標普全球 (SPGI) 2016 Q4 法說會逐字稿

Welcome to S&P Global's fourth-quarter 2016 earnings conference call. I would like to inform you that this call is being recorded for broadcast.

(Operator Instructions)

To access the webcast live go to investor.spglobal.com, that is investor.spglobal.com, and click on the link for the quarterly earnings webcast.

(Operator Instructions)

I would now like to introduce Mr. Chip Merritt, Vice President of Investor Relations for S&P Global. Sir, you may begin.

Good morning. Thank you for joining us for S&P Global's earnings call. Presenting on this morning's call are Doug Peterson, President and CEO; and Ewout Steenbergen, Executive Vice President and Chief Financial Officer.

This morning, we issued a news release with our fourth quarter and full-year 2016 results. If you need a copy of the release and financial schedules, they can be downloaded at investor.spglobal.com.

In today's earnings release and during the conference call, we will provide adjusted financial information. This information is provided to enable investors to make meaningful comparisons of the Corporation's operating performance between periods and to view the Corporation's business from the same perspective as management's. The earnings release contains exhibits that reconcile the difference between the non-GAAP measures and the comparable financial measures calculated in accordance with US GAAP.

Before we begin, I need to provide certain cautionary remarks about forward-looking statements. Except for historical information, the matters discussed in teleconference may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including projections, estimates, and descriptions of future events. Any such statements are based on current expectations and current economic conditions and are subject to risks and uncertainties that may cause actual reserve to differ materially from results anticipated in these forward-looking statements. In this regard, we direct listeners to the cautionary statements contained in our Forms 10-Ks, 10-Qs and other periodic reports filed with the US Securities and Exchange Commission.

I would also like to call your attention to European regulation; any investor who has or expects to obtain ownership of 5% or more of S&P Global should give me a call to better understand the impact of this legislation on the investor and potentially, the Company. We are aware that, that we do have some media representatives with us on the call; however, this call is intended for investors and we would ask that questions from the media be directed to Jason Feuchtwanger at 212-438-1247.

At this time I would like to turn the call over to Doug Peterson. Doug?

Good morning. Thank you, Chip. Welcome, everyone, to the call. I would also like to welcome our new CFO, Ewout Steenbergen. Ewout joined us in November and is participating in his first earnings conference call with us. You will hear more from him shortly.

2016 was a memorable year with market uncertainties surrounding pivotal outcomes from Brexit, the US election, and a long-awaited increase in US interest rates. Despite this uncertainty, spreads tightened, issuance was strong, equity markets ended up the year, and the S&P Global delivered another solid performance.

Let me begin with 2016 highlights. We finished the year with strong fourth-quarter results. We delivered another year of impressive financial performance with mid-single-digit revenue growth and mid-teens adjusted EPS growth. We rebranded the Company as S&P Global with a new ticker, SPGI. We reshaped the portfolio with a number of divestitures and acquisitions the most significant divestiture being JD Power.

We successfully completed our 2014 to 2016, $140 million cost reduction initiative. We made substantial progress on our SNL integration synergy. We generated nearly $1.5 billion in free cash flow and we returned $1.5 billion through share repurchases and dividends.

We also delivered excellent financial results. The Company reported 7% revenue growth; of this growth, 89% was pull-through to adjusted operating profit. This is a direct result of our continued focus on productivity.

On an organic basis, revenue grew 6% and the pull-through to adjusted operating profit was also high. These achievements led to a 300 basis point improvement in the adjusted operating profit margin and continued a string of annual improvements and adjusted operating profit margin on more than 275 basis points for the third year in a row.

While, ForEx had a $24 million unfavorable impact on revenue, we had a $43 million favorable impact on adjusted operating margin -- operating profit with Market Intelligence realizing the majority of the gains. I'm very pleased that we were able to leverage 7% revenue growth into 14% adjusted EPS growth through combination of productivity improvements and share repurchase activity.

2016 was not an isolated year. Our revenue growth was consistent with the 7% annual growth over the past four years and our 300 basis point margin improvement caps 1,000 basis points of margin improvement over the past four years. Our focus on growth and performance has materially changed the earnings power of the Company.

This earnings power is translated into a substantial increase in adjusted earnings per share. In 2016, we almost doubled our 2012 EPS, delivering 18% compounded annual growth rate over the last 4 years.

During 2016, we continued to add capabilities and reshape S&P Global. In Platts, we're building world-class supply demand capabilities. With VINtek and Eclipse already in place providing US and European natural gas analytics, we purchased PIRA Energy Group, RigData, and Commodity Flow, adding a wealth of expertise in global energy market analysis, US rig activity and waterborne analytics. With our deep history of providing benchmark commodity prices, we believe providing a supply/demand analytics around these prices will be of great value to our customers.

S&P Dow Jones Indices purchased Trucost, a leader in carbon and environmental data risk analysis. Not only will this acquisition enable the creation of unique new indices but our Ratings business will leverage Trucost's capabilities in the creation of new ESG products such as Green Bond [evaluations]. Ratings added to its international capabilities with the acquisition of a 49% stake in TRIS, Thailand's leading credit rating agency. Thailand is actually our second-largest economy and third-largest bond market.

We reshaped our portfolio with the divestiture of JD Power, our pricing businesses, and our equity and fund research business, and QuantHouse in January 2017. These moves-up moves left us with the stronger, more cohesive set of businesses.

I want to turn to our outlook for 2017, and discuss key themes that are shaping 2017 and beyond. These are topics I've discussed with our Board as well as the division presidents, as we look to the next year and the next three to five years. We look forward to discussing these themes with you this quarter and during the year.

Global GDP, though increasing this year, is running much lower than the past. Interest rates that have been declining since 1981 could continue to rise geopolitical considerations like Brexit, [populas] changes to governments, and threats to establish trade deals create new risks. Regulation has become an unparalleled force for change.

We count 22 Ratings regulators worldwide today, with the majority less than five years old. All of you have witnessed the rise of compliance within your own firms. Our customers have changing expectations, are feeling competitive pressures and facing changing business models.

Technology continues to disrupt every industry, including ours. According to Citibank, there's been a tenfold increase in fintech companies in the past five years. It took 75 years for the telephone to reach 50 million users; radio, 38 years ; TV, 13 years; Internet, 4 years; and Pokemon Go, 19 days.

Sustainability is becoming ubiquitous among companies and investors. Climate change conferences, ESG Investable Funds, point to significant changes in behavior. We need to stay ahead of these trends and create products that address the changing needs of our clients and markets. Things like Green Bond evaluations, ESG Indices, new credit tools and new product platforms are opportunities that we are pursuing.

Our economists expect global GDP to grow 3.5% in 2017. The chart depicts their view for the next 2 years, in which all world areas, except Europe, will experience accelerated GDP growth. In the US, low unemployment and increased consumer spending will underpin GDP growth.

In Europe, recovery is on track and showing resilience but not enough to boost GDP. In Asia, we expect reasonable growth and little inflation, with India being the bright spot. And in Latin America, we expect improvement, driven by continued recovery of commodity prices and stabilizing domestic demand.

Last week, Ratings issued its Annual Global Refinancing Study. This yearly study shows debt maturity for the upcoming 5 years. The chart on the left illustrates data from the 2016 to 2017 studies. The 5-year period in the 2017 study shows a $100 billion increase in the total debt maturing versus the 2016 study. We use the study, along with other market-based data, to forecast issuance.

Taking a closer look at data from the study reveals an important trend in high yield maturities. Over the next 5 years, the level of high-yield debt maturing significantly increases each year, which is a potential source of revenue in the coming years. Last week, Ratings also published their latest issuance forecast.

Looking ahead to 2017, we expect an overall increase in global issuance of 3%. Positive global trends for issuance include the European Central Bank's quantitative easing program continued strong issuance out of China and expectations were slightly stronger GDP growth in the US.

Global issuance is still likely, however, to face headwinds from global political uncertainties and a continued devaluation of most currencies relative to the US dollar. One item that seems very clear is that interest rates will continue to rise in the US. Rising rates have been an investor concern for several years now, as the belief is that rising rates will impair debt issuance.

Our Fixed Income analytical team, our Fixed Income analytical team has explored this topic and published a report called recent policy proposals' potential impact on US corporate bond issuance. You can see it on RatingsDirect.

This chart shows US corporate issuance in GDP since 1996. Both GDP and issuance increased over the period. We find a statistically significant relationship between US corporate issuance and GDP.

This next chart shows US corporate issuance and a 10-year treasury yield since 1996. Our statisticians ran a number of tests, including the Granger causality test, a statistical test used to determine whether one-time series is useful in forecasting another time series. Their conclusion was there is a weak negative correlation between interest rates and issuance.

We've seen a number of tax proposals since the recent election, and we've been studying them. People from our tax, finance, economic, and public policy teams have been evaluating potential changes. The proposals remain in a state of flux and it's difficult to draw definitive conclusions. Nevertheless, I want to review our current thinking on the most commonly discussed potential tax changes.

First, on a lower corporate tax rate, as a Company with a relatively high tax rate, this would be very positive for the Company. On repatriation, a one-time repatriation that would likely reduce issuance but would be unlikely to have major impact on the long-term capital structures.

In addition, much of the cash [flow we oversee] is by large technology companies like Apple and Oracle that have very little debt. For our Company specifically, we would reevaluate our investment strategies and that could lead to repatriating much of our overseas cash.

We believe that the removal of interest expense deduction could reduce the attractiveness of debt, particularly for high yield issuers and likely reduce issuance. However, lower tax rates would provide greater borrowing capacity for companies, which could be positive. As for S&P Global, this would be a negative, as we currently have $3.6 billion of long-term debt.

The removal of municipal bond tax exemption would reduce the attractiveness of muni bonds to investors, requiring alternative funding of local projects. Therefore, it would likely hurt municipal bond issuance but infrastructure insurance could potentially increase to partially offset this.

Border adjustment could benefit our Company as a net exporter. Please note our 2017 guidance does not consider any of these potential tax law changes.

Let me finish by sharing some of our most important initiatives in 2017. As always, delivering financial performance is at the top of the list. We're introducing organic revenue guidance of mid-single-digit growth, adjusted diluted EPS guidance of $5.90 to $6.15, and free cash flow guidance of approximately $1.6 billion. Ewout will provide more color to the guidance in a moment.

Throughout the Company, I'm stressing we need to build excellence into all that we do. To be competitive, nothing less is acceptable. Some of the more visible areas include launching a beta version of a new Market Intelligence platform in the Fall.

Leveraging recent acquisitions create world-class supply/demand analytics for Platts' customers; continuing index innovation in international partnerships; and advancing Ratings' commercial disciplined, analytical quality and IT-driven productivity. We continue to track and execute on our SNL synergy program and fund additional productivity initiatives and process improvements. And we remain committed to compliance control and risk management across the Company.

We are pleased with our progress but we're working to make this Company even better. With that, let me turn the call over to Ewout. Thank you.

Thank you, Doug, and good morning to everyone on the call. This morning, I would like to discuss the fourth-quarter results and then provide guidance for 2017.

Let's start with the consolidated fourth-quarter income statements. Reported revenue increased 2%; however, organic revenue increased 11%. This was the strongest quarterly organic revenue growth of the year.

Adjusted operating profits increased 17% and adjusted operating margin increased 530 basis points. Adjusted operating margin improved primarily due to revenue growth, continued progress in productivity initiatives, and the sale of lower margin businesses.

The adjusted effective tax rate increased 500 basis points, primarily because the fourth-quarter 2015 tax rate was unusually low, largely due to favorable tax benefits from the resolution of prior-year tax audits. In addition, the fourth quarter 2016 rate included the impact from dividends we received from foreign subsidiaries and a slight increase in the US state income tax rate. Adjusted diluted EPS increased 14% and we decreased our average diluted shares outstanding by 4%.

Both our fourth-quarter and full-year results were impacted by changes in foreign exchange rates. In the fourth quarter of 2016, the two main impacts were a $2 million unfavorable impact on Ratings, adjusted operating profit, primarily due to the weaker British Pound, and a $9 million favorable impact on markets and Commodities Intelligence adjusted operating profit, primarily due to the weaker British Pound and the weaker Indian Rupee.

Now, let me turn too adjustments to earnings to help you better assess the underlying performance of the business. Pretax adjustments to earnings totaled to a gain of $272 million in the quarter and included a $347 million net gain on the recent divestitures, predominantly from the sale of the pricing businesses and disposal includes a $31 million expense associated with the disposition of QuantHouse, A $54 million expense associated with an increase in financial [crisis] legal research and a $21 million expense related to the early retirement of our 2017 debt.

In the fourth quarter, every business segment contributed to gains in organic revenue and adjusted operating profit. While this slide shows a 11% decline in reported revenue at Market and Commodities Intelligence, excluding the impact of asset sales, organic revenue increased 8%. Adjusted operating margins improved significantly in Ratings and Market and Commodities Intelligence but declined in S&P Dow Jones Indices. I will discuss these changes within each segment discussion.

Let me now turn to the individual segment's performance. Ratings had a strong quarter, leading the Company in both revenue and operating profit growth. Revenue increased 14%, including a 1% unfavorable impact on ForEx.

Considering normal seasonality in the fourth quarter, US bond issuance was robust, despite US election uncertainty, which only constrained bond market activity for a few days. Adjusted operating margin increased 360 basis points due to strong revenue growth, reduced legal and outside services spending, partially offset by increased incentives. While not shown on the slide, full-year adjusted operating profit margin reached 49.8%, an increase of 240 basis points, aided by a modest boost from ForEx.

Strong transaction revenue underscores Ratings' fourth quarter revenue growth. Non-transaction revenue increased 5% from growth and surveillance fees, increased intersegment royalties from Market Intelligence and growth at CRISIL. Transaction revenue increased 26%, as a result of improved contract terms, growth in structure, US public finance and corporate issuance as well as increased bank loan ratings.

This slide is a new quarterly disclosure that illustrates Ratings' revenue by its various markets. First, note that corporate and financials make up a majority of revenue.

Second, US public finance is the largest component of governments. In the fourth quarter, there were broad gains in every market with the exception of financials, which was negatively impact by concerns about the US election and an interest rate increase.

If you look more closely at the largest markets, fourth quarter issuance in the US was up 14%, with investment-grade decreasing 2%, high yields climbing 12%; public finance growing 19%; and structured finance soaring 45% due primarily to a 143% increase in CLOs in advance of the implementation of risk potential regulations which took place on December 24; and a 40% increase in ABS.

In Europe, issuance decreased 11%, with investment-grade declining 18%; high yields decreasing 1%; and structured finance increasing 5%. In Asia, issuance increased 1%. However, excluding issuance that we do not rate, notably domestic China issuance, Asian issuance increased 8%.

Let me now turn to Market and Commodities Intelligence. This segment includes S&P Global Market Intelligence and S&P Global Platts.

In the fourth quarter, reported revenue declined 11% due to recent divestitures. Excluding these divestitures, organic revenue increased 8%. Despite disposing of businesses that contributed more than $100 million of quarterly revenue, adjusted operating profit increased 8%.

This puts into perspective the enormous improvement that has taken place in this segment. Adjusted operating margin improved 600 basis points, primarily due to SNL Integration Synergies, Platts' expense control, divestiture of lower margin businesses, and ForEx.

Let me add a bit more color on the fourth quarter revenue growth in Market Intelligence. The most significant items in the quarter were the divestitures of SPSE and CMA Pricing businesses, and Equity and Fund Research. In addition, in January, we divested QuantHouse.

Due to the fourth quarter divestitures, revenue remains unchanged. However, organic revenue increased 10%, with growth across all major products. Another highlight was the progress we made in the $100 million synergy targets, as illustrated on this slide.

Successful integration of SNL and delivery of synergies was a top priority for the Company in 2016. We made tremendous progress, as evidenced in the margin improvement and remain committed to achieving our integration synergy targets and delivering on our expected return on investments in SNL.

We estimate that two-thirds of the $100 million synergy target was achieved at year-end 2016 on a run rate basis. We estimate that approximately one-half of the $100 million is reflected in our full-year 2016 results.

We are particularly pleased to have achieved about $10 million in run rate revenue synergies. About one-half of the revenue synergies came from utilizing Capital IQ relationships to sell the SNL Global Financial Institution's products; about one-quarter from using SNL relationships to sell the Capital IQ Desktop; and one-quarter from new business, combining Cap IQ Risk Scorecards with SNL Bank data.

If you look at the markets within Market Intelligence more closely, within financial data and analytics, S&P Capital IQ Desktop and Enterprise Solutions revenue increased 7%, with high single-digit growth in S&P Capital IQ Desktop. In addition, SNL revenue increased 14% over the fourth quarter of 2015.

SNL and S&P Capital IQ Desktop experienced year-over-year user percentage growth of 11% and 8%, respectively. Risk Services revenue increased 10%, led by growth in RatingsXpress.

Platts delivered solid organic revenue growth in an improving commodity environment. Oil prices rallied around the OPEC agreement to cut production.

IEA forecast 2017 oil prices in the range of $60 to $70 a barrel if OPEC members comply with the agreement. While the OPEC agreement provides support for the oil prices, RigData has reported that the weekly US rig count reached 782 in January and that's the highest level in over a year, creating downward pressure on pricing. Nevertheless, the outlook for many of our customers is better now than at the start of 2016.

Fourth-quarter revenue increased 12%; however, excluding revenue from recent acquisitions, organic revenue increased 5% due to growth in subscriptions and double-digit growth in Global Trading Services. The core subscription business delivered mid-single-digit revenue growth, led by the petroleum and petrochemical sectors. Global Trading Services' double-digit revenue increase was primarily due to strong trading volumes.

Now, let me turn to S&P Dow Jones Indices. Revenue increased 13%, mostly due to EPS, asset under management growth and increased data subscriptions. Adjusted operating profit increased 10%, primarily as a result of increased revenue.

Adjusted operating margin declined 200 basis points to 61.6%, due primarily to the Trucost acquisition, investments in a third data center, increased marketing costs, and higher cost of sales from growth, and OTC derivatives activity.

The highlight of the quarter was ETF AUM tied to our indices, topping $1 trillion in December. We celebrated the $500 billion mark in 2013, and 3 years later, we doubled that milestone. Clearly, the trends from active to passive investing has been an advantage for the index business.

Asset-linked fee revenue increased 10% during the quarter. The exchange-traded products industry reported enormous inflows for the second straight quarter, amassing $133 billion in the fourth quarter, driving yearly inflows of $380 billion, a new annual record.

Average ETF AUM, associated with our indices, increased 19% year over year. As mentioned, 2016 ending ETF AUM associated with our indices, reached a new record of $1 trillion, increasing 25% over year-end 2015, with inflows of 15% and market appreciation of 10%.

Transaction revenue from Exchange-Traded Derivatives increased primarily due to an 8% increase in average daily volume of products based on our indices. S&P 500 Index options led growth with a 22% increase in volume, with fixed options and futures, and CME Equity Complex contracts increased mid-single digits.

Subscription revenue, which consists primarily of data subscriptions and custom indices, increased 24% due to growth in data subscription revenue and the timing of subscription revenue. During the quarter, the Company launched 88 new indices and our partners launched 23 new ETFs based on our indices.

Our capital position is strong. As we look at the net debt of the Company, we ended the year with $2.4 billion of cash, of which approximately $1.7 billion was held outside of the US and $3.6 billion of long-term debt. Our debt coverage improved year over year, as measured by gross debt to adjusted EBITDA from 1.6 times to 1.4 times.

Free cash flow during the year was approximately $1.2 billion; however, to get a better sense of our underlying cash generation from corporations, it is important to exclude activity associated with divestitures and related tax expenses and the after-impact of legal, and regulatory supplements and related insurance recoveries. On that basis, free cash flow in 2016 was nearly $1.5 billion. As for return of capital, the Company returned $1.5 billion to shareholders in 2016; $1.1 billion through share repurchases as we completed our $750 million accelerated share repurchase plan in December and $380 million in dividends.

Now lastly, I will review our 2017 guidance. Based upon modestly improving global GDP and issuance growth, we introduced 2017 adjusted guidance as follows: mid-single digits organic revenue growth, with contributions by every business segment; unallocated expense of $145 million to $150 million, a modest increase over 2016 due to investments in Asia and upfront investments in office consolidation; deal-related amortization of about $100 million; operating margin increase of roughly 100 basis points; interest expense of approximately $155 million; a tax rate of about 30% to 31%; diluted EPS, which excludes deal-related amortization, of $5.90 to $6.15, the range is wider than prior years due to recent NASB guidance for accounting, for stop payments to employees which we estimate could increase EPS by $0.10 to $0.15 depending on SPGI's share price development and option exercise activity.

Capital expenditures is a range of $125 million to $140 million, as we anticipate increased investments in technology, data and efficient real estate solutions. Free cash flow, excluding after-tax legal settlements and insurance recoveries, of $1.6 billion; and we expect an annual dividend of $1.64 per share.

Our guidance does not take into consideration any potential policy changes from the new US administration. Overall, this guidance reflects our expectations that 2017 will be another strong year for the Company.

With that, let me turn the call back over to Chip for your questions.

Thank you, Ewout. Just a couple instructions for our phone participants.

(Caller Instructions)

Operator, we will now take our first question.

Alex Kramm, UBS.

First of all, thanks for the Pokemon Go stat. Definitely the highlight of my day. Nicely done.

Secondly, in terms of the business just wanted to comment to the Ratings guidance a little bit more, what you're expecting there. If I look at your -- the mid-single digit growth for the whole Company and I look at where index is running right now in terms of the run rate.

And I look at where now Market Intelligence is probably growing consistently, it seems like it's a little bit conservative or light on the Ratings side. In particular, if you're telling us 3% growth in the issuance. Either you're a little bit less -- more conservative on pricing or you're just conservative in general, but what are you expecting in terms of Ratings revenue here?

Alex, this is Doug and thank you for the -- joining the call and for your comments. On issuance, we've Incorporated various factors into our issuance forecast. As you know, in the slides we gave you before, we showed you the expectations for issuance coming up. We've always talked before about the relationship between GDP growth and issuance being a stronger one than interest rates.

As you know, January had very strong issuance. The issuance in January was a record. It was a $532 billion; it was up 13.6% from the prior years. A lot of that issuance was in the US. The US was up maybe 3%. We've incorporated that into the year.

Our expectation is that the first half of the year should be fairly strong given the overall investment profile that we expect of the economy and we've looked at more uncertainty in the second half of the year as we don't know exactly what the impact is going to be of the new administration aspects that are going to be rolling out, whether it's tax reform, regulatory reform, infrastructure investment, et cetera.

In addition, we've Incorporated some uncertainty into the second half of the year related to Brexit and other geopolitical aspects. But overall, we are -- we believe that the 3% forecast, which was prepared by our Fixed Income analytics team, is strong. It's based off of the combination of refinancing, which we are already aware of and we're expecting that most of that will come through.

And then what we see in pipelines from meeting with investment banks and Ratings issuance advisors to build our forecast. But it's built off of a base, as you know, those different factors and we're comfortable today that, that's what we are including in our guidance.

Fair enough. Thank you. And then just secondly, quickly, maybe on the Market Intelligence side a little bit here. When we talk to customers, it sounds like you're increasingly bundling all of these different products, which obviously you've put under one roof now. So maybe you can talk a little bit more about this.

It seems like there's more of a move to enterprise pricing and it seems like you're able to maybe gain a little bit more pricing power in the process. So can you just talk about what's going on there and how it could be impacting revenue more than what we've seen in the last couple years?

We've made great progress on the integration of SNL and Cap IQ to turn it into Market Intelligence. As you know, we've been reporting on our synergies throughout that time and how we've done with the different expense synergies and revenues synergies.

On our expense synergies, as you've seen, we've made excellent progress. This has allowed us to have an intensive focus on our commercial activities, on our operational activities and be able to address customer needs in a way that's more comprehensive and integrated across the Cap IQ and SNL platforms.

As I mentioned in my remarks, we are developing and will be launching later this year a pilot program, Market Intelligence Window, which will allow us on the desktop through mobile platforms, et cetera, to be able to address the needs of our customers.

Now what's that leading to, from a commercial point of view, and what your question is more specifically about, is that we can provide enterprise licenses which take into account the usage and the breadth of need of a firm, and provide them with a more simple contract that allows, in many cases, more users and more access to the system, which on the one hand, might as a per user basis, end up being less expensive to them. But they are using a lot more data and they have many more users in it which is very beneficial to us.

This, like many of our different products and services across the Company, these truly are a customer by customer basis in terms of how we deal with them and the sales process is a long professional sales market sales process. We've restructured our sales team so they are unified, and they been rolling out a comprehensive approach to our different markets whether it's by regions or it's by different types of industries and segments.

As you pointed out, that is our approach this year, would be to be rolling out almost everywhere but especially where it makes sense, an enterprise-wide pricing for Market Intelligence.

Excellent. Thanks for the color.

Thanks Alex.

Manav Patnaik, Barclays.

Congratulations and welcome, Ewout, to the call. Maybe just on the Ratings question, another way to ask that question is your 3% issuance volume forecast for 2017, if you were to back out sovereign ratings, which I don't think you guys make much money on and then China domestic, you said you don't do, what would that 3% number look like from the volume perspective?

If you just give me one second, I've got that calculated here. So let me just give you some of the numbers more specifically with the breakdown with and without those. I don't know I have the aggregate number in front of me but the -- but when you look at our non-financials, it's going to be in the range of approximately 2% to 6% financial institutions from about 1.5 % to 4%. Structured is right now one of the areas I'm the least certain about; it's more of in zero to 6% range.

Even though you look at the public finance potentially dropping a lot this year given the headwinds and what we saw is very strong issuance in the last couple years. So public finance could be down5% to 10%. So overall issuance about 3% and excluding sovereigns and domestic China, it is also about 3% once you take the positive upside in non-financials, what you've seen in the first month of the year and then you subtract some of the downsides. We still end up with about 3% excluding sovereign.

Okay. Got it. And then in the Market Intelligence side, I think you said two-thirds of the $100 million was realized so far on a run rate basis and you're targeting three-fourths by the end of 2017. So is that being conservative, or is that factoring in, I guess, your new platform launch that probably requires a bunch of investments? I just wanted some color there in terms of the -- how we should think about the progress.

Good morning, Manav. This is Ewout. We would certainly not consider that guidance as conservative. What you obviously might see when you do an integration is that you first take care of the low hanging fruit; that's why there's always a larger acceleration of the benefits at the beginning and then the remaining of the integration synergy benefits come later during the year and take more time to achieve that.

So this is really the best guidance we have. We expect that the remaining of the gains will be more back-end loaded because this is the harder part of the synergies, especially related to bringing our products to a one platform. That is really the main outstanding where the remainder of the synergies will be achieved.

Got it. Thanks a lot.

Toni Kaplan, Morgan Stanley.

Could you give us a rough breakdown of what rules the margin expansion within Market Intelligence this quarter on an apples-to-apples basis? Basically just trying to get how much of the expansion was driven by legacy Cap IQ, Platts, and from the SNL synergies?

Let me, first of all, just tell you what some of elements are. I don't know if I can give you a precise basis point by basis point approach to that. But as you remember, we have a combination of the three different businesses within Market Intelligence which you've seen: the Desktop, the Enterprise business, SNL business and then Risk Services.

We have Platts. We've taken out JD Power. We've taken out what was our pricing businesses. JD Power had generally a lower margin than the new average margin. The pricing businesses had higher margins than the actual businesses.

But I don't have the actual numbers and I am going to look to Ewout to see if he has a chart with those actual numbers. But those are the elements that are incorporated into that margin.

Toni, what I specifically would like to point out is that the total margin change for Market and Commodities Intelligence for the full-year 2016 was 410 basis points. The FX element in that was 140 basis points.

So that gives you the breakdown of how much was really underlying the performance improvement of the different areas versus the amount that came from FX and then as Doug said, there is the different elements of the businesses that are having different levels of margins. We probably need to come back to you later on with more specifics on that.

Okay. Are you providing updated targets for, I guess, Market Intelligence margins now that the segment includes Platts?

Let me just tell you a little bit about margins, generally. If you don't mind, I will give you some broader aspects to it. We don't have any guidance specifically about our margins, but we do have, what I might call, aspirations.

As you know in the last few years, we've had an intensive focus on margins. That's a combination of improving commercial activities, growing our topline, as well as maintaining productivity and being very disciplined around investments. In Ratings, we aspire to be -- had a 5% handle at the beginning of our margin.

We've been there for some of our quarters, but we aspire to be in the low 50%s and this, we help -- we believe we could get there through the continued commercial discipline and some of our productivity programs. In the Market and Commodity Intelligence segment, we aspire to the mid-to high 30s.

We think that as we complete our synergy programs over the next couple years as well as ongoing productivity programs and commercial programs that, that we would be aspiring towards that. In Index, we do not have a target.

We are very comfortable with the level of margin that we are -- we have now in the last years or so, it's been between 60% and 66%. We know that there's kind of -- it bobs around a little bit, but we don't have any target that's different than what we have there which would be in the low 60%s. But those are -- for the three segments, those are the -- our aspirations of our margins.

Terrific. Thanks and congratulations on the quarter.

Thank you.

Hamzah Mazari, Macquarie Research.

The first question is just if you could just give us an update on European bank disintermediation and whether Europe's mix -- how does that stack up to the US in terms of loans and bonds?

That is a -- that's been something that's been really interesting as we've continued to watch the development of the European market. It almost goes in fits and starts between when do you see issuance that's starting off in the European markets and you can get some very strong quarters of European issuance and then you get some very weak quarters of European issuance.

The main factor which is inhibiting that is really the ECB liquidity programs. THe ECB liquidity program has continued to provide a lot of liquidity in the European banks and it's basically between the strength of their capital, which has been improving and the European liquidity programs that are in place.

It's allowing the banks to continue to be strong lenders. But there is a general shift overall towards more and more issuance in the markets. Just as an example, in this year and during the year, there was -- in January, you saw the issuance go up in Europe in financial institutions.

In industrials, it was down a little bit. You've also seen more in sovereign. So total Europe was up about 13% in January. Over the last couple of years, it's been up and down. It goes from being up to flat, et cetera. But I do think it's the most important factor is really a combination of what we see happening with the LTR program, the ECB liquidity programs and the overall bank behavior that they're holding more and more credit on the balance sheet.

The other final point I would make is that the ECB itself has a very high demand for the purchase of assets. They continue the quantitative easing program and assets they want to buy are in the investment-grade debt securities. And ECB itself has been talking about promoting the development of capital markets.

In addition, there is a program based out of Brussels called the Capital Markets Union. The Brussels financial regulators are all in favor of having a more cohesive and a more European-wide approach to capital markets. So we're very close to those initiatives.

We have people in Brussels; we visit Brussels a lot. We visit all of the major financial capitals and we believe that this will continue to be positive over the long run, but it might be going in fits and starts.

Great. And just a follow-up, within the Indices business, are you concerned at all around fee pressure with -- given how concentrated the ETF market is? I know back in 2012, you had a -- we had Vanguard change the way that they looked at their customer base.

I know they were more retail versus institutional. But any color around how you're thinking about fee pressure in the Indices business or is that just not a concern?

It is a concern to the extent that we are going through a lot of change in the industry, and if I told you otherwise, I would probably be telling you something we spend a lot of time thinking about. We do have the few factors which we think position us incredibly well.

One is that we have benchmarks that are must-have benchmarks like the S&P and Dow Jones and other branded benchmarks that we have that are really necessary for, whether it's the actual ETF or other investment products, or for the data that's required by investment managers to be able to benchmark their portfolios and their performance. So I think we have one advantage in terms of the types of brands and the kinds of products we have.

The second is maybe a little bit, if you go back to microeconomics and you remember those curves, the elasticity of demand and some of the products which we believe are going to see price cuts, the price cut might be offset by the volume growth.

And I don't want to say that, that 's always necessarily going to work out that way, but if you look at the overall growth of volume in this industry and the recent DOL ruling, which looks like it might be reversed, that was going to probably benefit ETF and passive investments. We probably see some sort of passive investment benefit from a lot of these trends that will also benefit.

So even if they do go down and there's some fee pressure, we should be seeking advantage of that from volume. Just as an example, we mentioned it in our call. But it was just three years ago that we were -- had crossed the $500 billion line for ETF AUMs and we now crossed $1 trillion at the end of the year last year. Even only a year ago, we were at $815 billion.

So the growth in these -- it's a combination of new flows into the asset classes as well as obviously increase in the value of the indices themselves that we see that from. But we do -- we're very aware of the cost pressure. We're working closely with ETF providers and others and it's something that we are ensuring that we can maintain a leadership position in the quality of our benchmarks to the positioning that we have. The pricing pressure is something that we're aware of and we're trying to actively manage towards.

Jeff Silber, BMO Capital Markets.

I wanted to go back to some of the debt issuance trends you were talking about earlier. You mentioned how January was a real strong month, specifically in the US. Do you think any of your US clients might be front running some potential policy changes and we'll get a big inflow early on in the year that will taper off as the year progresses?

It's really hard for me to project. I've been doing this now for almost six years and every quarter, there is a different mix of what has been attractive in the markets. It depends on investment, on growth, on GDP growth, on what the interest rate environment is going to be, what Janet Yellen might do with the interest rate, what the net exchange rate is going to be for people that have global operations.

I -- it's possible that there is some pull forward that's taken place in January. It's also possible there was some pull forward into the fourth quarter. But there is a very healthy refinancing pipeline that we look at. Some of the issuance that was done in January was issuance by companies that have already incredible amounts of cash on the balance sheets, like Microsoft and IBM and AT&T and Morgan Stanley and Wells Fargo and BofA.

So the largest issuers in January weren't necessarily those that needed the cash. They also were all corporations that have massive amounts of cash offshore. So I don't know, I can't really answer your question about this pull forward or not. But we do in our forecast, if you look at the forecast that we prepared, we do have a more robust first half of the year than the second half of the year in the forecast that we prepared, which shows the 3% growth in issuance for 2017.

All right. That's helpful. If I could switch over to margins, you were kind enough to give us some of your long-term targets by segment. I know you don't usually guide by specific segment for the year but I'm just wondering directionally, what you were incorporating for margins by segment to get to your target for the Company overall? Thanks.

We don't give specific segments, but as we said in the prepared remarks that we expect margin expansion for each of our businesses.

Okay. Great. I will follow-up off-line. Thanks so much.

Peter Appert, Piper Jaffray.

Doug, the strength in the fourth quarter Ratings revenues performance is very impressive. I'm wondering if it's possible to give us any granularity in terms of the revenue drivers in terms of market share pricing and just overall market growth?

Let me give you some of the components here. So I'm looking here at the revenue components. If we make a breakdown between transaction and non-transaction, transaction was up 26%. Non-transaction was up 5%. If you look at a breakdown by region, US saw the largest growth of close to 17%. The EMEA region was around 6%.

Asia, ex-Japan, was around 8% and Japan itself was 13%. The rest were other smaller numbers. I have to note that Canada has had a quite large increase of 63%.

If you look at another breakdown of revenue, corporates, we saw up by 18%. Financial services, down 9%. Infrastructure, up 40%; US public, 37%, sovereign and structured, 11%. Overall, I could say that revenue was up very strong across-the-board.

We saw expenses up at $30 million quarter over quarter. But it mostly had to do with incentive compensation and catch-up given the strong results for the quarter itself. So if you look at the combination of strong revenue growth across the board in almost all regions and issuer types as well as really good expense control with the one change an increase related to incentive compensation. We saw that there was -- those margins in Ratings went up in a very healthy way.

Peter, let me add that if you go back to the slides that Ewout presented, there is a new slide which shows the revenue mix across broad categories. We thought it would be helpful for you to see a little bit further break down on that. I don't remember the actual slide number. We can pull that u. But it shows where we've got the growth across the different business segments and for example, in financials, there was a drop in the fourth quarter. And financial issuance from $115 million to $104. That's our revenue mix.

In Corporates, they went up 20% from $283 million to $340. We think that, that should also help give you some kind of direction as to what the -- what issuance trends are as well as the revenue that we're seeing from those. And you can get a view across-the-board how we think we're doing in those different groups. All of them are a combination of all the different factors, which Ewout mentioned.

Okay, thank you.

That's slide 29. Sorry.

Thank you. Do you have any preliminary thoughts on how potential changes and Dodd-Frank might impact the business?

Not really. We have looked at Dodd-Frank. There's really two aspects to it that I could mention, but this is -- think of this as more speculation because we don't have a lot of facts as to where this might go. On ourselves, we have -- we believe that the overall Dodd-Frank rules that have come in place are similar to the 21, I guess, jurisdictions around the world where we're also rated. So even if Dodd-Frank changes, it's not going to change our operating level very much because we're regulated similarly or even more heavily in other jurisdictions, like by ESME in Europe.

So there might be changes to Dodd-Frank that could have some small benefits to us in the US, but they're not necessarily going to have that much of an impact if we have to continue to comply with a similar or the exact same kind of provisions everywhere else in the world. On the actual markets themselves, to the extent that there are Dodd-Frank provisions which improve market liquidity or investor issuer access or clarify some of the things, for instance, broker rules.

We see banks getting back into more proprietary trading and higher liquidity issuance in the markets, or if there was a change to the risk retention rule that allowed CLOs and CMBS issuance to explode. If there has been that much of an impact from the risk retention rules, I can't quite tell, but it looks like there might be slight impact.

But those are the things that could be more market impacts. They don't have anything to do with us directly but if they end up providing an environment where there's growth in the market, and particularly, growth in financial markets, higher liquidity, higher issuance, we would potentially benefit from that.

Thank you, Doug.

Thanks Peter.

Tim McHugh, William Blair.

Thanks. Just following up a little bit on the question. Pete was getting into some of your initiatives to improve pricing and the strength in bank loans. How much -- were there any big incremental changes in the fourth quarter? And how much more room is there to run with trying to drive your improvement even relative to whatever the market does?

I don't know if I would call it relative to what the market does, but relative to ourselves, we've had a, what I would call, a multi-year program to bolster our commercial activities in the rating agencies. As a result of our own changes in Dodd-Frank, we have hired a world-class team of commercial people in our rating agency.

They are now out building relationships with customers, anticipating their needs for capital markets activities for -- by looking at their own exposures around the globe and by being closer in a relationship, having this relationship model, it's allowed us to also demonstrate what is the value that we bring and have a one-off, as I call them, individual conversations and negotiations with customers around the globe. And we started seeing the benefit of that from higher contract realization.

We expect that, that will continue to flow through in 2017. We saw the benefit of that in -- last year. Some of that into the fourth quarter. But it is part of our top line growth strategy is to have these one-off relationship conversations with the issuers to ensure they understand the value and we can see some of that value through improved pricing and contractual terms.

Okay. Thanks. And then SNL, the growth rate improved there versus a little bit at least versus what you guys have been talking about? I know you listed a couple of different areas in the business that did well but was there anything in particular that changed in terms of the performance, or got much better that drove the acceleration?

If you look at the last 12 years or so, they have grown over 12% per year; it was bouncing in the low teens from quarter-to-quarter, I think it's just noise in the quarter, whether it's 10% or 14%. We continue to see nice strength in the international SIG product, which is one of the new things we're launching and conversely, we don't see much strength in the metals and mining work, which is a difficult environment. Those are the two new areas that we've been focusing on ; overall together, it's better than our model, but it bounces quarter-to-quarter. Difficult to explain that.

Okay. Thanks.

Bill Warmington, Wells Fargo.

Good morning, everyone. Congratulations on a strong quarter and also welcome, Ewout.

First question, I wanted to ask about Platts' organic revenue growth. It had been trending down for the past three quarters and this quarter, it showed an improvement, up 5%. I wanted to ask whether you're seeing an inflection point in renewals and how those are going? Whether you think the stabilization of oil price is helping? And if you're seeing any differences there, US clients versus international clients?

Thank you for that question. On Platts, on our top-line growth, it clearly is a combination of all the factors that you discussed. As you remember a few years ago and going back to the question about Dodd-Frank, there was one provision of Dodd-Frank ended up that all of the major financial institutions exited the Commodities business. And now it had been a major drag on our top-line growth and on our revenue levels as all of the major global financial institutions exited Commodities and Trading Commodities business.

A few of those have a tiny trading desk left, but most of them sold their Commodities business to other trading organizations who were already our customers and we saw some loss of revenue there; that had been headwind. There was also a headwind when you saw the oil price, which had been in the $100 range drop into the $20s and $30s, and it put a lot of pressure on our major customers that are producers on the upstream side who were getting squeezed by -- on their profit margins and they were in tough negotiations to see what kind of renewal levels we would get, what kind of increase in pricing. So there were some headwinds there.

Obviously, on the other hand, some of the users, power plants and airlines and others saw a big benefit from the lower oil prices and lower energy prices and we had some potential upside there. But I think we are getting into a normalized position with the oil prices in the $40s, $50s and $60s. There still are some organizations that, that's not the right level that they can be very profitable in, but we do think that -- we will look carefully at the overall market positioning.

We felt that the increase in more maybe stable oil markets benefits us and as you know, one of our revenue streams that we talk about is the market services area. So it's not just the -- we saw a strong growth in that area which is one of the other areas. So we are not only just a subscription business, but we do have a small amount of our revenue coming from market and trading services.

And that area did benefit from the volatility as the market moved back up from the lower price to the middle price. So every fact you mentioned are things that we watch. We think that we're in a more stable environment and we don't think that there is going to be anybody getting in and out of this business and we will be negotiating throughout this year on ongoing long-term contracts.

For the second question, just a housekeeping question. On the $5.90 to $6.15 EPS guidance, does that include or assume a $0.10 to $0.15 benefits from the stock-based comp in that, or would that stock-based comp be incremental to that $5.90 to $6.15?

That includes the $0.10 to $0.15 from the accounting change for tax-based payments.

Great. All right. Well, thank you very much and congratulations again.

Bill, I don't want to pick on you, but I want to clarify this right now. The pronunciation is Ewout. The W is pronounced as a V, for everybody.

Ewout. Thank you very much. No problem, Bill.

James Friedman, Susquehanna Financial Group.

I wanted to ask my two upfront. Ewout, I was wondered if you could repeat what you said, if anything, about what assumptions are embedded with regard to repurchase. I heard the stock-based comp, but the repurchase? And then Doug, if I could ask because we get this one a lot; it's the deep end of the pool but with regard to the border adjustability tax, if you could just give us the Cliff Notes from your view at least. Do you think of the Company as an exporter? And maybe if you can give us some qualitative observations about that, that would be helpful? Thank you.

Let me start, James. Good morning. Regarding the assumptions underneath our EPS guidance with respect to buyback activities. At this moment, we cannot specifically comment on the size and timing for obvious reasons. What I can say is the following. We will continue with buyback activities also in 2017 following the strong track records of the Company.

We believe it's a good use of the strong cash position we have, and also the strong future cash generation we predict. And we believe our stock today is attractive at current levels. We will be, of course, be disciplined and focused on the way how we really can create value enhancement for shareholders. So definitely there is an assumption with respect to buybacks, but I cannot give you the specifics. But I hope this gives you a flavor for the underlying philosophy and especially the disciplines, capital management will apply as a Company.

Let me pick up the question about border adjustability. As you know, the tax code was updated 30 years ago in 1986 and at the time, our economy and the tax code was still very much skewed towards agriculture and manufacturing, especially with preferences and special exemptions for a lot of industries.

It's been a long time that we needed an update of our tax system. We also, as you know, have one of the highest corporate tax rates in the industrialized world with us, ourselves, paying over 30% rate, which has been very high. Now specifically related to border adjustability, this is one of those areas that is probably quite controversial because of the way it impacts different types of organizations.

As you know, because we have such a high tax rate, any lowering of rate would benefit us and then specifically on border adjustability, we are an intellectual property firm that has been around for a long time and our intellectual property is principally registered in the US and in fact, even in New York. When we sell and we have customers that are paying us from offshore to use our Ratings or Indices or Market Intelligence or Platts Data and that is being purchased overseas, that would be considered to be an export of services and we would benefit from a lower tax rate or from the border adjustability where we would not be having to pay a tax on that export of services.

I don't have a specific dimension yet. But I could tell you exactly what the benefit could be because we don't have enough of the proposal. But I would tell you that we would be a major beneficiary of that border adjustability and it's something that as that is developed, we have our tax team, our economics team, our public affairs team, et cetera, are working closely with other advocacy groups and organizations in Washington to understand all of these proposals and what the impact might be but this is one that for us, could be a major benefit.

Got it. Thank you very much.

Craig Huber, Huber Research.

My first question has to do with interest expense deductibility. This whole issue if it will or will not be included in the potential tax plan later this year. If it is included in there, and I guess depending on how may be structured if it's more like Germany, where you can only deduct interest expense of about 30% of EBITDA or if it's 100% eliminated.

What is your -- of those two scenarios, the German one versus getting rid of 100%, what is your general thought again further what it would do to the corporate finance debt issuance once it gets up and rolling in 2018 or something or if it's retroactive?

Craig, as you can imagine from my prior answer, this is also an our list with the same teams that we're looking at with advocacy groups and our tax, accounting, finance public affairs group, et cetera. This is one of those proposals that we think would have a -- also a potentially negative effect on issuance. Clearly, it's a proposal that is linked with a paid for to other sorts of changes in the tax code. For example, accelerated depreciation would be a paid for with the elimination of the interest rate deductibility.

So we see it typically in combination with other types of benefits, which then need to get paid for and they are paid for by the interest rate deductibility. In all the work that we've done looking at the different systems, we think that the major impact is going to be on high yield issuers. As you know, if you go back to what's the typical deal, whether it's a leveraged buyout or many sponsored deals, there is a high-yield debt not only provides them access to capital and improves ROE, it also provides a tax shield and the interest rate expense itself is part of the deal calculation as to what sort of tax shield you get from the interest rate.

And so this is the part of the yield curve and the credit curve where we think there will be the biggest impact for potentially issuance could get hit there. When we look at the higher quality end of the rating scale, so blue-chip companies, investment-grade companies, even without the deduction, we think debt would still be more attractive to companies than issuing equity.

I don't think companies are going to be willing to flood the market with equity due to financing. There might be a boom to investment bankers to structure hybrid or other sorts of instruments that could be a debt like or maybe equity like but not considered to be a common equity.

We do rate a lot of those types of instruments so preferred shares and anything with fixed coupon, we do rate those kinds of equities or things like that. But we do think that overall elimination of interest rate deductibility would probably be a net negative to issuance. That is what we are operating on right now. But we are trying to look very closely at the market and what the actual proposal is, since we don't really know what the proposal is and what it's linked to. So we're going to have to watch this.

We do know that over the long term, debt issuance levels are much more related to GDP growth. But this discussion about interest rate deductibility and tax law changes does throw some new elements into our planning and our thinking that we've got to be very close to.

My other question, please. On your S&P Ratings business, you have 14% revenue growth. I just wanted -- in the quarter, to better understand, is it better contract terms? Roughly last year, you guys have changed your contract terms with your customers to help you net on the pricing side. Do you have sense of how much that 14 percentage points growth came from better contract pricing?

And also, as you think out to 2017, is there much left to do? I realize it's generally annualized here, but it's more that you could change or help boost revenue growth in 2017 to help quantify that a few hundred basis points or not even that?

We don't quantify the amount of the contract changes, Craig, so we can't help you with that portion of the question. Was there another part of the question? I apologize.

Is there much left to go --

No, as I mentioned earlier. So we think we made nice progress in 2016. We think there's more progress that can be made in 2017 and I would say in those two years that will probably be the bulk of the progress on these programs we're working on. We'll be able to tell after that but most of them will be 2016 and 2017.

Okay. Thank you.

Thanks Craig.

Joseph Foresi, Cantor Fitzgerald.

This is Mike Reid on for Joe. Thanks for taking our call. Can you give a little color on some of the continued prospects for indices outside of equities. Including fixed income all the way through the custom indices? And also, do you see the custom indices helping you gain market share?

Well, first of all on indices, you know we have been diversifying our business in various ways. One of them is through different sorts of indices, as you mentioned, Fixed Income Indices. Right now that is a very, very new industry, so to speak. It's just recently had the large index complex started moving into organizations to see them more on a professional index managed approach to building up ETF products, et cetera.

We think that that space is still wide open and one that there's not a lot of ETF volume and should be growing and we are hoping to play a much larger position there. Custom indices and factor indices are getting very popular, especially with family offices, sovereign wealth funds and investors that need some a benchmark to manage a specifically against risks or asset liability matching in their portfolio.

We continue to see that as an area where we're investing and growing. We also have two other areas I want to mention. One is the ESG. We bought Trucost and Trucost is an organization that provides a very precise and high-quality climate and water and other sorts of environmental facts and environmental data. We were able to use that to build environmental or climate or other ESG type funds.

We see a very high demand for data and analytics and now increasingly also for funds that have Incorporated ESG or sustainability or long-term growth-type factors, especially coming from sovereign wealth funds and from pensions and endowments in Northern Europe and some places around Europe and the United States, so that's another area of growth.

Generally across the business, we're looking to see how we can capitalize off of the value of our data more and more, and see that as one of our growth areas and not just the traditional ways that we've had with AUMs and a fund approach and using our benchmarks into the fund areas. Data and data analytics is an area that we are looking at and that's where some of the other aspects to how the data is used, how we look at markets, et cetera, we're thinking there should be some opportunities there, as well.

Thanks. Thank you for the color on that.

Andre Benjamin, Goldman Sachs.

My question is back to tax reform. I was wondering if you are talking to any of the larger CFOs about how they are thinking about their balance sheet and EPS impact, I was just wondering is there any indication that people are putting more weight on the impact of funding costs versus the bottoms-up impact on EPS? I'm just trying to get some insight into how CFOs are actually weighing those two offsetting factors?

Andre, I don't have enough of a base of discussions yet to give you a scientific answer. I can just tell you anecdotally that every CEO and every CFO that we've been meeting with are studying the tax reform proposal the same way we are.

There has been -- if you met with the largest organizations, the largest global organizations and if you look at their repatriation topic which we have not touched on, repatriation is one that also has a very large impact on companies and could have, as I mentioned in my comments, a shorter term impact on issuance if people brought back a lot of cash and don't need to go to the markets. We don't think it would have a long-term impact.

But there's a lot of corporations that have literally -- there's a couple trillion dollars, $2.5 trillion we believe in overseas cash that could also go into that equation. I don't -- as I said, I only have anecdotal evidence. I do not have anything that's scientific yet. Each Company is impacted differently. If you went and met with retailers the import a lot of their products from offshore, if it's whether it's clothing, apparel, toys, electronics, et cetera, this -- the approach towards the border adjustability has a very negative impact on them. If you speak with large exporters like GE and Boeing and Caterpillar, border adjustability has a very positive impact on them.

A lot of the CFOs of the more highly rated companies, the combination of a much lower tax rate and interest deductibility are kind of a wash. And so they would say that it's not going to -- the interest rate deductibility is not going to have any impact whatsoever on their issuance programs because net-net -- the after-tax cost is even going to be lower because the interest rate is lowered so much.

Again, I can only be anecdotal. I would hope that as we get throughout the year and we get more specific proposals that I can give you better answers than I just did. But those are the kinds of factors that are being looked at in the kinds of conversations we've been having, but right now, it's all anecdotal.

That's helpful. One homework question, a model keeping from if we buy Market Intelligence, Platts business going forward as we combine those segments in our model? Should we assume that we will continue to get the individual revenue from Market Intelligence and Platts going forward.

Yes, we will disclose that going forward, as well. So you should see that breakdown in the future.

Thank you.

We will now take our final question. [Christian Bolu], Credit Suisse.

My first question. Are the revenue synergies inside of Market Intelligence related to the iteration that's going on? I realize you spoke to some left from synergies in the quarter, but I'm hoping for some more color on how that's going? Is it going along with your expectations, slightly better or slightly weaker? Just wanted to get your perspective on how customers are responding to your early cross-sell and integration efforts?

It's better than expectations. They had a target that when I share with you folks, they would accomplish it at this point in time and the $10 million target has exceeded -- the number has exceeded that target. So they were pleased with that. Once again, it's still early days because it's a lot of piloting going on as Cap IQ reps are going to Cap IQ customers and saying, look at our SNL product and let me show you how we do this.

But to me, the biggest move really can't take place until you have one integrated platform. That's when you can really begin to shape customers' behavior more meaningfully. And that's not going to be for awhile.

We're going to start beta testing that in the third quarter with a very limited number of customers. But we expect that, that will really be more the fourth quarter event when the Market Intelligence 1.0 platform is potentially ready for rolling out more -- on a more broader basis.

But just a slight difference answer to your question, we are very pleased with the integration of SNL. It's been something that we made some very tough management decisions when we brought it on board in terms of how we're going to manage the organization of putting the businesses together which was not necessarily something that was very natural for this organization. And it's paid off by making those tough decisions right upfront and having an excellent management team from SNL that came on board and incorporated some of the best management from the Company that was already here.

Generally speaking, we've been ahead of our target and we've been able to execute in a way that we've had very good financial performance principally from expense management. We are now focusing more and more on revenues and we have a few really good early wins. But I don't want to promise that we will get the same kind of speed of execution on the revenue synergies that we did on the expense synergies. But it's something we're tracking, we're watching and I'm hoping that we will. But it's a lot harder than getting expense synergies.

Understood. That's helpful. And then one last one for me, as it relates to your mid-single digit guidance on revenue, would it be fair to say you're incorporating the most conservatism on your Ratings business versus the other ones? I'm hoping for some color on factors that drive you to lower end versus upper end given that a lot of the potential changes impacting issuance aren't really getting factored into your outlook at this stage? Thanks.

How you should see our guidance is really middle of the road; it's neither conservative nor aggressive. That is the philosophy we apply. We think the guidance we have provided for 2017 is strong guidance for all aspects: high-growth, margin expansion, EPS growth, excluding the accounting change somewhere in the range of 8.5% to 12%. So we think this is very strong guidance we have provided. There's no particular conservatism in this. It's really considered middle-of-the-road.

Andre, there's one more thing I would like to add to your view is probably similar to other folks out there. And January was a great month. If January was a horrible month, maybe that question wouldn't even come in but we can't concern ourselves with one month out of 12, because we know every single year, it's choppy from month to month. So we can't be swayed by one particular month as we think about our annual guidance.

That's helpful. Thank you.

Well, let me thank everyone for joining the call this morning. As you see, we had a very memorable year in 2016. Although there was a lot of uncertainty in the market and a lot of change going on with things like the Brexit and the US elections, many of those uncertainties continue into 2017 and some of the topics we just talked about on issuance trends, tax changes, Dodd-Frank regulatory changes, et cetera.

We have people all over those and generally speaking, we've got our entire organization focused on growth and excellence. We are very excited about the prospects of taking this reshaped, very cohesive portfolio going forward. We appreciate your interest. And for all of the shareholders on the line, we thank you for being shareholders in the Company and we are excited about the prospects despite some of the uncertainty in the markets, and we are very pleased you joined the call this morning. Thank you very much.

That concludes this morning's call. A PDF version of the presenter's slides is available now for downloading from investors.spglobal.com. A replay of this call including the Q&A session will be available in about two hours. A replay will be maintained on S&P Global's website for 12 months from today and for one month from today by telephone. On behalf of S&P Global, we thank you for participating and wish you a good day.