growth pretty of an run ex the In globe.

that U.S., us critical part XX%. down the for market clearly the been is which transaction of have volumes for So example, in in

of some but like hit been And we’ve really actually our had UK markets other have from important hard rate the very there. retention decent

markets. the allowing pretty little performance challenging from, markets. of to environment risk think to a I in for certainly in precisely is And think our private results. in see lag some a a the of analytics these happy data – the very sometimes other pretty view let’s understand and that, we’re I of time. will changing be estate the REIT’s for choppy environment, for we have there say, could repricing is our people But with and We resilience still and need the real franchise bit strong So to

add Burgiss, on from think have don’t quarter. the really to anything I And that. last we that’s So

that So right. are those I comments, summary my think

Alexander Hess

Thanks, guys.

Operator

Lau The ahead. Oppenheimer. Please next comes with Owen from go question

Owen Lau

Yes. Thank you questions. for taking my

the So opportunity maybe region Chinese the region? broadly how please MSCI-linked Asia then, update or Pacific impact and the Thank would Pacific us China and index and the does in the talk could give approach reopening of you. about Asia how in on these of some stocks opportunities? the MSCI also of an comeback you AUM speaking, flow And

Henry Fernandez

Asia of impact you, as know, economic has is from and China China, loan lockdown protractive meaningful in the in positive additive our Thank – in of the balance for business opening Owen. Asia. you countries only The the Asia, not all of clearly, because, China COVID a of in but all

very So that’s it positive. in I even all draconic that the as the Despite we China. lockdown, fact mean clients see know. been don’t really you was Mainland really,

our MSCI been managing have to We grow China.

the We China compared to year. grow to growth in basis, last this have on able business and about been a run-rate quarter XX% X%, Mainland in both

So that’s a positive.

for almost us. to to so – Now, Obviously, China indices rate assets the itself, very the – for to the a MSCI that and for associated China non-material so run we the bode be emerging not of is effect to small, is are part of is with are The Mainland have up linked significant. big is China overall a directly index market well going assets us. that market positive and the the recovery made emerging going market that to there China, emerging index, index that’s

the So, various of that’s of a bit the breakdown little components.

the that country for up the asset, the are base, overall except a – China, market we the MSCI the as China effects increasing our very index. opening values positive in huge is it’s for have except So, in But that of the recovery not emerging part of equity I have optimistic business. and with said, the will in the China

Andy Wiechmann

to market on two are capture. those put U.S., nice see the pretty where flows. EM share ETF Henry’s markets We And areas both did flows to into outside we the international finer just a exposure. but And had healthy developed markets, point, point also into

about market of EM a the XX% ETF. flows, flows into of China new emerging On that. we clearly, is captured big actually component And

Owen Lau

or for down to kind for just dial assumptions to stay what for cash previously, flow bit. think then market I in this of the guidance slightly then there guidance at the year helpful. you. then in That’s speaking, mentioned I half quarter Thank the go broadly you decline you it. Andy, this little back the And And can second free let’s the first But take it does I And year. that MSCI current like I wondering decline would that any think remember in very the say, that market rebound Got dial mentioned ETF up is second and I in half. assume if, of you level? a am the change would here?

Andy Wiechmann

assumption to near-term, say, the can we the our continue that’s see a I in have cautious which ETF outlook overall you by underlying would AUM guidance. Sure.

the here the year. Just half to, of to then rebound the reiterate second from assuming markets’ current what gradually we the are quarter decline second the in levels alluded you and during

on. us for dial it’s or down, take would it to we I what about a question are up actively say dial It’s would your something calibration. to constant focused Just

markets still a we outlined the to the at guidance we our assumption continue better the during had the cautious first performed Although than have quarter the year, the near-term. in beginning in of outlook original

long-term further growth, pace on question, are to able can We say, being where do expense more the opportunities. slow on front a And investment we And further and growth sustained non-comp measured. can non-comp markets, tighten to, your we attractive we we ensure see need and invest in little accelerate to we a the levers cautious or those and hiring and expenses on would of we if downside. disciplined if But the are so, even we bit to areas I be to being are critical continue importantly, the headcount we and further do spend. stop on are downside the in to we ready improvement have,

we that cash mean and outlook free have cautious that of a we would sustained There puts what be but the a up takes And and And momentum And that, the guidance calibration outlook. recovering would in so, for really flow. us dial I and markets on a could think is say have, I of pace of if it spend. you is there, reflection that specifically that lot the comment that we would a and we here. determination see currently see see all to confidence want we then don’t a I got are the

Owen Lau

very you Thank it. Got much.

Operator

question ahead. with next Goldman Sachs. The Tong go comes from George Please

George Tong

morning. to drill into I Thanks. the Hi. Good further wanted down environment. selling

on tighter sentiment most impact exiting has quarter? the you ESG, longer the the can seeing elaborate how sales trended in budgets, you cycles. You and about talked are Outside being from client that business client of where

Andy Wiechmann

sure. Yes,

have core and in to index some a expect the of and deals, and some sales impacting also stick small where that strong among the in were elevated to cycles want And estate. But and the of think we with analytics, ticket to we some real impacts many quite big itself, by Baer overall, of in in made some clients the about be the estate, continues areas, the I dynamics are most is to would say in where those underscore of just So, these do factors be holding factors. driven secular manifests I but fewer because think continue is and impacting I there the up that see are the aspects to real some see But those what those short-term. large trends seeing and segments trying segment-specific large two okay. and of here, of analytics lengthening to outlined particularly index continue ESG, pronounced there business. am dynamics continue And way on number ESG generally as of Baer see real heavily those clients that points cancels, key dynamics a said, in and underscoring and not impact factors healthy. momentum. the only we engagement am are notable pipeline are the I it and are we ESG parts we that smaller I degree, climate. do listen, most Those Henry but Americas, talked to but indications just particularly and Geographically, steady, which of the was in of estate. these to ESG I

George Tong

and relatively up high-single X% of growth And it bit about growth to it the well. there Got the seeing growth. bit where is And it. are trends of target of holding the stay That’s in a of some expect in digit course you the Do you of analytics are year? revenue analytics accelerate what is? helpful. long-term the the the expect you then it business? Do a underlying puts you to below quarter, takes little the talked business over Organic

Baer Pettit

Yes.

and a We change. business as a But of We liked going didn’t so that in it’s would think don’t got actually, there strength-to-strength quarter. there pipeline a large as little that really had I well is look, and have dramatic this we do deals bit have from good fixed income quarter. bag. So, mixed quite is it quite a make few we didn’t this a

to sure. don’t dramatic. than We quarter I don’t this we do So, little a for see like would think anything better we did

including got alluded that to a deals it of decent have think comments some was. We the pipeline, I larger my I Owen, in to earlier

pipeline. from a anything So, see I it are think We here, growth to we we are working is would than like right where higher expect the we now. but bit overall, the don’t dramatic

George Tong

helpful. Very it. Thank you. Got

Operator

Alwy go ahead. with Deutsche from The next Please question Faiza comes Bank.

Faiza Alwy

you. Thank Hi. Yes.

I Andy, wanted point a to investments. final put expenses on So just and

expense I this maintained measured levers downside know levers. upside further that your quarter. have you favorability and are have being but and And some mentioned guide, there talked about also You you

that for has that anything rest over the investment relates changed are few how the last you to you are and the your months year? the spending relative viewing expenses curious, it So to of as incurring

Andy Wiechmann

nothing too No, significantly.

to but we this back our better are in baked As roll said, have that here the the a guidance markets the forward outlook at the into original assume the assumptions had now. cautious ETF and we bit and that then of did a half year. will the back rebound guidance, year I beginning of in the underlie than continue first to quarter little where short-term markets a the we the AUM we performed bit in of the pull Clearly,

that’s we the areas, moderated to the have of with that degree here, the headcount growth, in of probably to and we started consistent so, key the expenses would I And you we say, where the grow, on spend we areas for would have year. continue is growth continue pace I firm. the pace and caution say view key although overall and saw generally of

Henry Fernandez

me times all asset asset outlook what values. that just And we of manage have is therefore, our there is significantly to that something understand on future. because in investment we have of to equity manage plan. manage you expense equity in emphasis we do you are don’t following, want environment magic. investment base, what terms we that in more. going – the the a to this the and it’s happen sense to an are and than base we foreseeable in expenses have could rapidly when our thought we keep our to expense no and better a investments our and our higher insights and about to plan. than equity The values, values is say we And alter give our order predicting We is to our that add be order if number Let having want referred a in you a We But a of would don’t I mindset position surprised positively values of the radically into get we want that be, our playbook they with is upturn expenses to can what be difficult invest we like. we bloated

go that’s this are do or mechanism will – a the But third a mindset any we of in that So, here. major We quarter just have is to to of don’t insights bit we our there market what the base. little trying second the down quarter. the as expense use manage no

Faiza Alwy

climate right that. more It me on sounded as side. the that the then and to mentioned on my mentioned a But opposed follow-up and in you environment any U.S. the ESG just sales on on that’s the the ESG side then you And further that. segment, side, for you obviously uncertainty you might Thank climate curious have and climate regulatory the is political new color to Europe. takeaway Understood. that’s in the – some slowing if takeaway

Henry Fernandez

Yes.

So, that’s a good question.

by They etcetera, yet also don’t have an caution the of right. rotation environment financial over sales what are they to of you direction interest they markets. start context environment all, slowdown of potential look or of the all in because or and the peaking, ESG our etcetera, climate to know world going overall clients cautious know be First spending the at may don’t – values level rates or are of when equity the

the spending into line now product XX the so. overall any it been cautious last is has therefore, of take will or more So than to have in that clients account months

issues are risk in to of when referring and secondly, you a some hear – referring the climate, political sometimes likes in gas that. they ESG. and are really to lot respect referred the the the social ESG, and sometimes are politicians, But U.S. So, to of they issues climate of yes, or the to ESG issues oil as and with

caution as about So, U.S. it even the ESG you though market, alone, the hear varies. it

of it the social to and go a Florida, lot ESG. you is If about

part If it a of climate you environmental go the of to is about or part lot Texas, the ESG.

in be climate all because Europe, leader how increase as that but So, over is institutional the in take climate managers retail demand U.S. may individual how out we all we the asset are slower. is And little efforts. increase tools figure demand demand the renewable the across will – a know, their the to a in pushing economies, trying think to In climate the board, are the Europe, bit to climate on into place to and account. decarbonize they

climate on very are we world down bad. very, the not about in tools a ago, for rate prospects growth XX% clearly It XX%, year us. the optimistic from slowed So, of but climate is

Faiza Alwy

you. Thank Great.

Operator

Huber Huber from go Research question Please ahead. with Craig next Partners. The is

Craig Huber

you. Thank Great.

you there? tell sets about that talk you guys you apart quickly, tools, the guys from your you peers data On can and us just if would, in you climate have really think what analytical obviously, long-term. out front, climate you what And

rate You will think climate of rest get run larger than ESG. your eventually the

makes and a tools standpoint stand from really from what data climate? out So, you

Baer Pettit

Yes.

But we temperature competitive are of there such are – it’s the what spend that It’s course, with landscape it’s our implied securities. of you time modeling companies, more But And those I market of of obviously our like cover depending would is depth. physical longer little risks, a and the climate, which large to it’s is It’s think a on terms be it’s question, more happy But very offline happy And we offline. in. indicators in to also fundamentally, and of some be some sophisticated of checker – excuse things. a in of me discussion. it’s very this would part the breadth you So, what take because we the highlights. change. variety a including climate

Andy Wiechmann

segments one an you cuts million us. for know, it And product don’t just Yes. point, be [ph] rate differentiator I mind, across if Craig, is important underscore run but That all $X think really to of you which I for us. climate want

across there. process other differentiates And the to offer of from providers really the ability us part so almost solutions out every investment

caused a in big our is index a there. our to of I generally. more us index which leadership And leader clearly, part be you So aware, it, in is climate know leadership but are

enterprise just insights risk the a on And them data given at analytics leg we up. we do risk level. we climate that areas anyone like have across an ability climate on in risk portfolio else Our unique us helping have clients’ already leg our to really to up provide trying us private capabilities or a assets, then real where front portfolios, gives and a with are give

So, franchise that have people make a that the we real I is advantage total sure sight to competitive want don’t lose of.

Craig Huber

think – comments environment, cut base thinking go it is though you cautionary tougher did outlook they was, added for initial your will second right cost guidance basically Was tougher not companies a put their curious, now, how environment year. guidance because it were My given – say, significantly. am trim three when the your cost again, for the you you unchanged much they a cost is you you I not did months obviously your out you Often, outlook? what into your here. that. Thank when question, cut kept cost

Henry Fernandez

Okay.

change business with the expenses, we are up we on the plan. running base, business is our base, call the I cost we more into think expense which investment which our pure extremely comfortable what expenses divided

that resources, quarters by investment variety we vast expenses plan. of up majority in our to a in few ways have And preserved last the have done We okay. around of squeezing business free the the

the down, very we comfortable. very, that triggering believe than downturn is next have we anything, but we we don’t we a what the an dramatically operating have a obviously, But know. see lot In are upturn happens environment have the to to it lower base that today. we even exists expense We moves that that the scaled today, environment, event environment if company cautious operating the we the So, higher playbook I few levers us apply. probably can of of the playbook, quarters. operating of exists that probability believe to mean in with

So, we are extremely comfortable.

client everyone that asset MSCI We funds regions to about other is base and asset diversified world. a managers from The banks hedge our franchise. focus not on to managers the – remind and very thing owners, to of diversified client wealth is corporates diversified companies the to a and insurance – and banks, tend segments It’s on from that.

Americas, to the Asia-Pacific and assets to the product doing are well equity The climate relatively ESG public We in we and all what fixed and to and lines and now, do. in private EMEA, region. now income has overlaid right EMEA of well assets,

We tools. a lot of have performance

a of have lot risk tools. We

have forms AUM, pricing transaction and We volumes it’s it’s options. whether different of subscription, and it’s futures whether whether then like in

a employees [ph] big of in are very world, XX% are XX% of so diversified employee have We markets emerging spread markets. them are of a lot, developed the half our base.

in expenses hire is issue in labor there wages or we locations. increases a whenever tightness particular other an in So, location, and of

and non-dollar We dollar the hedges have between of like. a versus lot

very expense into nature is of that nature this diversified the the are our cautiousness the the franchise that’s of market. of with why So, and because base we going comfortable

Craig Huber

you. Thank Great.

Operator

Redburn Please go next comes Quelch Partners. from The Russell with question ahead.

Russell Quelch

But revenues you to terms me please? values. guidance QX, guidance having what assumes in what come of degree the rest in Yes. of And lower and Thanks baking into wondering the in on. are appreciate retention particularly year asset subscription I on rates to the

Andy Wiechmann

Yes. I subscription would – is as beast. you slow-moving base the know,

And don’t a the impact current so in sales hedges the rate meaningful to or around even adjustments have year. the retention

for impact asset-based really year is fees. say would this I around bigger So, the

Russell Quelch

just assuming then sort And you in cost base, from the Andy. up inflation pricing or what to Thanks in increase on of following can you that Cool. any Okay. related, cancellations are do please? offset

Andy Wiechmann

and increases they continue they recurring higher been that level would Sure. sales. have say a in than Yes. of I at larger a to new recent to years, contribute be price percentage continue

sales be measured price to clients a with saw I increases. will we delivering getting actually, increases price on even we quarter, we where this recurring with and even the higher say in contribution probably delivering are we We have value, to we continue front would will with it. to to successful extract first seem are with continue clients. than quarter. to value that been And saw and But our connection ensure subscription price slightly capturing be last traction we in

Russell Quelch

Good Okay. stuff. Thanks.

Operator

with from The ahead. Paribas. Greg question BNP next Simpson comes go Please

Greg Simpson

my applications taking potential MSCI doing you questions. today? can actively? just a are you to broad you exploring thoughts you I longer interested of implications appreciate I Hi. What share for can on the hear What AI if ask term? there. but would just know question, thoughts your be are And I some it’s

Baer Pettit

Sure.

clear have AI we look, So and projects in amounts complex few great are formulas client it service, giving and from enormous across everything where applications has books etcetera actively think in a quite methodology reading – we answers. of going and our

of extremely focused definitely slightly all there AI We there. of but on with different more that focused very across a on and are use it. – I are the are in you mean in working to but go And of on context, whole list we business. tell we it, the it would we ESG it can the love data clearly applications is a

Greg Simpson

class are Great. a like this asset it And Thank income interest you. from an more in fixed environment. is lot higher seeing seems investors you that rate

million I your add MSCI are in rate. think talk scale past more comes total just relatively it’s part of run into? growing got here since which of you And there small $XX business? Can you opportunities its about to parts that

Baer Pettit

Yes, for sure.

a on index. innovation So, And of as story, really it’s in very risk. are analytics class our part lot part a important basis multi-asset of both doing in and we a standalone both

some to exciting We are seeing clearly opportunities. client climate, to liquidity. I dinner relating things credit to starting from related have ESG and there related but actually evening some for am and going on a tiny this we a income base, really fixed got

going it’s people So, very where forward. and us important I forward, think bringing things it our will excited area are be of we to an story think growth see part

Greg Simpson

Thank you. Alright.

Operator

over closing for This like our I to remarks. Fernandez question-and-answer would conference any session. turn the back Henry concludes to

Henry Fernandez

morning. for joining us you Thank this

are and will operating heard we when continued much all-weather differentiate us have future sometimes in to in to keep times say, happy As of than perform are you we times a more very environment. that opportunity, day. risk. of what intending you themselves, are than to of you this These on, calls. Thank challenging abreast great all franchise again these and companies fully our well more be And capitalize that’s

Operator

Thank presentation. has today’s conference now for concluded. you The attending

You may all now disconnect.

MSCI (MSCI) 25 Apr 232023 Q1 Earnings call transcript