Good morning, and welcome to S&P Global’s First Quarter 2017 Earnings Conference Call. I’d like to inform you that this call is being recorded for broadcast. All participants are in a listen-only mode. We will open the conference to questions-and-answers after the presentation and instructions will follow at that time. To access the webcast and slides, 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 and thank you for joining us on 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 first quarter 2017 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’ll provide an 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 managements. The earnings release contains Exhibits that reconcile the difference between the non-GAAP measures and the comparable financial measures calculated in accordance with U.S. GAAP. Before we begin, I need to make 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 description 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 results 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 U.S. 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 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. With a surge of bond issuance healthy stock markets recovering commodity markets and improving global GDP, we’re off to a great start in 2017. Let me begin with the first quarter highlights. We attained strong organic revenue growth in every segment. Ratings results were truly outstanding and with a highlight of the first quarter. We continue to improve margins and delivered 630 basis points of margin improvement and adjusted diluted EPS growth of 35%. We generated $306 million of free cash flow, it was typically our weakest cash quarter due to payment of annual incentives. We returned $307 million to shareholders through share repurchases and dividends, and we increased our adjusted diluted EPS guidance to a range of $6 to $6.20. Looking more closely at the financial results, the company reported 8% revenue growth and on an organic basis grew 18%. We frequently talk about the pull-through of revenue to adjusted operating profit being quite high. It’s rather striking this quarter that the adjusted operating profit exceeded revenue growth. This can be primarily attributed to the markets in commodity segment, where divestitures drove, revenue declined to $68 million, we had adjusted operating profit only declined $7 million. The company achieved a 630 basis point improvement in adjusted operating profit margin due to the sale of lower margin businesses, strong organic revenue growth, and productivity initiatives. ForEx had an $8 million unfavorable impact on revenue, with a $6 million in favorable impact on adjusted operating profit. Ratings realized the majority of the impact. The progress we’re making to build a cohesive set of high-value assets is paying off. We were able to turn 18% organic revenue growth into 35% adjusted EPS growth through a combination of productivity improvements, share repurchases, and the inherent scalable nature of our businesses. In a moment, Ewout is going to discuss the results of each of our businesses in more detail. What I’d like to do is provide a bit more color on some of the current and future drivers of our businesses. And let me start with credit conditions. While GDP is the fundamental long-term driver of issuance, spreads can influence timing. This is clearly evident in the first quarter. High-yield spreads contracted 400 basis points over the past year, making attractive entry point for issuers. And during this same timeframe, investment credit spreads contracted 74 basis points. We saw a strong bank loan actively in the first quarter, partially as a result of the rate and spread environment. Bank loan rating revenues become an important part of our rating business over the past few years. This chart depicts the growth. First quarter 2017 bank loan rating revenue was particularly strong, increasing over 140% versus the first quarter of 2016. Bank loan ratings are primarily issued on leverage loans typically rated BB+ or lower. But the volume of leverage loans and the percent of leverage loans rated by S&P have increased over the past few years. Leverage loan growth has been supported by strong investor demand with record inflows into retail loan funds and recovery in issuance of CLO since the financial crisis. In the first quarter, leverage loan volumes were very strong driven by tight spreads driving borrowers to refinance their outstanding loans. We estimate that 40%, 47% of the global volume in the first quarter was for refinancing. In addition, the percentage of leverage loans rated by S&P surpassed 93% in the U.S. and 78% in Europe. While many of you track issuance, we always try to point out where issuance takes place? Which type of issuance and the size of issuance of deals make a big difference in the revenue we realize? This was abundantly clear in the first quarter. Global issuance in the first quarter, excluding sovereign debt increased 4%, yet high-yield debt increased by over $1 billion, or a 172% because very few high-yield issuers are part of our frequent issuer programs. This provided a tremendous amount of incremental revenue to the ratings business. Geographically, issuance in the U.S. increased 23%, with investment grade increasing 15%, high-yield soaring 115%, public finance decreasing a 11%, and structured finance increasing 57%, due primarily to strengthen CLOs, ABS and RMBS. In Europe, issuance increased 3%, with investment grade declining 1%, high-yield rocketing 181%, and structured finance decreasing 21%, with weakness in covered bonds and RMBS. In Asia, issuance decreased 18%. However, the vast majority of Asian issuance is made up of local China debt that we don’t rate. Ratings published its latest issuance forecast. For 2017, we expect an overall decrease in global issuance of 1%. This compares to the forecast of the 3% increase that we issued about three months ago. The most significant changes in international public finance, which had been forecasted increased 5% and is now forecasting to decrease 40%. It now appears the 2016 issuance in international public finance was an aberration and that issuance will revert to historical norms. Importantly, this is not a category that generates much revenue for ratings business. When you look at the chart, you can see that the categories that are most impactful to our revenue, namely non-financial services, structured news public finance are collectively forecast to increase in 2017. Turning to S&P Dow Jones Indices, in February, we celebrated the 60th anniversary of the S&P 500. We often talk about the importance of benchmarks and the time it takes to build one. None is more iconic than the S&P 500, but originally known as the Standard 500 is introduced at a luncheon for the press on February 27, 1957 at the Lawyers Club in New York, with a turnout of 35 top financial writers. The initial 500 included 425 industrials, 25 railroads, and 50 utilities that were deemed most representative of the overall market. These 500 stocks accounted for 90% of the total U.S. market value. The 500 is groundbreaking not only for its breath, but also because it could be calculated and distributed on an hourly basis. Today, the S&P 500 is the world’s most followed stock market index being calculated continuously. S&P Dow Jones Indices continue to build its business and several examples are listed in the slide. I’m only going to touch on the first item. S&P Green Bond Select Index was created for market participants seeking to monitor developments in the critical areas of green finance. This pioneering index maintain stringent standards in order to include only those bonds whose proceeds are used to finance environmentally friendly projects. Platts is also actively expanding its business opportunities and two examples are listed here. We believe the U.S. Gulf Coast is poised to become a key anchor for liquefied natural gas prices. And our customers required that the new flexible supply from the U.S. is underpinned by both price transparency and the means to hedge. In response to the growing U.S. LNG exports, ICE will launch LNG derivative contract. These will be cash settled against the Platts LNG Gulf Coast market price assessment and these Platts-derived forward curves for daily settlement. The first OTC swap contract for Black Sea Wheat traded with the Black – Platts Black Sea Wheat price assessment as the settlement price. This transaction is a significant step towards the emergence of a new regional futures market for Black Sea Wheat. The Black Sea region is a major global wheat trading hub. But in spite of its size, this major trading hub has not had dedicated derivatives market, reflecting its own supply and demand dynamics. Turning to Market Intelligence. [I had the] [ph] instruction to provide a breakdown of the business by customer type. With investor concerns about the impact of the continued movement of assets from active to passive could have on market intelligence revenue, you can see that investment management makes up only about 25% of our customers annualized contract value. In addition, our move to more enterprise-wide contracts should result in less customer volatility. As we look to the remainder of 2017, geopolitical risk in Central Bank actions may create volatility in the second-half. There are number of positive trends that we have identified, including expectations for slightly stronger GDP growth in the U.S., European GDP looking promising, ECB continues to have a quantitative easing program, strong global equity market so far in 2017, and a steady shift from active to passive investing. There is cause for caution, however, with a number of risks, including potential for U.S. fed reserves to initiate more frequent interest rate increases and begin on winding its balance sheet from a Brexit negotiation and upcoming elections in Europe and continued devaluation of most currencies against the U.S. dollar. Finally, I want to share with you some significant changes, plans for a Board of Directors. Sir Win Bischoff and Hilda Ochoa-Brillembourg two longstanding Directors will provide a wise count full oversight over many years of retiring. In the meantime, four new Directors have been added in the past six months who bring a wealth of business acumen and experience to our Board. With that, let me turn the call over to Ewout.

Thank you, Doug, and good morning to everyone on the call. This morning, I would like to discuss the first quarter results and then provide updated guidance for 2017. Doug already discussed the changes in revenue, organic revenue and adjusted operating margin for the company. I would like to point out that the tax rate of 30.3% is below the anticipated full-year run rate of 31%, due primarily to the discrete tax benefit from stock option exercises through March. In addition, our ongoing share repurchase program led to a $6.4 million decrease, or 2% in average diluted shares outstanding. I would like to echo Doug’s comments that with a 35% increase in adjusted diluted EPS were off to a great start to 2017. Net of hedges, foreign exchange rates had a modest negative impact on the company’s revenue and adjusted operating profits in the first quarter. The bulk of the impact was in the Rating segment, with a $6 million unfavorable impact on revenue and an $8 million unfavorable impact on adjusted operating profits, due to weakness year-over-year in the British pound and euro. Now, let me turn to adjustments to earnings to help you better assess the underlying performance of the business. Pre-tax adjustments to earnings totaled to a loss of $41 million in the quarter and included $15 million of acquisition and divestiture-related adjustments, a $2 million expense associated with an increase in financial crisis, legal reserves, and $24 million in deal-related amortization. In the first quarter, every business segment contributed the gains in organic revenue, but the gains in ratings were particularly note worthy. Reported revenue declined in Market and Commodities Intelligence was due to several divestitures. The adjusted operating profit growth varied by segments was 50% at ratings and 14% at S&P Dow Jones Indices. Once again, the impact from divestitures affected results with Market and Commodities Intelligence, adjusted operating profit declining 3% due to the sale of several businesses. Organic growth and synergies were able to make up much of this loss. Both Ratings and Market and Commodities Intelligence delivered remarkable adjusted operating margin improvement. Let me now turn to the individual segments performance. As Doug discussed earlier, tight spreads drove high-yield issuance and bank loan volume. And this resulted in a surge in high-yield and bank loan ratings and propel results for the Rating segments. Revenue increased 29%, including a 1% unfavorable impact from FoRex, 79% of the incremental revenue flowed through adjusted operating profits, highlighting the scalable nature of the ratings business. Adjusted operating margin increased substantially with 53.1%, due to strong revenue growth, largely offset by increased headcount and incentive compensation. Very strong transaction revenue fueled ratings first quarter revenue growth. Loan transaction revenue increased 4% from growth in surveillance fees, entity fees, intersegment royalties from Market Intelligence and CRISIL. Transaction revenue increased 65%, primarily from a substantial increase in high-yield bonds and bank loan ratings, as well as improved contract terms. If you look at ratings revenue by its various markets, you can see that while all of these categories reported growth, the growth in corporates was exceptional. And this is the category, where the high-yield bonds and bank loans are reported. Let me now turn to Market and Commodities Intelligence. This segment includes S&P Global Market Intelligence and S&P Global Platts. In the first quarter, reported revenue declined 10% due to recent divestitures. Excluding these divestitures, organic revenue increased 7%. Adjusted operating profit was down due to the divestiture of several businesses. Despite these divestitures, adjusted operating profit only decreased by $7 million, as organic growth and synergies were able to make up much of this loss. Adjusted operating margin improved 270 basis points, primarily due to the sale of lower margin businesses, strong organic revenue growth, and SNL integration synergies. Let me add a bit more color on the first quarter. Recent divestitures masked solid organic growth of 9%. This was due in part to a 9% increase in the number of SNL, S&P Capital IQ, and ratings direct desktop users. One of the important milestones in the quarter was the launch of a unified S&P Capital IQ and SNL commercial organization. This is a critical step in harmonizing our product offering into cohesive enterprise commercial agreements and ultimately one product platform. During the quarter, we also expanded our content quality reward program to include most of the Capital IQ content. Some of you may be familiar with this program, as it awards $50 to those who finds an error in our data. And the final highlight of the quarter was the beginning of a strategic relationship with Kensho Technologies. If you are not familiar with Kensho, you should check them out. Kensho provides next-generation analytics, machine learning, and data visualization systems to Wall Street’s premier global banks and investment institutions. We have agreed to a long-term commercial relationship, which will do so in product and data collaboration. We have introduced a new disclosure here depicting market intelligence revenue by three components. Risk services delivered the strongest growth in market intelligence.Thanks to mid-teens growth of ratings express and high single-digit growth of ratings direct. Enterprise Solutions revenue increased 7%, as demand for data feeds continued to be robust. And finally, our Desktop products grew 8%, as the growth of the former SNL and S&P Capital IQ Desktop products continues to roll out as a one commercial offering. Finally note, data was $38 million of revenue in the first quarter of 2016 from businesses that were divested. Platts delivered reasonable organic revenue growth, as commodity markets recover. The OPEC production cuts have been very successful in increasing oil prices. Tensions remain as higher prices have increased new shale investments. According to RigData, North American rig counts have doubled since the low in May of 2016. First quarter revenue increased 10%. However, excluding revenue from recent acquisitions, organic revenue increased 4% due to modest growth in both subscriptions and global trading services. The core subscription business delivered mid single-digit revenue growth, with similar gains across all commodity groups. Global trading services low single-digit revenue increase was primarily due to the timing of revenue and strong trading volumes in petroleum, partially offset by weakness in metals. Of particular importance during the quarter was the announced inclusion of Norway’s Troll as the latest addition of crude grade in the Brent basket beginning January 2018. The makeup of the Brent oil benchmark as we force over time as production changes path occurs. This latest change follows the addition of Forties and Oseberg in 2002 and Ekofisk in 2007. Here again, we had a new disclosure breaking out Platts revenue by four primary markets. You can see that petroleum and power and gas make up the majority of the business. The growth rates of each markets are depicted on the slides. During the first quarter, Platts delivered revenue growth in all of the metals and agriculture markets due to lower metals revenues and global trading services. Please note that about a $11 million of revenue in the first quarter of 2017 from recent acquisitions. Now, let’s turn to S&P Dow Jones Indices. Revenue increased 14%, mostly due to a surge in ETF assets under management. Adjusted operating profit increased 14%, primarily as a result of increased revenue. Adjusted operating margin increased 20 basis points to 67.9%, as revenue gains were partially offset by increased headcount in commercial and operations to support future growth. Asset linked fees experienced the greatest growth in the first quarter, rising 26%, driven by a 39% increase in average ETF AUM. Subscription revenue increased modestly due to growth in data subscriptions and exchange traded derivatives revenue declined 8%. The trend of assets moving into passive investments was very strong in the first quarter. The exchange traded products industry reached inflows of $189 billion, a new record by a first quarter and it was 2.5 times larger than the previous first quarter record. The quarter ending ETF AUM tied to our indices growth of $1,116 billion, up 35% versus the first quarter of 2016. As the chart shows, this was the result of $162 billion of inflows and $126 billion of market gains over the last 12 months. The $1,116 billion was a new record, surpassing the previous quarterly record of $1,023 billion set on December 31, 2016. The first quarter average AUM associated with our indices increased 39% year-over-year, and this is a better proxy for revenue changes than the quarter end figures. Exchange traded derivatives faced a tough comparison to the first quarter of 2016, when market volatility was much higher. Transaction revenue from exchange traded derivatives declined due to a 10% decrease in average daily volume of products, based on S&PDJI’s indices largely as a result of declines at the CME Equity complex. Now, turning to our capital position. There was a little change from the end of the fourth quarter. We continued to have $2.4 billion of cash and $3.6 billion of long-term debt, $1.8 billion of this cash was held outside the United States at the end of the first quarter. Our debt coverage, as measured by gross debt to adjusted EBITDA was 1.3 times versus 1.4 times at the end of the fourth quarter. Free cash flow during the quarter was $306 million. However, to get a better sense of our underlying cash generation from operations, it is important to exclude activity associated with divestitures and the after-tax impact of legal settlements. In the first quarter, there was little difference, as free cash flow on debt basis was $307 million. As for return of capital, the company returns $307 million to shareholders in the first quarter, $201 million through repurchasing 1.5 million shares and $106 million in dividends. Now, I will review our updated 2017 guidance. Based upon a strong first quarter and our expectations for the remainder of 2017, we have made several changes to our original 2017 guidance. This slide depicts our GAAP guidance and the changes that we have made Please keep in mind that our guidance reflects current spot market ForEx rates. This slide shows our updated adjusted guidance. The changes are highlighted on this slide. I’m going to discuss the changes to our adjusted guidance, which were as follows. We have increased our organic revenue growth from mid single digits to mid to high single digits growth, with contributions by every business segments. We have lowered our unallocated expense from a range of $145 million to $150 million, down to a range of $130 million to $140 million. Corporate unallocated is expected to be lower, driven by continued cost discipline. We have changed our operating profit margin guidance, which had been for an increase of roughly 100 basis points to a range of 44.5% to 45.5%. And we hope that providing the margin percentage is more clear than merrily providing the change in basis points. We have increased diluted EPS, which excludes deal-related amortization from a prior range of $5.90 to $6.15 to a new range of $6 to $6.20. And free cash flow, excluding after-tax legal settlements and insurance recoveries was $1.6 billion and now is greater than $1.6 billion. Our guidance does not take into consideration any potential policy changes from the new U.S. administration. Overall, this guidance reflects our expectation 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 of instructions for our phone participants. [Operator Instructions] Operator, we will now take our first question.

Thank you. Our first question is from the line of Peter Appert of Piper Jaffray. Your line is now open.

Thanks. Good morning. Doug, the first quarter results are obviously very impressive. I’m wondering about your thought process and guidance. It seems to imply that maybe some of the strength in the first quarter you’re looking at is just pull-forward. Can you talk to that issue?

Yes, first of all, thank you Peter for the comments. As we looked at guidance, we wanted to take into account this very robust first quarter issuance, and taken a look at the rest of the year what we forecasted and what we budgeted. If you look at a report that we issued called credit trends in global issuance for 2017, as you can see, we looked at different categories. In my comments, I mentioned that, international public finance was going to be dropping and that was driving the overall 1% decrease. But for the entire year, we’re looking at industrials being up for about 5% issuance overall, financial services about a 3% range, structured finance about a 4%, and then U.S. public finance down about 6% to 7%. That’s – those were kind of the underlying conditions we used for issuance for the rest of the year. I don’t – I wouldn’t necessarily call it pull-forward, but it was a very robust year. We also wanted to highlight this quarter, bank loan ratings. We have never really given the kind of disclosure we gave before on the bank loan rating product. As you can see, results are very strong in the first quarter, partially driven by the rate environment, the spreads have come down considerably, as well as what I’d call a much more positive consumer outlook as well as corporate outlook for growth in the U.S. economy. As we’ve always said, growth is huge. GDP growth is the number one determinant of issuance, spreads are also part of that. But we’re expecting the quarter as well as the rest of year to play out, and that’s what we used to build our guidance.

Understood. Thank you, Doug. And then secondly, and this might be for Ewout. The margin progress likewise has been very impressive. I’m just wondering how you think about where you are in that process? How far along we are and how much more there is to come on the margin front beyond the guidance for this year?

Yes, Peter, thank you again for the complement on the margin improvement. I think what you have seen is, indeed margin improvement for each of the businesses on an organic basis if you take out the acquisitions and divestitures. If you look at the improvements of Market Intelligence, Market and Commodities Intelligence, what you clearly can see is, there are the growth of the business as well as the impact of the SNL synergies. This was in line with what we provided to you in terms of guidance for 2017 with respect to the achievements in synergies and the run rate improvement should – we should see during 2017. Clearly, the margin improvements in ratings was a result of the better top line growth and modest expense increase. So it shows the scalable nature of the ratings business. Obviously, this is not the level of margins we expect going forward as the new standards, but it’s clearly a good improvement in terms of direction of the Ratings margins going forward. And then lastly, with respect to the Indices business, margins as you know are already in the mid 60% range. This is a range where we are probably comfortable with respect to margins going forwards. It’s a very scalable business, the marginal expenses are relatively limited if we are able to add additional revenues to that business, so that’s why we are confident that margins should stay in that range going forward as well.

Peter, I want to add something. First of all, I think you know that we’re committed to efficiency and improvement of our margins. The best way of improve them is through revenue growth, but in addition to that we’re looking at other sorts of discipline on how we invest, where we invest our expenses, how we allocate. But the overall aspirations are to get to a sustainable low 50% range in the ratings business and then the MCI including Platts, aspiring to the mid-to-high 30% range. And then in Indexes, as Ewout just said, we don’t have any specific targets, because we’re already at such an attractive level and we do want to keep investing in that business for growth.

Great, thanks very much.

Thank you.

Thank you. Our next question is from the line of Joseph Foresi of Cantor Fitzgerald. Your line is now open.

Hello, hi this is Mike Reid on for Joe. Thanks for taking our call. I was wondering if – could you give us a little color on some of the progressing from the Index business outside of equities, including the custom indices and maybe an update on the Trucost and the ESG indices?

Yes, let me take that. First of all, as you know over time we’ve been looking at growing our index business in different types of asset classes. We have investments around the globe that we’ve made with international exchanges to help them professionalize their index markets, as well as have distribution of U.S. indices and other international indices we have into those market, so that’s one of our diversification strategies. Another one has been on different types of asset classes that are smart beta or different ways to weight indices. And one of the most important growth factors that we have is ESG. We’re seeing very high demand on environmental, social and governance factors used by investors around the globe. It’s, asset owners are increasingly demanding more and more information, as well as benchmarking to EST factors. That’s one of the reasons we bought Trucost. Trucost comes with a phenomenal set of data and analytics, but more importantly a really high quality team. We’ve integrated them very quickly into our business and one of the beauty of Trucost isn’t just that we’re able to develop new funds and launch of funds, we’re up over 100 ESG refund already, but that Trucost also benefits all of our divisions across the company. We’ve got – we didn’t highlighted that we’ve been launching some green bond assessments, as well as ESG products in the Ratings business and we’re looking at ways that we can incorporate more ESG factors and climate factors into market intelligence data as well, so the Trucost has been a fantastic acquisition for us. We see a lot of synergies across the entire group for that acquisition.

Okay, great. And do you have any more commentary on outlook of possible tax reform and impact to issuance, because it’s still too uncertain to really give anymore color on that?

Last quarter we gave you a view of what we saw at the time, there hasn’t been enough of a change yet for us to update any of our thinking around that, but as the new tax proposal evolve, we will provide more guidance on that and more of our views as it more comes out.

Great. Thanks, guys.

Thank you.

Thanks Mike.

Thank you. The next question is from the line of James Friedman of Susquehanna Financial Group. Your line is now open.

Doug, in your prepared remarks you called out some of the opportunities in the high-yield market and that – and how that may have helped propel the quarter? I thought you also mentioned about your mind share and market share, if you could elaborate on that opportunity going forward that would be helpful.

Yes, first of all, as I mentioned, the high-yield market has been one that that we’ve been able to benefit from. I’ve always talked every quarter, we always talk about the importance of understanding the mix of issuance and this quarter the mix including a large component of leverage loan refinancing, as well as high-yield bond financing was something that benefits us on the top line because of the – because they are the types of organizations and companies we don’t have frequent issuer programs with. But at the same time, while we benefited from that type of issuance overall, if you went back to Slide 10 in our materials, what you’d see is that we’ve also been able to increase our market share of the leverage loan issuers over the last few years. What we see is that investors demand the opinions in the valuation, the opinions and evaluations from S&P Global Ratings when they look at loans and we’ve been able to benefit from that and a robust market and because of our increasing market share we benefited with the increase in volume.

Okay, thanks for that and then my follow-up. Ewout, I think you called out some headcount growth in Indices. Doug, I realize you’re trying to discipline the margin there, but I saw quietly, I think you said that was commercial related, you know what – how should we be thinking about the revenue growth relative to the headcount growth?

Thank you for that question, James, I think overall if you look at the expense development in the Indices business relative to the revenue growth, what you see is a couple of step up expenses that we are incurring compared to a year ago that should stay more or less flat going forward again. So to give you a little bit more details on that, we had the inclusion of Trucost. Doug, already just gave you some further explanation of the importance strategically of Trucost and how it is benefiting the whole company from an ESG capability perspective. So that is a step up cost that we didn’t incur a year ago and that you see in the expense base of the Indices business. We had also the launch of a third datacenter during 2016, so that is another step up cost that we are incurring now in the first quarter of 2017 that you don’t see in a comparable period of last year. And then we had some people on capability investments, which we think is important because we further want to expand this business, it’s a business as you are very much aware of that has really a great perspective given the changes in the asset management world and the very large shift from active to passive management. So we look at this expense as more a step up expenses and the margin increase and expense increase from here should not be too much affected by those expenses going forward again.

Got it. Thank you for taking my question.

Thank you. Our next question is from the line of Warren Gardiner of Evercore ISI. Your line is now open.

Great, thanks. So there were some headlines during the quarter and some potential M&A in the Index business, I would just be curious to hear your thoughts on that and then maybe also give us a sense about how you guys are thinking about M&A? What qualitative and quantitative hurdles kind of need to be met maybe beyond one year accretion and being a benchmark type asset?

Well, first of all, as you know we wouldn’t comment at all on any kind of market speculation and market rumors, but we do evaluate obviously opportunities in the marketplace, as you saw that we announced this quarter that we have set up a strategic relationship and alliance with Kensho, it’s not an acquisition, but just in terms of the sorts of evaluations that we’re always doing in the market looking for financial as well as strategic fit. And we’re always looking to improve our portfolio in the parameters and bounds of what we’ve defined as the markets oriented data ratings benchmark organization. But let me hand it off to Ewout to give you some thoughts about the second part of your question.

What I would like to say is that, as a company, we are disciplined in every way how we utilize our capital. If it’s organic, inorganic, as well as other ways we can use capital, for example, the most optimal way to return capital to shareholders. With respect to using capital for M&A, we are looking at a couple of key metrics, accretion of EPS is an important element; discount of cash flow methodology is a second important element; and the third important metric we are looking at and actually I’m a very big believer of the importance of this is return invested capital. So we are very much measuring if M&A is ultimately hitting our hurdle rates and cost of capital over a couple of years in the future. Of course, you have to also take into consideration the strategic importance of acquisitions over time. But those are in terms of framework to ways how we measure and assess M&A opportunities in the market.

Great. Thank you. That’s really helpful. I guess, my one another question there. Obviously, a really nice quarter in the ratings business. How much of that 29% year-over-year gain would you kind of attribute to improving contract – improve contract terms? And where are you guys in terms of what inning you’re kind of in terms of capturing that opportunity?

Well, in general terms, we don’t give that breakdown. So we cannot give you a specific answer. Directionally, what we can say is that a largest part of debt was volume driven and contract terms is only a smaller part of the contribution of the 29% increase in revenues.

And the other thing I – we can add is that, as we think about the inning of where we’re at with this contract work, we probably got about half in 2016. We’ll probably get about the other half in 2017, maybe it’ll trickle forward after that, but really largely in 2016 and 2017.

Great. Thanks a lot.

Thank you. Our next question is from the line of Vincent Hung of Autonomous. Your line is now open.

Hi. So you recently invested in Kensho. Could you talk about what this investment gives you not such, but more broadly on how you’re thinking about the changing technological landscape impact in your business?

Yes, first of all, we have been looking at ways to enhance our analytical capabilities that move into new areas like machine learning and artificial intelligence and cognitive learning programs. Obviously, we try to do some of that on our own and there are ways that we can task force, or special labs, or initiatives, as well as embedding things into our work workspace. But in addition, there are companies like Kensho, which are on the cutting-edge that we felt like it was valuable for us to build this connection with them to get access to people who are building new products and services that we hope can enhance what we do that we can learn from them as well as build products and services together. This was definitely done with that in mind to the kernel of your question, which is that, as the world changes, we believe we need to get on with it and move ahead with it, and that we need a combination of internal, as well as external sources for that kind of innovation.

And I guess, it had just couple of things. We will be providing them with some data and they in turn will be providing us with some of their capabilities and will be offered our Market Intelligence platforms.

Thanks. And the next question is, could you give us an update on where we are on the project simplify initiative innovating relatively?

Let me give you a quick update on that. First of all, for those of you that don’t know a project simplify is, we have a – over the last five or six years, we have put in place a whole set of new policies and procedures and processes around improving our control in implementing new approaches to criteria, how we deal with documentation in our organization, and ensuring that we are operating at the highest quality and control standard for best practices, as well as to comply with the regulations that have been implemented around the globe, especially in Europe overseen by Esmond in the U.S. overseen by the SEC. So as we put in place all those different approaches to managing and controlling our business, we added on a lot of layers of activities and processes. And projects simplified for those of you that don’t know, then is an approach to take a step back and reengineer and reformulate our processes with many more of them being automated, as well as eliminating duplication et cetera. We’re probably, as Chip’s using baseball analogy this morning, we’re probably in the third inning. We have a ways to go where we’re just moving from the design phase into the piloting phase. The project is going very well. I’m pleased with the progress. I know that it’s going to require some change. But net-net, we think it will continue to allow us to move improvement in our margins and decrease some of our expenses. But more importantly, it will improve our work flow and our quality and allow us to invest also for other grow.

Thanks, Doug.

Thank you. Our next question is from the line of Toni Kaplan of Morgan Stanley. Your line is now open.

Good morning. This is actually Jeff Goldstein on for Toni. You had mentioned that part of the benefit that you received from high-yield issuance strength, because not many high-yield issuer is on the frequent issuer program. So can you just talk a little bit about your target in mix and ratings between transactional on recurring revenue? So are you just comfortable with your roughly 55 to 45 subscription to transactional mix, or would you look to alter that mix based on your insurance outlook at any given point in time?

We don’t target a – the right kind of a mix. But if I went back a few years, what I would tell you is that, we needed to look at a program, where we were ensuring that we’re getting the right kind of contract realization from our frequent issuer program. If there has been any major change over the last few years, it’s that we started looking at ways to ensure that we are having the right approach toward discounting policies on the frequent issuer programs. But we don’t have a target mix. We obviously want to grow the non-transactional revenue, it’s a valuable to have a more stable subscription like approach to our business. And in addition to surveillance fees, entity fees the royalties we get and then the basic frequent issuer program. The non-transaction revenue having that in our overall program is, it’s a good base to have, but we don’t have a specific target overall for that. Just to remind everybody on Slide 25, for this quarter, we did have a 65% increase in transaction revenue. It was and it was principally driven by the high-yield bond and bank loan ratings, as well as some of the improved contract terms, and we had a 4% increase in non-transaction revenue.

Okay, that’s helpful. And then just at the time of the SNL acquisition, you had provided some interesting data on the margin differential between established businesses that were in kind of the 30%-plus range and still some unprofitable both businesses like metals and mining and financial institution software. So I was just hoping, you could provide an update on some of these developing businesses, and if you expect them to contribute profit this year?

I’m a little bit scratching my head, because I don’t have that data in front of me. I’m looking around if we have the specific answer to your question. But what I can tell you is that, philosophically, we have continued to manage all of our businesses for a combination of growth. We do have – this is, Ewout, laid out to you a few minutes ago. We do have programs where we like to invest and we like to manage our investments and track them, that’s one of the nice disciplines that the SNL team brought as well as their approach towards opening new businesses and managing them for growth and investment. But I don’t have the specific margins. But Chip has some – [has familiar with it] [ph]…

Yes, we’re not going to share the margins. But one of the things we said at the time, the new businesses we’re looking in the metals and mining space and the international big product, there were losing money, because they were just playing new. We can say that the international big product is probably ahead of our plans or projections, and the metals and mining is behind our projection from a revenue perspective, and that’s really going to lead your margin, because we’re just talking about incremental margins on the revenue. So I hope, I believe that’s helpful that once and look better, but we work together, we will be a little better than our models, as expected.

That’s helpful. Thanks.

Thank you. Our next question is from the line of Alex Kramm of UBS. Your line is now open.

Yes. hey, good morning, everyone. I want to start with something a little bit bigger picture on the stock and the valuation. I mean, obviously, stock has been strong this year. But if you look at the valuation on fee or EBITDA, it’s still below, at least, on my numbers your primary ratings PR. But more importantly, when you look at some of the other businesses and look at the comps, they are like the index businesses, some of the data businesses that are out there. It seems like the stock is trading at a pretty big discount. So just wondering how you and the Board thinks about this? Is there something missing, or I know you’ve talked about the business mix and how committed you’re to the different business? But do you feel like there’s actually the opportunity if these businesses weren’t together, it’s really a realized – the value here. So just wondering how you and the Board think about the value that may be left on the table here, maybe because people are not understanding the businesses?

Well, first of all, thank you for the question. We don’t comment about the market and market price and valuation. But we do obviously look at it. It’s something that we pay attention to and look at. And what we can control is the quality of our businesses, the quality of our execution, the top line growth, the improvement in margins over time, and that’s how we value our performance and that’s also how we get paid. It’s important that people like you are helping understand the business and communicating to the market the quality of the businesses and how we’re performing. But as to the actual stock price itself and the valuation in multiples, it’s not something that I can comment on. That’s something the street actually has to comment on.

All right, fair enough. And then just secondly, some small here on the index side. I don’t think you commented on the subscription side of the business. I know it was up 3%. But if you think about that number relative to pricing power, like, it seems a little bit softer than we would have expected. I mean, is there – it was whether there’s some one timers maybe in the fourth quarter, also is the end market maybe a little bit tougher, given what’s going in the active management space. Just seems like some of your peers are doing better there, so maybe a little bit more color on the subscription side of the index?

Alex, this is Ewout. First of all, I think, if you look at that line that will fluctuate a bit quarter-to-quarter. There’s some custom kind of products that you see there that are fluctuating over periods, as well as we had a $2 million correction during the quarter in that line a one-time item of $2 million that should not recur during the next quarters again. So I think those are the main drivers why you saw a slight weakness in the line of the data subscriptions in the indices for this quarter.

All right, very helpful. Thank you.

Thank you. Our next question is from the line of Hamzah Mazari of Macquarie Research. Your line is now open.

Good morning. Thank you. The first question is just on how many of your customers right now are on enterprise-wide contracts? And any future impact you can share around the SNL and Cap IQ commercial organization? And is that in your synergy numbers already, is that upside? Thank you.

I don’t have the actual detail on the custom on what – how people move to enterprise-wide contracts. But it is the direction we’re going. So think of it this way that, the SNL contracts were principally on enterprise-wide contracts Cap IQ, we’re principally on per se contracts, and we’ve been steadily moving the Cap IQ into enterprise-wide contracts. But that’s actually the goal of our new and recent sales force reengineering and launch of a whole new approach to how we’re managing the integrated sales force. One of the things that we’ve done and we had a brief comment about it in the prepared remarks was to put in place a unified sales force for market intelligence, which is, as you know, the Cap IQ and SNL sales forces. It’s built in a way that we have a combination of relationship managers who are managing relationships for the long-term. They’re identifying opportunities. We have a sales force. We have an excellent high-quality sales services, organization and post sales support group. And that’s where we’re now launching and leveraging the compatibility and the quality of both platforms to build out this sales approach. And what we’re doing there is also moving more and more of our contracts to enterprise-wide pricing, as part of that process. And our salespeople have incentive to up-sell, to get deeper penetration, as well as to move to – and to move to enterprise-wide contracts.

Great. That’s very helpful. And just a follow-up question just on issuance. I’m just curious if you guys view issuance as less cyclical relative to past cycles either, because they are secular drivers around European bank disintermediation, or maybe refinancing is a bigger piece. Just curious how you think about cyclicality of issuance relative to past cycles if anything has changed? Thanks.

If you look over a long period like, let’s say, 15 years, and we have a chart, which we typically have in our investor materials, not necessarily in quarter material. You can see over the last 15 years, there has been a very steady year-by-year increase in total issuance with the exception of 2008 when there was a significant drop in particular in structured finance issuance. And that structured finance issuance has never actually recovered from the bubble that it reached in 2006 and 2007. If you look at corporate issuance and sovereign issuance, financial institutions issuance, it’s been also very steady underlying growth with the only year that it dropped us 2008, which was the global recession. So we look at it overall. It’s a steady growth, that’s where we plan around it. That doesn’t mean that quarter-by-quarter, month by-month that mix and issuance is going to be the same, but we need to look at overall GDP growth. As I mentioned in my remarks, just some of the factors with U.S. economy growing at higher levels than we thought with the EU starting to recover with emerging markets like Brazil that’s coming off of a very deep recession into mild growth in other countries in Latin American improving. China’s growth is a little bit more robust than we expected. Those are all very good factors for us to look at shorter-term issuance. But longer-term issuance, we look at kind of on a steady path tied to overall GDP growth, as well as capital markets development around the globe.

Thank you.

Thanks, Hamzah.

Thanks.

Thank you. Our next question is from the line of Tim McHugh of William Blair. Your line is now open.

Yes, thanks. I understand the strong revenue obviously probably helped your ratings margins this quarter. But market intelligence is there. I guess, is there any reason why this isn’t a level that should be sustainable, and I guess, how? If so I think it’s at the higher-end of kind of the medium-term targets you’ve set for that segment?

I would say, this is Ewout talking. Good morning, Tim. I would say that, if you look at the margin in market intelligence, there were no particular items this quarter that jump out, as well as get margin higher or lower than what you should expect directionally in the future, you have seen a significant step up of 270 basis points compared to the previous period of last year. We are seeing the benefit of some of the divestitures and those were businesses with lower margin. We see the benefit of the organic revenue improvements and we’re very pleased to see that this business is doing very well. Just want to point out one data point, again, 9% increase in desktop users compared to a year ago, 9%, which is, of course, a very good result to see that the top line is growing so fast. And then we see the benefit of the SNL synergies coming in. We gave you guidance on that and insight on that last quarter. We will give you an update later this year, but the SNL synergies, of course, helping the margin improvement as well. So ending up at 37.6% margin for the first quarter, that’s indeed in line with our longer-term guidance relates to higher 30% range for this business.

Okay, thanks. And then just the total margin guidance that you changed from kind of given us a basis point increase to a absolute number. Just – is that a increase in your guidance, or your expectation for the year, or is it because of change in kind of the format?. Just want to understand whether you kept your assumptions the same or increased them?

Yes, that was an increase from our previous guidance. Let me explain that to you a bit. The previous guidance was 100 basis points improvement of the margin during 2017, and that was measured from the base margin during 2016. That margin was 42.9%, so at 100 basis points, or at 43.9%. The new guidance is 44.5% to 45.5% to 60 to 160 basis points higher than the prior guidance we have given to you in terms of margin. So what you should read out of that is clearly a high-level of comfort that we’re on the right path with respect to the performance of the business. We are having a – of course, a great start of 2017, and therefore, we have raised our margin guidance for this year compared to the prior guidance.

Okay, great. Thank you.

You bet.

Thank you. Our next question is from the line of Manav Patnaik of Barclays. Your line is now open.

Yes, good morning, gentlemen. Congratulations on the quarter. My first question is just on the guidance. I mean, I think you said that all areas of your business – all your businesses were contributing to the increased guidance. The range still seems wide and still probably conservative. Is it fair to say that most of that is just at the ratings conservative, you guys typically assume early in the year?

I would say, we are very confident by the first quarter results. We are not providing quarterly guidance, this is yearly guidance. We have raised the bottom end of the EPS range by $0.10 and the top end by $0.05. What you should read out of that is a good start of the year. Again, we are not providing quarterly guidance. And from our perspective, this is the most reasonable middle of the road guidance we can provide you, it’s neither conservative nor aggressive.

Okay. And then, just your earlier comments around capital allocation and ROIC and so forth. So I mean, that disciplines sounds really good. And so, if it’s not M&A, the balance sheet still is really underutilized in our view. You’ve talked about how your ratings business obviously benefit from people trying to take advantage of spreads and ahead of rates and so forth. So the buybacks felt a little light this quarter too. So just curious on, should we be expecting action one way or the other in the next quarter or two?

Manav, let me say it in the following way. We believe that there is an opportunity to provide more specifics in terms of our capital management targets and capital allocation targets for the company. Today, we don’t have very specific targets. There is a limit, particularly on the debt level. There is a limit, we want to stay in the investment grade space. But where exactly in the spectrum of investment grade, we haven’t specified. What we expect is that, later this year, we will be able to come back to you with more specific and concrete targets with respect to our capital management strategy. It’s a little bit too early now. So I cannot give you more specifics at this point in time. But later this year, we will come back with more specifics on that.

Okay, that’s helpful. Thanks a lot, guys.

Thank you.

Thanks, Manav.

Thank you. Our next question is from the line of Jeff Silber of BMO Capital Markets. Your line is now open.

Thanks so much. I know, it’s late. I’m not sure if anybody asked the pricing pressure question that you typically – you got on each quarter’s call. So if they haven’t, if you could answer that for me?

Pricing pressure in a particular category or…?

I guess, both in market and commodities and then maybe feed pressures on the industry side?

Let me take that question. On the market intelligence, as you know, our shift to a enterprise-wide model allows us to model very carefully, or the value that we provide to our customers, and the kind of service that we’re delivering, it allows us to have a very good conversation about price. And it’s not necessarily tied to a price per user. As you know, we’ve had sometimes in the past with Cap IQ. So we look at that very carefully. It’s a value-driven approach to how we deliver that value, and then the kind of contract that we’re able to sign. So I wouldn’t say, there’s necessarily pressure there, because we’re able to negotiate that well. When it comes to the fee structures in indices, we wouldn’t necessarily talk about specific customer pricing actions. But we do have excellent margins and we’re very – looking very carefully at penetration at new products, new services, et cetera, as a way to grow our top line growth, and we’re very pleased with where we are in that business.

Okay, great. And then on the diluted EPS guidance for the year of $6 to $6.20, what share count is embedded in that guidance?

We cannot give you those specifics, because then we would implicitly tell you what is the level of share buybacks we’re aiming for during this year. I can just say that share buybacks, the company has a track record. We are a believer in buybacks that it is a good and value and handsome way to return capital to shareholders. So you may expect the company to continue with our track record going forward.

Thanks.

Thanks, Jeff.

Thank you. Our final question is from the line of Craig Huber of Huber Research. Your line is now open.

Yes, thank you. The other question for you here. This whole interest expense deductibility issue in Washing DC, you’re Paul Ryan’s tax plan. Are you aware of any country around the world of any significance that’s gone from allowing full interest expense deductibility to none in sell-through, I’m not, are you?

No, we’re not. There’s Spain, Germany, the UK, they have different aspects of how it’s implemented. But I don’t know of any place, where they’ve actually implemented in one sell-through.

I mean, do you sort of think then, Doug, along those lines and be a middle ground, like a Germany, as you say, would it allow only interest expense deductibility up to about 30% of EBITDA, is that sort of the middle ground maybe here? And maybe you also said…?

I don’t know there has been some interesting research and advocacy that’s been coming out recently on what the impact could be on beyond just the real estate industry on other industry that is dead, in particular, community banks are very worried about what the impact would be if their borrowers on SME type activities are not able to, or not able to deduct interest. And what that means both for SMEs, as well as for the small community banks that provide that kind of debt. There’s a lot of different angles coming out as this is being discussed more thoroughly and we’re watching very carefully what all the different arguments are. I don’t want to predict where it will end up, but I do know that there’s going to be a lot of arguments are going to be surfacing on this.

And to my other unrelated question, please, Doug. On average, what should investors expect for pricing increases this year across your portfolio? And is there any wide disparity between the segments?

No, we never give any kind of specific pricing guideline, and it’s especially for future pricing. We’re – it’s something that we would – we wouldn’t be able to give you at this point in time.

Thank you.

Thanks, Craig.

Thank you.

As everybody closes and we hang up on the call, I do want to thank everyone for your questions, and very importantly, I want to thank the team at S&P Global for excellent performance in the first quarter. We do know that we’ve had a great momentum from how we started the year, and there are some potential upsides, as well as some potential clouds out there. But we’re very, very pleased with how we’ve begun the year across the Board. Thank you very much everybody for joining the call this morning.

That concludes this morning’s call. A PDF version of the presenter slides is available now for downloading from investor.spglobal.com. A replay of this call, including the Q&A session will be available in about two hours. The 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.