Q4 2024 MSCI Inc Earnings Call
Okay.
Speaker Change: Good day, ladies and gentlemen, and welcome to the MSCI fourth quarter 2024 earnings Conference call.
A reminder, this call is being recorded.
Speaker Change: At this time, all participants are in listen only mode.
Speaker Change: Later, we will conduct a question and answer session, where participants are requested to ask one question at a time didn't add themselves back to the queue for any additional questions.
Speaker Change: Further instructions for you later on.
Jeremy: I would now like to turn the call over to Jeremy on head of Investor Relations and Treasurer you may begin.
Speaker Change: Thank you.
Speaker Change: And welcome to the MSCI fourth quarter 2024 earnings Conference call earlier. This morning, we issued a press release announcing our results for the fourth quarter 'twenty to 'twenty four this press release, along with the earnings presentation. A brief quarterly update are available on our website MSCI com under the investor relation.
Speaker Change: Let me remind you that this call contains forward looking statements, which are governed by the language on the second slide of today's presentation. You are cautioned not to place undue reliance on forward looking statements, which speak only as of the date on which they are made are based on current expectations and current economic conditions.
Speaker Change: They're subject to risks and uncertainties that may cause actual results to differ materially from the results anticipated in these forward looking statements.
Speaker Change: For a discussion of additional risks and uncertainties. Please see the risk factors forward looking statements disclaimer in our most recent Form 10-K, and our other SEC filings.
Speaker Change: During today's call. In addition to results presented on the basis of U S.
Speaker Change: We also refer to non-GAAP measures, you'll find a reconciliation of our non-GAAP measures to the equivalent GAAP measures in the appendix of the earnings presentation. We will also discuss operating metrics such as run rate and retention rate.
Speaker Change: Information regarding our use of operating metrics such as run rate or retention rate are available in the earnings presentation on.
Henry Fernandez: On the call today are Henry Fernandez, our chairman and CEO, <unk>, <unk>, our president and COO and Andy Wichmann, Our Chief Financial Officer.
Henry Fernandez: Lastly, we wanted to remind our analysts to ask one question at a time during the Q&A portion of our call. We do encourage you to ask more questions by adding yourselves back to the queue.
Henry Fernandez: With that let me now turn the call over to Henry Fernandez Henry.
Jeremy: Thank you Jeremy.
Jeremy: Good day, everyone and thank you for joining us.
Jeremy: In 2020 for MSCI delivered a strong financial metrics once again demonstrated our scale and leadership in servicing the global investment ecosystem.
Jeremy: For the full year, we achieved organic revenue growth of almost 10%.
Jeremy: Adjusted earnings per share growth of 12, 4%.
Jeremy: And free cash flow growth of 21%.
We also repurchased $810 million worth of EM.
Jeremy: See I shares for the full year.
Jeremy: During the fourth quarter and through yesterday, we repurchased over $425 million worth of MSCI shares in alignment with our shareholder centric capital allocation policy.
Jeremy: In the fourth quarter, our operating metrics included organic subscription run rate growth of 8%.
Jeremy: Excluding FX headwinds.
Jeremy: And 7% on a reported basis.
Jeremy: Asset based fee run rate growth of 15%.
Jeremy: And our retention rate of 93%.
Jeremy: Our ABF run rate growth was driven by higher average AUM.
Jeremy: Aided by the highest quarterly cash inflows into equity Etfs linked to MSCI indices since the end of 2021.
Jeremy: At more than 48 billion U S dollars.
Jeremy: Among client segments. We also had a strong quarter with hedge funds and wealth managers as we grew our firm wide subscription run rate growth by 15% and 12% respectively. Excluding FX.
Jeremy: Well active asset managers continued to face cyclical pressures, we posted 5% growth in subscription run rate, excluding FX and the 94% retention rate with this segment.
Jeremy: In my remarks today I will focus on three areas in particular that demonstrate the success of our strategy.
Jeremy: Index.
Jeremy: Well.
Jeremy: And fixed income.
Jeremy: And index products, the ecosystem linked to MSCI indices remain central to global investing.
Jeremy: And in Q4, we saw a number of milestones.
Jeremy: Last month for example, one of our large asset manager clients launched a new ETF linked to MSCI climate index.
Jeremy: With a record breaking seeded investment of $2.4 billion from one of our large pension fund clients.
Jeremy: This highlights the problem in the prominence of our indices.
Jeremy: The network effect, among our clients and the continuing demand for climate related investment products.
Jeremy: Clients increasingly won a specialized portfolio construction tools, while aligning with the frameworks classification systems and rules based methodologies that MSCI has established a standards.
Jeremy: This has fueled demand for Msci's custom index capabilities.
Jeremy: Including the folks Berry F nine platform, which has now been fully integrated into our product suite.
Jeremy: We also completed large index deals with two of the worlds top investment banks.
Barry: Which Barry will discuss shortly.
Barry: And the wealth segment in Q4, we achieved 12% subscription run rate growth with wealth managers excluding FX.
Barry: With a total wealth subscription run rate of $116 million.
Barry: We also saw direct indexing AUM based on MSCI indices increased by 31% to nearly a $130 billion.
Barry: MSCI wealth.
Barry: New MSCI, Brian is helping wealth managers attract AUR by enabling them to build a scalable personalized and outcome oriented portfolios.
Barry: Our client engagement levels with wealth managers are now higher than ever.
Barry: As I have seen firsthand in meetings across Europe over the past months.
Barry: Msci's progress in wealth.
Barry: So it reflects the benefits of our long term investments, including in our data and technology and a laser focus on evolving client needs.
Barry: And fixed income products during the fourth quarter, we drove fixed income run rate growth of 15%.
Barry: Most all of our product lines, which is now $104 million.
Barry: Most notably we completed a large seven figure fixed income portfolio management analytics deal with a U S based asset manager displacing a major incumbent provider.
Barry: We also secure a first of its kind federal government contract in which the client will use our agency mortgage backed security analytics to better understand the performance and risk of this huge market.
Barry: Both of these wins is stem from the work we have done to enhance our fixed income capabilities, including investing in hard to model assets like securitized products and mortgage backed securities.
Barry: Okay.
Barry: Putting it all together MSCI continues to benefit from the depth diversification and resilience of our clients.
Barry: Product and revenue base.
Barry: To the extent market levels.
Barry: In fund inflows remain supportive we believe this will support active asset manager client budgets this year.
Barry: MSCI is increasingly well positioned to expand our footprint among established and newer client segments alike. Thanks to our data models and technology.
Barry: We believe these advantages can help us drive compounding growth across the years and across market cycles.
Speaker Change: And with that let me turn the call over to bear bear.
Speaker Change: Thank you Henri greetings everyone.
Speaker Change: Given our focus on client segment grows I'd like to use this opportunity to review our progress in the fourth quarter, which highlighted the broad reach of our solutions and the underlying strength of our all weather franchise.
Speaker Change: I will start with wealth managers, where msci's recent investments have helped us build significant momentum across products.
Speaker Change: In Q4, we achieved firm wide subscription run rate growth of 12% among wealth managers, excluding FX, bringing our total subscription run rate, but that segment to $116 million.
Speaker Change: We also delivered 14% subscription run rate growth among wealth managers and analytics, excluding FX, which now totals over $25 million.
Speaker Change: In addition, we closed a large enterprise deal.
Speaker Change: For the MSE, our wealth manager platform, formerly known as fabric.
Speaker Change: MSCI wealth manager has positioned us to support a wide range of use cases, including proposal generation model portfolio construction and home office account management and monitoring.
Speaker Change: These use cases extend into ESG and climate in Q4, we achieved 28% climate run rate growth among wealth managers.
Speaker Change: $7 million.
Speaker Change: We drove 67% ESG and climate recurring sales growth among that segment, which was $3 million turning to hedge funds, we achieved 15% subscription run rate growth, excluding FX, including our best ever Q4 recurring sales driven.
Speaker Change: By 46% recurring sales growth among hedge funds and index.
Speaker Change: We completed large deals with several multi strategy hedge funds, including conversions of a one time slow data sales into recurring subscription deals.
Speaker Change: These conversions showcase the value of our products as well as the growing liquidity MSCI index linked products.
Speaker Change: Moving on to banks and broker dealers, we delivered 7% subscription run rate growth, excluding FX across product lines with particular strength from index, where new recurring sales for the segment was over $7 million in Q or growing almost 39%.
Speaker Change: In two of our most notable index business wins, we expanded our relationships with a pair of large investment banks in the Americas.
Speaker Change: As part of these deals the banks trading desks will use MSCI index data to support their origination of OTC derivatives and structured products and for Delta one use case.
Such examples confirm that market participants are increasingly using our content to enhance their research risk management and alpha generation strategies.
Speaker Change: If we look at asset owners, MSCI achieved 11% subscription run rate growth, excluding FX, including almost 40% recurring sales growth in Q4 among asset owners in index.
Speaker Change: Our position among asset owners has also been strengthened by the continued importance of climate, along with our burgeoning capabilities in private assets.
Speaker Change: We recently won a large climate index mandate with a UK based asset owner.
Speaker Change: Which is expected to result in $20 billion of bench.
Speaker Change: Benchmark to MSCI climate index.
Speaker Change: Meanwhile, our run rate among asset owners and private capital solutions.
Speaker Change: $78 million after growing 15% in Q4.
Speaker Change: As asset owners increased their allocations to private assets, we recently launched a new dataset to support their growing interest in private credit.
Speaker Change: Our new private credit data set provides terms and conditions transparency on more than 2800 private credit funds and more than 120000.
Speaker Change: Private credit holdings to support various due diligence and portfolio management needs.
Turning finally to asset managers, we grew our firm wide subscription run rate by 5%, excluding FX headwinds, while achieving a retention rate of 94%.
Speaker Change: In analytics, we landed a large deal with an asset manager in the Americas for our fixed income portfolio attribution and fixed income factor risk tools. This deal was enabled by our new AI portfolio insight solution and it further endorses the multiyear investments we have made in our fixed income products.
Speaker Change: Yes.
Speaker Change: Another key asset manager win.
Speaker Change: And with a large existing client in Europe, who expanded their use Msci's managed services data management and enterprise risk and performance analytics.
Speaker Change: We also continue to support asset managers with tools for sustainability and the low carbon transition.
Speaker Change: Globally, we delivered a retention rate of nearly 95% among asset manager clients for ESG and climate product.
Speaker Change: With asset managers in Europe, we landed numerous large ticket deals for our nature and biodiversity tools and for our climate scenario analysis and stress testing regulatory solutions.
Speaker Change: As you can see our product data and technology investments are helping us expand our footprint with a range of clients across the capital markets ecosystem.
Speaker Change: All of this supports our ability to deliver attractive topline growth and profitability.
Speaker Change: That let me turn the call over to Dan.
Speaker Change: Andy.
Dan: Thanks, Baer and hi, everyone.
Speaker Change: I continue to be really encouraged by the resilience of our results and the momentum we're seeing across product areas.
Dan: Index subscription run rate growth with asset managers and asset owners was almost 7% and 12% respectively.
Dan: These client segments comprise nearly 70% of our index subscription run rate.
Dan: Among hedge funds and broker dealers, we drove 22% and 8% index subscription run rate growth respectively in the fourth quarter.
Dan: Custom indexes and special packages grew 8% versus last year.
Dan: Within the category or custom index subscription run rate growth was mid teens, while we had a lower contribution from special packages.
Dan: And the overall retention rate in index was 95% with a retention rate of almost 96% with asset managers.
Dan: Within asset based fees global cash inflows into equity Etfs linked to MSCI indexes was <unk> $48 billion in the quarter.
Dan: With particular strength in Etfs linked to developed markets outside the U S ESG and climate and factors.
Dan: Q4 cash inflows into ETF products linked to MSCI ESG and climate Index has reached nearly $12 billion, our highest quarterly cash inflows since the first quarter of 2022.
Dan: These inflows accounted for nearly 70% of global cash inflows into ESG and climate equity ETF products in the fourth quarter.
Dan: AUM in ETF and non ETF products linked to MSCI climate equity indexes grew by more than 50% from last year, driven by strong inflows into Etfs and a few key mandate wins from asset owners.
Dan: Meanwhile, inflows into ETF products linked to MSCI factor indexes were almost $6 billion.
Dan: With solid inflows into quality value growth and momentum factors.
Dan: Msci's factor index linked ETF inflows were the highest quarterly flows since the second quarter of 2021.
Dan: And analytics subscription run rate growth was 7%, excluding the impact of foreign currency and was supported by the large wealth in fixed income mandates previously mentioned.
Dan: Analytics organic revenue growth was approximately 5% in the quarter.
Dan: As we previously indicated the revenue growth was impacted by the timing of implementation related revenues compared to a year ago.
Dan: The release of subscription revenues related to implementations can be lumpy and will fluctuate from period to period near.
Dan: Near term, we continue to expect recurring revenue growth rates will be slightly below run rate growth as we compare to periods with higher concentrations of these revenues a year ago.
Dan: And our ESG and climate reportable segment subscription run rate growth was 10%, which excludes the impact of FX.
Dan: Excluding FX headwinds the subscription run rate growth for the segment was 14% and Europe, 11% in Asia and 4% in the Americas.
Dan: Our retention rate for the segment was over 93% with most of the cancels, reflecting client down sales and not outright terminations.
Dan: The multiyear investments, we've made in data quality and new content and capabilities like biodiversity nature regulatory solutions and geospatial supported recent wins.
Dan: In general across our ESG and climate franchise, we are benefiting from the breadth of our offering.
Dan: Data quality large.
Dan: Large and comprehensive securities coverage across asset classes, and the interoperability across MSCI products and frameworks.
Dan: And private capital solutions run rate growth was 15% over the same period last year, and we had a retention rate of 92%.
Dan: In real assets, new recurring subscription sales improved although we had some large cancels related decline have been some vendor consolidation, particularly among developers brokers and agents.
Dan: Yes.
Dan: We had very strong free cash flow in 2024 up 21% with some improvement in collection cycles in Q4, our capital position remained strong with gross leverage of two six times 2020 for EBITDA and we continue to be laser focused on continuing to create value through disciplined capital allocation.
Dan: Turning to our 2025 guidance, which we published earlier this morning.
Dan: Our expense outlook assumes gradually increasing market levels throughout the year and reflects the ongoing reinvestments, we make back into our business to fuel future growth and efficiencies.
Dan: As we've seen in previous years, we expect adjusted EBITDA expenses to be about $35 million higher sequentially. In Q1, 2025 compared to Q4 of 2024, mostly driven by elevated compensation and benefits related expenses.
Dan: Our capex guidance reflects our investments in software development across most parts of the business.
Dan: Free cash flow guidance reflects higher cash tax payments in Q1.
Dan: Some of which we deferred during 2024 as a reminder, 2020 for free cash flow reflected cash tax timing impacts of which about $30 million, resulting in elevated payments in 2025.
Dan: Our interest expense guidance assumes our current debt levels and does not assume additional financings.
Dan: We expect our Q1 effective tax rate to include a benefit from discrete items beyond Q1, we expect our quarterly operating effective tax rate of 19% to 21%.
Dan: We're looking forward to an exciting year ahead our.
Dan: Our financial success in investments from 2024 provide a strong foundation for us to drive further growth in 2025, we have numerous large opportunities, though we are poised to capitalize on and with that operator. Please open the line for questions.
Speaker Change: Thank you if you'd like to ask a question. Please press star one one if your question has been answered and you'd like to remove yourself from the queue. Please press star one again and cases technical difficult difficulties. Please allow the speakers a few moments to reconnect.
Speaker Change: Our first question comes from the line of Toni Kaplan with Morgan Stanley. Your line is open.
Henry Fernandez: Thanks, so much heng.
Toni Kaplan: Henry I wanted to ask a question about how you're thinking about ESG <unk> climate more on the subscription side than on the ABS side.
Toni Kaplan: How are you thinking about the potential growth rate for the business long term.
Toni Kaplan: And sort of.
Toni Kaplan: Cyclical challenging period and it accelerates or is this sort of.
Toni Kaplan: A new normal and what are the key factors that with dictate sort of what happens from here.
Toni Kaplan: Thank you Tony.
Toni Kaplan: I've spent the last four weeks traveling.
Toni Kaplan: Through various cities in Europe.
Visited over 50 clients in four weeks.
Toni Kaplan: In seven cities and from five countries or so.
Toni Kaplan: And.
Toni Kaplan: So I've had a chance to.
Toni Kaplan: To discuss obviously this.
Toni Kaplan: Very clear.
Toni Kaplan: Critical topic for many of these.
Toni Kaplan: Clients, where there are some managers or <unk>.
Toni Kaplan: Or wealth managers banks insurance companies and the like.
Toni Kaplan: I have not seen any.
Toni Kaplan: Let up and the commitment of all of this European financial institutions.
Toni Kaplan: Sustainability.
Toni Kaplan: Obviously as I prepare to see each one of these clients I would read a lot of their material they way they position the way they look at their strategy or the way to describe themselves.
Toni Kaplan: And without any almost any exception.
Toni Kaplan: They are positioning themselves to live in a sustainable world.
Toni Kaplan: So with respect to Europe. The issue becomes that there is a new set of regulations.
Toni Kaplan: That people have been adjusting to their rebranding their products.
Toni Kaplan: And therefore, theres been a little bit of a pause.
Toni Kaplan: In launching a lot of new products.
Toni Kaplan: It'd be very hard to believe that European investors with a retail or institutional investors.
Toni Kaplan: We'll move away from there.
Toni Kaplan: Grain habits of investing according to sustainability principles.
Toni Kaplan: With respect to our product line the product line needs to evolve from simply a ratings in that report on ratings to the underlying data the underlying information.
Toni Kaplan: The reality of the signals that ESG presents.
Toni Kaplan: For for their investment process et cetera. So.
Toni Kaplan: So therefore, the demand is there.
Toni Kaplan: Obviously, the <unk> cyclical downturn is still here, but I don't see any.
Toni Kaplan: But we also have to evolve and transform our product line to meet that demand and part of that demand is compliant with the very heavy.
Toni Kaplan: Disclosures and regulatory requirements of European regulators over a lot of these financial institutions.
Toni Kaplan: They are not only not only European but any other international global institution that operate in Europe.
Toni Kaplan: Somebody I'm pretty bullish on the opportunity there we're beginning to see a lot of this early days, but we're beginning to see a lot of this in Asia Pacific.
Toni Kaplan: With a lot of new regulations in Australia, and Japan, and Hong Kong, and Singapore et cetera. So.
Toni Kaplan: So that is important in the U S. I think that obviously the new administration.
Toni Kaplan: <unk> is not focus on.
Toni Kaplan: The inability is not focused obviously on climate and therefore, we have to see how that evolves.
Toni Kaplan: Importantly, a lot of our clients in the United States.
Toni Kaplan: I've come to the view that sustainability and climate impacting their portfolio is here to stay and it's a secular trend.
Toni Kaplan: Weather.
Toni Kaplan: On a is Brazil and out of state or personal B is precedent in other states. So I think that a lot of these will move in the United States from the governmental sector to the private sectors, where issues should belong to begin with and people looking at their portfolio and the materiality of this factors in there in their portfolio.
Toni Kaplan: So I think it may take time, but it will come back and the demand will be there of course as we have noted in our disclosures we have been reevaluating our targets.
Toni Kaplan: Our long term targets and at some point hopefully throughout at some point during the year, we will be putting that in the marketplace, but we don't know yet what those be because obviously this has been a little bit of a moving target.
Speaker Change: Thank you. Our next question comes from Manav Patnaik with Barclays. Your line is open.
Manav Patnaik: Thank you.
Manav Patnaik: Andy I just wanted to follow up on your comment on the exciting year ahead, and I was hoping you could just contextualize that a bit with the environment. So this time last year, you talked about elevated cancels and then lower budgets following kind of a weak market period.
Manav Patnaik: For your large clients so from where you stand today like how do you look at the cancels and what are you hearing on the on the new budget environment. Please.
Manav Patnaik: Sure yes so.
Manav Patnaik: In general as we've talked about rising markets are supportive for clients both on the sales and cancels front.
Manav Patnaik: Momentum, we've seen in equity markets and overall confidence in the sustainability of market levels.
Manav Patnaik: It is constructive to buying behaviors in certain areas, notably in the U S and so we have seen some encouraging signs on top of that my excitement is coming from all the innovations we continue to make and so we are getting traction in key areas across custom indexes solutions in front office analytics.
Manav Patnaik: Inside many of our private asset solutions in areas in any climate and so we continue to be very excited about the outlook there.
Manav Patnaik: Generally speaking the.
Manav Patnaik: Environment is somewhat more constructive and we are seeing a pickup in our pipeline in spots.
Manav Patnaik: There are some spots, where we still see pressure and it will take some time to fully rebound.
Manav Patnaik: You see some lingering pressures on active managers, particularly in Europe.
Manav Patnaik: But overall, we're seeing a shift in the dynamic on the point of cancels.
Manav Patnaik: Okay.
Manav Patnaik: As you know from last year, we did have a concentration of cancels related that some big client events.
Manav Patnaik: We don't expect the same level of cancels in the first quarter here a year ago as I mentioned rising market should be somewhat supportive for clients.
Manav Patnaik: We will still see some lumpiness and lingering noise.
Manav Patnaik: But overall, we're seeing encouraging signs in areas in the market environment is constructive across many areas.
Manav Patnaik: And as I've mentioned before you Shouldnt focus too much on any one quarter.
Manav Patnaik: Okay.
Manav Patnaik: Thank you. Our next question comes from Alex Kramm with UBS. Your line is open.
Alex Kramm: Yes, Hey, good morning, everyone. Just maybe just stay on that same topic can you maybe talk about how pricing.
Alex Kramm: Conversations and impact should be this year, obviously in the last couple of years, you spend a little bit softer there, but your competitors.
Alex Kramm: We continue to be pretty aggressive.
Alex Kramm: At the environment should be better. So maybe you can talk about pricing a little bit more and also maybe on a segment basis because it does seem like.
Alex Kramm: ESG you have some more opportunities to aetna's market has matured currently thanks.
Alex Kramm: Sure sure so yes, Alex as you alluded to.
Alex Kramm: Across the company in 2020 for the contribution from price increases to sales was slightly less than the contribution in 2023.
Alex Kramm: As you alluded to we did moderate price increases in certain spots. It is important to keep in mind that price increases are not just like for like we are oftentimes providing clients with broader access broader usage. In addition to continually enhancing our products.
Alex Kramm: Which we capture through price increase and so we are as you know very focused on.
Alex Kramm: Capturing value and linking our price increases to the value that we're generating and the clients. We do look at the overall pricing environment and client health as well as an input here.
Alex Kramm: But.
Alex Kramm: The environment client health the value, we continue to add our important drivers to enable us to capture value from our clients. It is something that we will continue to monitor closely and calibrate based on the dynamics we're seeing.
Alex Kramm: But relative to competitors and we think we're very well positioned from an offering standpoint, and as you know we are continually trying to take a long term approach to pricing with our clients to be strong partners to them over time.
Alex Kramm: From a segment dimension I don't want to get into too much color on the pricing dynamics, specifically, but as you alluded to and as I mentioned, we think in many areas. We have a very strong value proposition based on the quality of our offering which is best in class based on the breadth.
Alex Kramm: Of coverage and depth of coverage that we have the interoperability of our tools and the value of the ecosystem to our clients.
Alex Kramm: Our ability to help them.
Alex Kramm: Raise money drive growth using our tools are all things that position us well to face off against competitors as you alluded to in places like ESG, we have seen.
Alex Kramm: Some competitive wins and we think we are well positioned there but across the organization. We think we are well position relative to competitors as well.
Speaker Change: Thank you. Our next question comes from Ashish <unk> with RBC. Your line is open.
ashish: Thanks for taking my question wanted to drill down further on.
Speaker Change: And to your comment on improving pipeline and a constructive environment. I was just wondering if you could also comment on how the sales cycles are trending if you've seen.
Speaker Change: Any sharpening their towards obviously been elongated last year and on the innovation front you talked about.
Speaker Change: Custom indices, but if you could just drill down further on the trends that youre seeing on the index for tanks.
Speaker Change: Sure so.
Speaker Change: As I alluded to elevated market AUM levels are constructive confidence.
Speaker Change: They're translating through to in many places higher revenue for asset managers, and that's constructive to budgets and buying behavior.
Speaker Change: I'd say the dynamics are very nuanced by geography by clients by segment.
Speaker Change: Although those things do work through to sales ultimately and in terms of the sales cycles.
Speaker Change: We see some improvement there, but in many areas that continues to be wrong.
Speaker Change: As I alluded to earlier the dynamics are slightly different between the U S and Europe.
Speaker Change: But overall, we are seeing constructive trends in general and in the U S. In particular.
Speaker Change: We are seeing.
Speaker Change: As you alluded to.
Speaker Change: Mentum across other client segments, as well and so areas like hedge funds areas like wealth managers asset owners. These are all areas, where we've we've grown at solid growth rates and delivered solid growth rates in the current quarter and so the dynamics can be slightly different in those areas.
Speaker Change: I'd say, it's something that continues to evolve and I think we are capitalizing on many of the innovations that we're generating.
Speaker Change: As I alluded to when you asked about on the custom index side.
Speaker Change: Within that custom index subscription line the growth in custom indexes was mid teens.
Speaker Change: We continue to see very strong progress on the custom index front on the ABF side as well obviously you can see your visibility into what's going on in ETF flows which were quite strong in the quarter.
But if you even look beyond <unk>.
Speaker Change: <unk> flows into non ETF passive.
Speaker Change: <unk> seen very strong traction in non market cap weighted.
Speaker Change: <unk>.
Speaker Change: So these are rough figures, but in non ETF.
Speaker Change: AUM, we saw close to 35% growth.
Speaker Change: In AUM linked to our non market cap indexes.
Speaker Change: Including ESG and climate in factor indexes that compares to 20%.
Speaker Change: Non ETF category overall, and 50% roughly within custom indexes and so it's an important important trend for us in institutional passive obviously something thats helpful. In indirect indexing. We also see it done the structured products front with banks and within over the counter derivatives and so this is an area where.
Speaker Change: We are harnessing our.
Speaker Change: Our position with clients the standards that we have out there together with our capabilities on the index side and across the organization. We are uniquely positioned to be a leader on the custom index front, we're excited for it.
Speaker Change: Thank you. Our next question comes from Alexander Hess with J P. Morgan Your line is open.
Alexander Hess: Yes, hi, everybody.
Alexander Hess: To come back to the sort of the overall discussion of the trends in the subscription business as it stands organics.
Alexander Hess: Organic subscription run rate growth of 8% in the quarter couple of quarters of growth.
Alexander Hess: So about that.
Alexander Hess: Level.
Alexander Hess: Obviously, it hasnt been an 8% grower in its history, how do we get that cycle too.
Alexander Hess: Turn when would that how are you thinking about when that inflection might occur can you help us dimension, how closely are to potential re inflection reacceleration.
Sure Alex as you know we've.
Alexander Hess: We've gone through a.
Alexander Hess: A dynamic environment over the last couple of years and so there have been a wide range of competing dynamics across client segments across product areas for us that have all fit into that overall subscription run rate growth.
Alexander Hess: Sitting here looking forward, we continue to be.
Alexander Hess: And excited about the opportunities in front of us in the short term here theres going to continue to be some noise as I alluded to as we see pressures working through the system. We see some of the lingering impacts of the outflows in asset management over the last couple of years, we see lingering impacts from some elevated client events that have worked through the <unk>.
Alexander Hess: System, but you can see in areas like index.
Alexander Hess: We've seen a bit of momentum, obviously, a strong quarter from recurring sales and recurring net new standpoint.
Alexander Hess: And as I alluded to we are seeing traction in some of those key growth areas. Both from a client segment standpoint, as well as from a content areas standpoint.
Alexander Hess: And so that combined with some of the big secular opportunities, which we think we're well positioned to capitalize on in areas like wealth management.
Alexander Hess: We're relatively small today, but growing at a healthy growth rate and have a differentiated value proposition there as well as in areas like.
Alexander Hess: Tcs.
Alexander Hess: And the private asset space in general and then areas like fixed income and on the analytics side.
Alexander Hess: We think we've got attractive opportunities in front of us that will help us fuel.
Alexander Hess: Higher growth in future.
Speaker Change: Thank you. Our next question comes from low end Lau with Oppenheimer. Your line is open.
Good morning, and thank you for taking my question.
Speaker Change: Could you please talk a little bit more about your analytics segment.
Speaker Change: It looks like the run rate came down a little bit from last quarter and I think you talk a little bit about the timing of subscription revenue in your prepared remarks, but could you. Please expand a little bit more on the July for all that and how do you see the outlook going forward. Thanks.
Speaker Change: Sure Yes.
Speaker Change: It's a good question. So let me actually take it in two parts one I'll focus on the subscription run rate growth, which if you exclude FX was relatively consistent from the prior quarter. So I think it was around seven 1% organic subscription run rate growth in the third quarter $6 seven.
Speaker Change: In the fourth quarter. So both around 7%. The stated number was lower so it did look like it dropped but that was driven by a meaningful FX impact on the run rate, which.
Speaker Change: FX impacts adjust the run rate immediately so the appreciation in the U S dollar relative to areas like the euro and the pound translate through to a drop in the.
Speaker Change: Stated run rate, but as we alluded to the organic run rate has been relatively steady.
Speaker Change: We continue to see good momentum in areas like as we called out fixed income well our insights offering continues to open new doors for us and create upsell opportunities. It is helping to improve the customer experience brings scale to our clients and help them be more efficient.
Speaker Change: Within their large and complex workflows and adding additional value. So we continue to be excited about the momentum we're seeing in these keeps key growth areas in analytics.
Speaker Change: Always there can be some lumpiness quarter to quarter and so you saw we did see a bit of a pickup in cancels.
Speaker Change: That's to be expected as some of the noise that we've seen across the company.
Speaker Change: The other segment.
Speaker Change: Hitting analytics, but overall, we continue to be encouraged by the momentum we've seen in analytics on the revenue front, if you alluded to.
Speaker Change: The revenue as we mentioned in prior quarters.
Speaker Change: <unk> was impacted by the timing of implementation implementation related revenues. So the revenue was slightly below our run rate growth. The revenue growth was slightly below our run rate growth in the quarter.
Speaker Change: And this was as a result of lower contribution from implementation related to revenue releases, which is in line with what we expected in the comparable periods a year ago, we did have.
Speaker Change: A large amount of implementation related revenue so when we compare to those periods that growth rate looks a bit lower we do expect in the very short term here that this will continue so we expect.
Speaker Change: The revenue growth to be slightly below the run rate growth.
Speaker Change: The next quarter.
Speaker Change: But I would focus on the run rate growth more generally as a sense as to the direction and trajectory of this segment and as I mentioned, we continue to be excited there.
Speaker Change: Thank you. Our next question comes from Kelsey issue with Autonomous your line is open.
Speaker Change: Hi, good morning, Thanks for taking my question.
Speaker Change: Asset quarter.
Speaker Change: Declines in powertrain pension right.
Speaker Change: Yeah.
Speaker Change: I was wondering if you can provide a bit more colors on that I know you touched on that in the prepared remarks.
Speaker Change: And for private capital solution.
Speaker Change: At the time of the acquisition you talked about accelerating revenue growth from mid to high teens to 20%. So I was just wondering what's the timeline to achieve that target.
Speaker Change: Sure sure Hi, Kelsey so.
Speaker Change: Yes.
Speaker Change: Maybe I'll look at Tcf.
Speaker Change: Separately from real assets, because the dynamics are different as you know and this is the first quarter when we are reporting.
Speaker Change: The two together.
Speaker Change: Here.
Speaker Change: And so it's worth dissecting them individually.
Speaker Change: On PCF as you alluded to we did see a slight slowdown in subscription run rate, but pretty steady growth at 15%.
Speaker Change: The sales and cancels can be a bit volatile and we did see a bit of softness in the recurring net new in the quarter. Although we are having good traction in landing new logos to the segment.
We're seeing good traction with both asset owners and managers and asset owners, where MSCI is I think bringing some opportunities with large organizations that are MSCI clients.
Speaker Change: Fully fully leveraging the burgess offering or the Pts offering.
Speaker Change: We've continued to see good momentum in EMEA and APAC and so overall, we are still encouraged about the opportunity in Pts and we see.
Speaker Change: Real opportunities there being like the index side as you know we released in the middle of last year.
Speaker Change: The wide range of benchmarks and indexes for the private asset space, we have been aggressively driving awareness around an adoption of those those indexes and those are things that over time will also lead into additional sales of not only our indexes, but our content more broadly and there's a whole host of.
Speaker Change: New innovations and content sets that we're releasing around private credit.
Speaker Change: Around additional data insights both of which were leveraging AI to unlock.
Speaker Change: That are creating robust opportunities for us, but as I said it will be sales.
Speaker Change: Sales and cancels can be a little bit volatile quarter to quarter.
Speaker Change: But overall, we continue to be encouraged about the opportunity within Tcs.
In real assets.
Speaker Change: We did see the same overall dynamics that we've been seeing for the last several quarters. So we were impacted by one large down sale with a client that has been feeling real pressure.
Speaker Change: Also felt some pressure as I alluded to in the prepared remarks with brokers and agents.
Speaker Change: That's that's translating through to softness in our data and property Intel products, we are still seeing decent momentum in areas like our index, Intel which gives market insights.
And we have started to see some very early signs of improved traction.
Speaker Change: In in capital coming back into the space sourcing institutional money start to come back and in the Americas and Europe, and we hope that that is.
Speaker Change: An early sign of transaction activity coming through at some point in the future and it pick up back in activity, but in the fourth quarter. We really saw just a continuation of the trends that we've seen with probably an outsized contribution of cancels and what we would expect to see just from a couple of big items.
Speaker Change: Thank you. Our next question comes from Scott <unk> with Wolfe Research. Your line is open.
Speaker Change: Hey, good morning, guys. Thank you for taking my question I wanted to ask on the wealth segment.
Speaker Change: The growth has been pretty strong there and just wanted to see if you can kind of share what sort of your strategic roadmap and priorities are for that opportunity as we move throughout 2025 potentially try to maintain that elevated run rate growth.
Speaker Change: <unk>.
Speaker Change: So I think there is clearly an opportunity across all of our product lines.
Speaker Change: And in some of those are in an existing use cases.
Speaker Change: Across indexes and benchmarking.
Speaker Change: And.
Speaker Change: In other of our standard data used in the investment process, but we think we have much more significant opportunities to to help with the scaling of wealth portfolios.
Speaker Change: And the balancing act of central control of risk of portfolio construction, with giving advisers insight and actionable tools.
Speaker Change: And we think there's an enormous opportunity there.
Speaker Change: And in fact, even just as Henri Henri and I across the Atlantic in opposite directions. So I spent the last few weeks in New York.
Speaker Change: And a lot of my meetings with large wealth players and there is a significant need.
Speaker Change: For improvement and I would say both the analytical.
Speaker Change: Environment for the the CIO office or the product control groups at the center.
Speaker Change: And for better tools for advisers and Theres a lot of legacy systems.
Speaker Change: That stand in the place of that so I think we have we have a generalized opportunity across all of our content, including.
Speaker Change: Theres enormous discussion.
Speaker Change: And now action of moving more private asset products into the wealth segment.
Speaker Change: Daily news about that that we all read.
Speaker Change: And.
Speaker Change: We think we have an enormous opportunity there also to incorporate all of the private asset analytics.
Speaker Change: That we have into the wealth segment, where often.
Speaker Change: Some of the largest wealth managers are also clearly significant Lps on behalf.
Speaker Change: Their clients as well as in some of them, even originating enacting as GPS in private markets.
Speaker Change: So both of those create opportunities for us. So I think the key point that I would say is we.
Speaker Change: <unk>.
Speaker Change: We've got very high levels of engagement I've been in some of those meetings ourselves myself and I think what we will continue to see we have attractive growth rates, but I think as we as some of our solutions start to get traction.
Speaker Change: I hope and believe and this is our plan that we get a virtuous circle, where our credibility.
Speaker Change: Becomes earned as a serious player in the wealth segment, which I think we have all the capabilities to deliver.
Speaker Change: And I'm quite confident that.
Speaker Change: As we look forward into 2025.
Speaker Change: This will be a really really important year for us and well and we will see both.
Speaker Change: More significant deals with larger players and we will establish ourselves with a great deal more credibility as a provider of solutions data and content to wealth managers.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Thank you. Our next question comes from Craig Huber with Huber Research Partners. Your line is open.
Speaker Change: Great. Thank you can you guys focus on AI here for a few minutes.
Speaker Change: Be curious if you could give us some concrete examples about where you are particularly excited where AI can help you on the cost efficiency side and maybe also give us some give us some examples of major beneficiaries on the revenue side were enhanced products.
Speaker Change: And long term do you think that will help you on the pricing side of things you are charged more for AI enhanced products. Thank you.
Speaker Change: Sure. So let me take those in order.
Speaker Change: So I would say that from the efficiency point of view very much leading the charge is in our data operations area, where we are able to.
Speaker Change: <unk> already seen the ability to significantly reduce the cost of data acquisition, but I think also importantly, because we still are growing business with a lot of demand to scale up.
Our ability to get new categories of data.
Speaker Change: With with significantly less cost than we would've had in the past.
Speaker Change: So if you look at if you look at certain areas that is also been tied in so the product transformation and the efficiency story kind of go hand in hand so.
Speaker Change: At present for example, we've embarked on.
Speaker Change: On a scalable.
Speaker Change: Sort of mapping of private credit data.
Using AI.
Speaker Change: Which would simply have taken us.
First of all a lot more time, we would've hired that had to hire a lot more human.
Our speed to market.
Speaker Change: <unk>.
Speaker Change: We are measurably lowering the cost of data acquisition and extremely importantly, we're going to be able to build more attractive products and analytics on the back of that much more quickly.
Speaker Change: Clearly in generally in software engineering, there are efficiencies to be had with AI.
Speaker Change: And and we built.
Speaker Change: Quite a number of those also into our 2025 budgets.
Speaker Change: So from a from a product point of view.
Speaker Change: I think that we've got some very interesting green shoots.
Speaker Change: And that that 2025 will be an important transformative year on the product side. So we've mentioned the AI analytics insights, which we will continue to deepen and is an important area for us.
Speaker Change: We will.
Speaker Change: We've currently brought to market for index.
Speaker Change: Sematic driver discovery, using AI, which we've had which is currently in beta we've had some very positive feedback from some very major clients and we'll be rolling that out shortly and additional versions of index inside.
Speaker Change: We will be coming out later in the year.
Speaker Change: Again, thats a confluence of.
Speaker Change: Data acquisition at scale and product innovation.
Speaker Change: In notably in the climate area both.
Speaker Change: Both the ESG in terms of the the.
Speaker Change: The scaling of data gathering and the quality control in areas like controversies et cetera, but one example would be our geospatial.
Speaker Change: Data asset intelligence on which we work with Google and which has a significant AI component. So I think that both in terms of our efficiencies.
Speaker Change: And in terms of.
Speaker Change: New product development 2025 will be an extremely important year for <unk>.
Speaker Change: For AI delivery I think the I think the jury is still out whether it creates kind of a raw pricing power.
Speaker Change: I don't think I don't think it had been.
Speaker Change: Inherently a pricing power topic, I think it's more an efficiency topic and it's a creation of exciting and interesting new products.
Speaker Change: Got it.
Speaker Change: It's not entirely clear if it to the strict sense of pricing power thing, but I think it will be a massive innovation engine and that should help us drive sales and growth.
Speaker Change: Thank you. Our next question comes from Faiza <unk> with Deutsche Bank. Your line is open.
Faiza: Yes, hi, thank you.
So.
Speaker Change: Alluded to some bifurcation in terms of geography around what you're seeing from your clients in the U S versus outside the U S. So I'm wondering if you can put a finer point on that share some color.
Faiza: Where.
Faiza: Where you think things might go from here.
Faiza: Australia versus U S and then some.
Faiza: Firstly, if I can just sneak in a housekeeping question you talked about some conversions of one time data into subscription. So curious if not I know thats normal.
Faiza: Course of business, but curious if that was that an outsized level.
Faiza: Okay.
Speaker Change: Sure sure Faiza so.
Speaker Change: On the geographic differences here.
Speaker Change: As I alluded to earlier, it's very nuanced and dynamic picture. So it does vary client segment to client segment, even firm to firm here.
Speaker Change: But we have seen.
Speaker Change: The pressure on asset managers.
Speaker Change: Linger a little bit more.
Speaker Change: In Europe and that is something that I think is we're seeing both on the sales and cancel side.
Speaker Change: I think in general.
Speaker Change: They followed the same trends that overall.
Speaker Change: Overall asset managers do it there can just be lags there and so in the Americas.
Speaker Change: We were coming out of a period, where we saw significant outflows for several years from many asset managers.
Speaker Change: I think with the market levels up.
Speaker Change: Sustained momentum a bit of confidence we are starting to see that change.
Speaker Change: And hopefully we start to see the same thing over time in EMEA, Although we expect to see some lingering impacts continuing at least in the near term and as you know there are some large mergers potential mergers out there that could happen as well, which we are keeping them keeping our eyes on.
Speaker Change: But overall, we do think the environment is encouraging.
Speaker Change: I think it's just going to impact different segments in different regions at different paces here.
Speaker Change: Yes.
Speaker Change: Sorry, if I could on the second question.
Speaker Change: You had that clarification was on on what topic.
Speaker Change: Well I think we lost her.
Speaker Change: I'll follow up with you Faiza.
Speaker Change: Housekeeping item.
Speaker Change: Free float data sales.
Speaker Change: Yes apologies for that so.
Speaker Change: Yes, we do have.
Speaker Change: From time to time, it's part of our business oftentimes, we will sell our free float data package on a onetime basis.
Speaker Change: And clients when they get a handle on it and how to use it and the value. They can derive from it will convert to a.
Speaker Change: Ongoing subscription and so that is something that we saw in the quarter I wouldn't I wouldn't call. It out as a significant item in the quarter, it's something we have seen in prior quarters as well.
Speaker Change: Part of our business model and part of our trend here and I think there are a number.
Speaker Change: Data offerings that we have where we can.
Speaker Change: Get in the door with clients sampling the data and then turn it into an ongoing relationship. So I wouldn't call out any outsized impact in the quarter from that.
Speaker Change: Thank you. Our next question comes from George Tong with Goldman Sachs. Your line is open.
George Tong: Alright, thanks, good morning.
George Tong: Wanted to go back to new subscription sales and cancellation trends you had expected cancellation trends.
George Tong: Normalize and improve in the fourth quarter on a year over year basis can you elaborate on areas that may have surprised to the upside or downside in the quarter with respect to cancels and also new sales and when you expect net new recurring subscription sales to inflect the positive growth.
George Tong: Yes, sure I mean, I touched on a lot of its earlier and don't want to be too specific about trajectories or inflection inflection points other than.
George Tong: Just to highlight that we are seeing encouraging signs and you do see as I alluded to earlier.
George Tong: A pretty strong quarter on the index subscription front, both on net sales and cancels side.
George Tong: I wouldn't say there were any dramatic surprises I think cancels in Q4 came in generally in line with what we had mentioned and what we were expecting we do see lingering impacts.
Elevated level of client events and budget constraints.
George Tong: You can see there were elevated cancels in areas like real assets, which we've been seeing.
George Tong: Unexpected you saw retention rate was pretty solid in ESG are pretty consistent in ESG and climate to just above 93% that stabilized over the prior quarter, but there are certain areas in ESG and climate, where we have seen.
George Tong: Some elevated cancels like with corporates and corporate advisors.
George Tong: And analytics just by its nature tends to be lumpy and we oftentimes do have elevated elevated cancels in the fourth quarter, just given client renewals.
George Tong: And so I would say the dynamics, we saw were pretty much in line with what we expected.
George Tong: And we continue to be encouraged by the outlook, but expect some lingering noise and impacts and probably some elevated degree of cancels from the factors that we've seen.
Speaker Change: Thank you. Our next question comes from Russell Quilt with Redburn Atlantic Your line is open.
Russell Quilt: Yes, hi, good morning.
Russell Quilt: Just wanted to ask a question on the partnership with Moody's in the ESG segment.
Speaker Change: What youre doing with the new data capabilities, you talked about on the private side. Given you now have access to their <unk> database is this already something where youre seeing an impact on sales growth and products opportunities. I also wanted to do is there an opportunity to increase the scope of this partnership.
Speaker Change: Yes, so the <unk>.
Speaker Change: The announcement that we made.
Speaker Change: I think last summer.
Speaker Change: <unk> had three components to it.
Speaker Change: The first component was.
Speaker Change: That.
Speaker Change: Moody's analytics.
Speaker Change: The Moody's Investor services, the rating agencies, but Moody's analytics.
Speaker Change: B <unk>.
Speaker Change: Subscribing to a lot of our ESG data to be able to package it with their products and sell it to their clients, which are a lot of them are banks and insurance companies.
Speaker Change: So that was one part of the announcement and we are we have already started doing a lot of that the second part of the announcement was that we would enter into a into a contract with Moody's that we will use.
Speaker Change: Eurobond day data.
Speaker Change: For My Bureau, van Dijk data base to create ESG scores.
Speaker Change: On a large number of entities.
Speaker Change: That are sitting in that database I think is probably going to be over $100 million entities with ESG scores.
Speaker Change: That can be again combined with their products.
Speaker Change: Alex.
Speaker Change: The third part of the announcement was an intention the first tool where actual.
Speaker Change: Extra leads right the third part of the announcement with any intention.
Speaker Change: The work together.
Speaker Change: Private credit.
Speaker Change: And of course as you know Moody's is very strong in.
Speaker Change: Credit analysis and probabilities of default.
Speaker Change: On the light and we're very strong obviously in a lot of databases and a lot of risk analysis and performance analysis.
Speaker Change: Individual instrument in private credit and in funds. So the idea here is to do.
Speaker Change: To explore the possibility joined.
Speaker Change: Joining forces.
Speaker Change: With those two complementary capabilities.
Speaker Change: Obviously, we're still talking we're still working through things and if there is some kind of agreement of that they will do it will be in due course.
Speaker Change: So those those.
Speaker Change: So I think that.
Speaker Change: His early days with respect to the synergistic revenues associated with this.
Speaker Change: <unk> from their side on our side.
Speaker Change: And obviously, we'll report more as we see.
Speaker Change: An upswing and a lot of these.
Speaker Change: Thank you.
Speaker Change: Next question comes from Jason Haas with Wells Fargo. Your line is open.
Speaker Change: Hey, this is <unk> on for Jason Hock, Thanks for squeezing this in here.
Speaker Change: I just wanted to ask on the expense guidance for 2024, we saw expenses come in towards the low end of the range. Despite the run in AUM.
Speaker Change: Last call you guys might have signaled that we would be gravitating towards the high end of the range.
Speaker Change: Versus where we ended up coming in so I'm just curious as to why that was the case. This year is there may be some offsetting savings or something to do with what youre seeing in the environment.
Speaker Change: Is keeping you from pressing on the gas a little bit more and then just wondering if you could talk to us about the puts and takes on the expense guidance range for 2025 understand the assumption on.
Speaker Change: AUM levels gradually increasing throughout the year, which is anything outside of the AUM that can take you guys either to the high end our guidance range in 2025.
Speaker Change: Sure sure. So yes, just on Q4, there can be a number of items that can swing the ultimate expenses up or down things like the ultimate bonus accrual.
Speaker Change: Can cause expenses to fluctuate a bit things like severance levels and other non comp expenses can cause things to swing a bit.
Speaker Change: Hugh.
Speaker Change: Did pick up on inner messages earlier that.
We are expecting.
Speaker Change: <unk> expenses in the first quarter.
Speaker Change: And so there can be some timing related items, and then as I alluded to as the main drivers compensation and benefits related expenses that is causing that sequential.
Speaker Change: Expenses to pick up from Q4 to Q1 here.
Speaker Change: In terms of the overall guidance for the year.
Speaker Change: As you heard our guidance is based on the assumption that markets gradually increase throughout the year.
Speaker Change: The overall approach has not changed where we are really continually trying to maximize the level of investment to drive topline growth, while also driving attractive profitability and cash flow growth on a consistent basis I'd say embedded in the expense guidance. It is our plan to continue to invest in those key secular growth area.
Speaker Change: Like rules based investing.
Speaker Change: Private markets front office analytics.
Speaker Change: Our.
Speaker Change: Architecture, AI, driven enhancements to our infrastructure, but also our solutions.
Speaker Change: And so we are we do have an ambitious agenda to continue to invest based on <unk>.
Speaker Change: Included in that that expense guidance, but we are also continuing to be focused on driving efficiencies.
Speaker Change: And importantly, we will continually calibrate the pace of spend through the year based on a whole host of factors as we always do looking at not only market levels, but business performance opportunities that we see out there.
Speaker Change: Factors. So we will keep you posted but no no change in our general approach to expenses.
Speaker Change: Thank you.
Speaker Change: Next question comes from David Mode Maiden with Evercore ISI. Your line is open.
Speaker Change: Hey, Thanks for squeezing me in I had a question a follow up on pricing. So you guys mentioned that pricing was lower in our the price increase you guys took was lower in 2024 versus 2023 and that you had moderated.
Speaker Change: Some of the price increases in 2024 does that mean that the price you guys captured in 2024 was below sort of the long term average price increase that you guys have taken historically.
Speaker Change: And I guess should we think about that being the same higher lower or is when you think about 2025.
Speaker Change: I would not.
Speaker Change: Yes, it would not.
Speaker Change: I don't want to provide too much detail on the exact level and relative to historical levels just to be clear.
Speaker Change: The contribution to recurring sales.
Speaker Change: Price increases in 2024 was slightly less than it was in 2023 and as you know in 2023.
Speaker Change: Was elevated given the overall pricing environment.
Speaker Change: Our approach continues to remain the same I think there are areas, where we do have pricing power importantly, there are areas, where we continue to enhance our products and the value, we're delivering to clients and prices. The way that we can unlock that although we are very thoughtful and measured and want to be constructive to our clients and so those.
Speaker Change: Dynamics do you differ across the company, but there are opportunities.
Speaker Change: For sure and there are areas, where we will be measured.
Speaker Change: Thank you.
Speaker Change: Next question comes from Gregory Simpson with BNP Paribas. Your line is open.
Speaker Change: Hi, there actively managed etfs to the fastest growing part of the industry last year.
Speaker Change: Wanted to ask if the ETF vehicle eventually started to replace the mutual fund do you think that changes the opportunity sets or MSCI with active managers do you think it's positive.
Speaker Change: Negative thank you.
Speaker Change: No.
Speaker Change: Currently a positive so we're extremely focused on this and bid in a number of meetings myself on this topic.
Speaker Change: In the end of last year and the beginning of this year. So in essence in simplified form.
Speaker Change: Is it is a continuation of active strategies, becoming more rules based.
Speaker Change: So and in turn that plays extremely well to MSCI strengths.
Speaker Change: As an index provider and as it provider portfolio analytics and analysis.
Speaker Change: So there are there is a continuum of death of things, which are much closer to index.
Speaker Change: Where we can we can help asset managers take active strategies and make them more rules based and if you'd like index by them.
Speaker Change: And then there is.
Speaker Change: Or closer to the index ended the spectrum and but there are also a number of ways that we can help manage actually quite active strategy is through.
Through helping clients build those portfolios.
Speaker Change: Through reflecting them.
Speaker Change: The risk management side of the portfolio construction side of things.
Speaker Change: So this is a huge focus for us right now.
Speaker Change: Going back to the regional thing on both sides of the Atlantic May have been somewhat more discussion.
Speaker Change: In the U S or maybe I would say more visibility, but it's definitely going to be a global trend and overall definitely a positive development for us that we're very focused on and where we are developing both more capabilities and new ways of pricing and adding value to our clients.
Speaker Change: Thank you.
Speaker Change: Our last question is from Alex <unk> of Jpmorgan. Your line is open.
Speaker Change: Yes, Hi, there was a lot of discussion on today's call about product innovation and product Rollouts in your products, but maybe.
Speaker Change: The organic side.
Speaker Change: How do you assess the M&A opportunity now in front of you.
Speaker Change: Obviously.
Speaker Change: <unk> industries, there's a lot of talk about a pick up in M&A just wanted to see what youre seeing within your business specifically.
Alex Kramm: Thanks for that Alex.
Speaker Change: No.
Speaker Change: Yes.
Speaker Change: As majority of our focus at MSCI.
Speaker Change: In inorganic growth.
Speaker Change: We have enormous opportunities.
Speaker Change: In new use cases, new client bases.
Speaker Change: New product development.
Speaker Change: And importantly in putting together closer.
Speaker Change: More synergistic may.
Speaker Change: Many of the data sets many of the models and maybe many of the analytics that we already have in house.
Speaker Change: From.
Speaker Change: From climate on ESG data to private assets to connecting them with index to create portfolio that client create can create portfolios to to look at risk analysis.
Speaker Change: And so on and so forth. So that's been our primary the primary mode of course, we look at almost everything that is out there for sale.
Speaker Change: And.
Speaker Change: And we analyze it we are investigating it.
Speaker Change: But we feel that.
Speaker Change: In order for us to deploy capital in those inorganic opportunities they have to have a high rate of return.
Speaker Change: Comparable to some of the returns that we get for organic investments.
Speaker Change: Of course, there are certain times in which the only way you can get into an area is to throw an acquisition like we do with burgers and real capital analytics and comp.
Speaker Change: Companies like that and it's one of the smaller sized fabric.
Speaker Change: <unk>, Barry et cetera, but our predominant focus is organic growth with that with opportunistic bolt ons in the event. They calm in the strategic areas and they are priced at the right level for us.
Speaker Change: Thank you that concludes the question and answer session I'd like to turn the call back over to Henry Fernandez for closing remarks.
Henry Fernandez: So thank you again for joining us today.
Henry Fernandez: As you can see <unk> delivered strong financial results and 24.
Henry Fernandez: And we're very focused on.
Henry Fernandez: On improving our operating metrics, especially in the subscription business with a backbone of improving client budgets and improving.
Henry Fernandez: And then improvement environment all of that demonstrates the resilience of our business model and the value that we provide to clients as bear.
Speaker Change: As Barry indicated and I indicated.
Speaker Change: Clients interested Adam is the ice starts from the top so we've been more than 50% of our time at the top level of our company.
Speaker Change: Talking to clients understanding their needs understanding how we can solve them.
Speaker Change: So we're continuing to expand our gross key client segments.
Speaker Change: We're driving innovation, we're working with in partnership with clients to to create efficiencies and scalability for their business.
Speaker Change: As we mentioned we are thoughtful and constructive on price increases we have enormous price empowered enormous but that cannot be misused. It has to be consistent with creating value for our clients. Because we are a long term compound or and as a long term compound or we want to be.
Speaker Change: Long term partner to our clients. So all of that gives us incredible strength and leadership.
Speaker Change: In the areas of data models and technology and all of our capabilities. So we look forward to keeping you abreast of all our activities and development and we thank you again for the time that you spent with us today.
Speaker Change: Thank you for your participation you may now disconnect everyone have a great day.
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: Okay.