MSCI(US:MSCI)2024-07-23 18:37Financial Data and Key Metrics Changes - MSCI achieved 10% organic revenue growth, 14% adjusted EBITDA growth, and 21% free cash flow growth in Q2 2024 [8][15] - Adjusted earnings per share grew by 12%, with asset-based fee revenue growth of 18% driven by record AUM balances in ETFs and non-listed products linked to MSCI indices [14][15] - The company reported a retention rate of almost 95% across MSCI [15] Business Line Data and Key Metrics Changes - In the Index segment, MSCI achieved 9% subscription run rate growth, with 10% growth in EMEA and APAC, and 17% growth in custom indexes and special packages [10][39] - The Analytics segment saw organic subscription run rate growth of 7% and revenue growth of 11% [13] - The ESG and Climate segment reported organic run rate growth of 13%, excluding FX impacts [13][18] Market Data and Key Metrics Changes - MSCI captured over $28 billion in ETF inflows during Q2, marking the highest cash flows in over two years [10] - Open interest in derivatives linked to MSCI indexes reached nearly $300 billion, up 9% year-over-year [11] - Fixed income ETFs AUM linked to MSCI and Bloomberg partnership indexes is now at $64 billion, with year-to-date inflows exceeding $6 billion [13] Company Strategy and Development Direction - MSCI aims to become a leader in private market indices, launching MSCI Private Capital Indexes to support investors seeking standardized benchmarks [7][16] - The company is focused on aligning its long-term strategy with secular trends, including the rising demand for high-quality data-driven models and insights [16] - MSCI is leveraging partnerships, such as with Moody's, to expand its ESG and sustainability content and enhance its private company ESG coverage [16][35] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about strong client engagement and the potential for growth despite near-term headwinds and longer sales cycles [28][25] - The company anticipates continued lumpiness in sales and cancels, particularly in Q3, which is typically a seasonally softer quarter [28][30] - Management highlighted the importance of capital allocation and the ongoing focus on creating shareholder value through share repurchases [15][25] Other Important Information - MSCI's cash balance remains over $450 million, with more than $200 million readily available in the U.S. [24] - The company has repurchased $290 million worth of shares at an average price of $484 per share, representing almost 40% of total outstanding shares [15] Q&A Session Summary Question: Sales growth in the quarter - Management noted that strong sales growth was driven by client engagement and momentum in equity markets, although longer sales cycles and elevated cancels are expected to persist [28][30] Question: Moody's partnership details - The partnership with Moody's is expected to enhance MSCI's ESG offerings and provide access to a significant private company database, benefiting both parties [35][36] Question: Cyclical versus secular challenges in asset management - Management acknowledged ongoing budget pressures but emphasized the potential for double-digit growth if market conditions improve [34] Question: Technical challenges in private indexes - MSCI is confident in its ability to tackle technical challenges related to data access and index construction methodologies, leveraging its extensive experience [44][50] Question: AI's role in driving revenues - AI is being integrated across various business segments to enhance efficiency and drive revenue growth, particularly in data management and analytics [75][76]