MSCI Inc. (NYSE:MSCI) Q2 2020 Earnings Conference Call - Final Transcript

Jul 28, 2020 • 11:00 am ET


MSCI Inc. (NYSE:MSCI) Q2 2020 Earnings Conference Call - Final Transcript


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Q & A

Thank you. [Operator Instructions] Our first question comes from Toni Kaplan with Morgan Stanley. You may proceed with your question.

Toni Kaplan

Thank you. The retention rate stepped down a little bit this quarter, but the new sales were very strong, especially in ESG and Analytics. And I think that's the opposite of what I would have expected just in the current environment. So you mentioned restructuring within client businesses. Just wondering if you're seeing that continue into the third quarter. And just any sort of extra color on the drivers of retention and new sales that you were seeing this quarter and if those are continuing. Thanks.

Baer Pettit

Hi, Toni, Baer here. So look, I think that the sales numbers reflect the positive actions that we were able to take in the quarter and the fact that we were really able to get up and running very strongly and continue our client outreach activities etc. So clearly, the pipeline for some of the items is -- it was longer. So I'm not suggesting that business was all originated within this quarter or the tail end of the previous one. But overall, the -- we found that we really had a pretty strong quarter for sales activity, and we continue to see that, and we're pretty pleased about it.

So when we look at the cancels, as we've mentioned a bit earlier in our comments, the -- a certain amount of those were more related to the current environment, as perhaps you had thought, notably a little bit on the -- notably on the hedge fund side with small or medium hedge funds and a few other categories. But the sort of restructuring of client business that we allude to were typically longer-term things. There were a few cases of both sell-side and asset manager clients removing themselves from certain lines of business.

And those things were not necessarily things that had occurred because of COVID or short-term market circumstances unlike the hedge funds. There were some structural cases. One example was a sell-side firm that had reduced a lot of its activities in equities, and similar things of that kind that were happening over time. And then additionally, as always, there are a few -- there's a -- I would say, those were the larger percentage and a smaller percentage of normal competitive type of things.

So looking forward, I would say that our -- there are two things, which are a little bit in contradiction to each other but not entirely. The first is, based on our current view of the pipeline, we do not have strong evidence that cancels will continue in a bad direction. We don't have that evidence, but I just want to reinforce that point. Equally, in view of the extraordinary circumstances we're in, which include the fact that the pandemic is certainly not over, unfortunately, in the United States. And while it appears somewhat better in other parts of the world, it could recur.

And the macroeconomic