Good day, ladies and gentlemen, and welcome to the MSCI First Quarter 2015 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. As a reminder, this conference call is being recorded. I would now like to turn the call over to Mr. Stephen Davidson, Head of Investor Relations. You may begin. Stephen C. Davidson - Managing Director & Director-Investor Relations: Thank you, Abigail. Good day and welcome to the MSCI first quarter 2015 earnings conference call. Earlier this morning, we issued a press release announcing our results for the first quarter 2015. A copy of the release and the slide presentation that we have prepared for you for this call may be viewed at msci.com under the Investor Relations tab. For the earnings presentation today, we have tried to make the information more additive to avoid repeating information that can be found in our release. So, we are happy to take your feedback on this different approach. Let me remind you that this call may contain forward-looking statements. You are cautioned not to place undue reliance on forward-looking statements, which may speak as of the date on which they are made. For a discussion of additional risks and uncertainties, please see the risk factors and forward-looking statements in our most recent Form 10-K and our other filings with the SEC. During today's call, in addition to GAAP results, we also refer to non-GAAP measures including adjusted EBITDA, adjusted EBITDA expenses and adjusted EPS. We believe our non-GAAP measures are more reflective of our core performance. You'll find a reconciliation to the equivalent GAAP term in the earnings materials and an explanation of why we deem this information to be meaningful, as well…

(12:20) model. Henry A. Fernandez - Chairman, President, Chief Executive Officer & MD: If we turn to slide 7, here we showcase our factor indexes, also known in the industry as smart beta indexes which are a key driver of our future growth. We have invested considerably in our factor indexes over the last year or two by bringing together our extensive equity index and equity risk model research capabilities and combining them with our wealth of data of over 40 years of Barra Factor data history. This unparalleled expertise is what differentiates us in our factor offering from our competitors. As a result, we have developed one of the leading factor index and factor risk model franchises in the world. Asset owners really get the best of both worlds as shown on the left side of the slide. They get the advantages of active management where they have the opportunity to outperform the market over long periods of time due to these factor indexes. And that is combined with the advantages of indexation or index investing where you have transparency and lower costs. This has resulted in a strong growth in factor-related AUM for us as shown in the upper-right chart. Active and passive AUM benchmark to MSCI Factor indexes grew 29% year-over-year. Included in these numbers is ETF AUM, and institutional passive AUM, and AUM related to clients who pay us subscription fees for data. This latter category is not required to report their AUM to us. So, there is an element of estimation of the AUM these customers have in their assets linked to our indexes. In the lower-right chart, we show the 67% year-over-year growth in the quarterly run rate related to factor indexes. We're also leveraging our research capabilities to assist ETF providers in launching…

Thank you. Thanks, Henry, and good morning to all of you on the phone. Please turn to slide 12 for a brief overview of our financial results. Our results this quarter were strong with 10% revenue growth and adjusted EBITDA expense growth of 8%, driving 11% growth in adjusted EBITDA, and a return to positive operating leverage which is well in advance of our second half 2015 commitment. Our adjusted EBITDA margin increased 67 basis points from the prior year quarter to 41%. Our net interest expense for the quarter now fully reflects the quarterly impact of our bond issuance in the fourth quarter 2014. The higher-than-expected tax rate was driven by an increase in operating profits in higher tax jurisdictions, but we continue to guide to an expected 35% to 36% effective tax rate for the full year 2015. Adjusted EPS was up 9% to $0.50 per share, benefiting from a 4% decline in the weighted average shares outstanding year-over-year and stronger operating results. The increase in share count compared to the fourth quarter reflects the impact of stock-based employee compensation in the first quarter. Before moving to the next slide, I wanted to comment on the impact of FX on our results. As we previously indicated, foreign currency fluctuations have been a headwind for our subscription revenues and run rate. The headwind had been mitigated by a significant portion of our expense base that is denominated in foreign currency. As a result, the net impact of foreign currency fluctuations on our earnings was not material in the quarter compared to a year ago. This framework, however, does not reflect the impact of foreign currency fluctuations on the underlying assets held in AUMs-linked to MCSI indexes which is the basis for asset-based fees. To a large extent, foreign currency…

Thank you. Our first question comes from the line of George Mihalos with Credit Suisse. Your line is open. George Mihalos - Credit Suisse Securities (USA) LLC (Broker): Hey, guys, thanks for taking my questions. Henry and Bob, you guys – you did a nice job sort of segmenting the businesses going into a lot of detail. You mentioned several times you're not pleased with where the analytics business is presently. I'm just curious, as you think of your subscription run rate business on the index side, which is sort of – call it a low double-digit grower from a run rate perspective. Where do you ultimately think with the investments you've made that you can take the analytics business to relative to that growth rate in index? Henry A. Fernandez - Chairman, President, Chief Executive Officer & MD: Yeah, George. First of all, I think we have made tremendous progress in returning the equity analytics products to growth. If you see the growth in run rates there excluding the impact of foreign exchange fluctuations, we are in the 7% or so, 6%, 7% growth category. And it continues to feel good because we have launching a lot of new risk models that were selling well, as I mentioned. The Barra Portfolio Manager analytical application is complete and now really getting into strides for sales. And obviously, the negative overhang that we have is the ESG product line that is shrinking. And obviously, a large part of that shrinking is going to BPM, and we're trying to encourage customers to move there. So, that is a fairly good indicator of continued growth; all of that is a fairly good indicator of continued growth in the equity analytics line. And we expect that in the coming quarters and coming couple of years that that equity analytics growth rate and run rate will continue to increase. We have to see how far it goes, but we are pretty hopeful that will continue to increase through the high single digits and maybe at some point get to the low teens, right? So, I think on the risk analytics product line, we are clearly lower in run rate growth there when you exclude foreign exchange fluctuations. I think we're about, what, 5%, Bob, or something like that?

5% to 6%... Henry A. Fernandez - Chairman, President, Chief Executive Officer & MD: 5.5-or-so percent growth in the risk analytics product line, excluding foreign exchange fluctuations. And we're hoping that given the refocusing on the business, the streamlining of the teams that we're going to have a similar progression to what we did with equity analytics. First, getting it to the high-single digits and maybe eventually getting into the 10%, 11% range. But at this point, it's too early to tell when that will happen. Those are our expectations. And very importantly, also we're very focused on the cost structure of all of this. They're fairly profitable, but we like them to be even more profitable. So, we're focusing on combining functions, combining cost, combining technology, combining a lot of things so that we can expand the margins of this product line. George Mihalos - Credit Suisse Securities (USA) LLC (Broker): Okay. I appreciate that color. And then, just a point of clarification, you sounded a little bit more encouraged about your sales. Some of them may have slipped from the first quarter into 2Q. Should we be assuming that on the RMA side, you are likely to post a sales number in 2Q higher than the $10 million in Q1? Henry A. Fernandez - Chairman, President, Chief Executive Officer & MD: Hard to tell at this point. I will say that – the comment that we made was that that we had a couple of larger deals that just slipped by a few days, the end of the quarter and therefore, the carryover into the second quarter. We obviously have to continue to work the pipeline in the second quarter and if everything closes in the way we would like it to be there, it'd be a good quarter. But we may have again two or three larger deals at the end of the second quarter that slipped into the third quarter, and so on and so forth. So, I think importantly, the way to think about risk analytics right now is without the actions that we are taking, our sales are kind of trading in that range. And what we're trying to do by the actions that we want to take that we are taking is to try to break out of that range into a higher amount of sales. And we'll be able to update you more where we are on that by the next call. But your expectation should be that we're in that sort of narrow range of sales per quarter of the risk analytics and it could be plus or minus, which is fine, but what we're trying to do is break out of that range to a much higher number. George Mihalos - Credit Suisse Securities (USA) LLC (Broker): Okay. Thank you.

Thank you. Our next question comes from the line of Toni Kaplan with Morgan Stanley. Your line is open. Toni M. Kaplan - Morgan Stanley & Co. LLC: Hi. Thanks for taking my questions. Just to follow-up on risk management analytics, can you just talk about the market environment there? Basically, are the challenges that you're seeing market-related as well as just company-specific? And when customers aren't using RiskManager, are they going to competitors or are they not using any products? Henry A. Fernandez - Chairman, President, Chief Executive Officer & MD: Yeah. So, Toni, the large majority of our clients, when they don't buy from somebody like us, they're not necessarily going to a competitor. It just means that the product or the functionality that they're looking for does not exist or doesn't exist in the way they wanted it, and therefore, they sit and wait, or they try to sort of patch things together internally in a sub-optimal fashion. So, now we want to continue to move forward the state-of-the-art in multi-asset class risk management and performance management analytics. And that's – because we believe that there is a fairly large feel here to help fulfill a lot of needs that people have to take a whole scientifically of their portfolios and understand on a more timely and more scientific basis what's happening with those portfolios, those total (44:16) portfolios and multi-asset class portfolios. I think the – going back to your first question, I attribute a meaningful part of our – when you look at it globally, a meaningful part of our slower growth to the fact that over the last two years or so, we have been really focused on upgrading the technology platform, including the data centers, making sure that our resilience was high, making…

Not comparable, Toni. This is Bob. We had significantly reduced inflows. We had positive inflows. Recall in the fourth quarter, a significant portion of inflows flowed into the U.S. You saw it in S&P and you saw in the first quarter a lot of it flowed out. Total flows in the ETFs were $53 billion. We captured $32 billion of it which is 60%. So, you can see some of the tone in there which was interesting, continued inflows into factors, which is $4 billion. But the interesting piece was we saw currency-hedged ETFs become popular in the first quarter given all the FX volatility. That's not necessarily a new product for us. That was something that we had in our tool kit and our investors were prepared to use and offer that to their clients and their investors. So, not comparable, back to your first question but... Henry A. Fernandez - Chairman, President, Chief Executive Officer & MD: The methodology is comparable.

Methodology. Henry A. Fernandez - Chairman, President, Chief Executive Officer & MD: Yeah. The methodology is comparable. It's just that the – where the money flows is different, right, Bob?

Correct. Yeah. Henry A. Fernandez - Chairman, President, Chief Executive Officer & MD: Yeah. So, I think in a nutshell, when – we're strongest around the world, developed markets, emerging markets and the like. So, when you see major flows of assets going to a lot of markets around the world, developed, emerging and the like, we benefit significantly. When you see a lot of flows going into the U.S., we do have a lot of U.S. products. So, we see inflows in those U.S. products. But relative to some of our own competitors and relative to the strength that we have around the world, you don't see as large amount of inflows. And the second part is that we're benefiting from factor indexes, obviously a lot of money going into there, as Bob indicated, and we're benefiting from the strong dollar, and people wanting investment products that are hedged against the dollar, right? So, that's what's happening, right? Now, look, this can reverse, right? If you see a huge amount of money flowing back to the U.S. at some point, we'll continue to get a major, a meaningful share of the flows because this is a category that is growing, but it may not be 60%, may be lower. Toni M. Kaplan - Morgan Stanley & Co. LLC: Thank you.

Thank you. Our next question comes from the line of Chris Shutler with William Blair. Your line is open. Christopher Shutler - William Blair & Co. LLC: Hey, guys. Good afternoon or good morning. On the non-cash charge, Bob, I'm just curious to get some more details on exactly what the project was that you discontinued and what the new direction is that you're going in.

Sure, Chris. We were focusing in on working on bringing together our product lines in the risk management analytics area, and that has been going on internally. So, the accounting convention that is capitalizing internally developed software cost, $2.9 million of that was compensation, $0.5 million was non-compensation. As Henry pointed out, we reached to the point where, yes, we could still continue to achieve sales. It's probably better. There's a better way to look at the platform as we combined the analytics, so we made a decision that this was not the highest and best use of where we focused our attention, and now we're looking at a new platform going forward. So, again, it was an accounting charge, previously deferred costs that were related to an analytics technical project. Christopher Shutler - William Blair & Co. LLC: But what is the difference between the old platform and the new platform? I hope you can be any more specific there. Henry A. Fernandez - Chairman, President, Chief Executive Officer & MD: Yeah. Let me try that, the challenge that we're facing at the company is that we have a few analytic application platforms that are – as a result of our own sort of growing and as a result of the acquisitions that we made, right. So, if you think about we have the RiskManager platform that came with the RiskMetrics acquisition and that supports a large number of use cases and significant amount of run rate. And then you have the BarraOne Technology platform that also has a lot of risk multi-asset class risk management capabilities, some fixed income portfolio management capabilities and some equity portfolio management capabilities and you have Barra Portfolio Manager platform which has a lot of equity portfolio management capabilities and is dealt on top of the BarraOne platform. So, what we're trying to do is in order to satisfy the convergence that clients have or need of having a much more integrated content and application that unites the risk management function, the equity portfolio management function and the fixed income portfolio management function into one consolidated approach. We've been taking – instead of trying to rebuild the whole thing which is not a good thing, we have been trying to come up with various technologies and programs to pull them together, as we think about it at the operational level, and then provide a much more integrated approach to the client. So, we went down this path, with this project, with technology that was good and tested, but it didn't do what we wanted it to do. So simultaneously with that, we had another approach to look at a different kind of technology that is probably newer and more innovative that could do it. And we are going with the second one, and therefore, stop doing the first one and discontinued it. And given that the accounting rules indicate that capitalize the time and effort in building that then we wrote it off.

The one thing I want to add on that, Chris, is that in between here, we're still going through the research and development phase, so the deferred capitalizations are not occurring because we haven't reached that point. So as Henry pointed out, we're still going through the review process of it. Henry A. Fernandez - Chairman, President, Chief Executive Officer & MD: But the goal is still the same, and I'm glad you asked this question, Chris, because the goal is still the same which is how do we take the existing operating system so to speak that we have built on the data libraries, the analytical libraries, and the computational abilities, the datacenters, and the like, and how do we glue them together and put them together with an overarching technology that connects them all, so that we can provide a much better integrated service to our clients that unites all these process in an efficient and fast way. And I think this new thing that we're looking at that is still in obviously developmental stage is very promising. But again, we'll have to report more on that in the future, right. So, there's a little bit of good news and bad news. The bad news is we wrote it off. The good news is that we find an alternative way that is better, and it holds more promise. And so, we're on that path right now. Christopher Shutler - William Blair & Co. LLC: Okay. Thanks for the detail, gentlemen. Just one more, Bob, on the guidance which I recognized on the adjusted EBITDA expense, it didn't change so it's $620 million to $640 million. How much growth does that imply I guess in dollars on a constant currency basis?

There's really – the growth would be, as I related to, if you take the first quarter and analyze it, it's more inflationary-based related to compensation. We had a little bit higher turnover in the first quarter. We'll be backfilling some of that, and we've got some other charges out there that we see in the future coming through. But I would hesitate to call it growth other than normal business as usual, Chris. Christopher Shutler - William Blair & Co. LLC: So, I mean, as I looked at it, Bob, I mean, at the midpoint of $630 million, it was I believe somewhere in the low $40 million range is what the year-over-year increase implies. But FX is maybe helping that number by, I'd like to call it, $15 million to $20 million. And then you also have the $15 million to $20 million that you called out last quarter of investment spend. So, kind of fair ex that investment spend and ex currency, you're in that low-$40 million sort of ballpark at the midpoint constant currency?

I think the message is that constant currency, we're in the mid – we're looking now at the lower end of $620 million to $640 million, probably benchmarked somewhere at the lower half on a constant currency. Obviously, FX seems to be volatile. Look what's happened in this first quarter or the second quarter. Sterling has climbed back up, euro has climbed back up. So, that's why I said, the impact has been on FX given our exposure. Yes, it's been there, but that could be a reversal as we proceed through the year, which we focus on the constant currency. And again, a piece of that growth is really, I'd call it, growth that was carried over that I mentioned in the first quarter and that'll continue on a year-over-year basis that we've talked about last quarter. Christopher Shutler - William Blair & Co. LLC: Okay. Thanks.

Thank you. Our next question comes from the line of Joel Jeffrey with Keefe, Bruyette Woods. Your line is open. Joel Michael Jeffrey - Keefe, Bruyette & Woods, Inc.: Hey. Good morning, guys. Henry A. Fernandez - Chairman, President, Chief Executive Officer & MD: Hi. Joel Michael Jeffrey - Keefe, Bruyette & Woods, Inc.: So just thinking about – looks like you guys are getting more comfortable with your margin growth. Just curious, I mean, how quickly do you think you can get margins back up into kind of the mid-40 (57:39) ranges, and how dependent is that on the improvements from the analytics business?

When we look at our forecasting, and as we take a look at it, we feel – I mean, our run rate is giving you a very good indication top line and what's happening out there, and we're managing our expenses to what we told you would be a midpoint. And as Henry pointed out, we're pulling for the timing of when our margin expansion would occur year-over-year in the first quarter. So we'll continue to see that steadily increase and we'll measure our costs going forward as we move forward, progress, and expanding the margin over the course of the year. Joel Michael Jeffrey - Keefe, Bruyette & Woods, Inc.: But I guess in terms of thinking about your business lines, I guess, is the analytics – yeah, the analytics business enough of a headwind to slow that down or could you just actually grow the margin meaningfully enough through the performance line?

No. I think – look, we look at this completely. We've had some very strong top-line performers, as Henry has pointed out. The index subscription which is core continues to show double-digit growth. The AUMs have been phenomenal on the ETF. Again, there could be a reversal of fortune out there, but then again, that's a significant piece of our revenue. Very promising top line growth on both ESG. And when you currency adjust the real estate, that continues to grow as well. Now, remember, that's the currency adjusted for real estate. Remember, there is exposure on the expenses so we get a benefit offsetting that as well. The PMA business grew significantly, when you think about it from that context, so it really is isolated to the RMA. And as Henry pointed out, the constant currency run rate was about 5.5%, so we're not all dependent on RMA. It does have a piece. If it does taper off, that does have some headwinds, but that's focusing in on the run rate on there. So, we still – look we haven't as of the end of the first quarter, we feel confident of continued margin expansion over the course of the year based on our analysis. Henry A. Fernandez - Chairman, President, Chief Executive Officer & MD: And I'll also add that everything that I said about the better leverage and better profitability of analytics including RMA, is not factored in in all the communication that we have given you about margin expansion in the course of this year, right. So, if that were to happen faster, it will be better. But obviously it's hard to tell at this point, clearly how fast we can turn growth around to a faster level and higher profitability so that would be – if we do it and happens this year or next year that would be on top of what we're thinking in terms of margin expansion.

Yeah, Henry's point, we're proactively managing our cost. We're constantly looking for efficiencies, we've demonstrated that in the first quarter. We will continue to demonstrate that and make tradeoffs going forward for the rest of the year with an eye on profitability. Joel Michael Jeffrey - Keefe, Bruyette & Woods, Inc.: Great. And then just on the CapEx side, I know you said there was some timing in it, it was a little bit lower, clearly lower than the sort of run rate would imply for the full year based on guidance. But just from a cash flow perspective, is there any sort of significant CapEx charge you're expecting in the coming quarters, or should we just think about it as sort of a $16 million per quarter rate through the end of the year?

It's kind of chunky. I mean, Joel, I would look at it because as Henry talked to, you've got timing related to certain projects (61:09) so hesitant to make it a straight line. We're trying to give you a guidance on where we come in for the full year of $55 million to $65 million. For the full year obviously, it was a little bit lower in, so anticipated higher in the out quarters for the rest of the year. Joel Michael Jeffrey - Keefe, Bruyette & Woods, Inc.: Great. Thanks for taking my questions.

Yeah.

Thank you. Our next question comes from the line of Patrick O'Shaughnessy with Raymond James. Your line is open. Patrick J. O'Shaughnessy - Raymond James & Associates, Inc.: Hi. So, my first question is on smart beta factor indexes, how do you think that what MSCI offers in that arena is differentiated from your competitors? Is it mostly just a function of your underlying strengths, and then you just apply factor indices to those ETFs, or is there something in your methodology, in your mechanisms that differentiates you from the other index providers? Henry A. Fernandez - Chairman, President, Chief Executive Officer & MD: Well, I mean, through the equity analytics product line, we have been the leader in factor investing since 1975. So, when you think about the content that goes into the analytics product line, remember, there's a lot of content that then gets enabled by an application like BPM. So, the content is all about factor investing. It's about what are the factors that give you the sources of risk and return in an equity portfolio. So, the entire DNA of our equity analytics organization is about understanding market factors that are driving risk and return in portfolios. So, when you combine that expertise with the significant expertise that we have in building equity indexes, you end up with something that no other competitor in the marketplace has right now, which is a major expertise on understanding factors and understanding how factors drive portfolios and back-testing those portfolios, and so on and so forth. Patrick J. O'Shaughnessy - Raymond James & Associates, Inc.: Okay, great. And then for my follow-up, I know it's only been a couple of months, but can you characterize the contributions that you've gotten from your three new board members? Henry A. Fernandez - Chairman, President, Chief Executive Officer & MD: Well, we've had, by now, two board meetings with them. And there was a fairly extensive onboarding process. Wendy Lane, which is one of our new directors, is sitting here in the room with us. So, welcome, Wendy, to the – to our first quarterly call here.

Thank you. Henry A. Fernandez - Chairman, President, Chief Executive Officer & MD: And it has been a significant amount of contribution because they went through a rigorous onboarding process. They are looking at the business with fresh eyes, and that's always good, including people like me looking it for a long time. So, it's good to see people looking at it from a fresh perspective. And they are very, very good directors that are really eager to contribute to the success of the company. So, there's been a lot of discussion and debate about all of that. And importantly, because we are – in the next few months, we have our usual annual strategy discussion with the board in the summer, and they're very engaged in doing that with us and helping us sort of think through all the opportunities that we have ahead of us. Patrick J. O'Shaughnessy - Raymond James & Associates, Inc.: Great. Thank you.

Thank you. Our next question comes from the line of Keith Housum with Northcoast Research. Your line is open.

Thanks, guys, I appreciate the opportunity to ask questions. Looking at your employee count sequentially, it actually went down, I think, by 37 employees. Was this intentional decrease in the head count, or is this a factor of hirings and firings that go on in traditional day-to-day work? Henry A. Fernandez - Chairman, President, Chief Executive Officer & MD: Well, remember, investments for us is largely, largely people, right? So when we say that we invested as much as we wanted to by now, now is more of a consolidation of that investment plan and (65:12) a lot of return out of that investment plan, and therefore, come back to more normalized levels of investment in the company and expense growth in the company. You're likely to see that tapering of the growth of head count. So since we have expanded quite a lot in the last 18 months, there was a meaningful deceleration in growth in the first quarter. It's not clear that that is what's going to continue for the next few quarters because it was one of those things in which we felt we had enough and we took a pause, but that's the rationale for it. But I will not read too much into it on the quarter-to-quarter change at this point, and we're not really managing to our head count, we're managing to an expense base, right?

The first quarter's always got a higher turnover. Henry A. Fernandez - Chairman, President, Chief Executive Officer & MD: Yeah.

Yeah, got you. Okay. Then for my follow-up if I may, yeah, the non-comp expense also came down, and I think you guys cited increased discipline. Was there any one-time items in there that perhaps would say that we shouldn't expect the same level of discipline for the rest of the year?

The only item – I mean, is obviously is going to be seasonality some of it. I mean, you can look at the non-cash charge of $500,000 that I referred to in my comments. If you recall, $3.4 million non-cash, $2.9 million of it was related to compensation. The other half was reversed in non-compensation. There's going to be some other seasonal charges in there. Obviously, CapEx was low. We can correlate some of the non-compensation costs to CapEx as we get equipment up and running and get licenses. So, there'd be some correlation there. But we're really effectively managing the cost on a discretionary basis as tight as we can – as well as we can with good corporate governance.

Got you. Thank you.

Thank you. I would now like to turn the call over to Stephen Davidson for further remarks. Stephen C. Davidson - Managing Director & Director-Investor Relations: Thanks, everyone, for your interest in MSCI, and we look forward to speaking with you all soon.

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.