MSCI Inc (MSCI) — Q1 2025 Earnings Call Transcript

Thank you. Good day, and welcome to the MSCI Inc. first quarter 2025 earnings conference call. Earlier this morning, we issued a press release announcing our results for the first quarter of 2025. 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 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. 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 Wiechmann, our Chief Financial Officer. Lastly, we wanted to remind our analysts to ask one question at this 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. I apologize for the scratchy voice. I suffer from seasonal allergies at this time of the year. In the first quarter, MSCI Inc. delivered strong financial metrics, including organic revenue growth of 10%, adjusted EBITDA growth of 11%, and adjusted earnings per share growth of almost 14%. We also repurchased $275 million worth of MSCI Inc. shares during Q1 and through April 21st. 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 2024. More specifically, MSCI Inc. delivered a retention rate of over 95%, organic subscription run rate growth of 8%, and asset-based fee growth revenue of 18%. This reflected strong growth in both ETF and non-ETF AUM linked to MSCI Inc. indices, including the highest Q1 cash flows into ETF products linked to MSCI Inc. indices since 2021. 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 Inc. 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's F9 platform. 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 Inc.'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 Inc. has the capabilities and the business model to weather periods of global turmoil. Periods of market disruption have always been when MSCI Inc.'s clients need us the most. These are the moments when MSCI Inc.'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 Inc. product clients. 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. This enables MSCI Inc.'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 amidst the current market turmoil. And with that, let me turn over the call to Baer Pettit.

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 Inc. 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 amid high levels of market volatility. We now have more than 60 hedge funds using those models, up from just 8 in 2022. 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 and new recurring subscription sales in Europe and the Americas. In particular, we saw robust demand for our factor models 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 Inc. Index Solutions, another sign of the growing push for customization. In addition, we completed a multiyear 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 Inc. 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 MSCI Inc. win including index and private capital solutions, with the wealth arm of a prominent global financial institution. This win came as part of a seven-figure multilocation renewal deal that spans seven countries and broadened the scope of an existing client relationship, resulting in a client run rate expansion of almost 38%. In the process, we fully displaced the equity benchmarks of two key competitors. We also secured a large multiyear sustainability climate win with the European wealth manager to expand their integration of sustainability at both the home office level and in client portfolios. Meanwhile, direct indexing AUM based on MSCI Inc. indexes increased by 30% to more than $131 billion. All of this illustrates how MSCI Inc.'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 in analytics and with particular strength in the Americas. 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 to adapt MSCI Inc. indexes to support their climate strategies. In Q1, assets under management in ETF and non-ETF products linked to MSCI Inc. climate indexes grew by 50%, reaching $387 billion in total. Finally, shifting to asset managers, our subscription run rate growth remained steady at around 5% driven by index. 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 seven-figure index deal with the asset management arm of a major European bank who made MSCI Inc. 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 Inc. is redoubling our product development efforts to meet asset managers' rapidly evolving needs, especially around active ETFs and fixed income. In summary, MSCI Inc.'s increasingly diversified portfolio of clients, products, and services strengthens our all-weather franchise. And with that, let me turn the call over to Andy.

Thank you, Baer. And hello, everyone. In these times, our global frameworks must have content and trusted risk and performance tools that are essential for understanding and navigating markets. 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%. These two client segments comprise almost 70% of our index subscription run rate. An index subscription run rate growth with hedge funds, wealth managers, and banks and broker-dealers was 22%, 16%, and 11%, 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. In non-market cap weighted run rate primarily includes our standard factor, 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 index was 15%. Asset-based fee revenue grew 18%, aided by stronger flows into international exposure products, an area where MSCI Inc. has particular strength. Non-ETF AUM linked to MSCI Inc. indexes nearly $3.9 trillion, growing 20% year over year. MSCI Inc. linked equity ETFs had an ending balance of $1.78 trillion at the end of March after attracting nearly $42 billion of inflows. $37 billion of the inflows went into products linked to MSCI Inc. DMX US, EM, and all country exposures. Categories where MSCI Inc. 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 ETF AUM linked to MSCI Inc. and partner indexes is now over $76 billion, 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. 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. 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. Private capital solutions 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. Real assets, overall activity remains 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 million of MSCI Inc. stock or over 493,000 shares since the start of the year. 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 Inc. to navigate a broad range of possible outcomes. As we mentioned last quarter, our guidance assumed that market levels gradually increased throughout the year. 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 the pace of hiring, 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. 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. We remain laser-focused on anticipating the needs of the investment community as market conditions evolve. With that, operator, please open the line for questions.

Thank you. I 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. You know, I guess, what are you hearing from clients in terms of conversations? Is there a little bit of reluctance to make new purchases? Are 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.

Hi, Toni. Baer here. So look, I want to be very measured in my comments. 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 purchase clients. More specifically, a few items that did not close in Q1, again, as of today, we believe they will close in Q2. That information could change in the coming weeks, but as of today, 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 few observations. There's a clear demand among clients for transparency, analytics, and stress testing in the current environment. There's an emphasis on opportunities outside the US from a number of clients in all geographies. Those are some key things. So we are not seeing a dramatic change. We are in constant contact with our clients at all levels of the organization from the sales force to Henry and myself. And we hope we can navigate this with our important mission-critical tools.

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

Sure. 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. 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. You've got incentive compensation, which adjusts naturally with the outlook for the business and overall business performance. A 10% swing in the performance relative to our targets has an annual impact of about $20 million 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 million and those can start to impact expenses within a quarter or two, relatively quickly. And then we can control the pace of hiring. Usually takes a couple quarters to start to have an impact on the financial results. But that similarly can have about a $20 million annual impact if we flex hiring up or down on the year. We can even calibrate more or less on all those levers. 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. We wanted to give you that color just to calibrate how much the market would impact overall expenses. 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. It's something that we'll continue to calibrate based on the outlook. We'll keep you posted. We're confident that we have a very strong financial model here in the leverage to deliver strong results in all environments.

Thank you, Andy.

Yes. Hey. Hello, everyone. Just wanted to come back to the selling environment and in particular, wanna ask about, you know, international investing. It seems to be the first time in a long time that people are talking about, you know, asset flows not towards the US, towards international markets, which seems fairly new. So given that most of your indices are on subscription sites 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 US, how would we think about maybe, you know, a pickup in your business? Not on the ETF side, but more on the subscription side, 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 this as a new trend in a long time, how this could actually impact your business. Thanks.

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 from the beginning of the year. Many of our global clients, including US clients, in their global portfolios, were already placing a lot of bets on Europe and Japan. Given the decline in interest rates and the weakening of the dollar, we also saw flows going into emerging markets and new inflows into emerging markets. As I said, that accelerated meaningfully since April 2nd. When you look at our business, we have done relatively well in the last two to three years relative to strong headwinds for us because a lot of our breakdown in subscription run rate is about 40% Americas, 40% Europe, or EMEA, and 20% Asia Pacific. So we are not that is where the client is located. Our business is predicated on global investing. If there is a massive amount of money flowing into the US market, it's a headwind for us. That trend is reversing significantly. In the last month or so, I've had 70 to 80 CEO level meetings through our role in Europe and Asia, and you could see palpable that shift. That hopefully will benefit us on a relative sense because we were having this headwind for a long period of time. It could clearly benefit the asset-based fee. Most of our asset-based fees are based on exposures that are outside of the US. We may get two benefits: better relative performance of assets outside of the US compared to the US and secondly, depreciation of the dollar may benefit us there. On the subscription side, clearly, active managers, pension funds, and all of that will do that. 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. Our geospatial location product is enormously valuable for people trying to assess which companies will be more or less impacted by trade wars. People need a lot of models to understand stress testing, scenario planning, factor decomposition. There is a major shift that will go on into value companies, growth companies, momentum companies, quality companies, and all of that. We're seeing significant dialogue with our clients regarding a lot of that. And as I said, the transparency is crucial. For private assets, we're not counting on a lot of money going into private assets. We want current investors in private assets wanting much more transparency on what's going on in their portfolio. For example, we have a database of 2,800 private credit funds that have about 14,000 companies. With this partnership with Moody's, we will have credit assessments on that. That's another example of how we can benefit in this environment. In an environment like this, MSCI Inc. comes at its best.

Thank you for your question. 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 and for new sales. Thanks.

Sure. Across the firm in the first quarter, the percent contribution from pricing 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 that price increases are not just like-for-like increases. We often provide our clients with enhancements to the existing solutions, broader access, and broader usage while continuing to provide enhanced client service. So all of those factors play into our approach to pricing. We do also look at client health and the overall pricing environment as inputs as well. There are definitely areas where we could push price more, but we are focused on being a very strong partner to our clients. And as Henry alluded to in these environments, we have the opportunity to do more with organizations and help them during these times. We factor that into our overall pricing equation.

That's very helpful, thank you.

Thank you for taking my questions. I want to go back to the new sales environment. You mentioned that some deals are pushed out from the first quarter to the second quarter. But you are still cautiously optimistic that you can sign them in the second quarter. 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? If this trade war or if this tariff narrative drags on for another quarter, do you think they will still sign the deal?

Thanks, Owen. Yeah, look. I think it's really not so much in the context of the trade war, honestly. I think it's much more kind of in normal business. Sometimes in 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. I was actually personally involved in some of those. So my point is not to connect it with the environment but to say that as of today, we're not seeing anything unusual. Our clients are cautious. There’s a lot of uncertainty. But in terms 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. As of right now, we are not seeing the volatility affect specific deals that we have in the pipeline.

Got it. Thanks a lot.

Hi, everybody. Baer, Andy, could you potentially comment on how AUM has trended in the non-ETF part of your business overall? I saw that was at 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, you know, up 27% by my math to just under $50 million on a quarterly basis. It's surely a big step up for you guys. It'd be helpful to know, you know, what we should be looking for there and, you know, maybe what's driving it. Thank you.

Sure. Hi, Alex. 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. If you look at the underlying AUM, we do see pretty healthy growth there. Non-ETF average AUM was up around 20% in the quarter compared to a year ago. We saw pretty healthy growth in new fund creation, particularly in areas like climate and custom mandates. A couple of areas to note here: we commented in the prepared remarks about direct indexing. So direct indexing does come through this line. While it's relatively small, it is high growth for us. Areas like institutional passive, which we continue to see help from one of our indexes, and increasingly against custom index is a place where we are differentiated. We think we can be a helpful partner to clients, and we do see pretty stable economics there. Average basis points have been quite resilient across non-ETF passive due to our non-market cap and custom index-type of mandate. It’s an area that we are focused heavily on. It’s very strategic.

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.

Yeah. No problem. End of period AUM and non-ETF passive was around $3.9 trillion.

Yes. Hi. Thank you. I was wondering if you could comment a little bit on retention rates, particularly on the index side and analytics. If I look at those, it seems like they were pretty normal relative to the historical trend. If I look back to 2022 and 2023, over time potentially from client consolidation with European F know, these levels as more normal from here or if there's additional impacts that you're expecting related to just the current environment or, you know, more generally anything else that you're expecting?

Sure. To provide a bit more color on the retention rate in the quarter: in Q1 of this year compared to Q1 of last year, we had lower cancels across most client segments and notable declines in cancels with hedge funds and banks compared to a year ago, which is not surprising given the elevated cancellations in first quarter of last year. We saw a nice rebound in retention among those client segments. So we saw pretty healthy retention in our largest product segments. Within index, it was 96.5%, and within analytics, 95.5%. From a client segment standpoint, we saw a retention rate of about 96% with asset managers and north of 95% with asset owners. The top cause of cancels continues to be client events. Looking forward this year, it's possible we could see some lumpiness in cancels in certain periods, particularly if market uncertainty continues, which can lead to some elevated client events. It's important to keep in mind that our tools are mission-critical here. As Henry alluded to, they're must-have solutions in these types of environments.

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

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, there was a little bit of carryover from the excitement of the new US administration and the risk-on trades. I would not read too much into Q1 being a period of difficulty. Clearly, things started to deteriorate in the latter part of Q1 and then obviously in April. In periods like this, there are two big forces that will shape our sales and growth. The first force is that clients need us the most. They need more data; they need more stress testing, factor decomposition; they need to understand what's inside an index; and they need better transparency with private assets because they want to know what's underneath the hood of all their investments, which will significantly boost demand for risk analytics and our index offering. Additionally, there is a significant reallocation of assets to non-US markets. We're seeing that trend begin to emerge now, which will also benefit us as we do much better when money flows around the world rather than just to the US market. We need to weigh these positives against the potential for clients to curtail their spending, and there's a lot we still don't know as this market evolves.

Great. Thank you guys for taking my question. Wanted to ask on the sustainability and climate segment just in terms of the acceleration and 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.

There's no question that sustainability is on a cyclical headwind. We continue to believe that on a secular structural basis, factors related to sustainability and understanding what's inside portfolios will be positive and will return to higher growth. The demand is also changing. Demand previously was largely for ESG ratings. People would take our ESG rating and create portfolios without looking under the hood. Now, clients want to see the underlying information—breakdowns into the various environmental sections, social sectors, and so on. The demand is changing, and we're gearing up to meet that demand with more underlying data, which is positive for us. The change in demand is also driven by regulatory burdens. Clients with sustainability portfolios want a lot more help complying with regulations all over the world. We have packages that help them do that automatically. We're confident that our existing database can also help us examine other issues beyond sustainability. Climate is a big focus, and while our engagement with clients has been high, we’re cautiously optimistic about growth in this area.

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? Maybe also if you could touch on the climate growth within ESG and how those revenues did year over year, that piece of it, please.

Sure. Hi, Craig. So there was a difference. The subscription run rate growth for sustainability and climate in EMEA was about 14%. That was 4% in the Americas and 8.5% in APAC. Those regions contribute about 52% from EMEA, 34% from 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.

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.

Sure. We see a number of lumpy expenses in the first quarter. Those are heavily related to compensation and benefits-related expenses. Other expenses tend to be elevated around year-end. The ultimate magnitude and timing of those can cause some swings in expenses in the quarter. Importantly, we have not changed our guidance for the year. Our expense trajectory is on track for our expense guide ranges, and we remain cautious, noting that if markets remain flat or decrease, we will calibrate accordingly.

Hey. Thanks. Good morning. I was hoping to dig into the sales, the gross sales that didn't close in Q1 that you guys are hoping will close in Q2. It sounds like some of those could be meaningful. I guess I'm wondering, were those concentrated within any segment? 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.

Sure. This has come up a few times. I want to reiterate that my key point is related to this is what I would call normal sales activity in a given quarter where certain deals either make it or don't make it. My emphasis here is to say we had a few deals that didn't make it, and we think they will close in the second quarter. These were across a number of different product lines; they were literally across all our product lines. Given the circumstances since then, we're not seeing evidence that those deals will not close.

Yeah. Hey, guys. I wanted to ask about the new Moody's partnership. Can 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 gonna show up in private asset that private asset segment.

Yeah. We started quite a number of years ago. We had gone to the senior management of Moody's and said to them, we have several highly complementary capabilities. Why don't we try to do some partnerships? At that time, it was very focused on ESG. We suggested that instead of continually running a whole ESG business, they could rely on us, feeding their ESG data and models and ratings into their business. Following that, a couple of years ago, they accepted that offer and began our partnership announced last summer. From the success of that, we started talking about what else we could do that one plus one becomes three without replicating each other's efforts. Eventually, we settled on using their flagship probability of default models applied to MSCI Inc.’s private credit data. This combination presents a joint product to the market, benefitting both sides. While this will show up in the private asset segment, the financial impact for this year is likely to be immaterial and relatively small.

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

Sure. While clients remain committed to sustainability and climate tools, we are seeing subdued demand, particularly in the US, where investors are cautious about launching sustainability strategies and funds. Additionally, we've encountered some regulatory complexities and uncertainties in Europe. The potential for reduced scope on regulations, which is small for us today, has created headwinds. We're likely to see near-term softness in this area. In the long term, we see some attractive opportunities, as clients broaden their thinking around sustainability into resilience. We're optimistic about our positioning in that regard.

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?

Comparing the retention rate to Q1 of last year, we had a lower retention rate related to client activity with banks and hedge funds in particular. While the retention rate was reasonably strong, I'd say I wouldn't attribute that to any one thing. It’s a combination of the mission-critical nature of our tools, proactive client engagement, and our strong competitive position in the market. So it’s not necessarily tied to pricing but reflects broader client satisfaction and engagement.

Hi there. I just wanted to ask for a bit more color on private capital solutions, which had 15% run rate growth this quarter, particularly 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 in private markets against this backdrop but also facing a little competition in the space. Thank you.

Private capital solutions, formerly the Burgess acquisition, is largely about offering transparency to institutional investors on their investments across the entire spectrum of private assets. We have more than 1,000 institutional LPs as clients in this area. We're underpenetrated globally, especially outside the US. Institutional LPs seek clarity about their portfolios relative to benchmarks. We are bullish about continued growth in this area. Additionally, we are now focused on providing higher transparency to wealth LPs. This current market is one where we retain strong leadership. We are making strides to expand that leadership, including creating products for general partners and index benchmarks for private assets. We are encouraging about the future.

Thank you, operator. I just want to reiterate that periods of global turmoil are when MSCI Inc.'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 performance, combining both into portfolio construction and asset allocation across market cycles. Those tools can take on even greater relevance in high levels of volatility. This is why MSCI Inc. remains confident in the resilience and adaptability of our all-weather franchise and our ability to expand in periods like this. It's in these times when clients need us the most that we see growth and engagement. Thank you again for joining us today, and we look forward to speaking to all of you again soon.