In its Third Quarter 2023 Earnings Conference Call, MSCI reported strong growth across its product lines, announced two strategic acquisitions, and maintained a focus on capital allocation. The company's adjusted EPS grew over 21%, total revenue increased by 12%, and its retention rate stood at 95.4%. The company's acquisitions of Burgiss and Trove Research are expected to enhance its offerings in private assets and the voluntary carbon market, respectively.
Key takeaways from the call include:
- MSCI's product lines, including index, analytics, ESG, and real assets, showed strong performance globally, particularly in the Asia Pacific region.
- Cash inflows into ETFs with US and developed market exposures were driven by roughly $3 billion of flows into equity ETFs linked to ESG and Climate indexes.
- The Burgiss acquisition is expected to generate slightly above $90 million of revenue for 2023, with Q4 revenues projected to be $22-24 million.
- The company remains focused on capital allocation, returning $459 million to shareholders and prioritizing high-growth investments.
- MSCI expects lower interest income on its cash balances due to funding the Burgiss acquisition, but the overall outlook for growth remains positive.
The company reported that growth in the ESG and Climate segment was around 15% in the Americas, 35% in EMEA and Europe, and 22% in APAC. MSCI attributed slower growth in the Americas to investors' more measured approach to integrating ESG, leading to longer sales cycles and more deliberate purchasing decisions.
In the earnings call, MSCI also discussed its pricing strategy, expense guidance, and the integration plans for the Burgiss acquisition. The company considers various factors, including inflation, when determining pricing. It also provided guidance for the rest of the year, with expense ranges reflecting the elevated pace of spend and the inclusion of a full quarter of expenses from Burgiss.
Andrew Wiechmann, during the call, addressed a question about the decrease in costs in all four segments in the third quarter. He explained that costs can fluctuate based on various factors such as nonrecurring expenses, professional fees, severance, and spend pace. He emphasized that there was no specific trend to note and advised focusing more on the guidance provided.
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