Alexander Hess: Hi, good morning, all. I just want to touch again on the retention rate briefly, 95.2%. I believe that was up somewhat from 4Q. Can you comment maybe how much of that sequential quarter-on-quarter improvement was driven by any sort of improvements or changes in the client environment? Or was that just seasonal factors there?
Andy Wiechmann: Yes. I would say the seasonal aspects do play a meaningful role. Given that we have the largest portion of renewals taking place in the fourth quarter, retention rates tend to drop a bit there. So I wouldn’t read too much into the sequential dynamics. As I just mentioned, we are encouraged that the overall retentions are in line – overall retention rate is in line with historical averages. And so, we’ve just seen some pullback from the high levels we saw a year ago. But overall, they are in a pretty good position. And as Baer mentioned, really where we are seeing the pickup in cancels is in ESG and climate and real assets. And from a client standpoint, it’s really showing up with smaller clients and within areas like broker-dealers and banks, hedge funds, real estate agents and developers. So it’s kind of around the edges and some of the structural stuff and client events that we would typically see in these types of environments.
Alexander Hess: Thanks, Andy. And maybe as a follow-up, you briefly mentioned real assets. Just wanted to maybe get an update on anything that’s gone on there with the Burgiss group with RCA. We’re a couple of years out now from some pretty large spend on those areas. It would just be nice to get an update on traction in the market and anything else you can maybe provide us with on those businesses.
Baer Pettit: Sure, I’ll make a few comments. So first of all, if we look at the overwhelming run rate is in real estate, just clearly been a very challenging environment across the globe. In view of that, we were pretty pleased actually to have an 8% run rate growth or 10% ex FX. So for example, transaction volumes in the U.S., which is clearly critical for us in that part of the market have been down 70%. And some of our other important markets from like the UK have been hit very hard but we’ve had actually really decent retention rate there. So I think allowing for the very challenging environment, we’re pretty happy with the results. And we will have to see – there is certainly sometimes a little bit of a lag from, let’s say, the REIT’s repricing to other private markets.
We could still be in a choppy environment for real estate for some time. But in view of that, I think the resilience of our franchise is pretty strong and people need our data and analytics precisely to understand the performance and risk in these changing markets. So that’s that. And I think on Burgiss, we don’t really have anything to add from the last quarter. So I think that those are my summary comments, right.
Alexander Hess: Thanks, guys.
Operator: The next question comes from Owen Lau with Oppenheimer. Please go ahead.
Owen Lau: Yes. Thank you for taking my questions. So broadly speaking, how does the reopening of China and the comeback of some Chinese stocks impact AUM and the flow of MSCI-linked index in the Asia Pacific region? And then, maybe could you also please talk about or give us an update on the opportunity in the Asia Pacific region and how MSCI would approach these opportunities? Thank you.
Henry Fernandez: Thank you, Owen. The – clearly, the opening of China from loan protractive COVID lockdown is positive for our business in all of Asia, not only in China, but all of Asia because, as you know, China has a meaningful economic and additive impact in the balance of the countries in Asia. So that’s been very positive. Despite the fact that the lockdown, we don’t even see clients in Mainland China. I mean it was really, really draconic as you all know. We have been managing to grow our MSCI China. We have been able to grow the business both in Mainland China and on a run-rate growth basis, about 9%, 10% in this quarter compared to last year. So that’s a positive. Now, we have to – so China itself, Mainland China is a very small, almost non-material run rate for us.
The assets that are linked to – directly to MSCI China indices are not significant. Obviously, the big effect is the part of the emerging market index that is made up of China, and the recovery there is going to bode well for the overall emerging market index and the assets associated with that emerging market index, so that’s going to be a positive for us. So, that’s a little bit of the breakdown of the various components. So, we are very optimistic that the recovery in China, the asset, the equity values increasing in China and the opening up of the country will have overall positive effects for our business. But as I have said, it’s not a huge base, except with the – except for the part of MSCI China that is in the emerging market index.
Andy Wiechmann: And just to put a finer point on the ETF flows. We did see pretty healthy flows into international markets, both developed markets outside the U.S., but to Henry’s point, also into EM exposure. And those are two areas where we had nice market share capture. On the EM flows, we actually captured about 60% of new flows into emerging market ETF. And clearly, China is a big component of that.
Owen Lau: Got it. That’s very helpful. And then can I go back to the guidance for a little bit. And I think Andy, you mentioned that you assume that ETF would decline slightly in the second quarter and then rebound in the second half. But I remember previously, you mentioned that the market would decline in the first half of this year. I am just wondering is there any change in assumptions here? And then I think broadly speaking, what does it take for MSCI to kind of like dial up or dial down the free cash flow guidance for this year if, let’s say, the market stay at current level? Thank you.
Andy Wiechmann: Sure. I would say, overall we continue to have a cautious outlook in the near-term, which you can see by the ETF AUM assumption that’s underlying our guidance. Just to reiterate what you alluded to, we are assuming the markets’ decline from the current levels during the second quarter here and then rebound gradually in the second half of the year. Just to your question about what it would take for us to dial up or dial down, I would say it’s a constant calibration. It’s something we are actively focused on. Although the markets performed better during the first quarter than the assumption we had outlined in our original guidance at the beginning of the year, we still continue to have a cautious outlook in the near-term.
And so, we are being cautious on expenses and the pace of hiring where we are being a little bit more measured. And we continue to be disciplined on the non-comp expense front to ensure we are able to invest in those critical growth areas and attractive long-term opportunities. We do have, I would say, further levers on the downside if we need to, and we can further slow or even stop headcount growth, and we can further tighten non-comp on the downside. But importantly, to your question, if we do see a sustained improvement in the markets, we are ready to accelerate investment and spend. And so, it would be really a calibration and a determination that we see that sustained momentum in the markets and confidence that we are recovering here.
And if we see that, then I think you could see us dial up the pace of spend. And I don’t want to comment specifically on what that would mean for free cash flow. There is a lot of puts and takes there, but I would say all the guidance is a reflection of the outlook that we have, and we have currently got a cautious outlook.
Owen Lau: Got it. Thank you very much.
Operator: The next question comes from George Tong with Goldman Sachs. Please go ahead.
George Tong: Hi. Thanks. Good morning. I wanted to drill down further into the selling environment. You talked about being tighter client budgets, longer sales cycles. Outside of ESG, can you elaborate on where in the business you are seeing the most impact from that and how client sentiment has trended exiting the quarter?
Andy Wiechmann: Yes, sure. So, listen, the way it manifests itself, and I am just underscoring points that we have made because I am trying to stick to what we are seeing here, which is fewer large ticket deals, lengthening of sales cycles and elevated cancels, particularly among smaller clients and particularly in just ESG and real estate. Those impacts are most pronounced in those two segments where I think there are some segment-specific factors. Henry outlined some of the factors impacting ESG, and Baer talked about some of the factors impacting real estate. I do want to underscore that index and analytics see some of those dynamics to a small degree, but are generally holding up okay. And there continue to be a number of large and key areas, not only in index and analytics, but also in ESG and real estate, where we continue to see strong momentum.
And many of those are the core aspects of those parts of the business. Geographically, the dynamics were most notable in the Americas, but I would say that was heavily driven by the impact in ESG and climate. But overall, pipeline is steady, as Baer said, and we do expect some of these dynamics to continue in the short-term. But I think we see the indications that the engagement with clients on these big secular trends continues to be quite healthy.
George Tong: Got it. That’s helpful. And then you talked a little bit about the analytics business holding up relatively well. Organic revenue growth of 6% in the quarter, it is a bit below the long-term target of high-single digit growth. Do you expect the growth there to accelerate over the course of the year? Do you expect it to stay where it is? And what are some of the puts and takes of underlying trends you are seeing in the analytics business?
