Doug Peterson : Thank you Jeff. As you know we always apply a discipline to looking at our portfolio, looking at top line growth, looking at the margin expansion, also looking at how it fits across the portfolio. During the year last year, we didn’t make a lot of noise about it but we did shut down some very small products. We shut down 8,000 indices that were subpar subside across the businesses within Commodity Insights Market Intelligence or some small products that we moved on. We also had a couple of small divestitures. But when you ask the question to us, we’re constantly looking at the portfolio trying to understand what fits best. We have different themes. You’ve heard us talk about the key themes private market, sustainability, supply chain, analytics, risk and credit.
These are the sorts of areas that we’re always looking to expand our presence to make sure we have the best capabilities possible to meet the needs of our clients. But within looking at the needs of clients we look at the shareholders. We look at how we’re going to put this portfolio together with the best way to leverage our technology. We will always apply the discipline as well to how we’re going to look at the portfolio in the future.
Jeff Silber : Thank you.
Operator: Our next question comes from George Tong with Goldman Sachs. Your line is open.
George Tong: Hi. Thanks. Good morning. I’d like to better understand your guidance for Ratings revenue growth in 2024. Do you expect billed debt issuance growth of 3% to 7%, but Ratings revenue growth of only 6% to 8% in 2024, which would reflect little to no pricing benefit or mix headwinds. Can you help bridge the gap there?
Martina Cheung : Hi, George. Thanks for the question. So, maybe I could start with transaction versus nontransaction and how we think about both of those. And as you know transaction is a somewhat lower proportion of our revenues compared to let’s say pre-pandemic. On the transaction front and specific to billed issuance, as I said, in my last response, we look at a variety of factors. Refinancing is a critical one. I covered that in my last response, as well as the key macro drivers when rate cuts could start for example what the exit rate on those looks like this year the potential challenge in predicting opportunistic issuance. And there we really do not have heroic assumptions around opportunistic issuance for this year.
So we’re being cautious on that. And then I would say as, I mentioned as well that we would expect to see more frequent issuer issuance this year, which wouldn’t show up in our billed issuance estimate of 3% to 7%. So I think with all of that you have to take into consideration the potential wide range of outcomes, whether it’s rates, whether it’s almost half the world’s population voting and elections and potential for greater volatility in the back half of the year. So that informs both the overall outlook of 3% to 7% billed issuance, but also the timing that Doug has mentioned, which is a stronger first half versus second half. On the transaction side, we see strong performance across all key areas there. So that would include our surveillance book.
It would include the res portions of the book for example CRISIL, as well as the royalty payment that we get from Market Intelligence. So maybe again I would just reiterate strong first half and tapering off in the back half. And then as Doug mentioned, it is early in the year. There is potential for upside in the range and we would look to get more precise on this as we go throughout the year.
Doug Peterson: Thank you, George.
Operator: Thank you. Our next question comes from Craig Huber with Huber Research Partners. You may proceed.
Craig Huber: Yes, hi. Good morning. Maybe just talk a little bit further about your guidance for the year about where potentially you could be conservative in your mind whether it be on the cost side of things? Or are you baking in too much assumption for cost there or on the top line? What segments potentially coming ahead of your outlook at this stage of the game? Thank you.
Doug Peterson: Thanks, Craig. As you saw when we put together our information, we put in our slides what are the key factors that we look at. And when you take a step back, we know that GDP growth is always the number one driver. It’s the highest correlated factor to our long-term revenue growth. We’ve looked over the years to see what are those factors that drive it the most. We see some potential slowdown in the economy in the US and EU. We’re planning for what we call we’re planning against what we call a soft landing which means that there could be some sort of slowdown in the economy. As you heard we’ve seen some slowness and a little bit of longer sales cycles in certain segments. But that’s – those are some of the downside factors.
What would happen with the geopolitical factors, how long will it take before central banks begin to cut rates, we’ve taken those into account as we built our guidance with some conservatism. So if we saw a much quicker return to lower interest rates, if we saw much quicker a geopolitical environment that was more stable, these are the kinds of things that create some upside for the company. We also look at segment by segment. We know that the automotive segment is going through a lot of change. We know that the energy transition which is changing the commodity cycle. So we’ve taken into account all of these different factors as we’ve looked at the – overall at the guidance. So to your upside risk – upside opportunities we think that it could come if interest rates move down lower faster, if the interest rates if the economies grow faster than we think, et cetera.
But these are all the factors we take into account across the divisions, as we’re setting up our guidance for 2024. Thanks, Craig.
Operator: Thank you. Our next question comes from John Mazzoni with Wells Fargo. Your line is open.
John Mazzoni: Thank you, good morning. Could you just help us understand how you’re thinking about the longer-term generative AI monetization specifically around cross-platforming as well as potential kind of upsell and cross-sell from kind of new products?
Doug Peterson: Great. Thank you for that. And when we think about technology when we think about AI we start with the framework that we showed you in our prepared remarks today which has the foundation of very strong proprietary data. We think that this is going to be one of the most important factors for AI becoming successful at any company no matter where they are. And we think that this gives us a running start in addition to what we’ve already been developing with Kensho over the last five years. But turning that into earnings and turning that into growth is something that we’re starting to build. We think that the AI opportunities we have, Adam talked earlier about ChatIQ is an example of something that gives customers the opportunity to dig much, much deeper into our data.
We think that it’s going to create stickiness. We’re starting with metrics that look at for example, our Net Promoter Scores. We’re looking at retention. We’re looking at how people — how — what kind of feedback we get from calls from customers that are calling in to see how we’re doing. We also believe that right now we’re going to be able to continue to meet our guidance that we gave you for our — in our Investor Day in 2022. We’ll be able to continue along that track. And then we’ll be able to come out with much more precise guidance for the impact of AI across our portfolio in the future. But we see this as something that’s going to be a game changer for all of our businesses. It’s going to be embedded in everything we do. And we’re just now learning how we’re going to measure those impacts.
But let me hand it over to Adam because he’s very close to a couple of the end market opportunities that we have right now.
Adam Kansler: Great. Thanks Doug and thank you for the question. As Doug mentioned, we do think generative AI has a transformative potential across almost all of our products. Remember we are one of the largest data providers in the world. And the one thing we have is a highly trusted, highly developed accurate set of data across our businesses whether that’s in Market Intelligence or the other divisions of our business. We’re also deeply embedded in the workflows of our customers. The combination of those two and when you really understand the power behind generative AI to unlock the potential in massive data sets that may correlate to each other, may have unique insights and the ability to process through that in a very rapid time frame.
For us thinking about portfolio monitoring workflows, research and insights, credit assessments, risk assessment, looking across broad sets of data for insights and what’s developing in various sectors or regions or how it could impact the portfolio. Those are all opportunities for us for making the data sets and workflows that we already provide today to our customers all the more powerful. When we look at the opportunity set in front of us and even just our product launch sheet for 2024, we’re pretty encouraged that we’re well-positioned to take advantage of the technology, increase the penetration we have with our customers and expand the kinds of services and insights we’re able to give them efficiently. That also increases the efficiency of their own internal workflows, which obviously comes with significant value.
We’ll see how that all materializes and how we’re able to monetize that. But we do think it’s a tailwind for us.
Doug Peterson: Thank you, John.
Operator: Thank you. Our next question comes from Jeff Meuler with Baird. Your line is open.
Jeff Meuler: Yeah. Thank you. Ewout when you described some of the costs that were higher than expected things like the heritage IHS Markit employee benefit cost, it wasn’t clear to me was there a true-up that was specific to Q4? Or was there a greater than expected step up in the expense baseline that’s happening now? And then on 2024 tax rate, what drives the step up? And is the new rate like a good steady state rate for the portfolio? Thank you.
