S&P Global Inc. (SPGI) Q4 2017 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the IHS Markit 2018 Guidance Conference Call. Currently, at this time, all participants are in a listen-only-mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference call may be recorded. I would now like to turn the call over to your host, Eric Boyer, Head of Investor Relations. Please go ahead.

Good evening and thank you for joining us for the IHS Markit 2018 guidance conference call. Earlier this afternoon, we issued our 2018 earnings press release and posted supplemental materials at the IHS Markit Investor Relations website. Some of the comments and discussions on the quarter are based on non-GAAP measures. Our non-GAAP or adjusted numbers exclude stock-based compensation, amortization of acquired intangibles and other items. The non-GAAP results are a supplement to the GAAP financial statements. IHS Markit believes this non-GAAP presentation and the exclusion of these items is useful in order to focus on what we deem to be a more reliable indicator of ongoing operating performance. As a reminder, this conference call is being recorded and webcast is a copyrighted property of IHS Markit. Any rebroadcast of this information in whole or in part, without the prior written consent of IHS Markit is prohibited. Please keep in mind that this conference call especially the discussion of our outlook may contain statements about expected future events that are forward-looking subject to risks and uncertainties. Factors that could cause actual results to differ and vary materially from the expectations can be found in IHS Markit's filings with SEC and IHS Markit website. After our prepared remarks, Jerre Stead, Chairman and CEO; Lance Uggla, President and COO; and Todd Hyatt, EVP and Chief Financial Officer will be available to take your questions. With that, it's my pleasure to turn call over to Jerre Stead. Jerre?

Thank you, Eric, and good evening and thank you for joining us for our 2018 guidance call. Today, we're pleased to provide our final guidance for 2017 with an upward revision to introduce our 2018 guidance and provide commentary on why we feel so confident about our future. We're heading into 2018 with great momentum. The integration is largely behind us. Lance's leadership team is in place and working really well together and we're moving forward as one IHS Markit. It was the goal that Lance and myself to have the organization in place upon our transition that the team would enter 2018 -- in a place upon our transition, that the team would enter 2018 with its full focus on operational execution. I am very pleased to announce we have successfully achieved that goal. The combination of operational focus, the improving health of the upstream managing market, and stable conditions with our other end markets puts us in a position to have a strong 2018. We will deliver organic growth within our long-term range, expand adjusted EBITDA margin by 100 basis points, produce nearly $1 billion of free cash flow, and repurchase $1.1 billion of shares to complete our $2.2 billion buyback commitment that we announced at the time of the merger. Finally, I am very pleased with our CEO transition. Partnering with Lance in the past two years from our first meeting in December of 2015 has been great fun and a great pleasure. His enthusiasm and drive will lead IHS Markit to ever greater things in the years to come. With that, I'll turn the call over to Lance.

Okay. Thank you, Jerre. As Jerre mentioned, we're heading into 2018 with momentum and strong business fundamentals. I'm excited about our future and confident in our ability to leverage our world-class information assets, deepen our research and insights, and continue to refine our analytics capabilities to power shareholder returns. Jerre has been an exceptional partner and you can be certain that we've set this transition up with a shared vision. At Investor Day, I said our strategy will be driven by a deep use of technology to better leverage our proprietary data and industry knowledge. We're already underway on this journey with over 20 proof-of-concepts that utilize technology to; one, become more efficient in how we ingest data; secondly, to create new proprietary information; third, to accelerate product development; and fourth, enhance analytic capabilities within our commercial solutions. I look forward to updating you on our progress. This year, we have seen increasing benefits of our combination from our revenue synergies as we continue to build sales pipeline and execute against our plan. We're now north of $10 million and accelerating. Long-term financial commitments to investors will remain the same, as what Jerre and I committed to since the merger closed. Organic revenue growth in the 4% to 6% range, adjusted EBITDA margin expansion of at least 100 basis points until we're within the mid-40s range. A level of share buyback fueled by our strong free cash flow and returning to double-digit adjusted earnings growth in 2019. In terms of M&A, we did not expect any large scale acquisitions in 2018 as we focus on operational execution and repurchase shares per our buyback commitment. Longer term, we'll continue to acquire assets in our scaled verticals. Now, turning to our 2018 business outlook. We're confident in our stated organic revenue growth range and the company is now executing within that range. In terms of our segments, here's what we expect. First, Transportation. Transportation organic revenue growth of high single-digits, driven by a number of levers. First, our used car business, which comprises 60% of our Auto business, will continue to see strength from recent product development initiatives, including used car listings and valuation services, expanding into new markets such as banking, and insurance and continued penetration of the VHR market with independent dealers. Now, on the new car market, we're focused on the increased demand for production forecasts, driven by the increased technology in cars; predictive analytics around emissions and fuel standards, enhanced recall product offerings, and digital marketing, especially around the continued expansion of our targeted audience capabilities, including both addressable TV and social media. Finally, we are delivering our automotive conquest audiences to dealerships through our recent acquisition of automotiveMastermind, extending the value we provide to OEMs and to the retail channel. Also in Transportation, Maritime and Trade and Aerospace and Defense businesses are expected to improve. Now, on to Resources. Resources' organic growth is expected to be in the low single-digits, anchored by continued strong performance within our mid and downstream businesses, which comprise approximately 35% of Resources' revenue and includes both our Chemicals and OPIS businesses. We also expect a more stable upstream market, which comprises 65% of our overall Resources business. Within Upstream, we believe customer uncertainty is largely behind us and we expect a positive CapEx spending environment, which will drive growth within our annual contract value for the year. Next, Financial Services. Financial Services business fundamentals continue to improve and is expected to deliver within our longer term, mid-single-digit organic target. Our Information business continues to attract new customers given our product's high quality and broad coverage. Our index franchise is also planning another strong year due to continued expansion of passive investing and growth in ETFs. Solutions is expected to deliver high single-digit organic revenue growth from our investment and products that help our customers meet regulatory challenges and reduce operating costs. Processing is expected to be down year-over-year or in the low single-digit range due to a difficult comparison in the first half of the year and our expectation that volatility will remain low. We expect the end market environment for product design to be improving, the product rationalization to be largely behind our TMT business and the reorganization of ECR into our Financial Services' business to start to bear fruit. This will drive overall CMS to single-digit growth, normalized for BPVC. Before I pass the call to Todd, who will provide our detailed 2018 guidance, I just want to finish by saying the best is yet to come for IHS Markit as we have the assets, people, and strategy in place to continue to drive strong shareholder returns for many more years. And with that, I'll turn the call over to Todd.

Thank you, Lance. I will start with our 2017 guidance which includes continuous improvement in revenue performance with revenue tracking modestly above the upper end of our current range of $3.49 billion to $3.56 billion plus $10 million acquired revenue for automotiveMastermind. Revenue guidance includes organic revenue growth of 3% to 4% and negative FX impact of approximately $30 million. Adjusted EBITDA at the midpoint of our guidance range of $1.375 billion to $1.4 billion, which represents modest improvement from our September update due to margin flow through from revenue stream. Adjusted EPS in the midpoint of our guidance of $2.02 to $2.08. Now, turning to 2018, as Lance said, we continue to be encouraged by growth trends within our Transportation and Financial Services segments, and improving trends within our CMS and Resources segments. We expect revenue of $3.77 billion to $3.83 billion, with organic revenue growth of 4% to 5%. Our revenue range includes approximately $10 million year-over-year revenue growth from FX and $80 million acquisitive revenue from Mastermind. In terms of revenue by segment, we are expecting Transportation organic revenue growth of high single digits, driven by continued strength in our Auto business. Within Financial Services, we expect organic revenue growth in this longer term range of 4% to 6%, driven by Information Services' organic growth of 4% to 6% and Solutions' high single-digit growth. We expect processing to be down year-over-year in the low single-digit range due to a difficult comparison. Resources organic revenue growth is expected to be low single-digits as we operate in a more stable upstream environment. As we discussed in our September call, our Q3 year-to-date Resources' annualized contract value decline was $10 million, which we expect to improve in Q4. We will enter 2018 with flat to slightly negative subscription revenue growth and expect to build on that throughout 2018 with low single-digit sales growth in our Upstream business and continued strong growth in our Chemicals and OPIS businesses. Within CMS, we expect low single-digit organic growth normalized for the Boiler Pressure Vessel Code. Moving on to adjusted EBITDA, we expect to deliver within the range of $1.5 billion to $1.525 billion. This represents a margin of 39.8% at the midpoint and at least 100 basis points of all-in reported margin expansion versus our 2017 adjusted EBITDA margin estimate. In order to achieve 100 basis points of reported margin expansion, the core business is expected to produce more than 200 basis points of expansion through revenue growth and cost synergies, offset somewhat by margin dilution from the Mastermind acquisition and incremental investment activity. And finally, we expect adjusted EPS of $2.17 to $2.23. At the midpoint, adjusted EPS growth is 7%. As I highlighted on our Q3 earnings call, 2018 adjusted EPS will be impacted by several items below adjusted EBITDA. We do see a clear path to return to double-digit adjusted EPS growth in 2019. Our supplemental guidance schedule provides detailed guidance ranges for items below adjusted EBITDA. In terms of color, we expect depreciation expense of $180 million to $190 million, which will increase over the next several years. On a long-term basis, we expect depreciation to track in line with our annual capital spending. Interest expense of $180 million to $190 million, which assumes we will continue to term out debt to our two-third fixed capital structure target. While this will drive elevated interest expense in 2018, this is the right long-term decision and we'll provide the company with committed long-term financing at attractive interest rates. We expect a slight uptick in the tax rate, but we'll continue to operate with a very efficient tax structure and expect an adjusted tax rate of 20% to 23% and a GAAP tax rate of 10% of 15%. We are continuing to manage equity grants consistent with commitments which we made at the time of the merger. In terms of our issues, we expect to grant 1% of outstanding shares or approximately 4 million shares in employee equity awards in 2018, down from 5.5 million shares issued in 2017. The 4 million shares equates to economic value of approximately $172 million, assuming a $43 of share grant price. Our GAAP reported stock-based compensation expense will be $200 million to $220 million and reflects expense amortization associated with previously issued RSUs and stock options, as well as in-year expense amortization for current RSU issuances. In terms of shares, we expect a fully diluted weighted average share count of 405 million to 410 million shares. This includes the following assumptions; full year 2017 weighted average diluted share count of 413 million to 417 million in shares and completion of our $2.2 billion share buyback commitment over 2017 and 2018. We have executed $1.1 billion through Q3, excluding $300 million of shares repurchased from option proceeds. We expect to buyback an additional $1.1 billion of shares over the next year, operating toward the upper end of our two to three times gross leverage range. In terms of cash flow, our 2018 cash conversion is expected to improve as merger-related restructured costs and capital spending begin to moderate and working capital improves. As a result, we expect 2018 conversion to track in line with our long-term, mid-60s cash conversion target by. IHS market is well-positioned to drive attractive shareholder returns given its financial scale, substantial cash generation and return of capital strategy, and synergy opportunity. This combination creates a very attractive financial lens. Moving forward, we're focused on accelerating growth, expanding margins, and producing strong free cash flow, which will create a path to long-term shareholder value creation. And with that, I will turn the call back to Jerre.

Thank you, Todd. IHS Markit is in a great position as the integration is behind us, our go-forward strategy is very sound, and the fundamentals of the business are strong. Upon my retirement as Chairman and CEO at the end of this fiscal year -- or calendar year, sorry, I will continue to be an excited, large shareholder for what is to come and IHS Markit's biggest fan forever. With that, we're ready to open up for questions

Thank you, sir. [Operator Instructions] Our first question comes from Bill Warmington of Wells Fargo. Question please.

Good evening everyone. And so first-off, congratulations to Jerre and wish for happy trails.

Thank you.

The -- so first question is, just a housekeeping one, really, on the--

Actually, though, just remember, one question only, buddy.

Okay. Okay. Here we go. This is it. On the interest rate guidance that you've given, could you just remind us where you are in terms of the fixed-to-floating mix? Where you expect to be at the end of 2017 versus the end of 2018? And kind of your view on interest rate increases during the year that you have built into that assumption?

All right. So, Bill, we are about 52%, 53% fixed debt taking account of the floating-to-fixed swaps that we have in the structure. I'm a little over $4 billion of debt. I think the debt is around $4.1 billion. The plan is to move that to two-thirds by exit 2018. We did -- I think, when you look at the long-term debt costs that we had in 2017 from the capital markets transactions, you think about long-term rate is somewhere 4% type range. In terms of the other assumptions around interest, we have built in assumptions around three short-term rate hikes in 2018.

Thanks Bill. Next question.

Thank you. Our next question comes from Gary Bisbee of RBC. Please go ahead.

Hey guys. I guess I just want to ask one about the share count. The dilution from the legacy, I guess, especially legacy market options, is that a big deal? With the stock down quite a bit from when you gave the initial commentary a month or so ago, it strikes me that share count would be quite a bit less given that -- I think at the Investor Day, you said every $1 is roughly 1 million shares. So, what's in the guidance in terms of share price? And is it right that that dilution is less at the current share price, meaningfully less, several million shares than what we would have thought when you were a month ago?

Go ahead, Todd.

Well, I think relative to the assumption on the share count on the dilutive instruments; we have $5 million RSUs and then on the stock options, there are $26 million outstanding options, and the dilutive share count on those right now is around 11 million shares, which we do see coming down a bit next year. As you've said, forecasting the stock price to determine the equity dilution from options is difficult. There are 26 million outstanding options, so $1 creates $26 million of dilution. And we, basically, have built a share price into the budget that is higher than the current share price. So, we do assume share price appreciation when we build the budget and that's reflected in the share count that we have.

Thanks Gary. Next question.

Thank you. Our next question comes from Kevin McVeigh from Deutsche Bank. Please go ahead.

Great. And Jerre, my congratulations as well.

Thank you.

Hey just one thought -- you're very welcome and well deserved. With oil being where it is, is there any kind of correlation with the organic growth? Really nice recovery on the energy side. But -- or I guess, given kind of the organic range in 2018, does that have some conservatism built into it or is that -- would that be where we would expect given kind of where oil is right now?

Lance?

Sure. Well -- hey, Kevin, it's Lance. So, what I'd say there is -- and we broke it out, so 65% of the segment is upstream. So, clearly, impacted the CapEx spending there is impacted by the oil price. And 35% are the -- we have PGCR, which includes our renewables, power, gas, coal. You've got the Chemicals business there. You've got the OPIS businesses. Those are all strong mid to high single-digits growers on 35% of the segment. So, what we're saying is that we have a good, strong baseline now in the upstream for performance to return to a positive growth and we've given a low single-digits target for the division.

Thank you.

So, not -- oil price is not a -- we don't see that as having a big impact on us in terms of the current forecast.

Thanks, Lance. You wanted to add, Todd?

The other point, just to be aware of, is I want to differentiate between the outlook on sales growth and the outlook on revenue growth. We do see improving sales growth and I talked about low single-digit, we felt pretty confident in the upstream. The downstream, midstream continues to perform very well, so think of that as mid to high. But deferred revenue model, you have to build the base and you only get so much of that sales growth flowing through to revenue and that's what you see reflected in the guidance.

Thank you. Next question please.

Thank you.

You bet.

Thank you. Our next question comes from Jeff Meuler from Baird. Please go ahead.

Yes, thank you. What's the guidance assumed in terms of how much of the net OPEC synergies from the deal are being realized in year 2018? Just wondering just what the tail is of what's incremental out to 2019?

Todd?

We expect to be pretty substantially complete as we exit 2018. I mean we will see some activities Q1, Q2 following that we'll flow through to 2019. I think the other part of the longer-term opportunity when we think of margin expansion into the future is really the [Indiscernible] redesign that we're very focused on. But as far as the headline items that we had targeted coming out of the merger, will be substantially complete by the middle of 2018.

Thank you. Next question.

Thank you. Our next question comes from Manav Patnaik from Barclays. Please go ahead.

Thank you. Good evening. I just wanted to follow-up on the Transportation business. Maybe just a little bit more color in terms of what the subscription and non-subscription pieces should do, like particularly just trying to get sense of how tough the recall comps are or any other color you can add there?

Good question. Todd?

Well, the Subscription business in Transport and in certainly in Auto has been double-digit. And in Transport, the Subscription business continues to perform very high single-digit, touching double-digit. When we look at the non-subs, while there is some level of variability in the non-subs, and we saw that very high in Q1, down a bit in Q2, we certainly still expect to see a positive growth in non-subs, think of that as sort of mid to high single-digit growth rate. And we continue to see very positive signals in a lot of the non-subs part of the Transport business.

Which we've got good visibility on right now. Thank you. Next question.

Thank you. Our next question comes from Brandon Dobell of William Blair.

Thanks. Maybe you have some color on what's your expectations are for the cadence in Resources bookings growth. Should we expect to see fiscal 2018 finish up high single-digits or do you think mid is more likely?

He said fiscal 2018. Thank you. Todd?

In sales growth?

Yes.

I talked about we're targeting a low mid-single-digit sales growth in upstream. I think the downstream midstream will be mid to high.

And exiting?

Exiting, all-in, we think we can certainly be pushing to, call it, low, mid, probably touching toward the mid as we exit the year.

On the upstream. Thank you. next question.

Thank you. Our next question comes from Andrew Steinerman of J.P. Morgan. Please go ahead.

Hi. I wanted to get more into that 2017 revenue guided comment that you'd be at the high end plus an additional $10 million from AMM. I remember AMM was announced when third quarter results were out in September. And at that time, you were trending at the high end. So, it just seems like that maybe organic revenue growth has come, again, faster than expected or is it just when you're putting AMM into the numbers?

It's a good question. I mean we are certainly encouraged with what we saw in Q4. So, the high end plus AMM was -- the high end was [35.60], AMM was $10 million, and so that's [35.70], which is consistent with what we've said on the Q3 call. We expect to be single-digit millions on that number. We do expect to outperform that a bit.

So, we've seen it in both. Thank you. Next question.

Thank you. Our next question comes from Anj Singh of Credit Suisse. Please go ahead.

Hi, thank you. A question on how the oil environment has impacted you guys. It's been impacting for a few years now and I realized it's still not in an ideal spot, but better than where we've been. So, looking ahead, would you say your confidence in the outlook is higher than in recent years? Or asked another way, what would you say are your biggest blind spots as we look at your 2018 guidance. Thanks.

Lance?

Yes. I think that we've been saying that throughout the year that we felt that we were establishing a strong baseline to grow off of in terms of our Resources division. So, a few years of challenging markets we're CapEx spending and industry was down. You then had both the OPEC agreements, you've had the advancement in supply coming from the Permian and a whole new baseline forming around $50, $55, which we've seen outperformed lately. And so all-in-all, we feel that solid baseline exists for us to grow from in the Upstream. And remember how we grow there. The reason our contract values and subscriptions went down there was that some of the big international global players retrenched into a single market from being in multiple markets. And -- so it's not that we lost those customers, it's just that they didn't have to buy as much -- as many products from us. So, we see some of that's starting to come back. Our thought leadership, you saw great results around CERAWeek this year, showing substantive interest in IHS Markit as the thought leader in terms of our research and insights, strong downstream OPIS, pricing in news, strong Chemicals, good results in Power, Gas, Renewables, and Coal. So, all-in-all, we're feeling -- we're signaling to you that we see upside in 2018 and we're cautiously presenting that to you as we look into next year. So, we feel good about that and hopefully, that's what we're describing to today.

Thank you. Next question.

Thank you. Our next question comes from Jeff Silber from BMO Capital Markets. Please go ahead.

Thanks so much. And Jerre let me add my best wishes to you as well.

Thanks Jeff.

Just -- I know this is only -- you're providing 2018 guidance, but you kind of talked about, generally, 2019 return to double-digit adjusted EPS growth, someone asked you about that. Is that solely going to come from margin expansion? Or is that going to be boosted by some of the below the line items, share count, tax, rate interest, et cetera?

Great question. Todd?

Yes, I think in 2019, you will see an improvement between the growth rate at the adjusted EBITDA level and the growth rate at the adjusted EPS level. And I think its several things; one is moderating interest expenses we term out the capital structure. The other thing, certainly, the buyback assumption for 2018 is a bit more backend loaded and so we'll see an improvement in the share count level. We expect tax to continue to be -- and efficient, efficient for us in the current environment or with the proposed new tax regs, we would still expect to be very efficient with the tax structure.

Thank you. Next question.

Thank you. Our next question comes from David Ridley-Lane of Bank of America. Please go ahead.

Sure. I wanted to ask about the revenue synergies that you're expecting in 2018. I know a lot of those came on the Resources side. Do you expect the improved environment to be beneficial to you in going after that cross-selling opportunity? Thank you.

Yes. So, I think on revenue synergies, what we've signaled is that we'd past that, the $10 million threshold this year in terms of run rate. The first half of the year, something additional there. The first half of the year was circa $2 million, but the second half of the year has been circa $8 million. So, a strong acceleration of quarterly revenue synergies. That's being driven by a nice, strong buildup across all segments in terms of our sales pipeline. And now that pipeline is starting to be converted at an accelerated rate. So, we did reconfirm that we felt an exit run rate of $100 million in 2019 that we had stated at the merger was a good number and we're signaling that it's across the group, strong sales pipeline, accelerating quarterly results that would suggest that the $100 million is a good number and we keep it intact.

Great. Thanks. Next question please.

Thank you. Our next question comes from George Tong from Goldman Sachs. Please go ahead.

Hi, thanks for taking my question. I want to go back to the market revenue synergies. Again, you indicated your revenue synergies are running north of $10 million and accelerating. Can you elaborate on how much -- or how you expect revenue synergies to unfold in 2018? And what assumptions for cross-selling Energy into Financial Services and vice versa you're including in your 2018 guidance?

Right. So, we -- what we've said in terms of any guidance, at the time of the merger, we said that we would have an exit run rate in 2019 of $100 million and we have reconfirmed that a couple of times. So that says -- and we reconfirmed it with words like increasing confidence in the achievement of $100 million. I also just said a moment ago, which is the first time we ever said that, which is the first half of the year revenue synergies were $2 million to $3 million; the second half of the year, $8 million, and that tells you that the sales pipeline is now being converted at a faster rate. And we've seen that every quarter since the merger. We've had growing pipeline and growing and increasing momentum of conversion. It comes from a variety of sources, as described. It's taking existing IHS products on the energy side and distributing those into financial market participants. Its -- we've taken legacy financial markets, data management solutions and have now sold those into several large energy companies. It's an increasing opportunity set that goes both ways now across the company. And we also have some new product development, so we have new benchmark indices that are in the pipeline that we've been working with legacy IHS data, creating benchmarks for index products in the -- into financial market participants. So, a good, broad, cross-section, confidence in the exit rate, and accelerating each quarter, that's what I'd say.

Thank you. Next question.

Thank you. Our next question comes from Toni Kaplan from Morgan Stanley. Please go ahead.

Hi, good morning -- well, good afternoon.

Same to you Toni.

And congratulations Jerre.

Thank you.

So, Lance, at the beginning of the call, you mentioned, using technology to better use data within the organization. I was just wondering if there are any areas of investment that you're making in terms of tax spending, specifically, are we seeing any of that in the guidance or would that be just something to think about going forward? Thanks.

Okay. Thanks Toni. Good question. So, for us, we said at Investor Day that we felt one of the golden opportunities in our merger was to invest in technology and use technology across the group in an increasing fashion. And that, when we hit $125 million of synergies, incremental synergies would be put into technology. Todd described in the margin today, next year, he said 2018 was more than 200 basis points, but offset by AMM plus increasing investments and those investments refer to our technology investments. We haven't put a number on that and I doubt we will. But we are increasing our technology investments. So, what are some of those things that we've done? Two large-scale platforms decisions to make the company more efficient, a rollout of Salesforce.com globally as well as a rollout of Workday globally to support our HR franchise. Both of those are third-party initiatives that we made decisions on through the merger. The second thing we've done is we've built out a cross firm data leg which now has some 20 proof-of-concepts. A proof-of-concept, for us, is something where the business and our data science unit has brought forward to our Advisory Board a key strategic initiative, leveraged with technology that can do one of three things; it can reduce costs through creating efficiencies and data management, it can leverage technology to provide for better distribution, it can use technology and analytics to enhance product development. And across those 20 initiatives, they cover all aspects, and sometimes more than one of those. And once they go through the POC, they become a product which will drive future revenue into 2018, 2019 and beyond. And we have several of the proof-of-concepts in the stage of rolling out to product initiatives and being turned back into the product groups. So, I'm really excited about what we've done with our technology strategy. And I feel that that positions us extremely well vis-à-vis our peers in using this merger to reinvest in what most all the companies we face day-to-day are increasingly looking to do and we've been well positioned to do that and support it through the merger.

Thanks Lance. Next question.

Thank you. Our next question comes from Hamzah Mazari of Macquarie. Please go ahead.

Hi, this is Kayvan Rahbar, filling in for Hamzah. Could you walk us through whether you have anything baked in either positive or negative due to MiFID II in your fiscal 2018 guidance and how should we be thinking about that?

Well, so MiFID II is a key regulation that plays into our company in several ways, but maybe I'll highlight a couple here on this conference call. So, the first off is we have over 1,000 analysts providing research and insights in the legacy IHS businesses. And given the MiFID II regulations around the use of research in the financial market, we are well-positioned for charging our -- for taking our research and competing more aggressively into the financial market as existing research providers in the traditional financial markets now have to charge for the research. So, rather than giving it away in exchange for trade flows, as they would have done historically, they now happen to charge. On our side, we already provide a very high level of research and insights, which flows more easily into a MiFID II supported environment. So, that's a positive. The second thing is there's a whole bunch of things around best execution, transaction cost analysis, regulations with respect to the markets we operate in, trade reporting, a whole bunch of things, that we've been able to capitalize on. And within our growth for Financial Services next year, that's an accretive part of the growth of our 2018 strategy.

Excellent. Thank you. Next question.

Thank you. Our next question comes from Andrew Jeffrey from SunTrust. Please go ahead.

Good afternoon. This is Oscar Turner on for Andrew. So, my question is on the Transportation segment. I was wondering if you can provide any color on your expectations for new and used car sales next year and to what extent those trends affect the outlook for the segment. I see that the 2018 outlook is in line with your long-term guidance, but was just wondering how much of that outlook is affected by new products versus strength or weakness in the end markets?

I think what's exciting about the automotive business is how well diversified we are across both the used car market and the new car market. And in my script today, I called out a 60/40 split on used and new, so that's the first thing to help you there. The second thing I said is that there's a whole variety of initiatives that are fueling growth across our used car segment and then a whole bunch of growth levers that are supporting the new car market. Overall, we've said before on these calls, the actual used and new car business is that we operate in, have a set of diversified levers that we feel will fuel growth in the high single-digits looking forward into the coming years ahead. We've also said that the addition of Mastermind's will add to that with acquired growth next year of approximately 80 basis points -- $80 million -- sorry, $80 million, sorry, acquired growth of $80 million, but we also signaled $120 million for 2019 which suggests another incremental 1% approximately. So, we really like the Automotive segment. I'd say, as a company that's operating in the information segment of both new and used cars, we're the global leader. We've expanded our position this year. We've developed new products and we've acquired to make sure that we have all aspects of the market, OEMs, consumers, used and new, covered. So, I'd say that strong high single-digit growth into 2018 and beyond.

Excellent. Next question.

Thank you. Our next question comes from Joseph Foresi of Cantor Fitzgerald. Please go ahead.

Hi guys. This is Mike Reid on for Joe. Thanks for taking our question. I had a question on which segments are driving the growth in indexing and how much of that strength is coming from fixed income indexing?

Yes. So, we're one of the world's leaders in fixed income indices and our growth there has been the highest ever quarter-over-quarter. I think we're north of $140 billion of EPS now outstanding against our indices and we've got two of the largest ETFs out there, LQD and HYD, two of our -- two of the benchmark ETFs against our indices industry. So, very strong. But we also, given the [Indiscernible] guidelines on benchmarks, we are now the benchmark operational provider for independence for several large financial institutions under the EU Benchmark Regulation. We continue to see extra work to be developed there next year that covers both equities and fixed income. We acquired a small business that gives us a growing position in the equity space, and so now we're very well positioned. We've also been doing some very great work in China. We acquired the HSBC indices which we've now integrated and grown and we continue to work with agencies within China to develop our index franchise there as well.

Thanks Lance. Last question.

Thank you. Our last question comes from Shlomo Rosenbaum of Stifel. Question.

Hi, thank you very much for squeezing me in. Just wanted to ask what you're seeing in Resources in terms of non-subs and how you're thinking of the growth there in 2018 in relation to your guidance?

Yes, we've seen low single-digit growth this year. We had a very, very strong CERAWeek. Consulting has been single -- low mid-single-digit. We'd see generally improving software, geoscience software. Next year, we think we'll be up a tick or so, Shlomo. So, sort of a mid-single-digit type growth rate. I think the other point on the non-subs part of Resources is certainly is when we look at the percent, about 15% of the segment, so it is definitely important and we do see an opportunity to have growth in that area. We, I think, have a pretty strong sort of floor with what we've seen on the non-sub part of Resources.

So, with that, we'll turn it back to Eric. We look forward to talking with all of you in January for our Q4 and year end results. Eric?

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