MSCI Inc.

Good day, ladies and gentlemen, and welcome to the MSCI First Quarter 2026 Earnings Conference Call. As a reminder, this call is being recorded. At this time, all participants are in listen-only mode. Later, we will conduct a question and answer session, where participants are requested to ask one question at a time, then add themselves back to the queue for any additional questions. We will have further instructions for you later on. I would like to now turn the call over to Jeremy Uhlen, head of investor relations and treasurer. You may begin, sir.

Thank you, operator. Good day and welcome to the MSCI first quarter 2026 earnings conference call. Earlier this morning, we issued a press release announcing our results for the first quarter 2026. This press release, along with an earnings presentation, are available on our website, msci.com, under the investor relations tab. Let me remind you that this call contains forward-looking statements, which are governed by the language on the second slide of the presentation. You are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date on which they are made, are based on current expectations and current economic conditions, and are subject to risks and uncertainties that may cause actual results to differ materially from the results anticipated in these forward-looking statements. For discussion of additional risks and uncertainties, please see the risk factors and forward-looking statements disclaimer in our most recent form 10-K in our other SEC filings. During today's call, in addition to results presented on the basis of U.S. GAAP, we also referred 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. Important information regarding our use of operating metrics, such as run rate and retention rate, are available in the audience presentation. On the call today are Henry Fernandez, our chairman and CEO, and Andy Wishman, our chief financial officer. With that, let me now turn the call over to Henry Fernandez.

Henry? Thank you, Jeremy. Good day, everyone, and thank you for joining us. MSCI's first quarter results affirm our foundational mission-critical role in global investing, while also showcasing the highly diversified nature of our business. Our key financial metrics included organic revenue growth of over 13%, adjusted EPS growth of nearly 14%, adjusted EBITDA growth of almost 19%. We remain long-term believers in the MSCI franchise, and we are committed to maximizing value creation through the disciplined deployment of our excess capital. Between January 1st and yesterday, we repurchased more than $464 million of MSCI shares at an average price of about $556 per share. In addition, we recently completed three very exciting and highly strategic small bolt-on acquisitions in key growth areas. Our Q1 operating metrics included total run rate growth of nearly 13% fueled by a record asset base fee run rate of $872 million, growing 25%. And recurring subscription run rate growth of 9% fueled by net new recurring subscription sales of $39.6 million, growing 52%. It was our best first quarter for net new recurring subscription sales since 2022. The rotation rate across all MSCI product lines was 95.4%. Our increased business momentum is starting to reflect the relentless adoption of agentic AI in everything we do, ranging from how we capture data and build models and platforms, to how we launch and market our products, to how our people work every day. This momentum costs across geographic regions, product lines, client segments, and asset classes. We did well in all regions in Q1, with Asia Pacific a particular standout. In fact, we posted our strongest ever Q1 on record for recurring sales in APAC at $15 million. up 46% from a year earlier. Across product lines, MSCI has built our momentum through sales of both newer and more traditional solutions. In index, for example, subscription run rate growth returned to double digits in Q1 at 10.7%. and we achieved a record level of Q1 recurring sales at nearly $33 million. These results were driven mainly by our market cap indices, but we also deliver impressive growth in custom indices. With more than $21 trillion in AUM benchmark to MSCI indices, The ecosystem around our products is scaling to new heights. This includes $7.4 trillion of indexed equity AUM benchmark to MSCI indices, comprised of $2.4 trillion in ETF products and $4.9 trillion in non-ETF products. Q1 was our best quarter since 2023 for traded volumes and run rate from listed futures and options contracts linked to MSCI indices. This further reinforces the power of our ecosystem and our shared success with MSCI exchange partners including our new licensing agreement for options on MSCI indices listed on the New York Stock Exchange. AI is helping us capitalize on these trends by offering more flexibility, faster customization, and greater interoperability. For example, our new index AI insights connector makes it easier for clients to answer questions about our index data and methodologies using their preferred AI large language models, such as CLOL and ChatGPT or on MSCI One. Hundreds of clients have used Index AI Insights since our launch in late February. MSCI's recent acquisition of Compass Financial Technologies, a Swiss-based provider of index calculation services, extends our customization capabilities into additional asset classes such as commodities, digital assets, and equity derivatives. Meanwhile, in private capital solutions, we deliver recurrent net new sales growth of nearly 44% in Q1 while driving adoption of both newer and established solutions. Some of our reimagined and innovative new tools include daily private valuation indices and benchmarks for private equity and private credit. MSCI's AI capabilities in private assets have increased dramatically over the past year, including a new connector on cloud linked to our private capital intel fund benchmarking. We're helping allocators streamline the due diligence and evaluation of private fund managers at scale with our private asset due diligence platform. Our recent acquisition of Vantager, a platform built entirely on AI, accelerates our ability to help clients perform better due diligence when investing in private markets. Likewise, our acquisition of PM Insights earlier this month will help us deliver secondary market pricing, liquidity, and reference data, which will support more robust portfolio construction and the development of indices and analytics solutions. Turning back to MSCI's Q1 performance, in analytics, we drove recurrent net new subscription sales of $8.2 million at nearly 55%. reflecting large wins and renewals of our equity offerings and enterprise risk tools. These wins underscore the continued innovation of our factor capabilities, such as our next gen models and the release of basket building solutions for the market making and trading community. They also demonstrate our advancements across total portfolio solutions, including our own parallel private asset coverage as seen in our new private credit risk models. Among client segments, MSCI has an especially strong quarter with hedge funds and traders. Among hedge funds specifically, We posted subscription run rate growth of 17%, along with our highest ever level of Q1 recurring net new subscription sales at roughly $12 million. These results were driven mainly by index and analytics. These wins included a seven-figure index rebalancing deal with a top global hedge fund. In analytics, hedge funds are also licensing our crowded trace data sets to support their alpha generation. Among banks and broker dealers, we deliver subscription run rate growth of almost 11%, along with our best ever Q1 for recurrent net new sales at nearly $11 million. Shifting to asset owners, MSCI achieved subscription run rate growth of nearly 10%, driven by private capital solutions and analytics. As more pension funds diversified into private markets, we see growing demand for our total portfolio solutions and private asset tools, including our tools for benchmarking and for transparency. Moving on to asset managers, we posted subscription run rate growth of over 6%, along with nearly 11% recurring net new sales growth, including notably a strong growth in analytics and a retention rate of close to 96%. MSCI is executing on key growth opportunities for the asset management segment including advanced data sets, private assets, total portfolio solutions, and active ETFs. Looking at our Q1 performance as a whole, we once again demonstrated the benefits of our all-weather franchise. Our client segment and product diversification, recurring revenue financial model, and the growing liquidity and scale of the investment ecosystem linked to our indices and our IP. Our ongoing technology and AI-driven transformation will strengthen these advantages. To help us lead that transformation, Dinesh Gupta joined MSCI last month as our new chief data officer and global head of operations. Dinesh came to us from Goldman Sachs, where he spent nearly three decades and held leadership roles spanning multiple business lines, including asset and wealth management. Dinesh served as global head of data engineering at Goldman, and he also led the organization responsible for building agentic AI platforms and machine learning capabilities across the whole firm. He's ideally suited to help MSCI strengthen our comprehensive data strategy, reinforce our technology and AI-first mindset, and accelerate our transformation.