明晟 (MSCI) 2011 Q3 法說會逐字稿

Good day, ladies and gentlemen.

Welcome to the MSCI Third Quarter 2011 Earnings Conference Call.

(Operator Instructions)

I would now like to turn the Conference over to Edings Thibault, Head of Investor Relations.

You may begin.

Thank you very much, operator.

And I'm delighted to be joined this morning by Mr.

Henry Fernandez, the Chairman and Chief Executive Officer of MSCI; and Mr.

David Obstler, the Chief Financial Officer.

Thank you all for joining us on our Third Quarter 2011 Earnings Call.

Please note that earlier this morning we issued a press release describing our results for the third quarter and nine months 2011.

A copy of that release can be viewed on our website, at msci.com, under the Investor Relations tab.

This presentation may contain forward-looking statements.

You are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date on which they are made, which reflect management's current estimates, projections, expectations or beliefs, and which are subject to risks and uncertainties that may cause actual results to differ materially.

For a discussion of additional risks and uncertainties that may affect the future results of the Company, please see the description of risk factors and forward-looking statements in our Form 10-K for our fiscal year ended November 30th, 2010 and on our Form 10-Q for the third quarter of 2011 that will be filed.

Today's earnings call may also include discussion of certain non-GAAP financial measures, including adjusted EBITDA and adjusted EPS.

Adjusted EBITDA and adjusted EPS exclude the following -- third-party transaction expenses resulting from the acquisition of RiskMetrics, restructuring costs related to the acquisition of RiskMetrics, and 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 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 our run rate is an approximation at a given point in time of the forward-looking fees for subscriptions and product licenses that we will record over the next 12 months, assuming no cancellations, new sales, changes in the assets and ETFs licensed to our indices, or changes in foreign currency rates.

Please refer to Table 10 in our press release for a detailed explanation.

Henry Fernandez will begin the discussion this morning with an overview of the third quarter, and then David Obstler will provide some details on our financial results.

In the case of financial accounting metrics, the discussion of the year-to-date numbers will focus on pro forma results, which assume the acquisition of RiskMetrics occurred at the beginning of MSCI's 2010 fiscal year.

Pro forma nine months 2010 includes MSCI's results for the nine months ended August 31st, 2010, and RiskMetrics' fourth quarter ended December 31st, 2009 and first quarter ended March 31st, 2010.

As a reminder, MSCI's acquisition of RiskMetrics took place on June 1st, 2010, the first day of MSCI's 2010 fiscal third quarter.

All operating metrics, as distinct from financial accounting metrics, have been restated to reflect MSCI's results on a combined basis during the comparable period in 2010.

That means all quarterly operating metrics reflect the calendar quarter or nine months indicated, rather than the prior fiscal period.

I will now turn the call over to Mr.

Henry Fernandez.

Henry?

Thank you, Edings.

Good morning, and thank you for joining us.

This morning, we reported third quarter revenues of $225 million, adjusted EBITDA of $104 million and adjusted EPS of $0.49.

Year-to-date, we reported revenues of $635 million, adjusted EBITDA of $315 million, and adjusted EPS of $1.39.

Our third quarter revenues grew by 11% versus third quarter 2010, and our adjusted EBITDA rose 19% compared to the same period last year.

Our adjusted EBITDA margin rose to 46% from 43%, and our adjusted EPS rose 48% versus the third quarter of 2010.

Our third quarter run rate rose by 8% year-over-year to $876 million.

Total sales remained at a healthy level despite choppy markets.

And our retention rate remained strong, driving continued growth in our subscription run rate.

The decline in the equity markets worldwide during the quarter did impact the growth of our asset-based fee run rate, especially on a sequential basis.

Total sales were $38 million in the third quarter.

New recurring subscription sales were $32 million, down 10% from a strong third quarter 2010 but up 4% from the second quarter of this year.

Our sales in Asia, especially in Japan, remained strong.

The US market for us was stable, and Europe was surprisingly steady despite the headlines.

During the quarter, our sales to asset owners were strong.

And banks and broker dealers were surprisingly resilient.

Our sales to asset managers remained stable, and our hedge fund sales remained weak.

Our retention rate overall remained strong.

The third quarter aggregate retention rate rose to 91% from 88% a year ago, as total cancelations declined more than 20%.

Our year-to-date retention rate is up 3%, to 92%.

The fact that our retention rate is holding in the low 90s validates the importance and mission-critical nature of our products to our clients' investment processes.

As a result, our net new recurring subscription sales rose 4% to $16 million during the quarter.

The growth of net new subscription sales was offset by a $6 million decline in run rate resulting from the strengthening of the US dollar during the quarter.

As a reminder, we adjust our run rate at the end of each quarter to reflect the current spot foreign exchange rates, again at the end of the quarter.

Including this adjustment in foreign exchange rates, our total subscription run rate was $758 million, up 8% year-over-year and 1% sequentially.

Finally, we have continued to invest in our business.

The number of MSCI employees has risen by about 8% since the end of 2010, with all of that growth coming in our emerging market centers.

After a slow start-up to the year, we have been more successful in adding employees over the second and third quarters, and that should position us very well for continued growth.

Next, let us take a close look at the performance of our major product lines.

Our index and ESG business reported revenues of $101 million, up 20% from the third quarter 2010; and a run rate of $383 million, up 13% year-over-year.

Total index and ESG sales rose 6% year-over-year to $14 million.

New recurring subscription sales were $10 million, down 5% from a strong third quarter of 2010.

Higher sales of our benchmark index products were offset by a decline in sales of index financial products.

Cancelations in the index and ESG business continued to decline, falling 27% year-over-year and pushing our retention rate to 95%, from 92% in the third quarter of 2010.

As a result, the index and ESG subscription run rate, which excludes asset-based fees, rose 3% sequentially and 15% year-over-year to $265 million.

Asset-based revenues rose 39% year-over-year but fell sequentially as a result of the fall in global equity markets.

The run rate at the end of the third quarter was up 9% year-over-year to $118 million but was down 16% from the end of June of this year.

At the end of September, there were $290 billion of assets in ETFs linked to our indices, down $70 billion, or 20%, compared to June 30th, 2011.

Virtually all of the decrease versus the second quarter was due to a fall in market values as declines in non-US indices were magnified by the strengthening of the US dollar.

Asset outflows were negligible.

Our average basis point fee, excluding minimums, fell slightly to 3.1 basis points at the end of the third quarter, driven by the outperformance of ETFs linked to our US indices.

We continue to see a lot of interest from asset managers in using our indices as the basis for new ETFs.

Twenty-seven net new ETFs linked to our indices were launched in the third quarter, bringing our worldwide total on September 30th to 508 funds.

As a reminder, on the second US business day of each month, we publish on msci.com the assets under management of ETFs linked to our indices for the prior month.

Those numbers will be updated after the close of today's market, and they will be as follows -- at the end of October, they were $322 billion in assets under management linked to our indices, up 11% from the end of the third quarter.

We continue to build our families of MSCI strategy indices.

These are in the series that are intended to complement our core market capitalization weighted indices.

And they include minimum volatility indices, fundamentally value weighted indices and risk weighted indices.

We have [already won] several institutional passive mandates on these indices, and iShares recently launched four ETFs linked to our minimum volatility indices.

These are encouraging signs of growing market acceptances of these products.

At the beginning of October, we also launched the MSCI Emerging Market 50 Index, which highlights the 50 largest constituents of the market-leading MSCI Emerging Market Index.

The product is designed as a more easily tradable alternative to the broader index, and we are seeing strong early interest from broker dealers.

Revenues for our risk management analytics business were $62 million, up 13% versus the third quarter of 2010.

The risk management analytics run rate of $252 million grew by 1% sequentially and by 10% year-over-year.

Changes in foreign exchange rates, especially the strengthening of the dollar against the euro during the quarter, reduced the risk management analytics run rate by $4 million or 2%.

Total risk management analytics sales were $13 million in the quarter, down 27% year-over-year from a very strong third quarter of 2010, and up 24% sequentially.

New recurring subscription sales were $12 million.

The level of demand for risk systems remains healthy, although we did experience some slippage during the quarter of deals from the third quarter into the fourth quarter.

One of the key areas of growth in our risk management analytics business is our sales to asset owners, especially pension funds.

We signed contracts with two of the top 20 US pension funds during the quarter.

To support this demand, we released an updated version of BarraOne that incorporates the latest version of the Barra integrated model.

This innovative model now includes coverage of private real estate portfolios, as well as publicly [credit] fixed income, [mobile] equities, currencies and hedge funds; and allows asset owners to have a more granular view of the risks and correlations across their entire investment programs.

The new model also enables us to provide our asset manager clients more in-depth analysis in certain asset classes, like fixed income and currencies.

Another key area of growth for us in the risk management analytics business is our hedge fund transparency product line.

Hedge fund investors are eager to better understand the risk across their hedge fund holdings, and our service provides aggregated position-level risk analysis and reporting without disclosing the fund-by-fund positions themselves.

During the quarter, we added two of the top 10 largest global [fund of] hedge funds to our client base.

Cancelations in the risk management analytics business declined 29%, and the third quarter retention rate improved from 88% to 92%.

For the first nine months of 2011, the retention rate has increased to 93% from 88%.

Our portfolio management analytics business, or PMA, continued to recover.

Revenues were $30 million.

While run rate of this business declined 3% year-over-year, it rose 1% sequentially to $119 million.

We had $4 million of new recurring subscription sales in our PMA business in the third quarter, with the majority of that coming from sales of our risk models and our data.

Our retention rates increased to 87% from 82% in the third quarter of 2010, as cancelations declined 29%.

For the first nine months of 2011, our retention rate stands at 89%, up from 85% in 2010.

As promised in this business, we are delivering new products into the equity portfolio management and trading markets.

During the quarter, we launched our innovative new US equity model, the first in a series of models designed to deliver much better forecast of risk and expected returns for optimized portfolios.

We also plan to launch an updated version of our global equity risk model in the near future.

Additional single-country models using our new framework will be launched, and new functionality into the Barra portfolio management software platform is being worked on.

The governance business continued to lay a foundation for future growth.

Revenues were $29 million in the third quarter.

Governance run rate slipped slightly versus the second quarter of 2010 to $107 million, as currency changes offset a third consecutive quarter of positive net new subscription sales.

Total governance sales rose 13% year-over-year to $7 million.

New recurring subscription sales, driven by strong sales of our new executive compensation product, rose 62% to $4 million, which more than offset a decline in non-recurring sales for the segment.

Cancelations rose 5%, and the retention rate for the third quarter was 86%, down 1% from the third quarter of 2010.

For the first nine months of the year, the retention rate was 87%, up from 86% a year ago.

To sum up -- MSCI reported strong operating and financial results during the third quarter of 2011, despite the impact of weaker financial markets all over the world.

The combination of solid overall sales and continued strength in retention rates helped drive continued growth in our subscription run rate.

Looking ahead -- our pipeline is healthy, and the ETF assets linked to our indices have rebounded from the lows of the third quarter.

We believe we are well positioned to take advantage of the strong long-term secular trends that are in demand in our business worldwide.

I'll now turn it over to David for some additional comments regarding our third quarter financial results.

David?

Thank you, Henry.

Before we get started, I want to remind everyone that we closed the acquisition of RiskMetrics on June 1st, 2010, the first day of MSCI's 2010 fiscal third quarter.

That means that all of the quarterly comparisons we are making represent the actual results of the Company on a combined basis.

MSCI reported revenues of $225 million in the third quarter of 2011 and $675 million for the first nine months of the year.

MSCI's third quarter revenue growth was driven by 20% growth in index and ESG product revenues and a 13% growth in risk management analytics revenues.

These gains were offset by a 5% decline in governance revenues.

By type of revenue -- subscription revenues grew 7%, asset-based fees grew 39%, and non-recurring revenues were essentially flat.

By segment -- performance and risk revenues grew by 14% year-over-year to $196 million in the third quarter of 2011.

Governance revenues, as I noted earlier, declined 5% to $29 million.

As a result of a shift in strategy within the ISS corporate business, we now have a greater percentage of sales, as Henry mentioned earlier, coming from recurring subscriptions rather than non-recurring sales, which is having a modestly negative impact on recorded revenues during the quarter versus prior period comparisons.

Overall, adjusted EBITDA expenses, which exclude depreciation and amortization, non-recurring stock-based compensation, restructuring costs and transaction expenses, rose 5% year-over-year to $121 million.

Our compensation costs rose by 5% also, to $85 million.

As Henry mentioned, we have been able to leverage our emerging market centers to mitigate the financial impact of our ongoing investments in our employee base.

In the past 12 months, we've grown our employee base by 10%, including a 7% increase in the third quarter.

The majority of this growth has come in emerging market centers like Budapest, Monterrey, Mumbai and Manila, where our headcount growth is over 40%.

That has helped keep our overall compensation costs in check.

We generated $104 million of adjusted EBITDA in the third quarter, an increase of 19% from the third quarter of last year.

Our adjusted EBITDA margin expanded to 46% from 43% in the third quarter last year.

On a segment basis, performance and risk-adjusted EBITDA grew 21% to $96 million, and the adjusted EBITDA margin expanded to 48.9% from 46.1% in the third quarter of last year.

Governance-adjusted EBITDA was essentially flat, but the margin expanded by 140 basis points, to 26.5%.

For the first nine months of 2011, we reported adjusted EBITDA of $315 million, an increase of 23% from the pro forma nine months of last year.

MSCI's adjusted EBITDA margin rose to 46.7% from 42.6%.

Performance in risk-adjusted EBITDA margin rose 24% to $290 million, and governance-adjusted EBITDA increased 5% to $25 million.

We incurred $12 million of other expenses in the third quarter, most of which was interest expense related to our debt.

Our interest expense declined versus the third quarter of last year as we realized the benefit of lower levels of outstanding debt and lower interest costs resulting from the re-pricing of our debt during the first quarter of 2011.

Our effective tax rate in the third quarter was 29.2%.

For the nine months of 2011, the tax rate was 33.3%.

The third quarter 2011 tax rate benefitted from the recognition of two non-recurring tax benefits totaling $4.2 million.

Excluding those benefits, the third quarter tax rate would've been 35.1%, and our year-to-date tax rate would've been 35.4%.

We are currently projecting our full-year tax rate to be approximately 34% to 34.5%, including those two non-recurring items I just discussed.

And that would imply a fourth quarter effective tax rate of approximately 37%.

Third quarter GAAP diluted earnings per share was $0.40 per share, up from $0.08 per share in the third quarter of last year.

Our adjusted earnings per share, which is a non-GAAP measure that excludes the after-tax per-share impact of restructuring costs, non-recurring stock-based compensation, the amortization of intangibles, transaction expenses, and debt repayment and financing costs, was $0.49 a share, up 48% from $0.33 per share in the third quarter of last year.

For the first nine months of the year, MSCI's GAAP diluted EPS was $1.05 a share, up $0.55 from last year; and our year-to-date adjusted EPS was $1.39, up 36% from the nine months of last year.

During the third quarter, MSCI generated $95 million of operating cash flow, up from $66 million in the third quarter of 2010.

Our operating cash flow for the first nine months was $175 million, up from $121 million last year.

Capital expenditures were $10 million in the third quarter and $17 million over the first nine months of 2011.

We ended the third quarter with $1.1 billion of total debt outstanding, of which roughly 38% is swapped into fixed rate instruments.

We also had $364 million of cash, cash equivalents and short-term investments on our balance sheet.

Finally, our quarterly weighted average fully diluted share count was 122 million shares, essentially flat from the second quarter of this year.

With that, we would be happy to take any questions you might have.

(Operator Instructions) Suzi Stein, Morgan Stanley.

I'm just wondering if you can update us on any conversations you've had with the ETF providers, particularly BlackRock, in regard to your fee structure, just given the tone of the market and given the recent filing by BlackRock to be an index provider.

Yes, Suzi, there is absolutely no change whatsoever on our fee structure with any ETF provider anywhere in the world.

There are no discussions or conversations about changes to our fee structure of any nature with anybody.

With respect to BlackRock, we have a great relationship, and getting stronger.

And we're trying to do more things together around the world.

So no change whatsoever there.

Okay.

And then, what's been the response for the new equity models released this quarter?

Are clients paying for the upgrade, or is it part of the subscription?

And then, is there a higher price point for new clients?

Well, the response has been overwhelmingly positive.

There are a lot of people who have been part of the beta test of this model who have seen how robust the new model is with respect to forecasting expected returns and risk in portfolios and in markets.

Let me pass it on to David with respect to the fee structure.

Yes, we are, [in] up-selling, selling through the model to clients and achieving success.

It's early days, we're just out with it.

But as Henry mentioned, the response from the clients is it's been positive.

And the only thing that I will highlight is that this model was built with a lot of new modeling methodologies.

And it's the first of a long series of models that we will be launching that have this improvement.

And a few of those models, for example, will be launched before the end of the year, and other ones will be in the first quarter and in the balance of 2012.

David Togut, Evercore Partners.

Could you give us an update, David, on the current rate of RiskMetrics-related cost savings in the September quarter and whether you see an opportunity to achieve additional cost savings the next 12 months?

Yes.

We reported in the last quarter that we achieved our target, $50 million, and that had run through the financial statements and closed the book on that chapter.

As far as going forward, we are making investments in the business, in the risk business, in a number of different areas, as well as continuing to work, as we do every quarter, on our cost structure in areas of non-compensation such as market data, IT, et cetera.

And those numbers are flowing through the growth rates in our cost structure which, as we said, is 5% in comp and non-comp in the quarter.

I see.

Then, Henry, you highlighted 27 net new ETFs that were linked to your indices in the quarter.

Do you have a good sense of the pipeline of new ETFs that might link to your indices in the next six to 12 months?

There's not a great deal of change on the pipeline.

Clearly, this is a product line that has remained resilient worldwide regarding flows of assets -- net new, so to speak, or net flows of assets -- compared to, for example, mutual funds.

So I think many ETF providers, even though cautious, continue to work hard at launching new products.

Robert Riggs, William Blair.

Could you just give us an update on your plans for hiring in the coming quarters?

It sounded like Q2, Q3 were big hiring quarters.

And then, a follow-up on that would be -- will there more of a focus on content development or sales, or both?

I think we will continue to hire new staff at a steady pace, especially staff in our emerging market centers.

We believe very strongly that the secular wins for pretty much everything we do get even more reinforced and even more positive for us during periods of crisis like this, from -- I would say from passive management to risk management, to quantitative tools to help in (inaudible) in portfolios, to governance, and so on and so forth.

So therefore, we are very keen on continuing to invest in our distribution channels.

So a lot of the people that we're hiring are in sales and client service, and consultant and the like, to work directly with clients.

And we're also very keen on continuing to invest and launch new products pretty much across the board.

We're launching new indices.

We're clearly launching a lot of new models and software in the Barra business.

We're investing also in the risk management business, in performance [contribution] and counterparty risk and liquidity risk, and, as you saw, non-private -- non-liquid assets for asset owners, and so on and so forth.

And all of that is already baked into the cost structure of the Company.

So the additional headcount, I think, is not going to put an inordinate amount of pressure at all on our financials.

As we mentioned in the remarks, the net hiring is in the emerging markets, and that has enabled us to add these heads but control the costs, the compensation costs, related to that.

Great.

Thank you.

(Operator Instructions) Michael Weisberg, Crestwood Capital.

Couple of things -- the index business -- could you give us a sense of the run rate on the sequential basis constant currency?

Is there a way of doing that?

Yes.

While David looks up some of the numbers, Michael -- the index business is largely priced in dollars.

Right.

In the index subscription business, not the ETF, not the asset-based fee --

I see.

-- largely priced in dollars, pretty much all over the world.

There are very, very few exceptions to that.

The businesses that follow a run rate is in foreign currencies.

For example, the risk management analytics business and the PMA, the portfolio management analytics, business.

But the index business is largely devoid of any sort of foreign exchange issues.

Now, clearly on the ETF part, the majority of the indices that we have and the ETF linked to those indices are non-dollar-denominated indices that get translated into dollars if listed in the US, for example.

Yes, just to follow up, Michael -- the impact in the quarter on the run rate in the benchmark business was less than $400,000.

As Henry mentioned, most of the contracts are denominated in dollars.

Most of the run rate difference, which is a little under $6 million, was in the risk management analytics business, where more of the contracts are in euros, et cetera.

So as far as the benchmark business is concerned, negligible effect on the run rate in the benchmark business from currencies.

Because I guess the follow-up would be -- you were flat sequentially; you were flat sequentially last year as well, in the second and third.

Is that because of a decline in non-subscription business?

Because you would think, based on the ACV, that your revenues would be up sequentially.

I'm talking about (multiple speakers) in index, I'm sorry, in the index business.

Yes, the index business was up 2.8% sequentially in the quarter on a run rate basis.

Right, I'm talking about revenues.

The revenues were flat.

Oh, the revenues would mainly be related to two things.

One is the AUM, as we mentioned, where the average assets under management were lower.

And there are small and recurring -- non-recurring sales, one-time sales, in periods-to-periods, that have that effect bound into the single percentages or so.

Okay.

Again, I was talking about flatness in the index business, not the ETF business.

ETF I understand.

I was talking about flatness in the index business.

And that would most likely -- that would be related to the one-time sales and the timing of those sales, with a one-time sale in one period versus the other.

I see.

Okay.

The subscription business, the benchmark was up 2.8% sequentially.

In run rate.

In run rate.

And that is for minor -- that doesn't include the non-recurring sales.

So this effect down into these percentages is related to whether you have a one-time sale in one quarter versus another.

I see.

So it's affected that.

What kind of challenge do you see in the fourth quarter in the risk business?

Just because I think a lot of the -- traditionally, a lot of the subscriptions come up for renewal fourth quarter.

Should we expect a material jump in cancel rates in the fourth quarter?

It's hard to say, to forecast, Michael, right now.

But what we can say is that the secular demand for risk management analytics products gets even stronger in environments like this.

Our pipeline remains pretty healthy.

But the RMA business is lumpy.

So for example, this quarter, this third quarter of 2011, compared to the third quarter of 2010, may look unfavorable because there were very strong sales, particularly to US asset managers, in the third quarter of 2010.

Some of that was delay of purchases that people delayed because of the closing of the RiskMetrics acquisition.

It was a little bit of uncertainty there from the second quarter, and therefore they slipped into the third quarter.

But overall, we're not worried per se about the level of fundamental demand for risk management analytics among our client base worldwide.

As I said, this quarter, this third quarter, it was particularly strong with asset owners, pension funds, in risk management.

It remains weak on hedge funds.

Part of that has been the way we've approached the market.

And we're making changes to that and re-pricing certain products to the lower end of the market so we can also participate there.

But part of it is that many hedge funds have been very, very negative about the market outlook during the third quarter.

Yes, Michael, as you've been following -- there is a weighting in the fourth quarter.

It's not our most weighted.

The governance business is more weighted in terms of renewals, but there is a weighting.

And that would mean, on the same retention rate, you would have more cancel than you've seen in previous periods.

But the weighting is not very significant in the RMA business.

David Scharf, JMP Securities.

I have a question on risk as well.

The new sales were, I think, stronger than certainly I was looking for.

And you mentioned in the press release strong growth, particularly from BarraOne.

I'm wondering, Henry, can you kind of bring us up to date on a year post the RiskMetrics acquisition -- just how BarraOne and risk manager are sort of positioned side by side in the market?

I can recall when RiskMetrics was standalone, and we would ask about BarraOne.

And the response usually was they really didn't cross paths in the sales cycle.

And just trying to get a sense for how they're positioned, what different types of customers perhaps they're going after, and whether there's some integration down the road, or cannibalization.

Yes, good question.

We don't see, pretty much, any cannibalization between these two product lines.

They are positioned differently, in the sense that BarraOne is ideally suited for what we call asset owners, pension funds, sovereign wealth funds, endowments, foundations and the like.

And risk manager, on the other hand, is ideally suited for hedge funds -- large multi-strategy hedge funds.

So the overlap in between is asset managers.

And within asset managers, risk manager is more well-suited for wealth managers.

And that's been a pretty strong market for us, although from clearly low levels.

And then, asset managers, [long-only] asset managers per se -- there's some that BarraOne will be better for them, and there are some that risk manager will be better for them, and we end up looking at what is the best approach for them.

Risk manager is also fairly well-suited for banks and broker dealers on the sales side, especially in the [brand] brokers operations.

And that's an area that, this quarter -- when I mentioned at the beginning that banks and broker dealers were surprisingly resilient, it's on the heels of good sales of risk management analytics, but especially risk manager per se, for that segment of the market.

So I think, between these two product lines -- covering pretty much the wide spectrum of different client segments and various use cases worldwide -- we feel that we're extremely well positioned, and with a strong secular demand for risk management analytics.

And the issue for us, clearly, is to deal with the lumpiness of these sales -- one quarter will be great, the next one will be less great, and the like -- and to continue to make sure we invest in the product line to deliver the functionality and the services that clients are demanding.

That's a helpful distinction.

Following that route of geography, I know risk manager historically has gotten anywhere from 40% upwards of 50% of new sales from Europe.

On the BarraOne side, this is a few quarters in a row where you've highlighted pension funds in particular.

So I assume that's BarraOne.

Are those all US-based?

And from the asset owner standpoint, and BarraOne in particular, is there a European pipeline of substance?

Or is it primarily focused on domestic sales for the time being?

The pipeline is across the world, from BarraOne sales in Japan to Europe and the US.

Obviously, the US -- especially the US public pension fund market -- has been a pretty sweet spot for us.

In the old days, corporate pension funds -- if you go back 20 years or so, corporate pension funds were the ones at the leading edge of best practices and risk management and other areas.

Today, the public pension funds are the ones that are leading the charge.

So we have been very successful with public pension plans in the US and around the world.

And we're now beginning to develop quite a good pipeline of corporate pension plans.

In Europe, we have a few new clients that are in the 401(k), the equivalent of the defined contribution space, especially in the UK.

We got some good clients in Scandinavia and, as I said, some of the public and private (inaudible) and corporate pension plans in Japan.

The one area that we're still struggling to penetrate is the asset owners in mainland China, for example.

We have two or three of these salient, big clients there -- the China Investment Corp, for example, is a client of BarraOne.

We made a public announcement about that a few months ago.

And we just returned from China last week.

And one of the things we're trying to figure out is how to sell some of these systems in a market that is a little bit cautious about using online in [ASP] solutions.

Also, to add another aspect of the strength of the asset owner client base has been in our hedge fund transparency business, where the fund-of-fund and other asset owners have been strong.

That's been in Europe as well as in the United States.

So that's been a strength for us also in the asset owner area.

And that was as a result of the acquisition in July of 2010 of Measurisk, a small company that we bought from J.P.

Morgan.

And we merged it into a product called hedge platform that was part of RiskMetrics.

It took us almost a year to reengineer that combination and find alternative sources of data and the like.

But now it's beginning to go into high gear.

And that's an area of meaningful growth for us in the next years to come.

Great.

Thank you very much.

Thank you.

There are no further questions at this time.

I'll turn the call back over for closing remarks.

Thank you, Latoya.

And thank you, everyone, for joining us.

Have a good day.

Ladies and gentlemen, this concludes today's Conference.

You may now disconnect.