Good morning and welcome to McGraw Hill's Financial Third Quarter 2015 Earnings Conference Call. I'd like to inform that this call is being recorded for broadcast. All participants are in a listen-only mode. We will open the conference to questions and answers after the presentation, and instructions will follow at that time. To access the webcast and slides, go to www.mhfi.com, that's MHFI, for McGraw Hill Financial Incorporated.com, and click on the link for the quarterly earnings webcast. If you are listening by telephone, please note that there is a live phone option available to synchronize the timing of the webcast slides to the audio from your telephone. I would now like to introduce Mr. Chip Merritt, Vice President of Investor Relations for McGraw Hill Financial. Sir, you may begin.

Thank you. Good morning and thank you for joining us for McGraw Hill Financial's third quarter 2015 earnings call. Presenting on this morning's call are Doug Peterson, President and CEO; and Jack Callahan, Chief Financial Officer. This morning, we issued a news release with our third quarter results. If you need a copy of the release and financial schedules, they can be downloaded at www.mhfi.com. In today's earnings release and during the conference call, we're providing adjusted financial information. This information is provided to enable investors to make meaningful comparisons of the corporation's operating performance between periods and to view the corporation's business from the same perspective as management's. The earnings release contains exhibits that reconcile the difference between the non-GAAP measures and the comparable financial measures calculated in accordance with U.S. GAAP. Before we begin, I need to provide certain cautionary remarks about forward-looking statements. Except for historical information, the matters discussed in the teleconference may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including projections, estimates and descriptions of future events. Any such statements 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 results anticipated in these forward-looking statements. In this regard, we direct listeners to the cautionary statements contained into our Forms 10-Ks, 10-Qs and other periodic reports filed with the U.S. Securities and Exchange Commission. I would also like to call your attention to a European regulation. Any investor who has, or expects to obtain, ownership of 5% or more of McGraw Hill Financial stock should give me a call to better understand the impact of this legislation on the investor and, potentially, the company. We're aware that we do have some media representatives with us on the call. However, this call is intended for investors, and we would ask that questions from the media be directed to Jason Feuchtwanger in our New York office at 212-438-1247 subsequent to this call. At this time, I would like to turn the call over to Doug Peterson. Doug?

Thank you, Chip, and good morning, everyone, and welcome to the call. This is a significant quarter for the company. We made excellent progress with our strategic initiative, including some very important decisions regarding our portfolio, while at the same time delivering solid top line and bottom-line results. But before I go into the strong results, let me cover some of the more strategic highlights from the quarter. We added SNL to our portfolio, which was funded with $2 billion of new notes and closed on September 1. We merged our S&P Capital IQ business with SNL and made several leadership changes, and we commenced a process to explore strategic alternatives for J.D. Power. And we have a great collection of assets. It's a portfolio that's now more focused on scalable, industry leading, interrelated businesses in the capital and commodity markets. With the closing of the SNL transaction, work is underway to take advantage of the capabilities of both firms. The combination of S&P Capital IQ's broad data and powerful analytics with SNL's deep sector intelligence gives users unrivaled insights into the markets. As we execute our integration plans and learn more about SNL, we're identifying opportunities for additional synergies and are increasingly enthusiastic about the potential SNL brings to our company. Now, on this slide you can see, as previously announced, Mike Chinn will lead S&P Capital IQ and SNL. Mike is building a unified organization that drives creativity and innovation and delivers best-in-class performance. He has built a team which is made up of key leaders from the former SNL and S&P Capital IQ organizations, and Mike will manage the business from Charlottesville, Virginia. The integration of SNL is well underway. I head a steering committee that closely reviews key metrics to assess integration and synergy progress versus…

Thank you, Doug, and good morning to everyone on the call. As you just heard from Doug, there has been a great deal of continued progress building an ever more focused and capable McGraw Hill Financial while continuing to deliver strong financial performance. Today, I want to add some color to several items related to our financial performance, and then we will open the call up for your questions. First, I'll recap key financial results and review certain adjustments to earnings that were recorded during the quarter. Next, I will clarify the impact from acquisition-related amortization and foreign exchange. After that, I will review important changes to the balance sheet and progress year-to-date on free cash flow and return of capital. And finally, I will update our 2015 guidance. Let's start with the consolidated third quarter income statement. Overall, these were solid results, particularly the continuing progress in margin improvement. Revenue grew 5% as the balance of the portfolio offset a modest decline at Standard & Poor's Ratings and the continued headwinds from foreign exchange, which reduced our growth rate by about 2 points. Adjusted consolidated operating profit grew 11% with all four businesses contributing to this growth. Adjusted operating margins approached 40%, up 230 basis points from a year ago. Revenue growth combined with the continued progress on our productivity initiatives resulted in this improvement. Adjusted unallocated expenses did increase 11%, largely due to professional fees in support of several enterprise-wide initiatives. The tax rate on an adjusted basis was 28.8%. This was unusually low due to favorable outcomes from the resolution of certain prior year tax audits, which generated a positive impact to adjusted diluted earnings per share of approximately $0.06. We now expect a full year adjusted tax rate of approximately 31.5%. And finally, both adjusted net…

Thanks, Jack. Just a couple of instructions for our phone participants. I would kindly ask you to limit yourself to two questions. That's two questions each in order to allow time for other callers during today's Q&A session. Operator, we'll now take the first question.

Alex Kramm, UBS, your line is open.

Yeah. Hey. Good morning, everyone. Just want to start with J.D. Power, actually. I think this doesn't come as a total surprise, but I want to talk about – or ask about the timing a little bit here. I mean, you just completed the NADA acquisition recently, or NADA, and it seems like that's kind part of that business. So, just want to ask what changed in the commitment considering that you just did an acquisition there and now you're looking to potentially divest this business? It seems like a little bit of a flip flop. And then, maybe just in terms of the numbers from J.D. Power, EBITDA around $50 million, is that fair? And what would you do with the proceeds?

Hi, Alex. It's Jack. First, (32:50) about the Used Car Guide. Look, that was a great addition to the J.D. Power portfolio. We'd been in discussions for quite some time. It really adds and broadens the capability of the PIN business that sits within J.D. Power, which is maybe one of the most valuable assets within it. So, it was a great opportunity and we're pleased with the progress that we've seen so far in the integration; and a great addition to the organization. Relative to timing, we don't have a strict timetable. We are just beginning the process. We have engaged an advisor. We do anticipate that we'll be reaching out to various parties in the coming weeks. And we have no gun to our head to get it done overnight, but at the same time we don't want this process to linger. So we hope to move it forward as we get into the early part of next year. Relative to your question on margins, next year in 2016, our current view is that the business on a revenue basis will be approaching $350 million in revenue. And once – and we still have some work to do to get the stand-up EBITDA margins. But I do think we'll have stand-up EBITDA margins of approximately approaching 20% as we get into next year. And, you know, we look – this will be a nice inflow to U.S. cash, which is something that we are – we're tightly managing the balance sheet right now and using that available U.S. cash, if there's not tuck-in acquisitions available, returning that cash to shareholders.

All right. Fantastic. Thanks for the detailed answer. And then, secondly, want to go back to the slide of the leadership reorganization. Unfortunately, the slide is not up anymore, but it looks to me like you created a new position sitting between Capital IQ and Ratings. So, maybe you can just talk a little bit more about what you're doing there, in particular as it seems like, relative to your primary competitor, your revenues (34:57) through Capital IQ is much lower than theirs. So, any goals of bringing this up substantially in the next one year to three years? Thank you.

Yeah. This is Doug. So, we have created a new business which is underneath the S&P Capital IQ Group, which is called Global Risk Services. The woman who's going to be leading it is named Martina Cheung. She is going to continue to report to Mike Chinn. She is going to be part of our Executive Committee. We have an Executive Committee that meets almost weekly, three times to four times a month, that talks about all of our key strategic initiatives, how we're going to be investing in the company, where we're going to be growing, et cetera. So Martina is reporting to Mike Chinn, but she's joining our Executive Committee because this is such an important growth initiative for us. So the way we look at this, there is a very large demand for increased information inside of financial institutions, as well as corporates, for risk components, risk data, in some cases, liquidity information, et cetera. And we're pulling together all of the different assets that we have that are related to that type of information and putting them under Martina. And that's basically what the role is that she's going to be taking on.

Okay. Very helpful. Thank you.

Our next question comes from Craig Huber, Huber Research. Your line is open.

Yes. Good morning. A few questions, if I could. First one here, the synergies you talked about here of $70 million-plus by 2019 for SNL, can you just give us further update on how that breaks down between costs and revenue? And why 2019? That just seems like an eternity here. I mean, why can't this get done within, say, 18 months? I have some follow ups, too. Thank you.

I think for today, just kind of going back to the original assumptions that we put out there, to your point, it's $70 million in EBITDA by 2019, we are pointing currently to sort of an even mix between cost and revenue that support that assumption at the time of the acquisition. That all being said, I think both Doug and I are enormously encouraged by the enthusiasm by which, collectively, both the legacy S&P Capital IQ and the SNL team are working together to forge a new and integrated organization. And we announced that very soon after the closing of the acquisition. And they're deeply (37:32) at work, detailing and updating that synergy case. And we hope to have a more complete update for investors when we get to our next call. But I would say at this time we're highly encouraged that we have great confidence in the $70 million. We are pointing to an upside to that number, both in terms of aggregate amount and timing. And I think with the decision we've made to move towards an integrated organization, I think there should be some upside, particularly as it relates to cost synergies.

And then, also, what is holding you guys back? I get this question a lot from investors. What's holding you back from buying a lot more stock than you've bought back in the last three quarters, particularly with your stock trading in the low-double digits on EBITDA basis? Then, you go out and do what a lot of people and investors perceive is a very expensive acquisition at a few times that multiple. Why aren't you buying back stock a lot more aggressively here, particularly at these price levels?

Well, you know what? I would just point to – we did step up our share repurchase activity in the third quarter, despite the fact that at the same time we were completing the SNL acquisition. And I think we agree with investors that we do have balance sheet flexibility as we go forward. And we do believe that continued share repurchase will be important part of our capital allocation in the fourth quarter and as we move forward into next year.

And then, my last question, please. What is your outlook for the bond ratings business, for the transaction revenues here for, say, the next three months? Are you seeing any green shoots here or anything?

So, this is Doug. Just in terms of the mix that we've seen over the last year, as you saw on the slides, and all of you know because you track it very carefully, issuance has been – the story of issuance has been very mixed this year. And as you know, total global issuance was down 20% in the third quarter with different puts and takes in terms of how they came out. So far, October started off very weak. It was a weak month with issuance. So, we're cautious about the fourth quarter overall. There were some large issuance related to M&A as well as some, what I call, synthetic repatriations where corporations have a lot of offshore cash they don't bring back, but they do borrow domestically. In the last week or so we saw Microsoft, ACE. There's continued to be a robust pipeline of municipal and public finance issuers, like Texas and Florida. So, we're not projecting anything right now. It's hard to see. Some of the same conditions which made the third quarter very volatile, like the questions about what's going to happen to the U.S. interest rate; when is Yellen going to increase interest rates; what kind of impact that's going to have, what are some of the emerging markets' volatility factors, China, Brazil, et cetera; what's happening with the banking market? There's a new initiative which was released last week from the Fed for U.S. banks about resolution and recovery planning, which has new guidance about TLAC. In addition, in Europe, they're looking at TLAC, which is the total loss-absorbing capacity of the large financial institutions. Depending on where that comes out, that might drive more issuance. But we're looking at a lot of different factors. I don't want to give you a forecast, but I'd tell you that we're seeing – we saw a slow start to October, a very robust end of October. But generally speaking, in the fourth quarter, we are going to be watching interest rates, inflation numbers, TLAC, China, Europe, et cetera; and we're cautious.

Okay. Thank you.

Doug Arthur, Huber Research, your line is now open.

Yeah. Thanks. Jack, it looks like cost – adjusted cost at S&P or in the Ratings Group was down 9% in the quarter. Can you just sort of break that down in terms of the currency – whether you had a currency benefit? How much is that is year-over-year drop in legal costs, and how much of it is productivity? Thanks.

Yeah. Sure, Doug. A good part of it is related back – as you may remember, back in the third and fourth quarter of 2014 we had a couple of restructuring actions at Ratings. Those restructuring actions are making a significant contribution to this expense management that you're seeing this year. In terms of – we have seen some benefits from reduced legal expense, but, to a large part, a good part of that benefit has been offset with some selective investments in areas of compliance as we are working to tighten up some of our processes there. So it's been a couple of moving pieces. And overall, in terms of forex impact on Ratings, there's not a big part – I mean, there is a benefit, but it's – actually, on a profit basis, forex within Ratings – forex was actually – caused a modest – hit profits of a couple million dollars. Because we had – that's also the business where we have the most significant forex impact on the top line, and the savings that we get on the expense side are not enough to offset that.

And just as a follow-up, in terms of total cost year-over-year for the company in the quarter, how much – you may have said this, but how much did FX benefit or not benefit the year-over-year relationship? Thanks.

As I mentioned, the total profit impact of forex was a modest positive, less than a $0.01 of EPS. So in large part, the revenue hit that we took, which was about 2 points of growth, was to a large part offset by the impact on expenses.

Great. Thank you.

Denny Galindo, Morgan Stanley, your line is open.

Hi, there. I wanted to delve a little bit more into Ratings. Your numbers were a little bit worse than your big competitor, and I wanted to understand if you guys had more exposure to LatAm and Asia, where you saw some weakness, than your global peer? And then, they also called out CMBS as an area of strength. Did that – is it kind of a lag in CMBS hurt the numbers as well?

Yeah. This is Doug. So, the main sources of differences of the top-line are related to CMBS, and a little bit of CLOs and CDOs, on the structured finance business, and then there was a slight difference to what we could see in Europe; but generally speaking, those are the main differences.

Okay. And then, I wanted to talk about margins a little bit. With the shift in the leadership in the Ratings division, margins have been doing really well, especially with revenue down. But will there be any differences in your approach to margin improvement? Will there be more reliance on pricing or any changes at all there to what you've been doing in margin expansion for Ratings?

There's no expectations we're changing any of our approaches, although we are watching very carefully what's the outlook for issuance. So I don't know what kind of top line growth we're going to have. As I mentioned before, I'm cautious about expectations on what's going to be happening in the markets with issuance, generally speaking. We do have a continued focus on margins, on efficiency, and the new president of Standard & Poor's Ratings Services is committed to continuing to manage the business in a way that does look at the bottom line. On the other hand, we are looking at ways that we can improve some of our workflow, have more automated approaches to some of the ways that we deliver information to the markets. So it's possible that we will be investing in technology and automation to improve our overall performance; but maybe we'll see some investments in that. But generally speaking, let me say that for Ratings and all of our businesses we're committed to continuing to drive margin improvement. And over time, that's something we're going to look at, but I can't guarantee you that we're always going to get that if the markets themselves are not going up and our growth is not delivering.

Okay. That's helpful. And then, switching gears to Index, I've never really thought of Index as a place where the margins could go even higher. It's usually Capital IQ and Ratings. But your competitor recently released margins and they were a little bit higher than yours. I've always thought of you as more innovative, more investments in new products like fixed income, indices. Is that what – at least the difference between your margins and your big competitor, or is there something else, maybe the mix of subscription revenue, risk trading revenue; maybe just any thoughts on the difference between your margins and theirs?

Denny, one thing that you may want to check – I don't have it in front of me, but you may just want to check. I think when that particular competitor talked about their margin, I think they excluded the impact of D&A. So I think they were EBITDA margins. So I'm not sure it's quite apples to apples.

(47:25) something like 1% or so, right?

Well, I think it's enough to close the gap. So I think that's the best part of the story.

Okay. And last one, with energy markets declining, customers cutting back, are you seeing anything new in the acquisition pipeline that you could add in terms of energy? It seems like there must be some assets that you can get a little bit cheaper than usual at this time.

When it comes to our acquisition pipeline, we have a disciplined process to keep our eyes on different opportunities in the U.S. and around the globe. We are always, obviously, looking at ideas. We have nothing that – we've said before, we have a lot of work to do right now with SNL. That's our top priority, is integration, as well as working to ensure that we have a very smooth process with J.D. Power. So right now, our top priorities are to shape the portfolio in the direction that we've discussed today.

That's it for me. Thanks.

Thank you.

Peter Appert, Piper Jaffray, your line is now open.

Thanks. Good morning. So, Doug, just continuing on the margin theme, the results have been very impressive, obviously, across the portfolio. So I'm wondering if you're rethinking what the upside might be longer term and if you can quantify it for us in terms of the various segments where you see the upside?

Well, I think that that's one of the things that we're working on right now as, typically, you might hear from a lot of corporations. In our fourth quarter, we're looking at a three-year to five-year strategic plan and, very importantly, now going to come up with a one-year approach. So in February next year when we do our full year earnings, we'll also be presenting our guidance for 2016. And I would – if you don't mind, I'd rather defer my thinking on that question until we've had a chance to put in place our 2016 expectations; but Jack wants to add something.

Peter, just one obvious point, though, I just want to add to Doug's comment. As you know, we do see the newly integrated S&P Capital IQ, SNL business segment as a business unit that we would anticipate some sustained margin expansion going forward. And back to Doug's comment, I think we'll put some more specifics and guardrails on that when we get into our guidance view for 2016.

Got it. Understood. And then unrelated, in the structured finance market I think you're exclusion from the CMBS market ends in the beginning of 2016. Should that have some measurable impact on your operating results next year?

As of right now, I don't know and I'm not – it's not something I can really talk about, yet.

You can't talk about it because you don't know how it's going to play out or...?

Because of the agreements that we have with the government on our ability to talk about that business.

Oh, I see. Okay. Thank you.

Tim McHugh, William Blair, your line is open.

Thanks. I guess, just coming back to SNL, you'd, I guess, hinted at some potential for upside and I guess it was something you feel better about. And I think it was more about the cost, but can you elaborate more on it? Is it about the cost of SNL and the ability to improve their margins, or are you feeling better about the synergies with Cap IQ? I guess, what makes you feel better about – enough to hint at upside in terms of the timing and size of the profit contribution from that business?

Let me start, and then I'm going to hand it over to Jack. So first of all, this is literally only about a month, two months since we've been working with Mike Chinn. And as we did the due diligence and got to know the business very well over a period during the second and third quarter this year, we were always impressed with SNL and their operating capacity, as well as what we saw as the ways to merge these businesses and get a lot more out of both of them. So through that, now that we've got this very thorough integration management office in place, where we're tracking 12 projects with some of them with other subprojects and driving that very intensively faster than anybody expected, I can guarantee you that people did not expect that we were going to put Mike Chinn in charge of both businesses within eight days of closing the transaction. And so, we are really serious about this, and we're driving it fast and hard. You already answered the question in your question itself by where we're finding the opportunities. We're finding them both in cost in both businesses, ways we can do things more efficiently. We're finding them in revenue opportunities. We're also able to work more closely with some other projects Jack is driving about how we manage the corporate center; but let me see what else Jack wants to add.

No, look, I think the thing that gives us the confidence, Tim, more than anything is the speed at which, to Doug's point, that we've moved to integrate the organization, building sort of the best from both organizations. And when you move away from the outside in, evaluation of synergies, to the inside out, and you're starting to see the detail behind it and the clear accountability and a better sense of the timing to realize, I just think today, two months post-close, we feel better than ever about the synergy case; and we hope to have more insight for you in our next call.

Okay. Thanks. And on Platts, can you elaborate? Obviously, it's good performance in the face of a tough environment. Is it the pricing initiatives you had talked about maybe a year or so ago, I guess, but what – that or what else, I guess, is really contributing to the growth, and particularly, I guess, in the petroleum sector right now?

Yes; so a couple of things. Clearly, it's a matter of many, many different factors. It's a much more concerted effort on the commercial side where we've got a – with the combination of Larry and, now, Imogen in place looking at how we can be very customer-focused, have a good approach to sales, pricing, discipline, et cetera. It's also something that is maybe not – is maybe a little bit counterintuitive, but even though the price of oil is down very low, there still are a lot of winners. It's not just the losers that are hit by the market. You have people that are also consumers downstream in the environment of oil industry, airlines, the travel/leisure industry, et cetera, that are big consumers of data and analytics and pricing from commodity space that are beneficiaries of the lower prices that also have a lot of demand for the data. So we are finding that the demand is not necessarily dropping as dramatically as you would expect given the volatility and the lowering of the prices. But we are very carefully, obviously, watching the number of seats, the kind of cost initiatives that could be going on in a lot of the firms to ensure that we're prepared for, potentially, a weaker environment. But through many, many different initiatives, we're pleased that we're still driving the growth.

Okay. Thank you.

Vincent Hung, Autonomous, your line is now open.

Hi. Good morning. I'll keep it to two questions. Firstly, can you talk about what John has already done in his short time as President of the Ratings business and what his priorities as President will be going forward?

Yes. So John is – just to tell you a little bit more about John since you asked the question, John has been with us for over five years. He was instrumental in helping drive the transformation of McGraw Hill Financial and the sale of the publishing and non-core assets. He knows all of our leaders across the firm. He's a very strategic manager with excellent project management and executional capabilities. So John's main focus has been to continue the programs and progress that Neeraj Sahai had been making in how we're managing the workflow, managing the business, ensuring that we are responsive to the markets and our customers, and very, very importantly that we have in place regulatory and risk programs that meet the requirements of all of the new regulations that have been coming up around the world. So John's priorities have not changed from Neeraj's. But in terms of how he's managing the place, he's spending a lot of time in the field, walking the floors, learning the business as quickly as he can; although, he's off to a – he was able to hit a running start because he already knows the business well. But John, as I said, priorities haven't changed but maybe his style and how he's getting it done is a little bit different. And he's getting a lot of visibility with the troops and energizing the organization.

Okay. And just lastly, what is going so right in Capital IQ Desktop in light of the strength in user growth?

Well, just – there's nothing really new there. In the last three years, if you look at the user growth on the desktop, it's basically most quarters been kind of a low teen growth number. So, we're just continuing to penetrate a marketplace that is increasingly appreciative of the additions we've made to that product. It's a great price point and it's an ever better product.

I'd add to that that there is also continued international growth, so that there's more penetration, as always, continuing overseas. And when you look at a lot of the customers, there's a lot of them who are trying to understand what are the requirements of their internal data needs and which is the product that best serves those needs, looking at some of the competitors, and we're also winning out a lot of those reviews against some of the other maybe more expensive competitors or those that have different products and services that don't necessarily meet the needs of the users on the floors.

Great. Thanks a lot.

Andre Benjamin, Goldman Sachs, your line is open.

Thank you. I wanted to know if you could maybe talk a little bit about where you stand in terms of continuing to add fixed income indices. I know you called out Indices and the business up quarter-over-quarter. I didn't know how much of that was fixed income, and then how much that business is contributing to the overall revenue pot today?

So, we continue to have – this is one of our key growth areas. So, when we look at the index business, if I were to over simplify our growth approach, it's to the international expansion, which we talk about a lot and we had some recent wins there in Chile and some other markets where we're growing out our international expansion. The second is fixed income indices. The fixed income indices today is – represents a...

About $30 billion of the AUM.

$30 billion of the AUM. It's not a large – it's not a significant factor in our top line growth, but today – our top line results. But we are – it's an area that we think that – if you go to the wealth managers, in particular, and you look at the secular trends of the baby boomers retiring, the needs for different types of products beyond just the buying bonds directly and other sorts of benchmarks, we're continuing to see this as a top priority for us even though it has not produced a lot of growth right now – or a lot of income. It is something that we're positioning for because we want to get ahead of that opportunity.

I have a little bit more specifics to follow up on the Capital IQ question you just answered. In terms of the growth, is it really broad-based across both fixed income and equity products? And then, who are you finding that you're taking share from? I mean, the markets are not up double digits and your competitors have generally talked about a more benign environment. So, I guess, where are you seeing that you're getting the most share gains?

We're getting the most share gain in analytical-type roles. So it's both fixed income and equities, and it's also risk management. And so, these are areas that we're continuing to see growth. I can't tell you directly if we're taking share from somebody else, but we're finding that we can penetrate those areas, analytical roles – mid-level and junior level analytical roles at banks, investment banks, asset managers, some corporations, et cetera. So, we're pleased with the growth we're seeing, and we've got an aggressive sales program out to call on our customers and identify where they can use our products.

Thank you.

Bill Warmington, Wells Fargo, your line is open.

Good morning, everyone. Just a couple of housekeeping items for me, I think. Just double checking the organic constant currency growth, looks like it was about 5% reported, 7% constant currency, 3 points from acquisitions, would give you about 4%. Am I doing that right?

Pretty close. I think it's pretty – it rounds closer to 5%, but...

5%? Okay.

...the general approach you're going at makes – is about right.

Okay. And then, if I could then, the share count exiting Q3, because I know you – it looked like you bought back a bunch later in the quarter so...

Yeah. We did – we were buying. So, basic share count as we ended Q3 was 271 million.

Okay. And with the dilution?

On a fully diluted, it was 274 million.

274 million. Great. That does it for me. Thanks a lot.

Thank you, Bill.

Our next question comes from Manav Patnaik, Barclays. Your line is now open.

Yeah. Thank you. Good morning, gentlemen. The first one, just on Pratts, in the context of some of your peers reporting sort of the divergence between the subscription and non-subscription performance of the business, I apologize if I missed it, but can you talk about sort of the growth on subscription and non-subscription and how that tallied to the total that you talked about?

There's really very little of that business that's non-subscription, so roughly 90% of that business is a subscription business. So we're not impacted by reduction in consulting fees of that nature. The other 10% is really on the derivative trading side. That's going to be the contracts that are traded at the major exchanges, like the ICE Exchange and the Singapore Exchange, which in the quarter did quite well. I mean, as you know, volatility bodes well for that business.

Yeah. I think that's what I was trying to get to, though. So like sometimes, that number can be really high and obviously skew that total result. So that's what I was just trying to understand, like – I mean, is it fair to say that the subscription was at par with the total that you talked about?

Subscriptions at par with the total you talked about?

Look, I think we did see relatively faster growth in the non-transaction part of the Platts business, but the fact that that's only approaching 10% of the overall mix, there's limits to how much it can impact the overall number. So, in balance, we saw pretty good growth in the subscription business. It was high-single digits.

Okay. Fair enough. And then...

So, the derivatives side increased double-digit, but to Jack's point, it's only 10%. So it's nice growth, but it can only move the needle so far.

Yeah, Okay. I understood. And then, Doug, just sort of bigger picture, I mean, you know the management slide that you had out there, I think you sort of had a similar slide when you first began with another team. So, I was just trying to understand like – in terms of the evolution of your few years as CEO now, like is this – are there more changes to be coming? And then, just on the departure of Lucy, was just curious if we should take that as an indication of there's not a lot more legal work left to be done?

Yeah. I think that – first of all, I believe that this is a young company, even though we have a very long legacy; over 125 years as McGraw Hill and 150 years with S&P businesses. We think that it is a young company. We've only been in this configuration for two years, and it's only been eight months since the time of the Department of Justice settlement. So I'm very pleased with the team that we're building. We have a – and I think team is the right word. People get along very well. We're aligned on how – what our purpose is and what our goals and objectives are going forward. I don't have any expectations that we have management changes underway. We have a lot of people in new jobs. So if there's one thing that I'm spending a lot of time on with the team is to ensure that the people in new jobs have the resources that they need, that they've got the approach to leading and managing their teams that's going to be successful. So, I don't – I really think that it's a great team without any – with no changes in place. On the legal department's role, I do think that we have a meaningful shift in what would have been a year ago versus today's approach to the legal department. As you know, we used to include in our earnings releases every month a list of all of the legal cases. We had very significant litigation with the Department of Justice and the states, et cetera. So as we settle into a – more of a BAU approach with a little bit of legacy litigation, we are pleased that we have a legal department that is an advisory department, helping us grow the businesses and looking more forward with a future approach as opposed to a legacy approach. That doesn't mean that we're not going to ensure we have all of the best resources available and the best minds to settle the final little pieces of litigation here and there, but really, team focus across the entire team; want to make sure everybody's successful and that we're focused now on growth and performance.

Okay. Thanks a lot, guys.

Thank you.

We will now take our final question from Bill Bird, FBR. Your line is open.

Good morning. Thank you. I have two questions related to S&P Ratings. One, how much cost flexibility do you have should the operating environment change and should you need to reduce costs quickly? And then, second, you had great growth in non-transaction revenues. Could you just speak to kind of the durability of that growth? Thank you.

Yes. So first of all, on the cost flexibility, we – this isn't just a question for Ratings. We actually look at this for every business, and there's obviously opportunities which any company has when they're approving their budgets which relate to head count. Do you have, for instance, growth areas that you would slow down the growth? Do you have the opportunity if people left, if there's attrition, not to replace the attrition? I mean, these are traditional and typical tools that you use to address any sort of opportunities if you need to slow down your expense growth. Another one could be if you have any major initiatives which you're undertaking, can you also slow them down or delay them or cancel them? In addition, we have – if the performance is not going very well, you obviously have not – you're not going to be accruing the same level of compensation and bonus accruals and things like that, which is another opportunity. We also have other projects which we're, obviously, always looking at. I mentioned in my comments that we're looking to see how we can leverage lower cost operations in the U.S. and around the globe to make sure that we're also finding the best mix of costs so we can still support all of our businesses and our customers. So those – there's a lot of those tools, and I say it's not just Ratings. That goes for every business we've got, that we're always looking for that kind of flexibility. And as I've said before, we always feel like we need to be prepared and we want to be able to control what we can control.

Thanks. And the other question was just related to the strong growth you had in non-transaction revenues.

Oh, sorry. Yeah, on non-transaction, so we had a – there were a couple of reasons for that. One was there was a – you know, because of all the M&A activity around the globe, we had a large increase in Ratings Evaluation Services. Those are coming from the M&A activities in the U.S., in Europe, et cetera. So that was one of the main drivers of the increase in that area.

And also, too – that's also where we – our CRISIL results are largely – in CRISIL, well, it was a – it had very nice growth in sort of mid-teens area. So that was another good contribution.

So, would you characterize the growth in that line as maybe elevated above normal and likely to moderate? Or is there anything else going on?

If you look historically, I mean, most of the time that line is kind of in the mid-single digits. So we've had periods we're a little below it, you know, the last couple of quarters, but mid-single digits is, in the long run, is kind of a reasonable area for that line item.

Okay. Thank you.

Thanks, Bill, and let me thank everyone for joining us on the call today. We were very pleased with our results, obviously, as I said. Going forward, we're going to be focusing the company on these four pillars of scale businesses that are very interrelated, that have excellent brands focused on global growth. And we look forward to speaking with you at the end of the year when we have our next quarter. And clearly there's a few questions that we need to get back to you on when we launch our 2016 – when we give you our guidance. But we really appreciate all of your questions and your support, and we look forward to seeing you soon. Thank you very much.

That concludes today's – this morning's call. A PDF version of the presenter's slides is available now for downloading from www.mhfi.com. A replay of this call including the Q&A session will be available in about two hours. The replay will be maintained on McGraw Hill Financial's website for 12 months from today, and for 1 month from today by telephone. On behalf of McGraw Hill Financial, we thank you for participating and wishing you a good day.