Release Date: April 22, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- MSCI Inc (MSCI, Financial) reported strong financial metrics with organic revenue growth of 10%, adjusted EBITDA growth of 11%, and adjusted earnings per share growth of almost 14%.
- The company achieved a retention rate of over 95% and organic subscription run rate growth of 8%, indicating strong client loyalty and recurring revenue.
- MSCI Inc (MSCI) saw significant growth in asset-based fee revenue, with an 18% increase, driven by strong ETF and non-ETF AUM linked to MSCI Indices.
- The company reported a 24% growth in net new recurring subscription sales for Private Capital (Trades, Portfolio) Solutions, highlighting its expanding footprint in private assets.
- MSCI Inc (MSCI) has a robust capital allocation policy, demonstrated by the repurchase of $225 million worth of shares during Q1, reflecting confidence in its stock value.
Negative Points
- New recurring subscription sales were down compared to Q1 of 2024, indicating potential challenges in acquiring new clients or expanding existing accounts.
- The Sustainability and Climate segment saw net new sales decline, with muted demand particularly in the US and regulatory complexities in Europe affecting growth.
- Real Assets activity remained muted, facing headwinds related to client consolidation, particularly among brokers and developers.
- The company noted that some deals did not close in Q1 and are expected to close in Q2, indicating potential delays in sales cycles.
- MSCI Inc (MSCI) faces a complex operating environment with market volatility and uncertainty, which could impact future financial performance and client spending.
Q & A Highlights
Q: Can you provide insights into the current selling environment, particularly for Index and Sustainability products? Are clients showing reluctance to make new purchases?
A: Baer Pettit, President and COO, noted that despite the uncertain environment, there is no significant change in client purchasing habits or pipeline. Some deals that didn't close in Q1 are expected to close in Q2. Clients are showing demand for transparency, analytics, and stress testing, especially outside the US.
Q: Could you elaborate on the downturn playbook and how MSCI is preparing for a wide range of outcomes?
A: Andrew Wiechmann, CFO, explained that MSCI can flex expenses based on market conditions. Levers include adjusting incentive compensation, delaying professional fees, and controlling hiring pace. These measures can collectively impact expenses by about $20 million annually.
Q: Are you seeing a shift in investor sentiment towards international markets, and how might this impact MSCI's business?
A: Henry Fernandez, CEO, confirmed a marked shift towards international markets, benefiting MSCI as most asset-based fees are linked to non-US exposures. This trend could positively impact both asset-based fees and subscription sales, as clients seek more data and models for global investing.
Q: How is pricing trending for renewals and new sales?
A: Andrew Wiechmann stated that price increases are consistent with last year, though slightly lower than 2023. Pricing strategies include enhancements to existing solutions and broader access, with a focus on maintaining strong client partnerships.
Q: Can you discuss the impact of the new Moody's partnership on MSCI's growth, particularly in Private Assets?
A: Henry Fernandez highlighted the partnership's focus on combining Moody's credit risk models with MSCI's private credit data. This collaboration aims to enhance credit risk assessments in private credit, though the financial impact this year is expected to be minimal.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
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