Good day, ladies and gentlemen, and welcome to the MSCI Fourth Quarter and Full Year 2016 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.

Thank you, Sonia. Good day and welcome to the MSCI fourth quarter and full year 2016 earnings conference call. Earlier this morning, we issued a press release announcing our results for the fourth quarter and fiscal year 2016. A copy of the release and the slide presentation that we have prepared for this call may be viewed at msci.com under the Investor Relations tab. 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 speak only as of the date on which they were made and are governed by the language on the second slide of today's presentation. 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 SEC filings. During today's call, in addition to GAAP results, we also refer to non-GAAP measures, including adjusted EBITDA, adjusted EBITDA expenses, adjusted EPS, and free cash flow. We believe our non-GAAP measures facilitate meaningful period-to-period comparisons and provide a baseline for the evolution of results. You'll find a reconciliation of the equivalent GAAP measure in the earnings materials and an explanation of why we deem this information to be meaningful, as well as how management uses these measures on pages 24 to 28 of the earnings presentation. On the call today are Henry Fernandez, our Chief Executive Officer; and Kathleen Winters, our Chief Financial Officer. With that, let me now turn the call over to Mr. Henry Fernandez. Henry?

Thanks Steve and good day to everyone. As you have seen from the newswire this morning, we’ve been very busy and there is a lot to be excited about at MSCI. We are pleased share with you our fourth quarter and full year financial results. We executed very well against our strategy and we continue to create new growth and services design to help our clients solve their most challenging investments problems and capitalize on their significant investment opportunities. As a result, MSCI is even more embedded in the fabric of the global investment process therefore creating a valuable network effect with our clients. Please turn to Slide 4 for a review of our financial results for full year 2016. A 31% increase in adjusted EPS was driven by a 7% increase in operating revenue, a 2% decrease in adjusted EBITDA costs, an 18% increase in adjusted EBITDA, a lower effective tax rate, and a 12% decrease in our share count. We have been to achieve these - strong results because the management team has been keenly focused on three areas as we have been reporting to you each quarter. We’re focused on investing in new products and services to drive our top line growth is driving from greater efficiency and productivity gains to create an even more efficient organization and ensuring the capital at MSCI is right sized and optimally deployed in the highest return opportunities to enhance shareholder returns. First, in terms of revenue growth, we’re recorded a 7% increase in revenue driven principally by a 10% growth in Index revenue. Excluding the foreign exchange impact on subscription revenues, operating revenues would have been 8% higher. As we say would have been an increase of 8%. This was a 12 consecutive quarter of year-over-year double digit growth in…

Thanks Henry, and hello to everyone on the call. I'll start on Slide 6 will take you through our fourth quarter results. We closed up the year with the very strong Q4. We delivered a 7% increase in revenue driven primarily by a 6% increase in recurring subscription revenue and an 11% increase in asset-based fee revenue. Adjusting for the impact of foreign currency exchange rate fluctuations on subscription revenues, total operating revenue would have been increased 8%. As a reminder, we do not provide the impact of foreign currency fluctuations on our asset-based fee tied to average AUM of which approximately two thirds are invested in securities, denominators and currencies other than U.S. dollar. On a reported basis, operating expenses increased 1% and adjusted EBITDA expenses were basically flat. Expenses that are supposed to foreign currency exchange rate fluctuations represented about 40% of adjusted EBITDA expenses in Q4 and the full year 2016. Excluding the impact of foreign currency exchange rate fluctuations, fourth quarter operating expenses and adjusted EBITDA expenses would have increased 3.5% and 2.7% respectively. The primary currency move that drove this benefit with the British pound, which was substantially weaker year-over-year. We delivered a 17% increase in operating income and a 16% increase in adjusted EBITDA with an adjusted EBITDA margin of 50.2%. Our effective tax rate was 29.7% in line with the 29.8% effective tax rate in prior year Q4. The 2015 fourth quarter tax rate benefited primarily from higher net tax benefits mainly associated with various research and production related credits and deductions. These benefits impacted Q4 2015 adjusted EPS by $0.04. The current quarter's tax rate benefited from higher 2016 profits recorded in lower tax jurisdictions than previously estimated, as well as several favorable discrete items including the settlement of tax audit and…

Thank you. [Operator Instructions] And our first question comes from Alex Kramm of UBS. Your line is now open.

Hey, good morning everyone. Maybe just starting with the environment and the outlook a little bit clearly that cancels are still elevated in the year, but the sales were really, really strong. So what are you seeing out there, I guess particularly on holiday to maybe to some degree on index in terms of confidence level that the sales can remain elevate or increase, so what are you seeing out there, we also while also selling I mean and the cancellation side do you feel like a lot of the kind a one time or such done now or when you look at the customer base there are there still some areas that you think should be struggling so we might continue to see some of these elevated levels? Thank you.

Yes, so the pipeline remains pretty solid going to 2017 and in January. So that we remain cautiously optimistic about the prospects of gross sales, and return sales this year. I think the environment I mean we have obviously very strong financial result despite the - our end client environment, we sell quite a lot to active managers you know around the world that's a lot of our subscription business is based on that clearly asset based fee business that based on passive managers. And that you know client base the active management client base is suffering from two areas, cyclical pressures, the value stop thinking is last when you have you know sort of asset prices being determine by monetary policy around the world. And you have secular issues such as you know passive management of grudging a lot in what they do. So throughout the year all the way through to December those trends have continues to the extent that the new environment that we're seeing of higher growth around the world the U.S. or Europe or Asia more emphasis on deficit spending or system policy rather than the monetary policy, higher inflation. So our end client base can benefit from that and the prospects will get better than what we are currently seeing. Too early to tell at this moment clearly there was a big run up of banks and asset managers, and insurance companies, and the like from November to December someone that some of it has been reversed in January. But again it's too early to tell, we tried not to count on that or focus on that, but we try to do is we extremely focused on understanding the client or what the client is facing positively or negatively and try to help them with that. So with respect to cancel, I think it's hard to say, clearly we have high sales, because of all the efforts we’re doing and the new product and the newer services, the new approach to go to market, the solutions that we're trying to come to our clients with it, all of that has benefited the gross sales. I think they will continue to be some level of evaluated cancels given the structural changes that are going on maybe they get a little lower because of less pressure on the cyclical changes but again is too early to tell. And therefore the conclusion from our part is the pipeline where executing well against that, we hope to continue our piece and pace of sales but again I don’t know it will do every quarter with the last quarter. We are assuming that the cancels will continue to be elevated at some level given the environment on as an environment turns.

Very helpful, thank you. And then just I need to address of course the asset-based tied in terms of ETF fees and other index fees I mean thanks for the color in terms of the mix. But obviously when you think about your biggest customer BlackRock, you saw some of the moves that they just made on the custody side moving $1 trillion over to it to J.P. Morgan from State Street and I think in the process they also said that they are getting more conscious with some of their vendors. So when you combine that and you see other moves like swap for example lowering fees aggressively for their index products even on the index mutual fund side like it just seems like the fee pressure is still out there. So any updated thoughts on how that how you fit in and if there could be anything coming out if your discussed that change with some of the customers of yourself? Thank you.

I think the first think that we are trying to do best that we could to provide you kind of an insight look of how we view our licensing strategy and done with the comments by Kathleen. The flagship, product line, the new index families they were launching that of course have less value at the moment than the flagship one that are been around for about 20, 30 years and then the domestic one U.S. domestic one that have a fairly different competitive dynamics than the prior tool right. So a lot of what we’re going in is like we know we just want to rest on the flagship product line and the wonderful things that we’ve done there, we want to continue to expand dramatically into all areas of the ETF marketplace regardless of the competitive dynamics good or bad as long as we - is a good return on our capital and on the effort. So that’s what we trying to simplify here in as good of a way as we could. I think that the BlackRock is an example of that on the partnership approach that we take in with our largest client and which we together trying to optimize the revenue for them and consequently the revenue to us, was in the same way, we do it with a lot of other clients on the active side and on the passive side, I suppose to just being a vendor and just being the lowest cause vendor to them. So we believe that there are segments of the market like flagship indexes that will have less cost pressure or less pressure, because there is unique IP there, and unique properties. But there are other segments of the market that we have more fee pressure. And I’m not afraid of going into them towards, it’s not a question of fees, the question already return on our capital, return on our efforts. And we have great returns and all built upon already low cost, marginal low very low marginal costs infrastructure, we are going to be in all those places.

So you’re look at the space, going to continue to grow and gather substantial net of assets overtime right. And we’re focused on how we capture that market share through new product innovation and our differentiated licensing strategy. Over the long term, we’re pretty confident that the volume price trade-off makes sense for us.

All right. Very good. Thanks again.

Thank you. And our next question comes from Bill Warmington of Wells Fargo. Your line is now open.

Good morning, everyone.

Good morning.

Good morning.

So a question for you also on the Analytic side that’s an area where you guys have been putting through some price increases and so even though you had elevated attrition there, margins were still up 120 basis points on a year-over-year basis and even 30 basis points on a sequential basis. So was it just that some low margin clients left or are you taking more of up and out up or out I should say for some of the more marginal clients?

No, no. I think overall Bill, the approach has been how do we take a very aggressive and proactive management of the product line or no last picks of it, or last pick. So we started by saying what is the value of this products to our clients and how does that value compared to the price. They were charging and we - so and realize that some of these flow coming credible value. Clients are running their entire infrastructure in many cases on this and therefore dividing immense value and the price they were paying was lower. So we said okay, you know overtime, we got to try to equate value and price on that. So that you know the genesis of the price increases and things like that right. The price increases have not driving the cancellation by any meaningful or way at all.

Got it.

So that they know sounds one approach. The second approach is that we look at all of our activities, so Analytics is composed to a lot of different activities and a lot of different products, insight that we say what, how much capital, how much and expenses or capital will be flowing to one area versus another area versus another area and we started cutting back significantly the effort on the capital in some area in order to deployed into higher yielding opportunities and alike. So that yield is a significant kind of demand of savings and we’ve put a lot of that in the margins. But reportedly very specifically a meaningful part of the savings are being deployed on our on what I mentioned briefly our efforts on fixed income analytics, fixing income risk and fixed income analytics and we’ve been able to sell fund. That significant effort last year and in the coming years out of that and it’s still be on our way to achieve those targets. So if you were to think about it, it’s almost like management one-on-one right. Understand your value proposition and the price that you are charging and what clients are you doing it and understand your how you deploying your people internally and what activities and what cost and we’re very pleased with what we’ve done, but we believe we also believe in recognize that we have we still have a long way go to yield even better financial results. And as we said, couple of years ago, when we launched this whole program of restructuring and reengineering and transformation of analytics, we knew that the first half of the program was going to be margin expansion and the second half has to be revenue growth and that’s what we’re focused on, on the revenue growth.

One more if am I might on leverage you pointed out the on Slide 16, the gross leverage at 3.7 times which is you know - sorry above the targeted at 3, 3.5, but really what stands out is the net leverage at 2.3 times which would tend to bring in the comment there you’ve got a fortress balance way overcapitalized, a high class problem of course. But are you thinking - you’ve got a lot of cash there, so are you thinking about doing some M&A or you are going to be more aggressive on the buyback?

So I think the way to think about it is clearly the excess capital or excess cash and if the growth numbers look big and all of that but when you take the money that is outside of the U.S. which you can bring it unless there is some tax.

Unless there is tax reformers opportunities.

Plus $200 million that is kind of locked away right. And then the money that in the U.S. 500 plus million and you got to have operating cash to run in the business so that roughly at the moment gives you 400 plus or so million in that and we haven't yet paid the cash and the dividend payment this quarter and tax interest payments and all of that. So we are - we're getting close to kind of steady state in which we're setting up the excess capital and excess cash. And as we do we will continue in the same path of what we've done in next two, three years, mostly organic growth and mostly sort of return of capital for dividend and buyback with then occasionally acquisition here and there. But the less excess cash on your balance, it makes you to be even more opportunistic and discriminating on the purchase of your shares. So we’ll continue to it, but in this far way.

Well, thank you very much.

Thank you. And our next question comes from Toni Kaplan of Morgan Stanley. Your line is now open.

Hi good morning.

Good morning.

Good morning.

You mentioned some cash collections that were expected in fiscal 2017 that were received in the fourth quarter and so I was wondering if that dynamic impacted your new sales level during the quarter as well?

Well, you know if you look at those two events are data points and look we had strong sales in the quarter, we’re very happy with that. Actually in the second half of the year sales were quite strong. And then we had the really healthy cash collections which is an interesting thing to see, you don’t often you see that where clients are actually paying ahead of the due date. So optimistically like to think that okay the environment looks pretty healthy, right clients have incremental cash are paying early but yet still we look at the overall environment, we look at some of our client segments that have been challenged over the last several quarters. So we're still a little bit cautious, but yes you're point too good data points there.

Okay. And you've mentioned a couple of times the tax initiatives this year that will impact next year's tax rate by about 200 basis points by sort of positioning your business mark globally from a tax perspective. And so would potential tax reform in the United States if there were to be a reduction to a federal level of call it 20% would that impact your strategy or what you would do going forward for achieving your tax initiatives?

Yeah, well, so first of all there are a lot of unknowns with regard to tax reforms in terms of what it looks like, when it takes place, when in effective. So we're waiting to see how that plays out, we’re watching that very closely. You know it depends on what form it takes right. Reduced corporate tax rate obviously would be beneficial, but then there are other considerations to an unknown like what happens with interest deductibility. So we're watching to see how that plays out, but generally the work we've done on the tax side really just aligned our tax structure with our operating structure, so where we employ our people, where we're generating our assets, where our clients are located. So all of that makes sense and we're waiting to see what any incremental changes might be with tax reform.

Thank you.

Thank you. And our next question comes from Joseph Foresi of Cantor Fitzgerald. Your line is now open.

Hi guys this is Mike Read on for Joe, thanks for taking my question. Just could you go into a little bit what do you think other impacts from the new administration could be outside of possible tax reform that you might expect to see?

I think the more the bigger one for us were obvious one would be to the - what I said before to the extent that there is higher growth in the U.S. may potentially be higher growth we're seeing the higher growth in Europe in the last few days, few weeks. More emphasis on fiscal policy rather than monetary policy there are more inflation all of that will be very beneficial to our client base, asset managers, hedge managers, banks, wealth managers, et cetera, and that will have two effects, they will buy more products from us, they wanted to buy, but the budgets are being constrained and then maybe less you know less slashing and burning cost basis. You can see that our major weakness, not major weakness, but a relative weakness in our - when you look at our councils has been the bank on asset managers, especially in Europe it bank on wealth managers. Even the bank balance sheet themselves well in the last quarter but in general the banks have been clearly slashing and burning expenses. So to the extent they feel better about trading to expand the asset managers feel better about flows and feel better about stop thinking and all of that that can potentially have a very leverage of bull effect on us, because we are right there, we’re the partners, we're helping them in a lot of things so you may have a two side of benefit, higher sales and lower councils and that will be highly leverage for us. But it is too early to tell, because that may be cope with your political risk or trade risk and things so that. So we’re cautiously optimistic, but we have to wait and see how it all being travel.

Okay, thanks. And then just switching over to the margin side after the strong expense in the last few years in the overall company even a margin kind of runway and do you see left in the medium and longer term for overall company margins?

Well I mean we continue with the same policies that we have outlined so far, so very slow change from that.

Okay, thanks guys.

Thank you. And our next question comes from Keith Housum of Northcoast Research. Your line is now open.

Good morning guys, thanks for taking my call. Just want to clarify on the tax rate guidance, 31.5% to 32.5% that includes the stock base compensation change in the first quarter?

Yes, Keith it does include that.

Okay and I think also just a follow-up question that in terms of the cash collections. I guess how to understand the logic about why would customers pay early because obviously people like to further hold their cash and then obviously they pay for it to do it otherwise, so why people pay early here in the fourth quarter?

That's a really good question.

We don’t know.

We asked ourselves that question that we were happy to take the $20 million.

Well if this guy came to you and said they can fairly.

They send it to us.

All right, thanks. Appreciated.

Thank you. And our next question comes from Warren Gardiner of Evercore. Your line is now open.

Yes, thanks. I actually just on our last question to, so was that - did it impact growth sales, in the fourth quarter just to clarify that?

No.

Like would have been in 1Q you had on the cash payment, the growth sales?

If I have not come in Q4 that cash would have come in Q1 and that cash was across the pretty broad group of clients, so there’s no at one client or two clients, there was quite a number of clients that for sure.

And by the way this is all in the - in our normal qualitative of cash collections, so there were no incentives for them to pay as earlier or anything like that or some people to discount or whatever it’s zero, I mean it was all in the normal course of collecting cash.

So what is the - with sales of the gross sales number would that have been many different, I guess was more?

No.

Okay, thank you. And then my other question was you know on the index subscription basis a really nice quarter for growth again. So obviously I like around right there, but I do want to ask because you've seen the growth in the number of kind of non-U.S. mutual funds kind of slow pretty significantly recently. So I mean how do you guys thinking about that trend maybe impacting that gross sales outlook for the index subscription basis. I mean obviously there are some other stuff that's gone pretty well in custom and factor, but just kind of thinking about the legacy sort of active mutual fund manager with emerging market mutual fund or just do you know anything on those things?

Well, I think the value of our benchmarking product line to mutual funds all over the world dramatically increased in the last few years, the value because on an average of general basis mutual funds used to be sort of largely benchmark to indices but doing whatever they wanted, with the pressure intense pressure by passive investing which is obviously did benchmark replicated in the benchmark, the mutual funds have to spend a lot more time understanding the benchmark which is some respects the competition, because that's where passive is coming from. Really establishing a lot more discipline on whether they overweight, whether they underweight if they run a little more concentrated portfolio what the exact risks are you know all that and so on and so forth, so that add to the input of our clients subscribing more to our information in more locations, with more people, with more intensity, and all of that. Secondly we don't - we typically constantly put more and more data, more and more new things into the same modules to the same packages of data. So the client is constantly getting an upgrade product so if you say, if do not price increases the product is a lot big bigger to a lot more valuable for the prices remained the same. So if you're basically have increased the price you want to think about it that way. So that's what has added significant interest and potential to what we learn in the third element is obviously the subscription here is catch subscriptions to market indices, but also add subscription to factor indices, factor indices are not just being used for passive, we have clients subscribing to fact indices in the benchmarking product line and is dramatic indices and the ESG indices and all of that, so all of that is expanding our relationship with our clients and our value added to our client. Despite the headwind that pretty much every mutual fund in the world has clearly with a lot stronger in the U.S. getting stronger in Europe, best strong in Asia, Asia is much more mutual fund driven at this point, so different dynamic and different regions of the world.

Thank you.

Thank you. And our next question comes from Patrick Sanche of Raymond Jameson. Your line is now open.

Hey, good afternoon, I guess. First question just a little bit of housekeeping, the incremental $5 million to $6 million expenses you capitalized or you amortize your capitalized software in 2017, is that incremental the $5 million to $6 million versus 2016 if I recall correctly said it was basically nominal this past year?

No it’s not incremental, is $5 million to $6 million in 2017, but it was a pretty small number, couple of million in 2016.

All right thank you. That's helpful. And then my follow-up, curious if you can share any thoughts on that Morningstar open indexes initiative that they talked about last I think it's December or November. It kind of interesting from the perspective that know there's a handful of buy side firms expressed displeasure with their indices licensing fees and certainly the initiative would be seeming to come after you a little bit, so curious about your thoughts on that?

Yes, so first of all there's always been competition and new entrance I mean it running the company for 21 years there's always been so many creating another formally or globally indices, if you're going to look around there you could look at three, four, five branded indices providers or one category or another who have international indices, well all over in the world right. So that’s not new, I mean there’s always been those offerings throughout the last 20 years. I think is that, it's very hard, I mean - our value proposition is to be a standard of communication and a standard of comparisons, communication between the asset owner and the asset manager and a standard of comparison across investment products and across different entities. So that the throwing at standard like that is very hard, because then you lose that standard being issues here, if you say okay, English is the language of the world, and you say now okay, now we're going to speak here, only three of us, well the mark right because the standard is English, right. So that's pretty hard to this on. The third element already that we are high value added and obviously premium product line will that standard it continuously innovating, continuously renovating the indices and the benchmark and all of that continuously evolving, so I’ll mix it also harder to catch up with that process as well.

Great thank you.

Thank you. And our next question comes from Chris Shutler of William Blair. Your line is now open.

Hi this is Andrew Nicholas filling in for Chris. Just on the net sales front in the analytics segment. Obviously those were solid numbers in the quarter, but it does look like constant currency run rate growth continues to decelerate, just wondering if you can help me better understand what's driving that dynamic?

Yeah there was a slight FX impact on the run rate. I don't have that number in my fingertips right now we can get that for you Andrew. But I think the key point here is that if you look at the sales numbers for really the second half of the year we've seen pretty healthy sales numbers in analytics in the Q4 30% and Q3 the recurring sales number was 26%. So even despite the cancels which are really isolated to those specific client segment that we referred to earlier. We’re pretty happy with overall performance.

Okay, thank you.

Yeah I'm just checking the run rate numbers here, 3.4% on a reported basis, 3.8% at FX.

Right, right. It's just little bit down from second and third quarter. So that's why I was looking for a little more color.

Yeah.

And then the second question I think you provided a little bit of guidance segment margins for analytics, if I'm not mistaken just curious if you could talk a little bit more about maybe segment targets for 2016 in the other segments and how that is kind of relative to your long term goals? Thanks.

Yeah, so just to reiterate the long term target, right, index 68% to 72% margin target you know we're in that range that expect to continue to execute and stay within that range. Analytics are margin rate - our exit margin rate at the end of the year is almost that the long term target range of 30% to 35% so that’s a sustainable margin rate from our perspective and there is more improvement, more margin expansion to come to get strongly into that 30% to 35%. We do of course had a little bit of lumpiness from quarter-to-quarter sometimes, but when you thing about annual margin rate we’re pretty confident and continue to progression there and then or other segment we’ve made great progress with regard to restructuring in the real estate on product and we expect that progress to continue as well.

Okay thank you.

Thank you. And ladies and gentleman this does conclude our question-and-answer session. I would now like to turn the call back over to Mr. Stephen Davidson for any further remarks.

Thanks everyone for your time and have a great afternoon. Thank you.