MSCI Q1 2025 Earnings Call Transcript

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Provided by Quartr
April 22, 2025
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Jeremy Ulan
Jeremy Ulan
Head of Investor Relations & Treasurer at MSCI

You, Gigi. Good day and welcome to the MSCI first quarter twenty twenty five earnings conference call. Earlier this morning, we issued a press release announcing our results for the first quarter twenty twenty five. This press release along with an earnings presentation and brief quarterly update are available on our website msci.com under the Investor Relations tab. Let me remind you that this call contains forward looking statements, which are governed by the language on the second slide of today's presentation.

Jeremy Ulan
Jeremy Ulan
Head of Investor Relations & Treasurer at MSCI

You are cautioned not to place undue reliance on forward looking statements, which speak only as of the date on which they are made, are based on current expectations and current economic conditions and are subject to risks and uncertainties that may cause actual results to differ materially from the results anticipated in these forward looking statements. For a discussion of additional risks and uncertainties, please see the risk factors and forward looking statements disclaimer in our most recent Form 10 ks and in our other SEC filings. During today's call, in addition to results presented on the basis of U. S. GAAP, we also refer to non GAAP measures.

Jeremy Ulan
Jeremy Ulan
Head of Investor Relations & Treasurer at MSCI

You'll find a reconciliation of our non GAAP measures to the equivalent GAAP measures in the appendix of the earnings presentation. We will also discuss operating metrics such as run rate and retention rate. Important information regarding our use of operating metrics such as run rate and retention rate are available in the earnings presentation. On the call today are Henry Fernandez, our Chairman and CEO, Baer Pettit, our President and COO, and Andy Wishman, our Chief Financial Officer. Lastly, we wanted to remind our analysts to ask one question at a time during the Q and A portion of our call.

Jeremy Ulan
Jeremy Ulan
Head of Investor Relations & Treasurer at MSCI

We do encourage you to ask more questions by adding yourselves back to the queue. With that, let me now turn the call over to Henry Fernandez. Henry?

Henry Fernandez
Henry Fernandez
Chairman & CEO at MSCI

Thank you, Jeremy. Good day, everyone, and thank you for joining us. Sorry for this scratchy voice. I suffer from seizure allergies at this time of the year. In the first quarter, MSCI delivered strong financial metrics, including organic revenue growth of 10%, adjusted EBITDA growth of 11%, and adjusted earnings per share growth of almost 14%.

Henry Fernandez
Henry Fernandez
Chairman & CEO at MSCI

We also repurchased $275,000,000 worth of MSCI shares during Q1 and through April 21. As always, the share repurchases affirm our belief in the current and future value of our stock and our commitment to a robust capital allocation policy. Our first quarter operating metrics showed durable retention and asset based fee revenue growth, although new recurring subscription sales were down from Q1 of twenty twenty four. More specifically, MSCI delivered a retention rate of over 95%, organic subscription run rate growth of 8%, and asset based fee revenue growth of 18%. This reflected strong growth in both ETF and non ETF AUM linked to MSCI Indices, including the highest Q1 cash flows into ETF products linked to MSCI Indices since 2021.

Henry Fernandez
Henry Fernandez
Chairman & CEO at MSCI

Among our client segments, we had a strong quarter with hedge funds, asset owners, banks and broker dealers, and wealth managers. At the product level, we achieved retention rates of over 96% in index and over 95% in analytics. We also drove recurring net new sales growth of over 60% for each of these product lines. MSCI is providing a growing mix of solutions for portfolio customization and personalization. We have built solid momentum in custom indices, which will be further supported by our integration of Foxbury F9 platform.

Henry Fernandez
Henry Fernandez
Chairman & CEO at MSCI

Meanwhile, net new recurring subscription sales in private capital solutions grew by 24. We continue building new solutions to help clients diversify into private assets. Yesterday, we announced a very exciting partnership with Moody's to develop independent credit risk assessments for private credit. By combining Moody's credit risk modeling solutions with MSCI's private credit investment data, we will drive greater clarity and confidence in this asset class, especially at a period of credit stress in the world. MSCI has the capabilities and the business model to weather periods of global turmoil.

Henry Fernandez
Henry Fernandez
Chairman & CEO at MSCI

Periods of market disrupt disruptions have always been when MSCI's clients need us the most. These are the moments when MSCI's standards and solutions take on much greater importance for clients across segments. Not just our benchmark indices and risk analytics, but also the full range of our integrated interconnected tools and content. 88% of our subscription run rates come from clients who use multiple MSCI product lines. We provide mission critical data, models, and technology that clients need in all environments and all phases of the business cycle, but especially in periods of high uncertainty, low clarity, and relative volatility in markets.

Henry Fernandez
Henry Fernandez
Chairman & CEO at MSCI

This enables MSCI's all weather franchise, robust cash flows, and fortress balance sheet. And all of that makes us confident in our ability to deliver consistent financial results amid the current market turmoil. And with that, let me turn over the call over to Bear Pettit.

Baer Pettit
Baer Pettit
President & COO at MSCI

Thank you, Henry and greetings everyone. In my remarks today, I will discuss our first quarter performance by client segment, including meaningful business wins that give us conviction in our global strategy. We delivered encouraging results among established and newer segments. Among hedge funds, MSCI achieved 14% subscription run rate growth driven by analytics and index and covering a wide range of products and capabilities including customization and the reimagining of risk. For example, our next gen factor models and analytics are helping a growing number of hedge funds understand the key factors driving risk and return amid high levels of market volatility.

Baer Pettit
Baer Pettit
President & COO at MSCI

We now have more than 60 hedge funds using those models up from just eight in twenty twenty two. We also completed a significant multi region hedge fund deal for our ETF linked custom index module. Amongst banks and broker dealers, we delivered over 9% subscription run rate growth with strong analytics new recurring subscription sales in Europe and The Americas. In particular, we saw robust demand for our factor models and related solutions confirming the importance of our risk analytics tools during periods of market volatility. We also saw strong demand for custom baskets created with MSCI index solutions, another sign of the growing push for customization.

Baer Pettit
Baer Pettit
President & COO at MSCI

In addition, we completed a multi year deal with a large bank in The Americas for a sustainability and climate regulatory solution that can support asset liability management. This last win demonstrated that MSCI can generate enormous value across climate risk and sustainable finance. Turning to wealth managers, we achieved subscription run rate growth of 15% driven by index across all regions and by sustainability and climate in Europe. For example, we landed a large One MSCI win including index and private capital solutions with the wealth arm of a prominent global financial institution. This win came part of a 7 figure multi location renewal deal that spanned seven countries and broadened the scope of an existing client relationship resulting in a client run rate expansion of almost 38%.

Baer Pettit
Baer Pettit
President & COO at MSCI

In the process, we fully displaced the equity benchmarks of two key competitors. We also secured a large multi year sustainability and climate win with the European wealth manager to expand their integration of sustainability at both the home office level and client portfolios. Meanwhile, direct indexing AUM based on MSCI indexes increased by 30% to more than $131,000,000,000 All of this illustrates how MSCI's wealth solutions cut across product lines and meet different use cases for a growing number of clients. Moving on to asset owners, we delivered subscription run rate growth of 12% driven by analytics and private capital solutions. Notably, we achieved 10% run rate growth among asset owners and analytics with particular strength in The Americas.

Baer Pettit
Baer Pettit
President & COO at MSCI

We also completed several large private capital solutions deals with pension funds in The Americas and Europe. These deals helped us drive 24% recurring net new sales growth in the overall PCS product line. Additionally, asset owners and other clients continue adapting MSCI indexes to support their climate strategies. In Q1, assets under management in ETF and non ETF products linked to MSCI climate indexes grew by 50% reaching $387,000,000,000 in total. Finally, shifting to asset managers, our subscription run rate growth remained steady at around five percent driven by index.

Baer Pettit
Baer Pettit
President & COO at MSCI

We achieved a retention rate of 96% with asset managers in Q1, up from 95% a year earlier. In our most notable business win, we completed a 7 figure index deal with the asset management arm of a major European bank who made MSCI their exclusive partner and index provider for all future passive ETFs. This deal also included access to our fixed income issuance weighted module and our fixed income custom index. Looking ahead MSCI is redoubling our product development efforts to meet asset managers rapidly evolving needs especially around active ETFs and fixed income. In summary MSCI's increasingly diversified portfolio of clients, products and services strengthen our all weather franchise.

Baer Pettit
Baer Pettit
President & COO at MSCI

And with that, let me turn the call over to Andy.

Andrew Wiechmann
Andrew Wiechmann
CFO at MSCI

Thank you, Bear, and hello everyone. In these times, our global frameworks must have content and trusted risk and performance tools are essential for understanding and navigating markets. And our relationships with the world's leading investment institutions are deeper than ever, positioning us to help them navigate global markets. With 98% recurring revenue, strong margins and high cash flow conversion, we have a highly resilient financial model that positions us for strength in all environments. In index, subscription run rate growth was 9%, with asset managers growing nearly 7% and asset owners growing over 10%.

Andrew Wiechmann
Andrew Wiechmann
CFO at MSCI

These two client segments comprise almost 70% of our index subscription run rate. In index subscription run rate growth with hedge funds, wealth managers and banks and broker dealers was 22%, sixteen % and eleven %, respectively. Please note that beginning this quarter, our investor slides will show a slightly different presentation of our index subscription run rate. This new categorization, which now breaks out the run rate across market cap weighted products, non market cap weighted products, and custom index products, is intended to provide better insights into the growth dynamics across key offerings, especially the custom index offerings. The most notable change from the prior categorization is that the run rate from special packages is now primarily included in the market cap weighted category.

Andrew Wiechmann
Andrew Wiechmann
CFO at MSCI

Non market cap weighted run rate primarily includes our standard factor and sustainability and climate modules, which span both equities and fixed income offerings. As you can see in our presentation, subscription run rate growth from custom indexes was 15. Asset based fee revenue grew 18%, aided by stronger flows into international exposure products, an area where MSCI has particular strength. Non ETF AUM linked to MSCI indexes was nearly $3,900,000,000,000 growing 20% year over year. MSCI linked equity ETFs had an ending balance of $1,780,000,000,000 at the March after attracting nearly $42,000,000,000 of inflows.

Andrew Wiechmann
Andrew Wiechmann
CFO at MSCI

Dollars 37,000,000,000 of the inflows went into products linked to MSCI DM ex US, EM and all country exposures, categories where MSCI collectively captured roughly 45 of all inflows. These cash flows represent the second strongest quarter since 2022, behind only Q4 of last year. Our strong asset based fee growth also benefited from growth in fixed income index products. Fixed income ETF AUM linked to MSCI and partner indexes is now over $76,000,000,000 growing 20% from a year ago. In analytics, subscription run rate growth was 7%, reflecting continued momentum in equity analytics and solid growth with hedge funds, trading firms and asset owners.

Andrew Wiechmann
Andrew Wiechmann
CFO at MSCI

Similar to last quarter, we expect analytics revenue growth to be in line with to slightly lower than run rate growth in Q2 as we compare to periods last year when we had meaningful contributions from implementation related revenues. In our Sustainability and Climate reportable segment, previously referred to as the ESG and Climate segment, we drove almost 10% subscription run rate growth, reflecting some large deals in banking that we previously spoke about, supported by 14% growth with both asset owners and wealth managers. Our long term target for this product line remains under review, as we assess the impact of the near term environment on the long term trajectory. That said, we're seeing traction on several fronts, including with our geospatial asset intelligence solutions, where we've had several recent wins. The retention rate of 94.5% for the segment highlights that our sustainability and climate tools remain mission critical.

Andrew Wiechmann
Andrew Wiechmann
CFO at MSCI

As a reminder, in the second quarter, we will be lapping the prior year benefit from the Moody's partnership, which had a significant contribution to last year's sustainability and climate new recurring sales. In private capital solutions, we saw a 24% increase in recurring net new sales and continued mid teens growth of our run rate, reflecting steady interest in our data, performance and benchmarking solutions. In Real Assets, overall activity remained muted. We continue to face headwinds related to client consolidation, particularly among brokers and developers. On the capital allocation front, we've repurchased over $275,000,000 of MSCI stock or over 493,000 shares since the start of the year.

Andrew Wiechmann
Andrew Wiechmann
CFO at MSCI

This reflects our opportunistic approach to capital deployment and our belief in the long term value of the franchise. We have a strong balance sheet with our gross leverage ratio now at 2.6 times the last twelve months adjusted EBITDA. Our guidance is unchanged. In this complex operating environment, we are preparing MSCI to navigate a broad range of possible outcomes. As we mentioned last quarter, our guidance assumed that market levels gradually increase throughout the year.

Andrew Wiechmann
Andrew Wiechmann
CFO at MSCI

To the extent markets remain at their current levels, we would expect expenses to be at the low end of our current guidance ranges. As a reminder, we have various expense playbook levers that we can rapidly flex. These include, but are not limited to, managing pace of hiring and flexing non comp and professional fees. Additionally, our incentive comp remains self adjusting with overall financial performance. Our Q1 effective tax rate of 12.8% reflected the benefit of significant discrete items, as we previously indicated.

Andrew Wiechmann
Andrew Wiechmann
CFO at MSCI

Beyond Q1, we expect the quarterly effective tax rate, excluding potential discrete items, to be in the range of 19% to 21% each quarter for the rest of 2025. Our Q1 performance adds to our track record of consistent, durable financial results. The long term secular opportunities remain intact, and we remain laser focused on anticipating the needs of the investment community as market conditions evolve. And with that, operator, please open the line for questions.

Operator

Our first question comes from the line of Toni Kaplan from Morgan Stanley.

Toni Kaplan
Toni Kaplan
Executive Director, Senior Equity Research Analyst at Morgan Stanley

Thank you. Wanted to ask about just the selling environment. It looked like in periods of market volatility, I feel like retention typically is strong and we saw that this quarter. But I guess I wanted to focus more on sort of new sales. So, particularly maybe index and sustainability, I guess, what are you hearing from clients in terms of conversations?

Toni Kaplan
Toni Kaplan
Executive Director, Senior Equity Research Analyst at Morgan Stanley

Is there a little bit of reluctance to make new purchases? Is any deals sort of getting pushed out? And just wanted to understand if there was any change in the market environment particularly maybe towards the end of the quarter? Thanks.

Baer Pettit
Baer Pettit
President & COO at MSCI

Hi, Tony. Baer here. So look, want to be very measured in my comments. So the first one, which I think is self evident is this is an extremely uncertain environment with new news coming every day on a variety of market topics. If we then go more specifically and narrowly to our clients and our day to day activities, as of today we don't have evidence that there is a change in the purchasing habits or the pipeline with our clients.

Baer Pettit
Baer Pettit
President & COO at MSCI

More specifically a few items that did not close in Q1, again as of today that we believe they will close in Q2. You know that information could change in the coming weeks, but as of today you know we believe that some of those items that didn't close in Q1 will close in Q2. Our pipeline is in decent shape. Our levels of client engagement are high and notably a observations. There's a clear demand among clients for transparency, analytics, stress testing in the current environment.

Baer Pettit
Baer Pettit
President & COO at MSCI

There's an emphasis on opportunities outside The US from a number of clients in all geographies and so those are some of the key things. We are not seeing a dramatic change. We are in constant contact with our clients at all levels of the organization from the Salesforce to Henry and myself. And we hope we can navigate this with our important mission critical tools.

Toni Kaplan
Toni Kaplan
Executive Director, Senior Equity Research Analyst at Morgan Stanley

Thank you.

Operator

Thank you. One moment for our next question. Our next question comes from the line of Manav Patnai from Barclays.

Manav Patnaik
Managing Director, Equity Research Analyst at Barclays Investment Bank

Hi, thank you. Andy, I

Manav Patnaik
Managing Director, Equity Research Analyst at Barclays Investment Bank

just wanted to ask, in terms of your comment on your preparing for a wide range of outcomes, maybe just remind us kind of of that downturn playbook that you've talked about many times before, but with just a little bit more context on perhaps those outcomes you're referring to in this environment.

Andrew Wiechmann
Andrew Wiechmann
CFO at MSCI

Sure. And as you know, we continually calibrate the pace of spend based on not only the market levels, but business performance and opportunities that we see. And so, if markets improve, we will flex up. And similarly, if markets turn down, we have the levers to manage our expenses down. Just to be a little bit more specific about those levers that we have if we need to use them.

Andrew Wiechmann
Andrew Wiechmann
CFO at MSCI

You've got incentive compensation which adjusts naturally with the outlook for the business and overall business performance relative to targets. A 10% swing in the performance relative to our targets has an annual impact of about $20,000,000 just to dimension how much that can swing. There are certain non comp expenses that we can flex. Delaying professional fees, flexing other non comp items that can collectively have an annualized impact of about $20,000,000 And those can start to impact expenses within a quarter or two, so relatively quickly. And then we can control the pace of hiring, which usually takes a couple quarters to start to have an impact on the financial results.

Andrew Wiechmann
Andrew Wiechmann
CFO at MSCI

But that similarly can have about a $20,000,000 annual impact if we flex hiring up or down on the year. And we can even calibrate more or less, obviously, on all those levers. And so, it's a continual calibration. As we had said before, our guidance assumed that markets gradually increase throughout the year. If the market levels remain relatively flat through the year, we will be towards the low end or at the low end of our expense guidance ranges.

Andrew Wiechmann
Andrew Wiechmann
CFO at MSCI

We wanted to give you that color just to calibrate how much the market would impact overall expenses. But it is important to highlight that there are many factors that feed into the pace of expenses beyond just the market levels and AUM levels. But we also look at business opportunities, financial performance, and potential investment traction that we're getting in key areas. So it's something that we'll continue to calibrate based on the outlook and we'll keep you posted. But we're confident that we have a very, very strong financial model here and the levers to deliver strong results in all environments.

Manav Patnaik
Managing Director, Equity Research Analyst at Barclays Investment Bank

Okay, thank you, Andy.

Operator

Thank you. One moment for our next question. Our next question comes from the line of Alex Kramm from UBS.

Alex Kramm
Alex Kramm
Managing Director - Equity Research at UBS Group

Yes. Hi. Hello, everyone. Just wanted to come back to the selling environment. And in particular, I want to ask about, you know, international investing.

Alex Kramm
Alex Kramm
Managing Director - Equity Research at UBS Group

I mean, it seems to be the first time in a long time that people are talking about, asset flows not towards The U. S, but towards international markets, which seems fairly new. So given that most of your indices are on subscription side internationally focused, just wondering if you're starting to see a change at all in terms of investor or customer sentiment. So if more assets are flowing into, let's say, Europe or away from The U. S, how would we think about maybe a pickup in your business, not on the ETF side, but more on the subscription side?

Alex Kramm
Alex Kramm
Managing Director - Equity Research at UBS Group

Like, would you expect more fund launches? Anything you can see already? Or is it just way too early? But just trying to think about, if this is a new trend in a long time, how this could actually impact your business. Thanks.

Henry Fernandez
Henry Fernandez
Chairman & CEO at MSCI

Well, thanks for that question, Alex. Definitely, we're seeing a marked change in everything you're talking about. This obviously accelerated with the tariffs, but it was already ongoing you know, from the beginning of the year in which a lot of our global clients, including U. S. Clients in their global portfolios, were already placing a lot of bets on Europe and on Japan.

Henry Fernandez
Henry Fernandez
Chairman & CEO at MSCI

And given the, at that time, the decline in interest rates and obviously the weakening of the dollar, we also saw flows going into emerging markets, you know, and new inflows into emerging markets. As I said, that accelerated meaningfully, you know, since the, since April 2. And, you know, and when you look at our business, you know, we have done relatively well against, in the last two, three years, relative to strong headwinds for us know, a lot of first of all, our breakdown in subscription run rate is about 40% Americas, forty % Europe or EMEA, and 20% Asia Pacific. So we are not and that is where the client is located. But at the end, our business is predicated on global investing.

Henry Fernandez
Henry Fernandez
Chairman & CEO at MSCI

And if there is a massive amount of money flowing into The US market, it's a headwind for us. And that's what was happening in the last two, three years. That trend is reversing significantly. In the last month or so, I've had 70 to 80 CEO level meetings throughout all of Europe and Asia, which just came back, and you could see palpable, you know, that shift, you know. So, that hopefully will benefit us in the, on a relative sense because, you know, we were having this headwind for a long period of time that will clearly benefit the asset based fee.

Henry Fernandez
Henry Fernandez
Chairman & CEO at MSCI

Remember, you know, most of our asset based fees are based on exposures that are outside of The US And then we translate them into dollars. So we may get two benefits, you know, relative, better relative performance of assets outside of The US compared to The US. And secondly, depreciation of the dollar. So, that may benefit us there. And on the subscription side, clearly the active managers, the pension funds, and all of that, you know, will do that.

Henry Fernandez
Henry Fernandez
Chairman & CEO at MSCI

You know, but I want to amplify, my answer here to say these are periods in which people need a lot more data to understand the underlying issues of portfolios, whether it's index data or transparency data for private assets or ESG data, sustainability data, climate data, they want to understand what's going on. This geospatial location product that we have is enormously valuable to now people trying to assess, you know, who are the companies that are going to get more impacted or less impacted by trade wars, you know, because, you know, we have location of manufacturing plants per company, locations where they're selling the products and all of that. So that hopefully can give us a lot of benefit in there. These are times in which people need a lot of models to understand stress testing, to scenario planning, scenario, you know, what if this, what if that, you know, factor decomposition. You know, there is major shifts that will go on into a value company, a growth company, a momentum company, a quality company, and all of that.

Henry Fernandez
Henry Fernandez
Chairman & CEO at MSCI

You know, so we're seeing significant dialogue going on with our clients with respect to a lot of that. And I said the transparency. So if you think about private assets, it's important to know that in an environment like this, we're not counting on a lot of money going into private assets. That would be icing on the cake. We're counting on the current investors in private assets.

Henry Fernandez
Henry Fernandez
Chairman & CEO at MSCI

One thing, much more transparency of what's going on in their portfolio. And that's where we come in. In private credit, for example, you know, with the potential of slowdowns or recessions around the world, especially US Europe, people want to know what's underneath my private credit portfolio. So we have a database of 2,800 private credit funds that have about 14,000 companies. We have terms and conditions in those private credit funds.

Henry Fernandez
Henry Fernandez
Chairman & CEO at MSCI

And now we have, you know, with this partnership with Moody's, we will have credit assessment, you know, on that. So that's another example of the benefits we can get in this environment. And again, we're not savoring this environment. We're not, we say we don't deserve it and the like, but in an environment like this, this is where MSCI come at its best.

Alex Kramm
Alex Kramm
Managing Director - Equity Research at UBS Group

Very good.

Alex Kramm
Alex Kramm
Managing Director - Equity Research at UBS Group

Thank you.

Operator

Thank you. One moment before our next question. Our next question comes from the line of Ashish Sabadra from RBC.

Ashish Sabadra
Ashish Sabadra
Analyst at RBC Capital Markets

Thank you taking my question.

Ashish Sabadra
Ashish Sabadra
Analyst at RBC Capital Markets

I just wanted to focus on the pricing. I was just wondering if you could comment on how the pricing is trending both for renewals, but also for new sales. Thanks.

Andrew Wiechmann
Andrew Wiechmann
CFO at MSCI

Sure. So I would say across the firm in the first quarter, the percent contribution from price increases to new recurring sales was roughly in line with the contribution we saw a year ago. That is slightly lower than what we saw in 2023. It does vary a bit across product lines and client segments, but in most areas, I'd say price increases were roughly comparable to last year. It's important to keep in mind here that price increases are not just like for like increases.

Andrew Wiechmann
Andrew Wiechmann
CFO at MSCI

We are oftentimes providing our clients with enhancements to the existing solutions, broader access, and broader usage in addition to continuing to provide enhanced client service. And so, all of those things factor into our approach to pricing. And we do also look at client health and the overall pricing environment as inputs as well. And there are definitely areas where we could push price more, but we are very focused on being a very strong partner to our clients, as we said before. And as Henry alluded to, in these environments, we have the opportunity to do more with organizations and help them in these times.

Andrew Wiechmann
Andrew Wiechmann
CFO at MSCI

And so, we factor that into the overall pricing equation as well.

Ashish Sabadra
Ashish Sabadra
Analyst at RBC Capital Markets

That's very helpful, Kuler. Thank you.

Operator

Thank you. One moment for our next question. Our next question comes from the line of Owen Lau from Oppenheimer.

Owen Lau
Executive Director & Senior Analyst at Oppenheimer & Co. Inc.

Thank you for taking my questions. I want to go back to the new sales environment. And you mentioned that some deals are pushed out from the first quarter to second quarter, but you are still cautiously optimistic that you can find them in the second quarter. So could you please provide more color on under what circumstances that they will proceed with the deal? Do they need to see the escalation of the trade war?

Owen Lau
Executive Director & Senior Analyst at Oppenheimer & Co. Inc.

If this trade war or if this tariff narrative drag on for another quarter, do you think they will still sign the deal? Thanks.

Baer Pettit
Baer Pettit
President & COO at MSCI

Thanks Owen. Yeah, look, I think it's really not so much in the context of the trade war honestly. I think it's just much more kind of in quote normal business. So in the sense that look sometimes some quarters we get a lot of things at the very last minute, sometimes things get bumped. We had a few larger deals that didn't make it this past quarter.

Baer Pettit
Baer Pettit
President & COO at MSCI

I was actually personally involved in some of those. So I think I want to link it less to the environment in the sense that my overall observation was one, we are not for the moment seeing anything unusual. People are our clients are cautious. There's a lot of uncertainty but on the day to day level of what's going on with our clients in terms of let's say a deal not making it from one quarter to the next, the evidence shows that those things will close based on what we know today. So my main point is really to say that as of today we're not really seeing a big change in the environment.

Baer Pettit
Baer Pettit
President & COO at MSCI

We're not being told by clients that the environment will mean they do not do something. And so in that sense my emphasis is on continuity in what we're doing, continuity in our client talks but the background is this uncertainty. So a lot can happen in the next months during the course of this quarter but as of right now we're not seeing the volatility affect specific deals that we have in the pipeline right now.

Owen Lau
Executive Director & Senior Analyst at Oppenheimer & Co. Inc.

Got it. Thanks a lot.

Operator

Thank you. One moment for our next question. Our next question comes from the line of Alex Hess from JPMorgan.

Alexander Hess
Alexander Hess
Vice President - Equity Research at JP Morgan

Hi, everybody. Andy, could you potentially comment on how AUM has trended in the non ETF part of your business overall? I saw that was some pretty healthy growth in the quarter. If you could just sort of elaborate as to what is driving your growth there and what your expectations are for the balance of the year, up 27% by my math to just under $50,000,000 on a quarterly basis is surely a big step up for you guys. It'd be helpful to know what we should be looking for there and maybe what's driving it.

Alexander Hess
Alexander Hess
Vice President - Equity Research at JP Morgan

Thank you.

Andrew Wiechmann
Andrew Wiechmann
CFO at MSCI

Sure. Sure. Hi, Alex. Yeah, so firstly, it's important to keep in mind that there can be a little bit of lumpiness in revenue in the non ETF passive category related to true ups and true downs just when we get the updated assets reported to clients. But, if you look at the underlying AUM, we do see pretty healthy growth there.

Andrew Wiechmann
Andrew Wiechmann
CFO at MSCI

So, non ETF, average AUM was up around 20% in the quarter compared to a year ago. We saw pretty healthy growth of new fund creation. We even saw that particularly in areas like climate and custom mandates. And so, we continue to be encouraged about the opportunity. A couple areas to note here.

Andrew Wiechmann
Andrew Wiechmann
CFO at MSCI

We commented in the prepared remarks about direct indexing. So, indexing does come through this line. While it's relatively small, it is high growth for us. And then there are areas like institutional passive, which we continue to see healthy growth in, where institutions are launching mandates against one of our indexes. And as I alluded to, that's increasingly against custom indexes.

Andrew Wiechmann
Andrew Wiechmann
CFO at MSCI

And that's a place where we are differentiated. We think we can be a helpful partner to clients. And we do see pretty stable economics there. And so, average basis points have been quite resilient across non ETF passive on the heels of our non market cap and custom index type of mandate. So, yeah, it's an area that we are focused heavily on.

Andrew Wiechmann
Andrew Wiechmann
CFO at MSCI

It's very strategic for us. And I think it's a reflection of some of those custom index opportunities that we see out there.

Alexander Hess
Alexander Hess
Vice President - Equity Research at JP Morgan

Thanks. And just in case it wasn't clear, I did mean to ask for end of period AUM for the non ETF business. Sorry about that.

Andrew Wiechmann
Andrew Wiechmann
CFO at MSCI

Yeah, no problem. End of period AUM and non ETF passive was around $3,900,000,000,000

Operator

Thank you. One moment for our next question. Our next question comes from the line of Faiza Alwai from Deutsche Bank.

Faiza Alwy
Faiza Alwy
Managing Director, US Company Research at Deutsche Bank

Yes. Hi. Thank you. I was wondering if you could comment a little bit on retention rates, particularly on the index side and analytics. And if I look at those, it seems like they were pretty normal relative to historical trend, if I look back to 'twenty two and 'twenty three.

Faiza Alwy
Faiza Alwy
Managing Director, US Company Research at Deutsche Bank

I know you had talked about some lingering impacts over time potentially from consolidation with European asset managers. So just curious if we should think about these levels as more normal from here or if there's additional impacts that you're expecting related to just the current environment or more generally anything else that you're expecting.

Andrew Wiechmann
Andrew Wiechmann
CFO at MSCI

Sure. So, maybe just to provide a bit more color on the retention rate in the quarter, and then we can talk about some of the dynamics looking forward here. But if we look at Q1 of this year compared to Q1 of last year, we had lower cancels across most client segments. And we had notable declines in cancels with hedge funds and banks compared to a year ago, which probably is not surprising. If you remember, we had the large cancel related to the large global bank merger in the first quarter of last year.

Andrew Wiechmann
Andrew Wiechmann
CFO at MSCI

And we had some elevated hedge fund events in the first quarter of last year. And so, we saw a nice rebound in retention among those client segments. But to your point, we saw a pretty healthy retention in our largest product segments. So, index, it was 96.5 and within analytics, ninety five point five percent. And from a client segment standpoint, we saw a retention rate of about 96% with asset managers and north of 95% with asset owners.

Andrew Wiechmann
Andrew Wiechmann
CFO at MSCI

And so, the core part of the business saw some pretty healthy resilience in the quarter. The top cause of cancels continues to be client events. And I think the comments that I made last quarter around some caution, particularly in Europe, still holds. I think when we look forward this year, it's possible we could see some lumpiness in cancels in certain periods, particularly if the market uncertainty continues and that recent volatility continues, which can lead to some elevated client events. But it's important to keep in mind that our tools really are mission critical here.

Andrew Wiechmann
Andrew Wiechmann
CFO at MSCI

And as Henry alluded to, they're must have solutions in these types of environments. But we were encouraged by the retention here, but a bit cautious on the outlook for the balance of the year.

Operator

Thank you. One moment for our next question. Our next question comes from the line of Kelsey Xu from Autonomous.

Kelsey Zhu
Analyst at Autonomous Research

Hi, good morning. Thanks for taking my question. Just on analytics, I think you previously highlighted that in the period of high volatility and uncertainty, analytics would generally see stronger growth. I'm not sure we've really seen this in Q1 that you see those numbers. But under the current environment, I was wondering if you can talk a little bit more about growth expectations for analytics new sales in Q2 and the rest of the year.

Henry Fernandez
Henry Fernandez
Chairman & CEO at MSCI

So, first of all, Q1 was not yet a period of significant turmoil or uncertainty. If anything, there was a little bit, at least part of the Q1, was a little bit of the carryover of the excitement of the new US Administration and the risk on trades that took place. So, so I will not read too much on that Q1 being, at that period of difficulty. Clearly, things started to get a little more to deteriorate in the latter part of Q1 and then obviously, you know, in April. So in periods like this, are two big periods like this, and especially this one, there are a little bit of three different forces that will shape our sales and our growth and all of that.

Henry Fernandez
Henry Fernandez
Chairman & CEO at MSCI

First force is client needles the most. Clients need more data. They need more stress testing, factor decomposition. They need more understanding of what is inside an index. They need better transparency with private assets and all of that because they want to know what's underneath the hood of all their investments.

Henry Fernandez
Henry Fernandez
Chairman & CEO at MSCI

And therefore, that will be a very significant positive, especially in risk analytics and in our index offering, which is the largest part of MSCI. Imperials like this also, is the non imperialist like this. In this particular period, there is a significant reallocation of assets to non US markets with a consequent declining of the dollar and, you know, we're booming Japan and Europe and other places like that. And we're seeing that. And that again is another positive for us compared to what the last two, three years was a massive inflow into The US market.

Henry Fernandez
Henry Fernandez
Chairman & CEO at MSCI

So on balance, we do much better when money flows around the world than just to The US market. Those two very significant positives needs to be weighed against spending of our clients, you know, the budgets of our clients in which there's some clients that are doing well. You know, lot of equity long short hedge funds will do well. Macro hedge funds will do well. Pension funds are typically very steady.

Henry Fernandez
Henry Fernandez
Chairman & CEO at MSCI

You know, index fund managers are going to do well. You know, active managers may not do as well, but some of them, if there is a period in which active management, you know, should be very brilliant is this period. So, some of those active managers are going to do well and their budgets are not going to be curtailed, but others may be curtailed. So, I think that, you know, we need to put those three factors into the equation. How much of the two positives outweigh the negative of potential lesser spending by our clients or vice versa?

Henry Fernandez
Henry Fernandez
Chairman & CEO at MSCI

And we don't know the answer to that until we go through the whole period.

Operator

You. One moment for our next question. Our next question comes from the line of Scott Wirtzl from Wolfe Research.

Scott Wurtzel
SVP - Equity Research at Wolfe Research, LLC

Great. Thank you guys for taking my question. I wanted to ask on the sustainability and climate segment just in terms of the acceleration in run rate growth that we've seen this quarter along with it sounds like some relatively large deals being signed. Just wondering if you think we're maybe seeing a potential inflection point in that segment and that we could potentially see acceleration in growth down the line here. Thanks.

Henry Fernandez
Henry Fernandez
Chairman & CEO at MSCI

So, there's no question that sustainability, the old ESG, is on a cyclical headwind. We continue to believe that on a secular structural basis, factors related to sustainability and understanding the inside of portfolios will be positive and will return to higher growth. But the demand is also changing. Demand that we had was ESG ratings. People would take our ESG rating.

Henry Fernandez
Henry Fernandez
Chairman & CEO at MSCI

They trusted what we did. They didn't want to look under the hood, and they went out and created portfolios on that. Now people say, Yeah, I'd love to take your ESG rating, but I want see the underlying information. I wanna break it down into the various, you know, the environmental, you know, sections, the social sectors, and all of that. So decline, the demand is changing, and therefore we're gearing up to that change in demand, which is a lot more underlying data, which is actually very positive for us because we have all of that.

Henry Fernandez
Henry Fernandez
Chairman & CEO at MSCI

It's just a question of how do we package it and how we sell it. You know, the other change in the demand is major regulatory burden. So people, a lot of our clients who have portfolios on sustainability or are launching sustainability, they want a lot more help in complying with every one of these regulations all over the world. And we have packages that help them do that in an automatic fashion. So, now the last piece is that, you know, bear in mind that in order for us to get to sustainability, we gather an enormous amount of information about our clients' operations, where the employees, where they're located, you know, they have their offices, they are, you know, they're in hiring practices and their controversies, this and all of that.

Henry Fernandez
Henry Fernandez
Chairman & CEO at MSCI

So that database becomes very valuable also to examine other issues, not just sustainability, but other issues. So, and so that's, you know, something that can pick up in demand. Now on climate, you know, which is climate demand and factors are, and variables are going to gradually be very separate than the other part of sustainability, what we call ESG. Right. We used to call ESG.

Henry Fernandez
Henry Fernandez
Chairman & CEO at MSCI

So on climate, you know, it's not going away, you know, but the demand is also changing. It's going from long term, long dated transition risk in pools of assets that were long dated, such as pension funds over wealth funds and all of that, and on transition, net zero commitments, how to get there and all of that. That continues, but the bigger demand is now in the front end in physical risk with the banks and insurance companies wanting to do that. And that's why, you know, our partnership with Swiss Re on physical risk models is part of, you know, it's part of going in that climate direction. You know, as I said, I just spent three months on the road, five straight weeks at a time for ten weeks altogether.

Henry Fernandez
Henry Fernandez
Chairman & CEO at MSCI

And I met with seventy, eighty CEOs. I didn't see anybody stepping away from the climate risk issues. Now, you know, in an environment like this, is that the first thing they're going to do? Probably not because they need to survive in the short term before they make it to the medium term. But climate risk is hitting these people really hard, especially banks and insurance companies.

Henry Fernandez
Henry Fernandez
Chairman & CEO at MSCI

And we see it all over the world. The physical risk has increased. So we're hopeful that after a period of maybe softness you know, on climate that things begin to pick up. One notable, for example, one notable area that we're doing a lot of work, particularly with the European asset owners, is taking a climate risk overlay on fixed income portfolio. So, we're delivering climate adjusted fixed income indices for this asset owner clients to reallocate their fixed income portfolios in this direction.

Henry Fernandez
Henry Fernandez
Chairman & CEO at MSCI

I hope that helped.

Operator

Thank you. One moment for our next question. Our next question comes from the line of Craig Huber from Huber Research Partners LLC.

Craig Huber
Equity Research Analyst at Huber Research Partners

Yes, hi, thank you. My question around ESG, is there a material difference in the year over year growth rate in the quarter we just finished here by region, Europe versus Asia versus The Americas? And maybe also if you could touch on the climate growth within ESG, how those revenues did year over year, that piece of it, please.

Andrew Wiechmann
Andrew Wiechmann
CFO at MSCI

Sure, sure. Hi, Craig. Yeah, so there was a difference. So, the subscription run rate growth for sustainability and climate in EMEA was about 14%. It was 4% in The Americas and 8.5% in APAC.

Andrew Wiechmann
Andrew Wiechmann
CFO at MSCI

And those regions contribute about 52% from EMEA, 30 4 Percent Americas and 14% in the APAC region. Climate run rate growth was 20% across the entire company. Within the sustainability and climate segment, it was about 17% growth. And just to dimension that, the climate related run rate within the sustainability and climate segment is around $151,000,000

Operator

Thank you. One moment for our next question. Our next question comes from the line of Jason Haas from Wells Fargo.

Jason Haas
Jason Haas
Director & Senior Equity Research Analyst - Business & Information Services at Wells Fargo

Hi, good morning and thanks for taking my question. I was curious if you could talk about why the first quarter EBITDA expenses came in below your expectations?

Andrew Wiechmann
Andrew Wiechmann
CFO at MSCI

Sure. Well, we see a number of, as we've talked about before, lumpy expenses in the first quarter. Those are heavily related to compensation and benefits related expenses. And we have other expenses that tend to be a bit elevated around year end. And so, just the ultimate magnitude of those and the timing of those can cause some swings in the expenses in the quarter.

Andrew Wiechmann
Andrew Wiechmann
CFO at MSCI

Importantly, as you saw, we have not changed our guidance for the year. And so, we're kind of assuming the markets gradually increase for the year, the expense trajectory is on track for those expense guide ranges. As we alluded to, we are being cautious. And to the extent markets remain flat or go down, we will calibrate accordingly. But expenses are kind of in the first quarter, we're on the trajectory which we expect it.

Operator

Thank you. One moment for our next question. Our next question comes from the line of David Motemaden from Evercore ISI.

David Motemaden
Managing Director & Sr. Equity Research Analyst - Insurance & Business Services at Evercore ISI

Hey, thanks. Good morning. I was hoping to dig into the sales, the gross sales that didn't close in 1Q that you guys are hoping will close in 2Q. It sounds like some of those could be meaningful. I guess I'm wondering, were those concentrated within any segment?

David Motemaden
Managing Director & Sr. Equity Research Analyst - Insurance & Business Services at Evercore ISI

It looks like index was definitely a little bit lower. Was a lot of that in there? Or any other detail you could give us would be helpful.

Baer Pettit
Baer Pettit
President & COO at MSCI

Sure. So look, this has come up a few times. I want to reiterate that my key point related to this is that this is kind of what I would call normal sales activity in a given quarter where certain deals either make it or don't make it, right? So my emphasis is not so much on these deals in the context of change, but more to say, look, we had a few deals that didn't make it and we think we're going to make it in the second quarter rather than that there's something special about them or unusual or what have you. So I think the long story short is they're across a number of different product lines.

Baer Pettit
Baer Pettit
President & COO at MSCI

They were literally across all of our product lines. Some of the larger, what are few of the larger deals didn't quite make it. So I think it's kind of a dangerous category to go too much into the detail and I think it's important to elevate the point to the higher level that I was trying to get to which is look some deals didn't make it which can happen in any given quarter but in the slightly changed circumstances since then we're not seeing evidence that those deals will now not close I. E. Changing environment, more uncertainty but our belief and understanding with our client engagement is that those deals that didn't make it in Q1 will make it in Q2 and we hope that to be the case.

Operator

Thank you. One moment for our next question. Our next question comes from the line of Joshua Dennerlein from Bank of America Securities.

Joshua Dennerlein
Joshua Dennerlein
Head of Business & Information Services equity research at Bank of America

Yeah. Hey, guys. Wanted to ask about the new the new Moody's partnership. Could you provide a little bit more color on how that came about and just maybe how you're thinking about it impacting your growth rate? I'm assuming it's going to show up in private assets, that private asset segment.

Henry Fernandez
Henry Fernandez
Chairman & CEO at MSCI

Yeah. So, we started quite a number of years ago. We had gone to the senior management of Moody's and said to them, We have a number of highly complementary capabilities. Why don't we try to do some partnerships? And at the time, it obviously was very focused on ESG.

Henry Fernandez
Henry Fernandez
Chairman & CEO at MSCI

And we said to them, instead of you running a whole ESG business, why don't you rely on us and you feed the ESG data and models and ratings into your entire business? So a couple of years ago, they came back and said, That makes a lot of sense rather than us doing that. So, why don't we do that? And that culminated in the partnership that we announced, on, on ESG last summer. On the success of that working relationship and partnership, we started talking about what are all the other things that we can do that one plus one is three so that they don't have to replicate what we do and we don't replicate what we do.

Henry Fernandez
Henry Fernandez
Chairman & CEO at MSCI

And then we started focusing on private credit. So that started last July. So we went through a number of iterations as to what were the areas that we could potentially benefit mutually from private credit and eventually settle on using their flagship probability of default models and apply it to MSCI's database of private credit and other risk models to come up with a third party significant assessment of creditworthiness of the private credit funds and the underlying instruments, the underlying holdings of those private credit funds. So it's significant because we have some probability default models, but they're not definitely at the scale of Moody's. Moody's has databases, but our database is superior to their private credit database.

Henry Fernandez
Henry Fernandez
Chairman & CEO at MSCI

So we joined forces to do that together so that we can present a joint product to the market. We're going to market it across all of our analytical platforms and our client bases. They're gonna market it in their own client bases, analytical platforms, and obviously third party platforms. So it's a win win for that. And therefore, on the heels of that second partnership, which obviously we announced yesterday, we're talking about what other partnerships are there things that we can do on climate?

Henry Fernandez
Henry Fernandez
Chairman & CEO at MSCI

They have incredible models on climate, physical models and other kinds of models. And we have, obviously, models we're very strong in transition risk. They're stronger in physical risk. We obviously have this other partnership on physical risk with Swiss Re. They have a lot of real estate databases.

Henry Fernandez
Henry Fernandez
Chairman & CEO at MSCI

We have a lot of real estate databases. We have a lot of other private they have their own database. We have our own sort of investment database. So can we do things? So in a nutshell, instead of them trying to replicate what we do to come up with new products and we're also replicating what they do, we partner up to benefit from each other's capabilities.

Henry Fernandez
Henry Fernandez
Chairman & CEO at MSCI

That's a little bit of the process that we've gone through.

Andrew Wiechmann
Andrew Wiechmann
CFO at MSCI

And Josh, it will show up in the private asset segment. Although, I would highlight that the financial impact this year is likely going to be immaterial, relatively small.

Operator

Thank you. One moment for our next question. Our next question comes from the line of George Tong from Goldman Sachs.

George Tong
George Tong
Sr. Research Analyst - Equity Research at Goldman Sachs

Hi, thanks. Good morning. I wanted to go back to sustainability and climate. This was the only segment to see net new sales decline in the quarter. Can you talk a little bit more about the factors behind that and when you might expect net new sales to inflect to growth and maybe in what kind of environment that would be most likely to happen?

Andrew Wiechmann
Andrew Wiechmann
CFO at MSCI

Sure. So, George, and you can see this in the retention rate, which was relatively solid in the quarter. As Henry alluded to, clients are committed to sustainability and climate is very topical and a big focus area for them. We are seeing muted demand in areas. Needless to say, it's a very nuanced and dynamic landscape.

Andrew Wiechmann
Andrew Wiechmann
CFO at MSCI

But we are seeing subdued demand, particularly in The US where investors remain cautious about launching sustainability strategies and funds. And even in Europe, we've seen some regulatory complexity that we've talked about in the past and some uncertainty persist. There is the potential for reduced scope on CSRD, which is small for us today, very small for us today, but obviously was an opportunity for us that's looking less likely. And so, tools remain absolutely mission critical to clients, but there is some caution and some headwinds which we're likely to see in the near term here. So, we expect the performance in the next couple quarters to be similar to what we've seen in recent quarters.

Andrew Wiechmann
Andrew Wiechmann
CFO at MSCI

As Henry alluded to earlier, we continue to be bullish about the long term opportunity here. We are seeing investors evolve on the climate front from emissions into physical risk. We see investors broaden their thinking around sustainability into resilience and really double clicking into all aspects of risk related to sustainability. And that's an area where we have always been differentiated and are very well positioned. And so, there are these attractive opportunities, areas within climate where we're getting early traction.

Andrew Wiechmann
Andrew Wiechmann
CFO at MSCI

I think some of the broader cyclical dynamics are gonna persist here in the short term, but over the long term, we continue to be focused on the big opportunities in front of us.

Operator

Thank you. One moment for our next question. Our next question comes from the line of Russell Quelch from Redburn Atlantic.

Russell Quelch
Managing Director at Redburn Atlantic

Thank you. Good morning. Perhaps as a follow-up to an earlier question on retention, can I quickly check that the improvement in Q1 was driven by a lapping of one off client consolidations and not due to proactive actions on pricing or discounting?

Andrew Wiechmann
Andrew Wiechmann
CFO at MSCI

So, well,

Andrew Wiechmann
Andrew Wiechmann
CFO at MSCI

comparing the retention rate to Q1 of last year, obviously, Q1 of last year, we saw a lower retention rate related to that client activity that I talked about with banks and hedge funds particularly. I'd say the retention rate was reasonably strong across all segments for us here. And I'd say, I wouldn't attribute that to any one thing in specific other than the broad mission criticality of our tools, our proactive client engagement and client service efforts, and our strong position relative to competitors in the market. So, I wouldn't say it necessarily is tied to pricing. But if you compare to last year, obviously, we did have some elevated client events in the first quarter of last year, which is why you saw a big increase year over year.

Operator

Thank you. One moment for our next question. Our next question comes from the line of Gregory Simpson from BNP Paribas Exane.

Gregory Simpson
Equity Research Analyst at BNP Paribas

Hi there. I just wanted to ask for a bit more color on Private Capital Solutions, which had 15% run rate growth this quarter. And in particular, how the sales and uptake of the suite of Private Capital Indexes you launched last year have been going? Just feel like there should be a lot of demand for transparency of private markets in this kind of backdrop, but also where there's a bit of competition in this space. Thank you.

Henry Fernandez
Henry Fernandez
Chairman & CEO at MSCI

So, Private Capital Solutions, formerly acquisition that we made, at the moment is largely a product offering transparency to institutional investors, institutional LPs on their investments in GPs across the whole spectrum of private assets. There are a lot of other sales that are for entities related to that ecosystem. And therefore, the market that we have, we have over 1,000 institutional LPs as clients in this area, and we're fairly under penetrated in this product line around the world, especially outside of The US, in the institutional LPs understanding with a lot of transparency, what is the portfolio? How is that doing relative to a benchmark? What is the performance of the portfolio, the risk of the portfolio?

Henry Fernandez
Henry Fernandez
Chairman & CEO at MSCI

What are the trajectory of capital calls, of returns of capital, and things like that? So, we remain extremely bullish about a continuation of fairly decent growth rates around the world on this area. The second part that we are now focused on is think of them as wealth LPs you know, or individual LPs advised by their wealth manager. They are not dramatically different than an institutional LP. They are LPs.

Henry Fernandez
Henry Fernandez
Chairman & CEO at MSCI

They are investors. And therefore, we're gearing up to provide much higher levels of transparency to those investors in private assets. Of course, private credit is one of the biggest sellers there and the like. That's a second area of initiative that we have. And the third one is, as time goes by, we are creating more products totally fitted for the GPs, you know, understanding their portfolios, comparing it to, competitors' portfolios, and all of that.

Henry Fernandez
Henry Fernandez
Chairman & CEO at MSCI

So, so far, you know, this market is, you know, you can hear a lot of competitors here and there and all of that, but this is a market we have a very strong leadership in it. Very strong leadership. And, you know, and we are advancing on that leadership and making it bigger and wider. The benchmark indices associated with that are a component of that level of transparency. They may not be an in and themselves, meaning we may not have a large amount of revenue that comes from just the benchmark indices and private assets, although, you know, we're going to try, but were going to be a major part of the entire transparency from performance to risk to understanding the market, which is a benchmark to the comparison to the market, etcetera, etcetera.

Henry Fernandez
Henry Fernandez
Chairman & CEO at MSCI

So, we're very bullish on this, you know, private capital solutions product line, you know, going forward.

Operator

Thank you. There are no further questions. I will now turn the floor over to Henry Fernandez for

Henry Fernandez
Henry Fernandez
Chairman & CEO at MSCI

Thank you, operator. I just want to reiterate that periods of global turmoil are when MSCI's clients need us the most and where we do our best. We provide mission critical tools for understanding key sources of investment risk and investment performance and combining both of them into portfolio construction and asset allocation across market cycles. Those tools can take an even greater relevance, I mean, high levels of volatility. This is why MSCI remains confident in the resilience and adaptability of our all weather franchise and our ability to expand in periods like this.

Henry Fernandez
Henry Fernandez
Chairman & CEO at MSCI

You know, it's not as, it's, it's, it's, you know, everyone tries to expand in bull markets and when things are going well, you know, MSCI normally expands the most in periods like this because clients need us the most, they want to talk to us the most, and all of that. So, thank you again for joining us today, listening to our story, and we look forward to speaking to all of you again soon.

Operator

This concludes today's conference call. Thank you for participating. You may now disconnect.

Executives
Analysts
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Key Takeaways

  • Strong Q1 financial results: 10% organic revenue growth, 11% adjusted EBITDA increase and 14% adjusted EPS gain, supported by $275 million in share repurchases.
  • Durable operating metrics with a subscription retention rate above 95%, 8% organic subscription run-rate growth and 18% growth in asset-based fees, driven by record ETF cash flows since 2021.
  • Across client segments, subscription run-rate growth was robust: 14% for hedge funds, 9% for banks & broker-dealers, 15% for wealth managers, 12% for asset owners and 5% for asset managers, highlighted by bespoke index and sustainability deals.
  • Product innovation and partnerships fuel growth: momentum in custom indices (enhanced by Foxbury F9 integration), 24% net new sales growth in private capital solutions and a new Moody’s collaboration to provide independent credit assessments for private credit.
  • MSCI’s all-weather franchise remains resilient amid market volatility, with 88% of run-rate coming from multi-product clients, a fortress balance sheet (2.6× leverage) and flexible expense levers to navigate uncertainty.
AI Generated. May Contain Errors.
Earnings Conference Call
MSCI Q1 2025
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