Good day, ladies and gentlemen, and welcome to the First Quarter 2018 IHS Markit Earnings Conference Call. [Operator Instructions] As a reminder, this call is being recorded. I would now like to introduce your host for today's conference, Mr. Eric Boyer, Head of Investor Relations. Please go ahead, sir.

Good morning and thank you for joining us for the IHS Markit Q1 2018 Earnings Conference Call. Earlier this morning, we issued our Q1 earnings press and posted supplemental materials to the IHS Markit Investor Relations website. Our discussion on the quarter are based on non-GAAP measures or adjusted numbers, which exclude stock-based compensation, amortization of acquired intangibles and other items. IHS Markit believes non-GAAP results are useful in order to enhance understanding of our ongoing operating performance, but they are supplement to and should not be considered in isolation from or as a substitute for GAAP financial information. As a reminder, this conference call is being recorded and webcast and is the 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. 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 materially from expectations can be found in IHS Markit's filings with the SEC and on the IHS Markit website. After our prepared remarks, Lance Uggla, Chairman and CEO; and Todd Hyatt, EVP and Chief Financial Officer, will be available to take your questions. With that, it is my pleasure to turn the call over to Lance. Lance?

Thanks, Eric. Thank you for joining us for the IHS Markit Q1 earnings call. We are pleased with our Q1 results as we outperformed our expectations for the quarter, and we continue to invest in our people, our products, technology and customers for long-term profitable growth. Key financial highlights of the quarter: revenue of $932 million, up 10% year-over-year and 6% on an organic basis and at the upper end of our longer-term range. We experienced broad-based growth across the firm. Adjusted EBITDA of $359 million and margin of 38.6%. Normalized margin expansion was 220 basis points, excluding the impact of FX and automotiveMastermind. And adjusted EPS of $0.53, up 18% over the prior year. Let me now provide some segment highlights. Transportation continues to produce very strong results with organic revenue growth of 10% in the quarter. Growth was driven broadly with continued strength across our auto business and improving performance within our aerospace & defense and maritime & trade businesses. Our recent acquisition of automotiveMastermind is performing well and will be a strong growth driver for us in the years ahead. Financial Services reported 6% organic growth with strength across our information and solutions businesses. In particular, a strong quarter for pricing, indices, valuation services, managed loan services, and enterprise data management businesses. CMS organic revenue growth was 5%, as we are benefiting from improving end markets and also operational changes since merging. And finally, in Resources, we were pleased with 3% organic growth as our upstream energy business continues to improve and our mid and downstream businesses remain strong. We are confident in our low single-digit organic revenue growth outlook for 2018 and mid-single-digit organic growth rate for our annual contract value. This view is in part supported by an increasing CapEx spend environment for our customers as we forecast the price of oil to average in the 60s in 2018. In the beginning of March, we held our annual CERAWeek conference, which brought together over 4,000 global industry leaders and policymakers from over 60 countries and the entire energy value chain. The CERAWeek team managed another great event with record attendance and revenues. We had growing segment participation from across our firm, including Financial Services, which exemplifies the powerful value proposition of the combined IHS Markit and gives us confidence in achieving our revenue synergy target for the year. From my conversations with customers and industry leaders, it was great to sense increasing confidence and optimism in the underlying energy market dynamics. And with that, I'll turn the call over to Todd.

Thank you, Lance. Relative to Q1 financial results, revenue was $932 million, an increase of 10%, and organic revenue growth of 6%. Adjusted EBITDA was $359 million, an increase of 12%, with margin of 38.6%, up 70 basis points. And adjusted EPS was $0.53, an increase of $0.08 or 18%. Relative to revenue, we were pleased with Q1 revenue and the continuation of positive revenue trends from the back half of last year. Looking at segment performance. Transportation revenue growth was 20%, including 10% organic, 7% acquisitive, and 2% FX. Organic revenue growth was comprised of 11% recurring and 10% nonrecurring. We continue to see very strong growth in our automotive businesses and remain confident in our ability to drive high single-digit organic growth in our Transportation segment. Resources revenue growth was 4%, including 3% organic and 1% FX. Organic revenue growth was comprised of 3% recurring and 8% nonrecurring. Recurring organic growth was driven by strong growth in chemicals, PGCR and our downstream pricing businesses. Upstream revenue was flat, which was significantly improved versus prior year. Our Q1 ACV across the entire Resources segment, including OPIS, was $709 million, which was flat to comparable beginning-of-year ACV. Nonrecurring organic growth was driven primarily by strong energy software sales. CMS revenue growth was 9%, including 5% organic, 1% acquisitive and 2% FX. Organic revenue growth was comprised of 3% recurring and 21% nonrecurring. All of our CMS business lines, product design, TMT and ECR, posted improved performance in Q1. We remain confident that CMS will deliver to its low single-digit revenue growth target in 2018. Financial Services revenue growth was 8%, including 6% organic and 3% FX. Information organic growth was 9%. Our indices business continued to deliver double-digit organic revenue growth and our valuation services and bond pricing businesses also…

Thanks, Todd. I'm pleased with our start to 2018 and feel confident in our ability to achieve our financial guidance for the year due to our execution and stable to improving end markets. We'll continue to take advantage of the merger synergies and our combined scale to make incremental investments that will help us better serve our customers and to aid in consistently delivering our longer-term annual financial commitments of 4% to 6% organic revenue growth, at least 100 basis points of adjusted EBITDA margin expansion as we move to our mid-40s target and a double-digit earnings growth. Operator, we're ready to open up the lines for Q&A.

Thank you. [Operator Instructions] Our first question is from Peter Appert of Piper Jaffray. Your line is open.

Thank you, good morning. Lance, given the very strong start to the year and the positive momentum in organic growth you're seeing across the portfolio, it feels like the 4% to 5% organic growth rate for the year might be conservative. Can you give us your thoughts on that?

Sure, no, that's a fair question and one that we expected. But I think the – from our view, Peter, is if we go back to the merger, we did talk 0% to 2%. We hit 2%, as we said. We then talked 2% to 4%. We hit 4%. We peaked into 6% on the final quarter last year, and we've had a good, strong quarter this quarter. But I think our view is, is that it is just a quarter. We've got a full year ahead of us. If we have another good quarter like that, we'll reassess in the summer. But at the present time, we held our guidance where it was. Thank you.

Thank you.

Next question.

Our next question is from Gary Bisbee of RBC. Your line is open.

Hi, guys, good morning. I guess on the Transportation business, obviously, you continue to do very well on the top line. But can you give us any more color what's driving such strong margin expansion before AMM? Obviously, at this type of revenue, this good operating leverage, but anything else going on? And how sustainable is that level of profitability improvement? Thank you.

Well, I think with automotive, in particular, we've always balanced continued investment in the business and delivery of margin. And we really have built a story over the last 3 to 4 years, balancing those two items. So, it's not unusual to see margin push up a bit higher in one quarter versus another, depending on investment levels. But I think longer term, we've talked about moving all of these scaled information businesses into the high 40s range. And so, it was a strong quarter in auto, and the underlying information elements of that business provides substantial operating leverage. I mean, there wasn't – really, nothing more complicated than that, Gary.

Thanks, Todd. Next question.

Our next question is from Bill Warmington of Wells Fargo. Your line is open.

Good morning everyone. So, a question for you on artificial intelligence. So, S&P Global recently spent $0.5 billion to acquire AI company, Kensho, the thought being that they were going to use it to accelerate cost efficiencies and new product development. So, I wanted to ask you to talk a little bit about how you guys are using AI and machine learning within IHS Markit? And how you're thinking about the build-versus-buy trade-offs for those capabilities? And what I'm getting at is, are you going to need to make a similar type acquisition at some point?

Okay. Thanks, Bill. It's Lance. So, I guess the first thing is when I hear the word artificial intelligence, it's definitely probably one of the hyped buzzwords of the day and one that's impacting a lot of conversations. But if I look back in time, the types of things that we've done in terms of being an information company with a lot of operational activities, if you look back in time, a lot of cost effectiveness came from putting some of the operational jobs in the best-cost locations. But then ultimately, what we found over the last 10 years is that we could use machine learning, which you mentioned, which I'd put as the kind of lower-hanging fruit of artificial intelligence for an information company, to start to take repetitive operational processes and use computerized or computer augmentation or assistance to actually do a lot of those functions. We've been doing a lot of that for the past 10 years and have significant efficiencies around those types of operational activities. The next-level AI comes when we start to move up the food chain from there, where we actually want the machine learning to actually improve over time with built-in processes of intelligence. And that's again, as an information company, something that we spend a fair bit of time internally. And through the merger, we did put in a new role of Chief Data Science, which is another great buzzword today, but somebody that's using math and science, quantitatively led, a high use of technology, can manage operational processes and improve them with AI. And Yaacov Mutnikas, who reports to myself, is our Chief Data Scientist. And as we've said on previous calls, we have about well north of 20 proof-of-concepts, of which 5 or 6 have now moved into pilot. These are all AI-driven. Now, go a bit further up the food chain and we get into natural language processing. Here, we're using computer augmentation to help us leverage available public-based, web-based Internet content to – in a multi-language setting to take events from the World Wide Web, classify them and then insert them into our data sets. And those data sets are both in Economics & Country Risk and in our aerospace & defense, Jane's business, where we're looking to achieve operational synergies and also improved amount of content that can be explored to insert into our events catalogs. So, as a firm, we're doing a lot ourselves. We'll continue to do a lot ourselves. We haven't considered or looked at any acquisitions in that space, but Yaacov's team is now built up to be a significant team within the firm. It's part of the area we're investing in, and we think it's a lot of – the hype around AI is business as usual for IHS Markit. Next question.

Our next question is from Kevin McVeigh of Deutsche Bank. Your line is open.

Hi Lance. How are you?

Good.

So, great job leveraging the market synergies. Can you just give us a sense of kind of – is it possible to maybe calibrate the upside from the synergies and how you've enabled that from a reinvestment perspective into the business?

Yes, so on the cost – are you talking cost or revenues?

Cost.

Yes, okay. So, on the cost side, we – when we merged, we said that we'd have a minimum $125 million. I think we also said at the end of last year that we – the $125 million was in hand, and then we also said that anything above $125 million, we'd invest back in the business. And we talked about four key categories that we felt incremental investment would lead to a higher propensity to achieve the top end of our range. And we really feel that some of those incremental investments that we've been able to put to work, some of the things just we're speaking to on Bill's question around AI and data science and data analytics, those are areas where we can leverage the overall content sets of our firm to improve our research, our insights, our valuations, et cetera. So, the $125 million was a good number, and we were able to put that to – get that in hand and any additional merger synergies put back into our business. On the revenue side, we targeted $100 million run rate at the next year's exit, 2019, and I think we had, had $10 million, $35 million, $100 million, and in fact we feel, if anything, the momentum on revenue synergies has been accelerating as we really look at – we were quite excited around CERAWeek, where we really could see the intersection of energy with financial market participants that want to finance the energy companies, with the automotive companies intersecting around mobility and the shifts in the supply of electric vehicles and autonomous vehicles, how that's going to impact energy prices, as well as demands on the power grid. That was a very interesting intersection. And then finally, the biggest intersection in the middle of all of this is technology, and of course, the Internet of Things. The leveraging of the cloud for information and distribution, the use of cheap storage and the fast analytics and much bigger chips is impacting all our business. So, we really felt IHS Markit come together around CERAWeek and it really felt like a firm-wide event, not a divisional event. Maybe next question.

Our next question is from Manav Patnaik of Barclays. Your line is open.

I guess the one thing that came up to my mind when you talked about the natural language processing and web scraping, it reminded me of, I guess, the GDPR regulations that are coming through. I was just hoping you could address maybe how prepared you guys are and thoughts around that.

Yes, that's an easy answer, Manav. We have to be prepared and we have to do an excellent job, and our teams have it in hand, and we don't foresee any challenges there. Next question.

Our next question is from Andrew Steinerman of JPMorgan. Your line is open.

Lance, we also heard those themes at CERAWeek, and I just wanted to make sure I understood. When the energy companies are talking about investing in digital technology and analytics, does that directly help the spend with IHS? Or is that a spend that they're more doing kind of internally on analytics using IHS data? And might some of the spend on technology be more with software providers Emerson or oil services company, Schlumberger?

Yes, no, that's both really. So, we – of course, our data sets provide the fuel into analytics, so that's a positive, but we also have a large geoscience and engineering business that is made up of several software assets. Those assets have been – the primary one there, Vantage, has been working closely with our data science team to build out much more rapid scenario analysis for asset valuations, giving us a competitive edge in terms of data and analytics. So, thank you. Next question.

Our next question is from Jeff Meuler of Baird. Your line is open.

Yeah, thank you. Maybe a different variation on Peter's question. So, I appreciate the consistently hitting numbers, Lance. But when you guys are calling out the tougher comps in the back half, it looks to me like that's largely, I guess, the Resources segment where the bookings are expected to continue to improve and that incrementally flows through positively to revenue over time. So, Todd or Lance, any other call-outs on where there might be headwinds or things that should weaken? Because I think Resources gets better and processing is already facing tough comps and down. So, other than maybe like CMS nonrecurring or just any other areas that you'd call out that we should be cognizant of where growth may decelerate?

I wouldn't say anything specific. You hit the primary one, I think, being processing. But when we look at the performance, we've seen progressively improved performance, really over the last five quarters. And so, it's certainly easier to grow at 6% when you're comparing to a 1% from the prior year. So, I think the key for us is to continue to sustain the growth level as we move into the back half of the year. And I think, aside from processing, aside from boiler code, I wouldn't call out discrete items, but it's just ensuring that we maintain that momentum as we move through the year and performing in a way that we're delivering to the expectations that we've made that are delivering a robust level of revenue and profit to the shareholders.

Thanks Todd. Next question.

Our next question is from Tim McHugh of William Blair. Your line is open.

Hi, thanks. Wondering if – on CMS, you talked about improved execution and better market there. But can you elaborate, I guess, in the nonrecurring strength there, is that sustainable? I guess just on kind of the underlying trends as we look forward there?

Well, first, as I said, we did see improved performance in all three sub business lines in CMS, so kudos to Ian, [indiscernible] and Chad for delivering that performance. Relative to nonrecurring, we did have I believe $2 million of boiler code revenue, and we did have some software that hit in Q1 that drove a significant nonrecurring growth number. And we certainly wouldn't expect that to repeat as we move through the year. And I think the sub number was 3% for CMS, which is more indicative of what we see when we talk about a low single growth rate for that segment.

I guess on the – adding to that on the operational side, I think Adam Kansler has been working with [indiscernible] and the team on ECR to build out a much bigger financial markets presence, and I think the team's done some great work there, and that gives them some tailwinds. Also, Ian Weightman on the TMC side, we've really taken technology and brought it up in the firm in terms of giving it a front row seat in terms of Ian leading it, reporting into Jonathan Gear. And the team there is really looking forward in extracting as much as it can out of its current products in a market that's favorable for technology. And then as Todd mentioned, Chad is doing a great job as well. So, a good shout out for all those three teams and they're working hard to be part of our growth. Next question.

Our next question is from Alex Kramm of UBS. Your line is open.

Hi, good morning everyone. Just wanted to dig into Resources again a little bit more. I mean, you put up 3% organically, which if I'm correct, is already at the high end of your guidance for the year. So, I guess if I think about the outlook for the rest of the year, what would it take for that number to actually continue to tick higher, in particular, on the outlook? And if it ticks higher, would we expect some of that upside potentially flowing to the bottom line? How are you thinking about it?

I think Todd said it right. He gave me an Aristotle quote and said, "A swallow does not a summer make," and I thought that was a good start for the call. And the fact is that it's one quarter. And we merged our companies, we've been very focused on delivering what we say we're going to do and we're really pleased that we have a 3% number. Energy is a diversified division, and I think far too much focus historically just on the upstream because it had such a weight of 65%. But the fact is, is we have the world-leading chemicals team. We've got OPIS leading in pricing and news in gas. We've got a great power and gas franchise and building renewables presence. And in upstream, we're still the world's thought leaders. We've got the deepest data sets, and we have a recovering CapEx. So, hey, we're back into some low single digits, let's see how we look at the end of the next quarter, and we'll go from there. But we think that low single digits is the right price for our guide – right level for our guidance, and we're just one quarter into the year. Thanks. Next question.

Our next question is from Jeff Silber of BMO. Your line is open.

Hi. It's Henry Chien for Jeff. Just wanted to dig into Financial Services. So, it seems like momentum has been pretty solid here. Just wondering how should we think about what could improve the organic growth rate here. Should we think about the end markets – or Financial Services markets either activity improving or profitability of the sector improving or maybe some of the synergies that you've talked in the past? Just curious how you're thinking about for the rest of the year what could tick-up improved momentum in this segment.

Yes, it's a – there are some tough comps in Financial Services in the second half, so I think that's the Number 1 thing that puts us in a place of being conservative and cautious and making sure that we don't get ahead of ourselves. So, I think you have to look at the comps forward and go, wow, last year was a big year. So that would be my Number 1 thing I'd have on my page. Outside of that, volatility is something that financial markets like. It creates activity. So, a few of the geopolitical and kind of political posturing, tariffs, a whole bunch of things that are driving some volatility in marketplaces, make markets interesting and, therefore, more active. So that might be a tick, but a tick that I would put very cautiously as we can see with the seesaw impacts that we've been seeing to financial markets. I would say that there's a strong trend that's been going for the last many years on passive investment, and our index franchise continues. Todd called it out again today. Indices and pricing, solid performers and we've put those on the plus side. And then finally, regulation. SFTR is a trade reporting regulation our teams developed a product for to meet regulations just announced. And they signed up 32 market participants and have the leading product. So, regulation still is a little bit of a tailwind as the implementation continues to take hold. So, I think we've got constructive good markets around us, a tough comp in the second half and some political uncertainty that could put pluses or minuses. So, at this point in time, we just hold firm to the guidance we've given you. Next question.

Our next question is from Hamzah Mazari of Macquarie Capital. Your line is open.

Good morning, thank you. I was hoping you could maybe give us a sense of how sales force productivity is tracking in your system and what metrics you look at there and whether there's any room for improvement as you look out over the next few years. Thank you.

Okay, I can see you guys aren't breaking us down on the financial side, so you're hitting us from AI, sales force productivity. Brand-new questions we haven't studied yet. So, sales force – hey, for any company, we all want to have the best sales force productivity possible. So, for us, we've broken our sales teams into account management and sales specialists. Sales specialists are commission-led so are very much self-motivated hunters, and they work within their product groups and they do an exceptional job to go out and close deals and renew deals and make sure that revenue is brought in. The addition of account managers across the firm, so we now have both financial market account managers that look for all the revenue synergies across the big financial players. We also, under Mark Rose, have – who is one of our senior energy experts, is leading account managers across corporates. And so, for us, we feel that if we cover our biggest corporate customers and financial market customers with account managers that are not led by the commission of the sales, but rather by deepening the relationship, and then organizing our sales specialists and product specialists into the account, we have a much more productive group. So, we've done that, that's been the last two years' work, and we're seeing the fruits of that and we're quite pleased with that. The second thing that gives us productivity is using technology. And so, at the base, if you want to be – go to the lowest-hanging fruit, of course, you have to have a good CRM. And when we merged, we had three. So, by fall of this year, we'll have a single CRM for all our sales teams globally. And that gives you the tools then to be more productive. More productive with the prescreening, the pipeline management, taking your sales team and products through the stages of closing, qualifying, and closing a deal and then, obviously, the renewing and managing the post sales. And for us, there's only one thing we want to do, is we want to be world class and we want to constantly improve productivity. And I think we've got all the knowledge and capability to do so, and we're working hard to make sure we set a high bar. Next question.

Our next question is from Joseph Foresi of Cantor Fitzgerald. Your line is open.

Joe, are you there?

Hello, can you hear me?

Yes, we can hear you now.

I'll see if I can throw a curveball. But anything to call out from a revenue or a margin trajectory through the rest of the year? And can we get an update on the processing business? Thanks.

I wouldn't call out anything specifically. I mean, Q4 is our biggest quarter; Q1 is our smallest quarter. I think when you look at the ratable delivery year-over-year – the one thing I would say, this Q1, obviously, quite a bit bigger than last year Q1, but you're comparing a 1% organic grower last year to 6% organic grower this year. So, I think that probably balances out the two years a bit more. But I would expect the same seasonal dynamic. We don't have the code this year in Q3. We had it last year. From a processing perspective, the loan processing, flattish, slightly up. Derivative processing, I talked about credit was a bit of a drag. And as Lance said, I think the volatility tends to create more activity, particularly in the derivative processing. And then I think the capital markets refinancing, we'll see how the loan processing business performs this year. Last year was a very strong year, so tough comps, and that's why when we look in balance across processing, we basically have built in an expectation in the low single-digit decline.

Thanks Todd. Next question.

Our next question is from Toni Kaplan of Morgan Stanley. Your line is open.

Hi, good morning. Just looking at the past year, you've been around high 40s to low 50s free cash flow conversion rate. So, Todd, I was just hoping you could remind us of what the dynamics will be that will drive that into the mid-60s for this year.

Yes, I think the big thing, Toni, is we had substantial billings that occurred in Q1, and obviously, we will be collecting much of that as we move into Q2, Q3. Historically, Q2, Q3 have been our strongest cash quarters and the dynamic really follows billing patterns for the business. Expect the interest number to track in line with the guide around interest expense. Expect free – expect cash tax to be at or slightly improved to last year and then CapEx, from a guide perspective, we said would be down a bit. So those are really the big drivers of the cash flow. I think the other thing is the acquisition-related costs. As we move into future quarters, we'll see that number come down substantively as we wrap up much of the integration activity moving into the back half of the year.

Thanks Todd. Next question.

Our next question is from Shlomo Rosenbaum. Your line is open.

Hi, thank you for taking my questions. I just wanted to ask a little bit more about the ACV in Resources, and I wasn't sure I heard you correctly. I thought I heard $709 million, and I think last quarter, we talked about it being $630 million without OPIS, expecting $730 million with OPIS. And it seems like it's just lower. I don't know if there's a difference in the calculation or something's not tracking the way that you guys expected. If you can just give us a little more clarity on that.

No, I mean ACV is tracking as we expected. I mean we did add OPIS into the numbers and are flat in the quarter. And I think a flat performance in the quarter for us is not hugely surprising. I mean, there's some variability inside of quarterly activity, so nothing – I don't think anything from our perspective that's concerning or surprising. We still believe that we'll deliver low to mid-single-digit sub base growth for the year and that's a metric we'll continue to report on for the year. The one thing that does move the numbers around a bit, Shlomo, is FX. So, as we reset the beginning of the year, we reset it for current exchange rates. So that could be an item, but we can walk through the reconciliation with you.

Thanks. Thanks, Shlomo. Next question.

Our next question is from George Tong of Goldman Sachs. Your line is open.

Hi, thanks, good morning. Todd, you indicated a commitment to deliver 100 bps of annual EBITDA margin expansion normalized for FX. Can you discuss how much of an FX impact you expect on margins for the full-year? And whether you're open to toggling your investment activity to hit 100 bps of margin expansion after FX, especially given your strong market cost synergies to date?

Yes, so FX, and we've talked about this in the past, we certainly have exposure at the revenue level. As the dollar strengthens, we have less revenue. As the dollar weakens, we have more revenue. We have very equal offsetting natural hedges in expenses. And so, you saw it in the prior years where a strengthening dollar, despite the fact that it impacted revenue, it really had very little impact on profit. Now what we see is a weakening dollar. In the quarter, we saw 2% FX benefit, so call it, $18 million of additional revenue flowing through from FX. But we also have an offsetting amount of expense flowing through from FX. That's really a nonoperational item. And from our perspective, it doesn't make any sense to try to close a nonoperational item and try to over deliver the margin relative to that. So, as we think of margin delivery, we look at that on a normalized FX basis. And relative to investment, as we've said in the past, we'll balance delivery to shareholders, believe that this guidance is robust delivery of profit and we'll balance that with continued investment in the business so that we ensure that we can sustain future growth.

Thanks Todd. Next question.

Our next question is from David Ridley-Lane of Bank of America. Your line is open.

Good morning. Just wanted to get a sense of the relative impact of higher volatility within the Financial Services segment. Is that a notable positive here in the first quarter? And then if I could sneak one in, would you have any interest in acquiring an electronic bond trading platform? According to press reports, there are several assets that are potentially up for sale. Is that an area of interest for you?

Okay, we're not going to have any comments on any acquisitions, but we haven't engaged in any of the rumored sales that you spoke about either. The first question, with respect to volatility, it's – I don't really think in the quarter it had any major impact to us. Where volatility sometimes can impact IHS Markit in an interesting way has to be around volume-based businesses because we have a recurring business model, so whether markets are busy or slow, most of our services are demanded regardless. But where there can be impacts for volatility would be really two places. So, one, in the derivatives market, higher-volatility marketplaces usually mean the trade size is smaller and more frequent. And given we're paid per trade, that generally, on a historical basis, has worked out to be a positive. So, in tough fixed income markets where fixed income revenues were down, we found our rates processing business was improving. The second piece is that when interest rates start to rise, you see a lot of corporates wanting to extend term and lock in rates and, therefore, our loan processing business can see additional activity. And those are two places where I'd say volatility can impact and can have a – can add to a quarter in Financial Services. Outside of that, I don't think, at least in my initial thoughts here, there's any major places where there could be an impact, and we didn't see that impact in the quarter. Next question.

Our next question is from Gary Bisbee of RBC. Your line is open.

Hi, just one quick follow-up, another one on margins. The Financial Services business, Lance, prior to the merger, you talked about flattish margins and there was some mix with lower-margin things, parts of the business growing more quickly than processing, which had the highest margins. And yet in the last 1.5 years, you've had consistent and very strong margin expansion in the Financial Services business. Is this just a product of the cost synergies that the company's delivered? Or there's some other drivers within the financial business that's allowed this strong leverage you've been delivering? Thank you.

I think – well, I think two things. I think premerger, we were investing in the solutions businesses, and therefore, we were managing – we felt our margins were good, and we invested incrementally. At the time of the merger, we looked at the whole – the merger, we looked at the cost synergies and then we set a 3 to 5-year vision for the firm, and we said mid-40s. That's the home for IHS Markit and we're going to look at how do we develop our strategy to achieve a mid-40s margin across all our businesses. And of course, it comes from operational gains, which come through improving revenue, but also on the cost side, and we have a very focused best-cost strategy. We have seven significant locations, Minsk, Gdansk, Bucharest, in Eastern Europe; we have Penang in Southeast Asia; and we have Bangalore, Noida and Gurgaon, totaling 4,000 or approximately a third of our teams. And of course, that's margin enhancing and has been a great way for us to manage attrition and build our forward strategy towards the mid-40s. We also said at the time of merger that we were going to use technology to gain a competitive edge, both on product development, but if you remember, we also said that it'll be strongly supportive to us creating efficiencies and efficiencies gains. Now technology can be used to be able to operate remotely well, but it also can be used through AI and machine learning to actually become more effective on some of our operational jobs. And I think the teams across the board, every division, has a remote strategy. Every division has a long-term sight to margin. And as a firm, as a whole, we truly believe that we're marching towards mid-40s, and we're going to give you at least 100 basis points each year because we think over and above that, as stewards of the company, we should be investing in our future. And that's really important to us. I don't know, Todd, do you want to add to that?

No, we're good.

No. So good. Okay, so that's it. Thanks. Next question.

There are no further questions.

Okay, we thank you for your interest in IHS Markit. This call can be accessed via replay at 855-859-2056 or international dial-in 404-537-3406, conference ID 1992189, beginning in about 2 hours and running through April 3, 2018. In addition, the webcast will be archived for one-year on our website at www.ihsmarkit.com. Thank you, and we appreciate your interest and time.

Thank you.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program, and you may all disconnect. Everyone, have a great day.