S&P Global Inc. (SPGI) Q1 2013 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the IHS Inc. 2013 Financial Guidance Conference Call. My name is Sue, and I will be your operator for today. [Operator Instructions] As a reminder, this call is being recorded for replay purposes. I would like to turn the call over to Mr. Andy Schulz, Vice President of Investors. Please proceed, sir.

Thank you, Sue. Good day, and thank you for joining us for this special conference call. We issued our guidance news release earlier this morning. If you do not have this release, it is available on our website at ihs.com. Please note that we filed an 8-K and posted a presentation to our website, which we hope will be of use in summarizing one of the main takeaways from this call. The presentation is available under the Investor Relations tab at ihs.com. The purpose of this call is to discuss our 2013 guidance. As many of you know, we are in the midst of compiling our 2012 fourth quarter and full year results and completing the related audit. As a result, it is not our intent to discuss the current quarter's performance. Some of our comments and discussions today are based on non-GAAP measures. The non-GAAP results are a supplement to our GAAP financial statements. Our website includes reconciliations of non-GAAP measures to their nearest GAAP equivalent. As a reminder, this conference call is being recorded and webcast, and is the copyrighted property of IHS. Any rebroadcast of this information, in whole or in part, without the prior written consent of IHS is prohibited. Please keep in mind that this conference call may contain statements about expected future events that are forward-looking, and subject to risks and uncertainties. Factors that could cause actual results to differ and vary materially from expectations can be found in IHS's filings with the SEC and on the IHS website. With that, it is my pleasure to turn the call over to Jerre Stead, IHS Chairman and CEO. Jerre?

Thank you, Andy. Good morning and welcome to all of our investors and IHS colleagues on this conference call and webcast. Thank you for taking the time to be with us today as we close out 2012 and look forward to continued profitable growth in 2013. I'll start with a quick review of events and results through Q3. As we reported in September, through Q3, we've grown revenue 17%; adjusted EBITDA, 23%; adjusted EPS, 11%; adjusted free cash flow, 22%; and adjusted free cash flow per share, 20%, while exceeding $5 per share of free cash flow on a trailing 12-month basis for the first time. As we completed our planning process for 2013 and the development of the guidance we're giving you today, we saw a continuation of the dynamics and trends that we discussed on the Q3 call. As a reminder of what we shared in September, our subscription business was solid and continued to grow at a high single-digits rate of organic growth, 7% or better for 9 consecutive quarters, with good price traction and no increase in cancellations or decline in renewal rates. We did not see the acceleration of growth that we were expecting from new businesses and nonrecurring revenue pipelines in Q3. We had seen in Q3 a sudden weakening in key markets, as customers delayed or put on hold many decisions in the uncertain environments. Also, on a regional basis in Q3, we saw a slowing of organic growth in EMEA and slower than anticipated growth in APAC, Latin America and the Northern American markets. In general, we saw a slowing in customers' new spending decisions that most significantly impacted our nonrecurring pipelines, creating a disproportionate impact on the overall business and growth rates. As you know, our fiscal calendar puts us a month ahead of most other companies while reporting financial -- when reporting financial results. On our Q3 call, we described a slowing that was surprising to some. And there was concern that our performance was weak relative to what other companies were expected to report. After our Q3 call, we saw the vast majority of earning reports come in lower than expectations, and many with negative growth. A good number of these companies are our customers. 61% of companies reporting Q3 results were below expectations, with nearly 1% overall decline in revenue growth. A significant number of these companies also lowered forward-looking guidance. We do see continued uncertainty around us. However, we continue to have solid profitable growth and are making great infrastructure progress. With that as a context, we're pleased to provide you with our guidance for 2013, which contains an outlook for continued positive organic growth and continued progress on expansion of margins. 2013, we expect all-in revenue in the range of $1.64 billion to $1.71 billion, representing 10% all-in growth at the midpoint. And all-in adjusted EBITDA in a range of $540 million to $582 million, representing a 16% growth at the midpoint. This then reflects a margin of approximately 33% to 34% for the full year and solid meaningful expansion from 2012 expectations. Also, assuming historic adjusted EBITDA to free cash flow conversion rates, this will represent about 20% growth in both free cash flow and free cash flow per share at the midpoint of our guidance. As we've discussed for many years, we expect expanding margins as we conclude the deployment of new systems and processes across every aspect of our business. The conclusion of this multiyear initiatives will allow us to capture benefits of scale and to enhance the efficiency and effectiveness of our global sales force and overall global workforce. This is the largest transformation and value-creation exercise in our company's history. With these new tools, we expect to drive consistent shareowner value as we continue to make major investments to support our sustainable, long-term profitable growth goals. As Scott and Rich will outline in just a moment, we're also providing a wider range of both revenue and EBITDA to reflect the near-term economic uncertainty. Our commitment to clear guidance for 2013 and the levels of growth reflect our continued confidence in our ability to grow at above market rates as we realize the benefits of our consistent investments, solid business model, market opportunity and expansion of market share globally. We will continue to update you quarterly on the market outlook and our expectation as the year unfolds. Now let me turn the call over to Scott, who's going to talk about our growth drivers related to our 2013 outlook. Scott?

Thanks, Jerre. We are focused on sustainable, long-term, profitable growth and are actively managing our portfolio, our investments, our priorities and the allocation of resources to our highest growth opportunities for the long term. We continue to see some of the same market and economic uncertainties as we discussed on our last call, and these will set the stage for the first half of 2013, as Jerre has outlined. I will give you the specifics of the drivers of our 2013 outlook that underlie the guidance we are providing today. Before I do that, let me reinforce, the fundamentals of our business model and market opportunity have not changed. It is our commitment to these fundamentals that will drive continued, long-term, profitable growth and the achievement of the long-term aspirations we have articulated. We continue to invest in our core systems, processes and infrastructure to support long-term organic growth, margin expansion and high levels of free cash flow generation. In the third quarter of 2011, we said that we were embarking on an 8-quarter period of transformation, the largest value-creation exercise in our history. We are now 6 quarters into that dedicated effort with much progress achieved, which means we are 2 quarters from beginning to realize the advantages and efficiencies from common financial, sales and order through cash systems and processes. We also remain focused on integrating offerings and capabilities to create new products and platforms tied to high-value customer decisions and increasing the breadth, depth and ease of use of IHS offerings. As we complete key deployments in the first half of 2013, combined with expected improving global market and economic conditions in the back half of the year, these efforts should provide momentum for IHS in our last 2 quarters and more measurably, as we enter 2014. Our efforts here will also result in lower costs and higher growth potential in our target industries and sectors and geographic markets. These fundamentals underlie the confidence we have in our ability to meet our long-term aspirations, to create strong organic growth with expanding margins and high levels of free cash flow. We continue to make the right strategic choices in investments and acquisitions with long-term growth potential targeting high-growth markets. These are represented by our market leadership and continued investment and growth in attractive global markets in energy, chemicals, electronics, automotive, maritime and aerospace. We continue to invest and deliver solid growth in key geomarkets with high long-term growth potential. We have also established leading information insight and analytics positions in key capital-intensive industries and supply chains, and are connecting capabilities across them to further enhance our leadership position. The result of this focused execution is organic growth rates that have and will continue to exceed market and economic growth rates in almost any macroeconomic climate. Weak economic growth trends globally and continued tight business spending patterns set the tone for our view of the first half of 2013, and is reflected in our full year outlook and guidance range. Our economists are projecting relatively flat global growth for the full year 2013 against 2012 levels. Continued uncertainty in key demand markets in the U.S. and EMEA are holding back emerging market output along with slowing in domestic demand in these markets, as evidenced by the 3.5% decline in Japan's third quarter GDP. As Jerre just said, in the third quarter, this uncertainty was reflected in the lowest levels of corporate revenue and earnings performance that we have seen in nearly 3 years. We believe this uncertainty will continue to inhibit or delay key business and capital investment decisions, as well as operating spend to the first half of 2013. With this sober near-term outlook, we see improved economic growth in a number of key markets for the full year 2013, indicating recovery and strengthening demand in the second half of the year, as current fiscal issues are resolved and confidence restored. We see year-on-year expansion in China, Brazil, India and U.K., with strengthening in the U.S. in the second half of 2013. Now turning to IHS's performance in our key markets. Despite these relatively weak global trends, we see solid growth in a number of our target industries and end markets which will allow IHS to continue to grow organically at above market rates. Energy growth is expected to remain robust worldwide with continued solid organic growth across our offerings. Chemicals will continue to do well globally with a solid growth outlook for 2013 for IHS, as we continue to integrate and build our offerings. We expect continued solid growth in transportation markets and IHS offerings within automotive, maritime and aerospace industries. Defense and security budgets appear to be stabilizing as we enter 2013 with a likely continuation of low to mid-single-digit growth rates. Although we all see economic uncertainty around us, our low market penetration and high-value offerings provide IHS the opportunity to continue to outperform overall market growth rates. Emerging markets in APAC and Latin America will continue to lead IHS organic growth in 2013 as we expect to increase our market presence. We will keep making significant investments in sales, capabilities and infrastructure in both regions to elevate organic growth in 2013. Now let's take a look at the key drivers of organic growth and the organic metrics that underlie our 2013 plan and the guidance which we'll outline in a moment. We continue to manage and measure our growth via 4 fundamental growth drivers: value realization, wallet share, new customers and new products. Value realization in pricing and discount management in 2013 will remain strong and should contribute between 40% to 50% of our overall organic growth due to continued solid renewal rates. Wallet share growth via upsell and cross-sell will be challenged as customers delay decisions through the first half, but the final phases of Vanguard should enable greater sales and effectiveness in the second half, helping upsell and cross-sell to contribute 20% to 30% of overall 2013 organic growth. New customers will be the focus of our expansion of the strategic account program and emerging market growth. As we expect new spend decisions to be slow in the first half, we anticipate new customers will contribute about 10% of overall organic growth in 2013. We will continue investment in new platforms and expect growth and traction in new offerings as we enter the second half of 2013, with new products contributing 10% to 20% of the overall organic growth for the full year. In summary, each of these growth drivers support our 2013 guidance with expected full year subscription organic growth in the range of 6% to 8%, and overall organic growth in a range of 5% to 7%, around the midpoint of our guidance. As Rich will outline, we are providing a wider range of both revenue and EBITDA guidance for 2013 and expect a lower delivery in the first half of the year, reflecting a continuation of the current uncertain and low growth economic environment. We do expect to realize the benefit from our infrastructure deployments and sales and product investments beginning or after midyear, combined with expected improving market conditions to enhance our typically stronger second half performance in revenue, profits and margins. As a result of the combination of these factors, we expect our subscription growth rates to rise to 8% or higher as we exit 2013, along with consistent delivery from our nonrecurring businesses. We have also continued to evolve our structure and operations to realize sales, product and market synergies, and we are making important changes as we begin 2013 to enhance the alignment of offerings and speed our time-to-market and new opportunity capture. This will nearly complete our journey to fully align all IHS operations, systems, processes and commercial delivery infrastructure around customers, work flows and target industries and end markets. As we discussed on the last call, we are also working to rationalize our portfolio of products, divesting underperforming assets while we invest further in those with the greatest long-term potential. As an example, we recently completed 2 small acquisitions, which are not material in terms of either financial characteristics or purchase price but are strategically important. Dodson Data Systems provides U.S.-based drilling, completions and nonproductive time benchmarking services and software to the oil and gas industry. As capital costs increase, a complete understanding of drilling and completions performance is critical for operators and service companies to improve operations while reducing costly nonproductive time. The other announced acquisition, Exclusive Analysis, is a U.K.-based provider of political and country risk and security, intelligence and forecast. The company offers intelligence and commentary, customized analysis and tools to assist clients in identifying relevant political and security risk across a number of sectors and 195 countries. Importantly, both assets are 80% or more subscription-based, with 90%-plus renewal rates. Both add capability to enhance our organic growth potential as we complete integration and connect these important offerings for our customers. As we focus on the total organic growth opportunity and building this potential across IHS, we have also just completed the sale of a nonstrategic asset and underperforming asset that is not material to overall performance but was dilutive to our organic growth rates. We will continue to manage similar future changes carefully to ensure minimal impact to ongoing operations while enhancing organic growth and margins, offsetting these with newly acquired high growth assets. As we continue to strategically align to the highest growth potential, prioritization of assets and investments and continued development of global infrastructure and scale, we will also restructure and rationalize to fully realize the potential of these investments. On our last call, we also discussed our enhanced focus on reducing the impact to our overall results from the unevenness of our non-subscription organic revenue growth. Specifically, we plan to increase the relative contribution from our steady subscription business to represent 80% or more of the total revenue, up from the current level of 75% to 77%. This will be managed gradually over time, perhaps between 3 to 4 years, and will not impact revenue or profit in any individual period, or for the full fiscal year in 2013. This transition can and will be managed in a measured manner, driven principally by increasing market acceptance of sales of software and services contracts on a subscription basis gradually over a period of time, as we have now done for many years. Remember, we're talking about a transition of just 3% to 4% of our revenue over 3 to 4 years, a fairly modest but very important move. In summary, we continue to invest and drive the fundamentals of our long-term profitable growth strategy. Despite the ongoing challenges and market uncertainty in a weak global economy, we have a disciplined and balanced operating plan that will create strong, above-market returns to shareholders. This begins with organic growth rates above market economic growth rates and above the organic growth rate of the majority of companies globally. Despite greater uncertainty and a lower organic growth environment, we will continue to expand margins and grow free cash flow to historic levels. As we complete this critical 8-quarter journey in investment and deployment of global infrastructure in 2013, we will have established a scalable base for sustained organic growth and rapid and more complete realization of acquisition synergies going forward. We believe that we have developed a focused and deliverable plan for 2013 that will continue to build shareholder value for the near-term and long-term. With that, I would now like to turn the call over to Rich, who will talk you through the specifics.

Thanks, Scott. Let me begin with the reaffirmation of our 2012 guidance. For 2012, we are reaffirming our revenue, adjusted EBITDA and adjusted EPS guidance, and expect all-in revenue in a range of $1.515 billion to $1.535 billion, including an organic; growth rate of approximately 8% for the portion of the business that is subscription-based; all-in adjusted EBITDA in a range of $480 million to $490 million; and adjusted EPS in a range of $3.77 to $3.89 per diluted share. Both the 2012 and 2013 guidance we are giving you today is on an all-in basis and assumes no further currency movements, acquisitions, divestitures, pension market to market adjustments or unanticipated events. Let's move onto 2013 guidance. For the year ending November 30, 2013, we expect all-in revenue in a range of $1.64 billion to $1.71 billion, including an overall organic growth expectation in the range of 5% to 7% around the midpoint; all-in adjusted EBITDA in a range of $540 million to $582 million; and adjusted EPS in a range of $4.23 to $4.43 per diluted share. This reflects a projected outstanding share count of approximately 67 million shares and assumes we fully execute our recently announced share buyback program. Regarding depreciation and amortization expense, we expect it to be approximately $140 million to $145 million. Capital expenditures should be approximately 5% of revenue as we reach critical milestones in many of our important initiatives like Vanguard. Assuming historic conversion rates, free cash flow and free cash flow per share should increase approximately 20%. Let me cover one additional item which is reflected in the 2013 guidance I have provided you. As you consider our quarterly revenue and profit progression for 2013, we believe our recent history serves as a useful guide. To this end, we have posted a supplemental deck to our website, ihs.com, which shows quarterly revenue and profit amounts as a percentage of their respective annual totals for both fiscal 2010 and 2011. Given the near-term uncertainty we are seeing in key developed and emerging markets in the first half of the year, we anticipate both our revenue and profit amounts, as a percentage of their respective totals, to be approximately 1% less per quarter in the first half of 2013 from where they were in previous years. In summary, we see challenging global economic conditions in the near term as reflected in our broader range of guidance, and we are expecting stronger relative performance in the back half of 2013. Jerre, back to you.

Thank you, Rich. We'll continue to update you quarterly on the market outlook and our expectation as the year unfolds. We look forward to delivering increasing revenue, adjusted EBITDA and free cash flow in this uncertain global economy. Now we'd like to open the call for Q&A. In the interest of time, please limit yourself to one question. Let's get started.

[Operator Instructions] And your first question comes from the line of Peter Appert, Piper Jaffray.

So Jerre, is it possible to be a little more explicit in terms of how the organic growth plays out through the year? The 5% to 7% range, is it meant to imply 5% in the first half, 7% in the second half?

We'll try to help you with color on that, Peter. Scott, give your comment because it's a good question Peter has raised.

Yes, thanks, Peter, and a really good question. So we talk about 5% to 7% and for the full year around the midpoint, and we also talked about 6% to 8% in the subscription base. So 2 important numbers to think about. If you look at where we were in Q3, we were roughly at the lower end of that range. And where we were then and what we're telling you now is we see those same kind of conditions continuing in the first half of the year as markets try to resolve the uncertainty that surrounds all of us right now. So what that would mean is we see this rate within that range, and at the lower end of it as we saw in Q3. And then what we're saying is typically we are building into the back half of every year. We've done that every year since we've gone public. And we'd expect the combination of our investments, our infrastructure improvements and then the market to all contribute to us, so lifting that growth rate upwards to the higher end of that range as we end the year.

And what we -- thanks, Scott, perfect answer. What we were trying to do, Peter, and everybody else with the comments Rich just made were we're anticipating of the total revenue about 2% less than our norm in the first half and about 2% more of our historical norm in the second half. So if you think through that, the way to think about it is, as Scott said, an accelerating growth level as the year goes through. Just as a reminder, historically, we run about 21% of revenue and EBITDA in Q1, 24% to 26% in Q2, 24% to 26% in Q3 and 28% to 30% in Q4. Think about that being perhaps 20%, 24%. And then the continued acceleration in the second half as a way to think through how that'll play out.

And your next question comes from Eric Boyer, Wells Fargo.

Jerre, I think last quarter you talked about being confident the subscription growth rate would be around 8% for the next several quarters. I guess the guidance implies it could be 6% to 8%. Could you help us understand what's changed there in the thinking?

You bet, Eric. Scott?

Great question. So what we've said and what you've clearly seen is 7% or better as we look back almost 9 quarters. What we are giving you for next year is a very pragmatic range in our performance of subscription that reflects the current environment, the level of new business spend as we discussed. And we see ourselves continuing to be solidly in that range as we have for 9 quarters. But again, wanting to reflect as we look at the first half of the year the potential for continued uncertainty and some slowness.

And if you think about what Scott was giving you with our 4 buckets of growth, I think you can see how that should play out because we tried to give actually more information than we've ever given on organic growth when we talked about what we expect each of the 4 buckets to produce over the coming 4 quarters.

And your next question comes from the line of Suzi Stein, Morgan Stanley.

How are you thinking about capital deployment for next year? Any chance that with the stock where it is, that you'd get more aggressive on stock buybacks?

Good question. Rich just said on his, as you heard, that we expect to complete the $100 million that was approved by our board in October. Certainly, if the market continues where it is, we'll relook at more share buyback. We'll do that at our January board meeting for sure. And we'll see how the market plays out. But certainly, today, we believe that a great return for our shareowner is exercising that first $100 million, and we'll make a decision on more share buyback early January, Suzi.

Okay, great. And can you just tell us what the tax rate that you're assuming for next year is?

Absolutely. Rich?

Yes, actually we'll reaffirm it on the January guidance call. What we said on the third quarter is we expected for the balance of the year, a GAAP rate of 20% to 21% and an adjusted rate at the 27%, 28%, as we close out the year in January.

2013, Rich.

2013 rate's unchanged, 22%, 23%, 27%, 28%.

Yes, so as is. And think about -- since you did such a good job, Suzi, of getting a second question in, and it's a good one, think about us operating with a cash tax, which is really the way we drive for free cash flow. Rich gave you the guidance of up to 5% capital in -- of revenue in 2013. Interest rates, you can figure out, remain very low and will continue to even if we do consider more share buyback. And then 21% to 22% actual cash max on taxes. So hope that helps you get from EBITDA to free cash flow.

And your next question comes from Andrew Steinerman, JPMorgan. Andrew C. Steinerman - JP Morgan Chase & Co, Research Division: You talked about the at-the-midpoint type of organic growth. Could you give us the organic growth assumption for the full range of revenue guidance? And does that imply non-subs will be up in the low-end scenario?

Great question. As you can -- great question, Andrew. As you can imagine, we worked that hard. So Scott, give him low-end, high-end.

It is a good question. And we talked about around the midpoint because we did give you a wider range to reflect the uncertainty. So the bottom end of the range is 1 point below what we gave you at the midpoint, so 4 and then up at the top end of course at 9. And what we said is we would expect for a lot of the internal reasons, as you know, all of our investments and deployments and new products and alignment of operations that are subspace would be lifting to 8 or better, so exceeding that 9-quarter rate as we exit the year solidly in the back half. What this suggests is stable performance from our nonrecurring businesses, a good solid contribution from our subscription base and those are the things that'll drive us to that upward level.

And at the low end is part B question of non-sub.

And just to be clear, if we look back over the last 3 years, we've actually never had a subs rate that has been at the low end that I just stated even in the worst of 2009, early 2010. So your point is really about non-subscription and what the uncertain environment does to the levels of that business. And we've seen some of the lower levels of growth in the last quarter. So we also, as you know this year will have easier comps as we come into the back half of the year.

And we will indeed. I hope as the year goes and we report results quarter by quarter, we'll tighten those ranges as we get more clarity, including giving as much as we can on actual organic growth split outs, et cetera, which I think you'll find we're giving more clear guidance on organic growth by piece, et cetera, than probably most companies ever consider.

And your next question comes from Bill Sutherland, Northland Capital Markets.

Really simple one, guys. Are you including the -- is the boiler vessel code this year, and is that excluded?

So Bill, I wish that was simple. But it's a great question. So the answer is there's been a shift from 2 standpoints. One is that it used to be a once every 3-year exercise, it's now a once every 2-year exercise. So that's a change since the last time. Secondly, it is, because of the size of our business today, it is insignificant at best. If you excluded, it would be 0.1% of organic growth excluded. And so, candidly, it's not in or out, period.

And your next question comes from Bill Warmington, Raymond James. William A. Warmington - Raymond James & Associates, Inc., Research Division: I just wanted to ask if you would comment on the -- what looks like an increased economic sensitivity of the revenue and profit characteristics of the business. And then also if you could talk a little bit about the divested business. I know that -- it sounded like it was small, but wasn't sure what the detail was on that.

So let's pick up the divestment piece, Scott. And again, just as a reminder, what Scott said was 2 small acquisitions strategically important that we closed on, much more than offset the one that we divested. But give color, and then let's come back, because I want to be real clear for everybody about what we think is happening on a global economic basis.

So thanks, Bill, and great question. We've said that we've got $40 million to $50 million of revenue, a small percentage of our overall business, that has a disproportionate impact on our organic growth rates and our nonstrategic businesses. So they're low potential growth, low performing or underperforming, dilutive to IHS's overall performance. And we would look for intelligent ways to manage out of those businesses. In this particular case, it's a business that was mostly nonrecurring revenues, so non-subscription revenues. It was one that was declining in organic growth, measured in revenue in the single millions of dollars. But you can imagine $15 million or so is 1 point of organic growth for all of IHS. And when you have even a single million dollar business declining, it is dilutive to the overall rate. So we managed a sale of that business, so a great home for IHS colleagues who were in that business and a great opportunity for it to be in the right strategic environment. And we matched it with 2 small acquisitions strategically important, great assets and colleagues, also measured in the single million. So a great way for us to manage it and that gives you a feel for it.

So now, Scott, let's go back to be as clear as we can be on the 4 buckets that we've given our best shot at for what we expect in 2013. Because Bill's question on being more sensitive to the economy is not one I think is we want to leave open. So close that off.

Yes. In fact, Jerre, to start with, we've had 7% subscription growth for more than 9 quarters. And what we're saying is 6% to 8%, so 7% in the middle for the full year. So that suggests actually no slowing of our subscription base. And Bill, we've suggested all of the hard work we've been doing for a few years is going to start to lift that despite these difficult economic conditions. So that range on our subscription base reflects the economic conditions. So I think pretty stable solid growth. Now we can't control customers' new spend decisions. And if those slow, that does take our overall growth potential down from this base rate of 5% to 7%, which is well above, of course, global economies.

And let's just go through, as a reminder for everybody, the 4 buckets where we expect to be in a normal economic time and what we're saying this year 2013.

So first and foremost, we see a positive renewal rate environment because we have must-have offerings. So we see no increase in cancellation rates, so positive environment there. We see value realization, which is pricing discount management, as I said 40% to 50%. And historically, it's been about to those levels. Now we've talked about wallet share, which is our upsell and cross sell as being 20% to 30%. That's probably 10% below or a point what we would see in a strong economic environment. We talked about new customers being 10%. And that's probably again a percentage point or so of organic growth below what we'd see in a more robust economic environment. And new product 10% to 20% of growth in 2013. And again, maybe a point below what we'd see in a robust environment. So our 5% to 7% range is then probably 2 to 3 points in aggregate below what we'd see in a very robust economy, but of course well above economic rates.

And last -- great color, Scott. Last point on that, if you think through what we are saying is that the only part of any uncertainty that we're seeing today is, as Scott said, which is a new decision by our customers; a new decision to buy non-sub-based or a new decision to buy new products or existing products. And that, we believe, will pick up, as Scott said in the script, our momentum as we enter the second half.

And your next question comes from Dan Leben, Robert W. Baird. Daniel R. Leben - Robert W. Baird & Co. Incorporated, Research Division: Just help us understand the delta between at the midpoint EBITDA growth about 16%, earnings growth about 13%, share count's roughly flat, tax rate no change. Help us understand all the drivers there. I know D&A is a little higher than that type of growth rate, but just help us understand why the delta?

Yes. So the delta, Dan, is very straightforward, and it's what you just said. Rich, give him the steps by steps on that. Because we tried -- we actually -- it's a good question, Dan. We gave you the numbers, because we wanted to make sure everybody was square on that. And the numbers we gave you, clearly there was a wide range of forecast on the share count, and we wanted to be specific. And included in there is the assumption we will complete the $100 million. So that was step 1. Rich, then give the next 2 pieces, because it's a good question, Dan.

You bet. Dan, to be very clear, the revenue overall growth at the midpoint is 10%. The adjusted EBITDA is 16%, and therefore, margin expansion in the range Jerre gave of 33% to 34%. Very importantly, adjusted EPS -- excuse me, free cash flow and free cash flow per share we anticipate at the midpoint approximately a 20% growth rate. So the conversion, cash generation and margin expansion.

But Rich, what he wants to know is why the adjusted EPS range, and we want to give him the specifics, because there was one big gap that was missing and you gave him that in guidance.

And Dan, I think as we studied where the folks were, we thought maybe depreciation and amortization would be an important metric. So we wanted to be very clear. We anticipate $140 million to $140 million depreciation and amortization and be clear on our share count, which is reflective of our assumed completion of our share buyback program. Daniel R. Leben - Robert W. Baird & Co. Incorporated, Research Division: Just why the D&A step up? Is it because of the completion of the 8-quarter process?

No, it's acquisition-driven. And it's the acquisitions, Dan. It's good question. It's the acquisitions that were made in the second half of this year, period.

Exactly, it's the culmination of both capital and acquisitions and purchase price amortization together.

Dan, we just have a pretty modest capital program despite all the investment. We don't tend to capitalize a lot. And that rate's remained relatively stable over the last few years, moving maybe 1 percentage point of revenue. So it is the acquisitions and the acquisitive nature of the company that people don't often see the translation or get it into D&A.

Your next question is from Brandon Dobell. Brandon Burke Dobell - William Blair & Company L.L.C., Research Division: I was wondering if you can talk about margin expansion guidance for a little bit. Is there anything in that margin range that's not related to revenue growth, i.e., the low end of the margin guidance relates roughly to the lower end of the revenue guidance or is there a chunk of spending that could come into the model or you could push out to '14? I guess I was trying to get my arms around the historical kind of 200-basis point margin commentary with kind of what the range looks like for fiscal '13?

Yes. No, great question. Scott? And I'll add a little color to that.

Yes, appreciate it. First and foremost, in any growth environment, we want to deliver high free cash flows and strong profit growth and conversion. So we're mindful at the low end of the range and I think you said it well that we are going to manage expenses closely and investment to ensure that we deliver expansion and high free cash flow levels. So we are going to manage this through the year. We see the potential to deliver up to the high end of the range, and we're going to manage investment to ensure we deliver a minimum, which was what we gave you at the midpoint. So we've got all the levers required, and we're in a great position actually completing a lot of infrastructure investments that are going to free up a lot of expense in the business that would have naturally driven expansion. So I think we've given you a pragmatic range that's consistent with what we said in the past, 100 to 200 basis points of expansion.

Yes, and yesterday when we were on our board call and getting approval for this year's plan, we talked about what many companies are doing and we too will do that, which is caution on additional expense and additional capital in Q1. We're going to wait to see how revenue plays out, same in Q2. Almost every customer we've talked to is in that same position. We feel, as Scott said, we're very blessed actually, because the timing with the great work that's been done on infrastructure, et cetera, lets us to free up the kind of margin improvement we expect to get. And if things play out, we'll continue to make the right investments long term on expense that gives us even more organic growth out into 2014 and '15.

And your next question comes from the line of Kelly Flynn, Credit Suisse. Kelly A. Flynn - Crédit Suisse AG, Research Division: I wanted to ask for one clarification on the subscription growth assumptions for fiscal '13 given the better visibility in that side of the business. Do you think that it could drop below 6% in a given quarter? Or do you feel like it should fall within kind of the 6% to 8% range for every quarter given what you're seeing now? And then, Rich, just on the earnings, I was wondering can you give the interest assumption for next year? I think that was the only specific number you didn't give.

Scott, pick up part A.

Yes. So just to give you a view, you'd have to go back several years. In fact, there's only 2 quarters in the last 5 years that our subscription organic rate has fallen below 6%. So we gave you that range very specifically. Again, broader range of guidance in general, but we gave you that range because the subs will be solidly in that range, and we don't see anything in the economic environment that rivals what happened in 2009 and '10, where we had a lot of companies going bankrupt, et cetera. So we feel very good about that range. We've had 7% -- as we said 9 quarters at 7% or greater. We've only had 2 quarters in our history that subs have been below the bottom of this range. So we feel very good about the range and the performance around the midpoint of it and as we said, accelerating actually to the high end and potentially above as we exit the year.

And Part B of your question on interest rates is basically year-over-year, very little impact change-wise. Kelly A. Flynn - Crédit Suisse AG, Research Division: Okay. I was asking about the interest line item. You think it'll be similar year-over-year? Is that...

Yes, interest. That's what I just said, sorry. Kelly A. Flynn - Crédit Suisse AG, Research Division: Okay, no. I wasn't sure if you're talking about the rate environment or the actual line item. Sorry about that. Okay.

No, that's okay. Makes almost 0 difference year over year is the total.

Your next question is from Brian Karimzad, Goldman Sachs.

With the weakness on the wallet share growth, I know you're chalking a good amount of it to macro. But I'm curious, are you seeing a harder time selling in recently acquired products to your existing base? Or is it kind of across the board, some even your legacy products with the cross sell and upsell?

So good question, Brian. I'll just tell you we'll give you very good color on that on January 8 when we announce Q4 and our year-end results. We look forward to doing that. But certainly, color, Scott, of what we're thinking about for 2013.

Yes, thanks, Brian. First, as you know, as we complete the next 2 deployments of Vanguard for the first time as we get into the second quarter, we'll have almost complete visibility of every customer across the business linked to our Sales Force Automation systems. So we'll, for the first time, be able to look at every customer and look at the whitespace in every account, which of course is the core to effective cross-sell and upsell. And up till now, it's been a very manual and time-consuming process, which led to a lot of inefficiencies for our sales teams. So we have that positive benefit happening, and of course new platforms that make it simpler. So Connect is out to almost 9,000 users now, which means it's an easy cross-sell, upsell platform, a single platform in the market. So all of those dynamics are really positive. The only thing that would hold that back is customers' decision on new spending. And we're all looking at what's happening right now or what we would see the coming 3, 4 months, fiscal cliff, what's happening in Europe and Asian growth to give us good signs as to what new business spend will look like. But we've got all the fundamentals in place to do it well. And the 20% to 30% of our growth next year that, that'll be comprised of is based on those good fundamentals inside the company.

There are no further questions waiting, thank you.

Thank you very much, everybody. As I said, we look forward -- Andy will close this off in just a second. We look forward very much to our January 8 call to report our Q4 results and our fiscal 2012. Thank you all very much for your participation today. Andy?

Thank you, Jerre. We thank each of you very much for your interest in IHS. This call can be accessed via a replay at (888) 286-8010, or international dial-in 1 (617) 801-6888, passcode 46526122 beginning in about 2 hours and running through December 19. In addition, the webcast will be archived for 1 year on our website at ihs.com. And as always, you can contact IHS Investor Relations with any follow-up questions. We can be reached at (303) 397-2969. Thank you. We appreciate your interest and time.

Thank you for your participation in today's conference. This concludes the presentation, and you may now disconnect. Good day.