MSCI(MSCI)2024-04-23 17:56Financial Data and Key Metrics - Organic subscription run rate growth in Analytics was 7%, driven by investments in next-gen models and Insights offering [2] - Analytics revenue included a large contribution from catch-up revenue items, primarily from large client implementations [2] - Private capital solutions saw a 17% run rate growth, with strong traction in EMEA and Asia [11] - ESG and Climate segment achieved 13% organic run rate growth, with 18% growth in Europe and 22% in Asia, while Americas grew at 9% [18] - Real assets run rate growth was 4%, reflecting subdued net new subscription sales due to lower transaction activity and commercial real estate pressures [18] - Index subscription run rate growth was 9.3%, with 12% growth in Asia-Pacific and 24% growth among hedge funds [94] - Custom and special index run rate growth was 19% [94] - ESG Regulatory Solutions run rate growth was 33% [33] - Climate run rate growth was 39%, driven by APAC and EMEA regions [93] - ABF revenues grew 13% year-over-year, benefiting from $21 billion in cash inflows and $93 billion in market appreciation [35] - Organic revenue growth was 10%, adjusted EPS growth was 12%, and free cash flow growth was 14% [41] - Retention rates were 95% for asset owners and 97% for asset managers [35] Business Line Performance - Analytics posted 12% revenue growth, with the highest Q1 recurring sales in a decade at $14 million [87] - RiskManager tool recurring sales grew by 60%, including a strategic win with a major global alternative asset manager [87] - Recurring sales growth in Analytics was 27% among banks, 20% among hedge funds, and 15% among asset owners [87] - Wealth managers run rate surpassed $100 million, growing over 15% year-on-year [42] - Index-linked ETF products reached a record high of $1.58 trillion in AUM, while non-listed products linked to MSCI indexes hit $3.23 trillion [32] - Custom index and special packages saw 19% growth, driven by demand for customization across client segments [35] Market Performance - EMEA accounted for over half of new client wins in Private Capital Solutions [106] - APAC saw 18% ESG run rate growth, with strong momentum in Asia [106] - Developed markets outside the U.S. and emerging markets saw over $22 billion in ETF flows [35] Strategy and Industry Competition - The company is focused on capturing opportunities in portfolio customization, indexation, private assets, and the global sustainability revolution [14] - The acquisition of Foxberry provides a new technology platform for custom index production and backtesting capabilities [14] - The company is leveraging AI to enhance analytics insights and deliver faster, differentiated calculations [127] - MSCI is positioning itself as a key provider of transparency and performance tools in the private assets market, particularly in private credit [79] - The company is enhancing ESG solutions, including EU sustainable finance disclosure regulation and Corporate Sustainability Reporting Directive (CSRD) [33] Management Commentary on Operating Environment and Future Outlook - Elevated cancels in Q1 were due to a concentration of client events, including a major global bank merger, but are not expected to continue at the same level [12][36] - The company expects retention rates to rebound through the year, moving closer to last year's levels [3] - The company remains optimistic about long-term opportunities in private capital solutions and sees strong engagement with clients [11][12] - The company is focused on capitalizing on secular trends such as portfolio customization, private assets, and sustainability [14] - The company expects AUM to decline slightly in Q2 but rebound gradually in the second half of the year [44] Other Important Information - The company closed the acquisition of Foxberry for approximately $22 million, with potential for additional performance-related payments [44] - The effective tax rate in Q1 was 13.5%, benefiting from favorable discrete items and higher excess tax benefits [44] - The company has a cash balance of over $500 million, including $200 million in readily available cash in the U.S. [90] Q&A Session Summary Question: Can you discuss the growth in index subscription run rate and its components? [100] - Growth in index subscription run rate was driven by 8% growth in market cap modules and 19% growth in custom and special packages [35] - The company expects sustained momentum in equity markets to positively impact buying behavior [22] Question: What is the outlook for the ESG and Climate segment? [104] - The company sees significant growth opportunities in ESG and climate, particularly in Asia, despite headwinds in the Americas [38] - New regulations in Europe, such as CSRD, are expected to drive demand for ESG products [104] Question: How is the company balancing reinvestment for growth with near-term margin performance? [116] - The company is focused on maintaining high levels of short-term profitability while investing in long-term growth opportunities [111] - The company is increasing investment at a rate double that of non-investment expenses to drive future revenue growth [111] Question: What is the outlook for private markets and the Burgiss acquisition? [114] - The company achieved 17% run rate growth in Private Capital Solutions, with strong retention rates of nearly 96% [106] - The company remains optimistic about the long-term opportunities in private markets [11] Question: How is AI being integrated into the company's products? [76] - The company is leveraging AI to enhance analytics insights and deliver faster, differentiated calculations [127] - AI is being applied to provide clients with greater insights from complex data, with new product launches expected in the coming quarters [127] Question: What is the outlook for basis point fees in the Index segment? [131] - Basis point fees declined slightly due to a mix shift towards lower fee products, but the company expects growth in assets to offset this decline over time [126] - Custom indexes and non-ETF passive products are areas of strong engagement and growth, often with higher fee mandates [126]