Q3 2019 Earnings Call
Good morning, and welcome to S&P Global's third quarter 2019 earnings conference call I'd like to inform you that this call is being recorded for broadcast.
All participants are in listen only mode. We will open the conference to questions and answers after the presentation instructions will follow at that time.
Access to webcasting slides go to Investor Dot SP Global Dot com.
If you need any additional technical assistance. Please press star Zero and I was just you momentarily.
I'd like to introduce Mr. chip Merritt senior Vice President of Investor Relations for S&P Global Sir you may begin.
Thank you and good morning welcome.
Welcome to Sep Global's third quarter earnings call presenting on this morning's call, our Doug Peterson, President CEO and eat up Steenbergen Executive Vice President and Chief Financial Officer.
This morning, we shouldn't news release, my third quarter 2019 results. If you need a copy of the release and financial schedules. They can be downloaded at Investor Day SP Global Dot com.
In today's earnings release and during the conference call will providing adjusted financial information. This information is provided to enable investors to make meaningful comparisons or the corporation operating performance between periods interview the corporations visits from the same perspective as managements.
The earnings release contains exhibits that reconcile the difference between non-GAAP measures and the comparable financial measures calculated in accordance with U.S. GAAP.
Before I begin I need to provide certain cautionary remarks about forward looking statements.
Except for historical information the matters discussed in the 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 risk.
No certainties that may cause actual results could differ materially from results anticipated in these forward looking statements.
In this regard we direct listeners to our cautionary statements contained our Form 10-K 's, 10-Q's and other periodic reports filed with the U.S. Securities Exchange Commission.
I would also like to call your attention to European regulation, any investor who has worked specs to obtain ownership a 5% or more that's a big global should give me a call to better understand the impact of this legislation on investor and potentially the company.
We're aware that we do have some media representatives with us on the call. However, this call is intended for investors. It would ask a question for the media be directed to Jason's work swinger at two one to four Threeeight one to four seven.
At this time, let's turn the call over the Doug Peterson.
Thank you chip good morning, and welcome to today's earnings call. We're pleased to report and very strong third quarter financial results with all four divisions delivering revenue growth. We continue to generate significant margin improvement due to topline growth in the ongoing execution of our productivity programs and this margin improvement is occurring despite the increase.
In investment spending.
During the third quarter, we delivered a 16% increasing adjusted diluted EPS based on this performance and our expectations for the rest of the year, we're raising our 2019 adjusted EPS guidance, which he though it will discuss in a moment.
Share repurchases are an important component of capital return and we recently completed or 500 million dollar MSR initiated in August .
And of course, we're always excited to talk about or new products. We recently launched unique technology innovations, including textual data analytics can show scribe and several yes, you related offerings I'll cover these in more detail in a moment.
[noise] to recap the financial results for the third quarter.
Revenue increased 9% almost $1.7 billion organic revenue excluding revenue from the divestment of spy isn't big data increased 10% or adjusted operating profit increased 14% or adjusted operating profit margin increased 230 basis points to 51.9%.
As you know, we measure and track adjusted margin on a trailing four quarter basis, which increased 200 basis points to 50.1%.
In addition, we reduced shares outstanding by 3%, which contributed to the 16% increase in adjusted diluted EPS.
Each quarter, we highlight the key drivers to our business is important projects underway this quarter, let's start with ratings issuance trends.
During the third quarter global bond issuance increased 12% with mixed performance in various geographies and asset classes. We also include bank loan ratings volume total global issuance increased 14%.
U.S. bond issuances in aggregate increased 16% is investment grade increased 33% high yield vaulted, 43% public finance increased 15% well structured finance decreased 11% with a large decline in siloed, partially offset by gains in RMBS.
HM.
Investors frequently assumed lower interest rates drive increased issuance. That's certainly was not the case in Europe this quarter.
Despite historically low rates European bond issuance decreased 7% as investment grade decreased 10% high yield sword, 61% and structured finance decreased 20% due to declines in siloed covered bonds that are RMBS, partially offset by gains and ABS and CMBS.
In Asia Bond issuance increased 20, 324% overall.
On the fourth quarter 2018 earnings call. We introduced this chart to track debt issuance in global cash balances of the 50 companies with the most overseas cash at the end of 2017.
As you see on this slide the cash balances of these companies to stabilize well bond issuance. Among these companies is rebounding compared to an anemic 2018.
There have been 15 unique issuers that have come to market. This year, so far even apple returned to the market issuing $7 billion a bonds in September .
Our latest global bond issuance forecast includes an update for 2019 and the initial 2020 forecast.
Excluding international public finance, which has minimal impact on our financial results. We now forecast 2019 issuance to increased 9%. This is up from our previous forecast of a 1% increase this change was given driven primarily by an increase in corporate issuance.
On that same basis 2020 issuance is expected to increased 5% with growth in each issuance category.
After year over year declines in bank loan rating activity in the first half of 2019 bank loan rating revenue increased in the third quarter to $80 million from $73 million in the third quarter of 2018.
We are frequently asked by investors have maturities of linked and does corporate treasurer seek to stretched low interest rates further into the future.
This chart depicts average U.S. bond maturities for the past 19 years.
Investment grade maturities have lengthened slightly in the past year, both investment grade in high yield average maturities have been virtually unchanged since 2012 2010.
During our 2018 Investor day, we introduced the framework powering the markets in the future, including six foundational capabilities. We use this framework to set our goals and allocate resources I'm pleased to share a great progress on a number of the new initiatives and or areas of global customer orientation innovation.
And technology.
Can show has created a new product called scribe.
It's a speech recognition solution. The transcribes earnings conference calls using deep learning techniques scribe parsed thousands of hours of audio files from market intelligence archives to develop its capabilities.
It essentially teaches itself to become more accurate scribes capabilities enable complexities like enumeration capitalization and identification instances.
Market intelligence produces approximately 33000 conference call transcript each year, we recently put scribe into production. It produced more than 2000 calls in the third quarter and we're ramping it up to transformer transcription business.
Scribe is capable of handling 100 concurrent conference calls without any degradation in quality.
There are several benefits described first is productivity with an average time savings of 1.25 hours per call second is improved accuracy scribe is considerably more accurate in the leading transcription services that we have tested and third is reduction and turnaround time of approximately 15 minutes per one hour call. This.
Means that the complete conference call is available to our market intelligence clean sooner 83 minutes versus 97 minutes.
[laughter].
Well investors of use earnings call transcript as a reference for many years market intelligence is launched a new product to glean additional insights from conference calls the product is called textual data analytics or TD eight.
We published two papers, which provide empirical evidence that the stock price of companies, whose executives exhibited the most positive sentiment will provided the most transparency during the earnings calls outperformed the broad U.S. equity market by at least two per cent per year between 2010 in 2017.
Our Nelson shows that the textual analytics derived from earnings calls such as positive versus negative words language complexity analysts selected for Kuni et cetera provide additional stock selection power.
TD eight provides intra day delivery covering more than 9000 companies with 40 different metrics on each call.
We've included an example of technical data analytics for major U.S. think versus its peers on their third quarter earnings call held earlier. This month. This slide depicts the scores for five of the 40 metrics.
Net positivity calculates the difference we've seen positive and negative words here the bank scored worse than its peers.
Numerical transparency evaluates the proportion of numbers versus words, the bank provided a higher level of transparency by using more numbers than its peers to show rather than use words to tell.
Language complexity was lower for the Bank conference calls with more complex language or generally associated with either poor results or other negative issues.
Analyst favorite Chisholm, assesses, which analysts had by hold or sell ratings and which were selected to ask questions. The bank here showed less favorite chisholm than its peers, but including more analysts were bearish.
Sentiment differential analyzes the difference between the net positivity score in the prepared remarks versus the Q and recession here. The bank sentiment differential is more negative during the Q any responses relative to the prepared remarks than its peers.
There are other there's several other interesting new product launches under way over the past five years Platts has seen significant expansion of our coverage of seaborne freight rates. The team covers tanker drybulk and container freight markets, which are used in physical contracts and as a settlement basis for forward freight.
Derivative contracts.
The latest addition is the Kate key for index for dry freight rates. The Platts Kate T. Four index is based on trade flow volume and captures the movement of widely consumed commodities, such as iron ore and cool to highlight physical spot market trading activity.
Next in advance of the implementation of the 0.5 sulfur capped by the international Maritime organization or Oh in January 2020, <unk> ice and seeing the exchanges launched a total of more than a dozen new marine fuels, 0.5% futures contracts did settle against price assessments recently launched.
Platts.
True cost is launched climate in physical risk analytics, a combination of voluntary initiatives such as Tcs D and regulations in certain countries are driving investor demand for increasingly sophisticated.
Fully a level climate analytics, covering all asset classes.
Climate risk analytics adds new scenario analysis around two principal areas. The first is carbon were true cost data. It helps evaluate the earnings at risk from future carbon pricing scenarios.
The second is to degree alignment assessment since portfolios are not homogenous Lee exposed to carbon price risk, it's necessary to better understand individual portfolio variations from a two degrees scenario.
In addition, true cost climate change physical risk dataset helps companies and investors understand their exposure to physical risks and report in line with Tcfifty recommendations are coverage extends to more than 15000 companies and includes six climate change physical risk indicators, including heat waves coldly.
These droughts hurricanes wildfires and river in coastal flooding.
And last as the upcoming launch of E. Mini S&P 500, SG futures and see a mean, we highlighted the creation of this index on our first quarter earnings call. It's great to see that so soon after its introduction of new futures contract is already being launched utilizing the S&P 500.
ESG indexes its benchmark.
Now I'd like to turn the call over to either Steenbergen, who is going to provide additional insights into our financial performance and our outlook a though.
Thank you, Doug and good morning to all of you on the coal.
Let me start with our third quarter financial results Duck offered to highlights a strong revenue and adjusted earnings per share growth I will take a moment to cover a few other items.
Well reported revenue increased 9% organic revenue increased 10%.
Adjusted operating profit margin improved 230 basis points based on strong revenue growth and ongoing productivity programs, partially offset by the impact of increased investment in growth initiatives.
Interest expense decreased 16% due to a reduction of fin 48 interest accruals associated with tax audits and increased foreign interest income.
Share repurchases continued to be an important element of our capital return program.
These actions resulted in a 3% decline in our diluted weighted average shares outstanding.
We recently completed our August 500 million dollar MSR and in October we have been repurchasing shares in the open markets through a tenbfive one program.
We expect to continue to repurchase shares through this tenbfive one during the fourth quarter.
Stock options associated with 125000 shares were exercised during the third quarter. This resulted in a stock based compensation tax benefit on EPS of two cents year to date stock option activity is running well ahead.
Last year, however, as the number of employee stock options continues to decline, we expect a reduction in the tax benefits generated by stock option exercises.
During the quarter changes in foreign exchange rates had a negligible impact on adjusted EPS.
Owning meaningful impact was on ratings revenue, primarily due to the weakening euro and the British pound.
There were three non-GAAP adjustments this quarter that collectively generated a pretax gain.
$49 million from gains on divestments of Rick data and spy us.
$6 million in can show retention related expenses and $29 million deal related amortization.
This is a slight that we shared at our Investor day in May 2018 at the picks a framework that we outlined to show the areas, where we most impact shareholder value. The first to require investments we need to continue to invest to fuel revenue moment.
Them with product innovations, new technology, new datasets and outreach to new customers in new geographies.
We have made great progress delivering EBITDA and enhancements and we continue to from new organic opportunities to drive additional productivity gains.
Rising financial leverage and false optimizing interest costs, reducing shares outstanding and optimizing the tax rate and finally, we want to return capital to shareholders, while maintaining flexible debt capacity.
We're committed to returning at least 75% of annual free cash flow to shareholders each year.
This quarter, all four deficient delivered revenue growth with ratings and in this is delivering double digit gains.
On a trailing four quarter basis, adjusted operating profit margin increased for all for the patients.
However, during the third quarter market intelligence did not improve this metric with investment spending increasing year over year as plants.
I will provide color on the individual business results in a moment.
Now turning to the balance sheets.
Cash and cash equivalents increased slightly to $2 billion versus the end of 2018.
Our adjusted growth leverage to adjusted EBITDA was 1.9 times remaining within our targeted range. One point 75 to two point Ptwenty five times.
Well then on adjusted basis, our gross debt to EBITDA leverage multiple decreased to 1.1 times based on EBITDA growth in the first nine months of 2019.
Free cash flow, excluding certain items increased $243 million to $1.647 billion into first nine months of this year.
Share repurchases totaled 500 million into third quarter through an ANSR that was initiated in August in addition, $140 million of dividends were paid during the quarter.
Now, let's turn to the deficient results starting with ratings.
Ratings revenue increased 13% and excluding the impact of Forex was up 14% consistent with the increase in issuance that DUC already discussed.
Adjusted expenses increased 4%, resulting in a 19% increase in adjusted segment operating profit and eight 340 basis point increase in adjusted segment operating profit margin.
On a trailing four quarter basis adjusted segment operating profit margin increased 80 basis points to 56.7%.
Non transaction revenue increased 2%, primarily due to fees associated with surveillance and new entity ratings, partially offset by rating evaluation surface and changes in foreign exchange rates, excluding the impact of Forex non transaction revenue grew 3%.
Protection revenue increased 25% due to very strong debt rating activity, particularly in high yield and increased bank loan rating activity.
This slide depicts ratings revenue bites end markets the largest contributor to the increase in ratings revenue lost at 22% increase in Corpus in addition.
Financial services revenue was unchanged.
Structured finance declined 8%.
Governments increased 25% and the crystal and other category increased 5%.
This includes an increase in inter segment royalties from market intelligence and an increase in crystals dollar denominated revenue.
In addition, we've added a new disclosure this quarter with a revenue breakdown of individual products within structure.
S C stance for structured credit and is primarily made up of close.
ABS and structured credit are the largest revenue categories.
Turning to S&P Dow Jones indices, the segment delivered 14% revenue growth with gains in each category.
In the third quarter report that 5% adjusted expense growth, 19% adjusted segment operating profit growth ends and adjusted segment operating profit margin of 70.1% an increase of 280 basis points on a trailing four quarter basis just.
That segment operating profit margin increased 160 basis points to 69.1%.
Revenue in the various categories was up during the quarter.
At the billing fees increased 17% due primarily to UN growth in EPS and strong growth in mutual funds as well as the purchasable certain intellectual property rights.
Exchange traded derivative revenue increased 12% on an increase in exchange traded derivative activity.
Data and custom subscriptions increased 9%, but recall that a year ago, we reported a catch up in real time reporting that cost a difficult comparison.
For our and assess division over the past year ETF net inflows were $47 billion and market depreciation was $3 billion. This resulted in quarter ending ETF AUM.
One point 55 trillion dollars, which is 3% higher compared to one year ago.
I want to make it clear distinction between efforts AUM in quarter ending AUM.
Our revenue was based on efforts AOL, which increased 5% year over year.
We disclosed, Florida, ending figures because flows and market gains and losses, our best depicted using korda any figures as shown in the waterfall chart on the right.
Sequentially versus the second quarter of 2019, ETF net inflows associated with our indices totaled 23 billion, while market depreciation totaled 12 billion.
Industry inflows into exchange traded funds were $106 billion into third quarter with the majority going into fixed income and global equity products lows into us equity funds were $34 billion.
This was an excellent quarter for exchange traded derivative volume with key indicators generally exhibiting large increases in Foley.
S&P 500 index options activity increased 6%.
Fixed futures and options activity increased 22% and activity at the CMB equity complex increased 47%.
Market intelligence delivered 5% revenue growth both on a reported and organic basis as the revenue impact from the divestment of spy EPS was not material.
Also I want to call your attention to some recent success at been Jeep up we have recently signed several new customers among the largest new sales transactions since Benji five watts founded.
We are creating value for our customers by adding that give us unique datasets to a commercial operation with a much larger footprint in an environment, where global trade data is increasingly important.
Adjusted expenses increased 7% due to increased investment spending.
Adjusted segment operating profit declined slightly and the adjusted segment operating profit margin decreased 160 basis points to 34.3% more importantly on a trailing four quarter basis, the deficient delivered a solid adjusted segments.
Operating profit margin increase of 250 basis points to 35.2%.
We have noted on the past few Ernest goals that we planned on increasing investment spending in market intelligence in the second half of the year to support their expansion efforts in China data marketplace SMB SG.
And cloud.
This increase in investment spending has impacted operating profit margins throughout 2019.
Desktop revenue grew 5%, excluding acquisitions and divestments active desktop users grew 11%.
While the improvement over last quarter growth in this category category has been slowing for the past few quarters due to several industry trends.
Lower industry growth in the desktop category.
A continued competitive environment and evolving customer preference for desktop and data feeds.
Data management solutions continue to exhibit strong growth with a gain of 8%.
Credit risk solutions grew 5% facing a difficult comparison as the prior periods included timing benefits associated with a contract renewal that we noted on the third quarter conference call last year.
And now turning to platts.
Steady revenue growth continue that labs, increasing 4%.
On the organic basis adjusting for the sale of Rick data in July organic revenue increased 5%.
That's delivered eight 4% increase in court subscriptions and a 16% increase in global trading surfaces with increased trading volumes of fuel oil gas oil LNG and Ivan or.
Yes, sanctions on Iran, and Venezuela have had a modest impact on platts revenue to date.
Adjusted expenses increased 3% leading to an adjusted segment operating profit margin.
50.7% improvement 40 basis points.
The trailing four quarter adjusted segment operating profit margin increased 160 basis points to 49.6%.
Power and gas delivered the largest rate of growth at 11%, primarily the result increased adoption of our LNG benchmark that JPM marker.
Petrochemicals grew 8% due mostly to growth in subscriptions.
That's also neck grew 7% thanks to increased iron ore derivative trading activity.
Petroleum revenue increased 3%.
Now lastly, I would like to discuss our 2019 guidance. This slide depicts our GAAP guidance those items that changed our highlighted.
Please keep in mind that our guidance reflects current spot markets Forex rates.
Now, let me review the changes to our adjusted guidance.
While we're not changing our revenue guidance of a mid single digits increase we are expecting higher revenue.
Corporate allocated expense has been reduced by $10 million due to a reduction in professional fees.
Operating profit margin has been increased by 50 basis points due to slightly higher revenue and better than anticipated expenses.
The tax rate has been reduced by half a percent points with higher levels of stock option activity than initially anticipated.
These items result in a 15 to 20 cents increase to our adjusted diluted EPS guidance range.
Our expectations for free cash flow are approximately $2.3 billion, which is at the high end of the previous range.
We continue to execute upon our enterprise initiatives, including our stepped up investments in growth opportunities and our 100 million dollar cost reduction program.
Update will be provided on all of these programs during our fourth quarter earnings call.
In conclusion, we expect 2019 to be another very successful year for the company as we continue to deliver excellent near term results, while simultaneously building for the future.
With that let me turn to fall back over to chip for your questions.
Thank you about just a couple of instructions for our phone participants to indicate you wish to ask a question press star one and record your name to cancel or withdraw your question simply press star too.
Please limit yourself to two questions. That's two questions each in order to allow time for other callers during today's unit session.
If you can listen to a speaker phone, we would like to now has a question. We ask you lift your handset prior to pressing star one and remain on the handset to your call. The questions answered this once you're better sound quality operator.
We now think our first question.
Thank you. This question comes from an off partner with Barclays.
We ask your question.
Thank you. Good morning, gentlemen, My first question is just a broadly around issuance of the season and 5% forecast for next year is good but I was hoping you could address a little bit into the recent transfer on inflated bond ratings and maybe the question is around your expectations for the full rates and so forth next year.
Great. Thanks Manav. This is Doug will first of all but just to talk a second about a ratings issuance in the last quarter. There was it was incredibly.
Volatile and across different asset classes, you might as seen in the numbers. We prepared you can see that the corporate in the US was up 66%.
But financial services was down 2.3% financial services in Europe was down 17%.
Structured finance was mixed also around the globe you had us like ABS was up 6.6% well structured curves down 4.6%. So some of those trends as we look into 2020 as you see we've estimated about.
Issuance is going to be up about 4.74, 0.8%, that's being driven by a combination of factors, including the a pipeline of maturities that's coming out. So we see that there's going be maturity schedule of debt. We always look carefully at that zero interest rates overall economic growth, we're looking out to see how that's going to factor in.
We're also seeing that there are a lot of M&A activity, that's going to be coming through a there's been.
Structured credit, which is going to get be refinanced et cetera. So we've put all of those into place to analyze where we're going to look out for 2000 2020 issuance, but let me address some of the concerns that you raised as well about the debt markets overall.
First of all let me just say that we stand behind or credit ratings, we had been.
Making changes since 2010 2011, we have being become a regulated around the world. There's actually 24 different jurisdictions, where regulated in that includes one of those jurisdictions covers 28 countries soon to be 27, and some very robust regulatory system around the globe its base.
On a set of principles that eliminate conflict of interest minimize conflict of interest other segregation of duties. We have the independent oversight, we have independent boards around the world overseeing working with us to ensure that we are meeting the requirements of the different regulatory areas. There is also inspections enforcement actions.
So we've seen a very robust regulatory system put in place around the world.
And since the financial crisis at S&P Weve systematically reviewed and tested all of very criteria weve updated many of those including financial institutions structured finance corporates. Most of those are the increased levels of of the amount of collateral or the approach to how we think about.
Coverage ratios and things like that and so throughout that period, we have done a lot of a very very heavy lifting along with the regulators themselves to ensure that the ratings system. Overall globally is very robust and has really strong independent oversight.
But let me talk a little bit about the current situation of of the global debt markets I would say that we're concerned but not alarmed I don't know said distinction makes sense to you.
We now have a decade of very low interest rates and in Europe , even zero interest rates with expectations that demographics and other factors are going to keep interest rates very low for a long time, and so thats led to a lot of issuance of debt around the world. So the debt levels has actually increased and you can see that in.
From the evidence of some of our ratings themselves, there's fewer AAA sovereigns around the world.
There is only two corporate a triple A.'s left the overall distribution of ratings across the entire rating scale. The distribution is changed a lot. There is much much higher percentage of triple B ratings.
Then there were in the past in fact, it's almost about 40% of the corporate ratings are now triple B as opposed to a center of gravity that used to be a little bit more towards the single a level.
In addition, theres been a a lot of increasing the b minus rating category, which is you know that so that's a very speculative grade and theres been a very large increase in that in fact, the number of a single B minus credits is back up to the same level around 2009, so as I said, we're seeing a lot.
Those issues that we would consider to.
Create what I'd call some concern in the markets and we've been raising those concerns through research we've been publishing last year at the end of year, we published a paper about when the credit cycle turns triple B downgrade risks may be overstated. It's a very thorough review of the of the overall triple B market again in May.
May we look to the whole new study of the Triple B market. Those on May 29, and then recently we looked at what are the wire companies moving to the triple B level. It was that something that management decided themselves or was this spurred by.
The downgrades themselves and it's interesting because about two thirds of the of people that moved from the single a range to the Triple B Ranger actually management actions themselves, whether it's in MH M&A transaction or some kind of Oh.
The reason that management is going to take on additional debt for investment and lower their overall debt levels anyway. We're watching this very carefully we're aware that theres a lot of a discussion going on the markets around the ratings industry and we're very confident that we have put in place an excellent system of controls.
Cross the company a high quality criteria high quality people and and we're we're also watching very carefully as the credit markets start seeing changes.
Got it that's that's super helpful.
Then just for my second question about you know for the for the moderating desktop growth I think you called out want us to reasons as the preference for desktop Pos data feeds and I was hoping you could just a.
Elaborate a little bit on that in terms of if anything has markedly changed only the competitive environment just more challenging there.
Good morning mine up if we look at our desktop.
We are still looking at our growth as the fastest growth overall in the desktop industry.
We set to you last quarter that we expect expect mid single digit growth in the desktop for market intelligence and that's still validates our best expectation at this point in time, and then you'll see that active users of our desktop products are still increased period over.
Periods by low teens kind of levels. So why do we see this kind of level of growth in the desktop I think that has do with a couple of reasons.
As always being a competitive environments. So to some extent that's not so much different than what we have seen in the past, but certainly to our changes in customer preferences in terms of the delivery mechanism of data. So we see more and more customers that want to have shortened specific data sets through data feeds which you can.
Taking two Dara data science groups combined with our own datasets, and then deliver shorten insights and take certain decisions out of debt. So for us it doesn't matter so much in which form customers, we'd like to receive our data in yen to desktop is just India and a delivery mechanism.
And we see our data feeds business growing in the very rapid way. So therefore, if we look at our data feeds business, our best expectation of growth in the future will be high single digits too low teens for most of the of the quarters.
Got it thank you guys.
Thanks minus.
The next question comes from Michael Show with JP Morgan You May ask your question.
Hi, Good morning, Thanks for taking my question that I just want to stay on the.
The market intelligence.
Segment.
Permitting about taping appreciate the color on on the ongoing investments in and margin puts and takes there is good time to may be can provide a reminder, comment about how you think about incremental margins in that segment.
Yeah, Michael Good morning on at the beginning of this year during our first quarter earnings goal, we set that margin expectations for market intelligence would be more or less at the level also reported margins into first quarter going forwards and that has to do with two offsetting developments on the.
I want to enhance the growth of the business to operating leverage which will drive to margins next will be up by itself and then offset by very specific.
Investments investment programs and some of those initiatives that we expect to help future growth all the company and when we speak about two to 100 million investment program overall about half of those investments are going to market intelligence. So that is obviously depressing a bit margins at the same.
Same time, so the two sectors are offsetting and therefore, we set that expect margins to stay more or less at that level of to first quarter and that there is also basically what you have seen during the second and third quarter. So going forward, we would say that probably the same expectation suits continue.
Margins in market intelligence to stay more or less at this level, maybe slightly creeping up I don't want to be too much ahead of ourselves and be too premature with respect to our 2020 guidance, but overall, we expect that we will have several initiatives, where it makes sense to put new investments behind because.
Again, these investments make sense for future growth and value creation for our shareholders. So therefore, a similar trends of what you have seen so far this year is probably the best expectation for market intelligence in the near future.
Okay understood. Thanks.
Just on such thing with market intelligence, just you talked about the desktop business and kind of mid single digit growth.
And the medium term and I think you heard hurt your preference.
Phil.
Stop and as a delivery mechanism the month of state a couple of times now I mean, if I think about the mid single digit growth I mean, how should we.
Framework or think about the components of that mid single digits.
Yes, I think two components is a bit.
Tricky to give you all the details because we have never been speaking so much about that so far but let me help you with a couple all pieces of information that this hopefully useful for for you. So when we look at our overall strategy for market intelligence and the desktop our strategy is focused about delivery.
Better contact but content more data higher quality data alternative data.
Better linking a better search engine and that we have our enterprise approach, which is the enterprise wide contracts verbal and to stimulate as much user the goal on our platform. So various a fixed price per customer and they can have as many users on the plan.
Form as they once they are forcing more active users and therefore, we see that going up as we reported this quarter, 11%, but this has been more or less in the low double digits for the last multiple quarters. So if you take that into account, we get a better product period after period and the combination of.
That strategy, if you look at the annualized contract value of our customers, we see a healthy growth and that gives us the confidence that we will be able to grow our desktop revenue in the future at the mid single digits level. The other points that I would like to highlight is our as far as.
Operational margin guidance for market intelligence, we have set that is mid to high thirtys. So that is the guidance that we want to provide overtime, where we think the margins will go for market intelligence.
Thank you.
The next question comes from Toni Kaplan from Morgan Stanley . Your line is now open.
Thank you the more me.
Can you talk a little bit more about strong ratings margin expansion in the corner wasn't driven by a greater mix has higher margin products or did you take more price then RMR and how sustainable is the level of margin going forward and ratings on what you consider raising your medium term ratings margin target.
Hi.
Good morning, Tony. This is said this is a evolves.
Thank you for recognizing the strong results in ratings. Obviously, we are also very pleased with the progress we are making.
The improvement in margins in ratings has been basically at college continued trends over the last spirits and you have to infect seeing debts in periods, where the debt issuance markets was a bit weaker at the end of last year at the beginning of this year, our margins were still developing in the favorable way.
And now we can continue on death also when the issuance markets look more look more favorable.
Overall rating some margins on a trailing four quarter basis, we're at the level of 56.7 percents. So according to our standards were not really at the level of our aspirational margin targets of high Fiftys, so have a bit of room still dare to grow and how do we.
I expect that growth to happen in the future continued revenue growth, which is a combination all new issuance and reap refinancings of course commercial contracts change us new initiatives that you put in place in ratings think about eight years GE evaluations think about our allowance of rigs and Stephanie.
In other countries around two worlds and then there is also continue to work around making two ratings organization more effective taking complexity out taking layoffs or both the organization outs and making it more an effective organization. So overall expenses.
Going up 4% this quarter and disciplined going up 13% I think is clearly a very good combination and that is helping margins, but you should expect basically the same trends the same activities to say management actions to continue into future.
Great and then international in next revenue is very strong in the quarter, yes, what are the largest traverse there and can you provide any additional color on the international opportunity and that potential to make some inroads stresses your largest competitor in that market. Thank you.
Sorry, Tony, which I missed which which segments were you referring to index, but specifically with regard to international.
The international strategy for index is not so much change so what we have set the in deposit I should know our businesses largely tailored around us equities, where we hold some of the largest benchmarks, but then we're growing our international business in many different ways, mostly through relationships with exchanges around.
Worlds and there are several of those in Canada in Australia and in many other markets Thats the way, how we're trying to grow our international business I'm. So there's nothing particularly here to call out with respect to Whats also drive. Our this is the same strategy that we have been applying over the last over the last period.
Thank you.
Thanks, Tony.
Your next question comes from Alex Kramm from GBS. Your line is now open.
Hey, good morning, everyone, just coming back to the issuance forecast for 2020. Thanks wants owning that again I know, it's an early look but to two quick ones see a one yes, you break it down by buckets, what the different growth rates are for Alkar corporate structure et cetera, I don't think you mentioned that and then a more importantly, if I look.
Mid single digits or 5% growth for next year in issuance.
During some of the pricing that you typically pick up that would probably pushed ratings revenue growth in the high single digits. I know this is not a guidance call and usually don't talk about ratings guidance, specifically, but any anything we are bad may not be the case that plays out what would be the the other factors so think about.
Yes, so the second part of your question, we're going to address in our next earnings call. So the full year fourth quarter call, we're going to talk about.
Give some outlook for 2020, but going back to the first for your question, which relates to our issuance. Let me give you some of the numbers then so.
For 2019, we give you 2019 in 2020, so for corporates, we see that.
By the end of year that corporate issuance should have gone up about 17% and then in 2020 up 6%.
Financial services up 6% this year and our forecast for 2020 is up 3.5% structured finance will in this year at about 2% up in next year were.
Looking at 5% up and then US public finance is 6.2%.
For this year in 2% for next year and that gives you total numbers of about 9.4% for 2019 and 4.7% for 2020 and as I said before this is based on a on a deep review and research by our credit research team in ratings that look across many different factors.
They looked at all the different markets. They look at interest rates. They look at at maturities coming up they look at the M&A market. They look at what's out in bridge loans et cetera et cetera. So this is this is right now they're best forecast at this point in time.
Alright fair enough and then just secondly quick on a youre pretty quiet on China and Youre a in your prepared remarks.
In terms of the domestic opportunity I think last time, you talked about how active you well over the summer engaging with potential new.
Corporate Stuart to get a listing I guess I would've expected a little bit more action I'm heading into the fall. So just curious what's what's what's been happening over there.
So China is still a super high priority for US is very exciting we still have a lot of people visiting and our launch has been going very very well and but because building market like this from scratch, it's going to take time and as you've heard us say in the past calls. This is a three to five to 10 year kind of initiative.
We are in this for the long run and so since last quarter, we've been holding hundreds of meetings educating market participants we've been calling on all types of market participants to discuss ratings are methodologies are criteria and we do see us their active pipeline building in addition to that.
We've also launched our market intelligence business and we've added full coverage of the Chinese public and private bond issuers with profiles and financials.
This market has actually notice that we'd be begun to add new customers in China for a credit solutions and so we're very pleased with the with the overall results. In addition to that one of the factors, which I personally watch very carefully is how are we doing hiring the right people and we now have in place a new chief financial Officer for Chinese Opera.
Regions as CTO, we've got ahead of people and so we've got the infrastructure in place now with really highly qualified people who are helping us build out the team and make sure. We have the right kind of functionality in place so more to come on China, We'll obviously keep reporting on it as as it progresses, but the progress in the third quarter was excellent and.
I'm really really pleased with the team we've built on ground and the market response that we've been getting.
Fair enough. Thank you.
Thanks.
Next question comes from Andrew Nicolas from William Blair, You May ask your question.
Hi, guys good morning.
Looks like data management solution slowed a bit I think you called out a onetime item in the year ago period, but is there any additional color you could provide there and then sticking with data management solutions.
Could you deconstruct the growth in this segment over the past couple of quarters, how much is coming from selling new data feeds to existing clients. How much is coming from existing clients maybe interested in data feeds from the first time and then I guess that would lead how much is coming from new clients altogether.
Good morning, Andrew.
We look at data management solutions, there is nothing particular to call out with respect to the growth. This quarter I was 8% growth as you have seen at this is always dancing around a little bit corridor by corridor based on specific transactions in deals that happens during the quarter itself.
Yes, we will look at this as normal volatility as I said before the expectation should be for the data feeds business growth over the next periods high single digits too low teens during most during most corridors and with respect to customers that is a whole makes all new customers.
Existing customers, new data feeds for putting more and moved more data.
Our express Pete's platform.
You have seen some of that for example, with respect to our transcript business, we choose to be a static product and has become now a data feeds products, where it's in machine readable format. It has to links.
They are at has has been tax to shorten key words for example, the analysts and then the analyst models or key individuals that are speaking to to the coal we have been jihad data on our feats business. The SNL data on our feats business at Douglas speaking in his prepared remarks.
About the sentiments course around data, so, we're adding more and more content on our data feeds business and that is ultimately driving growth both from existing customers and new customers.
Great. Thank you and then sticking in market intelligence.
The national revenue has been growing quite fast and faster than the new ESS revenue and I think that dynamic was a bit pronounced this quarter. So I was hoping you could speak to what's driving that and then.
Maybe which regions you're seeing the strongest growth.
Yes, that's correct observation, we are growing internationally, we were doing daz by growing our salesforce around the world and we see particularly growth in the EMEA region being very healthy as well as in Asia and Thats by the way not only a trend for markets intelligence. We see for example, the same for our plan.
Business and we're very pleased with that because that's a result over very explicit strategy, we have as a company to grow faster outside of to us at and be able to take our fair share in terms of market position around around the world. So yes. This is the result of very specific strategic actions.
We have taken in our businesses.
Great. Thank you.
Andrew.
The next question comes from Christian Bolu with Autonomous your line is now open.
Good morning, guys.
Just wanted to dig into each.
Monetization on customer demand for you as she services I guess now that you have done a number of years geo value or assessments.
Could you give a bit more carlo on sort of monetization.
How are you charge in foreign assessment and what does the fee based on that any sort of Carlo on sort of pipeline or target number of assessments.
You want to achieve over the next sort of 12 to 24 months.
Thank you Christian this is Doug first of all ESG products across the company or are quite varied as you as you know we put in place of framework, where last year I put in place a design team for SG cutting across all of the divisions. So that we can take advantage of this of this really big opportunity.
By the way just anecdotally I was in the IMF meetings in Washington, a couple of weeks ago. In every single meeting that I had we talked about SG. So just I know thats anecdotal, but it's a it's a really it's really booming area and so across the company. We have various CSG products that they had talked about a few of those that were we have with true cost which is part.
The market intelligence I also talked about one of the specific ESG indices, we have with the S&P 500, SG index that we now we're going to be launching.
I see in these can be launching a futures contract treated on that so across the board were seeing a lot of growth in this and we will give some more information about the overall outlook on or on our earnings call next quarter, but within the ratings product when you're specifically talking about we've had three.
Ratings ESG ratings SG evaluations from the ratings business, which have been published I made public the the introductory pricing. There is one that we're using as pilots with the clients that we've been meeting with and we're going to be rolling out a different pricing schedule overtime, but again as I mentioned with our China discuss.
And in earlier.
This is really a great opportunity for us to be rolling out a new products and services, which are in demand by the market with a long term view, we're not just rushing into this in the next quarter. The next two quarters. This is a two to three to five year initiative, we want to do it in the right way and we're very very pleased with the response that we've been.
Getting an hundreds of customers that were meeting with that are asking for follow up phone calls to learn more about the engagement so more to come on this but but we're off to what we think is a very good start and were very enthusiastic about what we see.
Great. Thanks very helpful color.
My follow up.
Europe , you mentioned issuance trends remained weak in Europe test by low interest rates, maybe some color on what you think is going on there and then more importantly, as we look into sort of 2020 amnion can how do you think trends evolve there.
Yes, the European markets Theres, a couple of big trends going on one of them. Obviously is very very low interest rates. In fact, the rates. There are now so low that even Greece had some negative rates in the last quarter, where you had the entire yield curve for a few markets the German market in the French market a few weeks ago.
The entire yield curve from overnight to 30 years was negative and so there's a there's a lot of questions about growth in Europe . There was a change going on in the PCB between Mario Draghi and coming in with that with a Kristine regard theres been some discussions at Christina regard, although she's in the FCB is somebody that's trying to.
Talk about more stimulative fiscal policies and structural reform, which would potentially help drive some some new growth in the markets. So I think that there is a combination of of questions about how long interest rates are going to stay that low you've got a questions about some new policies are going to becoming the market. You also have the Brexit.
Which has created some uncertainty so when when we speak with participants in the market. These are the sorts of factors, which they they will site as to why issuance has been a little bit week in Europe , but overall, though it's still a critical market for us we're well prepared to respond in no matter what direction that goes and we've also position ourselves for.
Brexit so that we were able to serve the market's matter what direction Brexit goes by having opened to a ratings headquarters in Dublin. So overall, we're very well prepared to respond whatever the direction goes but there's definitely there's definitely a lot of issues in Europe , which are the created some caution in the markets they're.
Great. Thank you.
Thanks Christian.
Next question comes from Bill Warmington from Wells Fargo, You May now ask your question.
Good morning, everyone.
So first question for you on class.
5% growth.
As expected.
During the question I have is a couple of years ago. It was a high single digit low double digit type grower and the non petroleum markets are actually growing at that level. You mentioned, several new product launches underway and I wanted to ask whether you thought there had been structural changes to.
The business or the end markets that are going to keep the business at the mid single digits or whether there was a possibility with new product launches and changes in the market.
That you can see an acceleration of that to growth back to the upper single digit low double digit range.
Good morning Bill.
Youre right. That's platts is a very steady grow or at the mid single digit level at this point in time machine to core subscription business to price reporting business being very steady growing every year at thats at that level. That's of course, the majority of the business and historic.
We also very March focus around oil petrochemicals gas and oil related products, but we are expanding very rapidly to new commodity categories, and we're very pleased with that and metals agriculture, we would have been speak about.
LNG and also renewables as of course, a very important element. They are also around TSG theme. So were clearly expanding around new commodities, which will help with future growth in flaps and then we're very pleased with the growth in global trading services at each other products that are being developed.
Up with some of the exchanges around to we'll think about Singapore exchange think about ice and the product development stay are are really having some traction and therefore good growth in global trading surfaces. One key element that we believe is very relevant with respect to future growth of flats as well.
The fact that commodity trading desk and some of the large investment banks have been reduced heavily over the last few years. So when we will see more of those global trading desks around commodities coming back in some of the investments banking.
Organizations, then we would expect to see a pickup in growth of flats in the future, but the best expectation for the near future is probably very steady predictable mid single digit level growth for platts.
Okay and then for my my second question on market intelligence in the past you've talked about that business by by end market and I.
I think about half of it was not on Wall Street Buyside sell side.
Related so historically, that's helped market intelligence buffer some buffer itself from some of the secular pressures on the sell side by side and I just wanted to ask if we get a little color in terms of how those two segments, Steve the to buy side sell side versus the.
Non wall Street side did all right and are doing.
We are continuing to be very pleased that we have such a well diversified customer base in market intelligence and effect that is one of the reasons why relief that we think contingent to grow a bit above the industry kind of levels. So.
We have by sites, we have cell sites in investment banking, we have a large customer group in corporate banking and insurance, we have general corporate we have the academic worlds. So we are seeing still a very well diversified group of customers. So.
We expect that to continue and overall, therefore, we feel where are relatively well insulated against some of the specific trends, particularly on the buy side as you have issue of highlighted.
And then pardon comment for chip, Bob I'm, just I'm looking forward to how you guys optimize your earnings calls going forward using the can show TD technology I think very good question.
[laughter].
Thanks Bill.
Next question comes from Joseph Foresi from Cantor Fitzgerald.
Question.
Hi, This is true coming on for Joe I know you mentioned scribe and TDO. Just wondering if you could talk about some other areas were can show is contributing.
Absolutely and we continue to be extremely excited about can show actually we feel this year. We have found a goods operating mode. A good groove so to say and the collaboration between the businesses and can show and our many initiatives that are going on and overall.
With a loan local to enter Shazam within the organization. So just due to mention a few we have at initiative about completely revamping the markets on close process in platts, which is being done with help all can show. We have continued work that's going on about data extraction.
And and linking.
There is work continuing around only search and improving of only search on the market intelligence platform. We have a product at this cold codecs, which is able to analyze very large sets all written materials documents and being able to pull out the most important ella.
Lunch to analyst, which would be analyst in any industry and in any kind of Oh job profile. We have work that's going on about what this cold data operations at the surface more fundamental data architectural work that is happening within the company and our many other other examples as well so.
So we feel there was good progress with potential and at the end to all this year during our fourth quarter Burnished goal. We will give you an update particularly with respect to devalue creation around can show as we did also a year ago.
Great and then just curious how the M&A pipeline looks.
Well, we are always looking at M&A and as you know that ace and additional opportunity to grow our topline.
We are always very busy looking at many opportunities in the markets, but you know we have a very clear framework. We first look at those areas that we have redefined as strategically important.
For the company so renewed looking at everything that's under the song or that is brought forward by a banker and then secondly, we have a very clear framework with respect our capital approach and valuation metrics. So there's always multiple projects going on at the same time.
This quarter, we had two very small acquisitions.
In Platts, which wants to life Rice index, and Canadian energy business, but we will continue to look at opportunities but of course, you may expect us to continue to be very disciplined both on the strategic angle as well as from the financial angle.
Perfect. Thank you.
Thanks drew.
The next question comes from Craig Huber from Huber Research Partners you May now ask your question.
Yes, good morning of two questions. The first one can you just sort of bridge for us.
Strong 25% transaction ratings revenue growth.
Versus I think you said, 12% or so debt issuance growth globally, just with the gap. There is obviously more than just 3% to 4% pricing mix issues as such we could talk about middle follow up thank you.
Correct. The main reason here was that in high yields we saw very large growth most of those issuers in high yield our notes on frequent issuer programs and that is driving the transaction revenue more opt and the overall issuance levels in the market.
So that is the main reason why you see it discrepancy at this particular item.
Just to add one thing that high yield overall globally was up almost 70%.
And then secondly, just staying with the ratings area, obviously for a number of years for you guys have been very very tight with cost or.
This quarter was only about 4% maybe up low single digits through the nine months here.
Versus obviously.
For center. So revenue growth can you just talk about what you're able to do there on the cost front the civil to drive the margins so much you're in and how much more sustainable going forward, obviously I guess.
But if you just touched on that thank you.
Joe Embarrass fourth and his team are continuing to look at opportunities to simplify the organization make it more effective introduce new technology tools to make sure that our credit rating analyst after spend less time on data aggregation updating their models and spreadsheets.
And look more at the high year value at its part of their jobs, so more to judgmental parts.
Yes.
Part of the credits risk assessments, so that is helping the ratings business at the same time, if you look at the expense growth this quarter versus.
Last year through our core there it was up $20 million, mostly related to small movements here and they are particularly incentive compensation was a bit higher this quarter based on the strong performance and then there were several elements that runs in different directions, so nothing else, particularly to pull out so we will.
We continue with the progress we are making the same strategy. The same same approach and taking benefit of operating leverage we have in our ratings business.
Thank you.
Thanks, Craig.
The next question comes from George Tong from Goldman Sachs. You May ask your question.
Thanks, Good morning.
Question on your ratings business to follow up on the on the part question. Your ratings revenue increased 13%, which was relatively in line with broader issuance volume growth can you discuss why ratings revenue did outperform broader issuance volumes given the benefits from pricing high yield and frequent issuers that S&P.
George that's a bit of the opposite question that plus just across the cross again, you'll have to look at the differential between transaction and non transaction revenue and non transaction revenue campaigns.
The surveillance fees. These R&D issuers that are on frequent issuer programs. These are new entity ratings. At this is some of the crystal and other category. This is rating evaluation surface. So this is a very steady parts all the overall ratings revenue and you saw that going up.
Two percentage points in this particular periods and then if you look at the transaction revenue, which is really driven by transaction starts are happening in the markets Darby solve this very healthy growth of 25% and debt was in fact higher than the issuance in the market and that was driven by what I just explains that.
Most of the high yield issuers are not in frequent issuer program. So.
You'll have to go one or two layer deeper in terms of granularity through really look at the underlying dynamics and drivers and see what are all the different components of our ratings revenue.
Got it.
The operating margins in the index business are continuing to go higher on a year over year basis, given the high flow through pricing. The margins can you discuss the pricing and competitive environment here and if you see any changes to your long term view or targets on margins for the index business.
George I'll take this question first of all in the competitive landscape you've seen a lot of big developments that were watching very closely right now as we think about our strategic plan for the long run.
You saw seen a couple of companies have come out on the retail sector to eliminate fees for stock trading.
That one of the effects of that as it seems that allow there's a lot more volumes going into into EPS, and when things, who NTS and they go into passive structures lot of times, we benefit from that so we look structurally at the market overall that we see some big shifts continuing to go on or in pricing overall, all the way from the.
Retail level to the institutional level and the big flow overall of assets into passive is something we're benefiting from now to get a little bit more specifically to your question. Please.
We don't see any specific pressure on our fees ourselves directly with very long term contracts with the people that we deal with.
We work with them in a way that we know in the long run with what our pricing is probably going to be and how it's going to end up and so we continue to see a similar structure to our own revenues and expense base that we've had in the past we saw a very large increase in overall.
Volumes. This quarter you saw that Ava talked earlier in his section about this and so from that increase across the board of our of our revenue from indices. It flowed through to improve our margin, but we don't see any overall change in the structure of the market or our own business model that we're going to see any significant change and.
In in the index margins, we will provide more update on that at the next earnings call.
Very helpful. Thank you.
Thanks George.
Next question comes from Henry Chen from BMO Capital markets, you May ask your question.
Hi, guys morning. Thanks, just a follow up question on some of the new products.
You mentioned, including can show and some of the ones on Platts just in context.
I guess some of the pressure and I guess in the sell side and in the energy space.
Hey, good Adsense.
Hello.
On like what's driving that product demand, whereas I sort of value created.
Or or sort of needs being met for some of these new products. Thanks.
So overall across the entire company, we spend as much time as possible listening to customers to understand what are you going to be the biggest trends that are that are driving the need for new analytical and benchmarks from S&P global when we listen to the markets Theres a lot of change going on technology.
US driving feed products and what we what we've been calling the marketplace in the market intelligence business. When we talk to people that they're looking at major changes in regulation, which for the last few years in the banking sector helped with a lot of the growth in risk services at market intelligence, It's our business at Crystal and specific.
Only with the energy transition that's going on related to climate change. There is an increasing interest in a combination of ESG products as well as products like the 0.5% IMO sulfur product, which is now moving to the CMV in ice exchanges is futures and so we try to look out in the four.
What are the things the biggest.
Trends that are going to be impacting people's needs to make financial decisions and market decisions and how can we serve those and in some of the products that we've talked about.
Many many years ago start showing up over time in our revenues.
As an example in platts we've been.
We've been responding to the market changes that are going on in the structure of the any energy industries and one of the.
Products that we featured frequently meaning over many years was the J km marker, which was the Japan Korea marker for LNG in Japan, which has now become the Asia price, which is now on the exchanges as the futures contract. So we'd like to give you updates. These are some of these products start out small, but they help show what do we think are the biggest.
Trends in the markets and how are we going to be addressing those trends and as I said their technology. The risk management, there SG trends that are changing people's needs to have more and more data about about markets and so we're trying to show you how we're addressing those going forward and appreciate your question.
Got it Okay. That's super helpful. Thank you.
Thanks.
Thanks Henry.
The next question is from Gary Bisbee from Bank of America Securities You May ask your question.
Yes. Thanks for squeezing me in this morning, I guess, just one question given the margin strength that you've delivered in recent quarters certainly over the last several years. How do you think about weighing stepped up potential for stepped up investments to drive the topline versus letting so much of the incremental profitability of your businesses flow to the bottom line or are there.
Opportunities in some of the businesses to accelerate based investment or are you comfortable the level you're investing is.
Is the appropriate level that the organization.
Thank you.
Yes, that's a that's a great question and we have issue understand Ulta all management's discussions around this topic because our philosophy is that topline growth in the end generates the highest level of value creation for our shareholders, particularly at the levels of margins steps we can report.
At this at this point in time, so that's why we have very explicit investment programs in place. That's the 100 million investment program that we have been talking about.
In the past and what we're seeing today is that we expect that those investments programs to continue because we will identify new opportunities to invest in the future.
And those will help with future growth of the company, which we think it's the most attractive for us going forwards at the same time to benefit is to add to we still have a local efficiency and productivity opportunities as well as a company. So we are able to self funds some of those investments programs.
At this at this moment and we believe that are still new efficiency opportunities as well going forwards. So therefore in fact, the if you look at our expense growth year to date expenses are up just under 2% year to date and that means that we have been able to absorb.
Acquisitions like been GPA rate large can show at have been able to make new investments in those large initiatives at 100 million level that we expect still for the full year. This year and just growing the expenses under 2%. So that is showing how we are working on both sides here.
In order to make very explicit divestments, but also be able to sell funds and I would expect debts.
To continue in that we can do still both at the same time into future as well.
Thank you.
Sure.
The next question is from Shlomo Rosenbaum with Stifel Nicholas.
Yes. Good question Hi, Thanks for squeezing me in under the wire.
Doug can you talk a little bit about just the market intelligence with enterprise DWA Enterprisewide contracts are you seeing any major displacements of competitors because of that.
In terms of your ability to.
Offer more so that they don't need to run so many systems or do you think that the head count growth that you're seeing is somewhat duplicative as their handling more.
A couple systems.
Hello, and thanks for the question.
No I can't tell you specifically, if we're displacing people I know that sometimes a here that anecdotally, but what I do hear what I do see is that when we move people onto onto the enterprise contract.
That users users go up and it's a combination of people before that were not necessarily users because they were there regarding the number of of seats, Joe slowly as to who would actually have access to the to the per seat pricing and so there's people that in the past wanted to use it or or needed to use of the now get access to it and then there is.
Other people that become more light users and so you get you see a huge advantages it starts getting built into the work flow of an institution because you have people that are not the not the hard core.
Power users there light users who are helping print out reports are helping download information there, helping look at new new a resurgence coming out and that actually helps us embed the the overall inline platform across the entire architecture of affirm. So does that then end up displacing other people we think it does.
But I don't want to give you anecdotes I'd rather come back at sometime in the future and give you more facts around them.
Okay. Thank you and then just one other follow up I was SNL Caf I Q integration going from the product side and your ability to migrate declines to platform. It just seems that when you are able to get debt done to probably it's an opportunity to improve the growth rate and market in China teligent on the desktop side.
Yes.
Is our strategy with respect to the migration also platforms as you probably know the whole SNL platform has already migrated to the new market intelligence platform and ended the next phase and that is a face that'll take quite some time.
It will be the movements altogether I Q customers to the new platform. We expect next year or debt, we will create a situation with dual access for our almost all of our customers. So that they kept by Q customers, we'll get some familiarity with the market intelligence platform and then slowly step by step with a lot of hand hole.
Adding we will move customers over and that will probably a process that will take quite some time. So mostly will go beyond 20, 2020, and that's important because we can't lose customers along the way customers half and bed at some of those desktops in their workflows have embedded in their models with ultimate that links.
We have to make sure that old data is available. All the features are available. So there is a little for handholding that these needed in order to make sure to customers are comfortable to to move Ofer. So were continuing to make progress. They are we have very specific actions plans for the next periods and particularly to make sure that all of our customers have.
Access to both platforms. When you are today only on kept by Q is going to be an important step for for next year.
Thank you.
Thanks level.
We will now take our final question from Patrick O'shaughnessy from Raymond James You May ask your question.
Hey, good morning, and just one question for me. So there's obviously a renewed effort underway to villify the rating agencies to what extent as their concern on your part that the FCC might feel pressured to re examine the issuer pays model or otherwise take steps to mitigate perceived conflicts of interest.
Patrick This is Doug clearly we are on top of this we're watching this very closely to see what kind of what kind of initiatives could be underway. The FCC already has been doing work for the last few years looking at different business models, they've got a couple of different groups that have been form.
To take a look at the ratings industry, but very importantly inside of the FCC as a group called the CR rates Acquitting Agency rating Agency group that has been is now had almost 10 years of work overseeing the rating agency industry. They've got the data they have the facts and we're engaging very closely across the board.
With the regulating with the regulators with the FCC itself with the CRM group anybody who would like to talk to US we have no problem sharing all the data we have about how we run the business as I said earlier, we stand by our ratings, we stand by our processes and procedures. The controls we put in place the quality of or the quality of our ratings the quality of.
Our processes et cetera. So as you know this is something that we will be watching very very closely will be actively participating in any dialogue that comes up around the around the business model for rating agencies and and we're ready to have very professional dialogue about this and appreciate your question. Thank you Doug.
Thanks.
Let me just wrap up until you again that we're very pleased with the results that we had today and we were able to talk about all four divisions and our significant margin improvement in the productivity programs. It's also encouraging that as a company we have the capacity in the ability to invest in some of the new products that we feature today, but very importantly, we appreciate.
All the interest from the analysts to ask questions today, and we always appreciate your questions the easy ones in the tough one so keep them coming thanks a lot.
That concludes this morning's call a PDF version of the presenter slides available now for downloading from Investor thought SP Global Dot Com a replay of this call, including the Q and a session will be available in about two hours to replay will be maintained on S&P Global's website for 12 months from today and by telephone for one month from today on behalf.
With S&P global we thank you for participating and you wish you good day.
Yeah.