Q4 2023 MSCI Inc Earnings Call

Good day, ladies and gentlemen, and welcome to the MSCI fourth quarter 2023 earnings conference call. As a reminder, this call's being recorded.

At this time all participants are in a listen only mode.

Later, we will conduct a question answer session, where participants are requested to ask one question at a time then add themselves back to the queue for any additional questions.

We will have further instructions for you later on.

I would now turn the call over to Jeremy you Lin head of Investor Relations and Treasurer, you may begin.

Thank you good day and welcome to the MSCI fourth quarter 2023 earnings Conference call earlier. This morning, we issued a press release announcing our results for the fourth quarter 2023. This press release.

Along with an earnings presentation and a brief quarterly update are available on our website MSCI com under the Investor Relations tab.

Let me remind you that this fall 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.

Certainties 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.

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 U S.

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.

The earnings presentation.

Also discuss operating metrics, such as one Lady and retention.

Important information regarding our use of operating metrics, such as one rate and retention rate are available in the earnings presentation.

On the call today are Henry Fernandez, our chairman and CEO Eric.

President and CEO and Andy <unk>, our Chief Financial Officer, as a final housekeeping item wanted to remind our analysts to ask one question. 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.

In the fourth quarter MSCI delivered impressive results to close out the year.

On our financial metrics, we achieved adjusted earnings per share growth of nearly 30%.

Organic revenue growth of 15%.

And free cash flow growth of 24%.

On our operating metrics.

We posted organic subscription run rate growth of 10%.

While completing our 10.

Consecutive year of double digit subscription run rate growth in index.

At 10, 8%.

We delivered a retention rate of nearly 94%.

Including our highest ever full year retention rate in analytics.

At 94, 4%.

Assets under management in equity ETF products.

Lee to MSCI indices.

Rich and all time record of $1.473 billion.

Our year end.

Along with New York.

AUM balances of nearly three two trillion dollars.

Dawn listed products linked to MSCI indices.

So Jeff separately managed accounts.

Other institutional and retail fund wrapper.

And we also achieved a record level of non recurring sales.

For the quarter.

And for the full year.

Well, 96% of women.

Revenue from subscription based.

Our other recurring revenue sources.

We also see strong demand.

That are often sold as nonrecurring.

Which form about 4% of revenue.

The latter group includes flow data.

Our recent product innovation.

Index licensing or OTC, the way bodies and structured products.

History data products.

And all of their unique datasets.

These products offer entry points for future subscription sales, while deepening client relationships.

And they represent.

Our bottom strategy.

Despite the global market.

And the thing the legal lowered rates by beds.

Our clients remain cautious.

Which has led to tighter budgets.

And longer sales cycles.

Yes, even with those headwinds.

We achieved strong fourth quarter results.

Demonstrating once again.

That MSCI has an all weather Brian Chase.

And that team.

That can deliver in any environment.

On capital allocation, our approach has not changed.

We remain committed to making organic investments.

And bolt on acquisitions that add value.

While returning excess capital to our owners in the form of share buybacks.

Dividend paid.

Over the past 11 years MSR.

<unk> has repurchased more than 40% of our shares outstanding.

Worth a combined $5 $8 billion.

At an average price of about $117 per share.

Creating enormous value for our shareholders.

Msci's client centricity on their lives.

Our consistent execution.

90% of MSCI run rate in 2023.

It was comprised of clients purchasing from more than one of our product line.

Whether in index.

Headaches.

But assets.

Or ESG and climate.

More than 60% of Msci's run rate was comprised of clients purchased from more than three of our product line.

This underscores the value we provide to many of the world's largest financial institutions.

And also the unique and vital role of MSCI in the capital markets.

The standards with debt.

And the tools, we provide help connect the providers of capital with the user of capital.

We want to capitalize on important secular trends that are reshaping the global investment landscape.

For example in the index industry.

We see rising demand for customization of portfolios.

In response.

We have expanded our cost of index capabilities, while maintaining our strength in traditional market cap business.

Our plan the Si index thing tool on MSCI, one allow investors to personalize indices or highly specific investment objectives.

The secular trend in our portfolio customization has also driven demand for specialized analytics tools.

Especially among wealth managers.

<unk> represent one of our fastest growing segment.

Earlier this month.

<unk> completed the acquisition of fabric.

Our wealth technology platform that provides portfolio design customization.

Analytics.

Adding their capabilities to our total portfolio toolkit will give us more ways than ever to serve the wealth segment.

Speaking of total portfolio solutions.

We now have an industry leading platform thanks to our acquisition of birthday.

We also have the worlds largest most comprehensive.

And highest quality private asset class data.

Covering 15 trillion dollars at holdings across private equity real estate infrastructure and natural resources.

Plus another 45 $3 million in real estate transactions and portfolio assets.

As private allocation continues to grow MSCI is well positioned to benefit from it.

Our data will help us build standards setting tools for private assets.

Including benchmark indices.

And model for evaluating risks performance and portfolio construction.

We can then combine our private and public asset class tools to deliver a portal portfolio view of risk and opportunity.

All of this will help deepen our relationships with multi asset class allocators of capital.

In the larger sense, it will strengthen our entire ecosystem of product lines and capabilities.

One notable example climate.

Because we built our Carboline nations estimates around rising granularity disclose data.

MSCI already provide climate data on about 73000 companies and issuers and their subsidy.

Including more than 5000 private companies.

Along with more than 7000, private equity and private debt funds.

We also provide location data on about $1 million asset location through MSCI geospatial.

We assess physical risks.

Nearly 80% of those locations leveraging our climate value at risk models.

Our climate strategy can help us draw msci's breath, among corporate issuers and their advisors.

With our recent acquisition of <unk> research.

We are now a leading provider of global intelligence.

<unk>.

Drug currently analyses around 15000 power projects.

Projects around the world.

And supplies that will search to corporates.

Investors and exchanges.

They also provide key climate data on more than 3000 companies.

Showing both the quantity and the quality of <unk> you.

Used by those companies.

And also how these are shaping their broader net zero transition plan.

There is simply no credible path.

To reach a net zero emissions without a significant expansion of the voluntary carbon markets.

Looking ahead, we still have a long runway to create compounding shareholder value.

As always MSCI will balance our long term strategic investments.

Including bolt on acquisition.

With our commitment to rigorous financial management and short term execution.

And with that let me now turn the call over to my partner in this great business Baer Pettit bear.

Henry and greetings everyone in my remarks today I will discuss some of the most notable business needs that we see among market participants around the world describe how MSCI is addressing those needs and explain what it all means for both our financial performance and are increasingly.

The diverse client base.

Perhaps the biggest overarching need is for more customized and personalized investment solutions.

Across industries and geographies investors are searching for highly specialized and scalable outcomes aligned with their unique preferences and considerations.

Within the index industry. This trend has boosted demand for custom indexes that investors can designed to reflect the specific objectives are very unique portfolios, which may include capital income tax risks climate sustainability and other considerations.

For example, since 2020 around one third of MSCI benchmark selected by asset owners or policy or mandate allocations have been passive index.

And in the fourth quarter, we posted 20% run rate growth in custom indexes and special packages. While we were pleased to see our clients have success in gathering applications linked to MSCI index.

For example, a major global insurance company allocated $8 million in Japan is linked to our custom index.

Large asset manager license to custom index as the basis for an MSCI climate transition aware Etfs in Europe.

Pricing demand for customization is especially visible in the wealth segments.

Our advisors have to integrate our house view with the preferences of their individual clients.

As Henry discussed our acquisition of Fab, Greg will make it much easier for MSCI to deliver customization and scale for wealth managers.

In particular by combining fabrics rules based portfolio construction tools with MSCI factor models and related solutions, we will greatly enhance our capabilities.

The fabric acquisition will build on the strength of our existing wealth franchise, which now totals $107 million firm wide and delivered 23% run rate growth in the fourth quarter.

Among other Q4 business wins, the wealth arm of a major global asset manager licenses MSCI is multi asset class factor models.

We've seen rising demand for integrated technology platform to support compliance with increasingly complex regulations, especially in climate and sustainability.

In response.

MSCI continues to integrate our own content and capabilities on platforms, such as MSCI, one, particularly leveraging our analytics franchise, which remains the backbone of where are we host client portfolios enrich those portfolios with specialized content and apply.

Models to deliver insights and reports for example in 2023, we helped our clients generate 130000 climate and sustainability report on him as Taiwan, using our analytics reporting engines up from 16000 reports in 2022.

And analytics more broadly.

Benefits from our ongoing investments.

Part, an open ecosystem integrations, adding differentiated content.

We achieved our best quarter and full year on record, our recurring sales and equity analytics with quarterly and annual sales of approximately $9 million and $30 million, respectively for the first time ever.

With strength from asset managers market makers, and hedge funds and run rate growing by 11%.

And product lines with current cyclical challenges, we still see healthy client appetite for key market data and related solutions, including in real assets.

For example, our real estate portfolio of services, which include climate insights and income insights and our index Intel products, which collectively represent about half of our product line run rate delivered run rate growth of over 10% and a top commercial real estate environment.

And MSCI private capital solutions, formerly mergers, we delivered recurring sales of $6 2 million in the fourth quarter.

With ending run rate of $98 million, Brian in the high teens versus the same period last year.

In general our integration of the <unk> team continues to accelerate and clients have been enthusiastic about our total portfolio vision for public private and multi asset class solution.

Across the board <unk>.

Investors increasingly expect richer more granular data and faster deeper insights powered by advanced technology.

MSCI is meeting this demand through our ongoing data and technology transformation.

Each has dramatically expanded our use of artificial intelligence.

We group AI initiatives.

Into three categories, providing data at scale transforming the client experience and driving operational efficiency, which will enable incremental investment capacity for MSCI.

We have made tremendous progress in each area for example through our partnership with Google Cloud, we've accelerated our documents acquisition and classification for ESG by a factor of seven while tripling the speed of our AI models and more than doubling our maximum calculation capacity for realized.

We want to continue to leverage large language models and open source geospatial data sets.

Meaningfully scale, our physical asset data coverage and quality.

We expect can expand to over 100 million physical asset location and accurate views in the next three years to support our goals of comprehensive and complete data coverage for our clients.

MSCI has always been a company that plans for extended time horizon.

We are constantly trying to anticipate capture and commercialize the next evolution of global investing.

We also worked tirelessly to deliver consistent results from quarter to quarter, which means we are laser focused on how to create value for clients right now.

We will continue striking that balance in 2024 and beyond.

With that let me turn the call over to Andy Andy.

Thanks, Baer and hydro one.

If you can see from our results we have a highly resilient business that continues to generate consistently strong performance across product areas and client segments. Despite cyclical pressures.

In index, we had nearly 11% subscription run rate growth, including 9% run rate growth in our market cap weighted modules and 20% growth in custom indexes and special packages.

Factor and ESG modules grew 11% a slower rate than last year as clients are favoring more customized approaches and we saw fewer clients launching new active factor strategies, we have a demonstrated track record of growing with our existing client base and index, helping them unlock value through a wide range of use cases across a broad range of content.

Half of our index client base subscribes to at least two or more modules with 20% of clients licensing as many as five or more different modules.

Our growing set of modules across market cap factor ESG climate thematic fixed income and custom dimensions enable us to continue to bring additional value to our clients and we maintained solid momentum in asset based fees with revenues up 16% year over year benefiting from over $48 billion of cash inflows.

And about $198 billion of market appreciation throughout 2023 within Etfs linked to MSCI equity indexes.

During Q4 cash inflows of $16 billion into equity Etfs linked to MSCI indexes were mostly driven by developed markets ex U S and emerging markets products.

From a product perspective, we saw inflows of about $6 billion into equity Etfs linked to MSCI ESG and climate indexes, which represented the majority of industry flows into ESG and climate products.

Within fixed income Etfs AUM in products linked to MSCI EM Bloomberg joined fixed income indexes reached $60 billion growing more than 30% year over year.

We had another very strong quarter for nonrecurring revenues roughly $16 million of the nonrecurring sales and revenues in the index were related to client fees for unlicensed usage of our content in historical periods.

We also earn nonrecurring revenues from other common use cases, including licenses to create structured products and OTC derivatives in index history sales, where a client requires decades of historical data to back test strategies and conduct research.

In analytics, we saw continued momentum across key areas with subscription run rate growth of 7% supported by strong net new recurring sales growth of 68%.

Analytics revenue also benefited from a large number of implementations that were completed in the quarter, which resulted in both elevated nonrecurring revenue and the release of recurring subscription revenue that was on hold during the respective implementation periods.

And our ESG and climate reportable segment organic run rate growth was 16%, which excludes about $4 $5 million of run rate from trophy and the impact of FX.

Run rate growth was approximately 15% and ESG research and 31% and climate, excluding the impact of trove and.

And run rate growth was 25% within Europe, and close to 20% in Asia for ESG and climate segment.

We continue to see strong engagement across client types with a retention rate of 94, 7% for the quarter at 95, 9% for the full year.

Although we did see an increase in cancels from smaller clients in large part related to an elevated level of current events within real assets run rate growth was 6% as we continue to see the impact of muted property values and lower transaction volumes.

Operator: Please enjoy yourself, and welcome to the MSCI fourth quarter 2023 earnings conference. As a reminder, this call is being held and At this time, all participants are in a listen-only mode.

The retention rate of 89% for the quarter was impacted by a pickup in capsules from small clients, namely brokers developers and lenders.

We're most acutely feeling these cyclical pressures.

Although once again, our larger clients tended to have higher retention rates.

Operator: Later on, we will conduct a question and answer session, where participants are requested to ask one question at a time, then add themselves back to the queue for any additional questions. We will have further instructions for you later on. I would now turn the call over to Jeremy Ewell.

Almost 80% of clients that subscribed to our RCA product offerings spend over $50000 per year on average and a retention rate of that cohort is 96% for the full year of 2023.

So it is worth highlighting that about 95% of client contracts for our CA products have an auto renew provision or multiyear contracts.

Head of Investor Relations and Treasurer, you may begin. Thank you. Good day, and welcome to the MSCI fourth quarter 2023 earnings conference call. Earlier this morning, we issued a press release announcing our results for the fourth quarter 2023. This press release, along with an earnings presentation and a brief quarterly update, is available on our website msci.com under the industrial 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. Please be careful 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.

Our integration of <unk>, which we now refer to as our private capital solutions operating segment is going well.

We recorded approximately $25 million of revenue for the quarter, which came in at the high end of our initial expectations. Although we did benefit from revenue catch ups, resulting from the completion of implementation on our total planned product offering.

Private capital solutions expenses included about $4 million of allocations from centralized and shared costs.

Continue to expect about $4 million to $5 million per quarter of these allocations to the segment.

These costs are reallocated from other segments and as a result will not impact from wide EBITDA.

Our approach to capital allocation remains unchanged, we will continue to invest in the business to drive strong topline growth over the long term, while continuing to deliver attractive free cash flow and EPS growth.

We will continue to optimize our capital structure return excess cash to shareholders through regular dividends that grow with adjusted EPS and opportunistically pursue share buybacks and value generative bolt on M&A that accelerates our strategy in key growth areas.

For a discussion of additional risks and uncertainties, please review the risk factors and forward-looking statements related to CLAIMR in our most recent Form 10-K and in our other SEC files. During today's call, in addition to results presented on the basis of US GAAP, we also refer to non-GAAP measures. You'll find the reconciliation of our non-GAAP measures to the equivalent GAAP measures in the appendix of the earlier 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, is available in the earlier presentation. On the call today are Henry Fernandez, our Chairman and CEO, Eric Heddit, our President and COO, and Andy Wiesman, our Chief Financial Officer. As a final housekeeping item, we wanted to remind our analysts to ask one question at a time during the Q&A portion of our call. However, we do encourage you to ask more questions by adding yourself back to the queue. With that, let me now turn the call over to Henry Fernandez. Henry?

In the spirit of continually optimizing our capital structure last week, we completed the refinancing of our credit facilities, where we replaced our term loan a and existing revolver with a new revolver that provides us with more capacity of $1 5 billion in total size slightly lower cost than the now retired term loan a and an.

Good tenor.

And our capital position remained solid overall as of today. We currently have approximately $600 million of cash on hand, well above our minimum global cash balance range.

Although cash balances are still down from last year's levels, which will continue to translate through to lower interest income.

Lastly, we continue to execute bolt on acquisitions that accelerate our long term strategy.

Total purchase consideration for <unk> fabric was approximately $48 million with the potential.

<unk> for additional performance related payments tied to the achievement of topline growth targets, although the majority of those payments will be treated as compensation expense.

Thank you, Jeremy. Good day, everyone, and thank you for joining us. In the fourth quarter, MSCI delivered impressive results to close out the year. On our financial metrics, we achieved adjusted earnings per share growth of nearly 30 percent. Organic revenue growth of 15% and free cash flow growth of 24% on our operating metrics. We posted organic subscription run rate growth of 10% while completing our 10th consecutive year of double-digit subscription runway growth in the index, at 7.8 percent. We deliver a retention rate of nearly 94%, including our highest ever full year retention rate in analytics, at 94.4. Assets Under Management in the Equity ETF Program, linked to a material in this, reach an all-time record of $1.47 trillion at year end, along with near record AOM balances of nearly 3.2 trillion dollars in non-listed products linked to MSCI indices. Suchasta from Nevada town, and other institutional and retail fund raffles.

Turning to our 2024 guidance, which we published earlier. This morning, our guidance assumes that AUM levels remain relatively flat to year end levels through the first half of 2024 with a modest upturn in the second half of the year.

Our expenses reflect the ongoing investments in our business as well as the impact of our acquisitions of purchase drove in fabric.

Our Capex guidance reflects continued software development to build or enhance our offerings across all of our segments, including private capital solutions as well as slightly higher hardware purchases related to our hybrid data center strategy.

Our interest expense guidance reflects the refinancing of our credit facilities and assumes the existing balance of approximately $340 million remains outstanding for the year.

Our tax rate guidance reflects the impact of the OECD global minimum tax which goes into effect. This year statutory rate increases were subject to in certain jurisdictions and a slightly smaller projected impact from windfall benefits.

I would like to highlight that our effective rate for the fourth quarter included a discrete benefit related to a favorable outcome on a tax position received late in the quarter.

And lastly, free cash flow guidance reflects the expectation of slightly higher cash taxes.

Overall, we remain well positioned to drive growth our client centricity of multiyear investments position us for strength to start 2024, and we look forward to keeping you posted on our progress with that operator. Please open the line for questions.

The floor is now open for your questions to ask a question. This time simply press the star followed by the number one on your telephone keypad.

We ask that you please limit yourself to one question and re queue if needed.

And we also achieved a record level of non-recurring sales, both for the quarter and for the whole year. Furthermore, 96% of MSCI's revenues are from subscription-based sources, and other recurring revenue sources. We also see a strong demand for products that are often sold as non-recurring, which form about 4% of our revenue. The latter group includes flow data at Research Products Innovation. Index Licenses for OTC Derivatives and Structured Products, history, data, prologue, and other unique data sets. These products offer entry points for future subscription sales while deepening client relationships, and they represent an important part of our strategy. Despite the global blue market and the signalling of lower grades by the Pell, our clients remain cautious, which has led to silent budgets and longer-sale prices. Yet, even with God's help, they... We achieved strong fourth quarter results.

Now take a moment to compile our roster.

Okay.

Our first question comes from the line of Toni Kaplan with Morgan Stanley. Please go ahead.

Thank you so much.

Hoping you could give some additional color on the market environment, maybe particularly with regard to index.

I know you've called out some market headwinds recently and so just looking into 'twenty four or do you see those persisting.

Toni Kaplan: How should we think about sales within index for next year. Thank you so much.

Sure Hi, Tony its Andy I appreciate the question.

So yes, I mean, we are we are seeing a tough environment for many of our clients as we've talked about before our largest client base is active managers that have seen flat markets for the last couple of years.

We're encouraged by the recent rally and that should be helpful. Over the long term, but that they have seen relatively flat market volatility and outflows. So we have seen headwinds, but we continue to have good momentum and I think the thing thats been encouraging to US is the success, we've had across modules and client segments.

So we mentioned some of these but just to highlight we saw a 9% run rate growth in our market cap modules.

And that's through delivering additional value to our clients continuing to up sell them.

Demonstrating once again that MSCI has an all-weather franchise and a team that can deliver in any environment. On several occasions, our approach has not changed, and we will remain committed to making organic investment and Bolton acquisitions that I value while returning excess capital to our owners in the form of share buybacks and David McPain. Over the past 11 years, CI has repurchased more than 40% of our shares outstanding, worth a combined 5.8 billion dollars, at an average price of about $117 per share, creating enormous value for our shareholders.

We saw 20% growth in custom and specialized modules and 11% growth in factor and ESG modules equally.

Equally as encouraging we saw 9% growth in asset managers, 15% growth from wealth and broker dealers and 22% growth among hedge funds. So.

We've definitely been encouraged here I think we will see longer sale cycles tighter budgets here budgets for the year are set at the end of the prior year.

For many organizations and so that will create some some noise for us, but this trend of indexation and the demand for the tools that we have across many different client segments seems to have it seems to have some momentum here. So.

We will continue to monitor closely.

Importantly, we continue to focus on creating value for our clients and that will hopefully translate through to continued success on non sales and growth.

Our next question comes from the line of Alex Kramm with UBS. Please go ahead.

MSCI's client centricity underlies our consistent execution. 90% of MSCI's run rate in 2023 was comprised of clients purchasing from more than one of our product lines. Annamarie, but I would ask that for ECF Climate.

Yes, Hello, everyone.

Interesting to hear you.

Talk a little bit less than usual about ESG and climate, So clearly I need to ask about it. So we obviously have continued to see slowdown in that segment.

After a couple of years of really really big strength, So I guess.

Now with with with that slowdown.

In the run rate now I'm, just wondering if there's any signs that that that things could be turning.

More than 60% of MSCI's run rate was comprised of clients purchasing from more than three of our products. This underscores the value we provide to many of the world's largest financial institutions and also the unique and vital role of MSCI in the capital market. The Standard Twister, and the tools we provide help connect the providers of capital with the users of capital.

Maybe as climate is becoming a bigger part of the equation or again as investors are rethinking kind of like what they need in particular outside of the U S. So any any any near term expectations, Dan and how is that impacting.

Our longer term outlook as well because obviously these run rates how far below your mid to high <unk> longer term range. So just curious how youre thinking about that at the moment. Thanks.

Sure sure Thanks, Alex so.

I'd say the most encouraging thing for US has been the strong level of engagement, we're seeing from our clients around ESG and very significantly around climate. So despite the slowdown we are still seeing a healthy level of dialogue with our clients on this front.

We want to capitalize on important secular trends that are reshaping the global investment landscape. For example, in the index industry, we see rising demand for customization of portfolios and Rick Fong. We have expanded our cost of index capability while maintaining our strength in traditional market capitalism. Our client-designed indexing tools on MSCI One allow investors to personalize indices for highly specific investment objectives. The secular trend of portfolio customization has also driven demand for specialized analytics tools, especially among wealth managers, who represent one of our fastest growing sectors. Earlier this month, MSCI completed the acquisition of Fabric.

Consistent with what we've seen in recent quarters and throughout 2023 as you alluded to growth has been slower for us.

Just to put a finer point on that in the ESG and climate segment growth in the Americas was about 9% that compares to 25% in Europe and close to 20% in Asia.

I would say the themes are consistent where clients are taking a more measured approach to how they integrate ESG, they're continuing to think about how and where they integrate it and thats, causing longer sales cycles and more deliberate purchasing decisions, which is probably compounded by I think cyclical pressures.

Debt.

Our our hitting many of our clients.

But given the wide range of use cases.

A Wealth Technology Platform that provides portfolio design, customization, and analytics. Adding their capabilities to our Total Portfolio Toolkit will give us more ways than ever to serve the wealth segment. Speaking of Total Portfolio Solutions, we now have an industry-leading platform thanks to our acquisitional budget. We also have the world's largest, most comprehensive, and highest quality private asset class data, covering $15 trillion in holdings across private equity, real estate, debt, infrastructure, and natural resources, plus another $45 trillion in real estate transactions and portfolio assets.

I think we continue to be quite encouraged about the outlook here.

We see regulation.

Create some some delays in purchases continues to be a big opportunity for us as you alluded to climate continues to be a big opportunity for us.

And we continue to innovate heavily across climate with plans to release things like.

Nature, and biodiversity datasets additional insights into private assets, geospatial data, which which bear alluded to physical and hazard risk enhancements and that's on top of continuing to broaden our coverage across ESG enhance the quality of our offering and our service and so I think we've got a rich pipeline of.

Opportunities and solutions, where we can continue to deliver value to clients, but I think we would expect.

Some of these dynamics that we're seeing the more measured purchasing decisions.

And some of the cyclical pressures probably to persist for.

For at least the next couple of quarters here.

Our next question comes from the line of Manav Patnaik.

As private allocations continue to grow, MSCI is well positioned to benefit from them. Our data will help us build standard setting tools for private assets, including benchmark indexes and models for evaluating great performance and portfolio construction. We can then combine our private and public asset class tools to deliver a total portfolio view of risk and opportunity. All of this will help deepen our relationship with multi-asset class allocators of capital. In the larger sense, it will strengthen our entire ecosystem of product lines and capabilities. One notable example is climate, because we built our carbon emissions estimate around granular disclosed data.

With Barclays. Please go ahead.

Thank you maybe I'll just go down the segments here can we just talk about the.

Manav Patnaik: The analytics business, obviously, it sounds like things have.

Got embedded there through the year it sounds like it's the equity asset class, but just is there.

Just is there some share gains and just the uptake in the models like maybe some of the trends that youre seeing there, perhaps I can help you sustain this high single digit rate.

Yes. So there are a number of trends at play here, but maybe I can I can group them together and say.

This heightened period of uncertainty and risk.

It has led to opportunities for us and so clients are turning to us across many of our different solutions to help understand market drivers and risks and how to navigate those risks.

And I think it's been very encouraging to see the highest ever full year retention rate, we've seen within the segment.

MCI already provides climate data on about 73,000 companies and issuers under subsidy, including more than 55,000 private companies, along with more than 7,000 private equity and private debt funds. We also provide location data on about one million asset locations through MSCI Geospatial. We assess physical risks on nearly 80% of those locations leveraging our climate value-at-risk model.

Underscores the power of that need for our tools in this market just to put a finer point on where we're seeing that we did see some strong successes within ERP in the quarter, our enterprise risk and performance offering.

Our climate strategy can help us grow the FBI's presence among corporate issuers and their advisers. With a recent acquisition of Trump Research, we are now a leading provider of global intelligence on Carbon Freight. Kroll currently analyzes around 15,000 carbon credit projects around the world and supplies that research to corporations, investors, and exchanges. They also provide key climate data on more than 3,000 companies, showing both the quantity and the quality of carbon credits used by those companies, and also how these credits are shaping their broader net zero transition plan. There is simply no credible fact to reach net zero emissions without a significant expansion of the voluntary carbon market.

So we did see pretty good momentum on equity analytics, particularly with our factor model sales.

And and we have had its early days, but we've had some traction with our risk insights offering as well, which is a new offering for us where we're providing clients with more easily accessible more interactive and more user friendly risk and performance stats on their portfolios.

So we're encouraged the growth we're seeing is in the areas that we've been focused on investing and so we.

No. We definitely are encouraged by the outlook, but I would say, particularly given the backdrop and the fact that within analytics, we do have a higher concentration of.

Looking ahead, we still have a long way to create compounding shareholder value. As always, MSEI will balance our long-term strategic investment, including Bob from Acoustic, with our commitment to rigorous financial management and short-term execution. And with that, let me now turn the call over to my partner in this great business, Bear Pettit. Thank you, Henry.

Broker dealers and hedge funds, we do expect to see some lumpiness in both sales and Campbell cancels.

Manav Patnaik: Moving forward here, but the long term dynamics in those areas.

Traction we've been getting have been quite encouraging to us.

Our next question comes from the line of Alexander <unk> with Jpmorgan. Please go ahead.

And greetings, everyone. In my remarks today, I'll discuss some of the most notable business needs that we see among market participants around the world, describe how MSCI is addressing those needs, and explain what it all means for both our financial performance and our increasingly diverse client base. Perhaps the biggest overarching need is for more customized and personalized investment solutions. Across industries and geographies, investors are searching for highly specialized and scalable outcomes aligned with their unique preferences and considerations. Within the index industry, this trend has boosted demand for custom indexes that investors can design to reflect the specific objectives of their unique portfolios, which may include capital, income, tax, risk, climate, sustainability, and other considerations. For example, since 2020, around one-third of MSCI benchmarks selected by asset owners for policy or mandate allocations have been custom indexes.

Hi, guys bear you alluded to desire to meaningfully scale, the physical asset business.

Just wanted to it sounded like you guys are flushed out a bit more sort of a concrete near term roadmap for the ESG and climate business, but sort of could you maybe dimensionalize why you guys weren't in that earlier.

Is that something where you feel the competitors, maybe you have a head start.

And then beyond that is there how would you monetize this is that going to be more of a consumption based model or is that going to be on sort of a subscription program as well. Thank you guys.

Sure So look.

The climate opportunity is an enormous one which will affect all aspects of the economy and industries right. So I think it's natural that there will be aspects of it which at the outset, we were not present in and where we are broadening and deepening our capabilities. So I think thats it.

General observation.

Which could be both from our actions organically and inorganic.

So in this instance, we're very excited with what we've done here not merely because there is clearly demand from this but it's also an area where we're able to apply.

In the fourth quarter, we posted 20% run rate growth in custom indexes and special packages. We were pleased to see our clients have success in gathering allocations linked to MSCI's Custom Index. For example, a major global insurance company allocated $8 billion to funds linked to our custom index, and a large asset manager licensed the Cushman Index as the basis for an MSCI Climate Transition Aware ETF in Europe. Rising demand for customization is especially visible in the wealth segment, where advisors have to integrate their outlook with the preferences of their individual clients. As Henry discussed, our acquisition of Fabric will make it much easier for MSCI to deliver customization and scale for wealth management.

A lot of interesting work in data science and AI.

So there is client demand.

Thanks to our strengths in this growth this growth category and I think we've got a really good chance of continuing to innovate just in terms of the business model is the same as usual right. So it's a subscription business model is integrated with the normal way that we sell.

And it's just enriching our capabilities.

Across the board.

Our next question comes from the line of Owen Lau with Oppenheimer. Please go ahead.

In particular, by combining Fabric's rules-based portfolio construction tools with MSCI factor models and related solutions, we will greatly enhance our capability. The Cybertechquisition will build on the strength of our existing wealth franchise, which now totals $107 million firm-wide and delivered 23% run rate growth in the fourth quarter. Among other Q4 business wins, the wealth arm of a major global asset manager licensed MSCI's multi-asset class factor model

Hey, good morning, and thank you for taking my question. So your non recurring revenue was up quite a bit in both index and analytics and I think <unk> recognized on fees for unlicensed in this age of the content like in the past couple of periods in the index business I think quite an Atlantic.

Large number of implementation on some onetime deals could you. Please elaborate a little bit more on what they actually are and what that means for recurring revenue going forward. Thank you.

Yes sure so on thank you.

So maybe I'll start on index, and then I can touch on analytics, but but yes, I think it is helpful to give a bit more color on exactly what these nonrecurring sales.

In response, MSTI continues to integrate its own content and capabilities on platforms such as MSTI One, particularly leveraging its analytics franchise, which remains the backbone of where we host client portfolios, enrich those portfolios with specialized content, and apply models to deliver insights and reports. For example, in 2023, we helped our clients generate 130,000 climate and sustainability reports on MSCI One using our Analytics Reporting Engine, up from 16,000 reports in 2022. In analytics more broadly... We're benefiting from our ongoing investment to support an open ecosystem integration and in differentiated contexts. We achieved our best quarter and full year on record for recurring sales and equity analytics, with quarterly and annual sales of approximately $9 million and $30 million, respectively, for the first time ever, with strength from asset managers, market makers, and hedge funds, and a run rate growing by 11%.

Revenues or so.

As we mentioned during the quarter, we had a very large contract signed to address the unlicensed usage of our index as in past periods.

And just to put a finer point on that.

Just to be very clear, we identified a client that had been using our indexes to create index linked products without a license over a long time period and so during the quarter, we signed an agreement.

That would be paid for that past unlicensed usage.

And as a result recorded a sale and revenue associated with that.

It is worth noting that.

That we continue to see contributions to nonrecurring sales and.

Revenue from the licensing of our indexes to create things like.

Structured products and over the counter derivatives.

We also have nonrecurring sales of end.

And usage of our some of our data packages like our free flow data package in our index history sales.

And so those unlicensed usage.

Sales are by their nature are going to be lumpy and we don't have those very often as you know.

But these other trends in things like over the counter derivatives and structured products or areas, where we do see some momentum.

In product lines with current cyclical challenges, we still see healthy client appetite for key market data and related solutions, including for real assets. For example, our real estate portfolio services, which include Climate Insights to Income Insights and our Index InVal products, which collectively represent about half of our product line run rate, delivered run rate growth of over 10% in a tough commercial real estate environment. And MSCI Private Capital Solutions, formerly Burgess We delivered recurring sales of $6.2 million in the fourth quarter, with an ending run rate of 98 million dollars coming in the high teens versus the same period last year. In general, our integration of the Burgess team continues to accelerate, and clients have been enthusiastic about our total portfolio vision for public, private, and multi-asset class solutions. Across the board.

It should continue to be a contributor for us, but no changes to our business model overall other than to say, we see growth opportunities across categories of nonrecurring revenue and sales for us yes.

As you alluded to on the analytics side.

We did have a number of implementation related services.

That were completed during the quarter and so those implementation related services are nonrecurring in nature.

And so we recognize nonrecurring revenue when we complete those it is worth noting on the recurring side as well for certain products that involve implementations such as our enterprise risk solutions, we defer the revenue until the implementation is complete at which point, we recognize the revenue from the beginning of the <unk>.

Racked period to that point.

And so we will have what we call. These catch ups when we have implementations coming online and we had several of those during the quarter.

I would say within analytics, the nonrecurring revenue tends to be most closely tied to those implementations and so it did generally will be tied to the business growth overtime.

Our next question comes from the line of Seth Weber with Wells Fargo. Please go ahead.

Investors increasingly expect richer, more granular data and faster, deeper insights powered by advanced technology. MSCI is meeting this demand through its ongoing data and technology transformation, which has dramatically expanded our use of artificial intelligence. We group AI initiatives into three categories, providing data at scale, transforming the client experience, and Driving Operational Efficiency, which will enable incremental investment capacity for MSR. We have made tremendous progress in each area. For example, through our partnership with Google Cloud, we've accelerated our document acquisition and classification for ESG by a factor of seven, while tripling the speed of our AI model and more than doubling our maximum calculation capacity for real assets. We want to continue to leverage large-language models and open-source geospatial datasets to meaningfully scale our physical asset data coverage and quality, which we expect can expand to over 100 million physical asset locations and attributes in the MSCI has always been a company that plans for extended time horizons.

Hey, guys. Good morning, I wanted to ask about traction with the purchase integration.

I think I heard something about run rate in the high teens, which sounds pretty encouraging.

On prior calls you've talked about how the how the product client is pretty undersold.

Globally, and just wondering how the integration or how the.

Combination is going with Burgess salespeople working.

With existing MSCI salespeople, just to kind of start cross selling the product. Thank you.

Sure so happy to take that question.

Very pleased with how the integration is going.

There was clearly a benefit that we were a minority shareholder bridges for a number of years not to know the business very well.

We had one of our senior executives J Mcnamara Theyre working for a number of years and really help to revitalize their client activity and go to market.

And all of the commercial side. So he is now co head of the business with net so I think both from an operational point of view, we're very pleased with the integration.

And we've got.

A team of client covered people there that were already if you like training the MSCI away under Jay and the and now those teams can work seamlessly with the MSCI client coverage team.

We are delighted with the way things have gone so far.

And I think we've got a big opportunity globally to expand significantly the footprint in private capital solutions. So so far so good.

And to the year and we hope to keep delivering some strong numbers in the course of 2020.

We're constantly trying to anticipate, capture, and commercialize the next evolution of global investment. Yet we also work tirelessly to deliver consistent results from quarter to quarter, which means we're laser focused on how to create value for clients right now. We will continue striking that balance in 2024 and beyond.

Our next question comes from the line of Kelsey Xu with autonomous. Please go ahead.

Hello, Good morning, Thanks for taking my questions.

On your expense guidance I was just wondering kind of walk us through kind of the puts on hold.

On that expense.

What we're hiring.

Hi Christian.

Thanks.

Sure sure so.

Listen on expenses.

Thank you, sir. And Hi, everyone. As you can see from our results, we have a highly resilient business that continues to generate consistently strong performance across product areas and client segments despite cyclical pressures. In indexed, we had nearly 11% subscription run rate growth, including 9% run rate growth in our market cap weighted modules and 20% growth in custom indexes and special packages. Factor and ESG modules grew 11%, a slower rate than last year, as clients were favoring more customized approaches, and we saw fewer clients launch new active factor strategies.

Similar story to what we give every year I think we outlined.

In the prepared remarks here that.

The AUM assumption that underlies the expense guidance assumes that the markets remain relatively flat for the first half of the year and then rebound slightly in the back half of the year.

As we always do we will continue to monitor the market and we'll continue to monitor business performance.

And so we will.

Go to our upturn and downturn playbooks throughout the year, if we do see sustained improvements.

Which could cause us to move towards the higher end of that range.

Or similarly cause us to manage expenses.

We have a demonstrated track record of growing with our existing Client Basin Index, helping them unlock value through a wide range of use cases across a broad range of content. Half of our client base subscribes to at least two or more modules, with 20% of clients licensing as many as five or more different modules. Our growing set of modules across market cap, factor, ESG, climate, thematic, fixed income, and custom dimensions enable us to continue to bring additional value to our clients. And we maintain solid momentum in asset-based use, with revenues up 16% year-over-year, benefiting from over $48 billion of cash inflows and about $198 billion of market appreciation throughout 2023 within ETFs linked to MFI Equity Index. During Q4, cash inflows of $16 billion into equity ETFs were mostly driven by developed markets like the U.S. and emerging markets like Prada.

More tightly.

If things deteriorate.

As you know and I think as evident there is a meaningful contribution from acquisitions as well in the the expense guidance for the year I think we've given color on the Burgess margin profile and I think we indicated drove <unk> fabric are relatively small in terms of their impact but from that you can back into the organic.

<unk> been in call it the mid to high single digit range.

Better than that guidance.

The balance being contributed from mainly Burgess, but to a lesser degree the smaller acquisitions coming in.

Last thing, that's probably worth flagging and we've mentioned this in past years, as we have seasonally high payroll tax and benefits related expenses in the first quarter and so we tend to see about $10 million to $15 million higher.

Those expenses coming through.

Which adds to some seasonality and higher expenses in Q1.

From a product perspective, we saw an inflow of about $6 billion into equity ETFs going to MSCI ESG and climate indexes, which represented the majority of industry flows into ESG-inclined products. Within fixed income ETFs, AUM and products linked to MSCI and Bloomberg joint fixed income indexes reached $60 billion, growing more than 30% year over year. We had another very strong quarter for non-recurring revenues. Roughly $16 million of the non-returnable sales and revenues in the index were related to client fees for unlicensed usage of our content during a historical period.

But other than that I'd say it's.

It's something that we continue to monitor and our goal ultimately is to continue to invest in the business.

To drive long term growth some of them will use opportunities.

If the market improves here to continue to do that but also continuing to deliver attractive profitability and profitability growth in all periods and attractive free cash flow growth.

Our next question comes from the line of <unk> <unk> with RBC capital markets. Please go ahead.

We also earn non-recurring revenues from other common use cases, including licenses to create structured products and OTC derivatives and index history sales, where a client requires decades of historical data to backtest strategies and conduct research. In analytics, we saw continued momentum across key areas, with subscription run rate growth at 7%, supported by strong net new recurring sales growth of 68%. Analytics revenue also benefited from a large number of implementations that were completed in the quarter, which resulted in both elevated non-recurring revenue and the release of recurring subscription revenue that was on hold during the respective implementation period. In our ESG and climate reportable segment, organic run rate growth was 16 percent, which excludes about four and a half million dollars of run rate from trove and the impact of FX. Run rate growth was approximately 15% in ESG research and 31% in climate, excluding the impact of growth.

Thanks for taking my question a quick question on the pricing actions that you might have instituted in 2024, and how should we think about the pricing theme than an index and overall business for 2000.

Yes, sure so listen it's important to underscore that we will continue to be very measured on our price increases and ensure that we are linking them to the value that we're delivering to our clients in terms of enhanced solutions enhanced services.

And broader usage of our tools.

As we mentioned in prior quarters during 2023.

Nice increases were higher than they've been in recent years and contributed a larger percentage of new recurring sales relative to recent years.

I would say.

Index.

That contribution is similar where the contribution from price increases within index was above 40% for the year.

And run rate growth was 25% within Europe and close to 20% in Asia for ESG and climate segments. We continue to see strong engagement across client types, with a retention rate of 94.7% for the quarter and 95.9% for the full year. Although we did see an increase in cancels from smaller clients, in large part related to an elevated level of client benefits, within real assets, run rate growth was 6%, as we continue to see the impact of muted property values and lower transaction volumes. The retention rate of 89% for the quarter was impacted by a pickup and cancellation rate from small clients, namely brokers, developers, and lenders, who were most acutely feeling these cyclical pressures.

Which I think is consistent with what we've mentioned before and it's important to underscore that there are numerous factors that feed into our price increases.

Including most notably the value that we're delivering to clients, but the broader environment.

And and client health are all things, we think about and so to the extent that inflation continues to moderate.

Manav Patnaik: We will likely moderate price increases in certain areas.

All else equal, but we'll continue to monitor all those factors, including the enhancements and value that we deliver to clients and calibrate price increases accordingly going forward.

Once again, our larger clients tended to have higher retention rates. Almost 80% of clients that subscribe to our RCA product offering spend over $50,000 per year on average, and the retention rate of that cohort is 96% for the full year of 2023. Also, it is worth highlighting that about 95% of client contracts for RCA products have an auto-renew provision or a multi-year contract. Our integration surges, which we now refer to as our private capital solutions operating segment, are going well. We recorded approximately $25 million in revenue for the quarter, which came in at the high end of our initial expectations, although we did benefit from revenue test drops resulting from the completion of implementations on our total planned product offering. Private capital solutions expenses included about $4 million of allocations from centralized and shared costs. We continue to expect about $4 to $5 million per quarter of these allocations to the segment. These costs are reallocated from other segments, and as a result, will not impact firm YDBDA. Our approach to capital allocation remains unchanged.

Our next question comes from the line of George Tong with Goldman Sachs. Please go ahead.

Alright, Thanks, good morning going back to the topic of ESG, you mentioned regulations are causing some delays in purchases can you elaborate on which regulations you are watching as well is how different outcomes of the U S election cycle could potentially impact ESG demand.

Sure. So I think there is there has been a there has been a component of the changes in the regulation in Europe Lane product issuance, but theres also a broader context that the regulatory framework in Europe in the EU.

<unk> is driving a lot of growth as well and you can see that in the numbers that we've mentioned so I think that overall the.

The regulatory topic.

Related to ESG and climate has definitely become a positive for us.

We will continue to invest in the business to drive strong top-line growth over the long term. We will also continue to deliver attractive free cash flow and EPS growth. We will continue to optimize our capital structure, return excess cash to shareholders through regular dividends that grow with adjusted EPS, and opportunistically pursue share buybacks and value-generative full-time M&A that accelerates our strategy in key growth areas. In the spirit of continually optimizing our capital structure, last week, we completed the refinancing of our credit facilities, where we replaced our Term Loan A and existing revolver with a new And our capital position remains solid overall. As of today, we currently have approximately $600 million of cash on hand, well above our minimum global cash balance range. Although cash balances are still down from last year's levels, which will gradually lead to lower interest income.

<unk>.

Look I don't it is not our role to speculate on U S politics and outcomes.

My only observation would be that when we look notably at a lot of the major asset owners in the U S. There are approached this topic has not changed and it remains central for them I think there may be a question as to when product issuance will pick up again in the U S.

Yes.

Time will tell.

But we're also seeing any significant.

Increased.

<unk> interest.

So on balance.

The landscape remains one with.

Some significant opportunity some areas a little bit slower, but we're just doing our business of interacting with clients every day and impressing them the value of our services and then politics will be with politics.

Manav Patnaik: Our next question comes from the line of Faiza <unk> with Deutsche Bank. Please go ahead.

Lastly, we continue to execute full-time acquisitions that accelerate our long-term strategy. Total purchase consideration for Trove and Fabric was approximately $48 million, with the potential for additional performance-related payments tied to the achievement of top-line growth targets, although the majority of those payments will be treated as compensation expenses. Turning to our 2024 guidance, which we published earlier this morning, our guidance assumes that AUM levels remain relatively flat to year-end levels through the first half of 2024, with a modest upturn in the second half of the year. Our expenses reflect the ongoing investments in our business, as well as the impact of our acquisitions of Burgess, Trove, and Fabric. Our CAPEX guidance reflects continued software development to build or enhance our offerings across all of our segments, including private capital solutions, as well as slightly higher hardware purchases related to our hybrid data center strategy.

Yes, hi, Thank you good morning.

Wanted to follow up on the expense question and I Wonder if you could talk about some of the puts and takes around investments.

Because it seems that you've sort of been.

Executing on more of a downturn playbook over the last couple of years and I'm curious how much runway you think you have around.

Expense savings are there areas, where you would like to invest more sort of how should how should we think about.

Our approach to <unk>.

Okay.

Yes, yes, so it's an area that we spend a huge amount of time on.

And we are continually focused on driving efficiencies enhancing productivity across the organization. So that we can invest more in the business.

And even though it's been tough.

For environment, we've been able to continue to enhance and increase the amount of money, we put into investment areas.

To your point, we would love to invest more.

We have very attractive opportunities across all the areas, we've talked about in terms of new solutions.

New client segments technology enabled.

Capabilities.

Those are all areas that we.

Have the upturn ready to go.

But we will be measured and ensure that we see sustained improvements in the market and business performance.

Before we take up the level of investment materially.

It's something that we are laser focused on and want to continue to maintain our triple crown disciplined and ensure that we're putting those investment dollars into those areas that are going to generate attractive near term returns for us and so it's something that we are on top of and continually monitoring and thats something that to the extent.

Our interest expense guidance reflects the refinancing of our credit facilities and assumes the existing balance of approximately $340 million remains outstanding for the year. Our tax rate guidance reflects the impact of the OECD's global minimum tax, which goes into effect this year, as well as statutory rate increases we are subject to in certain jurisdictions, and a slightly smaller projected impact from loan default benefits.

The market performance and business performance fluctuate, we will look for opportunities to put more investment to work.

Let me add a comment to what Andy said.

The long term given the significant then.

An incredible opportunity.

That we say.

Adam ACI.

And all of our product line.

Cost of mutation and index and direct indexing.

Operator: I would like to highlight that our effective rate in the fourth quarter included a discreet benefit related to a favorable outcome on a tax position received late in the quarter. And lastly, free cash flow guidance reflects the expectation of slightly higher cash taxes. Overall, we remain well positioned to drive growth. Our client centricity and multi-year investments provide us with strength to start 2024, and we look forward to keeping you posted on our progress. With that, operator, please open the line for questions. The floor is now open to your questions. To ask a question at this time, simply press the star followed by the number 1 on your telephone keypad.

Climate with climate opportunities to ESG to private assets and of course.

Significant uptick that we've seen.

The long term value creation.

Will depend a great deal on incremental investments in all of this growth here.

You can't go without.

Creating new products, creating new services.

Yes.

Reaching out to new client segments like well it sounds like corporate like GPS.

Private assets et cetera, so our overriding.

The amount of time that Thunder alluded to.

This area is.

Operator: We ask that you please limit yourself to one question and reach me if needed. We'll now take a moment to compile our results. Our first question comes from the line of Toni Kaplan with Morgan Stanley. Please go ahead. Thank you so much.

On the margin of the business with incremental investment and de lever that we've been pooling significantly.

Yes.

Creating more and more efficiency.

Tightening up.

We do with higher productivity, no, creating more and more of our staff to emerging market centers.

I was hoping you could give some additional color on the market environment, maybe particularly with regard to the index. You know, I know you've called out the market headwinds. Thank you. Hi Toni, it's Andy.

On the light and that has allowed us to send that said.

The amount of investment that we can deploy.

And in the business.

We are extremely excited about AI and the utilization of AI.

I appreciate the questions. So, yeah, I mean, we are seeing a tough environment for many of our clients, as we've talked about before. Our largest client base is active managers that have seen flat markets for the last couple of years. We're encouraged by the recent rally, and that should be helpful over the long term, but they have seen relatively flat markets, volatility, and outflows, so we have seen headwinds, but we continue to have good momentum. And I think the thing that's been encouraging to us is the success we've had across modules and client segments. So we mentioned some of these, but just to highlight, we saw 9% run rate growth in our market cap modules. And that's through delivering additional value to our clients and continuing to upsell them.

Allow for an even larger amount of efficiencies.

<unk>.

The weekend.

More of resources and again put it back into the investment of the business and all the color.

Areas that we've identified.

Our next question comes from the line of hesitant bulky with Bank of America. Please go ahead.

Hi, again.

Good morning, all I guess, it's almost good afternoon. Thank you for taking my question I just wanted to ask a little bit about index and market share we get incoming questions from investors asking about.

Where you guys fit in in terms of the broader market and I am curious from your perspective.

Where do you see that the wallet share opportunities and then what are you monitoring in terms of some of your competitors gaining share. Thanks, so much.

Yeah. Thanks for the question well look we clearly have pretty transparent statistics on that in the ETF market, which we discussed.

We saw 20% growth in custom and specialized modules, 11% growth in factory, and ESG modules. Equally as encouraging, we saw 9% growth in asset managers, 15% growth from wealth and broker-dealers, and 22% growth among hedge funds. So we've definitely been encouraged here. I think we will see longer sales cycles and tighter budgets here. Budgets for the year are set at the end of the prior year for many organizations, and so that will create some noise for us.

Those have been fairly stable.

Manav Patnaik: It's quite difficult to judge this in a lot of the subscription market theres not really transparent data that shows us exactly what's happening.

So the key thing that we that we try to focus on is ensuring that we are continuing to maintain our growth rates.

And some of our key.

Our key segments as you can see from the numbers that we put out quarter after quarter, but more importantly is trying to be innovative about some of the opportunities that have been central to our growth that have been a big theme throughout our comments today the customization.

But this trend of indexation and the demand for the tools that we have across many different client segments seems to have some momentum here. So we'll continue to monitor closely, but importantly, we continue to focus on creating value for our clients, and that will hopefully translate through to continued success in sales and growth. Our next question comes from the line of Alex Kramm with UBS. Please go ahead. Hello everyone.

An area is dramatic in all client types, and we're investing in that both organically and through the <unk>.

Interesting to hear you talk a little bit less than usual about ESG and climate, so clearly, I need to ask you about that. So, we obviously, you know, have continued to see a slowdown in that segment after, you know, a couple of years of really, really big swings. So I guess now with that slowdown in the run right now, just wondering if there's any signs that things could be turning, maybe if climate is becoming a bigger part of the equation, or again, as investors, are we thinking kind of like what they need in particular outside of the U.S.? So, you know, any near-term expectations there, and how is that impacting your longer-term outlook as well? Because obviously, these run rates are far below your mid- to high-20s longer-term range, so I'm just curious how you're thinking about that at the moment. Thanks.

Did some of these acquisitions that we're looking at.

Even if they're bolt on ones. So I think as we get.

Our big drive driver is to be innovative in new segments with customization and if we do that I think we can continue to have the leading position.

The industry than we have and then I think the other one that I would say is a key focus is global geographic diversification.

This is an enormous strength of our franchise.

And we've seen that in the numbers as we continue to grow.

In all geographies and index notwithstanding the fact that in many of the geographies over the last number of.

Quarters equity markets have been.

Thanks, folks. So, I'd say the most encouraging thing for us has been the strong level of engagement we're seeing from our clients around ESG and, very significantly, around climate. So despite the slowdown, we are still seeing a healthy level of dialogue with our clients on this front. Consistent with what we've seen in recent quarters and throughout 2023, as you alluded to, growth has been slower for us. You know, just to put a finer point on that, in the ESG and climate segment, growth in the Americas was about 9%. That compares to 25% in Europe and close to 20% in Asia.

In the doldrums more than they've been in the U S. But we still continue to put in strong performances and subscription growth. So so so I think overall, we kind of look at how we're innovating.

Same things anecdotally about competition, but I don't think theyre going to be helpful. So so it's mostly focusing on what we do well in serving clients and innovating and if we keep doing that I am confident that we can maintain our growth trajectory.

Our next question comes from the line of Craig Huber with Huber Research partners. Please go ahead.

I'd say the themes are consistent, where clients are taking a more measured approach to how they integrate ESG. They're continuing to think about how and where they integrate it, and that's causing longer sales cycles and more deliberate purchasing decisions, which is probably compounded by, I think, cyclical pressures that are hitting many of our clients. But given the wide range of use cases, I think we continue to be quite encouraged about the outlook here. You know, we see regulation will create some delays in purchases, but it continues to be a big opportunity for us, as you alluded to. Climate continues to be a big opportunity for us, and we continue to innovate heavily across climate with plans to release things like nature and biodiversity data sets, additional insights into private assets, geospatial data, which Bear alluded to, and physical and hazard risk enhancements.

Great. Thank you I wanted to hear your thoughts on your sales force. Your Salesforce, obviously been very effective very efficient over many many years you guys highlighted part that today with all the cross selling that <unk> been doing and stuff and I am just curious if your plans for internal investment spending this year does it include any extra.

Spending levels above and beyond what you normally would do on the sales force what your organization for this upcoming year I'm trying to get a sense on that because it seems like a pretty.

Good opportunity you guys to lean further into that I'm just curious what your thought is on that thank you.

Look it's a great question. So as you know Henry as our lead salesman now and has been an enormous amount of his time with clients, which has had a huge impact in our senior relationships I am myself, a retired global head of client coverage.

And our current global head of client coverage, obviously <unk> is doing a great job.

And so I think it's both the question of scale and reach which we've really.

And that's on top of continuing to broaden our coverage across ESG and enhance the quality of our offering and our service. And so I think we've got a rich pipeline of opportunities and solutions where we can continue to deliver value to clients. But I think we would expect... Some of these dynamics that we're seeing are more measured purchasing decisions, and some of the cyclical pressures are likely to persist for at least the next couple quarters. Our next question comes from the line of Manav Patnaik with Burt. Please go ahead.

Focused on but it's also really important to be creative and innovative.

And as we look across a given order like the one we have today the diversity of transactions of different client types different geographies different use cases, all of that comes from our client coverage organization really having that DNA of finding out new use cases, new on.

Opportunities, which I think is really central to how we operate so and then for sure. We will continue to invest in our client coverage organization.

Thank you. Maybe we'll just go down the segment here. Can you just talk about, you know, the analytics business? Obviously, it sounds like things have gotten better there through the year. It sounds like it's the equity asset class. But just, you know, are there some share gains? Is it just the uptake in the models?

Salespeople and consultants and client service now we're also very focused on the productivity of the organization.

And that's the key component to ensuring we continue to advance.

This is really when we when we think of investments, we definitely think of our client organization and its reach and scale as being central to our future trajectory. So happy to take a longer discussion offline, but it's absolutely central to what we think is a great strength.

Like, maybe just some of the trends that you're seeing there could, you know, help you sustain this high single-digit rate? Yeah, so there are a number of trends at play here, but maybe I can group them together and say this heightened period of uncertainty and risk has led to opportunities for us. And so clients are turning to us across many of our different solutions to help understand market drivers and risks and how to navigate those risks. And I think it's been very encouraging to see the highest ever full-year retention rate we've seen within the segment, which I think underscores the power of that need for our tools in this market. Just to put a finer point on where we're seeing that, we did see some strong successes within ERP in this quarter, our enterprise risk and performance offering, which has been supported by things like liquidity analytics and demand for deeper insights into liquidity risk. We've also had some traction with the partnerships that we've alluded to in the past, and we have gotten favorable feedback by enhancing user experiences.

Yeah.

Let me close.

So, it's an LLC or that up.

The.

The area.

And then it's AI has progressed significantly in many many areas the one area that I feel.

Brown <unk> Brown.

But I would just I guess.

Is the incredible level of reach.

Dialogue.

With with clients all over the world.

Is not only.

At the at the user level. Additionally.

Additionally, in the past MSCI, so by a subject matter expert.

Selling directly into our user.

The client organization.

We now have done it in addition to that is build very deep very wide.

The relationship with the CEO and the CIO.

And all of that because we are conscious that we're increasing our wallet, we're facing our wallet share mine share with a lot of these clients and we need a lot of support from the top down in understanding what we're doing and how we can add value and partnered up with them when they were going to win with our client organizations.

The client coverage organization.

As we've talked about in the last couple quarters, we had another strong quarter and a strong year across our factor models as well. We did see pretty good momentum on equity analytics, particularly with our factor model sales. It's early days, but we've had some traction with our risk insights offering, which is a new offering for us where we're providing clients with more easily accessible, more interactive, and more user-friendly risk and performance stats on their portfolios. So we're encouraged.

I'll, just say is I think 1200 professionals by now.

So.

Significant expansion because of some of the acquisitions that we have made.

<unk> added a lot of salespeople and the key focus there is industrial scale.

Brian to figure out how do we continue to grow that client over his reputation in.

In a matter that it is tightening up the organizational structure. The organizational design the roles of responsibilities, we're putting a lot of technology and a lot of data.

And understanding.

What are the client buying how are they buying managing the pipeline and so on.

And so forth. So I think we have a lot of runway.

The growth we're seeing is in areas that we've been focused on investing in, and so we are definitely encouraged by the outlook. But I would say, particularly given the backdrop and the fact that within analytics, we do have a higher concentration of broker-dealers and hedge funds, we do expect to see some lumpiness in both sales and cancels moving forward here. But the long-term dynamics in those areas of traction we've been getting have been quite encouraging to us. Our next question comes from the line of Alexander Hess with J.P. Morgan. Please go ahead.

To go up.

The benefit from <unk>.

Reaching out to more clients. This is going to become a specially important because we're scaling up significantly to two new areas wealth management is a lot of wealth management organizations around the world corporates there.

That has been done.

The corporate entities around the world right.

<unk> companies in the <unk>.

<unk> partners, so basically private equity firm private credit firm private infrastructure.

But I bet that.

Firms and the lifestyle.

Really really exciting a lot of what we're doing.

There are no further questions.

Tom I would like to turn the floor back to Henry Fernandez for closing remarks.

Hi Guys. Bear, you alluded to a desire to meaningfully scale the physical asset business. It sounds like you guys have fleshed out a bit more of a concrete near-term roadmap for the ESG and climate business. But sort of can you maybe dimensionalize, you know, why you guys went in on that earlier? You know, is that something where you feel the competitors maybe have a head start? And then beyond that, is there, you know, how would you monetize this? Is that going to be more of a consumption-based model, or is that going to be sort of a subscription program as well? Thank you, guys.

So thank you everyone for joining us today, our fourth quarter and full year performance as you can see.

Result of our focus on clients and Chris.

And our all weather franchise.

We remain very excited about the tremendous opportunities that we put on the walls and the <unk>.

<unk> that we're making to capitalize on them.

We will execute flawlessly on that growth agenda.

One.

The thing that is always important to keep good company. We welcome anybody who wants to have a dialogue with us at any point at any time.

Sure. So look, the climate opportunity is an enormous one that will affect all aspects of the economy and industries, right? So I think it's natural that there will be aspects of it which, at the outset, we were not present in, and where we're broadening and deepening our capabilities, right? So I think that's the general observation, which could be both from, you know, our actions organically and inorganically.

There will be more than happy to answer your questions or any other questions that people may have thank you again and have a great day.

This concludes today's call you may now disconnect.

[music].

So, in this instance, you know, we're very excited with what we've done here, not merely because there is clearly demand for this, but it's also an area where we're able to apply a lot of interesting work in data science and AI. So, there is client demand, it plays to our strengths in this growth category, and I think we've got a really good chance of continuing to innovate. You know, just in terms of the business model, it's the same as usual, right? So, it's a subscription business model, it's integrated with the normal way that we sell, and it's just, you know, enriching our capabilities, you know, across the board. Our next question comes from a line from Owen Lau with Oppenheimer. Please go ahead. Hey, good morning.

Yes.

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Yes.

[music].

Sure.

Thank you for taking my question. So your non-recurring revenue was up all your bid in both index and analytics. And I think you recognize some fees for unlicensed usage of the content, like in the past; there are several periods in the index business. I think for analytics, you have some large numbers of implementations and some on-time deals. Could you please elaborate a little bit more on what they actually are and what that means for the current revenue? Yeah, sure, Owen, thank you.

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Manav Patnaik: Okay.

[music].

Yes.

Yes.

[music].

So, maybe I'll start with the index and then I can touch on analytics, but yeah, I think it's helpful to give a bit more color on exactly what these non-recurring sales and revenues are. So, as we mentioned, during the quarter, we had a very large contract signed to address the unlicensed usage of our indexes in past periods. And just to put a finer point on that.

Okay.

[music].

And to be very clear, we identified a client that had been using our indexes to create index-linked products without a license for a long time. And so during the quarter, we signed an agreement that we would be paid for that passed-on license usage, and as a result, we recorded a sale and revenue associated with that. It is worth noting that we continue to see contributions to non-recurring sales and revenue from the licensing of our indexes to create things like structured products and over-the-counter derivatives. We also have non-recurring sales and use of some of our data packages, like our free flow data package and our index history sales. And so those unlicensed usage sales are, by their nature, going to be lumpy, and we don't have those very often, as you know.

Yes.

Thank you.

[music].

Yes.

[music].

Sure.

[music].

But these other trends in things like over-the-counter derivatives and structured products are areas where we do see some momentum and should continue to be a contributor for us. But no changes to our business model overall, other than to say we see growth opportunities across categories of non-recurring revenue and sales for us. Yeah, as you alluded to on the analytics side, we did have a number of implementation-related services that were completed during the quarter, and those implementation-related services are non-recurring in nature, and so we recognize non-recurring revenue when we complete those. It is worth noting on the recurring side as well, for certain products that involve implementations, such as our enterprise risk solutions, we defer the revenue until the implementation is complete, at which point we I would say within analytics, non-recurring revenue tends to be most closely tied to those implementations, and so it generally will be tied to business growth over time. Our next question comes from the line of Seth Weber with Wells Fargo. Please go ahead. Hey guys, good morning. I wanted to ask about progress with the Burgess integration.

Okay.

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Okay.

Okay.

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I think I've heard something about run rates in the high teens, which sounds pretty encouraging. And, you know, on prior calls, we talked about how the product line is pretty undersold, you know, globally, and just wondering how the integration or, you know, the combination is going with the Burgess Health people, you know, working with existing MSCI sales people just to kind of start cross-selling the product. Thank you.

So, I'm happy to take that question. You know, we're very pleased with how the integration is going. I think there was clearly a benefit that we were a minority shareholder of Burgess for a number of years, so we didn't know the business very well. We had one of our senior executives, Shane McNamara, there for a number of years, and he really helped to revitalize their client activity and go to market and all the commercial sides. So, he's now a co-head of the business with Carissa Smith.

So, from an operational point of view, we're very pleased with the integration. And you know, we've got a team of client coverage people there who were already doing things the MSCI way under Jay, and now those teams can work seamlessly with the MSCI client coverage team. So, we're, you know, delighted with the way things have gone so far, and I think we've got a big opportunity globally to significantly expand the footprint in private capital solutions. So, so far, so good, you know, a good end to the year, and we hope to keep delivering some strong numbers in the course of 2024. Our next question comes from the line of Kelsey Zhu with Autonomous. Please go ahead.

Hi, good morning. Thanks for taking my question. On your extensive guidance, I was just wondering if you could walk us through kind of the puts and takes of that expense guidance range, what would take us to the higher end versus the lower end of that. Sure, sure. So, listen, on expenses, it's a similar story to what we give every year. I think we outlined in the prepared remarks here that the AUM assumption that underlies the expense guidance assumes that the markets remain relatively flat for the first half of the year and then rebound slightly in the back half of the year. As we always do, we will continue to monitor the market, and we'll continue to monitor business performance. As we always do, we will continue to monitor the market, and we'll continue to monitor business performance or similarly causes to manage expenses more tightly if things deteriorate. As you know, and I think it's evident, there is a meaningful contribution from acquisitions as well in the expense guidance for the year. I think we've given color on the Burgess margin profile, and I think we indicated Trove and Fabric are relatively small in terms of their impact.

From that, you can back into the organic expense growth being in the mid to high single-digit range embedded in our guidance and the balance being contributed from mainly Burgess, but to a lesser degree, the smaller acquisitions coming in. The last thing that's probably worth flagging, and we've mentioned this in previous years, is that we have seasonally high payroll tax and benefits-related expenses in the first quarter, and so we tend to see about $10 to $15 million higher of those expenses coming through, which adds to some seasonality in higher expenses. But other than that, I'd say it's something that we continue to monitor, and our goal ultimately is to continue to invest in the business to drive long-term growth, and we'll use opportunities if the market improves here to continue to do that, but also continue to deliver attractive profitability and profitability growth in all periods, and attractive free cash flow growth. Our next question comes from the line of Ashish Sabadra with RBC Capital America. Please go ahead.

Thanks for taking my question. A quick question on the pricing actions that you might have instituted in 2024, and how should we think about the pricing tailwinds in the index and overall business for 2024? Yeah, sure.

So listen, it's important to underscore that we will continue to be very measured in our price increases and ensure that we are linking them to the value that we are delivering to our clients in terms of enhanced solutions, enhanced services, and broader usage of our tools. You know, as we mentioned in prior quarters, during 2023, price increases were higher than they've been in recent years and contributed a larger percentage of new return sales relative to recent years. You know, I would say in the index, that contribution is similar, where the contribution from price increases within the index was above 40% for the year, which I think is consistent with what we've mentioned before. And it's important to underscore that there are numerous factors that feed into our price increases, including, most notably, the value that we're delivering to clients and the broader environment. Thank you. Thank you.

And client health, all things we think about. And so to the extent that inflation continues to moderate, we will likely moderate price increases in certain areas, although it's equal. But we'll continue to monitor all those factors, including the enhancements in value that we deliver to clients and calibrate price increases accordingly going forward. Our next question comes from the line of George Tong with Goldman Sachs. Please go ahead.

Hi, thanks, and good morning. Going back to the topic of ESG, you mentioned regulations are causing some delays in client purchases. Can you elaborate on which regulations you're watching, as well as how different outcomes of the U.S. election cycle could potentially impact ESG demand? Sure, so I think there has been a component of the changes in the regulation in Europe to land product issuance. But there's also a broader context that the regulatory framework in Europe, in the EU, is driving a lot of growth as well, and you can see that in the numbers that we've mentioned. So I think that, overall, the regulatory topic related to the exchange climate has definitely become a positive for us, on balance. Look, I don't. It's not our role to speculate on U.S. politics and outcomes.

My only observation would be that, you know, when we look notably at a lot of the major asset owners in the U.S., their approach to this topic has not changed, and it remains central for them. I think there may be a question as to when, you know, product issuance will pick up again in the U.S., and, you know, time will tell, but we're also seeing, you know, a significant increase in, you know, the age of interest, so on balance, you know, the landscape remains one with, you know, some significant opportunities, some areas a little bit slower, but, you know, we're just doing Our next question comes from the line of Faiza Alwy with Deutsche Bank. Please go ahead. Yes, hi. Thank you. Good morning.

I wanted to follow up on the expense question, and I wonder if you could talk about some of the puts and takes around investment. Because it seems that you've sort of been, you know, executing on more of a downturn playbook over the last couple years.

And I'm curious, you know, how much runway you think you have around, you know, expense savings, are there areas where you'd like to invest more? Sort of how should we think about, you know, your approach to investment? Yeah, so it's an area that we spend a huge amount of time on, and we are continually focused on driving efficiencies and enhancing productivity across the organization so that we can invest more in the business. And even though it's been, you know, a tougher environment, we've been able to continue to enhance and increase the amount of money we put into investment areas. To your point, we would love to invest more. We have very attractive opportunities across all the areas we've talked about in terms of new solutions, you know, new client segments, technology-enabled, and capabilities. Those are all areas where we have the upturn ready to go.

But we will be measured and ensure that we see sustained improvements in the market and business performance before we take up the level of investment materially. But it's something that we are laser focused on and want to continue to maintain our Triple Crown discipline and ensure that we are putting those investment dollars into those areas that are going to generate attractive near-term returns for us. And so it's something that we are on top of and continually monitoring. And that's something that, to the extent, you know, market performance and business performance fluctuate, we'll look for opportunities to make more investments. Let me add a comment to what Andy said.

In the long term, you know, given the significance... An incredible opportunity that we say at MSCI in all of our product lines, you know, from customization and index and direct indexing to climate risk and climate opportunities, to ESG, to private assets, and of course, you know, the significant uptake that we've seen in analytics. The long-term value creation of MMPI will depend a great deal on incremental investment in all these growth areas. You can't grow without creating new products, creating new services, creating innovation, reaching out to new client segments like wealth, like insurance, like corporate, like GPs, private assets, etc.

So our overriding amounts of time that can be resorted to in this area is to balance out the profitability of the business and the margin of the business with incremental investment, and the lever that we've been pulling significantly is creating more and more efficiency, tightening up, you know, what we do with higher productivity, locating more and more of our staff in emerging market centers, you know, and the like. And that has allowed us to, as Andy said, increase the amount of investment that we can deploy in the business. We are extremely excited about AI and the utilization of AI to allow for an even larger amount of efficiency, a lot of productivity, which we can free up more resources and again put it back into the investment of the business in all the growth areas that we've identified. Our next question comes from a line from Heather Balsky with Bank of America. Please go ahead. Hi, good morning. Well, I guess it's almost a good afternoon.

Thank you for taking my question. I just wanted to ask a little bit about index and market share. We get questions from investors asking about where you guys fit in terms of the broader market. And I'm curious, from your perspective, where do you see the wallet share opportunities? And then what are you monitoring in terms of some of your competitors being shared? Thanks so much.

Yeah, thanks for the question. Well, look, we, you know, we clearly have pretty transparent statistics on that in the ETF market, which we discussed, and those have been fairly stable. It's, you know, quite difficult to judge this in a lot of the subscription markets; there's not really transparent data that shows us exactly what's happening. So, you know, the key thing that we try to focus on is ensuring that we're, you know, continuing to maintain our growth rates in some of our key, you know, our key segments, as you can see from, you know, the numbers that we put out quarter after quarter. But more importantly, trying to be innovative about some of the opportunities that have been, you know, central to our growth that have been a big theme throughout our comments today. You know, the customization area is dramatic for all client types.

And we're investing in that both organically and, you know, through some of these acquisitions that we're looking at, even if they're both on one. So, I think as we get, you know, our big drivers to be innovative in new segments with customization, and if we do that, I think we can continue to have the leading position in the industry that we have. And then I think the other one that I would say is a key focus is global geographic diversification. This is an enormous strength of our franchise, and we've seen that in the numbers as we continue to grow, you know, in all geographies and indexes, notwithstanding the fact that in many of those geographies over the last number of quarters, equity markets have been, you know, in the gold rooms more than they've been in the U.S., but we still continue to put in strong performances in subscription growth.

So, I think overall, you know, we kind of look at how we're innovating. We, you know, I can say things anecdotally about competition, but I don't think they're going to be helpful. So, it's mostly focusing on what we do well, serving clients and innovating, and if we keep doing that, I'm confident that we can maintain, you know, our growth. Our next question comes from Craig Huber with Huber Research Park. Please go ahead.

Great, thank you. I want to hear your thoughts on your sales force. Your sales force has obviously been very effective, very efficient over many, many years. You guys highlighted part of that today with all the cross-selling that they've been doing and stuff. And I'm just curious, your plans for internal investment spending this year, does it include, Thanks. Bending Level, above and beyond what you normally would do in a Salesforce-grade organization sometime in the year? Good opportunity, guys, to lean further into... Look, it's a great question.

So, as you know, Henry is our lead salesman now, and he spends an enormous amount of his time with clients, which has had a huge impact on our team and relationships. Now, I am, myself, a retired Global Head of Client Coverage for MSCI, and, you know, our current Global Head of Client Coverage, Alizé Minori, is doing a great job. And so, I think it's both a question of scale and reach, which we've really, you know, focused on, but it's also really important to be creative and innovative. You know, and as we look across a given border, like the one we have today, the diversity of transactions of different client types, different geographies, different use cases, all of that comes from our client coverage organization really having that DNA of finding out new use cases, new opportunities, which I think is really central to how we operate.

So, and then, for sure, we will continue to invest in our client coverage organization, you know, in salespeople, in consultants, in client service. Now, we're also very focused on the productivity of the organization, and that's a key component to ensuring we continue to invest. But, you know, this is really, when we think of investments, we definitely think of our client organization and its reach and scale as being central to, you know, our future trajectories. So, you know, happy to take a longer discussion offline, but, you know, it's absolutely central to what we think is a great strength of MSCI. Let me add something else here that, The area.

MSCI has progressed significantly in many, many areas. The one area that I feel the most proud of, or proudest, I guess, of is the incredible level of reach and Diablo that we have with clients all over the world. It's not only, You know, at the user level. Traditionally, in the past, MSCI was sold by a subject matter expert to MSCI, selling directly to a user at the client organization. What we now have done is, in addition to that, build very deep and very wide relationships with the CEOs and the CIOs and all that, because we're conscious that we're increasing our wallet, we're increasing our wallet share, our mind share with a lot of clients, and we need a lot of support from the top down in understanding where we're going and how we can add value and partner up with our client organizations.

The Client Coverage Organization, Algecet Munare, is I think 1,200 professionals by now or so, a significant expansion because of some of the acquisitions that we have made, which have added a lot of salespeople. And the key focus there, at industrial scale, is trying to figure out how to continue to grow the Client Coverage Organization in a manner that it is tightening up the organizational structure, the organizational design, the roles, and the responsibilities. We're putting a lot of technology and a lot of data into understanding what the clients are buying, how they are buying, managing the pipeline, and so on and so forth. So I think we have a lot of runway to benefit from in reaching out to more clients. This is going to become especially important because we're scaling up significantly to a new area, wealth management. There are a lot of wealth management organizations around the world. Corporate entities There are thousands and thousands of corporate entities around the world. Insurance companies, the general partners of private equity firms, private credit firms, private infrastructure, private debt firms, and the like.

So really, really exciting. There are no further questions. At this time, I'd like to turn the floor back to Henry Fernandez for closing remarks. So, thank you, everyone, for joining us today. The fourth quarter and three-year performance, as you can see, was a direct result of our focus on clients and..., and our all-weather franchise. We remain very excited about the tremendous opportunities that we have in front of us and the investments that we're making to capitalize on them, and we will execute flawlessly on that growth agenda.

Thank you again and have a great day. This concludes today's call, you may now disconnect. ??? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ??