MSCI(US:MSCI)2024-04-23 17:56Financial Data and Key Metrics Changes - MSCI achieved organic revenue growth of 10%, adjusted earnings per share growth of 12%, and free cash flow growth of 14% [4] - Non-recurring sales increased by 16% to $18 million, reflecting the lingering impact of market volatility and pressures on investment firms [77] - The effective tax rate for Q1 was 13.5%, benefiting from favorable discrete items and higher excess tax benefits recognized on stock-based compensation [28] Business Line Data and Key Metrics Changes - ABF revenue grew by 13%, driven by record AUM balances in ETFs and non-listed products linked to MSCI indices [4] - Analytics revenue grew by 12%, with recurring sales of the RiskManager tool up by 60% [80] - Index subscription run rate growth was 9.3%, with 12% growth in Asia-Pacific and 24% growth among hedge funds [97] Market Data and Key Metrics Changes - AUM in equity ETF products linked to MSCI indices reached a record high of $1.58 trillion, while AUM in non-listed products hit $3.23 trillion [24] - ESG and Climate segment saw organic run rate growth of 13%, with Europe at nearly 18% and Asia at close to 22% [10] - The Americas experienced 9% growth in the ESG and Climate segment [10] Company Strategy and Development Direction - MSCI is focused on capitalizing on trends such as portfolio customization, indexation, and the growth of private assets [5] - The acquisition of Foxberry aims to enhance custom index production and provide simulation and back-testing capabilities [5] - The company is committed to maintaining high levels of revenue growth and profitability despite external challenges [78] Management's Comments on Operating Environment and Future Outlook - Management noted that elevated cancellations were primarily due to industry consolidation and client events, but do not expect this trend to continue [77][30] - There is confidence in the resilience of the business model, supported by high levels of client engagement across all segments [78] - The company anticipates a gradual rebound in AUM and retention rates in the latter part of the year [28][106] Other Important Information - The company reported a retention rate of 94%, with clients using multiple product lines accounting for 85% of the total subscription run rate [79] - The integration of Burgiss is on track, contributing over $24 million in revenue for the quarter with a retention rate of nearly 96% [83] - MSCI's analytics team is experiencing massive demand for products amid market volatility, with significant growth in risk insights and multi-asset class models [80] Q&A Session Summary Question: What is the outlook on closures and cancellations? - Management confirmed that the elevated cancellations were largely due to a significant client event and do not expect this level to continue [12][85] Question: How is the company addressing the longer sales cycles? - Management acknowledged longer sales cycles due to budget constraints but expressed optimism about converting client engagements into bookings [51][106] Question: What is the growth potential for custom index products? - Custom index products saw a strong run rate growth of 19%, with significant market opportunities identified [57] Question: How does MSCI balance reinvestments with margin performance? - The company aims to maintain high profitability while investing in growth opportunities, focusing on efficiency and strategic investments [128] Question: What is the impact of new regulations on ESG demand? - New regulations in Europe are expected to drive demand for ESG products, while the company remains focused on financial materiality [91]