MSCI Inc (MSCI) — Q3 2024 Earnings Call Transcript

Thank you. Good day, and welcome to MSCI's third quarter 2024 earnings conference call. Earlier this morning, we issued a press release announcing our results for the third quarter 2024. 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. 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-K 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. You will 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 Wiechmann, our Chief Financial Officer. As a housekeeping item, we wanted to remind our analysts to ask one question at a time during the Q&A portion of our call. 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?

Thank you, Jeremy. Good day, everyone, and thank you for joining us. MSCI's third quarter results highlight the underlying strength of our business model and client footprint, as well as the essential role that our solutions play in global investing. Financially, we achieved total revenue growth of 16%, adjusted earnings per share growth of 12%, and free cash flow growth of 46%. We repurchased $199 million worth of MSCI shares, bringing our total share repurchases for the year to $440 million. In our operating metrics, we delivered asset-based fee revenue growth of nearly 20%, subscription run rate growth of 15%, and a retention rate of 94%. Looking at our overall performance, we show significant strength in ABF revenue driven by record AUM balances in both ETF and non-ETF products linked to MSCI indices, including third quarter ETF cash flows of $18.6 billion. Index and analytics new recurring subscription sales grew 5% and almost 11% respectively. Among asset owners and hedge funds, organic subscription run rate growth was 11% and 15% respectively. However, net new recurring sales in our ESG and climate segment were down meaningfully from last year's levels. We believe the subdued demand in ESG and climate is cyclical and may be prolonged, but the need for all investors to integrate ESG financial materiality and to decarbonize portfolios are real and secular. For asset managers, new recurring subscription sales were down 5% year-over-year, reflecting cyclical pressures, although retention remains excellent at 96%. As our Q3 results demonstrate, MSCI's product lines are diverse and increasingly complement each other. We are a growth company with an enormous addressable market for our products, which serve a vital function across the investment ecosystem today. Today, I would also like to comment on three key drivers of our long-term strategy. First, our growth among wealth managers and how it reflects both the increasing use of indices and the benefits of our new technology platform. Second, our progress in developing private capital solutions that cut across product lines, and third, our commitment to providing climate solutions that clients need to measure, report, and act on the decarbonization of investments. Starting with wealth, in Q3, MSCI achieved a significant index win with the private banking arm of one of the world's largest banks. We also achieved direct indexing run rate growth of 22%. Meanwhile, our MSCI wealth manager technology platform, formerly known as Fabric, continues to drive robust client engagement for analytics. Looking ahead, we believe this platform can help us deliver content for wealth managers that spans multiple product lines including Index, ESG, Climate, and Private Assets. Regarding Private Capital Solutions, we believe that our work in this area can enhance our capabilities across multiple sectors. We have already seen this with products such as MSCI Private Capital Fund Indices catalyzing notable new client wins and prospects since their launch in July. Our private capital fund indices cover more than 13,000 funds representing over $11 trillion in AUM, and we believe they can help us become a standard setter in private assets. Our partnership with Moody's positions us well to expand our ESG coverage of private companies while also providing more ESG content for segments such as banks, insurance companies, and corporates. As we announced last week, I am pleased to welcome Luke Flemmer to MSCI as our new Head of Private Assets to further build and scale our business to new heights. Luke joins us from Goldman Sachs. Regarding Climate Solutions, as the risks and negative impacts of climate change become ever more apparent, all institutional investors and capital market participants will need high-quality data models and research to adapt. This is inevitable, and it is just a matter of time for this demand to accelerate. MSCI already supplies carbon emission data on more than 60,000 private companies and more than 7,500 private equity and private debt funds. MSCI is well positioned to be the provider of choice for this large-scale reallocation of capital and repricing of assets. We are constantly seeking to upgrade both our talent and our solutions. Last week, we announced that Richard Mattison has joined MSCI as Head of ESG and Climate. Richard comes to us from S&P Global and is also the founder and former CEO of Trucost. We know that MSCI will greatly benefit from his expertise and knowledge. On the Climate Product side, MSCI has recognized the emerging consensus that voluntary carbon markets are critical to achieving net zero. Just last month, we introduced MSCI Carbon Project Ratings, which offer a comprehensive and independent assessment of more than 4,000 carbon credit projects worldwide. All of this demonstrates MSCI's single most important competitive advantage, the global, diversified, and integrated nature of our franchise. We have always sought to capture the biggest trends reshaping the global investment industry, and we are now better equipped than ever to capitalize on these trends while supporting both traditional and new client segments. And with that, let me turn the call over to Baer. Baer?

Thank you, Henry, and greetings everyone. In my remarks today, as I review our third quarter results, I'll focus on our progress and opportunities with individual client segments across the investment ecosystem. Let us start with asset owners, who accounted for some of MSCI's most notable Q3 business wins. Overall, we delivered 11% organic subscription run rate growth, with asset owners showing particular strength in analytics. In Asia, for example, a large public pension fund made MSCI their primary risk analytics provider leveraging our highly competitive mix of applications, sophisticated algorithms, specialized data, and managed services. We closed another significant deal in analytics with a U.S. public pension fund who selected MSCI as their analytics platform of choice for the entire investment process, from planning and asset allocation through to performance attribution and measurement. In each case, MSCI displaced a major competitor. Deals like these helped us achieve our best third quarter on record for recurring sales in analytics, with particular strength in both Europe and the Americas. Despite the softness that Henry mentioned, asset managers remain the largest contributor to our subscription run rate, adding over $60 million of organic run rate in the past 12 months alone. Our firm-wide retention rate among asset managers has stayed high, close to 96% in the third quarter. However, our asset manager clients still face fee compression leading to tighter budgets, though there are some signs of stabilizing redemption pressures and improving inflows. In MSCI index-linked ETFs, year-to-date inflows were nearly $68 billion, which helped our ABF revenues grow nearly 20%. As Henry mentioned, our work in index increasingly reinforces our work in Climate, and MSCI is leveraging this integration to help asset managers navigate the low carbon transition. In the third quarter, one of our pension fund clients in Europe ceded a $1.6 billion ETF linked to an MSCI climate Custom Index launched by one of our asset manager clients. Turning to other client segments, MSCI also did well with hedge funds, wealth managers, and banks and broker-dealers, who have collectively added $60 million in organic subscription run rate over the past 12 months and grew by 10% combined in Q3. For example, we completed a large ticket deal with a global quantitative investment firm who will use our index content and analytics risk data to enhance their overall research and alpha generation strategy. Shifting to wealth managers, they have added about $11 million to MSCI's organic subscription run rate over the past 12 months. Our wealth subscription run rate now stands at $112 million, growing 11% organically, and we have a wealth retention rate of over 97%. MSCI's wealth solutions have become a key differentiator with clients seeking firm-wide investment tools that support the home office while enabling optimization and alignment across leverage, risk, rebalancing, taxes, and securities and fund selection. We are well positioned to build on this momentum by leveraging the MSCI wealth manager platform in different business areas. Wealth represents a key opportunity for MSCI, and we will continue growing our wealth-focused investments across product, client coverage, and research. As you can see, MSCI remains determined to increase our wallet share with both established and newer client segments throughout the investment ecosystem. All of this has enabled our consistent delivery of attractive top-line growth and profitability. And with that, let me turn the call over to Andy. Andy?

Thanks, Baer, and hi everyone. In the third quarter, we delivered 11% organic revenue growth, 17% adjusted EBITDA growth, and 46% free cash flow growth. Within our index segment, subscription run rate growth with asset managers and asset owners was 7% and 11% respectively. These large established client segments represent nearly 70% of our index subscription run rate. Index subscription run rate growth with hedge funds and wealth managers was 23% and 13% respectively in the third quarter. Global cash inflows into equity ETFs linked to MSCI indexes were $18.6 billion in the quarter. We saw robust cash inflows into non-U.S. exposures, particularly in developed markets outside the U.S. These flows, together with strong market appreciation, helped to power another quarter of record balances with the ending AUM and equity ETFs linked to MSCI indexes of $1.76 trillion. Additionally, AUM and non-ETF passive products linked to MSCI indexes reached $3.65 trillion, also a record balance. The combined record AUM balances of $5.4 trillion across ETFs and non-ETF index products linked to MSCI indexes drove nearly 20% year-over-year growth in ETF revenue and reflect momentum in the long-term trend of indexed investing. In analytics, subscription run rate growth was 8%, reflecting the traction we see across several key growth areas such as our factor models, our Insights offering, and our fixed income analytics offerings. Organic revenue growth was slightly below 12% in the quarter, benefiting from another quarter of strong non-recurring revenue, with some large implementations coming online faster than anticipated. We still expect recurring revenue growth rates to more closely align with run rate growth in the upcoming quarters, especially as we begin to compare to prior year periods that included large implementation-related revenues. As a reminder, the timing of implementations is lumpy, and revenue growth will fluctuate for several reasons, as it has in the past. In our ESG and climate reportable segment, organic run rate growth was 11%, which excludes the impact of FX and about $5.3 million of run rate from Trove. Regionally, the subscription run rate growth for the segment was 22% in Europe, 18% in Asia, and 7% in the Americas. Client engagement remains strong, and we continue to see clients looking to grow with us on multiple fronts. We have seen successes from clients looking to consolidate providers, further solidifying our position as a leader. We remain competitively differentiated, and we continue to believe our ESG and climate solutions are a mission-critical part of the investment process, representing a massive opportunity across ESG integration, regulatory compliance, and climate. We also recognize that the recovery of this product line to higher growth rates may take some time, and therefore we continue to evaluate the through-the-cycle growth trajectory of this product and what the ultimate long-term growth target should be. In Private Capital Solutions, run rate growth was 17% over the same period last year, with new recurring subscription sales of over $6 million. Since the end of 2023, over 1/4 of our incremental Private Capital Solutions run rate growth has originated from new client relationships. The Private Capital Solutions retention rate was almost 94%, and we recorded almost $27 million of revenue for the quarter. In real assets, run rate growth was roughly 5% in the third quarter, with a retention rate slightly above 92%, improving both sequentially and versus the same period last year. During the quarter, we closed a few large-ticket deals in the Americas. One of these large deals was for our transaction data offering and was enabled by our open integration, which allows clients to access our large content sets on platforms like Snowflake. We see very early signs of improving market activity, although the commercial real estate industry continues to see significant pressure. Across the company, we saw the resilience of our financial model and our ability to generate strong free cash flows. In the third quarter, we repurchased over $199 million of MSCI shares at an average price of roughly $522. This brings our year-to-date repurchases to $440 million or 879,000 shares at an average price of about $501. Our cash balance at quarter-end was over $500 million, and we continue to be focused on opportunistically repurchasing our shares. I would highlight that we paid down $125 million of our revolver subsequent to quarter-end. Moving forward, we may pay down and draw the revolver in modest amounts from time to time to support our capital uses and optimize interest expense. Turning to our 2024 guidance, consistent with our previous comments, if markets remain at current levels or higher, we expect to be towards the higher end of our expense guidance range for the full year 2024. We've increased our CapEx guidance range by $10 million, reflecting our plan to purchase a larger amount of hardware for our data center in the fourth quarter. We are enhancing our data center environment to more effectively and efficiently support the growth of several of our new solutions in a hybrid cloud and data center approach to infrastructure. We have increased our free cash flow guidance range by $80 million, which reflects some strengthening of cash collections and some tax timing benefits. This year, we are seeing a $40 million discrete tax timing benefit and a roughly $30 million deferral on certain cash tax payments. It’s worth noting that the $30 million cash tax deferral will be paid in early 2025. The lower interest expense guidance primarily reflects the previously mentioned revolver paydown. We also narrowed the forecasted range for the effective tax rate to 18% to 19.5%, based on refined estimates of discrete items we expect to finalize in Q4. In summary, we remain encouraged by the dialogue with clients, and we see very attractive long-term opportunities. While we are beginning to see some gradual signs of improvement in the sales pipeline, we still expect some degree of elevated cancel activity and longer sales cycles to continue in the near term. We look forward to keeping you posted on our progress. And with that, operator, please open the line for questions.

Thank you. Good morning, Henry. I just wanted to ask about the recent management changes you made in both ESG and private credit. Those are obviously two areas that you've talked a lot about having a lot of long-term massive opportunities. So just trying to understand if that's signaling any change in strategy or any nuances that you might want to point out to us.

No, thank you for that question, Manav. This is just a continuation of strengthening and deepening our senior management team, especially in areas that we see incredible runway into the future. As we have said before, the global investment process and the global investment community is increasingly focused on the investment in private assets. Obviously, private credit is in a revolution right now and will transform finance in many parts of the world, with a continual strength in private equities and private infrastructure developing into a major asset class. While private real estate may be experiencing some difficulties, the world will require a lot more physical assets in that space. So with that, we were fortunate to attract Luke to come to us from Goldman Sachs Asset Management to help us lead this effort. We have traditionally been very strong with limited partners (LPs) and are looking to develop new products to also be very strong with general partners (GPs). Regarding ESG and Climate, you can obviously divide it into two. ESG is still navigating through its own issues around the world, although we've stabilized and believe that we will do well and, on a long-term basis, ESG investing is here to stay. We are really focused on developing the Climate part which, given the increasing physical risks in the world, demands a significant amount of data—especially carbon emission estimates, models, and valuation models. We're very fortunate to have Richard joining us today; he comes from being founder and CEO of Trucost, a major player in climate, and we believe he can significantly help us lead that effort and develop new capabilities, tools, and client segments.

Hey, thanks so much. Now that we're getting closer to the end of the year, I was hoping you could share any early read on the budget environment at your clients and maybe in particular how you're thinking about pricing in 2025. Thanks.

Sure. Hi, Toni, it's Andy here. Across MSCI and our client base, we are beginning to see some gradual signs of improvement in dialogues that we hope will translate into a stronger sales pipeline over time. I would highlight that we do expect elevated cancel activity and longer sales cycles to continue in the near term. As you know, asset managers are our largest client segment by run rate. And while redemptions and outflows, as Baer mentioned, are stabilizing, asset managers are still managing with tighter budgets. So we do see that pressure in our day-to-day dialogues. However, given the run in AUMs, we are seeing more constructive discussions with clients, which we hope translates into improved budgets. On the pricing front, the message is consistent with what we've said in recent quarters—where we have been moderating our price increases. The contribution from price to overall recurring sales is down slightly from a year ago. We are very focused on not only the overall price environment and client health, but the value that we're delivering. And even where we can increase prices more, we're taking a long-term view and approach, wanting to be constructive partners to our clients.

Yes, hey, good morning, everyone. I just wanted to stay on the same topic and sorry if I'm being too nitpicky about the short term here. But I think Andy, previously you suggested that things should get better in Q4, particularly on retention. If I'm hearing you correctly, it sounds like things are still pretty soft. So maybe you can be more specific about how you think cancellations will compare year-over-year in Q4, which is obviously the most important quarter. And the same comment on sales. If you want to be specific on the segments, that would be helpful. Thank you.

Yes, sure, Alex. While I don't want to be too specific, as we've seen, quarter-to-quarter trends can be lumpy. On the cancel side, we do expect Q4 cancellations to remain elevated relative to the same period last year. Q4 typically tends to be a seasonally higher period for us in terms of cancellations. We are still working through the impacts of elevated client events that we've witnessed over the past year, along with the effects of numerous pressures discussed on industry participants. Consistent with past comments, we expect retention rates to be closer to where they were in the fourth quarter of last year compared to the significant drop we observed in retention rates in Q3 relative to a year ago. Regarding sales, we continue to see tighter budgets which vary across client segments. We are seeing earlier signs of more constructive dialogue, and with the run in AUMs, many clients are beginning to see their revenues improve, potentially leading to more positive budget situations moving forward.

Yes. Hi, gentlemen. We've had quite a few quarters now with discussions around the sales cycle in the asset manager channel specifically. How do you look internally to ensure that there are no product gaps or execution gaps within MSCI? Additionally, what external metrics should analysts track to assess when that pivot might happen in client budgets?

Yes, thanks for the question, Alex. Clearly, when making that assessment, the competitive situation is critical. We don't have enough time here to analyze it product by product or sub-product. However, generally, where we view it as an industry dynamic is when our performance lagged relative to competitors. Some cases of that may be evident in earnings announcements from some of our competitors. An important indicator is assessing cancels that may arise from client events versus performance issues on our end. Transparency is key, and we aim to provide a high level of granularity in terms of metrics at the SEC segment level, helping to distinguish between challenges arising from competitive market dynamics and those driven by broader economic contexts.

Hi. Thanks for taking my question. I wanted to drill down further on ESG and Climate. There was a reference to cyclical but prolonged subdued demand there, but strong secular trends. Where do we start to see some of those cyclical headwinds moderate? What factors should we continue to track? And with the new leadership focus on climate, will that aid in sales momentum and bundling climate with ESG?

It's important to differentiate between cyclical and secular trends. On a secular basis, it's hard to believe that societies worldwide will not focus on social, environmental, and governance issues of accountable entities. This interconnectedness is evidenced by social tensions and climate change implications on strategies for companies globally. Currently, there's a short-term focus on monetary policy, inflation, and geopolitical issues, taking attention away from these larger problems. We believe attention will return. ESG is going through issues, though we are stabilizing and confident in its future. Climate is recovering faster, driven by physical risks. The investment industry will require substantial data, especially on carbon emissions, and we're well-positioned to meet that demand. Richard joining us significantly strengthens this effort. We believe in these long-term trends and are committed to capturing them.

Hey, good morning, guys. Thank you for taking my question. I wanted to ask about the fixed income and multi-asset side of the business. When looking at emerging growth opportunities, it was one of the stronger growers on an organic basis. Can you share where we are in your journey on fixed income multi-asset class analytics and how much more room there is for that side of the business to continue to grow?

Thanks for the question. As you heard in the prepared remarks, we've noted that fixed income has been a very important component of our strength and credibility across analytics. We've seen significant success in recent sales, attributable to improved capabilities. This is both critical for multi-asset class sales and increasingly standalone fixed income sales. Looking ahead, if we can enhance areas like fixed income performance attribution, it will be valuable for both sales and retention in analytics. Hence, we anticipate continued success and growth in this area.

Hi, good morning. Thanks for taking my question. Regarding private assets, with new leadership in place, I want to circle back to your medium-term strategy to expand in that market. Previously, during the Burgiss acquisition call, you discussed three buckets of private asset benchmarking data providers, and MSCI plans to expand into collecting transaction benchmarking data. Can you share your latest thoughts on that and your investment timeline?

Great question. We intend to deepen and broaden our data collection in private markets, enriching our analytical capabilities significantly. Improved methodologies using AI enable us to enhance the data we collect, and we aim to serve both LPs and GPs. Regarding benchmarking and indexes, it's early days, but exciting developments are taking place to improve our benchmarks in this area; overall, I see significant growth potential in the coming year.

Hi, thanks. Good morning. I wanted to revisit net new recurring subscription trends, which flipped from positive growth in Q2 to a decline in Q3. You discussed tighter client budgets and increased cancel rates, which were also the case in Q2. Can you detail what happened in this quarter to drive this shift and any external conditions you would need to see for trends to improve?

Sure. George, I would highlight that sales remain strong, particularly in Index and Analytics, our two large franchises, despite seeing an uptick in cancellations in Q3 compared to the prior year. Cancellations can be lumpy quarter-over-quarter, and we expect some of that volatility to persist in the near term. The combination of improvements in client dialogue should translate into a more encouraging net new sales trend for us moving forward.

Hi. Thank you. I wanted to ask about competitive displacement. I think in your commentary, you specifically referred to the analytics business and mentioned several deals where you displaced a competitor. Can you provide more insight into the sustainability of this, and is there a specific product leading to these displacements? Any additional details would be helpful.

Certainly. In ESG and Climate, we have data demonstrating our competitive advantages despite current headwinds. We achieved 22% run rate growth in EMEA. In Analytics, we have a long-standing policy of not naming competitors, but our displacement often occurs in formal situations like RFPs. The competitive landscape in our industry can fluctuate, but we remain confident in our execution.

Hey, thanks. Good morning, Andy and Baer. You both spoke about seeing early signs of constructive dialogues with clients. Given the rise in AUM, which benefits revenue for your clients, what else do you think is necessary to reach an inflection point in new sales? Do you foresee any disruptions to the relationship between AUM and client activity going forward?

Yes, it's important to note that we see varying dynamics across our business. While active asset managers have faced challenges, they are looking to grow with us as their AUMs increase. The return of constructive client dialogues will likely translate into stronger demand. Moreover, we see promising momentum in other client segments like wealth management, where there is significant growth potential. Therefore, we maintain numerous avenues for growth throughout our franchise.

Yes, it's Owen Lau from Oppenheimer. Thank you for taking my question. In Analytics, I want to better understand the prevailing message. Many peers are noting tight budgets and vendor consolidation, and you've mentioned similar trends. However, both your recurring subscriptions and non-recurring revenue were strong in the third quarter. Was this driven by implementation revenue or large episodic deals? Can you discuss the analytics outlook? Additionally, while adding your beginning analytics subscription run rate to the net new sales, I arrived at $685 million versus $691 million reported. Can you clarify this discrepancy?

Certainly. Regarding the difference between the calculated run rate and the reported number, fluctuations are typical, particularly from FX impacts. On the overall analytics business momentum, we are experiencing robust demand in environments where there is heightened risk. Success in our equity risk models and improvements in fixed-income offerings have driven sales and retention. While revenue growth remains high due to recent large implementations coming online faster than expected, we anticipate it to align more closely with run-rate growth in the coming quarters as we shift toward comparisons with prior periods that included larger implementation-related revenues.

Yes, hi there. Could you provide further insight into the operating environment? Given the strong stock market performance this year, as well as the Fed lowering rates and manageable inflation, many managers are feeling more optimistic. Why do you continue to highlight a tough operating climate? Are discussions for 2025 budget planning proving to be more positive than in the past?

That's a very insightful question and touches on the core of our discussion. We have strong areas of performance, including record AUM growth in passive products and notable sales in analytics. There may be an overemphasis on weaker segments, notably from active asset managers, who represent over 50% of our subscription run rate. While they've seen significant improvement, they haven't fully recovered yet. We remain cautiously optimistic about their prospects moving into 2025 as they rebuild budgets based on improving revenue. The cyclical downturn in ESG and Climate remains a factor, although we believe those areas will recover in time.

Hey, good afternoon. Thanks for taking my question. I’m curious why you chose not to raise the expense guidance for the year, considering the stronger market performance. Are there offsetting savings, or is the environment keeping you cautious about investment?

Absolutely. We are always looking for growth investment opportunities while balancing stable profitability. While we anticipate AUM to remain strong, the dynamic between investment and profitability must be constantly calibrated. Some investments yield quicker returns, while others will take longer. Our expense guidance reflects this delicacy, and there's often a lag to account for as we assess and invest in growth areas based on market performance.

Good morning, thanks for having me on. You reported another strong quarter of mid-teens run rate revenue growth in custom and specialized index solutions. This now accounts for close to 10% of index segment run rate revenue. How big do you see the opportunity here, and how does MSCI differentiate from competitors surrounding growth in this space?

We remain very excited about the custom and specialized index solutions. This capability question presents an exciting future, as we integrate our Foxberry acquisition, enhancing speed and flexibility across various calculations and combinations. Our advantage lies in our extensive analytics research for portfolio construction and risk exposure modeling. This differentiation spans clients from asset owners to asset managers and banks, giving us compelling opportunities to build relationships and enhance growth.

Hi, guys. I wanted to check in on the RCA business performance within the context of the 2% private assets organic run rate growth this quarter. When you acquired it, you mentioned aspirations of double-digit growth. What do you think is necessary to accelerate it back up? Is it cyclical around real estate transactions, or any competitive aspect you can point out?

The major challenge has been the drop in transaction volume, which is a significant revenue driver. We're beginning to see a recovery as transaction volumes are on the rise, indicated by the narrowing spread between buyers and sellers in real estate. We believe that we could be turning a corner in the coming year, and I anticipate improvements in this area based on those trends.

Yes, hey again. Just one very quick one on the custom opportunity you just discussed. I noticed the run rate for custom and specialized went down a couple of hundred thousand dollars quarter-over-quarter. Were there elevated cancellations or specific reasons for this decline?

No specific issues to call out right now. The broader pressures impacting the business also reached custom and specialized packages, which may have contributed to the quarter-over-quarter movement, but we see strong engagement across numerous client areas. Custom climate indexes are also seen as a key growth driver in ABF, and we see significant demand through various client channels.

Thank you very much, everyone, for joining us today and for your continued interest in MSCI. As you can see from the publications we discussed today, along with the prepared remarks and Q&A, we're intensely focused on delivering innovative products and capabilities to support our clients while growing our wallet share with them. Our steadfast execution enables us to fulfill our ambitious strategy and be a long-term compounder of shareholder value creation. We aim to moderate our enthusiasm and focus on delivering actual results rather than merely discussing potential outcomes. Please bear this in mind. We look forward to engaging with all of you during the quarter and updating you on all the exciting initiatives we are undertaking.