[Management View]
Key metrics, strategic priorities: MSCI Inc. reported strong financial performance in Q2 2025, with revenue growth of over 9%, adjusted EBITDA growth of over 10%, and adjusted EPS growth of almost 15%. Free cash flow exceeded $300 million. The company highlighted record-breaking ETF-linked AUM and sustained growth in asset-based fees as central to its growth model. New product launches, particularly in private capital and climate data, have contributed to differentiated sales opportunities and client engagement.

[Outlook]
Performance guidance, future plans: MSCI Inc. expects expense guidance to remain unchanged across all categories, with results likely to fall toward the middle of the guidance range if AUM levels remain near current highs. The company continues to prioritize product innovation and strategic client reclassification, aiming to accelerate non-active subscription growth over time despite current visibility challenges.

[Financial Performance]
YoY/QoQ trends compared to expectations/estimates: Total run rate grew 11% in Q2 2025, with record AUM levels in ETF products linked to MSCI Inc. indices. Asset-based fee run rate grew 17%, driven by index-linked products. Indexed equity ETF AUM linked to MSCI Inc. indices surpassed $2 trillion for the first time. Analytics subscription run rate grew 8%, marking the strongest ever Q2 for recurring sales and net new sales.

[Q&A Highlights]
Question 1: Did Apple Intelligence drive sales of the iPhone 16 series? Which features are most popular with users?
Answer: In markets where Apple Intelligence was introduced, the iPhone 16 series outperformed markets where the feature was not introduced. Users used features such as ‘Writing Tools,’ ‘Image Playground,’ and ‘Genmoji’ extensively, especially the ‘Clean Up’ feature. The ‘Clean Up’ feature received a lot of attention in Apple Store demos. Apple Intelligence is also continuing to expand language support, which is expected to further enhance user experience and demand.

Question 2: Henry, you talked a lot about your asset manager base kind of staying stable in that mid-single-digit growth range. It sounds like, for you guys to get back to faster growth, you need to get that growth accelerated again. And I was just wondering, based on your conversations, clearly, budgets, spend, etcetera, is tight there. Like, is it innovation, or how do you think you can get that piece of the puzzle growing faster again?
Answer: The crux of the question on the subscription business is that 50% of active asset managers are growing at a little over 6%, while the other 50% is growing at 11.5%. To accelerate total subscription run rate, the non-active asset managers need to grow faster. MSCI Inc. is creating new products and reallocating salespeople to these client segments. The fast money segment, including banks and hedge funds, shows promise due to their reliance on the indexed AUM ecosystem. The wealth segment grew over 17%, and asset owners grew over 12% in the last quarter. However, the active asset management industry remains challenged with outflows, cost pressures, and consolidation. MSCI Inc. is focused on maintaining and enhancing retention rates and creating new products to support active asset managers, including active ETFs.

Question 3: Maybe this sort of dovetails on the last part of the last question. But just hoping to get an update on consolidation that you're seeing and how much that you're aware of will impact your results in sort of the upcoming quarters if there's any way to sort of quantify that and talk about if you're seeing that trend maybe start to dissipate or if that's an ongoing thing that we should expect over the next number of quarters?
Answer: Consolidation is a secular trend, but MSCI Inc. is not overly concerned about its acceleration. The industry needs to transform, with a significant shift from non-listed mutual funds to various types of ETFs, including active ETFs. This transformation is expected to create growth opportunities for MSCI Inc.

Question 4: I just wanted to focus on the retention, which was a bit soft, overall level, particularly on analytics and sustainability. I was wondering any color on that front. And as we think about the rest of the year, any puts and takes on retention going forward?
Answer: Retention rates can be lumpy quarter to quarter. In Q2, lower retention in analytics and sustainability and climate was driven by client events and financial budget pressures. Hedge funds and corporate advisors were primary sources of increased cancellations. Retention rates in real assets and sustainability and climate have been lower compared to 2022. However, retention rates with asset managers remain solid at around 96%.

Question 5: I do want to go back to the sales environment in the second quarter and also far in the third quarter. I think it was $44 million in the second quarter and down a little bit year over year. But I do think you had a one-off item in the second quarter of 2024. So if you can unpack a little bit more on the sales environment and the outlook, that will be great.
Answer: The second quarter of last year had a meaningful contribution from the Moody's ESG partnership, which was not present this year. The markets were volatile in the first half of the second quarter, leading to cautiousness from clients. However, the markets are now hitting new highs, benefiting the ABF side. Overall, the sales environment remains consistent with recent quarters, and sustained favorable market dynamics could be constructive for MSCI Inc.

Question 6: Maybe you could just help us puzzle in the various moving pieces here and understand a bit more, especially with Henry's comments to lead off the call. If asset managers are going to remain tricky, does that mean that sort of that 10% revenue low double digits, excuse me, ABF revenue growth target is sort of now a bit of a stretchier target. And then I have a follow-up question on that as well.
Answer: MSCI Inc. sees significant growth potential in asset-based fees (ABF) due to the trend towards systematic investing in various forms, including ETFs. The subscription business, which is half dependent on active asset managers and half on other client segments, also shows promise. The non-asset management client segments, such as wealth management, private assets, and climate solutions, present enormous opportunities for growth.

Question 7: I wanted to ask about the demand environment for custom indexes. Because there was a slight slowdown in custom indexes subscription sales. And I would have thought that given the Foxbury acquisition and some of the technology advancements that you've talked about, that we could see potentially accelerating growth. So just wanted to hear more about what's going on there.
Answer: The outlook for custom indexes remains positive, with no fundamental change. The slight slowdown in subscription sales is attributed to specific deal timing. MSCI Inc. continues to build out capabilities and sees custom indexes as an important growth opportunity.

Question 8: Henry, I'm glad you mentioned active ETFs a few times in prepared remarks and in the Q&A. What we really see is there's been a wave of active ETF launches globally since the start of 2024, and a lot of them are based in the US. I understand it's a very big market for MSCI Inc., but maybe not the strongest market. So just curious to hear more about how MSCI Inc. is positioned with active ETFs and if you could talk a little bit more about the economics of the products and services you provide there, that would be really helpful as well.
Answer: Active ETFs present a significant growth opportunity for MSCI Inc. The company engages in dialogue with active asset managers to support various active ETF strategies, ranging from enhanced indexation to unconstrained stock picking. MSCI Inc. provides data, benchmarks, and investment theses to support these products. The company sees strong interest in active ETFs globally, including in the US and Europe.

Question 9: Andy, I wanted to ask you, what's sort of the puts and takes here? How we should think about getting to the high end of your outlook for cost for the year? Versus getting to the low end of the guidance range there? And then with that, if you could answer the question, please. About I think three months ago, you guys said you were assuming stock markets would gradually increase over the course of the year. Obviously, these last three months, they were quite strong. What are you guys assuming right now as for your base case you think about your internal investment spending and cost overall? Thank you.
Answer: MSCI Inc. is continually calibrating the pace of spend based on various factors, including market conditions. If AUM levels remain around current highs, the company expects to come in toward the middle of its expense guidance ranges. There are other factors, such as business performance, FX movements, comp adjustments, and severance, that also influence expense growth.

Question 10: I wanted to touch on some of the emerging growth opportunities, in particular fixed income and wealth management and seeing the run rate growth accelerate, up to the high teens this quarter versus last? And just wondering how you guys kind of view the sustainability of those growth rates as we look out over the near to medium term here.
Answer: MSCI Inc. is pleased with the results in fixed income and wealth management, with run rate growth in the high teens. The company continues to invest in capabilities and go-to-market strategies for these areas, expecting sustained growth rates in the near to medium term.

Question 11: Totally hear you on the asset managers and the steady growth there. One of the other areas of opportunity, just that you had mentioned was on hedge funds. And I was surprised to hear the subscription run rate growth continue to decelerate. I think it was 12% this quarter. It's, like, 14 or 15 the past few quarters. Can you just unpack about what's driving that deceleration?
Answer: The hedge fund segment is inherently lumpy and tends to run at a lower retention rate. The current quarter saw a client event-driven cancel on the index side, affecting growth rates. MSCI Inc. continues to see strong momentum in equity models and index content for hedge funds, with ongoing innovation and opportunities in the fast money community.

Question 12: Hi, thanks. Good morning. Henry, you talked about a goal of accelerating your non-active subscription growth beyond 11.5% by creating new products and relocating sales and consultants into this segment. Can you comment on how long it would take to see meaningful acceleration here based on these initiatives? And how much faster non-active subscriptions can grow?
Answer: The non-active subscription growth initiatives are expected to show results over time. MSCI Inc. sees significant opportunities in the fast money segment, wealth management, private capital solutions, and climate solutions. The company is prioritizing these areas and expects meaningful acceleration as new products and business plans are rolled out.

Question 13: You touched on this briefly, but can you maybe give some more color on how adoption is trending for private capital solutions in the US and also internationally where I think you're more underpenetrated and what you're doing to grow that adoption. Thank you.
Answer: MSCI Inc. has been integrating datasets, technology, and people from the Burgess acquisition and ramping up AI for data capture. The company is now focused on expanding the business with new product developments and business plans. There is significant interest from asset managers in private assets, and MSCI Inc. is working on providing transparency and liquidity solutions to support this demand.

Question 14: Could you talk about how you're thinking about the pricing environment as you begin having conversations with your clients? Especially more so now since the macro is still uncertain. Just sort of what the conversations are like, and are there any areas where people are more not as receptive compared to prior years?
Answer: MSCI Inc.'s approach to pricing remains consistent, aligning with the value delivered to clients and ongoing enhancements. The contribution of price increases to new recurring sales is roughly in line with recent quarters. The company continues to calibrate pricing based on the inflationary environment, client health, and other factors.

Question 15: You mentioned earlier you're not relying on partnerships with the GP for private fund data. But if I'm not mistaken, you are restricted from selling aggregated LP data without GP permission. So can you update in your thinking here any progress with GPs around opening up on the data side? What products you might be able to offer to GPs that would drive greater engagement and growth from this potential customer base?
Answer: MSCI Inc. captures data from GPs through LP instructions, but the data is proprietary to the GP. The company can aggregate and anonymize data for broader use. Discussions with GPs are ongoing to liberalize data rights for wealth managers and smaller LPs, driven by the GPs' interest in capital raising from these segments.

Question 16: Just on the asset-based fee side, the ETF licensing yield has been quite stable for a few quarters now. Has there want to check-in on what you're seeing around pricing trends of ETF issuers. Do you think we're more stable from here on? And are also asset-based fees quite stable on the or yields quite stable on the non-ETF passive side too? Thank you.
Answer: ETF licensing yields have been stable for several quarters, with a small impact from contractual fee changes and positive mix shift from international markets. MSCI Inc. expects fees to gradually come down over time but sees significant secular growth opportunities in ABF. Non-ETF passive fees have also been stable, with strong traction in non-market cap weighted products and custom index mandates.

Question 17: Your largest client is out there saying that their MSCI Inc. World backed product, and I'm gonna quote, is the darling of ETF savings plans in Europe. Do you guys foresee sort of the ability for the MSCI Inc. World maybe over the course of the next, I don't know, decade to look a bit like your competitor has here in the US, where you sort of have that deep ecosystem? Is that something you guys are actively trying to build towards?
Answer: MSCI Inc. sees enormous potential in global benchmarks like MSCI Inc. World and MSCI Inc. ACWI as foundational portfolios for global exposure. The company expects these benchmarks to play an increasingly larger role as the world continues to globalize, particularly in the capital markets.

[Sentiment Analysis]
Tone of analysts/management: The tone of the analysts was inquisitive and focused on understanding the growth potential and challenges in various segments. Management's tone was confident and optimistic about the company's strategic initiatives and growth opportunities, despite acknowledging some industry challenges.

[Quarterly Comparison]
| Metric | Q2 2025 | Q2 2024 |
| --- | --- | --- |
| Revenue Growth | 9% | N/A |
| Adjusted EBITDA Growth | 10% | N/A |
| Adjusted EPS Growth | 15% | N/A |
| Free Cash Flow | $300 million | N/A |
| Total Run Rate Growth | 11% | N/A |
| Asset-Based Fee Run Rate Growth | 17% | N/A |
| Indexed Equity ETF AUM | $2 trillion | N/A |
| Analytics Subscription Run Rate Growth | 8% | N/A |

[Risks and Concerns]
Risks and concerns content: Management noted ongoing client budget constraints and episodic deal lumpiness impacting retention and sales metrics, particularly in analytics and hedge fund segments. The sustainability and climate segment remains challenged, with muted demand and slower sales. Consolidation in the asset management industry is a secular trend that could impact results.

[Final Takeaway]
MSCI Inc. delivered strong financial performance in Q2 2025, driven by record ETF-linked AUM and sustained growth in asset-based fees. The company continues to innovate and expand its product offerings, particularly in private capital and climate data. While the active asset management industry faces challenges, MSCI Inc. is focused on accelerating growth in non-active client segments. The company's strategic initiatives and diversified revenue base position it well for long-term growth.