$MSCI MSCI Inc Q2 2024 Earnings Conference Call

Good day, ladies and gentlemen, and welcome to the MSCI Second Quarter 2024 Earnings Conference Call. As a reminder, this call is being recorded. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session where participants are requested to ask one question at a time and then add themselves back to the queue for any additional questions. We will have further instructions later on. I would like to now turn the call over to Jeremy Yulen, Head of Investor Relations and Treasurer. You may begin.

Thank you. Good day and welcome to the MSCI Second Quarter 2024 Earnings Conference Call. Earlier this morning we issued a press release announcing our results for the second quarter of 2024. This press release, along with an earnings presentation and brief quarterly update, are available on our website msci.com under the Investor Relations tab. Let me remind you that this call contains forward-looking statements, which are governed by the language on the second slide of today's presentation. You are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date on which they are made, are based on current expectations and current economic conditions, and are subject to risks and uncertainties that may cause actual results to differ materially from the results anticipated in these forward-looking statements. For a discussion of additional risks and uncertainties, please see the risk factors and forward-looking statements disclaimer in our most recent Form 10-K and in our other SEC filings. During today's call, in addition to results presented on the basis of US GAAP, we also refer to non-GAAP measures. You'll find a reconciliation of our non-GAAP measures to the equivalent GAAP measures in the appendix of the earnings presentation. We will also discuss operating metrics such as run rate and retention rate. Important information regarding our use of operating metrics such as run rate and retention rate are available in the earnings presentation. On the call today are Henry Fernandez, our Chairman and CEO; Baer Pettit, our President and COO; and Andy Wishman, our Chief Financial Officer. As a housekeeping item, we wanted to remind our analysts to ask one question at a time during the Q&A portion of our call. We do encourage you to ask more questions by adding yourselves back to the queue. With that, let me now turn the call over to Henry Fernandez.

Thank you, Henry, and greetings everyone. In my remarks today, I will discuss our second quarter performance in greater detail with a focus on both product lines and client segments. Our performance shows how MSCI continues to balance long-term strategy and short-term execution. We design our business plans for extended time horizons, but we also do the hard work necessary to deliver for shareholders in the short term. Looking at our second quarter results, in Index MSCI achieved 9% subscription run rate growth, including 10% growth in both EMEA and APAC, and 177% growth in custom indexes and special packages. In addition, direct indexing AUM based on MSCI indexes is now $113 billion, up 28% year-over-year. We are also encouraged by our progress with custom indexes. In Q2, we supported a large asset manager client in their launch of a new custom ETF climate series linked to the MSCI Transition Away Select Indexes. Meanwhile, we closed on our acquisition of Foxbury, with an enhanced custom index platform launch underway for the second half of the year. Looking at global investment flows, we are encouraged that ETF products linked to MSCI indexes captured the highest cash flows in over two years, with over $28 billion of inflows during the second quarter. In general, the depth and scale of tradable products linked to MSCI indexes continues to grow. During the quarter, we strengthened our position as a top index provider for ETF products as the number of launches of equity ETFs linked to MSCI indexes nearly doubled year-over-year, translating to $2.5 billion in cash flows and a nearly 30% share of new equity ETF fund flows. Open interest in derivatives linked to MSCI indexes is now nearly $300 billion, up 9% from the same period last year. Shifting to Analytics, we delivered another strong quarter across regions and business areas. Most notably, Analytics achieved our best-ever Q2 for new recurring subscription sales at over $21 million and our best-ever Q2 retention rate at close to 96%. We had a strong quarter with hedge funds, including a large win for our Equity Risk Models to support a new client's recent fund launch. Our offerings are supporting broad use cases such as market risk, regulatory capital management, counterparty credit risk management, liquidity monitoring, and investor reporting. We also drove $3.6 million in new recurring sales from asset owners, up 63% year-over-year, to support their enterprise risk management amid an industry reimagining of risk management. Risk teams at global investment firms are under pressure to find efficiencies, modernize services, all while harnessing the potential power of generative AI. We launched a new Future of Risk product suite during Q2, including our MSCI AI Portfolio Insights tool, as Henry mentioned. This tool demonstrates how we can leverage our existing strength and IP to drive innovation. It combines MSCI's deep history in natural language processing and machine learning with our industry-leading data and risk and factor models. Turning to ESG and Climate, we delivered 14% run rate growth for the combined segment along with 30% climate run rate growth across our product line. Our new game-changing partnership with Moody's to offer MSCI ESG sustainability data to Moody's broad base of global clients reinforces MSCI as the market standard for ESG. The partnership will also help us expand our ESG and sustainability coverage for private companies. In addition, the Moody's partnership also confirms the continuing importance of sustainability considerations in global investing. MSCI continues to advance our product roadmap, including for regulatory solutions. Last month, for example, we launched a new data set to help issuers, advisors, and corporates align with the Corporate Sustainability Reporting Directive (CSRD) in Europe. In Climate, we released an important new product, MSCI Geospatial Asset Intelligence, which will help clients identify physical and nature-based risks on more than 1 million locations for 70,000 public and private companies. With this product, we are once again using AI for data collection and mapping so that investors and lenders can better assess climate risks in their portfolio and loan books. Initial client interest is encouraging, and we've already signed two deals, including with a large prominent private credit GP. In Private Assets, we are driving important product and client milestones. MSCI Private Capital Solutions subscription run rate is almost $106 million, which represents growth of 177% over Burgess's performance in the same period last year prior to the acquisition, and the retention rate was almost 93%. On the product side, we achieved a key milestone with the launch of MSCI Private Capital Indexes, which will accelerate our push to become a standard setter in private markets, supporting investors seeking standardized taxonomies and benchmarks to measure and evaluate private asset classes consistently. Given MSCI's global leadership and track record of success in indexing and benchmarking, clients have expressed significant interest in having us create benchmark indexes for private markets. Finally, in Real Assets, we posted a run rate growth of 3% and a retention rate of 90%. While the commercial real estate market remains challenging, we are encouraged by client demand for products uncorrelated with transaction volumes, including Portfolio Services, Index Insights, and Climate, which enabled us to land almost $3 million of new recurring sales in Europe, growing 16% year-over-year. Looking ahead, we will continue aligning MSCI's long-term strategy with secular trends and our competitive advantages while staying laser-focused on short-term execution. And with that, let me turn the call over to you, Andy.

Thanks, Baer, and hi everyone. In the second quarter, we delivered 10% organic revenue growth, 14% adjusted EBITDA growth, and 21% free cash flow growth. We are encouraged by the results, which reflect our unrelenting dedication to execution even in the face of market headwinds which may persist in the short term. We are encouraged by the rebound in retention rates from the first quarter, which we did expect, and we have not seen any deterioration in conditions, although we expect cancels to remain elevated in Q3 compared to last year and we expect somewhat longer sales cycles to persist in the short term. I also want to note that Q3 tends to be a seasonally softer quarter for us on the sales front. Within Index, we grew our subscription run rate among asset managers and asset owners at 8% and 12% respectively. These segments collectively represent 68% of our Index subscription run rate. Meanwhile, our Index subscription run rate with wealth managers and hedge funds grew 11% and 24% respectively. Across Index subscription modules, we saw another strong quarter from Custom and Special Packages, growing 177%. ABF revenues were up 18% year-over-year, benefiting from $28 billion of cash inflows and about $21 billion of market appreciation in ETFs linked to MSCI equity indexes during the second quarter. ETFs linked to our indexes continue to attract flows in non-US exposures, particularly in developed markets outside the US and in emerging markets, as we have seen a pick-up in flows into ETFs with exposures outside the US. Fixed income ETF AUM linked to MSCI and Bloomberg partnership indexes is now at $64 billion with year-to-date inflows of over $6 billion. Given strong recent equity market performance, non-ETF revenue in this quarter included the impact of tugs related to higher reported client AUM and newly reported product launches. We reached a significant milestone in the quarter with AUM in ETFs and non-listed passive products tracking MSCI indexes now surpassing $5 trillion. In Analytics, organic subscription run rate growth was 7% and revenue growth was 11%. The difference is largely attributable once again to the impact of recent client implementations which continued from the last couple quarters. As we've noted in the past, Analytics revenue growth can be lumpy because of items such as these implementations, and we expect revenue growth rates to more closely align with run rate growth in Q3. In our ESG and Climate reportable segment, organic run rate growth was 13.3%, which excludes the impact of FX and about $5 million of run rate from Trove. Q2 new recurring subscription sales for the segment included a significant contribution from the Moody's partnership. Regionally, subscription run rate growth for the segment was 17% in Europe, 20% in Asia, and 9% in the Americas. In Private Capital Solutions, year-over-year run rate growth was 177%, and we continue to gain traction in key markets. New recurring sales in Europe reached a record, and we also saw solid traction in sales with our GP client base. The Private Capital Solutions retention rate was approximately 93%, and we recorded almost $27 million of revenue in the quarter. In Real Assets, run rate growth was roughly 3% with a retention rate slightly above 90%. We continue to have solid momentum in our Index Intel and our Income and Climate Insights offerings, while we continue to see industry pressure impacting our transaction data offerings, including our RCA and Property Intel products, which we expect to continue to face headwinds in the near term. Our rigorous approach to capital allocation remains unchanged. Through yesterday, we've repurchased over $290 million, roughly 600,000 shares, since late April. Our cash balance remains over $450 million, including readily available cash in the US of more than $200 million. Turning to our 2024 guidance, we've increased our guidance for depreciation and amortization expense and operating expenses by $5 million, reflecting in part the impact of acquired intangible amortization expense from the Foxbury acquisition which closed in April. I would note that our guidance assumes that ETF AUM levels increase slightly from June 30th levels through the end of the year. To the extent AUM levels track higher than this, we would expect to be towards the higher end of our expense guidance ranges. As of right now, we expect a quarterly effective tax rate in both Q3 and Q4 to be in the range of 20% to 22% before any additional discrete items. Before we open it up for questions, I want to underscore that we see tremendous opportunities with compelling secular trends. We see strong client engagement and tangible opportunities to drive growth. We see near-term headwinds and client pressures, but we continue to execute and drive leadership in these large addressable markets that will drive long-term growth for us. We look forward to keeping you posted on our progress. And with that, operator, please open the line for questions.

Thank you. Ladies and gentlemen, we will now begin our question and answer session. If you have dialed in and would like to ask a question, please press star followed by the number one on your telephone keypad. If you would like to withdraw your question, simply press star one again. As a reminder, please limit yourself to one question only. Afterwards, you may add yourself back to the queue for any additional questions. We'll pause for a moment to compile the Q&A roster. Thank you. The first question comes from the line of Alex Kramm from UBS. Please go ahead.

Yes, hey, good morning everyone. Just wanted to maybe unpack the strong sales growth in the quarter a little bit more. Last quarter obviously fairly soft, and I think the tone even looking forward is still fairly somber. So maybe you can just help us: what happened across the different segments? Did you gain more pricing? Was it just timing that a lot of these longer sales cycle deals closed? Or was the sales force really engaged after what happened last quarter? Just trying to understand the really strong results here after a challenging environment. Thank you.

Sure, thanks Alex. It's Andy. A few observations here. Firstly, I would remind you, and I think you know this, sales and cancels can both be lumpy quarter to quarter. I would say that we haven't seen a deterioration in conditions, and I would say the sales in Q2 were solid as you pointed out. I would also say that we haven't seen an inflection yet overall. We still see pressures on clients, we still see the longer sales cycles, so we would expect the lumpiness in sales and cancels to continue here. And as I mentioned in the prepared remarks, Q3 can be a seasonally softer quarter for us. But as we've highlighted before, sustained momentum in equity markets is helpful to overall buying dynamics, although the impact on our subscription sales and operating metrics more generally tends to lag the markets. I would highlight that we are seeing strong client engagement across the globe, and we see it across most product areas and client segments. I think both the momentum in the equity market and the strong client engagement should eventually lead to some momentum on the sales front. So we are encouraged here, but we remain cautious and expect some continued lumpiness.

The next question comes from the line of Manav of Night from Barclays. Please go ahead.

Thank you. I wanted to ask about the Moody's partnership, actually. It's a very interesting partnership, sounds like a win-win. I know you alluded to a bit, Henry, but maybe just some context on why now and how the mechanics of the agreement works between the two of you. I presume there's revenue sharing going on. And just quickly, Andy, I think you mentioned in your remarks that there was already some contribution from Moody's. I apologize if I missed that. If you could just help with that.

Hey, Manav. Baer here. So look, simply put, the deal is... First of all, maybe on a higher level, we've stated repeatedly here in the call and in various meetings with many of you that we're constantly on the lookout for partnerships. And I think this is a critical thing which we hope will have a positive impact across our business in a variety of ways. So we started exploring with Moody's on a variety of fronts, and in essence, what we've come up with here is Moody's felt that us being a leader in ESG, they could use us significantly across a variety of their products and services to their clients. And in turn, Moody's has an extraordinary private company database with a product they now call Orbis, and that's an area where we at MSCI have been really focused on trying to get better data and information for a variety of use cases, but notably for ESG and climate where that company information can be very hard to get hold of. So that's kind of the two parts of the deal. We're very pleased with it, mostly because we think it's a great deal for both parties, but specifically we were able to put this together very quickly in just a number of months with a true spirit of partnership with Moody's. So we see a lot of upside from this in the future.

And maybe if I can just touch on the second part of that question, Manav, about the economics. As I mentioned in the prepared remarks, the partnership has resulted in a significant contribution to new recurring sales in Q2. Unfortunately, I can't give more specifics, but I would highlight that we haven't seen any notable changes to the segment trends that we've been seeing in recent quarters.

The next question comes from the line of Tony Kaplan from Morgan Stanley. Please go ahead.

Thanks so much. In the past couple quarters, I think one of the debates that has emerged is this cyclical versus secular debate around the asset manager and market. And you've spoken about the challenges of tight budgets which have intensified over the past roughly two years. It seems like it's still going to be a little bit tough in Q3. I guess what do you think the catalyst is for the change that we'll see at some point? Because I think that you are sort of alluding to this being more of a cyclical issue. So what drives that change? And can you sustainably grow double digits in an environment that continues to be challenged, or does the end market need to pick up? Thanks.

The next question comes from the line of Ashish Sabadra from RBC Capital. Please go ahead.

Uh, thanks for taking my question. Henry, I just wanted to drill down further on the index front. Particularly, the slowdown in subscription growth there is understood, but as we think about marching back into the low double digit growth over the mid term, I was wondering if you could help us parse how do you think about the market cap versus custom and direct indexing versus factor and thematic indices, and how do you think about those?

Growth profile and thanks for flogging some of those Wi-Fi fabrics as well as the AUM for direct indexing. How should we think about the direct indexing right now? These direct custom indices are only 15% of index subscription revenue, but how do we think about that over the next three to five years?

Thanks, sure. A number of questions there. I'll try to touch on several of them. I think you alluded to this: if we focus on the index subscription growth rate, we are seeing a slowdown now from softer recurring net new over the last few quarters, which is a reflection of the tougher environment and the pressures we've talked about. Although I would highlight that we are seeing resilience and momentum based on the second quarter results, which reinforces the long-term opportunity for us. If we double-click on what's driving the growth and the outsized areas of growth across the index franchise, it's similar to the drivers we've seen in recent quarters. We saw 8% growth in our market cap modules but, as you highlighted, 177% growth in our custom and special packages, which is a reflection of this move towards rules-based, systematic, customer-outcome-oriented investing where indexes are a very effective and efficient mechanism to develop those strategies. We are well positioned to benefit there. If we look across client segments, we saw 8% growth with asset managers, more than 11% and 12% growth with wealth managers and asset owners, and 24% growth with hedge funds. As Henry alluded to, we see tremendous opportunities related to this move towards indexation in many different large client segments, and that trend is continuing. It reflects a long-term compelling secular opportunity for us. If we focus on the direct indexing as you alluded to or asked about, I think direct indexing is mainly showing up in the non-ETF passive line for us. It is still very early in its evolution, and it's a place where we are well positioned to help both wealth managers and asset managers serving wealth managers with direct indexing solutions, providing them not only the underlying indexes—which is where most of our run rate comes from today and most of our revenue in that non-ETF passive line—but also broader solutions that help them on that customization journey at scale. Fabric is an enabler there, along with our broader analytics tools like our optimizers, risk models, ESG content, and climate content. So we are uniquely positioned to benefit from direct indexing, which I believe is still in its early days and will be a big opportunity longer term.

The next question comes from the line of Alexander Hess from JP Morgan. Please go ahead.

Hi everyone. So there was a large deal in the private asset space involving one of your larger clients this quarter. Can you address the opportunity for private indexes? Now MSCI is out talking about your own private index business and the opportunity for private capital indexes. But how do you think about the technical challenges to creating those sorts of indexes and gathering the data? How has the private capital solution been able to tackle some of those? Any comments about how to frame the demand and opportunity for that business would be appreciated as well. Thank you.

Next question comes from the line of Owen Lau from Oppenheimer. Please go ahead.

Good morning and thank you for taking my question. The broader market was quite strong in the first half, probably better than the initial market assumption. I'm just wondering what else you would like to see so that you can raise your full-year free cash flow guidance.

Thanks, sure. The cash flow performance has been strong for us; it was strong in the second quarter. I think we've benefited from both high collections compared to a year ago and lower cash tax payments. On the guidance front, there are a lot of factors that can impact free cash flow, everything from billings and collections across both subscription and ABF. Obviously a higher ABF environment does help, although ABF we tend to bill with a lag. Cash expenses and cash tax payments can swing quite a bit. We're only halfway through the year, and we are continually focused on driving strong free cash flow growth and strong free cash flow conversion. But I would highlight that it can swing quarter to quarter.

The next question comes from the line of Heather Balski from Bank of America. Please go ahead.

Hi, thank you for taking my question. I appreciate it. Last quarter during the call, you talked about your thoughts around margin expansion going forward, and I think the message was you expect more modest expansion. As we think through the strong growth you're seeing with regard to AUM, how are you thinking about reinvesting that? Has your thoughts changed from last quarter? If you were to sort of accelerate investments, where are you most focused? Thanks.

Sure. So Heather, I would say we are not focused on and we don't target a specific margin expansion or margin level. What we are continually doing is balancing investing for the long term while driving attractive profitability and free cash flow growth. So that is the calibration we are continually focused on. I would highlight the comments I made in the prepared remarks, where as you alluded to, AUM levels have been running higher than what underlay our guidance in previous quarters. We've assumed for the current guidance that AUM levels increase slightly from the 630 balances. If AUMs track above that, we will likely be at the high end of our expense guidance ranges. We would use the higher growth to invest in key areas of the business, as we have in the past. Those key areas tend to cut across the big growth frontiers we're talking about. From a solutions standpoint, we are very focused on the custom index front, which is a broad topic involving everything from technology to researchers to go-to-market. We do have investments in the climate front, and there are a number of opportunities across private assets and private capital that we are investing in. We are laser-focused on continuing to drive these long-term growth drivers while at the same time squeezing the run-the-business expenses and identifying efficiencies. But it's a constant calibration for us, and we are calibrating based not only on AUM levels but on overall business performance, outlook, and financial dynamics. We'll keep you posted on that.

The next question comes from the line of Fiza Ali from Deutsche Bank. Please go ahead.

Yes, hi. Thank you. I wanted to follow up on the environment you're seeing out there, specifically in ESG and climate, because it sounds like there was a pretty significant increase in new recurring subscription sales for that. I know you alluded to the Moody's partnership that may have driven a chunk of that growth. But then I also heard you talk about new products around CSRD. Give us a bit more around what you're expecting for ESG and if the underlying environment is any different or has improved.

Sure. So I would say we've seen a continuation of the dynamics we've been seeing in recent quarters. There haven't been major changes to the trends you've been seeing and we've been seeing. I think we highlighted this, but from a regional standpoint, segment run rate growth in the Americas was about 9%, about 17% in EMEA, and 20% in APAC, which is generally in line with what we saw last quarter. The theme we're seeing in each of the regions is fairly consistent. In the US, we're still seeing investors take a more measured pace on how they're integrating ESG, causing longer sales cycles and more deliberate purchasing decisions. In EMEA, we do see opportunities in areas like regulation—we've had some early wins with CSRD and EU Pillar 3—but regulation at the same time is creating complexity and confusion as it cuts across many different objectives from financial materiality to do-no-harm to specific climate objectives, resulting in some hesitancy from many clients. In Asia, we are seeing solid engagement, and it feels like Asia is earlier in its adoption of ESG. So very similar trends to what we've seen in the past. I would highlight that the industry pressures that impact all parts of the business are probably more impactful within the ESG and climate segment, where we serve such a wide range of client types and use cases, and there probably are some nice-to-have use cases that will get impacted more significantly from environmental pressures. We expect these dynamics to persist in the short term, but we remain encouraged by the long-term dynamics. As I alluded to, areas like regulation are compelling opportunities. We've seen some early wins, but also opportunities in some of the new offering areas that Andy highlighted around our asset-level physical risk and nature data sets with the Geospatial Explorer. That is quite exciting, very early days, but these things continue to add value to our clients. On top of that, we still see climate as a very dynamic area that has tremendous opportunities across not only new solution sets but client segments for us. As Henry alluded to, this is opening up opportunities in banks, insurance companies, and corporates directly, even opportunities with GPs. There are a wide range of opportunities we are excited about in the long term, but in the short term, no change in dynamics, and we expect it to continue.

The next question comes from the line of George Thong from Goldman Sachs. Please go ahead.

Hi, thanks. Good morning. Your analytics business had another strong quarter, including strong new recurring subscription sales and retention rates. What are the top factors enabling this performance, and how sustainable is double-digit organic growth in analytics?

Yes, so I would say—and you've noticed this in the results over the last several quarters—we've seen some good momentum. We're seeing strong client engagement across many different parts of our analytical tools. There's probably some benefit from the environment driving an intense focus on investment risk, credit risk, and liquidity risk, and we are a leader on all fronts, so that definitely has been helpful to us in certain areas. The performance is also driven in part by the enhancements and innovations we've continued to deliver. We've been seeing traction with our Insights offering, which delivers our risk analytics through a modern data architecture with enhanced visualization, and as you know, we've now integrated AI capabilities into that. That's an area where we do see strong client engagement, and we've seen some traction in enabling new sales for us. We've seen solid sales within our fixed income offering and continue to see opportunities there, and we continue to see strong momentum with our equity analytics business, our equity risk models, which is something we've highlighted in recent quarters. So a lot of the same drivers we've talked about in the past have been encouraging, and we continue to see opportunities. Although I will say it's likely to be lumpy, and some of the pressures that have impacted the broader company are likely to impact analytics as well.

The next question comes from the line of Scott Vermil from W Research. Please go ahead.

Great, good morning guys, and thanks for taking my question. I wanted to stay on the analytics segment and maybe talk about the margin you were seeing there. Obviously there was pretty notable expansion both sequentially and year-over-year. I'm wondering if you can walk us through and maybe drill down into the drivers of that notable margin expansion in analytics. Thanks.

Sure. We've commented on this in the past. There are several factors that drive the analytics margin and have driven it higher over the last several years. One is we have been capitalizing software, so the level of capitalized software has picked up a bit, which will drive the EBITDA margin up—it doesn't impact the operating margin but does impact the EBITDA margin. Broader expense efficiencies and expense discipline across the company tends to impact the analytics segment just given how we do many of our allocations. I would also highlight there are parts of the analytics business that we have invested less in as well. We've been very strategic and targeted with the parts of analytics we have been investing in, but there have been some parts we have invested less in to allow us to invest in other parts of the company that are very strategic for us. So all those factors have contributed to the analytics margin increasing over time. As you can tell by the growth, we do see very compelling opportunities within analytics that are not only attractive growth opportunities in their own right but are very strategic for driving growth across the company. So we do have investment opportunities in analytics that we will be putting money into and continue to invest in.

Question comes from the line of Craig Hoover from UBS Research Partners. Please go ahead.

Great, thank you. Just wanted to ask you guys a question on AI. Can you give us some examples of where you're really excited about uses of AI to help drive revenues long term, and also a similar question on the cost efficiency side—where AI can really help you on the cost side and help your margins out even better?

The next question comes from the line of Russell Quota from Redburn Atlantic. Please go ahead.

Yeah, hello. Congratulations on a strong Q2 result. I wanted to focus on private asset benchmarks if I can. Wondered if you could size the current addressable market you see there and the rate at which you think that market is growing. Also, if you could talk to the competitive dynamics—is this mainly white space for you guys, or is there others that you'll be looking to displace as you grow? Finally, do you have all the data assets you need to grow now, or will you be looking further to inorganic growth opportunities, particularly around data in this area?

The next question comes from the line of Gregory Simpson from BNP Paribas. Please go ahead.

Hi there, can I just quickly check in on the latest contribution of pricing to new sales across index and the other segment, and if there's any client behavioral changes around pricing you'd call out? Thank you.

Sure. I would say across the company, the contribution of price increases was slightly smaller than last year, very consistent with what we said last quarter. We have been slightly moderating our price increases in many places given the pricing and economic environment, which is very much in line with what we said last quarter. Importantly, I want to underscore this: we are focused on aligning price increases with the value we are delivering. So we do factor in the overall price environment and client health, but we also are focused on ensuring we're capturing the value for the enhancements we make to our solutions and service, and balancing that with the long-term relationship with our clients. Most of our growth is going to come from existing clients, so we are very focused on being a strong long-term partner to our clients. That means adding value, selling more to them, providing enhanced services to them, and that will translate through to enhanced price increases but also translates through to additional services we can deliver to them. So we're continually balancing value with price increases.

The next question comes from the line of Alex Kramm from UBS. Please go ahead.

Yes, hello again. Just a quick follow-up on the sales environment as I asked about earlier. When you think about the second half, and I know it's maybe a little bit too specific, but if you compare to last year maybe sales in dollars, are you still comfortable or are you comfortable that you can do more sales this year in the second half? Anything specific to 3Q or 4Q? That's the question. Thanks.

Sure. So as I mentioned, 3Q—and I know you're aware of this, Alex—3Q is typically a softer quarter for us seasonally, from a sales perspective. Q4 tends to be a seasonally strong quarter. I don't want to be too specific or prescriptive about what can happen. As I mentioned, sales and cancels can both be lumpy, and we do see some challenging dynamics out there. But as I alluded to earlier, we are seeing strong client engagement and opportunities out there. As we've seen in past cycles, if there is sustained momentum in equity markets, that tends to translate over time into more favorable buying dynamics for clients. But as I said earlier, we are cautious. We still see some pressures on clients, but overall we do see opportunities as well.

And that concludes the question-and-answer session. I would like to turn the floor back over to Henry Fernandez, Chairman and CEO, for closing remarks.

This concludes today's conference call. Thank you for your participation. You may now disconnect.