Good day, ladies and gentlemen, and welcome to the Q4 2018 IHS Markit Earnings Conference Call. 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 maybe recorded. I'd now like to introduce your host for today's conference Mr. Eric Boyer, Head of Investor Relations. Sir, you may begin.

Thank you. Good morning and thank you for joining us for the IHS Markit Q4 2018 earnings conference call. Earlier this morning, we issued our Q3 earnings press release 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 times. IHS Markit believes its non-GAAP results are useful in order to enhance the understanding of our ongoing operating performance. But they are a 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 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. This conference call, especially the discussion of our outlook may contain statements about expected future events that are forward-looking and subject to risk and uncertainties. Factors that could cause actual results to differ materially from expectations can be found on IHS Markit's filings with 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.

Thank you, Eric. Happy New Year and thank you for joining us for the IHS Markit Q4 earnings call. Today we'll review our Q4 and 2018 financial performance, reaffirm our 2019 outlook, and discuss the progress we have made on our strategic initiatives. 2018 was a very successful year for IHS Markit on all fronts. Financially, we delivered strong results with organic revenue growth of 6%, adjusted EBITDA margin expansion of a 100 basis points excluding Ipreo and FX and year-over-year adjusted EPS growth of 11%. We also completed the acquisition of Ipreo, and made great progress on our longer term strategic initiatives. We finished the year with a solid Q4 and we are reaffirming our 2019 financial guidance. We remain comfortable with our outlook even with increased uncertainty over global growth from when we last spoke in November. We believe that our role as a trusted partner, our mission-critical solutions, recurring business model, and diversification will help us perform well through all business cycles. Operationally, we're performing with the right sense of urgency and we feel good about the momentum that we have within each of our end markets. A few points that bode well for 2019. Energy is still consolidating growth off a low base. Automotive is well diversified and investments are bearing fruit. CMS is reorganized and positioned to grow at a steadier rate. And Financial Services will continue to have solid recurring revenue growth, while our non-recurring revenue could see both two way variability. We also remain focused on executing against various operating levers to help us deliver upon our adjusted EBITDA margin expansion and adjusted EPS growth targets independent of the business environment. Over the past two years, we've also termed out our capital structure and significantly improved our free cash flow conversion which positions…

Thank you, Lance. Before we get started, as a reminder, we closed Ipreo on August 2nd. And as a result, our Q4 results include a full quarter of Ipreo and our year-to-date results include four months of Ipreo. On a year-to-date basis Ipreo contributed in line with our expectations with a $102 million of revenue and $27 million of adjusted EBITDA. Now for the Q4 results. Revenue was $1.068 billion, an increase of 13%, an organic growth of 5%. GAAP net income was $81 million and GAAP EPS was $0.20. Adjusted EBITDA was $417 million, an increase of 14% with margin of 39.1%. And adjusted EPS was $0.57, an increase of $0.05 or 10%. We were pleased with the finish to the year and the strong revenue and profit performance we delivered throughout 2018. Relative to revenue, our Q4 organic revenue growth of 5% included stable recurring organic growth of 6% and non-recurring organic growth of 1%. Looking at segment performance. Transportation revenue growth was 11%, including 10% organic, 2% acquisitive and negative 1% FX. Organic revenue growth was comprised of 10% recurring and 9% non-recurring. Resources revenue increased 3% including 4% organic and negative 1% FX. The organic revenue increase was comprised of 4% recurring and 1% non-recurring. Our Q4 ACV increased $5 million and our full year ACV increased $22 million. We ended the year with ACV of $732 million which was up 3% versus prior year. We continue to transit an ACV level in line with our 2019 revenue expectation. CMS revenue declined 1% including flat organic revenue growth and negative 1% FX. Organic revenue was negatively impacted by 1 percentage point from prior year Boiler Code. CMS recurring organic growth was 2% and non-recurring declined 11% or $2 million primarily due to prior year Boiler Code.…

Okay. Thanks, Todd. We had a strong 2018 and have good operational momentum entering 2019. I want to thank our colleagues around the world for their hard work in delivering for our customers and our shareholders. Operator, we’re ready to open the line for Q&A.

Thank you. [Operator Instructions]. Our first question comes from Gary Bisbee from Bank of America Merrill Lynch. Your line is open.

Hey, guys. Good morning. Lance, ever since the merger of IHS Markit, you have talked about increasing reinvestment in product development, in people and analytics and all these things. I guess can you a couple of years in just give us a sense of how impactful that is today into either incrementally driving revenue or how much investment there is that might be impacting margins? Just trying to get a sense of how that’s going and how important it is today versus a couple of years in the future? Thank you.

Okay, good. Well on the revenue side, I think the impact is increasing innovation through analytics and data science in terms of improving existing products or incrementally improving existing offers with a positive revenue impact and some of the revenue synergies that are being driven are coming from the application of Advanced Analytics now. We also have invested in technology and platforms and those are our merger expenses but have made us more efficient and therefore bodes well for our continued margin expansion as we look forward. Learning and development was an area that showed up early on in terms of training and developing our management team and with 15,000 people globally and those located in more than 100 offices around the world. Leadership plays a big part in both getting your efficiencies as well as getting your products out the door. So I feel really positive about the vitality of the firm, the sense of urgency, the quality of people, the investments in platforms and seeing the brand of IHS Markit to continue to develop with the application of data science and analytics, and that bodes well. And I hope that at least 10% to 15% of our overall organic growth as we look forward can be attributed to the investments that we have been making. Next question?

Thank you. Our next question comes from Peter Appert from Piper Jaffray. Your line is open.

Thank you, good morning. So Todd or Lance, the margin performance has obviously been pretty impressive here in last few years. Can you talk about the pathway to getting to the mid 40% margin? I am asking this in the context of this -- you’re already there with regard to the financial side. Does it have to come disproportionately from CMS, how broad-based can the margin improvement be?

So maybe I can just start. So, our view on our mid-40s is supported by our location strategy, one. So we see a clear path through organizational design to use location as a continued expansion of margin, and that bodes very well for us. We have expensive locations, we have mid-cost locations, and we have better cost locations globally, but the quality of our people in each center is very similar. And so therefore, through organizational design and looking at forward attrition and investment, we feel very confident that we have continued margin expansion until we get into the mid-40s, and it's across all our businesses. It's not focusing on the businesses that have lower margins and trying to get more, it's just a constant across the whole firm and leveraging our operational footprint. Some of our higher cost businesses are actually where we're producing non-recurring revenue, where we have consulting or professional services, and those tend to be three handles in terms of margins and we're not going to probably change much of that. So that's a small piece of our revenue. Core businesses have room for efficiencies and technology and location, and we're attacking both of those and we'll continue to do so.

Yes, as Lance said, we have a number of operational levers that we will execute against in the coming years to drive forward margin progression. When we look at it at the segment level, certainly with financials, Resources, and transport, those are segments that we see can move well up into the high-40s. We’ve invested quite a lot in transport. We've driven a lot of growth there, but certainly opportunity for significant forward margin progression there. Resources, with the downturn, we were able to manage through stable margins. But I've always said I think Resources, probably the most heavy classic information business in the portfolio with a lot of operating leverage. Financials has always done a good job on margin, but we do see a forward progression there. You asked about CMS, yes, I think CMS, there are just structural realities within CMS with the royalty-bearing part of the business, certainly an area that we have invested in our underlying product platform within product design, and we think we can move margin up there, but it will perform at a much lower margin than the other segments.

Thanks, Peter. Next question?

Thank you. Our next question comes from Manav Patnaik from Barclays. Your line is open.

Hi, this is Ryan calling in for Manav. Just a question. I mean, obviously, the highly subscription business but during periods of volatility like we saw with oil prices, again, kind of moving at the end of the year in the financial piece and just the equity markets, especially now with Ipreo in the mix, can you maybe walk us through how to think about your client conversations during these periods of volatility, and how that kind of flows into the subscription offering?

Right. Well, decisions that are made within the energy markets and where CapEx is being deployed, those are decisions that are being made based on current state with a forward look at energy prices. And when the CapEx is committed, our services come into play on a subscription basis, and they’re long-term in line with the CapEx. And I think the really good thing for us that gives us significant confidence around our Resources plan of 4% to 6% is the fact that we're still consolidating off of a low base. And therefore, we can -- we've got good visibility and insight into the building book of business. Our mid to downstream businesses have performed right through the past several years with high-single digits overall when you add the OPIS franchise into that mix, chemicals, power, and gas. We really have a strong team that’s done well on a recurring basis right through the last period and we don’t see that changing. So I’d say with respect to your question, in Resources, we feel very good about our plan against the current environment, and our expectations of supply and demand forward as it impacts and creates changes to CapEx. We also have seen a bit of -- a large proportion of CapEx we saw focused into North America and we’ve seen that CapEx distribution spread more broadly globally, and that also bodes well for our subscription-based businesses. When you look into automotive, I think the comment there is our confidence in high single-digits come from the diversification of our businesses. We’re highly diversified. We’ve made investments. We’ve made acquisitions. We cover a higher percentage of the used car market than the new but the new car market even with a slight decline in SAARs needs advertising investments around incentives to…

Thank you. Our next question comes from Jeff Meuler from Baird. Your line is open.

Thank you. So when you gave the guidance in November for 2019 you kind of widened out the Ipreo range and I think that gave you some protection to the downside. But just the issuance in December and certain financial instruments seemed to really freeze up. So I guess what conditions could put the Ipreo guidance at risk and given the December freeze, is that an order of magnitude that’s enough that we need to consider it in our Q1 modeling? And then Todd maybe if you could just go into a bit more detail. You had a call out in your prepared remarks about I think Ipreo and the ramp of new products that for second half should be stronger than the first. But just want to make sure that we get expectations aligned appropriately to incorporate your comment. Thanks.

Okay, so I'll do the first one. When you think about Ipreo in terms of capital market issuance divided into three or -- three or four, really four, divided into municipals, fixed income, equities, private capital markets and think about those areas and how they can impact in different market environments. So to me high to lows on munis it's a market that has to finance, deals get done. They may be lumpy in different quarters with views et cetera. But highly -- the expectations of that within a range or highly a moderate level and the team has done a good job of reviewing that. In Fixed Income, very much subscription basis. So the incremental up or down there is small. And then in equities, there is a component that flows with the market. And you are right that, that is the component of the Ipreo side that -- which I can't forecast what the equity new issuance volumes will look like but I can look at the least number of deals done in the last 15 years including ‘08 and I can get a good flavor of what does that look like. And therefore I can give guidance and give it with confidence when I look at our overall business and I feel very confident with our 5% to 6% a 100 basis point margin and the double-digit earnings. That's what I feel confident with, the mix of that what's great about IHS Markit is we're well diversified across all of our businesses and that bodes well for our delivery. Todd, do you want to get the second part?

Yes, I mean relative to Ipreo, the products that are being deployed are private companies’ product to allow private companies to basically model their underlying financial positions and really it's tied into the PCM business, the private capital markets business. We're also -- we've launched Investor Access, we see take rates moving up on that through the year and then we have some on-boarding of new companies through the year that will drive forward growth. I think in the rest of the portfolio probably the most notable items that we've talked about are Conquest and AMM. We see that progressing through the year. CARFAX, we have our CARFAX for Life product targeted in the service market being launched. And then we have some energy upstream analytic offering. So, I think we have a good pipeline of products and products that we have a reasonable level of confidence that that will have some level of success in the marketplace.

Good. Thanks, Todd. And we do -- when we did refer to early wins in our Ipreo merger, early revenue wins, multiple wins coming in that private capital market today, we see that as a continued strong growth area as that marketplace looks to develop independent dataset benchmarks mid and back-office tools. We love the space, it was part of the core component of the acquisition and we don't see that -- if anything, we see those players needing more of those services as we look forward regardless of the market environment as that will help them manage their businesses and give them an opportunity to be more efficient as well. So we're very pleased with that. Net-net as Todd and I've been saying what's most important to us is deliver what we say we're going to do and that combination across the divisions is something that we're very happy with. Next question?

Thank you. Our next question comes from Bill Warmington from Wells Fargo. Your line is open.

A question. You guys beat -- you built -- beat your expectations today as well. On CMS, any additional portfolio rationalization plan there that might help organic growth and/or margins going forward?

Yes, I think, actually, we've got three pieces to CMS, ECR, TMT and product design. We've given low to mid single-digits. Last year we gave low. This is -- at the time of merger you had TMT suffering within that RootMetrics space where it’s just a lack of diversification across the client base globally, and therefore any consolidation of clients or exit of clients is expensive. And then happens with lots of small businesses that are heavy and not that well diversified across their client base. You can have consolidations of two competitors and have the revenue across those two. So TMT suffered from that, we've been through that, TMT does a lot more than that, they’re benchmarking, they've expanded the benchmarking from mobile phone coverage into the Internet of things, cloud-based services, there are a variety of semiconductor-based benchmarking and really the team has done a good job to diversify and start to grow. And for TMT we see strong growth within CMS. So therefore that bodes well. Second thing, product design, product design faces the pressure of standard-setting bodies that pay royalties and less royalties is always better and that exists within that base and our team has done a great job to reorganize, extract margin. And I believe we’re in a good position there to go into 2019 and look for a continued positive growth moving up gradually is what we say. And then ECR, we’ve participated there with some growth in terms of our acquisition of Macroeconomic Advisers, hit its plan completely, bodes well looking forward into ‘19. Global trade wars, volatile economic environments, geopolitical risks, volatile interest rates, economists love that stuff. That’s good thing for ECR. And not that I think we’re going to see any double-digit growth there. Ralf Wiegert and his team, they’re doing a good job consolidating at the low single-digits. And we believe we’re doing a good job to manage that group. We really see the whole conversation of anything around acquisitions or divestitures to be very mute in 2019 from IHS Markit. We’ll look at things, small bolt-ons, extremely small, we’re very focused on the delevering and return of capital. And I don’t see any real big change within CMS in terms of that, that business. I don’t know, Todd, if you have anything?

No, that’s it.

Okay. Next question?

And our next question comes from Tim McHugh from William Blair. Your line is open.

I just wondered, if you could elaborate a little bit on the information services, part of Financial Services segment? And you didn’t mention in-depth I think as part of the performance there. So I guess how did that impact it? But just more broadly, there was a little slower growth. So what were the pros and cons I guess this quarter?

Well, information services, it’s -- we have strong offerings in pricing and reference data, we’ve strong offerings in valuations and independent valuations, that’s derivative, that’s loans, that’s fixed income securities. So it’s tough to manage type valuations, which become increasingly in demand in volatile markets, where there’s not a lot of liquidity in trading, and therefore, the independent mark is a very, very important part of process. And then our index business, it’s growing globally. It’s grown every single quarter for the last many years. And we can see the buildup of new offerings, regional offerings. That bodes well for continued growth. Now, do I think is it coming from financial markets? Top financial markets, interest rates rising, fixed income ETFs, volumes declining a bit, I think our mix of business there will be slightly different through 2019, but not slightly different that means a lack of positive growth. And within the 4% to 6% for information services growth, again I have to say it's now 10 years that we've been overall 4% to 9% and that -- I don't see that range being breached in 2019. And I really probably couldn't tell you whether 4%, 5% or 6% is the number but pretty confident with our base level and our opportunity to outperform the 4%.

Yes. The other thing I would add, Tim, I mean I would always be careful about reading a lot into a single quarter. Last year we were 10% in Q4 in information, it was a really strong quarter. Sequentially information is in line with the same revenue level as Q3. So performing like we would expect and I think feel good about the 4% to 6% range on a forward basis for information.

Good point, Todd. Next question?

Thank you. Our next question comes from Andrew Steinerman from JP Morgan. Your line is open.

Good morning, guys. Two questions. The first one, could you give us a mix of revenues by Ipreo by asset classes, the asset classes you listed before munis, equities and private capital? My second question is, could you bridge the plus 3% that you shared with us on Resources ACV today at the end of 2018 with the fiscal ‘19 organic revenue growth for Resources targeted 4% to 6%. The things I'm thinking about is does ACV has to pick up to get there or you are counting on non-subs growing faster than subs in ‘19?

I'll do the first one, and then Todd can do the second one. So, the first one answer is no. But what I would say given JP Morgan's breadth of businesses across our sectors I imagine the percentages would mirror that. Todd, if you want to do the second question?

Yes I mean we do see the sub-base moving up in 2019 and that's certainly embedded in our forward view. And yes, when we talk about a mid single-digit grower for Resources we would expect to see that in both the recurring and the non-recurring. We last called this out in the script. We have a -- we were pleased with the renewal performance in year end through January. It's I think a market that will continue to grind it out and continue to see the sub-base move up through the year but we certainly do see Andrew ability to take the 3% that we drove in 2018 and grow on that and move it up into the mid single-digit percent.

Thanks, Todd. Next question?

Thank you. Our next question comes from Andrew Jeffrey from SunTrust. Your line is open.

Hi, guys. Good morning. Thanks for taking the question. Happy New Year. I wonder -- you are lots of time talking about new solutions and obviously the organic revenue growth reflects some of the success you're having. Could you just expand a little bit on specific initiatives internally to drive maybe faster time to market and/or comment generally on sales cycles? Can we see newer products come to market more quickly, things like Conquest I guess notwithstanding and can that support faster growth over time?

Yes. So our view at the time of merger was investments in product were about vitality and innovation, and investments in technology were about improvement in the tech stack to improve products and development lifecycle, use of Advanced Analytics or you can put it under data science, if it feels like it gives more spring to it. But the fact is that two years ago, so we're two years in, we’ve put all our technology, data science and analytics now under Yaacov at the end of last year. So we’ve consolidated that into a single team. We have more than 20 proof-of-concepts, more than 10 pilots and more than five new product offerings come out of the innovation of analytics and data science with faster rapid use of technology in the cloud and the delivery to deliver some new products. Where have those been? They've been within asset valuation in the energy space. They've been with the tracking of security events, which was highlighted in the script today, where we're using natural language processing to more rapidly analyze our economic and country risk coupled with our aerospace and defense security events. So use of more technology, enhancing what our people can do and then offering incrementally more. That's a good use of new data science. We also have launched something called commodities at sea, which is taking our maritime and trade with our knowledge of energy production, satellite imagery of energy storage and produce a much better view of trade flows, which plays well into our aerospace and defense and description of trade flows at sea energy related as well as our ability to better predict supply and demand. And so we feel really good Andrew about our investments in incrementally adding to our existing products, which is both defensive…

And our next question comes from Hamzah Mazari from Macquarie. Your line is open.

My question is around just the transaction business or the non-recurring fees. Just any thoughts as to what extent do you think the transaction side is a lead indicator to the subscription side and maybe what you’ve seen across the verticals in past cycles around sort of transaction leading subscription or that’s not the right way to look at it? Thank you.

No. I think that’s -- so when you say transaction, if you’re referring to processing, we process a whole bunch of different assets. We process credit derivatives, interest rate derivatives, equity derivatives, FX and loans. So those are the things we process. So rates rising generally means a slowdown for a period of the rise, the volatility in the loan markets. So that will lower the output of our processing and we get paid per trade. So we don’t care about the size of the volume. We just care about the number of transactions and that’s quite a nice business model, because -- the next part of the financial market is the interest rate derivative market, where we’re the biggest player in the marketplace globally covering every single market. And what’s interesting in tough times, interest rate derivatives volatility means lots of small trades. And that bode well. So post ‘08 actually saw positive strong increases. So, I look at interest rates in a volatile market, Brexit, trade wars, rising interest rates, building walls, whatever we’re doing, the fact is that interest rate derivatives can have higher volumes. Lack of liquidity in credit markets bodes well for CDX as a hedge, which is our main index. We’ve partnered with ICE on non-exchange contract and we have a full JV with ICE and that bodes well in this environment. Equity derivative, smaller business, it’s probably insignificant in the analysis. And then FX has actually been a growth business for us, because we’re a new player coming in, we’re booking up pre and post trade flows for Tier 2 banks and that bodes well in terms of revenue growth and volatility clearly helps FX markets. So that’s why I said today, really when you judge that this year in financial services, take a close look at recurring revenue and see if we’re hitting our goals on recurring. On non-recurring, your guess is as good as mine. I think plus 2%, minus 2% could be an equal guess. And it's a $170 million out of $1.5 billion, $1.6 billion in Financial Services. And so, therefore it’s not going to really drive the 4% to 6% or 6% to 8% with Ipreo in Financial Services. I have to focus also going back to Andrew Steinerman’s question which was the right one, how's your capital market Ipreo business going to be impacted? Well there is a transactions component in the equity space and that's very subscriptions-oriented, that business. So it's not -- it doesn't have a high kind of plus, minus range but it has a plus, minus range. And if you model it off of the least deals done since 2008 year, we can accept that and we can see the overall picture fitting in within our guidance. So that's our view, if you're talking about transactions in the financial markets. Thank you. Next question?

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

Hi. Thanks. Good morning. You've reiterated your expectations of low to mid-teens Ipreo revenue growth for the full year. Understanding there's a range of possible outcomes. Can you discuss whether your non-recurring revenue expectations for Ipreo have been overall tempered in light of a moderation in capital market volumes? And if so, what offsetting factors you see in your subscription-based business?

Yes, well, it’s really -- the point is the low means less transactions. Keeping in the range and still feeling low to mid is continued growth in private capital market. So those are your two levers. The private capital market growth is the racecar. The transactions, end markets, that’s the kind of steamship and it can be slower or faster. And with the combination of those two, we're happy with low to mid and we're happy with how that feeds into our overall firm guidance because at the end of the day you invest in us for our capabilities of running our four divisions and the diversity across them. And so what I have real strength in today is the 5% to 6% guidance for the firm. And I have -- I always pick my worst case scenario across all the divisions and make sure that it can add up into the circa 5% number and that's how I look at it George and I feel confident in reaffirming that today. Next question?

And our next question comes from Alex Kramm from UBS. Your line is open.

Yes, hey. Good morning, everyone. Just wanted to circle back on Financial Services. Lance and Todd, both of you guys highlighted loans in your prepared remarks both in terms of I think more challenges which -- from you Lance which I think is broadly the view out there. And then I think Todd you said solutions was driven by loan. So I guess given some of these uncertainties I went back and I think market at one point said that in 2013 loans made up 20% of market, I assume that's grown faster than the average for market since then. So maybe you can give us an update, how big the loan business has become and then if there are more challenges maybe just outline where those challenges could hit? Because I mean I get it on the processing side but clearly on information and solutions, there's a lot of stuff you do for a lot of different players. Thanks.

I can start, you can bring in the financial piece. I'll give you the Markit, Alex. So first of all, Todd didn’t say solutions was driven by loans but there's a piece of our loan business that is services. And that's generally -- that's offered out of our WSO product. It had great -- can I say that it was strong growth last year. And it's kind of AUM driven, CLO issuance, there's a whole lot bunch of things. And so within your own banks, you can look at the CLO space, it's still fairly buoyant and our loan business is diversified across pricing, processing data, reference data, managed services, which is a big growth area, that's us managing the accounting and back-office and then of course our installed customers as well. So loans is a strong piece of our franchise and of course a much lower percentage of financial markets today than back in the Markit days where we were consolidating all through acquisition a lot of those pieces. So IT solutions growth which is the word that we talked about circa 10% growth, if you look back to the day, we always called solutions a double-digit grower, expecting 10% to 15% growth with opportunity for that to happen on a recurring basis. Through a period we flipped to single-digit growth and what I've been most impressed with is the growth back to double-digits and the amount of the financial markets both sell side and buy side that are looking at using service providers more readily to deal with tax, to deal with reg and compliance, KYC, KY3P, outsourcing data management, outsourcing portfolio management, outsourcing the management and corporate actions. And so all of a sudden solutions are right back in vogue. In ‘08 they were in vogue because…

The only thought I would add. Just three buckets Lance talked about, the loan pricing, think of that as the subscription business, generally very predictable and stable. The loan services to WSO business has actually been -- we’re really servicing mid-office, back-office loan activities, it tends to not be impacted by volumes. And then the loan settlement is really the processing piece. And there we have settlement of both primary and secondary. So, I think that’s certainly the area that would have the highest variability.

Good. Thank you. Next question?

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

I think I also want to ask about processing. So could you just talk about what the primary drivers of the decline was this quarter? Or was it the slowdown in loan issuance? And was that in line with your expectation and are you still confident that processing will be positive in ‘19? Thank you.

As Lance said, there’s some variability in processing that we’re not going to precisely predict. Processing revenue was $63 million in Q4, $64 million in Q3. And when we say it was down, it was down a few million dollars versus prior year. Lance talked about the dynamics in terms of market volatility that actually are a net positive in derivative process. And I think in loan processing, you really look at primary market activities that I think is certainly down over the last couple of months. Secondary activities, probably, generally up. But I think that’s really the dynamic in the processing business.

And really Toni, it was -- I think it’s 3 million was the shift from Q4 last year, Q4 this year. So you had a bit better volume quarter in Q4 given a 5% decline into this year. So, it really -- it’s just -- it’s really processing, it’s a really insignificant lever in terms of delivering our 4% to 6%. It’s a sticky consistent business and it’s top to bottom range. If it’s up 5% or down 5%, you’re talking a total of …

$12 million.

12?

Yes.

$12 million.

5%.

… across the group. It’s just -- so I really just don’t have a -- no, but I meant that across the division, it’s insignificant. And I broadly affirm, it’s even more insignificant. So, do I believe processing will be down 5% or up 5%? Don’t know. What I think, it could have been down 10%, up 10%? I’d say highly unlikely. So even when I put those numbers on it, it’s kind of -- it’s 1% of the division and it’s negligible in the firm. So that’s my view. But we’re the most sticky consistent global player with great customer base, great team and a good business, it's just doesn’t have a lot of growth expectations to it. But we always smile when it does grow at 5% to 10%, we go “That’s kind of wind in our sails that we didn't know.” And most of it goes to the bottom-line if not all of it. So that's how I look at next year. Next question?

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

Thanks so much. I know it's late, just one quick question. There's a lot of I guess uncertainty regarding the government shutdown. Can you just remind us, do you have any direct exposure to federal government revenues and in which segment it is? And from an indirect perspective, do you see that having any impact on your business? Thanks.

Yes, the biggest area would be product design where we provide service for the army, navy. Typically the contracting process is a continuing resolution process. So ultimately the funding does seem to come in. But there's a continuation of services and ability to recover the full revenue, assuming that ultimately we do get funded. And then it’s -- I don’t have off the top of my head, I don't know the percent, but I would say within product design probably less than 10% to 15%.

Okay. Thanks, Todd. Next question?

Our next question comes from Ashish Sabadra from Deutsche Bank. Your line is open.

Thanks. Solid results and pretty good margin expansion in the quarter. My question was just on the Transportation margins. You called out the recall and marketing spend for CARFAX and there are a number of products that you launched. Just wondering if you can talk about the margin profile in that business going forward?

Well, I talked about this earlier. I mean in transport we have invested at some level. We do have the ability to drive forward margin growth. It is an area that will continue to balance the level of investment with margin delivery. In the quarter we did have some outsized investment activities that I talked about earlier and a little bit heavier on the recall which tends to be lower margin. But there certainly wasn't anything in the margin within transport that caused this concern in the quarter.

Next question?

And our next question comes from Joseph Foresi from Cantor Fitzgerald. Your line is open.

Hi. I know it's late, so I guess I'll ask the token capital allocation question. I know you suspended the share buyback. What does the debt paydown schedule look like this year? What's available on the acquisition side? And any thoughts about that share buyback? Thanks.

We see ourselves getting below the 3 times in Q3. We talked about that at the time of the Ipreo acquisition. We've made good progress on cash and we see below 3 times by the time we exit Q3. I think relative to acquisition activity, Lance talked about this earlier, we see continue to do very small bolt-ons. But in terms of capital allocation for this year it will be directed primarily at the buyback and delivering to the $500 million full year commitment that we talked about in November.

Next question?

Thank you. And I am showing no further questions from the phone lines. And I'd like to turn the conference back over to Eric Boyer for any closing remarks.

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