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IHS Markit Ltd. (NASDAQ:INFO)
Q2 2018 Earnings Conference Call
June 26, 2018, 8:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, ladies and gentlemen. And welcome to the second quarter 2018 IHS Markit earnings conference call. At this time, all participants are in listen-only mode. Later, we will conduct question and answer session, and instructions will follow at that time. If anyone should require operator assistance, please press * then 0 on your touchtone telephone. And as a reminder, today's conference call is being recorded. I'd now like to turn the conference over to Eric Boyer, Head of Investor Relations. Please go ahead.

Eric Boyer -- Head of Investor Relations

Good morning. And thank you for joining us for the IHS MarkIt Q2 2018 earnings conference call. Earlier this morning, we issued our Q2 earnings press release and posted supplemental materials to the IHS Markit investor relations website. Our discussion on the quarter based on non-GAAP measures or adjusted numbers which exclude stock-based compensation, amortization of acquired intangibles, and other times. IHS Markit believes non-GAAP results are useful in order to enhance the understanding of our ongoing operating performance. But they are a supplement to and should not be considered in isolation from or as a substitute for GAAP financial information. As a reminder, this conference call is being recorded and webcast and is a copyrighted property of IHS Markit. Any rebroadcast of this information whole or in part without the prior written consent of IHS Markit is prohibited. This conference call, especially the discussion of our outlook may contain statements about expected future events that are forward looking and subject to risk and uncertainties.

Factors that could cause actual results to differ materially from expectations can be found on IHS Markit's filings with SEC and on the IHS Markit website. After our prepared remarks, Lance Uggla, Chairman and CEO and Todd Hyatt, EVP and Chief Financial Officer will be available to take your questions. With that, it is my pleasure to turn the call over to Lance.

Lance Uggla -- Chairman and Chief Executive Officer

Thank you, Eric. Thank you for joining us for the IHS Markit Q2 earnings call. We outperformed our expectations for the quarter, and we're able to continue to invest in our people, products, technology, and customers for long-term profitable growth. Some key financial highlights of the quarter are revenue of $1.008 billion, up 11% year-over-year and 8% on an organic basis and well above the upper end of our longer-term range. We experienced broad-based growth across the firm. And all businesses performed well. Adjusted EBITDA of $398 million, up 13% over the prior year, a margin of 39.5%. Normalized margin expansion was 110 basis points excluding the impact of FX and adjusted EPS of $0.61, up 17% over the prior year. Let me now provide some highlights. I'll start with transportation which delivered record organic revenue growth of 14% in the quarter.

Growth was driven broadly with continued strength across autos, aerospace and defense, and maritime and trade businesses. Financial services reported 7% organic growth with strengths across our information and solutions businesses. Within these businesses, top performers were pricing, indices, valuation services, managed loan services, reg and compliance products, and enterprise data management offerings. CMS organic revenue growth was 4% as we continue to benefit from improving end markets and operational changes made within our product design, ECR, and TMT businesses. Resources organic revenue growth was 5% as our upstream energy business continues to improve, and our mid and downstream businesses remain strong. As we discussed on our Q1 call, we held our annual CERAWeek conference in the beginning of March with record attendance and revenue which contributed to strong Q2 results. We are confident in our low-single digit organic revenue growth outlook for 2018.

We expect sustained global GBP growth and market dynamics to support our oil price forecast in the $65.00 to $75.00 range for the remainder of the year. However, we expect CapEx spend for IOCs to remain relatively tight as companies will remain budget focused on shoring up their balance sheets and rewarding shareholders. 2019 should see a bigger increase in CapEx. M&A update. In Q2, we also announced the acquisition of Ipreo and the planned divestiture of our MarkitSERV business. We are excited about the acquisition of Ipreo which is compelling from both a strategic and financial perspective, as it will help us shift our longer-term growth curve higher and expand our addressable markets with limited incremental risk. Strategically, we know the Ipreo business well, and it is highly complementary to our existing financial service business, which we believe limits the risk.

Ipreo will increase the size of our addressable markets, including our presence in the primary and secondary capital markets as well as the alternative sector, a large and underpenetrated market with long-term, double digit growth prospects. Financially, Ipreo has been a strong, double digit revenue grower and is expected to be accretive to our organic growth, allowing us to increase our long-term company goal from 4% to 6% up to 5% to 7%. The acquisition is also expected to be modestly accretive to our earnings in 2019 and will ramp from there. As we said on our Ipreo acquisition call, we're confident in our ability to deliver to Ipreo financial commitments and have multiple levers to ensure this happens, including revenue growth from known market expansions, growth initiatives, and revenue and cost synergies.

Finally, the sale process for our MarkitSERV business has kicked off in earnest, and we expect a robust process given the early indications of interest. We expect to announce the sale in Q4. And with that, I'll turn the call over to Todd.

Todd Hyatt -- Executive Vice President and Chief Financial Officer

Thank you, Lance. We were pleased with Q2 revenue and the continuation of positive trends from the back half of last year. Organic revenue growth of 8% was above the upper end of our long-term range due to organic recurring revenue growth of 6% and outsize growth of 15% in our nonrecurring businesses, due in large part to strong growth in our advanced and our automotive recall offerings. Looking at segment performance, transportation revenue growth was 22%, including 14% organic, 7% acquisitive, and 2% FX. Organic revenue growth was comprised of 12% recurring and 19% nonrecurring. Nonrecurring growth was driven primarily For the remainder of the year, we continue to expect high single-digit growth in our Resources revenue growth was 6% including 5% organic and 1% FX. Organic revenue growth was comprised of 12% recurring and 19% nonrecurring. Nonrecurring growth was driven primarily by our automotive recall offerings and our annual maritime event.

For the remainder of the year, we continue to expect high-single digit organic growth in our recurring revenue offerings but expect lower, nonrecurring growth. Resources revenue growth was 6%, including 5% organic and 1% FX. Organic revenue growth was comprised of 3% recurring and 14% nonrecurring. Recurring organic growth was driven by our chemicals, PGCR, and downstream pricing businesses. Upstream revenue was flat on a year-over-year basis. Our Q2 ACB across the entire resources segment, including OPIS was $714 million which was up $5 million versus beginning of year sub base. We continue to expect low- to mid-single digits sub base growth for the year. Non-recurring organic growth was driven primarily by record revenue from our annual CERAWeek event. CMS revenue growth was 6%, including 4% organic, 1% acquisitive, and 2% FX. Organic revenue growth was comprised of 3% recurring and 10% nonrecurring.

All of our CMS business lines, product design, TMT, and ECR posted organic revenue growth in line with overall segment organic growth. We expect CMS to deliver to its low-single digit growth target in 2018 but will see negative growth in Q3 due to it being an off-cycle BPBC year. Financial services revenue growth was 9%, including 7% organic and 2% FX. Information organic growth was 11% with strong performance across indices, pricing, and valuation services. Processing organic revenue declined 3%. While the loan processing market continues to be strong, revenue was down due to difficult year-over-year comparisons. Derivative processing was flat. Solutions organic revenue growth was 7%, led by our regulatory and compliance solutions and continued growth in our WSO loan management and enterprise data management offerings. We expect to perform at the high end of our longer-term 4% to 6% organic growth range for the year.

Turning now to profits and margins, adjusted EBITDA was $398 million, up 13% versus prior year. Our adjusted EBITDA margin was 39.5%, up 60 basis points on a reported basis and up 110 basis points, normalized for FX. Regarding segment profitability, transportations adjusted EBITDA was $125 million with margin of 42.1%, an increase of 160 basis points. Financial services adjusted EBITDA was $156 million with margin of 46.4%, an increase of 150 basis points. Both transportation and financial services margin expansion benefited from strong revenue growth. Resources adjusted EBITDA was $101 million which was up slightly versus prior year. Resources margin was 42.4% which was down versus prior year due in part to lower margin CERAWeek revenue and a modest increase in year-over-year resources spend. For the remainder of the year, we continue to target some investment spend in our resources segment.

CMS adjusted EBITDA was $30 million, down $2 million versus prior year with a margin of 21.5%. Adjusted EPS was $0.61 per diluted share, a $0.09 or 17% improvement over the prior year. Our adjusted EPS includes an adjusted tax rate of 19%, in line with our full-year adjusted tax rate guidance of 18% to 20%. Our GAAP tax rate was 10%. On a full-year basis, we expect a negative GAAP tax rate due primarily to the estimated $136 million net benefit from one time items associated with US tax reform which were recorded in Q1. Q2 free cash flow was $323 million. Our trailing 12 month free cash flow improved to $851 million and represented a conversion rate of 58%. Excluding acquisition related costs, conversion was 64%. We expect continued improvement in cash conversion throughout the remainder of the year and to be at our mid-60s target for the year. Our quarter end debt balance was $4.5 billion which represented a gross leverage ratio of approximately 2.7 times on a bank covenant basis.

And we closed the quarter with $159 million of cash. Our fixed debt as a percent of total debt is 55%. We continue to target a minimum level of two thirds fixed rate debt by year end. As discussed on the Ipreo acquisition call, we expect bank leverage to increase to 3.6 times at time of Ipreo close. On a business as usual basis, we expect to delever below three times by Q3 2019. A divestment of market share will further accelerate deleveraging. We have suspended our share buyback until we return to our target leverage of two to three times. During Q2, S&P upgraded our corporate debt rating to BBB- from BB+. After Q2 quarter end, we closed our investment grade bank credit facility with improved terms and conditions compared to our prior bank credit facility. We remain committed to managing the company within our capital policy. Our Q2 weighted average diluted share count was 404 million shares.

Year-to-date, we have executed $752 million of share repurchases and have repurchased 15.9 million shares at an average price of $47.30. In terms of guidance, we are reaffirming our 2018 guidance from our March 27 earnings call but are increasing revenue by $25 million to reflect the strong Q2 organic revenue performance. For the year, we continue to expect $35 million revenue benefit from FX. The guidance provides for revenue of $3.85 to $3.9 billion with an increase in organic growth guidance to 5% to 6%. We expect solid revenue delivery in the second half of the year but also expect revenue growth to moderate due to more challenging year-over-year comparisons and lower nonrecurring revenue growth. We also expect adjusted EBITDA to be at the upper end of our current range of $1.5 to $1.525 billion. Margin will be negatively impacted by approximately 35 basis points from FX. But we expect to deliver our 100 basis point margin expansion target normalized for FX.

Relative to items below adjusted EBITDA, we expect interest expense to be slightly above the top end of the range but expect all other items to be within the current guidance range. We expect adjusted EPS of $2.23 to $2.27. The current guidance does not include Ipreo. We expect to remain within the current adjusted EPS guidance range post-Ipreo close. We had a good first half of the year and are focused on delivering to shareholder commitments we made at the beginning of the year while continuing to invest in the business to drive long-term growth. We look forward to providing further updates as the year progresses. And with that, I will turn the call back over to Lance.

Lance Uggla -- Chairman and Chief Executive Officer

Okay. Thanks, Todd. I'd like to acknowledge all of our teams around the world who collectively accomplished a lot in the quarter. We delivered strong results. We also announced the acquisition of Ipreo and the intent to sell our MarkitSERV business. We exited the first half of the year with good momentum and are set up well to meet our full year commitments. Operator, we're ready to open the lines for Q&A.

Questions and Answers:

Operator

Thank you. Ladies and gentlemen, if you would like to ask a question at this time, you may press * and then the No. 1 key on your touchtone telephone. If your question has been answered or you wish to remove yourself from the queue, please press the # key. And to allow everybody the opportunity to ask a question, we ask that you please limit yourself to one question. And our first question comes from the line of Peter Appert of Piper Jaffray. Your line is now open.

Peter Appert -- Piper Jaffray -- Analyst

Thank you. Good morning. The transportation performance has been particularly impressive here for the last bunch of quarters. So, I was hoping Todd or Lance, you could just maybe unpack a little bit the drivers of the revenue growth, your confidence in the sustainability of it, and in particular, the margin performance relative to the guidance you'd given earlier about potential dilution from the autoMastermind transaction. How are you driving the margin improvement?

Lance Uggla -- Chairman and Chief Executive Officer

Okay. So, I think in the case of transportation, margin improvement's coming from strong revenue growth. We are, across the firm, very focused on the cost side as well. But we're starting to invest and make sure that we can maintain the higher end of our growth ranges. I think with transportation, we feel we're very well set up now for long-term, high-single digit growth with a very broad, diversified set of revenue drivers coming from VPaC, recall, digital marketing, CARFAX, CARPROOF, extensions into the new markets that we've been focused on. And Masterminds is a piece of that puzzle. And together, we think our automotive and transportation assets can continue in a diversified way to give us high-single digit growth longer-term. So, I guess if you looked at this quarter, we'd say it's a quarter that outperformed. I don't know if -- Todd, do you wanna add to that?

Todd Hyatt -- Executive Vice President and Chief Financial Officer

Yeah. The couple of things I would add -- this is the five-year anniversary shortly of Polk acquisition. And so, this performance has actually been delivered for I think five years. And there's strong business model, strong teams, and a strong market position. And what we see is continued new product opportunity, continued analytics. And we expect those things will drive the forward growth. In terms of margin, this is an area that we have invested in. We'll continue to invest at some level. But we're driving strong margins. And we'll continue to see margin expand as we move forward. But a lot of things working well in transport. The one thing I will call out, it's a very heavy quarter for recall. And we do expect to see the nonrecurring come down a bit in the second half of the year. Recurring will still stay very high, high-single digit range. But you should be aware that we do expect nonrecurring to come down from the levels that we saw in the first half of the year.

Lance Uggla -- Chairman and Chief Executive Officer

Thanks, Todd. Thanks, Peter. Next question?

Operator

Thank you. And our next question comes from Jeff Meuler of Baird. Your line is now open.

Jeff Meuler -- Baird -- Analyst

Yeah. Thank you. So, good quarter overall. Just on the resources margin, you guys did a great job there in a tough revenue environment. How are you thinking about -- as the environment starts to recover the level of investment that's required, should resources margins remain under pressure? And then I guess this is a related question on the consolidated margin. Are you planning to continue to reinvest the upside and deliver to the 100 basis points? Or as you have outsized margin expansion at Ipreo and automotiveMastermind and other drivers, would you potentially let more margin expansion than the 100 basis points flow through? Thank you.

Lance Uggla -- Chairman and Chief Executive Officer

Okay. Let me start, and then Todd will add to that. So, I guess on 100 basis points, our view is that IHS Markit as a whole should be able to consistently expand margin. And our first target is that we get to mid-40s. And mid-40s to me sounds like 44 to 46. And we're some 4 percentage points away from the bottom end of that. But we think we have a reasonable number of levers across the group to drive 100 basis points of margin expansion. And we believe that mid-40s is the right target for us as a firm. So, we are gonna manage to deliver that for our shareholders. We've made that statement loud and clear in our last investor day, some 18 months ago. And we build our strategy around that. We also have told you that we're gonna drive 4% to 6% revenue growth. At 4%, we think we can get the 100. It's tougher at 4%, easier as you push toward 6%.

And with Ipreo, we've said that we'll move our long-term revenue growth to 5% to 7%, so up a point from 4% to 6%. And again, the 100 basis points margin, it'll be harder at 5% and easier at 7%. But we're committed to the mid-40s target. We're gonna be very focused on delivering that over the next three, four years. And we feel we've got ample levers to do so. And right now, we've got strong global economies around all of our marketplaces, and it's up to us to show up for that global growth and then expand and compete to take additional share. And that makes the whole margin delivery obviously easier when you're performing at the upper end of your revenue range. Todd, do you wanna add?

Todd Hyatt -- Executive Vice President and Chief Financial Officer

Yeah. The thing I would add specific to resources, I would be careful when you look at an individual quarter margin about getting too fixated on a number because you can have certainly a little bit of noise inside of any given quarter. What we see in resources is this 42% margin level, a little bit more spend in resources. You have a business where we were really managing costs very tightly during the downturn. And as we've seen a stabilization in the market, we've had a bit of forward spend. But we see that as really an opportunity to ensure that we continue to drive good forward revenue growth and take advantage of an improving market. So, we're very comfortable with the way the resources business is currently being managed.

Lance Uggla -- Chairman and Chief Executive Officer

Okay. Next question.

Operator

Thank you. And our next question comes from Bill Warmington of Wells Fargo. Your line is now open.

Bill Warmington -- Wells Fargo --Analyst

Good morning, everyone.

Lance Uggla -- Chairman and Chief Executive Officer

Hi, Bill.

Bill Warmington -- Wells Fargo --Analyst

So, question for you on the resources business. The recurring revenue growth remained stable at 3% despite a more difficult comp and the ACV continues to grow. Looking into third quarter, fourth quarter, the comps continue to get progressively tougher. Do you think you can maintain that 3% type growth or better on the resources recurring heading into the second half?

Lance Uggla -- Chairman and Chief Executive Officer

Yeah. I think that we're confident with the low-single digit growth across resources and see ourselves delivering into that for the year. Todd, do you wanna add anything?

Todd Hyatt -- Executive Vice President and Chief Financial Officer

Yeah. It's about how the business is performing. We do expect the sub base to improve a bit in the second half of the year. But low-single digits is the place to be for 2018 in terms of reported revenue.

Lance Uggla -- Chairman and Chief Executive Officer

We do see the large IOCs wanting to look after their balance sheets, look after their shareholders. We see that as a key piece of the strategy around resources for this year and leading into more CapEx spending into 2019 which will bode well for the division. Thanks, Bill. Next question.

Operator

Thank you. And our next question comes from Manev Patnaik of Barclays. Your line is now open.

Manav Patnaik -- Barclays -- Analyst

Yeah. Hi. Good morning, guys. So, I just had a question on thinking about your M&A strategy. I think at the investor day 18 months -- so, as you know, I think the talk was of smaller deals than what Ipreo was in size. So, going forward, is that opportunistic? Is that a pipeline? I was just curious how you guys think about that.

Lance Uggla -- Chairman and Chief Executive Officer

No. I think we said when we did the Ipreo deal that it was somewhat outside of -- if you looked at a normal course of business, our view with that would have not been a tuck in $500 million or less acquisition. It was larger and outside of that guidance. But when we looked at the combination of a MarkitSERV divestiture coupled with a Ipreo acquisition, we felt that that combination would allow for us to shift our financial markets growth curve up a couple of percentage points from 4% to 6% to 6% to 8%. It would do that in a way that expanded addressable markets into the big alternative space which we see as a long-term growth driver.

And the combination of those two, we could execute with limited risk to our forward financial plans but change our outcomes forward in a very positive way, longer-term. So, I think you should see us now retrenching back into that strategy, well, first, to delever and then second, to move back into smaller tuck in $500 million or smaller type acquisitions. So, that's where we're at. Thanks, Manek. Next question.

Operator

Thank you. And our next question comes from Andrew Jaffrey of Suntrust. Your line's now open.

Andrew Jeffrey -- Suntrust-Analyst

Hey, guys. Good morning. Thank you for taking the question. Lance, can you discuss a little bit what you think happens in the transport business, especially in auto in more of a restrictive global trade environment? Are higher tariffs potentially a demand driver for you? And to the extent that, for example, there are tariffs implemented on European vehicles in particular, does that mean that your used business gets a boost? Just trying to think through the potential outcomes.

Lance Uggla -- Chairman and Chief Executive Officer

Right. So, I think one of the things I've learned post-merger about our automotive business is that it is very diversified, first across used and new car sales. So, that's a good thing that gives us a diversified set of revenue drivers. The second thing is that the markets that we're in, the addressable markets in the different areas of our automotive franchise are ones that are large and have opportunity for continued expansion. So, let's walk through a couple of those. So, if you go to -- first of all, we help the OEMs do their forecasting. That's subscription-based business. They use our data. And regardless of the market environment we're in, they're still forecasting, and they're still taking those subscriptions, and our teams are still helping them. And that's on a global basis. And we have price within that offering in terms of some growth. And of course, we have world-class teams that help the OEMs do their job.

And therefore, we see the strength in that part of our business as something that's very consistent, regardless of the market environment and the global trade flows of automotive vehicles. The second thing is we also see growth of automotive in China, in India, in emerging markets where the vehicle count per household is way lower than the developed economies. And so, we're starting to see nice growth for our offerings in those markets as well. Those are all subscription-based and aren't being pushed up or down by general trade flows. The second thing we do is we play into the digital marketing. So, that's targeted marketing television, targeted marketing social media, targeted marking into gaming devices. And in that market, it really is a big, billions of dollars per annum spend that's now shifting to a targeted market environment.

And we've seen excellent growth across digital marketing over the past years. And regardless of some of the changes and challenges around customer confidentiality, we still see where there's an opportunity to place a targeted ad to a qualified recipient that's growth versus general broadsheet, paper-based advertising. So, we see that continuing, and we see a big, addressable market. And the stats suggest that's got growth forward. We also use our pulp data to help OEMs with reporting on their emissions outputs of their fleet. And that, again, is subscription-based. We're good at it. We have a competitive edge with our data. It's subscription-based. It's a business that we see regardless of whether there's a -- whatever the volume of automotive sales into the fleet, that calculation still needs to be done, regardless. And it's not done on a per car basis. We also have in that automotive segment, CARFAX. CARFAX which is world leader, US leader.

With CARFAX, we've rebranded CARPROOF to CARFAX Canada, leading in Canada. And we're expanding CARFAX into Europe. And here, the vehicle history report is the first piece that created our community. But we're now leveraging that into used car sales, insurance, banking. We're now looking at the service lane opportunity which is a big market. And we really do have some really great assets. And when you combine that with our recent acquisition of Masterminds, you really do have a complete automotive footprint. So, that's a big answer. Basically, what I'm saying is we're confident in high-single digit growth, long-term, diversified set of drivers. We believe we'll continue to drive those numbers regardless of the global trade, potential for tariffs, some of the raw material tariffs that might come about. We feel our services are well diversified and would play through that. Thank you. Next question.

Operator

Thank you. And our next question comes from Andrew Steinerman of JPMorgan. Your line is now open.

Andrew Steinerman -- JPMorgan --Analyst

Hi, Todd. I know resources ACV includes OPIS in the second quarter as it did in the first. And so, when I look at ACV of $714 million, how does that look year-over-year? And could you describe how the second half has to come together to get to the low- to mid-single digits sub base growth for the year?

Todd Hyatt -- Executive Vice President and Chief Financial Officer

Yeah, Andrew. We do expect to see some acceleration in ACV growth in the second half of the year. And we did see the ACV strength last year as well in the second half. I think in terms of the growth rate, we're running as an ACV growth rate that if we fully normalize FX adjusted, probably around 2%. We don't expect a big revenue lift in recurring subscription in the back half of the year. We understand the deferred revenue model and would expect some improvement as we move into 2019. But we expect the recurring sub to be in the low-single digit with some improving sub base in back half of the year. And we're forecasting a low- to possibly mid-single digit sub base when we get to year end.

Lance Uggla -- Chairman and Chief Executive Officer

Thank you. Next question.

Operator

Thank you. And our next question comes from George Tong of Goldman Sachs. Your line is now open.

George Tong -- Goldman Sachs -- Analyst

Hi. Thanks. Good morning. Can you talk about how market revenue synergies are progressing versus your $100 million target through the end of 2019 and in which areas you're seeing the most benefits?

Lance Uggla -- Chairman and Chief Executive Officer

Okay. Thanks, George. I'll take that to start, and then Todd can add if I leave anything off. So, the first thing I would say is that we're well-oiled machine now in terms of focusing on synergies. And our account management across financial markets has a very strong working relationship with all aspects of the legacy IHS product groups ranging from TMT, aerospace and defense, maritime, upstream, chemicals, and the automotive franchises. And they really are doing a great job at building pipeline and converting that into revenue synergies. And we exited last year at a run rate of somewhere around $12, $13 million. And we said that we would exit this year at $35 million. And I think I've reconfirmed that $35 million twice. And I still feel confident that the $35 million is the correct number for this year. So, that's all good on revenue synergies. And we're talking hundreds of executed opportunities.

Not ten or 20. So, it's a lot of small $10, $20, $50, $100 million where we're taking information, insights, and research from Legacy IHS and selling in to a hungry financial market that's looking for information to make decisions. The second piece that's been surprisingly exciting is where we took financial market data management software. We put a team on it for the first six or so months to build data management for a energy company to manage energy related data assets within the company. And we've now moved through ten sales, nice pipeline. And these are chunkier $300, $500, $750 grand opportunities. And that's leveraging data management software we created for financial markets and brought it into the activities of an energy company.

We also had a record CERAWeek this year. And the CERAWeek this year, how it differed from other years is it had a combination of financial market participants, technology, mobility -- so, that's the intersection of automotive with energy -- and of course, it's the world's leading flagship energy conference. So, what we're doing with that is we're bringing the strength of the entire company to bear around the perimeter of that conference which is driving some very interesting revenue synergies as well. And we see that growing as we look forward. So, all in all, I can say we delivered the first year revenue synergies. We're gonna deliver the second year revenue synergies. And at the end of this year, I'm gonna have to give you the outlook of the $35 growing to $100 which is clearly a bigger step up that as we come into the fourth quarter, we'll look at what did we do in the fourth quarter. And if we're running at $15 million for the quarter, I guess I'll feel really confident in the $100 million.

But we got two quarters to figure that one out. But for now, I think the teams have done a world-class job, and revenue synergies have been a pleasant and a continued upside. Thank you. Next question.

Operator

Thank you. And our next question comes from Hamzah Mazari of Macquarie. Your line is now open.

Hamzah Mazari -- Macquarie Capital -- Analyst

Good morning. Thank you. Lance, I was hoping you could speak to how you think about sustainability of Ipreo's growth profile. Specifically, I guess what we're looking for is how cyclical is that business? I know you've highlighted 68% fixed reoccurring revenue. But just curious how to think about cyclicality of that revenue base. Thank you.

Lance Uggla -- Chairman and Chief Executive Officer

Right. Okay. Well, they have a capital market business that definitely does well when issuance is higher. But you really need to break that down into munies, corporates, loans, and break it down into the different asset classes. If you look at the munie market, it's a pretty steady marketplace and one where you can forecast it very well. But if you then go on to the fixed income or the corporate side, of course you can have some market volatility. But as rates initially first start to rise, I think that generally bodes well for issuance as people look to get themselves put into the marketplace at a reasonable debt level or interest rate level. I also think that interest rates in our economy are being managed in a way that is allowing for a slow and steady, careful set of interest rate rises. And I think that bodes well for some consistency. But there is a little bit of volatility around that, and we'll take that within the forward plans. And we think that the combination of the overall Ipreo business will be well positioned to hit its revenue forecast.

What I like a lot though about the forward growth plans of Ipreo, which I think play very well in all market conditions is the fact that the combination of the Ipreo eye level assets in and around the alternative market which is about a $10 trillion market, there's about $1.7 trillion of dry powder to be invested in that market. And that market's expected to more than double in size over the coming years. And that market, like many others that IHS Markit has developed transparency, reporting, pricing tools, valuation tools in -- so, if you look at what we did in the loan market, it's five to ten years of steady, double digit growth as we built the tools to support the leverage loan market. I see the same opportunity in that alternative space. And I think that that's the most important piece of the growth parameters of the Ipreo acquisition. And then finally, the investor relations platform of Ipreo, it's world-class. It's best in class in the marketplace. The corporates need that regardless of the market environment.

And I think our 50,000 corporate relationships can be married to that product in a way that an IR platform that's important to a CFO or a COO to see their shareholding base. We will be able to enhance that platform with some of our key product that will be important to that CFO or COO, purchasing manager's indices, credit default swap spreads of themselves and peers, short interest in their stock. We have a whole bunch of really unique datasets that we think will bode well to put either revenue up sale or making our product sticky vis-a-vis the competitors. So, I think we've got multiple levers. And across that, we'll deliver well to the plans we paid out. Todd?

Todd Hyatt -- Executive Vice President and Chief Financial Officer

Lance, the other thing I would add is that with the exception of the municipal bonds, these are not fully penetrated asset classes in capital markets. So, there's opportunity from a market perspective to drive a greater level of penetration. There are regional markets that we're stronger in and regional markets that we have opportunity to continue to grow share. There are certainly a universe of banks that we can sell more products and services to. We can add add-on products to the existing solutions. And really, the trend to automated workflow solutions and these utility services, this positions us extremely well to capitalize on those. And then also, the opportunity from the broader financial services perspective to drive revenue synergy. So, I don't think you should look at this solely through the lens of capital markets activity and draw a conclusion on ability to sustain revenue growth.

Lance Uggla -- Chairman and Chief Executive Officer

Good add, Todd. Thank you. Next question.

Operator

Thank you. And our next question comes from Alex Kramm of UBS. Your line is now open.

Alex Kramm -- UBS -- Analyst

Yeah. Hey. Good morning. Lance, curious if you could give us an update on MiFID II. Particularly, as I look at I guess your financial services performance and information in particular, can you size up the positive impact you might have seen? Some of your competitors are talking about demand for reference data, best execution, and so forth. So, just wondering if you've seen the same thing, if you can size it up. And then related to that, if it is a one-time step up this year as people get ready for new regulations, does it create a tough comp or headwind next year, and also, as maybe some of the unintended consequences kick in? So, just some updated thoughts about the trajectory here. Thanks.

Lance Uggla -- Chairman and Chief Executive Officer

Okay. No. Good question, Alex. I'd love to say that MiFID II has been the homerun. It's been a steady addition of revenue to IHS Markit but nothing stellar that I would call out. But what I would call out is the fact that large banks -- we're seeing a lot of the business model of researchers providing research to the bank customers. We're seeing a lot of those individuals exit. And the volume of research from leading financial market participants, the banks is going down. And the research that's coming out of those entities is now being charged for. So, I then look at what do we have. And I think it always shocks people if I ask them, if I sat down at UBS and said, "How many people do you have doing energy market research at a senior level?" There might be a team of ten. Might be a team of five. But it probably isn't a team of 25. If I look across IHS Markit, Legacy IHS, and I ask you to tell me how many equivalent type researchers we have at IHS, I think you'd be shocked when I tell you that there's 1,700 of those researchers.

So, we have significant research and content that goes out and gets paid for by market participants, mainly corporates, some financial market participants, governments, national oil companies, automotive companies, OEMs, big technology producers, solar tech investors. We have just this huge depth of research. It's like a firehose of research. But when I look at it, and I go, "How come we're not growing 10%, 20%, 30%, 40% year-over-year into financial markets?" alls I can tell you is that we're making the investments. We're adapting the research. We're coming up with the way to sell it and price it correctly. And we're growing year-over-year. And we'll continue to grow year-over-year for many years. But it's not a number that is ready to be called out because we've achieved something out of the ordinary. It's going into our synergy number.

We've made the investments in resources, automotive, technology on an organized team to sell the data and research. And we think MiFID II bodes well for us. So, conservatively, it's adding. Optimistically, it could add a lot more, but it's not doing it yet. Thanks, Alex. Next question.

Operator

Thank you. And our next question comes from Shlomo Rosenbaum of Stifel. Your line is now open.

Shlomo Rosenbaum -- Stifel, Nicolaus & Company -- Analyst

Hi. Thank you for taking my question. Hey, Lance. Can you talk a little bit about the nonrecurring revenue growth in the resources segment? We've seen three quarters in a row of pretty good growth. 10%, 8%, and now 14%. Is any of this stuff precursors to stronger resources, recurring revenue growth? Could you just give us a little color as to what the nonrecurring sales are? And is it just that they've been growing off of a low base? Or is there something that there's some momentum that's building? Just give us some color over there

Lance Uggla -- Chairman and Chief Executive Officer

Right. Okay. Well, the first thing to call out is CERAWeek. So, that's one piece of the puzzle. And that's an excellent grower both last year and this year and specifically in its reference quarter. The other thing I'd say is as recovery and investment, higher oil prices, more projects being looked at now again, whether it's Brazil, or off-shore Africa, things going on in the Middle East, potential public offerings, all of a sudden, the opportunity for us to take our experts in and consult to lead to subscription-based revenue services is increasing. And therefore, I think that we'll see a managed increase of that year-over-year as we look forward. But we will manage it within the context of our recurring revenue so that that mix is well balanced. So, it's really market conditions, positive, a little bit of professional services around software sales. So, we sell the software.

That's a subscription. But there's then some professional services around setup and implementation. And that goes into the nonrecurring bucket. So, nothing really extraordinary to call out except that market conditions are a bit better and both the recurring and non-revenue components are moving up. And I think the nonrecurring component moving up first and a bit faster makes a lot of sense to me. Todd, do you wanna add anything to that?

Todd Hyatt -- Executive Vice President and Chief Financial Officer

I think that covers it.

Lance Uggla -- Chairman and Chief Executive Officer

Okay. Thank you. Next question.

Operator

Thank you. And our next question comes from Jeff Silber. BMO. Your line is now open.

Jeff Silber -- BMO Capital Markets Equity Research -- Analyst

Thank you so much. Just wanted to go back to your guidance for the year. You raised the revenue guidance slightly. You're now coming in at the top end of the adjusted EBITDA guidance. I know interest expense might be a little higher than you thought, but just curious why you did not change your EPS guidance. Are you just being overly conservative? Or is there something else we're missing?

Lance Uggla -- Chairman and Chief Executive Officer

Well, OK. I'll pass it to Todd. Sorry. I'm just gonna start talking here. I'll pass it to Todd in a sec. I think Todd did call out that we're comfortable with the upper end of our range. Moved revenue up a little bit. And we're half of the way through the year with a half a year ahead of us. So, I thought that the numbers were fair. We've tried to give a really consistent, open view to what we're doing post-merger. And at this moment in time, that's what we feel is a appropriate level of guidance for the marketplace. Todd, you were gonna add to that?

Todd:

I think on the adjusted EBITDA, adjusted EPS, as I said, a little bit higher interest expense. We want to accommodate Ipreo in the guidance. Many see a penny there of drag at the time of that acquisition. So, that's why you don't have perfect symmetry between the adjusted EBITDA and the adjusted EPS.

Lance Uggla -- Chairman and Chief Executive Officer

Good. Next question.

Operator

Thank you. And our next question comes from Joseph Foresi of Cantor Fitzgerald. Your line is now open.

Michael Reid -- Cantor Fitzgerald -- Analyst

Hey, guys. This is Mike Reed on for Joe. Appreciate you taking our question. Just looking at the information segment. Was strong again for I think the third period in a row. Could you go into a little more detail what was driving the strength there and maybe the expectations there going forward?

Lance Uggla -- Chairman and Chief Executive Officer

Yeah. I guess I'm always surprised the information. Double digit solution, now high-single digits. I could have just as easily arrived and thought those numbers could have been the other way around, and I would have been equally pleased. So, I think that our performance in financial markets is well diversified. And it happens to be that being in indices and being one of two world leaders in fixed income indices, we're showing up in a marketplace that's growing double digits. And we're extracting our share of that and maybe expanding our share a little bit. So, the teams have done a great job. Pricing, reference data, these are all markets that are also growing. And they're growing internationally. International market participants are raising their bar and standards to global market standards. And therefore, they want independence, transparency. They want these products. And again, part of growth is showing up in growing markets.

And then the second part is actually expanding your market share and taking from competitors. I have to say that Adam and the financial markets team, they're doing that on a consistent basis. So, information, great job. Solutions, managed by Yaacov which includes all of our data science and analytics piece, it's a bit lumpier. But I have to say they're also doing an excellent job. And I think the combination of those, coupled with our position in the loan markets bodes well for mid-single digit growth. And that's something that conservatively, you can put into your models looking forward and I think will bode well. Todd, do you want to add?

Todd Hyatt -- Executive Vice President and Chief Financial Officer

No, I think that's --

Lance Uggla -- Chairman and Chief Executive Officer

No? That's good? Okay. Good. Next question.

Operator

Thank you. And our next question comes from Toni Kaplan of Morgan Stanley. Your line is now open.

Toni Kaplan -- Morgan Stanley -- Analyst

Thank you. Given that you haven't actually closed the MarkitSERV divestiture -- I know you're looking at 4Q for that, and so you don't know what price it will be sold at, but could you just give us a sense directionally if the combination of Ipreo and MarkitSERV in '19 would be EPS neutral? Or would it most likely be dilutive? And then given that MarkitSERV, you're expecting in 4Q to close the sale, would that be concurrent with Ipreo? Or would it be after? And so, therefore, would you hold a guidance call after Ipreo closes and then have another one when you close the disposition? Or how are you thinking of that? Thanks.

Todd Hyatt -- Executive Vice President and Chief Financial Officer

Relative to Ipreo, we gave very clear numbers for 2019. $370 of revenue. $115 million of adjusted EBITDA and said that it was modestly accretive. So, that's Ipreo. Relative to MarkitSERV, we provided a view of the size of MarkitSERV, including revenue, margin profile. As the process moves forward, we'll provide more information on that. But we haven't talked about valuation with the MarkitSERV disposition.

Lance Uggla -- Chairman and Chief Executive Officer

I guess one thing we could provide which is how's the process going, the team kicked off the process, Toni, once we announced it. I think they've signed between strategics and private equity close to 30 NDAs. There's still five or six kicking about to be completed. Early indications of interest. We expect by the end of this month, beginning of next we'll narrow that group down. I can see with the number of strategics and the deep interest around private equity, it's gonna be a robust process and one that should deliver a fair market value. And we'd expect that we'd get this announced before our fiscal year ends. So, I think it bodes well that there's a good process. It's robust. There's lots of players. And therefore, we should be able to drive it to a reasonable conclusion barring any unforeseen events that we're not aware of today. So, no. I think the team's done a great job. Next question.

Operator

Thank you. And our next question comes from David Ridley-Lane of Bank of America Merrill Lynch. Your line is now open.

David Ridley-Lane -- Bank of America Merrill Lynch -- Analyst

Sure. In the past, you've spoken about perhaps increase in technology spend in the near-term around cloud, information security, and so forth. Wondering if you're toward your full run rate today if that is planned to continue and how that fits in your broader margin expansion framework. Thank you.

Todd Hyatt -- Executive Vice President and Chief Financial Officer

I think as we look forward, we really are managing the company in a way that -- we put out the 4% to 6% long-term revenue growth. We hit 6% twice. We now hit 8%. And we're operating still in that 4% to 6%. And we've raised that to 5% to 6%. And I think that that's a good operating level for the company. With MarkitSERV out and Ipreo in, we moved that to 5% to 7%. What you're gonna see us do as we look forward, we want to find all our strategic levers to give us a propensity to be at the top end of our range. And we want to manage our cost and manage our teams and our performance so that if we come at the bottom end of our range, at the 5% level going forward, we're still able to deliver a 100 basis points margin and work our way forward to a mid-40s margin target over the coming years. Now as we go above 5%, of course you're gonna ask us for more margin.

And our job is gonna determine what additional margin should we give as we head to mid-40s versus investment in people, products, technology, and customer strategy. And I think our opportunity as a firm is to manage those four investment levers so that our teams can consistently hit the upper end of the range because a 5% with 100 basis point margin can deliver double digit earnings growth. 7%, we can invest. We can have a higher propensity to stay at a higher end of our range, deliver 100 basis points, deliver double digits, But if it's more consistent, more firm, and more long-term, that's great for shareholders. So, our job will be the balancing act of those levers. And right at the moment, I can just say I'm really pleased with the team, that they're consistently hitting in that 4% to 6%. They beat it one quarter. That's good. But we're not gonna brag about that because we might miss it one quarter, and we're not gonna be worried about that either.

So, we're managing the company for a long-term framework that's great for the company, great for customers, good for people, great for shareholders. And that culmination is exactly what IHS Markit should be doing. Next question.

Operator

Thank you. And our next question comes from Tim McHugh of William Blair. Your line is now open.

Trevor Romeo -- William Blair -- Analyst

Hi. This is Trevor Romeo on for Tim. Thanks for getting me in here. Just had a quick one on the CMS margin being down almost 300 basis points year-over-year. I know it's only one quarter, but is there anything you'd call out as driving that? Thank you.

Lance Uggla -- Chairman and Chief Executive Officer

Yeah. It's a good question because ultimately, the margins are down. So, we're starting to see revenue growth. So, first of all, where's revenue growth coming? This piece of our company is delivering -- and I'm talking about product design here. It's delivering engineering specs and standards that we distribute and pay royalties to market participants that are building things. So, whether it's an airplane, plant, some set of infrastructure, we're supplying into that. So, GDP growth, global economy strong, expect revenue growth. But the distributors and the owners of the standards have increased their royalties over time, and that's margin suppressing. So, our view as we look at our company and we look at product design in general is we've got a world-class team. We've got engineering workbench. We've got Goldfire, the software around our product design driven by natural language processing. Those are all good components for growth, but they're gonna come at two-handle, 25% margin type levels.

But if we can grow the revenue at high-single digits instead of low-single digits, good business, great team. That's what we should be doing. And within the context of the company, I'd be more than pleased with that result. TMT, which is also in that number, we expect those guys to deliver us high-single digits over time. And we expect them to open up margin. We expect the same out of Zbyszko who runs our ECR product. Get us into mid-single digits, expand margins, add customers. We've got three great teams there. They're all doing what they're doing. But don't expect a lot of margin out od product design. I think that's our last question. Eric?

Eric Boyer -- Head of Investor Relations

Yeah. This call can be accessed via a replay at 855-859-2056, or international dial-in 404-537-3406, conference ID 2694077 beginning in about two hours and running through July 3rd, 2018. In addition, the webcast will be archived for one year on our website at www.IHSMarkit.com. Thank you. And we appreciate your interest and time.

Operator

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program. You may all disconnect. Everyone, have a great day.

Duration: 67 minutes

Call participants:

Eric Boyer -- Head of Investor Relations

Lance Uggla -- Chairman and Chief Executive Officer

Todd Hyatt -- Executive Vice President and Chief Financial Officer

Peter Appert -- Piper Jaffray -- Analyst

Jeff Meuler -- Baird -- Analyst

Bill Warmington -- Wells Fargo --Analyst

Manav Patnaik -- Barclays -- Analyst

Andrew Jeffrey -- Suntrust-Analyst

Andrew Steinerman -- JPMorgan --Analyst

George Tong -- Goldman Sachs -- Analyst

Hamzah Mazari -- Macquarie Capital -- Analyst

Alex Kramm -- UBS -- Analyst

Shlomo Rosenbaum -- Stifel, Nicolaus & Company -- Analyst

Jeff Silber -- BMO Capital Markets Equity Research -- Analyst

Michael Reid -- Cantor Fitzgerald -- Analyst

Toni Kaplan -- Morgan Stanley -- Analyst

David Ridley-Lane -- Bank of America Merrill Lynch -- Analyst

Trevor Romeo -- William Blair -- Analyst

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