MSCI Inc (MSCI)

Sales Growth and Outlook
Q: What's driving strong sales, and what's the outlook?
A: Sales were solid in Q2, but we haven't seen an inflection yet. We expect lumpiness to continue due to client pressures and longer sales cycles. Q3 can be seasonally softer, but strong client engagement and sustained equity market momentum should eventually lead to increased sales. We're encouraged but remain cautious. -

Asset Manager Challenges
Q: Can you sustain double-digit growth amid asset manager challenges?
A: We don't see our growth rate slowing down despite challenges in traditional active management, which has been over 50% of our subscription revenues. We're increasing penetration in rules-based systematic index investing and very active concentrated management, including private assets. We expect significant growth in these areas, balancing out any cyclical issues in traditional segments. -

Moody's Partnership Impact
Q: What's the impact of the Moody's partnership?
A: The partnership resulted in a significant contribution to new recurring sales in Q2. Moody's can leverage our ESG leadership, while we benefit from their extensive private company database, enhancing our data in areas like ESG and Climate. We see a lot of upside from this collaboration. -

Private Assets Indices
Q: How do you view the opportunity in private asset benchmarks?
A: We're excited about launching 130 private capital indices, building on $11 trillion of high-quality data. Technical challenges include data access, but with our expertise in index construction and global distribution, we're confident we'll lead in private assets. This positions us to provide benchmarks, performance attribution, risk models, and more to LPs and GPs. - , -

Index Subscription Growth
Q: What's driving Index subscription growth amid slowdown?
A: While we've seen a slowdown from softer recurring net new sales, we're witnessing resilience and momentum. Custom and special packages grew by 17%, reflecting a move towards rules-based systematic and custom investing. We're well-positioned to benefit from trends like direct indexing, which is still in early stages but shows significant potential. -

Margin Expansion and Investment
Q: How are you thinking about margins and reinvestment with higher AUM?
A: We're not targeting specific margin expansion but focus on balancing long-term investment and profitability. With AUM levels higher than expected, if they continue, we'll likely be at the high end of our expense guidance. We'd use higher growth to invest in key areas like custom indices, climate, and private assets. -

ESG and Climate Dynamics
Q: Has the ESG and Climate environment improved?
A: We're seeing a continuation of recent dynamics, with no major changes. Regional growth rates are 9% in the Americas, 17% in EMEA, and 20% in APAC. Opportunities exist in areas like regulations, but industry pressures impact ESG and Climate more significantly. We expect these dynamics to persist short term but are encouraged by long-term prospects. -

Analytics Segment Growth
Q: What factors are driving strong Analytics growth?
A: Strong client engagement and focus on investment risk, credit risk, and liquidity risk are driving performance. Enhancements like our insights offering, which integrates AI capabilities, are gaining traction. We see opportunities but expect some lumpiness due to broader industry pressures. -

Use of AI for Growth and Efficiency
Q: How is AI helping drive revenues and efficiencies?
A: We're using AI across the business, notably in data processes like calculations, production, and extraction in areas like ESG and Climate. AI is leading to cost efficiencies and quality improvements. In new product development, AI enables offerings like geospatial data analysis and enhances our future risk assessments. -

Free Cash Flow Guidance
Q: Will you raise full-year free cash flow guidance?
A: While cash flow performance has been strong, benefiting from high collections and lower cash tax payments, many factors can impact free cash flow. We're only halfway through the year, and fluctuations in billing, collections, and expenses mean we're cautious about adjusting guidance at this point. -

Pricing Strategy
Q: What's the role of pricing in new sales, any client changes?
A: Contribution from price increases was slightly smaller than last year, as we've moderated price hikes due to the economic environment. We're focused on aligning price increases with the value we deliver, factoring in client health and maintaining strong long-term relationships. -

Analytics Margin Expansion
Q: What's driving Analytics margin expansion?
A: Factors include capitalizing software, which increases EBITDA margin, broader expense efficiencies, and being strategic in our investments within Analytics. While we've invested less in some areas to focus on strategic parts, we continue to see compelling opportunities that are both attractive and strategic. -

Second Half Sales Outlook
Q: Can you match or exceed last year's second-half sales?
A: Q3 is typically a softer quarter, with Q4 being stronger. Sales and cancellations can be lumpy, and while we face challenging dynamics, we see strong client engagement and opportunities. We're cautious but hopeful, given sustained equity market momentum. -