MSCI Inc. Q4 FY2025 earnings call

• Financial Performance: Achieved organic revenue growth over 10%, adjusted EBITDA growth over 13%, and adjusted EPS growth almost 12% for Q4 and almost 14% for full year; 11 consecutive years of double-digit adjusted EPS growth.
• Share Repurchases: Bought back nearly $958 million of shares in Q4 and ~$3.3 billion over the last 2 years.
• Operating Metrics: Net new subscription sales $65M, nonrecurring sales $31M, total net sales over $96M; retention rate over 94% full year; total run rate over $3.3B, growing 13%; ABF run rate $852M, growing 26%; recurring subscription run rate over $2.4B, growing over 9%.
• AI Adoption: Extensive use of AI in operations (e.g., controversies, data capture in private markets) and product development (e.g., custom index creation automation).
• Geographic Trends: Strong momentum in EMEA and APAC; EMEA run rate in Index including subscription and ABF higher than Americas; significant inflows into ETF linked to MSCI indices in Europe.
• Product Innovations: Index flywheel helping clients form thematic baskets; new basket builder solution for banks; enhancements in Analytics, Sustainability, Private Capital Solutions, Real Assets.

Index: Fourth quarter had best-ever new recurring subscription sales; total ETF and non-ETF AUM linked to MSCI indices reached ~$7 trillion, driven by record inflows into clients' ETF products linked to MSCI indices, especially in Europe. Analytics: Subscription run rate growth over 8%, second highest Q4 ever for recurring sales, driven by enterprise risk and performance tools, risk models. Private Capital Solutions: Recurring sales growth 86%, supported by new products and client relationships. Sustainability and Climate: New subscription sales lower than last year, softness in Americas; expanding solutions across client segments and asset classes. Active Asset Managers: Recurring net new sales growth 13%, subscription run rate growth over 7%; MSCI supported clients' launch of over 50 new fee-generating active ETF products in 2025. Hedge Funds: 13% subscription run rate growth, 26% recurring net new sales growth; example of a top global hedge fund using new extended custom index module. Wealth Managers: Nearly 11% subscription run rate growth, 15% recurring sales growth; closed 2 major CIO office deals in Asia for multi-asset class factor models. Asset Owners: Close to 11% subscription run rate growth, strongest recurring net new sales growth in 5 years, driven by private capital solutions and analytics. Banks and Broker-Dealers: Subscription run rate growth over 9%, secured landmark deal for new basket builder solution with a prominent bank in the Americas.

• 2026 Guidance: Expense outlook reflects operating leverage; CapEx includes build-out of new London office and software capitalization; full year tax rate guidance 18%-20% (Q1) due to stock-based compensation headwind; free cash flow guidance impacted by ~$100M higher cash taxes in 2026; capital position strong with ending cash balance over $515M, revolver paid down to $175M.
• Long-Term Targets: Aim for low double-digit revenue growth (excluding ABF), adjusted EBITDA expense growth high single digit to low double digit, adjusted EBITDA growth low to mid-teens; ABF expected to be outsized double-digit grower.

• Regulatory Uncertainty: Impact on Sustainability and Climate segment, particularly in the U.S. due to political undertones.
• Market Volatility: Effect on client behavior and investment decisions, potentially impacting sales and retention rates.
• Competition: Threat from other data and analytics providers, affecting market share and pricing.
• Tokenization Impact: Uncertainty around how tokenization trends will impact business, though potential for significant impact exists.

Q: Toni Kaplan on AI, which launches are most meaningful, client interest, impact on growth rate.

A: Henry Fernandez on AI applications in operations and products, 120-140 projects, AI insights in Analytics, custom index creation automation.

Q: Alex Kramm on international flows, new sales, pricing.

A: Henry Fernandez on devaluation of dollar, flows into ex-U.S. MSCI indices, uptick in EMEA activity, APAC momentum.

Q: Brendan Popson on private assets, what drove growth, early innings.

A: Andrew Wiechmann on PCS growth from total plan offering, transparency, EMEA traction, real asset green shoots.

Q: Ashish Sabadra on free cash flow puts and takes.

A: Andrew Wiechmann on cash taxes, interest expense, CapEx for London office, software investments.

Q: Alexander Hess on pipeline strength, cyclical uplift, megatrends, new product innovation.

A: Andrew Wiechmann on constructive buying behavior, market momentum, pipeline from innovations and client segments.

Q: Kelsey Zhu on ESG recovery in Europe, Sustainability recovery.

A: Henry Fernandez on ESG recovery in Europe, U.S. softness, APAC efforts, pivoting to other risks.

Q: Craig Huber on Analytics costs, Sustainability costs.

A: Andrew Wiechmann on Analytics cost lumpiness, infrastructure investments, Sustainability cost reallocation.

Q: Owen Lau on tokenization impact on private assets.

A: Andrew Wiechmann on tokenization potential as catalyst, need for evaluated prices, credit risk tools.

Q: Scott Wurtzel on active asset manager outlook.

A: Henry Fernandez on active managers' move to ETF wrappers, product development, supplier consolidation.

Q: Faiza Alwy on AI efficiencies, profitability.

A: Henry Fernandez on AI reducing expenses, reallocating to innovation, accelerating product introduction.

Q: Anna Wu on cancellations, sustained reduction.

A: Andrew Wiechmann on client dynamics improvement, retention rates in segments, enhancements driving engagement.

Q: David Motemaden on EMEA asset manager cancellations.

A: Andrew Wiechmann on EMEA retention rate dynamics, slight improvement.

Q: Jason Haas on index recurring revenue drivers.

A: Andrew Wiechmann on personalization, customization, hedge funds, broker-dealers, asset managers/owners usage.

Q: Alex Kramm on pricing power.

A: Andrew Wiechmann on stable price contribution, enhancements enabling price increases via AI