Release Date: October 29, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- MSCI Inc (MSCI, Financial) achieved total revenue growth of 16%, adjusted earnings per share growth of 12%, and free cash flow growth of 46%.
- The company reported asset-based fee revenue growth of nearly 20%, driven by record AUM balances in both ETF and non-ETF products linked to MSCI indices.
- MSCI Inc (MSCI) maintained a high retention rate of 94%, indicating strong customer loyalty.
- The company achieved significant growth in its wealth management segment, with direct indexing run rate growth of 22%.
- MSCI Inc (MSCI) is expanding its private capital solutions, with a 17% run rate growth and new recurring subscription sales of over $6 million.
Negative Points
- Net new recurring sales in the ESG and climate segment were down significantly from last year's levels, indicating subdued demand.
- New recurring subscription sales among asset managers were down 5% year over year, reflecting cyclical pressures.
- The company expects elevated cancel activity and longer sales cycles to continue in the near term.
- MSCI Inc (MSCI) faces challenges in the ESG and climate segments, with a cyclical downturn impacting growth.
- The analytics segment experienced an uptick in cancellations, affecting net new recurring subscription trends.
Q & A Highlights
Q: Henry, I just wanted to ask about the recent management changes you made in both ESG and private credit. Are these changes signaling any strategic shifts?
A: Henry Fernandez, CEO: These changes are part of strengthening our senior management team in areas with significant growth potential. We see private credit transforming finance globally and ESG investing as a long-term trend. The addition of new leaders like Luke Flemmer and Richard Mattison will help us capitalize on these opportunities.
Q: Now that we're getting closer to the end of the year, can you share any early insights on client budget environments and pricing for 2025?
A: Andrew Wiechmann, CFO: We're seeing gradual improvements in client dialogues, though budgets remain tight, especially for asset managers. We've moderated our price increases, focusing on long-term client relationships rather than short-term gains.
Q: Can you provide more specifics on the expected retention and sales trends for Q4, given the current environment?
A: Andrew Wiechmann, CFO: We anticipate elevated cancellations in Q4 compared to last year, but retention rates should be closer to last year's levels. Sales dialogues are improving, but budget constraints remain, particularly for asset managers.
Q: How do you ensure that the challenges in the asset manager channel aren't due to product or execution gaps within MSCI?
A: Carroll Pettit, COO: We assess competitive situations and client events closely. Our transparency in reporting and product pipeline analysis helps us differentiate between industry-wide challenges and internal issues.
Q: Regarding ESG and climate, when do you expect cyclical headwinds to moderate, and how will leadership changes impact this?
A: Henry Fernandez, CEO: ESG and climate are long-term trends. While we're in a cyclical downturn, we expect climate to recover sooner due to increasing physical risks. Leadership changes will enhance our capabilities and client engagement in these areas.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
