MSCI Inc. (MSCI) Q1 2013 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the MSCI First Quarter 2013 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Edings Thibault, Head of Investor Relations. Sir, you may begin.

Thank you, Sam. Good morning, everyone, and thank you for joining our first quarter 2013 earnings call. Please note that earlier this morning, we issued a press release describing our results for the first quarter 2013, and a copy of that release may be viewed on our website at msci.com under the Investor Relations tab. You'll also find there, a slide presentation that we have prepared for this call. This call 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 MSCI's future results, please see the description of risk factors and forward-looking statements in our Form 10-K for our fiscal year ending December 31, 2012. 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: restructuring costs; and non-recurring 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 and pages 14 through 17 of the investor presentation for the required reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measures and other related disclosures. We will be referring to run rate frequently in our discussion this morning, so let me remind you that a run rate is an approximation at a given point in time of the forward-looking revenues for subscriptions and product licenses that we will record over the next 12 months, assuming no cancellations, new sales, changes in the assets and ETFs license to our indices or changes in foreign currency rates. Please refer to Table 7 in our press release for a detailed explanation. I will now turn the call over to our Chief Financial Officer, Bob Qutub.

Good morning. Thank you for joining us. Let me share some highlights from the first quarter before we dive into the numbers. Earlier this morning, MSCI reported its financial results for the first quarter of 2013. Our operating results were highlighted by 10% growth in our total revenues aided by recent acquisitions, continued growth in our subscription run rate and a strong growth in our adjusted earnings per share. Our index and ESG subscription run rate continue to be a strong driver of our growth rising 9.5% organically, and the recovery of our governance business also continues. Our asset-based fee revenues also grew, rising 6% year-over-year, as we continue to benefit from strong inflows into MSCI's ETFs despite the impact of the loss of much of the revenue related to the 22 Vanguard ETFs, which started to transition away from MSCI indices this quarter. After adjusting for the loss of Vanguard in both periods, this business would've grown by 15%. Our portfolio management analytics unit continues to struggle as we expected in the first quarter, down -- fell and, to a lesser extent, the impact for the weakening end continued to put pressure on run rate growth. Our IPD acquisition accounted for $8 million of index and ESG revenues in the first quarter. First quarter, though, is the seasonally lowest revenue quarter for that product line, and we expect second quarter revenues to be significantly higher. I'll touch more on that later. Finally, we continued our policy of a balanced capital deployment. We acquired InvestorForce, divested CFRA and repaid a modest amount of debt in order to lower our overall interest expense. Now let's get into the numbers. MSCI reported first quarter revenues of $252 million, up 10% from first quarter 2012. Adjusted EBITDA was $110 million, up 8% year-over-year, and adjusted EPS rose 30% to $0.57 per share. Net income was $59 million, representing an increase of 34% over first quarter of 2012. Our first quarter revenue growth was led by the performance in the risk segment, which reported revenue growth of $21 million or 11% driven by a higher growth in index and ESG, energy and commodity analytics and risk revenues, partially offset by a decline in CMA. On an organic basis, which for purposes of analyzing revenues, excludes the impact of acquisitions of IPD and InvestorForce, Performance and Risk revenues rose by 6%. In addition, you should note, the first quarter of 2012 was negatively impacted by a $5 million revenue correction in our energy and commodity analytics product line. Our governance revenues segments rose $1.5 million or 5%. When you take a look at our revenue growth by type, quarterly subscription revenues grew the most with $22 million or 12% over the first quarter of 2012, or 7% organically, and asset-based fees rose 6%. On a run rate basis, our total subscription business grew by 8% to $848 million. On an organic basis, which for purposes of analyzing our run rate, excludes the impact of the acquisitions of IPD and InvestorForce and the divestiture of CFRA, our subscription run rate grew by 3% led by a 10% increase in index and ESG subscriptions, 5% growth in governance and 3% growth in risk. Also, the volatile foreign currency market continued to have an impact on our hour growth, reducing our subscription run rate by almost $8 million year-over-year. Total sales of $40 million were down 7% from first quarter 2012. Our overall retention rate remains solid at 92%. On a sequential basis, our run rate grew by 1% organically, impacted in part by $6 million of the currency headwinds relative to the fourth quarter of 2012. Let's take a look at the performance of our 4 major product lines starting with our index and ESG subscription products. Revenues there grew by $13 million or 18%. On an organic basis, revenues grew by 7%. Before I go on to discuss index in ESG, I want to spend a moment on IPD. IPD contributed $8 million in revenues during the first quarter 2013, a number that we expected to be a seasonal low for the year. This is because one of IPD's major products consists of annual benchmarking reports, many of which are delivered in the second quarter, resulting in a strong seasonal tilt in revenue recognition to the second quarter. We expect second quarter revenues to be approximately twice those of the first quarter and we also expect second half revenues to be recognized more evenly over the final 2 quarters. The timing of revenue recognition has no impact on cost which, for the most part, are recognized ratably [ph] over the year. Index and ESG subscription run rate grew 24% to $344 million or by 10% on an organic basis, driven by growth in index benchmark products. IPD got off to a good start to the year, but some of that progress was offset by a $2 million negative impact on foreign currency changes on the run rate. As I begin my discussion of asset-based fees, let me remind you that we continue to reflect Vanguard revenues in our reported P&L along with the related AUMs as a measure of performance. However, we have adjusted our run rate, which is a forward-looking measure, beginning in the third quarter 2012 to reflect the loss of the Vanguard ETFs. Our asset-based fees benefited from a combination of solid performance and strong inflows in ETFs linked to MSCI indices, offset in part by the migration of some of the Vanguard ETFs to other indices during the quarter. Revenues rose 6% on the back of an increase in overall assets under management and higher revenues from non-ETF asset products. Asset-based fee run rates fell 2% year-over-year to $134 million as a result of the Vanguard loss. But if we also excluded the run rate attributable to the Vanguard ETFs run rate at the end of the first quarter 2012, our annual asset-based fee run rate growth would have been 17%. There was $357 billion of assets under management in ETFs linked to MSCI indices at the end of March 2013, flat year-over-year, and down 11% from the end of December. On that, $72 billion was in Vanguard ETFs and have yet to transition with $285 billion in non-Vanguard ETFs. Excluding the transitioning of Vanguard ETFs, our average realized fee on MSCI-linked ETFs was 3.6 basis points at the end of the first quarter. On the flow side, MSCI had another strong quarter. In total, MSCI-linked ETFs benefited from $22 billion of total inflows. $14 billion of those flows were worked into ETFs that we expect will remain linked to MSCI. Those flows were offset by the migration of $83 billion in Vanguard ETFs. When we report our monthly AUMs tomorrow morning, or tomorrow afternoon, on our website, we will report the impact of further migration in April of an additional 8 ETFs, with total AUMs of $28 billion as of April 16. That leaves only 5 Vanguard ETFs with AUMs of $45 billion as of April 26 that remain to be transitioned. Risk management analytics revenues rose by 5% year-over-year, and by 3% on an organic basis. Run rate rose $17 million or 6% and by 3% organically. RMA sales remained flat year-over-year, but ticked up slightly on a sequential basis. We did see an uptick in sales in Europe during the quarter, but that was offset by weaker sales in other regions. Overall, I would describe business trends here as steady during the first quarter relative to prior periods. Retention rates remained strong at 94%. It is also worth noting that foreign exchange rates negatively impacted RMA run rate by $2 million relative to the fourth quarter 2012. During the quarter, we completed the acquisition of InvestorForce. We're only 2 months along, but the early trends are positive. Our portfolio management analytics product line continued to face challenging conditions during the first quarter. Revenues fell 5% to $28 million and run rate fell 10% to $106 million. As was the case last quarter, the decline in run rate was also impacted by changes in foreign currency rates, which lowered the run rate by $2 million on a year-over-year basis and $1.5 million relative to the fourth quarter. Sales picked up slightly from a quarter ago but continued to like [ph] cancels. We did launch several new products, including a significant upgrade to our portfolio management software, but too early yet to see any impact from those products. Governance revenues rose 5% to $32 million as the recovery in the segment continues. Our run rate fell 2% year-over-year as a result of the loss of CFRA. And on an organic basis, which excludes CFRA, run rate increased 5%. Total sales growth slowed as we began to lap the rollout period of our new U.S. compensation data and analytics products, but retention rates remained strong, especially for our core proxy research and voting products and services. We sold the CFRA forensic accounting product line at the end of the first quarter, so we will start to feel the loss of the $10 million in annualized revenues during the second quarter. As noted earlier, it has already come out of our run rate. Let's turn next to expenses. Our adjusted EBITDA expense rose by 12% to $142 million with substantially all of that growth coming from higher compensation expense. Total compensation expenses rose 16% to $107 million. The growth in compensation expense was driven primarily by the acquisitions of IPD and InvestorForce and, to a lesser extent, by an increase in overall annual compensation levels for other employees. Our headcount rose to 2,844 from 2,465 a year ago, and the percentage of our workforce in low call [ph] centers remain flat at 41%. Non-compensation expense was flat in the first quarter of 2013 despite the acquisition. That's the outcome of the continued tight focus on trying to minimize expenses in this area, as well as the impact of not having to carry some of the double-rent expense in IT cost we incurred 1 year ago as we shifted on New York and Rockville office locations and reconfigured our data center strategy, as well as other cost benefits. Adjusted EBITDA rose by 8% to $110 million in the first quarter of 2013. Our effective tax range was 29.5% in the first quarter of 2013, down from 35.6% in the first quarter of 2012 and 36.3% for all of 2012. Our tax expense benefited from several discrete items, including a reduction in state taxes and the reinstatement of the 2012 R&D tax credit. Taken together, those items totaled up to a $3.8 million benefit to our quarterly tax expense. We continue to expect our full year effective tax rate to be in the 34% to 34.5% range. Now let's turn to our balance sheet and cash flow. We finished the first quarter with total debt of $829 million and a total cash position of $263 million, of which $69 million is held offshore. During the first quarter, MSCI generated operating cash flow of $71 million. We spent $5 million of that for capital expenditures and used $23 million to acquire InvestorForce. We also spent $26 million to repay debt in the quarter, which we anticipate should enable us to reduce the interest rate on our remaining term loan by 25 basis points under the terms of this facility. The $100 million accelerated share repurchase that we announced in December continues to be ongoing and the 2.2 million shares we withdrew at the time enabled us to lower our average diluted share count by 1% since first quarter 2012. That ASR program will expire no later than July of this year. Looking forward, we continue to expect our CapEx budget to be in the $30 million-$35 million range for the full year. Our schedule debt repayments for the balance of 2013 are now $33 million, and MSCI did not use any cash to buy back stock during the first quarter because of ASR, so we continue to have an outstanding repurchase authorization for up to $200 million worth of our shares that we intend to use over the stated[ph] time. Now let me turn over to Henry for some additional comments.

Thank you, Bob, and thank you, all, for joining this call. As Bob focused quite a lot on our financial results, I want to focus my remarks this morning on innovation, what are we doing to generate stronger growth on MSCI. Innovation has always been a very critical element to MSCI's success. In a slow marketing environment, like the one we have seen for the last several quarters, it is even more important and critical. MSCI has made significant investments in order to step up our level of innovation. Over the past 2 years, we've grown our headcount from 2,000 employees to more than 2,800 by making selective bolt-on acquisitions and a significant additions to our sales and client service team and our new product development efforts. And as you know well, those investments means people and headcount and the ability to create new products and services to our clients. Those investments are starting to pay off in the form of a steady stream of new products. So for example, to help equity managers worldwide, we introduced new momentum indices, rolled out new quantitative modeling -- models covering the North American and ETF markets, added new back-testing functionality to our portfolio manager platform and enhance our InvestorForce analytics. On the multi-asset class side, we launched a new performance attribution tool that will enable investors to better understand both the performance and risks of their multi-asset class portfolios using a common set of data and analytics. In addition, during the quarter, our governance unit rolled out QuickScore, a quantitative governance rating system covering U.S. public companies. We do not anticipate that any of these products will single-handedly lead to a significant increase in our sales over the next few quarters. That is really not just the way our business operates, and the nature of our business. But the total sum of all these new products is increasing, which should result in our products delivering a higher level of value to our clients and we expect, over time, a higher level of overall sales and, therefore, growth for our company. New products are the most obvious example of innovation, but we are innovating in other ways. Over the past few quarters, we have dramatically stepped up our level of activity in the index business outside the traditional benchmark subscription business. We have put in place a series of agreements with a worldwide network of derivative exchanges. These agreements will enable investors and traders to tap into a wide range of MSCI-linked futures and options, and centrally clear, structured products. We have increased our level of engagement with the managers or of [ph] the investors in ETFs. A lot of our progress here has been a little bit overshadowed by the Vanguard presentation. But as Bob indicated, we have seen very good traction in a number of MSCI-linked ETFs when compared to similar ETFs based on other indices. That is a powerful sign that given the choice between a competing index and those that are designed more directly addressing the investment needs and which link them to a broader family of global equity indices, many investors have opted for an MSCI-linked ETF. We're also investing in our governance business by increasing our sales efforts in order to take advantage of the demand for compensation data and analytics, not only in the U.S., but also outside of the U.S. in markets like the U.K. and Canada. A big focus of our innovation efforts is an initiative that we internally call, 1 MSCI. 1 MSCI starts with our strategic goal: To continue to build mission-critical, performance and risk tools for each major asset class and to be used by managers, owners and traders of this asset class. The primary focus of this 1 MSCI initiative is to deliver the full value of the MSCI platform, i.e., the data, technology, operational procedures and processes, research insight, our modeling capability, et cetera, to our clients in the form of new and enhanced products and also integrated products that add value to their investment process. So, for example, a client wants to know if the performance measurement and standards that we use for equity portfolio management tools are the same that we use for the equity part of our multi-asset class tools. We can show them the common elements, the inputs and the products that we create from those inputs, and the way we combine them to create tools for investment management, risk and performance, equity portfolio management and all other important processes that are mission-critical to our clients. To do so, we will need to continue to leverage even more our common platform and further integrate our businesses to create new products and enhance existent products with a unique set of data and tools that are delivered to them in a cost-effective manner. We have taken several steps to make the 1 MSCI initiative a reality. First, we have started to reposition our sales force so that they focus on integrated solutions for clients in addition to the historical product sales. Secondly, we are using our client service teams, spread around the world, to coordinate cross product approaches to the issues and the needs that our clients present to them. We call this ladder initiative, internally, the Client Experience. Most recently, we have instituted also a new client ownership management program in which we are assigning some of our most senior managing directors to our top accounts. This last step is critical. Our largest clients are major users of almost all of our product lines. So a major buyer of indices is also likely to be a major buyer of risk systems and/or portfolio management analytics from us. In fact, 9 of our top 10 clients are large clients in at least 3 of our product lines. By managing these critical relationships more closely and by working on solutions to their needs, we believe we can continue to strengthen the links between our products, create new integrated products, innovate more and make sure that our clients are getting the full value of our suite of products that we can deliver to them. And over time, we believe that this is going to add another layer of growth to our business. As you can see, we've been very busy. Our new product pipeline currently is as full as it has ever been in recent years. In the coming months, you will hear more about our new indices, innovative new risk capabilities, further upgrades to our software, and so on and so forth. With the acquisitions of IPD and InvestorForce, we have acquired products for which we think there is growing secular demand around the world. We will be investing in order to further develop and enhance those products and expand their distribution around the world. We continue to invest in our technology platforms, including the integration of our portfolio management and risk management platforms. At the same time, as Bob noted in his remarks, we're going to continue to keep a tight reign on expenses, especially non-compensation expenses. We have always been very disciplined on this front, so we expect to continue in that fashion. We will also continue to use our cash to bolster our returns and supplement our growth. You can see the benefits of that with our refinancing and the benefits we have on our interest cost. And of course, the more modest impact that our accelerated share repurchase have on our shares outstanding. All of that will continue. Let me end where we began. We reported strong financial results for the first quarter of 2013 with 10% topline growth, 8% adjusted EBITDA growth and 30% adjusted EPS growth. Our asset-based fees continue to demonstrate resilience and growth even as we go through the transition of the Vanguard fund. Despite a continued challenging environment worldwide, we remain focused on innovation, both in the form of new products, as well as the continuing emphasis on exploiting the full value that the MSCI platform can deliver to our clients. I want to stop there and turn the call over to the operator to take your questions. Operator?

[Operator Instructions] Our first question comes from George Mihalos of Credit Suisse. Georgios Mihalos - Crédit Suisse AG, Research Division: I wanted to start off on the RMA side. And specifically in the past, you've said that the pipeline for those services remains very, very robust. It's been an issue of actually converting that into sales. Can you provide a little bit of color again, as to how big the pipeline is, has there been any shift there? And is there anything different competitively in that environment, maybe over the last couple of quarters? That will be very helpful.

George, the -- everything remains very, very similar to what we've said in the past. The RMA business is a little more lumpy in its sales on a quarter-to-quarter basis than many other businesses. So, 1 quarter you're going to see significant sales relative to expectations, and the next quarter, maybe a little less relative to expectations. But the key to focus on clearly, not that quarter-to-quarter but are we still on track to certain level of growth in that business. The pipeline remains pretty healthy in this quarter, this current quarter that we're in and we feel pretty good about it and many of these segments that in the past have been a little bit weaker like hedge funds are coming back and the like. So we feel pretty good about it. Now again, it's lumpy and the like. In terms of competition, nothing really new have changed very dramatically. We still have a very good and leading position in this market. But clearly, there is competition and we deal with it and we go through the RFP process, we win most of those and we feel pretty good about where we are and where we're headed with this business. Georgios Mihalos - Crédit Suisse AG, Research Division: And maybe just -- to expand on that point a little bit, Henry. Any change in how you view the long-term growth potential of that business? And maybe any sort of way to frame what you think the long-term growth rate is within RMA?

Well, we don't forecast at this point, especially in this recuperating environment, where we think they're going to head longer term. But we continue to believe very strongly that the demand for risk management analytics, on the buy side and the sell side will remain robust. It's just a question of ensuring that we're in front of those clients, that they free up those budgets to be able to install these systems and put them in place. If anything, we're beginning to see demand not only in the U.S. and in Europe, which is where we've been strong, but we have also deployed a number of senior people and increase our sales effort and product development effort in Asia. And that is beginning to show some very good activity -- though, obviously, we'll have to translate into sales and the like. We also are very -- continue to be very bullish in this business because of the regulatory framework, either regulations directly forcing people to have risk systems or because of that regulatory scrutiny, a lot of our clients wanting to have a more robust risk management framework to address their worries by their own clients. So we begin to see that in the risk management system. The other thing is that the regulation of certain aspects of the hedge fund industry has allowed us to come up with a lot of new products that there will be -- we're selling into that space and that's part of the revival of the hedge fund business as well. Georgios Mihalos - Crédit Suisse AG, Research Division: Okay, great. That's helpful. Just a last question for me. Just maybe in broad terms, maybe what you're seeing in terms of the pricing environment. I think -- what we've seen in the past is that the only segment that seems to have had some pressure there would be on the PMA side. Anything different that you've seen over the past quarter or so, maybe as it relates to the other segments?

Nothing really different at all in terms of -- and the only segment that we have opted to do a small price increases have been index, as you know well. We could do it in RMA, but has adopted the policy that we only do it selectively, maybe in the future we'll change that, but that's where we are right now. One of the things that we have also done is scale our pricing to the value proposition. So in certain parts of the RMA business, the value proposition is very strong because you have large pools of money, needing risk management system, and therefore, pricing is going to strengthen there. And in the emerging manager segment, such as new hedge funds or -- and the like, we are pricing our products to be able to grow with them, so that we'll sell them a system that, over time, they pay us more. So that's an element as well. But in general, in terms of the overall picture, no major change on pricing.

Our next question comes from David Togut of Evercore Partners.

This is Rayna for David Togut. Could you tell us the drivers for your decline in your portfolio management retention rate?

Yes. There are a number of things in the portfolio management analytics. The first thing to always think about is the state of the end market. The end market for this product is quantitative equity asset managers and the quantitative support of fundamental managers, mostly loan-only equity managers. So both of those segments have been relatively challenged for years now. The quantitative part since 2007 and the fundamental -- the quantitative support of fundamental managers since the beginning of the crisis. So there have been quite a lot of costs focused on that, quite a lot of paring down of headcount and expenses and so on and so forth. So we have adopted a strategy of helping our clients manage their business so that we're there with them when things are tough, and we're there with them, and benefit when things grow. So quite a lot this past quarter, something like 80%, 85% of the cancels in the PMA business have been down sales to existing clients as they're renewing contracts in order to help them navigate their cost issues and with a promise that when things get better, we're going to ride it out with them. So that's happening as well. Obviously, they're still the competition issue that we continue to face, but that's nothing new there, it's pretty manageable and the like. And the other thing is that this business, we believe, that hopefully, will start turning around and growing with the addition of a lot of new products that will create better need -- fulfill better needs to our clients and we have especially in this year, quite a lot of new proposals, a lot of new models are coming to the market. This year, we'll probably add more models than we've added in the last 5, 7 years. We've recently launched a new version of the portfolio manager platform, which we're pushing pretty hard and so on and so forth. So I give you 2 answers. One is, why the cancel and the state of that business, and then, secondly, what we think we can do to revive it.

Thanks for the insight. And second is -- and my second question is, what are your capital allocation priorities for the next 12 to 18 months? Is a dividend a possibility?

I think right now -- this is Bob, we've indicated the $200 million share buyback is what we're focused on right now. Annually, we'll take a look at what our capital allocation policy will be. But right now, we're committed to the $200 million.

Our next question comes from Toni Kaplan of Morgan Stanley.

Just as a follow-up. How should we think about the trajectory of the retention rate and PMA for the rest of the year? I know first quarter historically has tended to be on the higher side.

I think it's too early to tell at this point. I mean, we -- you may remember 1 year or so ago, maybe 1.5 years ago, we felt good because the business has stopped sliding and then we've returned it to growth only to see it dip down again. So we need to be cautious about this business. We feel good that we believe, if you think about the entire book, the entire run rate of this business, we believe that most of it has been repriced to the realities of the end markets and the realities of the cost pressures and the competitive landscape. But we can't really tell you for sure, but we feel that on the cancel front, we will see surprises. But quite a lot of the larger part of the book of business has been managed appropriately and has been repriced. So we keep focus on retention, quite heavily, that's a major focus of ours. But we are now beginning to turn even more attention to the sales efforts of not only the existing products and the recently launched products but also a lot of these new products that I just mentioned. So we were cautiously optimistic that over the next few quarters, we can to stabilize this business and at some point, begin to grow again. But again, I don't want to predict again what's happening here until we see it all happen.

Okay. And then on the ETF side of the business, following the Vanguard move and then, recently, a couple of ProShares funds, not a lot of assets but, switching to FTSE. Could you talk about FTSE becoming a little bit more aggressive than they've been historically? Are they trying to undercut on pricing? And just what you're seeing there?

Well, there is no question that we have a predatory competitor out there, right, in FTSE? And they are aggressively trying to a lot of different things. But in reality, when we look at our entire relationships in ETFs around the world and our book of business, we feel very good about the leading and competitive position that we have both in terms of our tight relationships with ETF managers, but also the existing products and the new products that we're talking to them about. In the case of the ProShare, if funds that transfer to FTSE -- a couple of thoughts there. One is, they were not very big and obviously, as you know. But secondly and much more importantly, we have a very good relationship with ProShare and they did not want to make this move. But those funds were designed from the very beginning to be linked to the Vanguard fund, to be almost derivatives of the Vanguard fund. So as Vanguard switched the underlying index and their funds to FTSE, eventually, ProShares have no choice but to switch them. We do not think that there are too many of those products around the world, if any at all. So we believe this is a special case and -- particularly to ProShares. And they're sorry that, that is happening and we are as well, but we have a great relationship with ProShares.

Our next question comes from Chris Shutler of William Blair. Christopher Shutler - William Blair & Company L.L.C., Research Division: Could you first just walk us through your thoughts on pricing for '13 in the index business and what exactly is baked into your index subscription run rate?

We've already gone out with our standard pricing increases that are based on -- relative to the market, that will be reflected in the run rate. No significant change on a year-over-year basis. Christopher Shutler - William Blair & Company L.L.C., Research Division: Okay, that's helpful. And during the quarter in PMA, you launched the new version of Barra Portfolio Manager. I know that's kind of been a staggered rollout here over the last few years. Now that it sounds like that product is more complete, do you see evidence that client interest is increasing? Or any evidence that run rate could begin to improve there?

Yes. There are various goals that we have with Barra Portfolio Manager. The first goal is to ensure that those clients would like to migrate from a desktop-client-hosted solution, that is Aegis, to an MSCI-hosted ASP solution, which is Barra Portfolio Manager. So in some respects, that is a defensive move and may not translate into a lot of revenue, but should translate into high retention rates. The second goal is -- and by the way, there will be many clients that would want to continue to use Aegis, so that's also that we are preserving. A second goal for us is to expand the use case of the Barra Equity Models with not only the quantitative portfolio managers and the quantitative support fundamental managers but to begin to expand the universe of users to more lite-quant fundamental managers that will benefit from a tool that helps them understand the risk, the exemptive [ph] risk for their portfolio and helps them be able to optimize their portfolio and construct and manage their portfolio. So we're hoping to do that with this new software. We feel very good as the way it is now in this new version, which has significant back-testing capabilities. The buzz is very good around the industry. There are quite a lot of trials going on. But I think it's too early to tell whether this is going to lead to a lot of sales or not. We are being very thoughtful and very careful about the rollout of it in a way that it focuses on the first goal first of enhancing the Aegis revenue run rate and then, once we secure that, then begin to expand into new areas. So over time, for sure, we hope that it's going to lead to a lot of new sales. But I think the timing of that is still uncertain because our focus is on the first goal. Christopher Shutler - William Blair & Company L.L.C., Research Division: Okay. And then just final question. As I look at your website here recently, it looked like you have considerably more job openings right now than you did 1 year ago, and I was curious, what if anything, we should read into that as it relates to the comp for the remainder of the year?

Well, as I've said in my remarks, I mean, to us, innovation, it means investment and an investment is mostly people. So we're stepping up the headcount additions, mostly in emerging market centers purely, but some in developed markets. I want to continue to emphasize that we do all of this with a very keen eye on maintaining a tight grip on expenses in the company so that none of it has significant or meaningful effect on our profitability. We want to have the cake and eat it, too. We want to continue to grow and make investments at the same time that we remain a highly profitable company. And we've been able to do that successfully, including with this major opening that we have. Yes, we -- purely, the low-level [ph] openings are a little higher than it was last year because we're ramping up those centers around the world. And we started well in the first quarter, but we need to ramp up in the second and third quarter. And the implications of that are -- on the cost are, we think, they're highly manageable in the way that we've always done in the past.

Thank you. And at this time, I'm not showing any further questions. I'd like to turn the call back to management for any closing comments.

So just to conclude, a lot of our remarks, we feel good about where we are in the financial results given the environment. We feel good about the positioning of our company for further growth in the future, not only organic, but a little bit of bolt-on acquisitions if they come. And we feel good about the level of profitability and the capital allocation decisions that we have made. So all of that will continue. And we thank you for your interest in this call. Thank you.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program. You may all disconnect. Everyone, have a great day.