MSCI Inc.

Good day, ladies and gentlemen, and welcome to the MSCI Fourth Quarter 2021 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 Ms. G. Sousa of Investor Relations. You may begin.

Thank you, Elizabeth. Good day and welcome to the MSCI fourth quarter 2021 earnings conference call. Earlier this morning, we issued a press release announcing our results for the fourth 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 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'll 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 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 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. And with that, let me now turn the call over to Henry Fernandez. Henry?

Thanks, Jisoo. Hello, everyone, and thank you for joining us today. MSCI delivered exceptional results in 2021, especially in the fourth quarter, demonstrating the strengths of our ambitious strategy, key long-term investments, and consistent execution. The results also reflect unprecedented demand for our solutions and enormous growth opportunities for the years ahead. To list just a few highlights, in the fourth quarter, MSCI achieved organic revenue growth of nearly 20 percent and adjusted earnings per share growth of over 28 percent. For the full year, we achieved organic subscription run rate growth of over 13 percent, recurring subscription sales of more than $255 million, and close to 95% retention. In addition, we generated free cash flow of more than $883 million, which represented a 16% growth rate. Our strong financial results reaffirm our strategic progress. MSCI continues to expand its role as a change agent for the global investment industry while providing the common language and the tools investors use for indexation, risk management, factors, ESG, climate, and other key investment categories. Across all of our business lines, MSCI is making a big impact and gaining further recognition. We saw numerous examples of this during the fourth quarter. In October, Hong Kong exchanges launched a futures contract on an MSCI China-Asia index, the first offshore sector balance China-Asia future supported and approved by Chinese regulators. It proved to be the most successful launch ever of a futures contract based on an MSCI index. In November, we affirmed our status as a leading provider of climate solutions for investors. During the COP26 Finance Day, the UN Capital Development Fund even launched a new ETF linked to the MSCI ACWI Climate Pathway Select Index. Before and after COP26, we rolled out several new climate tools, including an analytical tool that provides carbon emissions data for more than 15,000 private companies and nearly 4,000 active private equity, and debt funds. This is in addition to the carbon emission data we provide on nearly 10,000 public companies. As the global race to net zero accelerates, we see enormous opportunities to provide data, tools, and solutions to support investors and companies decarbonization initiatives, and the resulting asset repricing and capital reallocation. Our ongoing and incremental investments will help us maximize these opportunities and drive climate progress across the whole of the capital markets industry. Climate is just one example of the historic changes reshaping the global economy. At this time, MSCI's products and services have never been more important to investors and business leaders around the world. Across most client segments and regions, we currently see a strong operating environment. Among our clients, we see more confidence than at any point since the 2008 financial crisis. Our intense client centricity has enabled us to add wallet share organically and emerge as a go-to partner for clients seeking to differentiate themselves. That includes asset managers and asset owners. MSCI's largest installed base of clients. Last year, our subscription run rate among those two client segments increased by 11%, excluding acquisitions. We're also rapidly expanding client segments and end markets, such as wealth managers, hedge funds, broker dealers, insurance companies, and corporate. We generated close to $78 million of incremental subscription run rate from those groups in 2021 for a growth rate of nearly 20%. Within our products and services, we continue to address the enormous market for indices across asset classes, exposures, and investment thesis. In indexes, MSCI remains a go-to provider for tools to support asset allocation, portfolio construction, performance benchmarking, indexation, and customized outcomes. As we modernize the client experience and capitalize on growth opportunities, MSCI continues investing in and executing on our data transformation strategy. This strategy was a direct result of the feedback we received from many of you more than a year ago and before the last Investor Day. To put this data transformation in context, MSCI has traditionally used third-party data to create indices, risk models, and other products. We will continue to do that in the future while creating new pathways for clients to access and interact with our products. But we will also source and collect much more data from alternate and direct sources. on areas ranging from private equity and fixed income to real estate and climate in order to generate more meaningful and richer insights for our clients. In effect, MSCI has always been a data processing factory. Now we are rapidly becoming a data building machine. The value of this transformation cannot be overstated. In a world that increasingly runs on data, MSCI's new capabilities will dramatically enhance our competitive advantages and boost our long-term growth potential. Our new data strategy is closely connected to our technology transformation. We recently launched MSCI Developer Community, a cohesive platform for clients to access our APIs and our code. This platform will help developers and clients customize and improve their offerings and scale various use cases, such as integrating front and back office applications. We're also pleased with our accelerated migration to the cloud. Last year, we successfully exited one of our on-premise data centers, and we are on track for another exit this year. Looking at the larger picture, MSCI's all-weather franchise and mission-critical solutions position us favorably in every type of operating environment. That includes periods of sector, factor, geographic, and ESG rotation due to our diversified product line, periods of elevated inflation due to our pricing power, and periods of market volatility due to our franchise and risk management and index derivative around the world, and of course, our approach to repurchase of shares. Today, with a strong momentum in a constructive environment, MSCI continues making investments that we are confident will deliver tangible near-term benefits. These investments are fueling robust business growth and helping us modernize the client experience. We believe that they will also help us build on this historic achievement of 2021 and reach even greater heights in 2022. With that, let me pass the floor over to Bear.