Good day, ladies and gentlemen, and welcome to the MSCI Fourth Quarter 2024 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 turn the call over to Jeremy Ulan, Head of Investor Relations and Treasurer. You may begin.

Thank you. Good day, and welcome to the MSCI's fourth quarter 2024 earnings conference call. Earlier this morning, we issued a press release announcing our results for the fourth quarter 2024. This press release, along with an earnings presentation and 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, which are governed by the language on the second slide of today's 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 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. You will 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 earnings presentation. On the call today are Henry Fernandez, our Chairman and CEO; Baer Pettit, our President and COO; and Andy Wiechmann, our Chief Financial Officer. Lastly, we wanted to remind our analysts to ask one question at a time during the Q&A portion of our call. We do encourage you to ask more questions by adding yourselves back to the queue. 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. In 2024, MSCI delivered a strong financial metrics that once again demonstrated our scale and leadership in servicing the global investment ecosystem. For the full year, we achieved organic revenue growth of almost 10%, adjusted earnings per share growth of 12.4%, and free cash flow growth of 21%. We also repurchased $810 million worth of MSCI shares for the full year. During the fourth quarter and through yesterday, we repurchased over $425 million worth of MSCI shares in alignment with our shareholder centric capital allocation policy. In the fourth quarter, our operating metrics included organic subscription run rate growth of 8% excluding FX headwinds and 7% on a reported basis, asset based fee run rate growth of 15% and a retention rate of 93%. Our ABF run rate growth was driven by higher average AUM aided by the highest quarterly cash inflows into equity ETFs linked to MSCI indices since the end of 2021 at more than US$48 billion. Among client segments, we also had a strong quarter with hedge funds and wealth managers as we grew our firmwide subscription run rate growth by 15% and 12% respectively excluding FX. While active asset managers continue to face cyclical pressures, we posted 5% growth in subscription run rate excluding FX and a 94% retention rate with this segment. In my remarks today I will focus on three areas in particular that demonstrate the success of our strategy: index, wealth, and fixed income. In index products, the ecosystem linked to MSCI indices remains central to global investing and in Q4 we saw a number of milestones. Last month, for example, one of our large asset manager clients launched a new ETF linked to an MSCI climate index with a record…

Thank you, Henry. Greetings everyone. Given our focus on client segment growth, I'd like to use this opportunity to review our progress in the fourth quarter which highlighted the broad reach of our solutions and the underlying strength of our all-weather franchise. I will start with wealth managers where MSCI’s recent investments have helped us build significant momentum across product lines. In Q4 we achieved firm wide subscription run rate growth of 12% among wealth managers excluding FX, bringing our total subscription run rate with that segment to $116 million. We also delivered 14% subscription run rate growth among wealth managers and analytics, excluding FX, which now totals over $25 million. In addition, we closed a large enterprise deal for the MSCI Wealth Manager, formerly known as Fabric. MSCI Wealth Manager has positioned us to support a wide range of use cases including proposal generation, model portfolio construction and home office account management and monitoring. These use cases extend to ESG and Climate. In Q4 we achieved 28% climate run rate growth among wealth managers which totals $7 million. We drove 67% ESG and Climate recurring sales growth among that segment which was $3 million. Turning to hedge funds, we achieved 15% subscription run rate growth excluding FX, including our best ever Q4 recurring sales driven by 46% recurring sales growth among hedge funds index. We completed large deals with several, multi strategy hedge funds, including conversions of a one-time Float Data sales into recurring subscription deals. These conversions showcase the value of our product, as well as the growing liquidity of MSCI Index Linked products. Moving on to banks and broker dealers, we delivered 7% subscription run rate growth excluding FX across product lines with particular strength from index where new recurring sales for the segment was over $7…

Thanks, Baer, and hi, everyone. I continue to be really encouraged by the resilience of our results and the momentum we're seeing across product areas. Index subscription run rate growth with asset managers and asset owners was almost 7% and 12%, respectively. These client segments comprise nearly 70% of our index subscription run rate. Among hedge funds and broker-dealers, we drove 22% and 8% index subscription run rate growth, respectively, in the fourth quarter. Custom indexes and special packages grew 8% versus last year. Within the category, our custom index subscription run rate growth was mid-teens, while we had a lower contribution from special packages. An overall retention rate and index was 95%, with a retention rate of almost 96% with asset managers. Within asset-based fees, global cash inflows into equity ETFs linked to MSCI indexes was $48 billion in the quarter, with particular strength in ETFs linked to developed markets outside the U.S., ESG and climate and factors. Q4 cash inflows into ETF products linked to MSCI ESG and climate indexes reached nearly $12 billion, our highest quarterly cash inflows since the first quarter of 2022. These inflows accounted for nearly 70% of global cash inflows into ESG and climate equity ETF products in the fourth quarter. AUM and ETF and non-ETF products linked to MSCI climate equity indexes grew by more than 50% from last year, driven by strong inflows into ETFs and a few key mandate wins from asset owners. Meanwhile, inflows into ETF products linked to MSCI factor indexes were almost $6 billion, with solid inflows into quality, value growth and momentum factors. These MSCI factor index-linked ETF inflows were the highest quarterly flows since the second quarter of 2021. In Analytics, subscription run rate growth was 7%, excluding the impact of foreign currency and was…

Thank you. [Operator Instructions] Our first question comes from the line of Toni Kaplan with Morgan Stanley. Your line is open.

Thanks so much. Henry, I wanted to ask a question about how you're thinking about ESG ex-climate, more on the subscription side than on the ABF side. Just how are you thinking about the potential growth rate for the business long-term? Are we in sort of a cyclical challenging period and it accelerates? Or is this sort of the new normal? And what are the key factors that would dictate sort of what happens from here?

Thank you, Toni. I've spent the last four weeks traveling through various cities in Europe. Visited over 50 clients in four weeks in seven cities and some five countries or so and so I've had a chance to discuss obviously this very critical topic for many of these clients, whether it's managers or wealth managers, banks, insurance companies and the like. And I have not seen any let up in the commitment of all these European financial institutions to sustainability. Obviously, as I prepare to see each one of these clients, I read a lot of their material, the way they position, the way they look at their strategy, the way they describe themselves. And without any – almost any exception, they are positioning themselves to live in a sustainable world. So with respect to Europe, the issue becomes that there is a new set of regulations that people have been adjusting to. They’re rebranding their products and therefore, there’s been a little bit of a pause in launching a lot of new products. But it’d be very hard to believe that European investors, whether retail or institutional investors will move away from their ingrained habits of investing according to sustainability principles. With respect to our product line, the product line needs to evolve from simply ratings and report on ratings to the underlying data, the underlying information, the materiality of the signals that ESG presents for their investment process, et cetera. So therefore, the demand is there. The – obviously, the hiatus and cyclical downturn is still here, but I don’t see any. But we also have to evolve and transform our product line to meet that demand. And part of that demand is compliance with the very heavy disclosures and regulatory requirements of European regulators of a lot…

Thank you. Our next question comes from Manav Patnaik with Barclays. Your line is open.

Thank you. Andy, I just wanted to follow-up on your comment on the exciting year ahead and I was hoping you could just contextualize that a bit with the environment. So this time last year you talked about elevated cancels and then lower budgets following kind of a week market period for your large clients. So from where you stand today, like how do you look at the cancels and what are you hearing on the new budget environment, please?

Sure. Yes. So in general, as we’ve talked about rising markets are supportive for clients, both on the sales and cancels front. The momentum we’ve seen in equity markets and overall confidence in the sustainability of market levels is constructive to buying behaviors in certain areas, notably in the U.S., and so we have seen some encouraging signs. On top of that, my excitement is coming from all the innovations we continue to make. And so we are getting traction in key areas across custom indexes, solutions in front-office analytics, analytics insights, many of our private asset solutions and areas in climate. And so we continue to be very excited about the outlook there. Generally speaking, the environment is somewhat more constructive, and we are seeing a pickup in the pipeline in spots. There are some spots where we still see pressure and it will take some time to fully rebound. We do see some lingering pressures on active managers, particularly in Europe. But overall, we’re seeing a shift in the dynamic. On the point of cancels, as you know from last year, we did have a concentration of cancels related to some big client events. We don’t expect the same level of cancels in the first quarter here as a year ago. As I mentioned, rising markets should be somewhat supportive for clients, and we will still see some lumpiness in lingering noise. But overall, we’re seeing encouraging signs and areas and the market environment is constructive across many areas. And as you know, and as I’ve mentioned before, you shouldn’t focus too much on any one quarter.

Thank you. Our next question comes from Alex Kramm with UBS. Your line is open.

Yes. Hey, good morning, everyone. Just maybe to stay on that same topic, can you maybe talk about how pricing conversations and impact should be this year? Obviously, in the last couple of years, you’ve been a little bit softer there with your competitors. Continue to be pretty aggressive. And as you said, the environment should be better. So maybe you can talk about pricing a little bit more and also maybe on a segment basis because it does seem like in ESG, you have some more opportunities to as this market has matured clearly. Thanks.

Sure, sure. So Alex, as you alluded to across the company in 2024, the contribution from price increases to sales was slightly less than the contribution in 2023. As you alluded to, we did moderate price increases in certain spots. It is important to keep in mind that price increases are not just like-for-like. We are oftentimes providing clients with broader access, broader usage in addition to continually enhancing our products, which we capture through price increase. And so we are, as you know, very focused on capturing value and linking our price increases to the value that we’re generating the clients. We do look at the overall pricing environment and client health as well as an input here. But the environment, client health, the value we continue to add are important drivers to enable us to capture value from our clients. It’s something that we will continue to monitor closely and calibrate based on the dynamics we’re seeing. But relative to competitors, we think we’re very well-positioned from an offering standpoint. And as you know, we are continually trying to take a long-term approach to pricing with our clients to be strong partners to them over time. From a segment dimension, I don’t want to get into too much color on pricing dynamics specifically. But as you alluded to, and as I mentioned, we think in many areas, we have a very strong value proposition based on the quality of our offering, which is best-in-class based on the breadth of coverage and depth of coverage that we have. The interoperability of our tools and the value of the ecosystem to our clients and our ability to help them raise money drive growth using our tools are all things that position us well to face off against competitors, as you alluded to, in places like ESG, we have seen some competitive wins and we think we're well positioned there. But across the organization, we think we are well positioned relative to competitors as well.

Thank you. Our next question comes from Ashish Sabadra with RBC. Your line is open.

Thanks for taking my question. Wanted to drill down further on Andy, your comment on improving pipeline and a constructive environment. I was just wondering if you could also comment on how the sales cycles are trending, if you've seen any shortening there. Those obviously were elongated last year. And on the innovation front, you talked about custom indices. But if you could just drill down further on the trends that you're seeing on the index front. Thanks.

Sure. So as I alluded to, elevated markets and AUM levels are constructive to get confidence. They're translating through to in many places higher revenue for asset managers and that's constructive to budgets and buying behavior. I'd say the dynamics are very nuanced by geography, by client, by segment, although those things do work through to sales ultimately. And in terms of the sales cycles, there – we see some improvement there, but in many areas it continues to be long. As I alluded to earlier, the dynamics are slightly different between the U.S. and Europe, but overall, we are seeing constructive trends in general and in the U.S. in particular, we are seeing, as you alluded to, momentum across other client segments as well. And so areas like hedge funds, areas like wealth managers, asset owners, these are all areas where we've grown at solid growth rates and delivered solid growth rates in the current quarter. And so the dynamics can be slightly different in those areas. I'd say it's something that continues to evolve and I think we are capitalizing on many of the innovations that we are generating. As I alluded to and you asked about on the custom index side, within that custom index subscription line, the growth in custom indexes was mid-teens. We continue to see very strong progress on the custom index front on the ABF side as well. Obviously, you can see you have visibility into what's going on in ETF flows which were quite strong in the quarter. But if you even look beyond ETF flows into non-ETF passive, we've seen very strong traction in non-market cap weighted products. So these are rough figures. But in non-ETF AUM, we saw close to 35% growth in AUM linked to our non-market cap indexes including ESG and climate and factor indexes. That compares to 20% in the non-ETF category overall and 50% roughly within custom indexes. And so it's an important trend for us in institutional passive, obviously something that's helpful in direct indexing. We also see it on the structured products front with banks and within over the counter derivatives. And so this is an area where harnessing our position with clients, the standards that we have out there, together with our capabilities on the index side and across the organization, we are uniquely positioned be a leader on the custom index front, we're excited for it.

Thank you. Our next question comes from Alexander Hess with JPMorgan. Your line is open.

Yes. Hi everybody. Just to go back to the sort of the overall discussion of the trends in the subscription business as it stands, organic subscription run rate growth of 8% in the quarter, a couple quarters of growth of about that level. Obviously MSCI hasn't been an 8% grower in its history. How do we get that cycle to turn? When would that – how are you thinking about when that inflection might occur? Can you help us just dimension how close we are to potential reinflection reacceleration?

Sure, Alex. As you know, we've gone through a dynamic environment over the last couple years and so there have been a wide range of competing dynamics across client segments, across product areas for us that have all fed into that overall subscription run rate growth. Sitting here, looking forward, we continue to be, as I mentioned, excited about the opportunities in front of us. In the short term here, there's going to continue to be some noise as I alluded to, as we see pressures working through the system. We see some of the lingering impacts of the outflows in asset management over the last couple of years. We see the lingering impacts from some elevated client events that have worked through the system. But you can see in areas like index, we've seen a bit of momentum, obviously, a strong quarter from recurring sales and recurring net new standpoint. And as I alluded to, we are seeing traction in some of those key growth areas, both from a client segment standpoint as well as from a content area standpoint. And so that combined with some of the big secular opportunities, which we think we're well positioned to capitalize on in areas like wealth management were relatively small today, but growing at a healthy growth rate and have a differentiated value proposition there as well as in areas like PCS and the private asset space in general. And then areas like fixed income and on the analytics side, we think we've got attractive opportunities in front of us that will help us fuel higher growth in the future.

Thank you. Our next question comes from Owen Lau with Oppenheimer. Your line is open.

Good morning, and thank you for taking my question. Could you please talk a little bit more about your Analytics segment? It looks like the run rate came down a little bit from last quarter. And I think you talked a little bit about the timing of subscription revenue in your prepared remarks. But could you please expand a little bit more on the driver of that? And how do you see the outlook going forward? Thanks.

Sure. Yes. Owen, it's a good question. So let me actually take it in two parts. One, I'll focus on the subscription run rate growth, which if you exclude FX, was relatively consistent from the prior quarter. So I think it was around 7.1% organic subscription run rate growth in the third quarter, 6.7% in the fourth quarter, so both around 7%. The stated number was lower, so it did look like it dropped, but that was driven by a meaningful FX impact on the run rate, which as you know, FX impacts adjust the run rate immediately. So the appreciation in the U.S. dollar relative to areas like the euro and the pound translate through to a drop in the stated run rate. But as we alluded to, the organic run rate has been relatively steady, and we continue to see good momentum in areas like, as we called out fixed income, wealth. Our insights offering continues to open new doors for us and create upsell opportunities. It’s helping to improve the customer experience, bring scale to our clients and help them be more efficient within their large and complex workflows and adding additional value. So we continue to be excited about the momentum we’re seeing in these key growth areas and analytics. As always there can be some lumpiness quarter-to-quarter and so you saw we did see a bit of a pickup in cancels. That’s to be expected as some of the noise that we’ve seen across the company and other segments is hitting analytics. But overall we continue to be encouraged by the momentum we’ve seen in analytics. On the revenue front. As you alluded to, the revenue as we mentioned in prior quarters was impacted by the timing of implementation related revenues. So the revenue was slightly below run rate growth. The revenue growth was slightly below run rate growth in the quarter and this was as a result of lower contribution from implementation related revenue releases, which is in line with what we expected. In the comparable periods a year ago, we did have a large amount of implementation related revenue. So when we compare to those periods the growth rate looks a bit lower. We do expect in the very short-term here that this will continue. So we expect the revenue growth to be slightly below the run rate growth in the next quarter. But I would focus on the run rate growth more generally as a sense does to the direction and trajectory of the segment. And as I mentioned we continue to be excited there.

Thank you. Our next question comes from Kelsey Zhu with Autonomous. Your line is open.

Hi, good morning. Thanks for taking my question. So in private assets this quarter I think we’ve seen declines in both retention rates and net new sales. Was wondering if you can provide a bit more colors on that? I know you touched on that in the prepared remarks. And for private capital solutions, I think at the time of the acquisition you talked about accelerating revenue growth from mid to high teens to 20%. So we’re just wondering what’s the timeline to achieve that target? Thanks.

Sure. Sure. Hi, Kelsey. So yes, maybe I’ll look at PCS separately from real assets because the dynamics are different, as you know. And this is the first quarter when we are reporting the two together here and so it’s worth dissecting them individually. On PCS as you alluded to, we did see a slight slowdown in subscription run rate but pretty steady growth at 15%. The sales and cancels can be a bit volatile and we did see a bit of softness in the recurring net new in the quarter, although we are having good traction in landing new logos to the segment. We’re seeing good traction with both asset owners and managers and asset owners where MSCI is I think bringing some opportunities with large organizations that are MSCI clients and not fully leveraging the Burgiss offering or the PCS offering. And we’ve continued to see good momentum in EMEA and APAC. And so overall we are still encouraged about the opportunity in PCS and we see real opportunities there. Things like the index side, as you know we released in the middle of last year a wide range of benchmarks and indexes for the private asset space. We have been aggressively driving awareness around an adoption of those indexes. And those are things that over time will also lead into additional sales of not only our indexes but our content more broadly. And there’s a whole host of new innovations and content sets that we’re releasing around private credit, around additional data insights, both of which we’re leveraging AI to unlock that are creating robust opportunities for us. But as I said it will be – sales and cancels can be a little bit volatile quarter-to-quarter. But overall we continue to be encouraged about the opportunity within PCS. In real assets, we did see the same overall dynamics that we’ve been seeing for the last several quarters. So we were impacted by one large down sale with a client that has been feeling real pressure. We also felt some pressure, as I alluded to in the prepared remarks with brokers and agents that’s translating through to softness in our data and Property Intel products. We are still seeing decent momentum in areas like our Index Intel, which gives market insights. And we have started to see some very early signs of improved traction in capital coming back into the space or seeing institutional money start to come back in in the Americas and Europe. And we hope that that is an early sign of transaction activity coming through at some point in the future and a pickup in activity. But in the fourth quarter we really saw just a continuation of the trends that we’ve seen with probably an outsized contribution of cancels and what we would expect to see just from a couple big items.

Thank you. Our next question comes from Scott Wurtzel with Wolfe Research. Your line is open.

Hey, good morning guys. Thank you for taking my question. Wanted to ask on the Wealth segment. The growth has been pretty strong there and just wanted to see if you can kind of share what sort of your strategic roadmap and priorities are for that opportunity as we move throughout 2025 to potentially try to maintain that elevated run rate growth? Thanks.

Sure. So I think there’s clearly an opportunity across all of our product lines and some of those are in existing use cases across indexes and benchmarking and in other of our standard data used in the investment process. But we think we have much more significant opportunities to help with the scaling of wealth portfolios and the balancing act of central control of risk of portfolio construction with giving advisors insight and actionable tools. And we think there's an enormous opportunity there. And in fact, even just as Henry – Henry and I crossed the Atlantic in opposite directions. So I spent the last few weeks in New York. And a lot of my meetings were with large wealth players. And there is a significant need for improvement in, and I would say, both the analytical environment for the CIO office or the product control groups at the center, and for better tools for advisers. And there's a lot of legacy systems that stand in the place of that. So, I think we have a generalized opportunity across all of our content, including there's enormous amount of discussion and now action of moving more private asset products into the wealth segment. And there's daily news about that, that we all read. And we think we have an enormous opportunity there also to incorporate all of the private asset analytics that we had into the wealth segment, where often the – some of the largest wealth managers are also clearly significant LPs on behalf of their clients as well as some of them even originating enacting as GPs in private markets. So both of those create opportunities for us. So I think the key point that I would say is, we've got very high levels of engagement. I've been in some of those meetings myself. And I think what we'll continue to see, we have attractive growth rates. But I think as we – as some of our solutions start to get traction I hope and believe, and this is our plan, that we get a virtuous circle where our credibility becomes earned as a serious player in the wealth segment, which I think we have all the capabilities to deliver. And I'm quite confident that as we look forward into 2025, that this will be a really, really important year for us in well, and we will see both more significant deals with larger players, and we will establish ourselves with a great deal more credibility as a provider of solutions, data and content to wealth managers.

Thank you. Our next question comes from Craig Huber with Huber Research Partners. Your line is open.

Great, thank you. Can you guys focus on AI here for a few minutes. I'd be curious if you can give us some concrete examples about where you're particularly excited where AI can help you on the cost efficiency side? Maybe also give us some examples of major beneficiaries on the revenue side, enhanced products. And long term, do you think that will help you on the pricing side? I think you will charge more for AI-enhanced products?

Sure. So let me take those in order. So I would say that from the efficiency point of view, very much leading the charge is in our data operations area where we are able to – we've already seen the ability to significantly reduce the cost of data acquisition. But I think also importantly, because we still are growing business with a lot of demand to scale up our ability to get new categories of data with significantly less cost than we would have had in the past. So if you look at certain areas, that is also been tied in, so the product transformation and the efficiency story kind of go hand in hand. So at present [ph], for example,, we've embarked on a scalable sort of mapping of private credit data using AI, which would simply have taken us, first of all, a lot more time. We would have hired – had to hire a lot more humans. So it's both a speed to market is, we're measurably lowering the cost of data acquisition. And extremely importantly, we're going to be able to build more attractive products and analytics on the back of that much more quickly. Clearly in – generally, in software engineering, there are efficiencies to be had with AI. And we've built quite a number of those also into our 2025 budgets. So from a product point of view, I think that we've got some very interesting green shoots and that 2025 will be an important transformative year on the product side. So we've mentioned the AI analytics insights, which we will continue to deepen and it is an important area for us. We will – we currently brought to market for index, some thematic driver discovery using AI, which we've had – which is…

Thank you. Our next question comes from Faiza Alwy with Deutsche Bank. Your line is open.

Yes, hi, thank you. So you’ve alluded to some bifurcation in terms of geography around what you’re seeing from your clients in the U.S. versus outside the U.S. So I’m wondering if you can put a finer point on that, share some color on where you think things might go from here internationally versus the U.S.? And then separately, if I can just sneak in a housekeeping question. You talked about some conversions of onetime data into subscription. So curious if that – I know that’s normal course of business, but curious if that was at an outsized level? Thank you.

Sure. Sure, Faiza. So on the geographic differences here, listen, as I alluded to earlier, it’s a very nuanced and dynamic picture. So it does vary client segment to client segment, even firm to firm here. But we have seen the pressure on asset managers linger a bit more in Europe. And that is something that I think is we’re seeing both on the sales and cancel side. I think in general, they follow the same trends that the overall asset managers do, there can just be lags there. And so in the Americas, as you know, we’re coming out of a period where we saw significant outflows for several years from many asset managers. I think with the market levels up, sustained momentum, a bit of confidence, we are starting to see that change. And hopefully, we start to see the same thing over time in EMEA, although we expect to see some lingering impacts continuing at least in the near term. And as you know, there are some large mergers, potential mergers out there that could happen as well, which we are keeping our eyes on. But overall we do think the environment is encouraging. I think it’s just going to impact different segments in different regions at different paces here. Sorry, Faiza, on the second question you had, the clarification was on what topic? Well, I think we lost her. I’ll follow up with you, Faiza, on the housekeeping item. Oh, the free float data sales. Yes, apologies for that. So, yes, we do have from time to time, it’s part of our business. Oftentimes, we will sell our free float data package on a onetime basis. And clients when they get a handle on it and how to use it and the value they can derive from it, will convert to a ongoing subscription. And so that is something that we saw in the quarter. I wouldn’t call it out as a significant item in the quarter. It’s something we have seen in prior quarters as well, and it’s part of our business model and part of our trend here. And I think there are a number of data offerings that we have where we can – we get in the door with clients sampling the data and then turn it into an ongoing relationship. So I wouldn’t call out any outsized impact in the quarter from that.

Thank you. Our next question comes from George Tong with Goldman Sachs. Your line is open.

Hi. Thanks. Good morning. I wanted to go back to new subscription sales and cancellation trends. You had expected cancellation trends to normalize and improve in the fourth quarter on a year-over-year basis. Can you elaborate on areas that may have surprised the upside or downside in the quarter with respect to cancels and also new sales? And when you expect net new recurring subscription sales to inflect the positive growth?

Yes, sure. I mean I touched on a lot of this earlier and don’t want to be too specific about trajectories or inflection points other than just to highlight that we are seeing encouraging signs, and you do as I alluded to earlier, a pretty strong quarter on the index subscription front, both on the sales and cancel side. Listen, I wouldn’t say there are any dramatic surprises. I think cancels in Q4 came in generally in line with what we had mentioned and what we were expecting. We do see lingering impacts, elevated level of client events and budget constraints. You can see there were elevated cancels in areas like real assets, which we’ve been seeing and expected. You saw – retention rate was pretty solid in ESG and – are pretty consistent in ESG and climate to just above 93%. That stabilized over the prior quarter, but there are certain areas in ESG and climate where we have seen some elevated cancels like with corporates and corporate advisers. And analytics, just by its nature, tends to be lumpy, and we oftentimes do have elevated cancels in the fourth quarter just given client renewals. And so I’d say the dynamics we saw were pretty much in line with what we expected and we continue to be encouraged by the outlook but expect some lingering noise and impacts and probably some elevated degree of cancels from the factors that we’ve seen.

Thank you. Our next question comes from Russell Quelch with Redburn Atlantic. Your line is open.

Yes. Hi. Good morning. Just wanted to ask a question on the partnership with Moody’s in the ESG segment. Wonder what you’re doing with the new data capabilities you talked about on the private side, given you now have access to their Orbis database, is this already something where you’re seeing an impact on sales growth and product opportunities? I also wondered, is there an opportunity to increase the scope of this partnership?

Yes. So the announcement that we made, I think last summer had three components to it. The first component was that Moody's analytics, not the Moody's Investor Services, the rating agencies, but Moody's analytics would be subscribing to a lot of our ESG data to be able to package it with their products and sell it to their clients, which are, a lot of them are banks and insurance companies. So that was one part of the announcement, and we have already started doing a lot of that. The second part of the announcement was that we had entered into a contract with Moody's that we will use their Bureau Van Dijk Data, the former Bureau Van Dijk database to create ESG scores on a large number of entities that are sitting in that database. I think it's probably going to be over 100 million entities with ESG scores that can be, again combined with their products and our products. The third part of the announcement was an intention. The first two were actual – the actual deeds, right. The third part of the announcement was an intention to work together on private credit. And, of course, as you know, Moody's is very strong in credit analysis and probabilities of default and the like. And we're very strong, obviously in a lot of databases and a lot of risk analysis and performance analysis of individual instruments and private credit and in funds. So the idea here is to explore the possibility of joining forces with those two complementary capabilities. Obviously, we're still talking, we're still working through things, and if there is some kind of agreement of that, it will be in due course. So those – so I think that it's early days with respect to the synergistic revenues associated with this, both from their side and our side. And obviously, we'll report more as we see an upswing in a lot of this.

Thank you. Our next question comes from Jason Haas with Wells Fargo. Your line is open.

Hey, this is Odedra [ph] for Jason Haas. Thanks for squeezing us in here. I just wanted to ask on the expense guidance. For 2024, we saw expenses come in towards the low end of the range despite the run in AUM. I think last call you guys might have signaled that we would be gravitating towards the high end of the range, versus where we ended up coming in. And so I'm just curious as to why that was the case this year. Is there may be some offsetting savings or something to do with what you're seeing in the environment that's keeping you from pressing on the gas a little bit more? And then just wondering if you could talk to us about the puts and takes of the expense guidance range for 2025, understand the assumption on AUM levels gradually increasing throughout the year. Push anything outside of AUM that can take you guys either to the high end or low the guidance range in 2025? Thanks.

Sure, sure. So just on Q4, there can be a number of items that can swing the ultimate expenses up or down. Things like the ultimate bonus accrual can cause expenses to fluctuate a bit, things like severance levels and other non-comp expenses can cause things to swing a bit. You did pick up on in our messages earlier that we are expecting a jump in expenses in the first quarter. And so there can be some timing-related items. And then, as I alluded to, the main drivers, compensation and benefits-related expenses that is causing the sequential expenses to pick up from Q4 to Q1 here. In terms of the overall guidance for the year, as you heard our guidance is based on the assumption that markets gradually increase throughout the year. The overall approach has not changed where we are really continually trying to maximize the level of investment to drive top line growth, while also driving attractive profitability and cash flow growth on a consistent basis. I'd say embedded in the expense guidance is our plan to continue to invest in those key secular growth areas like rules-based investing, private markets, front office analytics, are a modern architecture, AI-driven enhancements to our infrastructure, but also our solutions. And so we are – we do have an ambitious agenda to continue to invest based on – included in that expense guidance. But we are also continually focused on driving efficiencies. And importantly, we will continually calibrate the pace of spend through the year based on a whole host of factors, as we always do, looking at not only market levels, but business performance, opportunities that we see out there and other factors. So we will keep you posted, but no change in our general approach to expenses.

Thank you. Our next question comes from David Motemaden with Evercore ISI. Your line is open.

Hey. Thanks for squeezing me in. I had a question, a follow-up on pricing. So you guys mentioned that pricing was lower in – or the price increase you guys took was lower in 2024 versus 2023, and that you had moderated some of the price increases in 2024. Does that mean that the price you guys captured in 2024 was below sort of the long-term average price increase that you guys have taken historically? And I guess, should we think about that being the same, higher or lower as we think about 2025?

I would not – yes, I would not – I don't want to provide too much detail on the exact level and relative to historical levels. And just to be clear, the contribution to recurring sales from price increases in 2024 was slightly less than it was in 2023. And as you know, in 2023, it was elevated given the overall pricing environment. Our approach continues to remain the same. I think there are areas where we do have pricing power. Importantly, there are areas where we continue to enhance our products and the value we're delivering to clients and price is a way that we can unlock that, although we are very thoughtful and measured and want to be constructive to our clients. And so those dynamics do differ across the company. But there are opportunities for sure and there are areas where we will be measured.

Thank you. Our next question comes from Gregory Simpson with BNP Paribas. Your line is open.

Hi there. Actively managed ETFs were the fastest growing part of the industry last year. I just wanted to ask if the ETF vehicle eventually started to replace the mutual fund. Do you think that changes the opportunity sets for MSCI with active managers? Do you think it's positive, neutral or negative? Thank you.

No, it's definitely a positive. So, we're extremely focused on this and been in a number of meetings myself on this topic in the end of last year and the beginning of this year. So, in essence, in simplified form, it is a continuation of active strategies becoming more rules based, so and in turn that plays extremely well to MSCI's strengths both as an index provider and as a provider of portfolio analytics and analysis. So, there are, there's a continuum of this, of things which are much closer to index where we can, we can help asset managers take active strategies and make them more rules based and if you like, indexify them and then there is, or closer to the index end of the spectrum. But there are also a number of ways that we can help manage actually quite active strategies through helping clients build those portfolios, through reflecting them, as the risk management side of them, the portfolio construction side of things. So, this is a huge focus for us right now. You know, going back to the regional thing on both sides of the Atlantic, there may have been somewhat more discussion in the U.S. or maybe I would say more visibility, but it's definitely going to be a global trend and overall, definitely a positive development for us that we're very focused on and where we're developing both more capabilities and new ways of pricing and adding value to our clients.

Thank you. Our last question is from Alex Hess of JPMorgan. Your line is open.

Yes. Hi, there's a lot of discussion on today's call about product innovation and product rollouts and your products, but maybe on the inorganic side, how do you assess the M&A opportunity now in front of you? Obviously across industries there's a lot of talk about a pickup in M&A. Just wanted to see what you're seeing within your business, specifically.

Thanks for that, Alex. The vast majority of our focus at MSCI is inorganic growth. We have enormous opportunities in new use cases, new client bases, new product development, and importantly in putting together closer and more synergistic many of the data sets, many of the models and maybe many of the analytics that we already have in-house, from climate and ESG data to private assets to connecting them with index to create portfolios that clients create, can create portfolios to look at risk analysis and so on and so forth. So that's been our primary mode. Of course, we look at almost everything that is out there for sale and we analyze it, we investigated it, but we feel that in order for us to deploy capital in those inorganic opportunities, they have to have a high rate of return comparable to some of the returns that we get for organic investments. Of course, there are certain times in which the only way you can get into an area is through an acquisition, like we did with Burgiss and Real Capital Analytics and companies like that, and this on the smaller side, Fabric and Foxberry, et cetera. But our predominant focus is organic growth with that, with opportunistic bolt-ons in the event they come in the strategic areas and they are priced at the right level for us.

Thank you. That concludes the question-and-answer session. I'd like to turn the call back over to Henry Fernandez for closing remarks.

So, thank you again for joining us today. As you can see, MSCI delivers strong financial results in 2024 and we're very focused on improving our operating metrics, especially in the subscription business, with the backbone of improving client budgets and improving, an improving environment, all of that demonstrates the resilience of our business model and the value that we provide to clients. As Baer indicated and I indicated, client centricity at MSCI starts from the top. So, we spend more than 50% of our time at the top level of our company with talking to clients, understanding their needs, understanding how we can solve them, et cetera. So, we're continuing to expand across key client segments. We're driving innovation. We're working in partnership with clients to create efficiencies and scalability for their business. As we mentioned, we are thoughtful and constructive on price increases. We have enormous pricing power, enormous. But that cannot be misused. It has to be consistent with creating value for our clients because we are a long-term compounder. And as a long-term compounder, we want to be a long-term partner to our clients. So, all of that gives us incredible strength and leadership in the areas of data, models and technology and all of our capabilities. So, we look forward to keeping you abreast of all our activities and development. And we thank you again for the time that you spent with us today.

Thank you for your participation. You may now disconnect. Everyone, have a great day.