MSCI Inc.

Good day, ladies and gentlemen, and welcome to the MSCI Third Quarter 2021 Earnings Conference Call. At this time, all participants are in a 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 third quarter 2021 earnings conference call. Earlier this morning, we issued a press release announcing our results for the third quarter 2021. 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. Your caution not to place undue reliance on forward-looking statements, which speak only as of the day 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 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 gap 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 rate, 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 filings. 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 rate. 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 this morning are Henry Fernandez, our Chairman and CEO, Bear Pettit, our President and COO, and Annie 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. And thank you also for everything you have done for MSCI for the last two years. Hello, everyone, and thank you for joining us today. Our organic revenue growth of more than 20% and excellent performance more broadly this quarter is further evidence of the accelerating demand we are seeing across MSCI. It also validates the investment that we have already executed on, including those we identified at Investor Day earlier this year. In my 25 years leading MSCI, I cannot remember a time when we have seen so much demand for our products and solutions and had so many attractive opportunities. As the investment industry continues to transform, our clients are turning to MSCI to create standards and offer solutions across market cap and non-market cap indices in both equity and fixed income, risk management products and services, factor models, ESG ratings and data, climate data and analytics, and insights and tools for managing private assets. Let me just give you a few examples where demand for our solutions is off the charts. In climate, we see interest exploding across our client base for data, tools, models, and solutions within every asset class and across every aspect of the investment process. Ultimately, we want MSCI's climate offerings to be the common language that capital markets participants use to discuss climate. We want to help market participants navigate the largest scale reallocation of capital in history as industries, and global economies begin to decarbonize. You will therefore see us to continue to invest heavily in our climate offering. You would also see us leading key strategic initiatives in the world, which are focused on impacting the global transition to a net zero economy. We recently hosted global asset owners asset managers, and policymakers at the MSCI Global Investing Conference, our flagship client event. This year, we focused the discussion in that conference on climate in the lead up to MSCI's involvement at the UN COP26 conference in Glasgow next week. In September, MSCI joined Mark Carney, the UN representative for climate, in playing a pivotal role in establishing the net zero financial services providers alliance. Collectively, the alliance members will give asset owners, asset managers, banks, insurance companies, companies, and other financial institutions the information they need to pursue decarbonization strategies and help the world reach net zero by 2050. MSCI is well positioned to be a key driver of the critical global dialogue regarding climate change. We already have long-term deep strategic relationships with global asset owners, asset managers, and other key market participants, and we have a well-established and growing leadership within ESG. To that end, I'd like to talk about ESG separately from climate. We continue to invest in comprehensive securities coverage for MSCI's ESG ratings. This includes the entire MSCI AQUI universe for equities, consisting, of course, of developed and emerging markets included in the MSCI equity indexes, as well as equity derivatives. It also spans across fixed income, especially corporate bonds, but also including munis, structured products, and sovereign bonds. In addition to ESG rating, we're also enhancing our ESG models and data architecture. to provide clients with more granular data. In addition to carbon emissions and governance metrics, we hear strong interest in having more data on social factors. Perhaps not surprisingly, given ongoing social justice issues and broader appreciation for the impact these considerations can have in creating or destroying shareholder value. In ESG, we're also investing in our sales and client service organization in order to serve a variety of needs across every part of the investment process, including from corporates and their advisors. Demand in ESG is truly on fire, and you will see us continue to invest heavily in this area. Another area where we see relentless demand for our offering is in custom indices. We highlighted this area during our February investor day, and interest from our clients has been accelerating even since then. Investors are increasingly looking for custom-built indices where they can choose their own universe, weightings, screening, hedging, and other characteristics. This demand is likely to explode in the area of direct indexing. MSCI has already made a number of investments to this end, and we will increase our base of investments to meet this accelerating demand for custom indices. Another area of renewed focus on high demand is our factors franchise. which this quarter topped $300 million in run rate, up more than 11% year over year. We continue to innovate in content, enhance our front office workflows, and expand our distribution through partners and newer software applications. I will now provide a quick note on the wider operating environment for us. Our clients are engaged. They're feeling optimistic despite some of the concerns we all hear about inflation, rising rates, potential economic slowdown as a result of COVID, and even political and geopolitical issues. We see that optimism continuing and translated into higher demand for our products and services. We believe that we have never had a more attractive set of opportunities across MSCI as we see today. With that, I'll turn over the call to Bear Pettit, my partner in this business for more than 21 years. Bear?