Good day, ladies and gentlemen, and Welcome to the MSCI First Quarter 2023 Earnings Conference Call. As a reminder, this call is being recorded. At this time, all participants are in a 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. I would now like to turn the call over to Jeremy Ulan, Head of Investor Relations and Treasurer. You may begin. Thank you, Operator. Good day, and welcome to the MSCI First Quarter 2023 Earnings Conference Call. Earlier this morning, we issued a press release announcing our results for the first quarter 2023. 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 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, including, but not limited to 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. We will also discuss Organic 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, Baer Pettit, our President and COO, and Andy Wiechmann, 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. Let me now turn the call over to Henry Fernandez. Henry. Thank you, Jeremy. Welcome, everyone, thank you for joining us today. MSCI delivered solid first quarter results in a challenging external environment, confirming the underlying strength of our franchise and our proactive financial management. We have not been immune to the market turmoil, our resilience continues to stand out as seen in the headline numbers from the quarter, which include Adjusted EPS growth of over 5%, organic subscription Run Rate growth of 12%, and a retention rate of over 95%. On a segment level, we posted our 37th consecutive quarter of double-digit Run Rate growth in index recurring subscriptions. We also maintain our momentum in equity portfolio analytics, achieving Run Rate growth of over 10%. Meanwhile, climate continued to drive a wide range of growth opportunities, including with many emerging client segments such as banks, wealth managers, and insurance companies. MSCI delivered 68% climate run rate growth across our product lines and a climate retention rate of over 96%. The difficult environment has certainly affected buying behavior of our clients. In some areas, client budgets have tightened, and sales cycles have lengthened, especially for larger purchases. ESG sales have also been affected by regulatory uncertainty in Europe and by a slowdown among wealth managers and retail investors in the United States, although institutional investor demand remains healthy and steady. As we have noted in recent quarters, our AUM-linked revenue tends to be an early mover in market cycles, while our subscription revenue tends to see a lagging effect. Still, our client engagement levels remains very healthy, and we continue to find a steady demand for our products and services. Even in tough environments, MSCI's unique competitive advantages endure. Clients need our data, models, analytics and research to navigate a rapidly changing investment landscape. With that in mind, we continue prioritizing core investments in areas we believe we can fuel growth while maintaining very rigorous overall expense discipline. We also recognize that periods of turmoil can spur opportunistic M&A at more attractive valuations than we have seen in prior years, especially as this market cycle persists. We're actively exploring potential bolt-on acquisitions that could accelerate our strategy. Looking ahead, a key driver of that strategy will be the network effects produced by our OneMSCI ecosystem. Our content and IP across product lines are already highly interoperable throughout the investment process. For example, clients can use MSCI tools to design an index-based portfolio, implement ESG or climate overlays on that portfolio, and then run analytics on it. All companies at times face short-term winds. We continue to see powerful secular tailwinds for MSCI. This is true across product lines, asset classes, and client segments. In a bull market, a rising tide can lift all boats. In a bear market, companies like MSCI differentiate themselves. MSCI remains confident that we can use this opportunity, this market cycle, to strengthen our client relationships and increase our competitive advantages. With that, let me turn the call over to Baer. Thank you, Henry. Greetings everyone. My comments today will focus on our business results this quarter, what we're seeing and hearing from clients, and how we are continuing to deliver on our dual commitment to our shareholders. Namely, the execution of our long-term growth agenda to capture more of our addressable markets while maintaining the profitability of the company. We finished March with $1.84 billion of recurring subscription run rate, with an organic growth rate of 12% after closing more than $56 million of new recurring subscription sales during the quarter. It has been a slower environment for closing new sales, as you can see from the year-over-year comparisons in our operating metrics as we continue to see tighter client budgets and longer sales cycles. While we cannot control the macro environment, we maintain our conviction in the mission-critical nature of MSCI's data, models, research, and tools. Our sales pipeline and depth of client engagement across products and regions remain steady, we have some promising larger deals that the teams are working hard to close in the second quarter. Retention rates across the firm are holding up well in the tough environment, with both Index and ESG and Climate reporting over 96% retention and 94% and 92% retention in Analytics and Private Assets respectively. This is a reflection of the investments we've been making, not only in our products, but also in our client servicing capabilities. I'll now review a few additional highlights across product lines. In Index, we drove 12% organic recurring subscription Run Rate growth with broad-based strength in both our most well-established and emerging client segments and product lines. In market cap-weighted index modules, our subscription Run Rate is now almost $600 million, and it grew 11% during the quarter. Investors are still turning to our market cap indexes to understand their global investment opportunity set across sectors, styles, sizes, and geographies to implement rules-based strategies. They're also using our indexes to implement customized strategies and to express an investment thesis. Our custom and specialized index modules are now $108 million of our subscription Run Rate and grew 13% during the quarter. Our index subscription Run Rate with asset managers expanded by over 10% this quarter, including from areas where we have existing strength, such as our core market cap index modules. Our subscription Run Rate with wealth managers has expanded by 23% year-over-year, supported by the licensing of our custom indexes for model portfolios and direct indexing use cases. In Analytics, we drove 6% subscription Run Rate growth excluding FX. New recurring subscription sales were almost $14 million during the quarter, roughly level with our performance in the same period last year. The current environment emphasizes the mission-critical nature of our analytics capabilities for institutional investors, and we're able to close several new strategic sales for both our equity risk models and enterprise risk and performance tools. Specifically in equity portfolio management, we closed nearly $6 million of new recurring sales. Driven by equity risk model sales to hedge funds who use our models and tools to actively position their portfolios to benefit from volatility and market dislocation while also managing downside risk. During the recent period of market instability, our clients relied heavily on our analytics, models, research and tools, significantly increasing their usage on our platforms, helping them to better understand potential risks and associated exposures within their portfolios. Stress testing, factor performance, liquidity risk, and counterparty risk all remain in the spotlight as clients try to assess and manage their counterparty and market risk exposure according to potential swings in market sentiment. Across all product lines, our ESG and climate run rate is now $453 million, which grew 20% year-over-year. Our firm-wide climate Run Rate is now $84 million, which grew 68% and continues to be one of the most attractive growth engines for us. We continue to launch new tools for our clients to better equip them to understand and manage climate risks and opportunities in the context of their investment portfolios. In the past quarter, we have introduced biodiversity screens and insights as well as multi-horizon climate probability of default. Additionally, to keep pace with the growing number of public and private assets our clients are invested in, we expanded both our Asset Allocation database and the coverage universe of our Implied Temperature Rise metric, which helps financial institutions and corporations set and meet climate targets. We believe our continued investments will help clients effectively navigate the evolving regulatory requirements impacting them, which will be a long-term catalyst for growth. However, in the short term, some clients are slowing down buying decisions in order to better understand new proposed or potential regulations. As we have previously stated, we are preserving investment capacity to secure new growth. Our intention is to preserve as much investment as possible in key areas aligned with client demand and where we believe we can deliver attractive returns such as climate, ESG, client design indexes, fixed income, and the ongoing modernization of the client experience. In parallel, we are equally focused on creating greater efficiencies across the company to allow us to fund these important investments. As I stated at the outset, we will continue to deliver on our dual commitment to shareholders, which means executing on our long-term growth agenda while maintaining the profitability of the company. With that, I'll turn the call over to Andy. Andy? Thanks, Baer, hi, everyone. The financial results in the quarter showcase the attractiveness of our financial model and the effectiveness of our actions. Subscription revenue, which is 75% of total revenue, remains steady with 13% organic growth, while we continue to feel the pressure from year-over-year declines in AUM-related revenue, with ABF revenue down 8%. While the first quarter tends to be seasonally lower for new sales, our results in the quarter were softer than last year, reflecting several factors. Relative to a year ago, we saw some lengthening of sales cycles and fewer larger ticket deals. These dynamics were particularly pronounced in the Americas and within our ESG and Climate segment. In ESG and Climate, the impact of macro pressures and constrained client budgets had a more pronounced impact, where the details of pending or recently released regulations have not been fully clarified or interpreted, and where there is likely a higher level of more discretionary purchases in certain use cases. In some areas of the firm, we saw a modest decline in retention, most notably coming from smaller hedge funds, broker-dealers and real estate brokers and developers. Importantly, firm-wide retention rates remain fairly strong overall and in line with historical averages. While the longer-term demand and pipeline remain steady, we expect some of these cyclical ESG dynamics to persist in the short term. Overall, we continue to operate from a position of strength, with strong momentum and healthy client engagement across our subscription base. In index, subscription run rate growth was 12% in the quarter. Client demand for active and passive index strategies remains healthy. We again saw notable strength within our market cap modules as clients continued to integrate indexes more heavily into their investment processes. We continue to benefit from a growing trading ecosystem. Since the end of December, AUM balances and MSCI-linked ETFs have rebounded by over $82 billion, including over $7 billion of cash inflows, which helped asset-based fees improve by 6% since year-end. We saw strong flows into both developed markets outside the U.S. and emerging market funds, both areas where ETFs based on MSCI indexes had strong market share capture. Recently, one of our clients completed the largest ETF launch in history based on AUM, which is linked to MSCI's Climate Action Indexes. Traded volumes of listed futures and options linked to MSCI indexes remain slightly elevated, but saw some normalization relative to the high market volatility environment last year. Within those cyclical dynamics, we continue to see the secular build of volumes resulting from the growing liquidity and trading ecosystem around financial products linked to our indexes. The growing volumes of listed futures and options have helped drive growth in the broader index derivatives franchise. We continue to see healthy client appetite for structured products and OTC derivatives linked to MSCI indexes, as well as strong demand from trading firms and hedge funds for our index data. These areas help to support both recurring and one-time sales volumes. In analytics, subscription Run Rate growth was 6% excluding FX. We continue to see strong demand from the buy side for our equity risk models and our broader equity portfolio management tools. Despite some of the previously mentioned pressures, the mission-critical nature of our analytics tools in these environments continues to provide a path of steady growth. In our ESG and climate segment, we saw overall organic subscription run rate growth of 30%, with growth in EMEA at 34%, while growth in the Americas slowed to 24%. Coinciding with a slowdown in new ESG fund launches in the region and some slowdown in client buying decisions related to the previously mentioned factors. In climate, we continue to see good momentum and very engaging discussions across client segments. Some of the factors impacting ESG sales did, to a smaller degree, also impact climate sales. Our climate subscription run rate growth across all products was 68%, which was roughly the same as the climate ABF growth rate. In real assets, we continued to deliver double-digit organic subscription Run Rate growth of 10%. We see strong engagement from our clients as they look for insights into the highly dynamic market, including around climate and income risk. We did see some pickup in cancels from smaller clients in the quarter. I'll now go over the puts and takes of our 5% growth in Adjusted EPS in the first quarter. Asset-based fees were lower than last year, growth in subscription revenues was a significant driver of the $0.16 Adjusted EPS expansion year-on-year. The lower share count drove $0.07 of the year-over-year increase, benefiting from the significant level of opportunistic share repurchases we executed last year. I would note that our Q1 adjusted EBITDA expenses of $247 million included about $22 million of seasonally higher compensation and benefits-related expenses that we had anticipated and indicated to you previously. We did have some comp-related accruals and non-comp items that were slightly more favorable than expected. We remain well-capitalized and ended March with a cash balance of nearly $1.1 billion. On client collections, we continue to see slightly longer payment cycles consistent with our prior comments, due in part, we believe, to the opportunity cost of a high-rate environment. There were no share repurchases during the quarter, although we continue to be poised for and actively focused on attractive repurchase and potentially compelling bolt-on M&A opportunities. We continue to believe this environment could result in some repricing and/or unlocking of previously unavailable acquisition opportunities. Lastly, I would like to turn to our 2023 guidance. Our guidance ranges across all categories remain unchanged. It is important to note that we have based our guidance on the assumption that ETF AUM balances decline slightly from current levels in the second quarter and gradually rebound in the second half of the year. While the environment may result in some caution from clients in the next quarter or two, we have the financial model and the proactive management levers to drive investment in the very compelling long-term growth opportunities while delivering very attractive financial performance. We remain encouraged by the strong client engagement across numerous growth opportunities. We continue to be closely aligned with the long-term trends transforming the investment industry. We look forward to keeping you all posted on our progress. With that, operator, please open the line for questions. We will now begin the question and answer session. To ask a question, you may press star, then One on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then Two. Please limit yourselves to one question and one follow-up. If you have additional questions, you may re-enter the queue. At this time, we will pause momentarily to assemble our roster. Our first question comes from Manav Patnaik with Barclays. Please go ahead. Thank you. good morning. I just wanted to just talk about, you know, the ESG slowdown, specifically. I mean, you know, is the comments around the regulatory delay, is that just people waiting? I just want to understand why that would impact whether they, you know, needed the data that you guys have or not. Then just hoping you could just break out, you know, the strong growth rates in ESG. Like, you know, how much of that is, you know, new sales versus cross-selling and upselling and pricing, just to help understand which part of the dynamic is being impacted the most. Hi, Manav. Thank you for the question. You know, first of all, let me just level set a little bit. As Andy indicated, you know, ESG and climate, we had a 30% run rate growth in the segment, per se, with 34% in EMEA, over 20+% in the Americas. We had a 21% run rate growth firm-wide in ESG and climate, despite the lower AUM link revenues that we have had given the, you know, the decline in equity values around the world. You know, in any environment, these are not too shabby, you know, numbers to begin with. They're definitely lower than the recent past, but not bad at all. We're very pleased about that. The second, you know, point that I will make before I go directly to your answer, Manav, is that we're very excited about a number of new products that we're launching in ESG and climate. First of all, we are continuing our ESG rating coverage expansion into more equities and more fixed income and other private assets that will bode well for additional sales. We're very excited about the uptake on the total portfolio carbon footprinting service that we're offering, which includes public and private assets and includes corporate loans, for example, for banks. You know, we have launched a European bank regulatory product in which for climate risk. That's important. We're launching a biodiversity set of data and products with a partnership with a firm. On climate risk, you know, we're very excited about the Climate Lab Enterprise. In addition to the climate probability of default, we believe that climate risk will be a major driver of risk analytics in the future and the like. There is a lot that we can be said about that. In direct answer to your question on the slowdown, you know, there are two major regions where our ESG and climate sales are happening. It's clearly the Americas and EMEA. The Americas, especially in the U.S., we have seen a meaningful slowdown in sales due to some of the geopolitical. I should say political, you know, discussions that are going on about ESG. You know, the institutions that we deal with, they're all continuing to subscribe to the product line, and they're continuing to integrate ESG and climate into their portfolios. They're trying to stay low-key so that they don't get in the crossfire of the political system. What we have seen is definitely a slowdown in retail demand, wealth managers, you know, mutual fund launches and the like, because a lot of the asset managers again are trying to assess the whole political landscape and being cautious not to get caught, you know, in the middle of that. We believe that that's gonna persist maybe for a year or more, given the elections coming up. At some point, it's gonna have to revive because ESG and climate are an integral part of the investment universe. In EMEA, you know, our sales have held up pretty steady from prior quarters. No, no meaningful reduction, you know, in sales. But, you know, obviously in EMEA, the regulators have, you know, have come up with a new system as to what is an ESG fund and what is not. Similarly to what I was saying in the Americas, the institutional demand remains pretty steady and very robust. The retail demand is going through a little bit of an adjustment as to what is an Article nine fund, what is an Article eight fund. You know, our clients are sort of, you know, sorting out, you know, how their product line, you know, lines up to a lot of that. We believe that, you know, once they finish that process, they're gonna start launching, ESG and climate funds because the fundamental demand in EMEA continues to be very strong. In a nutshell, we continue very excited about this segment. The growth has slowed down a little bit, you know, in addition to because of the cautionary budgets that exist in the world, and plus these other things, you know, the political situation in the U.S. and the regulatory situation in EMEA. You know, the fundamental demand is there. This is a product that is here to stay, especially, in all aspects, actually, the integration and the impact investing and all of that, and it's just a question, you know, of when we begin to see a return to higher growth rates. Manav, just very quickly on the composition of new recurring sales to your question. The strong majority of new recurring sales continue to come from new clients and new services or upselling our existing clients. I'd say the breakdown between those is roughly even, roughly even contribution from new clients and new services. I would highlight price is contributing a slightly higher percentage than what we've seen in the past to new sales. Okay. That's very helpful. Thank you. Just on the M&A, you know, I think you guys mentioned it a few times in terms of the valuations coming down and exploring bolt-ons. I was hoping you'd just elaborate a bit more on that. It sounds like it would be a series of small to mid-size tuck-ins and in the obvious areas of ESG and data and so forth. Just, you know, hoping that you can give a little bit more color there. As we said, Manav, these are all smaller bolt-on acquisitions. There is nothing sizable or transformational that we can see, you know, on the horizon. That obviously can change, you know, at any point, but, you know, we don't see that happening. We have been, you know, as you have seen us, we've been relatively muted in our acquisition path in the last few years because we're very disciplined buyers. Even if an asset is very strategic, it has to have financial underpinnings to it. It has to make sense financially. We saw a lot of our competitors bidding up assets to levels that we would not, we wanna participate in in the past. You know, we're waiting to see if this E-environment brings down those valuations, that make a lot more sense, and obviously only in the strategic areas that we're interested in. That's why, you know, we wanted to emphasize that, and especially in the context of the, you know, the lack of repurchases, you know, because we don't have a huge amount of cash, and we have wanted to preserve cash for these opportunities when and if they come. Okay. Fair enough. Thank you. The next question comes from Toni Kaplan with Morgan Stanley. Please go ahead. Thanks so much. Just wanted to follow up on the ESG questions. You know, I guess definitely understand what you just mentioned on the political environment and retail, et cetera. I guess, do you see ESG getting worse before it gets better? You know, should we just expect sort of a, you know, maybe modest environment for the next year? No. Thank you for that, Toni. You know, first of all, let me just reiterate that our ESG franchise is very diversified. Our ESG and climate franchise is very diversified across regions, across types of customers, you know, what we call client segments, whether it's an institution, an institutional investor, a manager managing institutional money versus a manager, you know, managing, you know, individual wealth money, across banks, and across, as I said, regions of the world and use cases. This is very varied and the like. What I wanna make sure we all recognize is that the U.S. marketplace is a clearly important one, but within the U.S. marketplace, you've got to break it down into what is going on with the, you know, with managers who are managing retail money versus people who are managing institutional money, versus the banks who have a different driver, versus the hedge funds and all of that. Therefore, it's a lot of different areas that we need to look at. My sense, our sense at MSCI is that the area of the market that it is asset managers managing, you know, mutual fund money or ETF money or wealth money, you know, is gonna stay subdued, and for a couple of reasons. One, the client segment, you know, half of them are, you know, blue and half of them are red, and some of them are gonna have different views as to what this product line should be. You know, secondly, a lot of asset managers are trying to stay below the radar screen of a lot of these political winds. You know, they don't wanna be attacked, so they don't wanna be, you know, making a lot of fanfare about new products they're launching, et cetera. In the U.S., it's gonna stay a little bit subdued on that segment of the market, but it, you know, it will not be on the institutional market, and it will not be on climate for banks, for example, climate risk for banks and others. You know, in the media, I think, I think this process of, reclassifying funds and reordering things. It may take a few months, a few quarters, and then the demand will pick up again, you know, in the context obviously of a total operating environment. We're beginning to see a lot of traction in Asia, in all client segments, and that is virgin territory for us. Great. Very helpful. Wanted to also ask, just in this sort of current environment, how you're thinking about investment in ESG products. I know long term the view is that, you know, as the trends are positive, but I guess in the maybe near term, you know, do you shift your investment towards other areas, or have you been shifting your investment towards other areas just in light of what's been going on? Thanks. Hi, Toni. Baer here. Look, maybe just using a slightly different tone, I can't control myself. Look, ESG and climate still grew 30% in this quarter, right? That's a very attractive growth rate. For sure, you know, if we can sustain that sort of growth rate on the run rate we have, you know, that remains a very significant opportunity. Adding the, you know, that amount in $ in run rate, you know, every quarter for sure will continue to require a lot of investment. You know, as Henry Fernandez has pointed out, you know, we have, you know, continuous demand across, you know, a variety of client segments, geographies, et cetera. There certainly isn't anything between this quarter and the last which changes our view that this is a structurally important opportunity, right? We have to balance it with, you know, the environment. You know, Henry alluded to, you know, certain strains, if you wanna call it that. Certainly, you know, from our perspective, this is a growth opportunity. It is structurally so, and we have a lot of client demand for continued data and improvements in the product line. Let me just add something else here. That is, you know, ESG and climate is one category that we use. Within that category, you also have to look at the ESG component, which obviously has a part of that is climate. You have to look at the climate tools themselves, on a standalone basis. We've been able to, we began to create more disclosures about that for all of you. On the climate side, you know, the run rate grew 68% to about $84 million-$85 million in run rate. We believe that in the next few years, and probably the next 5-10 years, climate is gonna be the biggest opportunity that all of us are gonna be faced with. You know, the whole world needs to figure out, the whole world of the capital markets, you know, the investment industry and the finance and insurance industry will need to deal with climate risk in their portfolio, decarbonization of their portfolios, and the like. We continue to make a steady investment in that area because we wanna be, you know, one of the undisputed leaders on climate, and the consequent growth that we can see and value creation. Makes sense. Thank you. The next question comes from Alex Kramm with UBS. Please go ahead. Yes. Hey, good morning, everyone. Just wanted to talk about the sales environment, in particular, what happened in the first quarter. Clearly, the second half of March got very volatile with some of the bank issues. Knowing salespeople, I know sometimes those sales can happen right at the end of the quarter. Just wondering if that was a big headwind at the time, if you actually think some of the 1Q opportunities got pushed into the second quarter, or if some what you just saw at the end of the first quarter actually is just a look at what may be to come and things actually get worse from here near term on the sales side. Definitely, Alex, you're absolutely right. You know, A lot of stress in the system happens in the last two weeks of a quarter in terms of clients and, you know, making budgetary decisions and we trying to close on sales. You know, the banking scare and the banking crisis, you know, took place around that time. There probably was some smaller impact in delaying some sales at that time, but it wasn't anything that we spent a lot of time on. That tells you that within sort of that is pretty big, pretty serious to the closing of the sales, you know, in the quarter. You know, the banking crisis per se doesn't have a huge direct effect on us because, you know, it has been concentrated in some of the smaller banks, obviously, with the exception of Credit Suisse, which was already, you know, in difficulties. The bigger banks, which are our clients, are extremely well capitalized. They're extremely regulated, so we're not as concerned about them. I think the overall banking crisis does add to the stress in the overall financial system. It adds to uncertainty. It will add to cautiousness and a little bit of risk aversion. That's likely to add, you know, one more variable to the environment that we have depicted here. You know, we remain pretty, you know... With respect to our pipeline and sales, it remains, you know, pretty solid. It remains pretty healthy, with the caveat that the larger deals, you know, have slowed down and, you know, what we call the big-ticket items have slowed down. Secondly, the sales cycles are longer, you know, and there may be a little bit of pickup in cancellations. We're not, you know, looking into the near future and thinking that, you know, we have a big problem coming, you know, our way. Okay, great. Secondarily, you know, you made some comments about, you know, still very focused on profitability and growing profitability. I think over the last few months I've heard you speak a little bit more when it comes to profitability in terms of EPS, earnings per share, and not as much on margins or EBITDA margins. Just curious, when it comes to EBITDA margins, which, you know, a lot of us care about, you know, are you still very committed when you talk about profitability on growing core margins, or are you thinking more holistically or what's your latest thinking about profitability? That's a great question because, you know, as you know, I'm a large shareholder in MSCI, so when I look at myself as a shareholder, at the end, you know, what I care is about the long-term growth of the Adjusted EPS. That's what's gonna... You know, if we have very healthy growth of Adjusted EPS over years and years, with healthy top line and healthy sort of, you know, EBITDA margins and the like, you know, the market will reward us with good multiples, and good valuation. We're beginning to focus a lot more on that, but it's not at the exclusion of clearly top-down growth. You know, the top-line growth is not at the exclusion of our EBITDA and our EBITDA margin. It's just a little bit of a mixing of the variables. The problem, you know, in the past, you know, for us has been that we're so focused and so obsessed with EBITDA and EBITDA margin that at times we neglected the EPS growth of the company. I thought that was wrong, you know, because our shareholders, that's what they eat. They eat, you know, EPS growth. That's what they value the company on the basis of that. Obviously, you know, there are a lot of other things that make up that, but that's a little bit of the, it's not an exclusion, it's just a pivoting of emphasis. All right, very good. Thanks for clarifying. The next question comes from Ashish Sabadra with RBC Capital Markets. Please go ahead. Thanks for taking my question. Baer, in your prepared remarks, I believe you mentioned there are some promising larger deals that the teams are currently working on to close in the second quarter. I was wondering if you could just provide some more color on those deals. Which are they in certain end markets? Is it focused more on index analytics or ESG? Any color on those fronts? Thanks. Sure. No, look, I think it's the normal mix, Ashish. You know, I don't think that there's any particular color to it. There's some important stuff we have for sure in analytics. We have some large ESG deals and index. The point was more to make a broader observation, you know, and picking up from Henry's observations that, you know, we haven't seen a decline in our pipeline. We had a few things, you know, referencing the larger deals that had a slightly longer, you know, sales cycle than we thought, and again, referencing also Alex's question. It was more of a general observation just to say we've got some, you know, we've got a healthy pipeline going into the next quarter, and, you know, we're very focused on trying to close. That's very helpful color. Maybe just a quick follow-up. As we think about the sales slowdown on the subscription growth, obviously, subscription growth has been really robust, 12% despite the macro challenges, but how should we think about some of these sales slowdown headwind on subscription growth? On the other side, we also have ABF improving as the AUM fund flows improve. Any puts and takes on the top line as we think about going forward? Thanks. Yeah, Ashish, and Henry alluded to this in his prepared remarks. We have this nice balance in our top line, where the ABF revenue tends to lead a cycle and the subscription revenue tends to be impacted on a lagging basis. I don't wanna overemphasize that we might be seeing some lagging impacts on the subscription base right now, there probably are some impacting it. Although it's important to underscore that our retention rates remain quite healthy, you know, in line with historical averages here, particularly in index and analytics, and ESG is even 96% plus. It is quite a diverse book of business. The two biggest pieces of it, index and analytics, are actually remaining quite strong here, and the outlook is okay on those fronts. In the short term, there could continue to be some impacts on the operating metrics, which impacts the subscription growth. I'd say overall, we've got quite a resilient franchise. To your point about asset-based fees, to the extent the market starts to recover and has a sustained recovery, that just adds to some of the momentum we have in the business and the resilience we have in the business. I would underscore, as I mentioned in the guidance comments, that we have a cautious outlook in the short term, our guidance is based on the assumption that ETF AUMs decline in the second quarter and then rebound gradually in the back half of the year. Any upside there is obviously beneficial to us and creates capacity for us to invest more. Very helpful color. Thanks. Thanks, Andy. The next question comes from Alexander Hess with JPMorgan. Please go ahead. Hi. Good morning, all. Just wanna touch again on the retention rate briefly, 95.2%. I believe that was up somewhat from 4Q. Can you comment maybe how much of that sequential quarter-on-quarter improvement was driven by, you know, any sort of improvements or changes in the client environment, or was that just seasonal factors there? Yeah. I would say the seasonal aspects do play a meaningful role, given that we have the largest portion of renewals taking place in the fourth quarter. Retention rates tend to drop a bit there. I wouldn't read too much into the sequential dynamics. As I just mentioned, we are encouraged that the overall retention rate is in line with historical averages. We've just seen some pullback from the high levels we saw a year ago, but overall, they're in a pretty good position. As Baer mentioned, really where we are seeing the pickup in cancels is in ESG and climate and real assets. From a client standpoint, it's really shown up with smaller clients and within areas like broker-dealers and banks, hedge funds, real estate agents and developers. It's, it's, kind of around the edges and some of the structural stuff and client events that we would typically see in these types of environments. Thanks, Andy. Then maybe as a follow-up, you briefly mentioned real assets. Just wanted to maybe get an update on anything that's gone on there with the Burgiss Group, with RCA. You know, we're a couple years out now from some pretty large spend on those areas. It would just be nice to get an update on, you know, traction in the market and anything else you can maybe provide us with on those businesses. Sure. I'll make a few comments. First of all, you know, if we look at the overwhelming run rates in real estate, which has clearly been a very challenging environment across the globe, in view of that, we were pretty pleased actually to have, you know, an 8% run rate growth or 10% ex FX. For example, transaction volumes in the U.S., which is clearly critical for us in that part of the market have been down 70%. Some of our other important markets from like the U.K. have been hit very hard, but we've had actually really decent retention rate there. I think allowing for the very challenging environment, we're pretty happy with the results. You know, we'll have to see. There's certainly sometimes a little bit of a lag, you know, in from, let's say, the REITs repricing to other private markets. We could still be in a choppy environment for real estate for some time. In view of that, I think the resilience of our franchise is pretty strong, and people need our data and analytics precisely to understand, you know, the performance and risk in these changing markets. That's that. I think on Burgiss, we don't really have anything to add from the last quarter. You know, I think that those are my summary comments. Right. Thanks, guys. The next question comes from Owen Lau with Oppenheimer. Please go ahead. Yeah, thank you for taking my question. Broadly speaking, how does the reopening of China and the comeback of some Chinese stocks impact AUM and the flow of MSCI linked index in the Asia Pacific region? Maybe could you also please talk about or give us an update on the opportunity in the Asia Pacific region and how MSCI would approach these opportunities? Thank you. Thank you, Owen. The clearly the opening of China from a long, protracted COVID lockdown is positive, you know, for our business, in all of Asia. You know, not only in China, but all of Asia, because as you know, you know, China has a meaningful economic and attitude impact in the balance of the countries in Asia. That's been very positive. You know, despite the fact that the lockdown, we couldn't even see clients in mainland China. I mean, it was really, really reckoning as we all know. You know, we have been managing to grow, you know, our MSCI, you know, China. We've been able to grow the business in mainland China and on a run rate growth basis about 9%, 10%, you know, this quarter compared to last year. That is, that's a positive. Now, you know, we have to, you know... China itself, you know, mainland China is a very small, you know, almost non-material run rate for us. The assets that are linked to directly to, you know, to MSCI China indexes are not significant. Obviously, the big effect is the part of the emerging market index that is made up of China, and the recovery there is gonna bode well for the overall emerging market index and the assets associated with that, the emerging market index. That's gonna be a positive for us. That's a little bit of the, you know, of the breakdown of the various components. We're very optimistic that the recovery in China, the assets, the equity values increasing in China and the opening up of the country will have overall positive effects for our business, you know. As I said, it's not a huge base, except for the part of MSCI China that is in the emerging market index. Just to put a finer point on the ETF flows, we did see pretty healthy flows into international markets, both developed markets outside the U.S., but to Henry's point, also into EM exposure. Those are two areas where we had nice market share capture. On the EM flows, we actually captured about 60% of new flows into emerging market ETFs, and clearly China's a big, big component of that. Got it. That's very helpful. Then, can I go back to the guidance for a little bit? I think, Andy Wiechmann, you mentioned that you assume that ETF would decline slightly in the second quarter and then rebound in the second half. I remember previously you mentioned that the market would decline in the first half of this year. I'm just wondering, is there any change in assumption here? Then, I think, broadly speaking, what does it take for MSCI to kind of like, dial up or dial down, the Free Cash Flow guidance for this year, if, let's say, the market, stay at current level? Thank you. Sure. I would say overall, we continue to have a cautious outlook in the near term, which you can see by the ETF AUM assumption that's underlying our guidance. Just to reiterate what you alluded to, we're assuming the markets decline from the current levels during the second quarter here and then rebound gradually in the second half of the year. Just your question about what it would take for us to dial up or dial down, I would say it's a constant calibration and something we are actively focused on. Although the markets performed better during the first quarter than the assumption we had outlined in our original guidance at the beginning of the year, we still continue to have a cautious outlook in the near term. We are being cautious on expenses and the pace of hiring, where we're being a little bit more measured, and we continue to be disciplined on the non-comp expense front to ensure we're able to invest in those critical growth areas and attractive long-term opportunities. We do have, I would say, further levers on the downside if we need to. And we can further slow or even stop headcount growth, and we can further tighten non-comp on the downside. But importantly, to your question, if we do see a sustained improvement, in the markets, we're ready to accelerate investment and spend. It would be really a calibration and a determination that we see that sustained momentum in the markets, and confidence that we are recovering here. If we see that, then I think you could see us dial up the pace of spend. I don't wanna comment specifically on what that would mean for Free Cash Flow. There's a lot of puts and takes there. I'd say all the guidance is a reflection of the outlook that we have, and we've currently got a cautious outlook. Got it. Thank you very much. The next question comes from George Tong with Goldman Sachs. Please go ahead. Hi. Thanks. Good morning. I wanted to drill down further into the selling environment. You talked about seeing tighter client budgets, longer sales cycles. Outside of ESG, can you elaborate on where in the business you're seeing the most impact from that and how client sentiment has trended exiting the quarter? Sure. Listen, the way it manifests itself is. I'm just underscoring points that we've made, 'cause I'm trying to stick to what we're seeing here, which is fewer large ticket deals, lengthening of sales cycles, and elevated cancels, particularly among smaller clients and particularly in just ESG and real estate. Those impacts are most pronounced in those two segments where I think there are some segment-specific factors. Henry outlined some of the factors impacting ESG, and Bear talked about some of the factors impacting real estate. I do wanna underscore that index and analytics see some of those dynamics to a small degree, but are generally holding up okay. There continue to be a number of large and key areas, not only in Index and Analytics, but also in ESG and real estate, where we continue to see strong momentum. Many of those are the core aspects of those parts of the business. Geographically, the dynamics were most notable in the Americas, but I'd say that was heavily driven by the impact in ESG and climate. Overall, pipeline is steady, as Baer said, and we do expect some of these dynamics to continue in the short term. I think we see the indications that the engagement with clients on these big secular trends continues to be quite healthy. Got it. That's helpful. Then, you talked a little bit about the analytics business holding up relatively well. Organic revenue growth of 6% in the quarter. It is a bit below the long-term target of high single-digit growth. Do you expect the growth there to accelerate over the course of the year? Do you expect it to stay where it is? What are some of the puts and takes of underlying trends you're seeing in the analytics business? Yeah. Look, I don't think there's dramatic change. We had a few large deals that didn't quite make it this quarter. You know, we didn't do quite as well as we would've liked in fixed income this quarter, but actually, we've got a really good pipeline there, and that business is going from strength to strength. It's a little bit of a mixed bag. I don't think we, you know, we don't see anything dramatic. We'd like to do a little better than we did this quarter for sure. We've got a decent pipeline, including some of the larger deals that I alluded to in my earlier comments to Owen, I think it was. I think overall, you know, we're working the pipeline. We'd like to see the growth a bit higher than it is here, but we don't expect anything dramatic from where we are right now. Got it. Very helpful. Thank you. The next question comes from Faiza Alwy with Deutsche Bank. Please go ahead. Yes. Hi. Thank you. Andy, I wanted to just put a finer point on expenses and investments. You mentioned some favorability this quarter. I know you've maintained your expense guide, but you've talked about being measured also, and that there are further downside levers and upside levers. Curious, has anything changed, you know, over the last few months as it relates to, you know, your investment spending relative to the expenses that you're incurring, and how you're viewing that for the rest of the year? No. Nothing too significantly. As I said, we did a roll forward of the ETF AUM assumptions that underlined our guidance at the beginning of the year to where we are now. Clearly, the markets performed a bit better in the first quarter than we had baked into the original guidance. We continue to have this cautious outlook and assume that the markets will pull back a little bit here in the short term and then rebound in the back half of the year. So I'd say the overall view on expenses and pace of spend is generally consistent with where we started the year. I'd say we continue to have that degree of caution here and we've moderated the pace of headcount growth. You probably saw we continue to grow, and that's in the key areas, the key growth areas for the firm. Let me just add something, because we have referred a number of times to our outlook, in terms of asset values, equity asset values. You know, I want all of you to understand that there is no magic. We don't have, you know, significantly better insights than you have about what could happen to equity values, in the foreseeable future. The emphasis on this is so that we manage our expense base, is that we manage our investment plan. Therefore, you know, when we say we're predicting the following, it's in order to give you a sense of what is our mindset in order to manage our expenses and our investment plan. You know, we wanna be in a position that if we get positively surprised that the equity values are higher than we thought they would be, we can rapidly do an after playbook and invest more. What we don't wanna be is going into a difficult environment with a bloated expense base and having to, you know, radically, you know, alter our expenses and our investments and the like. That's a little bit of the mindset of what we're trying to do here. There is no. We don't have any major insights that the market will go down in the second or the third quarter. We just use this as a mechanism to manage our expense base. Thank you for that. Just a follow-up on the climate side. You know, you mentioned sort of obviously slowing new sales on, you know, ESG and climate segment. You mentioned the political environment in the U.S. and some regulatory uncertainty in Europe. It sounded to me, my takeaway is that that's more on the ESG side as opposed to the climate side. Curious if that's the right takeaway and, you know, any further color you might have on that. That's a good question. First of all, you also have to look at the ESG and climate sales in the context of an overall caution environment or cautious environment of spending by our clients all over the world because they don't know the direction of equity values or financial markets. You know, they don't know yet when interest rates are gonna start peaking, what the level of potential slowdown or recession may be, et cetera, et cetera. Right. Therefore, you know, any private client will have to take into account that the overall spending of clients is more cautious now than it has been, you know, in the last 12 months or so. Secondly, with respect to ESG and climate, yes, a lot of the, you know, some of the political issues in the U.S., you know, are referred to as ESG. When you really hear the politicians, sometimes they're referring to social issues in ESG, and sometimes they're referring to oil and gas or or climate, you know, risk issues and the like. The caution about the U.S. market, even though you hear it as ESG alone, you know, it varies. If you go to Florida, you know, a lot of it is about, you know, social and ESG. If you go to Texas, a lot of it is about the environmental part or the climate part of ESG. you know, we think that the institutional demand will increase on climate, you know, in the U.S. and across the board, but the individual retail demand may be a little bit a little bit slower. In Europe, you know, climate is the climate tools are, you know, in demand all over the place because Europe, as we all know, is a leader in trying to figure out how to decarbonize their economies, how to increase renewable efforts, and they're pushing the asset managers to take climate into account. you know, 68, 70% growth rate on climate is not bad. You know, it's slowed down clearly from a year ago. we're very, very optimistic about the prospects of climate tools, you know, in the world for us. Great. Thank you. The next question is from Craig Huber with Huber Research Partners. Please go ahead. Great. Thank you. On the climate front, can you just tell us, quickly, if you would, what data and what analytical tools do you guys think you have in climate that really sets you guys apart from your peers out there? Obviously, you talk about long term, you think your climate run rate will eventually get larger than the rest of ESG. What really makes you stand out from a data standpoint and tools from climate? I think there's a variety of things. Of course, we'd be very happy to also take this offline because it's a longer discussion. Fundamentally, it's the breadth of depth. It's what we cover in terms of climate, companies, excuse me, and securities. It's our modeling of climate, including some of our more sophisticated indicators like Implied Temperature Rise. And in physical risks, the competitive landscape is such that it's a little checkered depending on what part of the, you know, the market you're in. But those are some of the highlights. It's obviously a, you know, it's a large question which we'd be very happy to spend more time with you offline. Craig, if you don't mind, I just wanna underscore one point, which I think you know, but it is really an important differentiator for us. That $84 million of climate run rate cuts across all product segments for us. The ability to offer solutions across almost every part of the investment process really differentiates us from other providers out there. Clearly, index is a big part of it, which I know you're aware, but our leadership in index is more generally, and our leadership in climate causes us to be a leader there. Our ability to provide climate risk insights across analytics where we have the client's portfolios, we're helping them with risk already, really give us a leg up on anyone else trying to do climate risk at a portfolio or enterprise level. In areas like private assets, just given our capabilities and unique data we have on that front gives us a real leg up. The total franchise that we have is a real competitive advantage that I wanna make sure people don't lose sight of. Thank you for that. My second question, you obviously kept your cost guidance unchanged here. Often companies when they go into a much tougher, what they think is a tougher environment, will cut their cost base significantly. I'm curious, given all your added cautionary comments right now, you did not though cut your cost outlook for the year. Is the environment basically how you were thinking it was, say, 3 months ago when you put out your initial guidance? Again, you did not trim your cost outlook. Look, I think we are, we are extremely comfortable with our cost base, our expense base, which we divided up into running the business expenses and what we call change the business expenses, which is the more pure investment plan. We have preserved in the last few quarters, the vast majority of our investment plan. We've done that by squeezing our run the business expenses in a variety of ways to free up, you know, resources. We're very, very comfortable. We believe we have scaled the expense base of the company to the operating environment, to the cautious operating environment that exists today, even with a lower operating environment that exists today. In the event that it dramatically moves down, we have a lot of levers that we can apply. If anything, we believe that, you know, the probability of us triggering an upturn playbook is probably higher than downturn playbook, but we don't know. I mean, obviously, we have to see what happens in the next few quarters. We are extremely comfortable. The other thing to remind everyone is that MSCI is a very diversified client base, a diversified franchise. We tend to not focus on that. You know, it's diversified about client segments from asset owners to asset managers, to wealth managers and banks and insurance companies are now corporates and hedge funds and banks. The regions of the world, you know, we're doing well in EMEA right now, relatively well in EMEA, to the Americas, to the Asia Pacific region. The product lines in public assets, equity and now fixed income and, you know, private assets and, you know, ESG and climate as overlay to all of what we do. You know, we have a lot of performance tools. We have a lot of risk tools. We have different forms of pricing, whether it's subscription, whether it's AUM, whether it's transaction in volumes, like in futures and options. We have a very diversified employee base. 65% of our employees are spread over a lot, half a dozen or so big emerging markets of the world. 35% are in developed markets. Whenever there is an issue of labor tightness or increases in expenses in wages in a particular location, we hire in other locations. You know, we have a lot of hedges between dollar versus non-dollar and the like. You know, that's why we are very comfortable with this expense base because of the nature of the franchise that is diversified and the nature of our cautiousness going into the market. Great. Thank you. The next question comes from Russell Quelch with Redburn Partners. Please go ahead. Yeah, thanks for having me on. Appreciate what you're baking into guidance in terms of asset values, wondering to what degree the guidance assumes lower retention rates to come on subscription revenues in the rest of the year, and particularly in Q4, please. Yeah, I would, as you know, the subscription base is a slow-moving beast. Even adjustments to the retention rate around the edges or sales don't have a meaningful impact in the current year. I'd say the bigger impact for this year is really around asset-based fees. Okay, cool. Thanks, Andy. Just following on from that, sort of related, what are you assuming you can do on pricing to offset any increase in cancellations or inflation in the cost base, please? Sure. Yeah. I would say that price increases continue to be at a higher level than they've been in recent years, and they continue to contribute to a larger percentage of new recurring sales. We have been successful with capturing price increases with clients. We actually in the first quarter, probably even saw a slightly higher contribution to recurring subscription sales than we even saw last quarter. I would say we'll continue to be measured on this front and ensure that we are delivering value to our clients in connection with price increases. Where we are delivering value, we will continue to extract price and seem to be getting traction with it. Okay. Good stuff. Thanks. The next question comes from Gregory Simpson with BNP Paribas. Please go ahead. Hi there. I appreciate you taking my questions. Can I just ask if you can share some thoughts on the potential implications of AI for MSCI, longer term? What are you doing today? What applications are you exploring actively? I know it's a broad question, but just would be interested to hear your thoughts here. Sure. Look, we're actively have quite a few projects going in AI across, you know, everything from client service, where we think it has great applications in reading our enormous amounts of methodology books and complex, you know, formulas and et cetera, and giving clear answers. We're working on it with it in ESG and all the data applications that can go there. I mean, there's a whole list of it, but we're extremely focused on it. You know, we'd love to tell you more clearly in a slightly different context, but we're definitely very focused on the use of AI across the business. Great. Thank you. It seems like fixed income is an asset class that is seeing a lot more interest from investors in this higher rate environment. I think you've got $79 million of run rate here. Can you just talk about which parts of MSCI that comes into and other opportunities to add more scale here since it's growing fast, but it's a relatively small part of your total business. Yeah. Yeah, for sure. It's both, you know, very important part in our analytics story, both on a standalone basis and as part of multi-asset class risk. We're really, you know, doing a lot of innovation in index. We're clearly starting from a tiny base. We've got some really, you know, exciting things going on there relating to ESG and climate, relating to liquidity. I am actually seeing a client this evening for dinner related to some credit and fixed income opportunities. We think it's, you know, it's an area where people are very excited to see, you know, us bringing things forward, and I think it will be a important part of our growth story going forward. Okay. Thank you. This concludes our question and answer session. I would like to turn the conference back over to Henry Fernandez for any closing remarks. Thank you for joining us this morning. As you heard José, our All-Weather franchise continued to perform well in this, you know, challenging operating environment. These are times when companies differentiate themselves. These are times of opportunity, you know, sometimes more than risks. That's what we are fully intending to capitalize on. We'll be more than happy to keep you abreast of all of that in future calls. Thank you very much again, and have a great day.