MSCI Inc.

Good day, ladies and gentlemen, and welcome to the MSCI fourth quarter 2020 earnings conference call. At this time, all participants are in listen-only mode. Later, we will conduct a question and answer session where we will limit participants to one question and one follow-up. We will have further instructions for you at that time. As a reminder, this conference call is being recorded. I would now like to turn the call over to Sally Schwartz, Head of Investor Relations and treasurer, you may begin.

Thank you, operator. Good day and welcome to the MSCI fourth quarter 2020 earnings conference call. Earlier this morning, we issued a press release announcing our results for the fourth quarter 2020. This press release, along with an earnings presentation, we will reference on this call, as well as a brief quarterly update are available on our website, msci.com, under the Investor Relations tab. Let me remind you that this call contains forward-looking statements. You are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date on which they are made and are governed by the language on the second slide of today's presentation. For a discussion of additional risks and uncertainties, please 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 of U.S. GAAP, we will also refer to non-GAAP measures, including, but not limited to, organic operating revenue growth rates, adjusted EBITDA, adjusted EBITDA expenses, adjusted EPS, and free cash flow. We believe our non-GAAP measures facilitate meaningful period-to-period comparisons and provide insight into our core operating performance. You'll find a reconciliation to the equivalent GAAP measures in the earnings materials and an explanation of why we deem this information to be meaningful, as well as how management uses these measures in the appendix of the earnings presentation. We will also discuss run rates. which estimates at a particular point in time the annualized value of the recurring revenues under our client agreements for the next 12 months, subject to a variety of adjustments and exclusions that we detail in our SEC filing. As a result of those adjustments and exclusions, the actual amount of recurring revenues we will realize over the following 12 months will differ from run rates. We therefore caution you not to place undue reliance on run rate to estimate or forecast recurring revenues. Additionally, we will discuss organic run rate growth figures, which exclude the impact of changes in foreign currency and the impact of any acquisitions or divestitures. On the call today are Henry Fernandez, our Chairman and CEO, Bear Pettit, our President and COO, and Andy Wishman, our Chief Financial Officer. Finally, I would like to point out that members of the media may be on the call this morning in a listen-only mode. With that, let me now turn the call over to Henry Fernandez. Henry?

Thank you, Sally. Hello, everyone, and thank you for joining us today. MSCI continues to deliver on its mission of helping investors build better portfolios for a better world. Our ultimate goal is to provide an index for every portfolio and tools for every investment decision worldwide. Especially in 2020, we continue to deliver mission-critical tools to enable clients to navigate uncertainty and respond to industry transformations resulting from the unprecedented environment. Our relentless focus on execution, our disciplined approach to investments, and our strategic capital allocation underpin our ability to deliver value to our shareholders. MSCI's financial performance in the fourth quarter strongly validates this approach. We achieved total revenue growth of over 9%, and total subscription run rate growth of nearly 11%. Adjusted EBITDA growth of over 16%. And adjusted EPS growth of over 17%. In 2020, we achieved free cash flow of $760 million, up 16% from 2019. We feel this was outstanding financial performance in the context of a very tumultuous year in so many fronts. Our success and our momentum has been driven by us being able to identify and capitalize on major transformations taking place in the investment industry. And our ability to support our clients with critical insights thought leadership, and actionable solutions. I will provide a few selected comments along the dimensions of clients, products, and capabilities, and there Anandi will then give you some more details. In the client category, we have been successful in expanding our footprint with both new and and existing clients. In our strategic focus on wealth management, we are capitalizing on the focus of financial advisors on direct indexing, portfolio construction, risk and performance management, and ESG and climate. We're also seeing early traction with corporate clients. and we now have over 80 corporate clients for our ESG and climate offerings. We continue to expand our business with our established base of asset managers and asset owners. In 2020, our asset management clients launched more than 150 new ETFs linked to MSCI indices. over half of which were linked to MSCI ESG and climate indices. Regionally, our integrated client approach has led to high levels of engagement and activity. In Europe, regulatory requirements for our clients help drive record quarterly recurring subscription sales during the fourth quarter. In Asia, New subscription sales in the fourth quarter improved 62% sequentially after a very slow process during the year given the early pandemic disruptions in the region. In the category of products and services, our product innovation is driven by our relentless focus on the needs of investors. One area of significant investor focus is the global transition to a low-carbon economy and its impact on portfolios. Our climate value and risk products have seen excellent traction and are already helping investors measure and manage climate risk, as well as identifying investment opportunities. Fixed income is another area where we continue to enrich our offerings. We are leveraging our strong brand in ESG, climate, factors, and risk and performance analytics to benefit our credit investor clients. Lastly, we continue to build critical capabilities, especially in technology and data. This includes accelerating the transition of our suite of products to cloud through our partnership with Microsoft. We're also excited about enabling clients further with more seamless access to MSCI data across all product lines. You will be hearing more about this in future quarters, especially in ESG and climate. Another key ingredient of our strategy is allocating capital in a systematic and disciplined manner. This approach has been highly effective for us, including in a year like 2020. We activated our downturn playbook in the second quarter as the pandemic took hold and market volatility and economic uncertainty rose dramatically. Then in the third quarter, we transitioned efficiently to our upturn playbook as our business remained resilient our financials were protected, and we saw expansion opportunities. It is also important to note that in 2020, our adaptable and entrepreneurial culture played a critical role in our success, especially given the major disruptions in our working environment and that of our clients. Following closely on the incredible momentum we have built in 2020, MSCI has never been better positioned to take advantage of accelerating secular and disruptive investment trends, which will allow us to deliver sustained and significant top line growth. We remain deeply committed to investing responsibly in triple crown opportunities to leverage and build on the established scale of our business. Our intention is to continue to drive long-term value for our shareholders. We're especially energized to talk further with you about our plans at our upcoming Investor Day on February 24th. Before I turn the call over to Bear and Andy, I am pleased to announce that we will be reporting ESG and climate as a standalone reporting segment, starting in the first quarter of this year. Our all other segment will consist of our private assets, you know, the private assets product line, including our real estate business. This incremental transparency will enhance awareness and understanding of these important growth areas for our company. you will have more insight into the drivers of segment growth, the actions that we are taking, and the investments that we're making. Finally, we believe it's critical that we meaningfully integrate corporate responsibility principles into our own strategy and operations. We continue to enhance our processes and disclosures, including, most recently, publishing our 2020 TCFD report, and SASB aligned disclosures on data security, workforce diversity and engagement, and professional integrity. I look forward to providing you with further updates as we continue to make progress in these very important areas. With that, I'll now turn over the call over to Bear.