S&P Global Inc. (SPGI) Q3 2013 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the Third Quarter 2013 IHS CERA Earnings Conference Call. My name is Lacey, and I'll be your coordinator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation over to your host for today's call, Andy Schulz, Vice President of Investor Relations. Please proceed.

Thank you, Lacey. Good morning, and thank you for joining us for the IHS Third Quarter 2013 Earnings Conference Call. We issued our third quarter earnings release earlier this morning. If you do not have a copy of this release, it is available on our website at ihs.com. Some of our 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. Our earnings release includes both our GAAP-based income statement and statement of cash flows and reconciliations to the non-GAAP measures discussed during this call. These reconciliation schedules are included in our release and can also be found on our website. The non-GAAP results are a supplement to the GAAP financial statements. IHS 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 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, especially the discussion of our outlook, 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' filings with the SEC and on the IHS website. After our prepared remarks, Scott Key, IHS President and Chief Executive Officer; Rich Walker, Executive Vice President, Global Finance; and Todd Hyatt, Senior Vice President and Chief Financial and IT Officer, will be available to take your questions. With that, it is my pleasure to turn the call over to Scott Key. Scott?

Thank you, Andy. Good morning, and welcome to all our investors and to my IHS colleagues. It's a pleasure to be with you this morning to share our results from the third quarter. Overall, we are pleased with the solid quarter. Importantly, we are tracking to our full year financial expectations and the numbers that we outlined for you on our call last month. R.L. Polk got off to a strong start during our first 6 weeks of ownership, with solid revenue delivery and good integration progress. We also had some notable product releases that are important milestones in our commercial platform development with positive market reception. We received very good news for the company, every colleague and our shareholders on the corporate sustainability front with the addition of IHS to the Dow Jones Sustainability Index. So it was a solid quarter with progress and delivery to our goals and our expectations for the period. Many thanks to my colleagues for all their hard work and performance, and I will give you a little more color on each of these developments in a moment. Let's start by reviewing some of the financial highlights for the third quarter. Revenue was $480 million, up 25%. Adjusted EBITDA of $144 million increased by 19%. Adjusted EPS of $1.27, up 6%, and year-to-date free cash flow of $279 million increased by 42%. Despite the same dynamics we've discussed on our last 2 calls in the corporate spend and investment environment, our overall organic growth improved sequentially to 5%, as expected. Our subscription business appears to have stabilized, finishing just short of rounding up to 6% organic growth for the quarter. We see improving subscription performance in Q4 and expect subscriptions will grow 6% organically for the full year, as we discussed in August. As we anticipated, our non-subscription business had its best quarter in quite some time as we benefited from the strong performance of certain seasonal offerings, as well as better-than-expected performance from other offerings like our Energy, chemical and analytics consulting businesses. Many parts of our non-subscription business, like consulting, are healthy and positive organic growers even as we continue to see some headwinds in e-commerce, transactions and non-consulting services. Consequently, the nonrecurring part of our portfolio in total remains variable as we head into Q4, but in line with our full year performance expectations as outlined in August. Geographically, our largest region, the Americas, appears to have steadied, with strength in our subscription business coming from a number of positive markets like energy and automotive. EMEA and APAC continue to grow organically at above-market rates despite being impacted by the extended timing of certain large renewals and new subscription business opportunities. I also want to provide a quick update on our recent R.L. Polk acquisition. Since the transaction closed in mid-July, revenue performance and growth have been strong, even better than we had expected in the current period. And although the upcoming quarter is traditionally the softest for R.L. Polk, we expect to deliver to our 2013 goals in this positive long-term growth industry. We have multiple teams working diligently on every aspect of the integration, and our new colleagues from R.L. Polk are a great addition to IHS as they are already extending and deepening our collective capabilities and enriching our culture. We'll have much more to share after Q4, the first full quarter performance under IHS ownership. Let's turn now to our commercial initiatives. IHS has a clear roadmap to deliver long-term, sustainable, profitable growth, building from a scalable foundation, which is now largely in place. We continue to make good progress across each of our key strategic commercial initiatives as evidenced by the number of important commercial product releases during the quarter. As we outlined at our Investor Day in April, we expect these initiatives will drive improvement in our performance over the next 3 years. An important part of these commercial endeavors is the development and rollout of our common workflow platforms. These platforms are aligned to our key customer workflows and allow easy access to our products and services. The convergence of information, insight and analytics onto a common integrated platform provides a single point of access for customers and enables cross-sell and up-sell, which are positive drivers of future organic growth for IHS. We made great strides on these platforms during the quarter. Let me take a minute to update you on the progress of 2 of these platforms in particular. Launched last year, IHS Connect is our market and business intelligence platform designed specifically for strategy planning and analysis customers. IHS Connect is a single integrated source for the broad range of IHS information, research and analytics and is transforming the customer experience. We remain on track with the plan outlined at our April Investor Day with the launch of versions 2.2 and 2.3 of IHS Connect during the third quarter and the latest launch of Connect 2.4 earlier this week. Each release has included an expanding range of subscription content linked to new analytic tools and capabilities, resulting in a robust energy offering as we enter 2014. Each successful step is significant for IHS as part of the multi-phased migration that will ultimately make IHS Connect the primary delivery platform for all IHS research and analytics across each of our core industry sectors, supporting the growth of more than 30% of overall IHS revenue. Another exciting workflow we are developing is our primary Product Design platform, which we refer to as the Engineering Workbench. During the third quarter, we executed to our long-term plan for the development of the Engineering Workbench and achieved notable milestones. Our Engineering Workbench strategy includes the seamless integration of our patented semantic search technology, called IHS Goldfire, with our industry-leading engineering information and analytics offerings. During this past quarter, we introduced an integrated IHS Standards Expert enhanced with Goldfire semantic search. This provides more relevant results than traditional text-based search engines and substantially enhances IHS' market-leading standards management solutions. In addition, we recently announced the introduction of IHS Knowledge Collections, an expansive set of engineering-rich documents allowing engineers access to more than 90 million scientific and technical documents spanning patents, journals, engineering e-books and best practices and design methods. Enabling these Connect collections with IHS Standards Expert with Goldfire is an exciting development that creates a comprehensive, seamless and efficient delivery of information and analytics for engineers managing complex and capital-intensive projects across each of our core industry sectors. For each of these recent platform releases, we have seen a positive marketing customer response. Although it is still early in the development of these key platforms and the new growth they will drive, initial customer interest is promising, and we are pleased to be progressing as planned. I will look forward to providing you additional updates on each platform as we make progress on the largest commercial deployment in our history. Another important element in our strategic commercial development is our Target 1,000 sales initiative, which focuses sales resources on high-growth, high-opportunity accounts. We are focused on building our capability and capacity in our 20 key geo-markets, and we are making good progress as we enter Q4 and look to 2014. Many of you know that we formally launched corporate sustainability as a key area of focus and a core metric for IHS about 2.5 years ago. We said that our definition of sustainability was making decisions that would ensure the long-term sustainable profitability of IHS, and we set a goal of becoming best-in-class by 2015, defined by the inclusion of IHS in the Dow Jones Sustainability Index. I'm incredibly proud of the progress we've made. You may have seen our press release last week announcing that IHS had been selected for inclusion in the Dow Jones North American Sustainability Index, and this represents achievement of our goal a full 2 years early. We were added to the Sustainability Index this year based on our performance in a corporate assessment that evaluates companies on a broad range of critical non-financial metrics in economic, environmental and social categories. Thousands of companies are measured through this investment-based assessment, and the top relative performers are included in the index for that year. Two highlights of this year's performance for IHS were our ranking in the 100th percentile for customer relationship management and our ranking within the 95th percentile for labor practices and human rights. There is ample evidence that companies which score high on these critical non-financial metrics deliver long-term, sustainable, profitable performance more consistently than companies which don't. Ultimately, excellence in performance on those non-financial measures translates into strong financial performance. To wrap up and for IHS overall, we were pleased with our performance in Q3 and expect to deliver our full year 2013 goals as we outlined on our last call. R.L. Polk is the largest and most important acquisition in our history and is now being integrated quickly and effectively, and early performance is positive in meeting our goals for this great asset. We are focused on operational excellence and placing our customers first in all that we do, and we have a solid and long-term sustainable growth path ahead of us. With necessary infrastructure in place, we are making expected progress on our many commercial platform and sales and marketing initiatives that will drive future performance and growth. We believe the future growth and performance prospects for our business are as bright today as they have ever been. And with that, I'll turn the call over to Todd, who will walk you through the details of our Q3 financial performance.

Thank you, Scott. I'll provide an overview of our results and reaffirm our 2013 annual guidance ranges from our last call. Let's start with revenue. Third quarter 2013 revenue increased 25% to $480 million. The growth in revenue includes 5% organic growth and 21% growth from acquisitions, with a 1% drag from FX. Subscriptions represented 76% of revenue and grew organically 5% in Q3. As Scott referenced, despite a slightly lower organic growth rate in Q3, we remain on track for 6% organic subs growth for the year. We saw strengthening sales pipelines in the period and expect improved organic subscription growth in Q4. Our non-subscription businesses also grew 5% organically and benefited from the inclusion of certain seasonal releases, including the Boiler Pressure Vessel Code. Looking at regional performance, growth was double digit across all 3 geographies due in part to the inclusion of R.L. Polk and anchored by steady organic growth. Americas overall revenue increased 32%. Organic growth continued at 4%, and acquisitions added 28%, primarily due to R.L. Polk's significant U.S. presence. EMEA's overall revenue growth was 13%. Organic revenue growth was a very solid 6%, and acquisitions added 8%. FX was a 1% drag. Despite the recessionary environment, EMEA subscriptions grew at a stable and positive 4% rate organically. APAC overall growth was 13%, with strong organic growth of 8%. Acquisitions contributed nearly 7%, offset by a 2% adverse FX impact. Turning now to profits and margins. Q3 adjusted EBITDA totaled $144 million, up 19% versus a year ago. Our adjusted EBITDA margin was 30% in Q3. On a year-to-date basis, our adjusted EBITDA margin was 30.6%, down 30 basis points. This reflects the inclusion of R.L. Polk and the continued impact from lower-margin recent acquisitions, certain onetime investments and sales of the Boiler Code. Regarding segment profitability, Americas adjusted EBITDA increased 28% to $122 million and benefited from the inclusion of R.L. Polk. EMEA's adjusted EBITDA was down $5 million to $26 million due primarily to product mix in a lower-growth environment, increased selling costs and adverse FX impacts. And APAC's adjusted EBITDA was $10 million, about flat to last year. Turning to cash flow. Our year-to-date free cash flow was $279 million, which was up $82 million or 42% versus the prior year. As we discussed in our call last month, we are targeting free cash flow conversion in the mid-60s in 2014, reflecting the impact of R.L. Polk and increased interest expense. This continued cash flow generation will allow us to rapidly de-lever. The reported GAAP tax rate for Q3 was impacted by several discrete items, including certain onetime R.L. Polk transaction items, which drove the rate to effectively 0%. We expect the rate to be more in line with previous levels for the balance of the year. Turning to adjusted EPS. Recall the calculation now excludes amortization of acquired intangible assets. For the quarter, adjusted EPS increased to $1.27 per diluted share, a $0.07 or 6% improvement over the prior year. As expected, discrete onetime costs associated with the R.L. Polk acquisition negatively impacted adjusted EPS by $0.05. Absent these items, adjusted EPS would have increased 10%. Looking at the balance sheet. We ended the quarter with $271 million of cash and $2.3 billion of debt and a trailing 12-month leverage ratio of 3.7x. As we have previously discussed, we are very focused on driving our leverage ratio down over the next 6 quarters. Deferred revenue at the end of Q3 was $561 million, an increase of 9% on a year-over-year basis. Moving to 2013 guidance. Our guidance is on an all-in basis and assumes no further acquisitions, currency movements, pension mark-to-market adjustments or unanticipated events. For 2013, our guidance remains unchanged, and we expect revenue in a range of $1.8 billion to $1.82 billion, adjusted EBITDA in the range of $540 million to $560 million and adjusted EPS between $4.75 and $5 per diluted share. In summary, Q3 was a solid quarter, and we are tracking to deliver at the midpoint of the full year numbers we outlined on our August call and today. With that, let me turn the call back over to Scott.

Thank you, Todd. We have a great business. We continue to make the right strategic choices to enable our growth and to put the infrastructure in place that is now allowing us to scale effectively as we combine market-leading capabilities on new product platforms. Each of these elements will enhance our performance and growth potential over the next 12 quarters and beyond. Before we conclude, I want to take a moment to thank someone who has contributed importantly to the success of IHS at many levels, particularly our strategic growth, shareholder value creation and the acquisition program that has been instrumental in defining IHS. We filed an 8-K earlier today announcing that Rich Walker has decided to leave the company. Rich joined IHS in 2006 and built an M&A capability and discipline that have been core to our growth story. During his tenure, we have completed over 60 acquisitions, deploying almost $4 billion in capital, culminating with the recent acquisition of R.L. Polk for $1.4 billion. Additionally, Rich has served the company in many senior leadership positions, including Chief Financial Officer, Chief Strategy Officer and leading strategic alliances. Rich and I have worked closely together during his tenure at IHS, and he's been a valued partner. His passion, values and commitment to the people and customers of IHS have been remarkable. I want to thank Rich for his partnership and for his leadership and contributions to making IHS the company it is today. I and the leadership team wish him very well in the future. Let me now hand over to Rich, who would like to make a few comments.

Thank you, Scott, and it's been such a pleasure to partner with you, the IHS leadership team and a great group of IHS colleagues. My time at IHS has been more personally and professionally rewarding than any other company over my 25-year career. The timing is right for me to make this move. I am appreciative of the numerous opportunities afforded to me by Jerre, Scott, the Board of Directors and the support I've received from all IHS colleagues. With the completion of the Polk acquisition and the continuing execution of the corporate strategy we have had in place for nearly 5 years, this is the perfect time for me to explore my next challenge, and I'm looking forward to the next chapter of my career after I work with the company over the coming months to ensure a seamless transition of my current responsibilities. I appreciate the relationships I've been able to form with many of you, and look forward to working with you again in my next endeavor.

Thank you, Rich, and we look forward to your continued success. I'm also pleased to announce that Todd Hyatt has been promoted to Executive Vice President and will maintain his CFO title. In addition, we have launched an external search to bring a new CIO into IHS in 2014. Until then, the IT organization will continue to be led by Todd on an interim basis as he has done so effectively for the past 2 years. Rich, Todd and I are ready to answer your questions, so let's start the Q&A. [Operator Instructions]

[Operator Instructions] And our first question will come from the line of Manav Patnaik.

Firstly, I guess, congratulations to Rich and Todd. My question is around the sort of the subscription organic growth you talked about. It seemed like it stabilized. Just in the context of, obviously, the next 2 quarters being your big renewal quarters, I just wanted to understand just what sort of visibility you have, what feedback you're getting ahead of that, just in terms of seeing this, call it, 5-point-something organic growth maybe pretax [ph] into the 6% range next year.

Yes. Thanks, Manav. Very much appreciated. As we outlined on the call, we're seeing strength in our subscription pipelines. So positively, we see improving subscription organic growth as we come into Q4, and that is really great momentum as we think about next year. We are right on track as we talked about a 6% organic subscription growth for the full year and again, are pleased to see that our pipelines are strengthening and building as we head into Q4. So it's a positive story, very solid and expanding subscription organic performance.

And our next question will come from the line of Paul Ginocchio.

Could you just break out the revenue from the boilerplate vessel code? And then also, can you talk about the timeline of when you think -- some of these IT releases and platform releases, when do you think you would start to see that? Or when is there -- what percentage of the revenue is it impacting? When do we start to see sort of an improvement maybe in some of the organic growth because of that specifically?

Thanks, Paul. Very much appreciated. So directly on the code, as we've talked about in the past, it's kind of single-digit millions, around the $7 million mark. So that's what you can expect for the code, and it's right in line with historical performance and levels. In terms of the timeline, we are on a build path. As we said, these common platforms connect, which rolls out in Energy and then into Chemicals next year. As we get into 2014, Connect will be out there in the market supporting about $150 million in revenue in total and represents that up-sell and cross-sell platform as we align sales as we come into 2014 with those bundles of subscriptions that customers will now find on the seamless Connect platform in Energy. So we'll see momentum into the year. Product Design, we're getting good reception in the market, have a number of trials underway with this new capability. And again, that's another build as we get into 2014 and enhance those platforms. So what we would expect is that when we start 2014 is to align sales around these new platforms and the subscriptions on them. And then as we go through the year, we'll see a build and cross-sell and up-sell as we get moving. But still very early days and a lot of releases to come, as we laid out on Investor Day. We've got a very robust 12-quarter roadmap across all of our revenues and workflows and industries that you'll just see us building on, Paul.

[Operator Instructions] And our next question will come from the line of Suzi Stein with Morgan Stanley.

Can you just remind us what your target leverage ratio is and your capacity and appetite for acquisitions at this point? And should we read into Rich's departure to indicate that activity there may slow down?

Thanks, Suzi. And I'll start, and then I'll let Todd jump in. We've got about $380 million right now in liquidity, so we're certainly, as we said in August, in good position to continue to make the right tuck-in acquisitions that are strategic for us. But we will, as we often have, taken a bit of a pause after a large acquisition to make sure we're integrating well and succeeding. So you'll probably see, for a quarter or 2, a slight reduction in the level of M&A activity and the size of those acquisitions. But we are in great shape, as we said, strong cash engine, and that's going to allow us to rapidly de-lever. So with that, I'll hand it over to Todd on leverage, and then I'll come back to you on Rich.

Suzi, we've talked about a target leverage ratio of 2 to 2.5x. We certainly intend to rapidly de-lever throughout 2014 and expect that we'll be moving toward that leverage ratio as we exit the year.

And then I appreciate your comments as, of course, Rich has been a huge partner of mine for a long time on acquisitions but much, much more than that. So we've developed strategy for the company together, developed a lot of key strategic alliances, so he's been an integral part. I think it's -- as always, we're running long and hard at IHS and have for a long time, and I think this is a great opportunity for Rich to take a deep breath and do something else exciting in his career. I know he's always looking forward to that.

And our next question will come from the line of Jeff Meuler with Baird. Jeffrey P. Meuler - Robert W. Baird & Co. Incorporated, Research Division: I guess just first, do you guys have an organic EBITDA growth rate? And then second, you guys are talking a lot about kind of being on path with the commercial initiatives and you're talking about the 12-quarter ramp. I guess maybe if you could just explicitly address, is the 12-quarter subscription revenue growth acceleration pathway that you laid out at your Analyst Day, is that what you're still targeting? Or has that target changed, either in terms of magnitude or slope of the line?

Thanks, Jeff. I'll actually start on the commercial initiatives and the path, and I'll let Todd talk about EBITDA. Of course, we always deliver and report on organic revenue growth. Organic EBITDA is not something we calculate, but I'll let Todd address that one. You're exactly right, Jeff, is we've outlined the 12-quarter path, over the next 3 years, starting in 2014, where these releases incrementally start to bring more and more revenue on the common platforms that surface the breadth and depth of IHS in a single place for each customer group, and that's really what's important. So we're a "build one, sell many times" story across connected industries. So when we create a solution on a common platform for an industry, like we're doing with Connect in Energy as an example, we then surface everything across IHS that would be of interest to Energy customers. We then go through a process of releases, like you've seen. Then we start aligning sales, and then we have a go-to-market motion. And then we start to see momentum in up-sell and cross-sell in our renewals. So it is a measured and metered path over the next 12 quarters that eventually will encompass all of our revenue and a slow build as we build our subscriptions and see momentum. So Jeff, with that, I'll let Todd address the organic EBITDA question.

Jeff, as Scott said, we don't report an organic EBITDA. And in fact, when we're really good at integrating acquisitions, the EBITDA characteristic of acquired companies goes away very quickly. We have said that we have seen some EBITDA pressure from margins from some of the acquisitions in the past year. We're very focused on improving those margins, and we've also talked about an EBITDA expansion target for Polk that we'll be managing to in 2014.

And maybe in closing, Jeff, it's a good point, we've had an unusual level of acquisition activity over the last 12 months, some significant assets last summer and then a couple of significant ones in 2013 as we started the year and in the year and then, of course, Polk. And as we said in the last call, actually it's managing the core expense of IHS very well, excluding some onetime items this year around security and our infrastructure, positive expansion of our underlying margins, but then we have this effect from this unusual activity around acquisitions and kind of the mid-20s margins of those -- profile [ph] those assets. But I will say we're making great progress in integration and great progress in getting to our goals with each of them. Jeffrey P. Meuler - Robert W. Baird & Co. Incorporated, Research Division: A follow-up on the first point. Are you still targeting 400 to 500 basis points of organic subscription revenue growth acceleration over the next 12 quarters? And understand the build, but also like on a 7%-ish type of baseline, are those still the right numbers to use?

I think we said 5% to 7% organic growth for this year. And of course, we're tracking towards the lower end of that, as we've talked about and as embedded in our guidance in August. And I think you have it exactly right, Jeff. So we've talked about kind of 100 basis points of organic revenue growth from that baseline over the next 3 years while we also deliver about the same level of margin expansion in each year. So a positive story of incremental organic growth improvement and margin improvement over the next 12 quarters. Yes, you have it exactly right.

And our next question will come from the line of Jeff (sic) (Peter) Appert with Piper Jaffray.

So I'm going to violate IHS protocol here. I have 2 questions for you, Scott. So I just want to make sure I have the numbers right on one thing first. So if the boiler pressure code is about $7 million, that would have been incrementally about 2%, I think, if I'm doing this right, to organic growth, which would imply organic growth overall was probably relatively static from second quarter to third quarter. I'm wondering if that fits with your understanding of things.

About -- more like 150 bps-ish, Peter, so between 100 and 200. And so what that would tell you is it's actually a mild increase in our organic performance sequentially, and we've been tracking to roughly a 4% organic rate through the year. We see positive improvement in subs, as we said, in the fourth quarter, and we're managing the nonrecurring very, very well. Our goal is to lift that overall organic rate sequentially again, as we get then into 2012. So we're working hard on elevating that 4% all-in organic rate that we've seen in last 3 quarters roughly.

That's helpful. And then just a follow-on on that then. The -- can you just talk a little bit more about what you're seeing in terms of what's driving the improvement in the subscription revenue here in the fourth quarter? Any granularity or color in terms of where the improvement is coming from and which might help us understand then the sustainability of it?

Yes. Thanks, Peter. Well, I think, as you look across our portfolio actually, even those areas that have been challenged, we've been seeing slow sequential improvement everywhere. I think corporations are still cautious, but we're starting to see increased deal flow, some great strengths. In fact, the strongest sales pipelines we've seen in consulting in a couple of years that are closed for Q3 and build momentum into Q4. As we look across the portfolio, we see stable and continued good performance in energy. We're seeing a lot of strength in Chemicals and a build there, momentum for our teams, as we created IHS Chemicals a year ago. Again, we see positive improvement in automotive. So those are all the pluses. Our EHS&S platform is doing very well, and even the areas that have been a relative drag, we're seeing some sequential improvement in subscriptions in electronics and media. We saw some sequential improvement in maritime, Aerospace & Defense. So I think, Peter, we're seeing the core of the business with positive, expanding and solid pipelines. We're seeing stabilization in some of the nonrecurring areas, and of course, now we'll begin to build momentum with these new platforms we have as we align sales around them on December 1. Todd, anything you'd add to that?

Yes. I think the other thing I would add, Scott, is relative to Q4, we did have some couple of large past dues that slipped out of Q3 into Q4, and we do have some very targeted new business opportunities in Q4 that give us a level of confidence with -- relative to the numbers that we talked about for Q4.

I think it's a good point also, as we said, we kind of had a -- we rounded up to 8% in Q1 on subs. It's roughly a 7%. We were roughly at 6% in Q2 on the sub space. Absent these 2 APAC and EMEA deals, we would have rounded, as I said, up to 6%, so roughly it's 6% now. The good news though is we see a real stabilization in that rate and real solid pipelines as we look into Q4.

And our next question will come from the line of Jeff Rosseti (sic) [Joseph Foresi] with Janney.

It's actually Joe Foresi. I just wanted you to -- if you could touch on 2 points. As we head into 2014, how should we think about the progress of that organic growth rate? I'm not asking for color, but you've clearly said that you had some targets to accelerate it. So maybe you could talk about the progress of that. And then, if you could also talk about -- the same question for the workflow improvements as you head into next year.

Yes, thanks. So maybe just to reiterate a little bit, we actually -- despite posting -- rounding down to 5% on the subs organic, absent a couple of deals, we are at kind of the stable 6% that we've seen and what we planned for the full year. Behind that, our pipelines are strengthening and are pretty solid as we head into Q4, so that's a good place to be as we start 2014 and really consistent with the guidance we set in August. So we feel really good about that guidance in our outlook. As you saw, we were doing what we said we would do in April. You're seeing these releases around platforms that will allow us to have a better engine for up-sell and cross-sell, and we'll start to align sales around that and our go-to-market motion as we end the year. All of those are well designed to do, Joe, exactly what you said and what we laid out at Investor Day, which is provide the opportunity to begin expanding organic growth from current levels by about 100 basis points or 1 point a year over the next 3 years. So we are on track, I think that was the important message today, with getting those platforms into market, and then we'll align sales and start to see momentum in early 2014. So those are the things that will elevate that growth and what we're targeting.

If I...

Go ahead, Joe.

Just one quick, on the pipeline strengthening, is that a general pickup in the demand environment? Or is that further penetration of existing client base? I'm just trying to get some extra feel for what we should be measuring or looking at when we look at the organic growth rate.

Great question. Thanks, Joe. And it's actually both of those. So we're seeing some good new subscription opportunities really across each of the 3 regions, and we're seeing good uplift in existing accounts, i.e., as we bring great subscription content together. And of course, we've added some strong assets with the acquisitions over the last year, many of them regionally constrained and we bring them to a global market. So all of those are helpful for us. And -- but it's both of those, as you outlined, that we're seeing in the pipelines.

Our next question will come from the line of Paul Condra with BMO.

I wonder if you could just drill down into the EMEA segment a little bit, maybe talk about where within that region are you seeing the strength and a little bit about new business trends.

Great. Thanks very much, Paul. First, you see a continued positive subscription organic number in EMEA. That's actually been pretty stable all year, in between kind of the 4% to 6% level, as you look at each quarter. And of course, given the environment in EMEA, it speaks a lot to the value of what we do in an uncertain environment and why customers come to us. We also -- clearly, the code release was helpful in Q3, but we see some improvement in the non-subscription part in EMEA as well and have been working very diligently on that. We -- kind of the same market segment and color that I gave overall, some strength in Energy, some strength in Chemicals. All of those things are kind of underpinning our EMEA performance. We are also investing in EMEA in the areas where we see opportunity like in Russia and the Middle East. So those are kind of the basics of it, Paul.

Could you just remind us of kind of geographic split there within EMEA?

Yes. We've got roughly 50% as we think about U.S.; Americas, about 60%. We've got APAC coming up on 20% of overall revenues. So EMEA is about 30-ish plus. That's kind of the breakdown overall of total IHS revenues.

That's great. I was just wondering if you could go any deeper like Europe versus Middle East versus Africa.

We haven't broken it out at that level. What I would tell you is we've been building our presence in Russia. We are probably 1/10 of what we should be there given the size of that market. I would say we've also almost tripled the amount of people we have in the Middle East over the last 2 to 3 years. We are investing in an expanded office as we start Q1 of 2014, and we are probably 1/10 of what we should be in the Middle East. So hence, the focus on those 2 areas.

Ladies and gentlemen, this concludes the question-and-answer portion of today's call. I would now like to turn the conference back to Andy Schulz for closing remarks.

Thank you, Lacey. We thank each of you very much for your interest in IHS. This call can be accessed via replay at (888) 286-8010 or international dial-in (617) 801-6888, pass code 90352263 beginning in about 2 hours running through September 26. 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 your presentation. You may all disconnect. Good day, everyone.