MSCI Inc. (MSCI) Q2 2011 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and thank you for standing by, and welcome to the MSCI Second Quarter 2011 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I'd now like to turn the program over to Edings Thibault, Head of Investor Relations. Sir, the floor is yours.

Thank you, Harry. Good morning and thank you all for joining our second quarter 2011 earnings call. Please note that earlier this morning we issued a press release describing our results for the second quarter and first 6 months of 2011. A copy of that release can be viewed on our website at msci.com under the Investor Relations tab. This presentation may contain 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, which reflect management's current estimates, projections, expectations or beliefs and which are subject to risks and uncertainties that may cause actual results to differ materially. For a discussion of additional risks and uncertainties that may affect the future results of the company, please see the description of risk factors and forward-looking statements in our Form 10-K for our fiscal year ending November 30, 2010. Today's earnings call may also include discussion of certain non-GAAP financial measures, including adjusted EBITDA and adjusted EPS. Adjusted EBITDA and adjusted EPS exclude the following: Third-party transaction expenses resulting from the acquisition of RiskMetrics; restructuring costs related to the acquisition of RiskMetrics; and nonrecurring stock-based expense. Adjusted EPS also excludes the amortization of intangibles resulting from acquisitions and debt repayment and refinancing expenses. Please refer to today's earnings release for the required reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measures and other related disclosures. Since we will be referring to run rate frequently on our discussion this morning, let me remind you that a run rate is an approximation at a given point in time of the forward-looking fees for subscriptions and product licenses that we will record over the next 12 months assuming no cancelations, new sales, changes in the assets and ETF licensed our indices or changes in foreign currency rates. Please refer to table 12 in our press release for a detailed explanation. Our chairman and CEO Henry Fernandez, will begin the discussion this morning with an overview of the second quarter. And then our Chief Financial Officer, David Obstler, will provide some details on our financial results. In the case of financial accounting metrics, the discussion will focus on pro forma results, which assume the acquisition of RiskMetrics occurred at the beginning of MSCI's 2010 fiscal year. Pro forma second quarter 2010 results reflect the combination of MSCI's historical fiscal second quarter ending May 31, 2010, with RiskMetrics first quarter ending March 31, 2010. Pro forma 6 months 2010 includes MSCI's results for the 6 months ended May 31, 2010, and RiskMetrics fourth quarter ended December 31, 2009, and first quarter ended March 31, 2010. All operating metrics as distinct from financial accounting metrics have been restated to reflect the company's results on a combined basis during the comparable period in 2010. That means all quarterly operating metrics reflect the calendar quarter or 6 months indicated rather than the prior fiscal period. I will now turn the call over to Mr. Henry Fernandez. Henry?

Thank you, Edings. Hello, everyone, and thank you for joining us. This morning we reported second quarter revenues of $226 million, adjusted EBITDA of $107 million and adjusted EPS of $0.47. For the first 6 months of 2011, we reported revenues of $450 million, adjusted EBITDA of $211 million and adjusted EPS of $0.90. Our second quarter revenues grew by 12% versus second quarter 2010 and our adjusted EBITDA rose 25%. Our adjusted EBITDA margin rose to 47.2% from 42.3%. Our adjusted EPS rose 34% versus the second quarter of 2010. From an operating perspective, MSCI benefited from solid overall sales and a continued and sustained improvement in retention rate. Our second quarter run rate grew by 17% versus second quarter 2010 and by 3% from the first quarter of 2011. Our subscription run rate, which as you know excludes the impact of our fast-growing asset-based fee business, grew by 13% year-over-year and by 3% sequentially. Total sales, which include recurring subscription sales as well as one-time sales, were $39 million in the second quarter, down 4% from last year. New recurring subscription sales were $30 million, a decrease of 10% from the second quarter of 2010. Our retention rate remained very strong during the second quarter, rising in each of our 4 largest product lines. MSCI's Aggregate Retention Rate rose to 92% from 89% in the second quarter of 2010 as cancellations fell by 18% year-over-year. The strength in retention rate speaks to the mission-critical nature of many of our products and is a testament to our efforts to invest in our client service organization. I would like now to discuss the performance of each of our 4 major product lines in more detail. Index and ESG products. Our index and ESG business continued its strong performance in the second quarter of 2011, with reported revenues of $103 million, up 21% from second quarter 2010 and a run rate of $398 million, up 26% year-over-year. Total index and ESG sales rose 9% year-over-year to $18 million. Recurring subscription sales were $14 million, down slightly from the very strong levels that we experienced in the second quarter of 2010. Cancellations continued to decline, falling 16% year-over-year and leading to an increase in our retention rate to 93% versus the 90% in the second quarter of 2010. The combination of strong sales and modest cancels boost our subscription run rate, which excludes asset-based fees, up 4% sequentially and 16% year-over-year to a total of $257 million. The growth in our index business in the first half of 2011 has been driven by strong demand for our core benchmark indices. While the strongest sales growth came from our emerging market indices, we also saw double-digit increases in sales of our developed market indices as well. Our clients also continued to expand their use of our indices and data within their organizations, which led in turn to strong growth in usage fees. During the quarter, we continued to be successful in our strategy of promoting the use of our All Country World Index, or ACWI, as a policy benchmark for pension fund and older asset owners, launching several more ACWI wins during the quarter. As a reminder, ACWI is a broad index covering 45 countries comprised of 24 developed markets and 21 emerging markets. During the second quarter, futures contracts based on the MSCI Emerging Markets and IFA Indices were migrated from the CME to the New York Stock Exchange Liffe platform. I am pleased to note that the transition of these 2 key contracts went very smoothly. We also continued to broaden our investment in the environmental, social and government, or ESG business, with the launch of 25 new ESG indices. These new indices reflect the combination of MSCI's deep understanding of the investment process and expertise in building indices with the world-class ESG research acquired in the RiskMetrics combination. Our new products should enable more institutional investors to implement a growing range of ESG investment strategies across the board. Our asset-based fee business of the index and ESG business remained a very strong engine of growth with second quarter revenues of $36 million and a run rate of $140 million. Most of the 48% year-over-year increase in our asset-based fee run rate resulted from the growth of assets under management in exchange credit funds linked to MSCI indices. At the end of June, there were $361 billion of assets under management in EPS linked to our indices, up $124 billion or 52% compared to June 30, 2010. The second quarter saw net inflows of $14 billion, offsetting a 1% decline in market value and marking the 13th consecutive quarter of positive inflows into EPS linked to MSCI indices. Net inflows to MSCI linked EPS rose 21% in the second quarter and are up 26% versus the first 6 months of 2010. That is a continued sign that the popularity of MSCI linked EPS continues to grow. Finally, our average basis point fee, excluding minimums, remained 3.2 basis points at the end of the second quarter, unchanged from the first quarter of this year. 47 new EPS linked to our indices were launched in the second quarter, bringing the worldwide total to 481 EPS. As a reminder, on the second U.S. business day of each month, we publish on our website the assets under management of EPS linked to our indices for the prior month. Those numbers were updated on Tuesday night of this week. At the end of July, there were $360 billion in AUM linked to our indices, about the same at the end of the second quarter, despite the turmoil in the equity markets around the world. Now on to our Risk Management Analytics business, or RMA. Revenues for RMA were $61 million, up 18% versus the second quarter of 2010. The RMA run rate of $249 million grew by 2% sequentially and by 24% year-over-year. Excluding the impact of the Measurisk acquisition done last July or July of last year, our annual run rate growth was 18%. Changes in foreign exchange rates, especially the strengthening of the Euro against the dollar in the quarter, also contributed $1 million to the growth in run rate versus March of 2011. Total RMA sales were $10 million in the second quarter, down 19% year-over-year. Recurring subscription sales were $9 million. As we have spoken about in the past in these calls, sales in the Risk Management Analytics business can be lumpy because of the impact that large dollar deals can have on the results of any given quarter. In the second quarter, we had fewer such large deals than in recent periods, which had an impact on the quarterly sales figures. In addition, second quarter sales were impacted by 2 other factors: First, we were disappointed by the level of sales into hedged funds. These customers appear to have turned more cautious in recent months and less willing to take on big new spending initiatives. The second issue is that we saw several deals primarily with pension funds take longer to close than we had expected. This second factor is primarily a timing issue. Some of these deals have already closed in this current quarter, and we expect others to close during the current quarter and the fourth quarter of this year. Cancellations in the RMA business increased year-over-year but remained at relatively low levels. The second quarter retention rate remained 92%. For the first 6 months of 2011, the retention rate has increased to 93% from 88% of the comparable period last year. Our business in Portfolio Management Analytics, or PMA, grew slightly on a sequential basis. Revenues were $29 million, and run rate rose 1% sequentially to $118 million. That is the second consecutive quarter of sequential run rate growth and another step towards returning this business to an acceptable level of growth. We had $3 million of recurring subscription sales in our PMA business in the second quarter, with the majority of that coming from sales of our risk models and data. Since the end of 2010, we have been relentlessly focused on protecting our existing client base from competitors, and those efforts have continued to pay off. Cancellations fell by almost half in the quarter and are down by 29% in the first half of this year. The Aggregate Retention Rate improved to 91% from 84% in the second quarter and to 90% from 87% in the first half. We are continuing to invest in the PMA business. In fact, we will be launching a new flagship U.S. equity market model on Tuesday of next week. This is the first of several new risk models we will be launching over the second half of 2011, and they incorporate cutting-edge analytical innovations that should cement Barra's status as a provider of high-quality and innovative quantitative risk models. We are excited to get these models into our clients' hands. We also remain on track to deliver major new functionality in our Barra Portfolio Manager platform later on this year to continue sales of that product. Finally, we are seeing some evidence that quantitative funds are beginning to outperform the overall market and some of our clients have made positive comments about the potential for a return to positive fund flows to this product class over the next 6 to 12 months. If that optimism by our quantitative clients is well played, it will be a welcome change in the overall operating environment for our PMA business. The Governance business also improved sequentially. Revenues were $31 million in the second quarter and our run rate expanded sequentially to $108 million driven by a combination of solid sales and a decline in cancellations. One of our major goals in the Governance business is to protect our existing client base and aggressively go after new clients. This strategy has began to bear fruit. Total Governance sales rose 18% to $7 million. Recurring subscription sales rose 17% to $4 million on the back of a strong gains in sales of our Proxy Distribution business in Europe. Cancellations declined 36% and the Aggregate Retention Rate for the second quarter increased to 90% from 86%. The Governance retention rate for the first half of the year increased to 88% from 85%. To sum up, MSCI reported a strong operating and financial results during the second fiscal quarter of 2011. Our combination of solid overall sales and an increase in retention rate across our major product lines drove strong growth in our run rate. Demand for our Index products was the biggest driver of growth. Our Risk Management Analytics business continues to grow but sales were softer than expected. Our Portfolio Management Analytics and Governance businesses continued to stabilize and their sequential growth in run rate is encouraging. Let me now turn it over to David for some additional comments regarding our second quarter financial results.

Thanks, Henry. MSCI reported revenues of $226 million in the second quarter of 2011 and $450 million for the first 6 months of the year. Second quarter growth was driven by organic growth of $17 million or 14% growth and the acquisitions of RiskMetrics and Measurisk, which added an additional $84 million. Compared to pro forma second quarter 2010, operating revenues grew by 12%. MSCI's revenue growths were driven by a 21% growth in index and ESG product revenues and an 18% growth in Risk Management Analytics revenues. These gains were offset by a 4% decline in Portfolio Management Analytics revenues and a 4% decline in Governance revenues. Also on a pro forma basis, subscription revenues grew by 10%. Asset-based fee revenues grew by 41% and nonrecurring revenues declined by 27%. On a pro forma basis, the Performance and Risk segment revenues grew by 15% year-over-year to $196 million in the second quarter. Governance revenues declined as I mentioned by 4% to $31 million. Overall, total pro forma adjusted EBITDA expenses, which exclude depreciation and amortization, nonrecurring stock-based compensation, restructuring costs and transaction expenses, rose by 2% year-over-year to $119 million. Pro forma compensation expenses, excluding nonrecurring stock-based comp, rose by 1% and non- compensation expenses rose by 5%. We generated $107 million of adjusted EBITDA in the second quarter of this year, a pro forma increase of 25% from the second quarter of last year. Our adjusted EBITDA margin expanded to 47.2% from 42.3% in the second quarter of last year. On a pro forma segment basis, the Performance and Risk segment adjusted EBITDA grew by 29% to $100 million and the adjusted EBITDA margin expanded to 50.9% from 45.6% in the second quarter of last year. Governance adjusted EBITDA declined 8% to $7 million and the margins fell to 24% from 25% in the same period last year. The sequential decline in our Governance margin was partially driven by a seasonally higher temporary labor costs necessary to process the volume of proxies in that quarter in the U.S. peak proxy season. For the first 6 months of 2011, we reported adjusted EBITDA of $211 million, an increase of 24% from the pro forma first 6 months of last year. MSCI's adjusted EBITDA margin in that period rose to 47% from 42.5% last year. Performance and risk adjusted EBITDA rose 27% to $195 million and Governance adjusted EBITDA increased 2% to $17 million. We incurred $13 million of other expense in the second quarter, most of which was interest expense related to our debt. Our interest expense declined sequentially as we realized the benefit of the reduction of interest costs resulting from the repricing and repayment of a portion of our debt during the first quarter. Lower overall debt balances also shrank our interest costs versus the first quarter of 2011. Our effective tax rate in the second quarter was 34.4% down from 36.6% in the year ago period. The tax rate benefited from several discrete items. Our year-to-date effective tax rate was 35.6%. Based on the actions taken to-date, we anticipate our full-year 2011 tax rate to be approximately 36%. GAAP diluted earnings per share for the period, for the second quarter, was $0.37 a share. Our adjusted earnings per share, which is a non-GAAP measure that excludes after-tax per share impact of restructuring costs, nonrecurring stock-based comp, amortization of intangibles, transaction expenses and debt repayment and refinancing costs was $0.47 a share, up 34% from $0.35 a share in the second quarter of last year. For the first 6 months, MSCI's GAAP diluted EPS was $0.64 a share. Our year-to-date adjusted EPS was $0.90 a share, up 36% from the comparable period. During the second quarter, MSCI generated $106 million of operating cash flow, up from $70 million in the second quarter of last year. Our operating cash flow for the first 6 months was $80 million, up from $55 million a year ago. Capital expenditures were $3 million in the second quarter and $7 million over the first 6 months of 2011. We ended the second quarter with $1.12 billion of total debt outstanding, of which roughly $420 million was swapped into fixed rate instruments. We also had $287 million of cash, cash equivalents and short-term investments on our balance sheet. Finally, our weighted average fully diluted share count was 122 million shares, up only slightly from the first quarter of this year. With that, we would be happy to take your questions.

[Operator Instructions] Our first questioner in our queue is Suzi Stein with Morgan Stanley.

Your retention rate in the Portfolio Analytics segment was very good this quarter. Can you talk about what's driving this and does this give you confidence heading into the second half of the year that you won't see a drop-off like you did in Q4 last year?

Yes. I think this is a business, Suzi, that is clearly stabilizing. We feel good where we are in that stabilizing cycle from declines of run rate and relatively higher cancels last year to a progression of return to growth and good retention rates. A lot of our efforts have been in blocking and tackling. I mean, we have put a lot of emphasis on those customers that are renewing in every quarter. We put a team together to make sure that the customers are using the product, that they're happy with what we're doing with them. We've been focused also as well in ensuring that if the customer's suffering from various issues or whatever, that we're flexible in our terms and conditions of our contract. With many customers we have actually increased the length of the contract from 1 to 2 or 3 years in order to create more stability with them. All of that is clearly reflected in the renewal rate and the like. So we feel pretty good about the retention and, therefore, we continue to be focused on that. But even more importantly, we are now focused on new sales, both with existing products and importantly the significant number of new products that we're going to be bringing to market in the next 12 to 18 months.

So just to be clear, are you cutting prices and lengthening contracts? Is that what I heard you say or did I misunderstand you?

No. I think that what we're doing is making sure that we maintain market share or increase market share in the business. And the way we do that is by a combination of factors, which is more service. We sometimes provide other products with the existing pay that they gave us. And in certain circumstances, we have declined -- we have decreased certain prices for people when the value proposition in a particular customer is not as we'd like it to be. But that's something we have been doing. This is not news at all. It is simply a continuation of what we've been doing for the last 3 years. So there's no new information. There's no new policies or anything like that in that approach.

And Suzi, to remind you, the retention rates are dollar retention rates. So all changes to contracts are included in that metric, which as you said was strong.

Okay. And you talked about the weakness in new sales. Can you talk about how much you think is related to timing versus how much is related to budget tightening?

In the RMA -- you're talking about the RMA business?

Yes.

Yes. In the risks business, as we say, the sales were softer than we had expected in the quarter. Pretty much all client segments were as expected with the difference being 2 of them, which is the Hedge Fund segment and the Pension Fund segment. On the Pension Fund segment, it's purely a timing issue. We have fairly healthy pipelines of pension funds wanting to put in a risk management system. And that's a market that we're fairly bullish about over the years and the future. In the Hedge Funds segment, there was a slowdown there. I think that there have been less launches of new hedge funds that have had the ability to spend money on high-end risk systems like the ones that we have. A lot of the flows of funds in that area have gone through existing large hedge funds that may already have a system from us. So what we're focused on is defining strategies to up-selling those larger customers and then figuring out other strategies to penetrate further the small and medium-sized hedge funds that may be needing assistance. I think on a mixed basis, clearly, the expected sales to hedge funds, that did not materialize, were clearly larger than the timing issues associated with the Pension Funds.

Our next questioner on our queue is from George Mihalos with Bank of America.

I just wanted to delve in a little bit more on the RiskManager sales as well. If we look at the total pipeline of your business, has that declined from Q1 levels? And also can you maybe just talk a little bit about the environment, U.S. versus Europe, what you're seeing there?

I think that the pipeline remains healthy pretty much across the board, as I said, with the exception of a weaker or softer pipeline in the Hedge Fund segment, which is not the majority of what we do but it impacts sales. The dialogue that we have with customers for Risk Management Analytics is very healthy, they're very strong. We also have quite a lot of trials going on and the likes of -- I think what -- that's one element, George. The second element is that there are -- the sales of this product line which are very different in this respect from other product lines have, at times, $1 million-plus sales from 0. I mean we clearly have renewals of contract in the Index business that are large, $1 million, $2 million, $3 million. But the net new is, at times, a few hundred thousand dollars as opposed to one lump $1 million or $1.5 million or $2 million. So therefore, when 1 or 2 or 3 of those million dollar sales hit the Risk Management Analytics business, it makes it a strong quarter. When you don't have that, it doesn't make it a strong quarter. We definitely have those kinds of million-plus deals in the pipeline, and it's just a question of when they close and all that. I think that overall certain client segments, it looks like hedge funds and maybe some of the banks, we haven't experienced that yet. But maybe people are more cautious given the operating environment that is going on. I think on a relative basis, the U.S. asset managers have been stronger than the European asset managers. I think hedge funds have been soft across the board, U.S. and Europe for sure. And on pension funds, we've been clearly more successful in selling pension funds in the United States, particularly, public pension funds, but we also have a good healthy pipeline of pension funds in Asia and in Europe.

Okay. Great. And just the overall sales environment outside of the RiskManager business, given the difficulties we've see in the market as of late, has the tone of your conversations with clients and potential clients changed at all in some of those other businesses, or is it sort of business as usual in your end?

I think except for those segments that I mentioned in Risk Management, I think the overall tone is healthy. The overall tone is good. At the very [ph] margin, you see that people are slowing a bit, some of them deficient. So it is not a change in whether they want to do the product or not. It just takes maybe one more approval, the cycle may be a little longer and the like. So we have not seen any major or wholesale change in mood in our clients, given the events in Europe, in the U.S. and, let's say, in China. But we're monitoring that very closely because I think some of those events are pretty recent.

Our next questioner in our queue is David Scharf with JMP Securities.

I'd like to follow up on the last question and response because quite possibly we are in a transitioning environment, it remains to be seen. But you've seen obviously a little bit of a pullback and lengthening of sales cycles potentially. When you think back to the I guess early, maybe late '08, early '09 period, kind of the onset of sort of the last downturn in the Investment Management sector, were there any leading indicators, kind of looking back on that period, that we should be focused on as we think about some of the moving pieces in this quarter and in the pipeline?

It's really hard. I mean it's hard to say. I think for one -- one indicator that I follow closely is in order to understand risk and the environment is the exchange through the fund business. And what you have seen in the EPS that are linked to MSCI indices is that week after week, you continue to see inflows into this EPS, even the risky ones, like in emerging markets and the like. And obviously they are partially or fully offset by declines in the market. If anything, from last quarter to now, the percentage of EPS that we have linked to emerging market indices versus developed market indices has increased by a tad, not by a lot, but maybe 1 or 2 percentage points in this play. So that continues to bode well, which means people are equitized. People are still invested in risky asset classes, like emerging markets and people continue to put new money into these products even though they're being offset by declines in the marketplace. So that's something that gives us some assurances. Secondly, on the overall Index business, we have very, very strong sales. Some of them abnormal in the second quarter 2010 in the Index business. So when you compare this quarter to that quarter last year, it's not a fair comparison but you see a very solid, strong sale of indices into the marketplace. But things are a little tighter. Customers are not yet -- we have not heard people saying we're reevaluating our budget. We're deciding to postpose decisions or we're deciding to cancel what we're asking you to do. We have not yet seen any of that. What you are seeing is simply people are distracted because, obviously, they're following events. People are taking a little longer to make decisions, a little more approvals here and there and the like. I would not blow too much out of proportion what's happening to us in the hedge funds. Some of that was self-inflicted because we had a lot of deliveries of systems that we had sold last year. And therefore a lot of our sales people were focused on that rather than selling. Secondly, we were not as focused in the mid hedge fund space with our sales people. And therefore we didn't optimize sales into that and the like. But the sales were weaker. No question about it. But it's hard to say completely, how much is the environment and how much was things that we didn't do totally correctly on our side. We clearly -- maybe entering new territories here with what's happening in the market yesterday and today and in Europe and in the U.S. But that is clearly very recent. So far we have not seen major significant changes in tone or in mood by our clients. We've just seen tightening of the margins, which obviously has had some effect on our sales.

Right and understandable. Lastly, can you just remind me the percentage of Index revenue that comes from usage fees that's actually tied to headcount? It's not a big number, is it?

The total run rate is, I think, 9%, 10%. It's not a big number. [Indiscernible] but the margin, it goes up by 10%. And this 10% on the total, that's 1% more sales, right?

All right. So that's 9%, 10% of index run rate is usage fees?

Yes, that's my guess. We can get back to you with that number.

Okay. So headcount, it obviously a little bit client based. It is not a material driver.

[Operator Instructions] Our next question on our queue is Michael Weisberg [ph] with Crestwood Capital.

Henry, maybe I missed it. Did you have a run rate number just for the Equity Index business, not combining it with the index funds? Did you show that number? I didn't see it.

The subscription portion of the Equity Index?

Yes, the run rate, I mean, it was $247.8 million in the March quarter.

It's $257.5 million, up 16.4%.

Great. Could you maybe talk about the integration of sales forces and how far along are you in trying to sell the existing risk space product and the new product and how each side is doing and how the sales force transformation...

Yes. Michael, we are pretty much done with the integration of RiskMetrics, the risk part of RiskMetrics and the risk part of MSCI. We're pretty much done with respect to the integration of the, sort of the administrative functions. We continue to now work on how do we grow from here in terms of better tools for the sales people, and in salesforce.com, for example, better financial analysis and planning in each one of the businesses that we're in. Those were not things that were part of the design or the plan or the integration of the 2 businesses. With respect to synergies, we're also largely done there. And if you notice that we didn't report that because we actually don't. We're not tracking them specifically anymore. We achieved what we said we would achieve. We're just moving forward now.

The integration of the sales forces, that we talked about, happened a year ago. And so the sales force is across geographies and in markets selling both products and has been for the last year.

Our next questioner in queue is from Roberts Riggs with William Blair. Robert Riggs - William Blair & Company L.L.C.: You mentioned some of the new product launches coming in the Portfolio Analytics business. Looking across your business lines, any other gaps or new opportunities that you see where you'd look to add products through acquisition or internal investments?

Yes. Our investment plans continue the impact [ph]. And you'll notice that in the quarter, I think we added 84 new people. Clearly our percentage of emerging markets continues to rise. So many of those people -- not all of them but many of them were added in emerging markets. On the PMA business, we are very much focused on strengthening and enhancing the sort of the library of risk models that we have across the board. We're working on 1 of 2 new models. But most of the effort is in launching the new generation of models with enhanced methodology, but in the existing market that we cover. And we're very much focused on creating a complete new software platform in Barra Portfolio Manager that has a huge amount of functionality to replicate the functionality that is in Aegis. I think that once we go beyond this in the next 12 months, we are already starting to plan for the development of a lot of new products, particularly models, in the portfolio management analytics space from statistical models and other models of that type, so that we can cover new markets, new scales and the like. So we feel pretty good about the Portfolio Management Analytics business and the turnaround that we make to that, and the very aggressive position that we got in the marketplace, the relentless focus on client retention and new sales, tightening up the internal organizational structure and a great team of people in research and software engineering delivering on a lot of new products. We don't see acquisitions there in the horizon. Most of our focus right now is organic growth. Even though the world economy and the world financial market is suffering dramatically from growth, for us, some of that is a little bit cyclical. The secular trend in our business are pretty powerful and, therefore, we're very focused on ensuring that we continue to invest in creating new products and the like in order to capitalize on those secular trends.

And at this time, I show no additional questioners in the queue. I'd like to turn the call back over to Mr. Fernandez for any closing comments.

Well, yes. Thank you very much for participating especially on a day like today. It's not easy, given the events out there in the marketplace, we feel pretty strongly that your company here continues to deliver on our marketplace and our promise and we'll talk to you on the ensuing days.

Thank you. Ladies and gentlemen, this does conclude today's program. Thank you for your participation and have a wonderful day. Attendees, you may disconnect at this time.