Manav Patnaik

Manav Patnaik inquired about Cintas's 'downturn playbook' and strategies to maintain high single-digit growth if unemployment rises.

Answer

Todd Schneider, President and CEO, outlined Cintas's multi-faceted growth approach, including new business acquisition (especially from 'no-programmers'), cross-selling to existing customers, and M&A opportunities. Jim Rozakis, Executive Vice President and Chief Operating Officer, provided an example of successful cross-selling within an existing customer account, emphasizing the significant internal growth potential.

Manav Patnaik inquired about Cintas's 'downturn playbook' and strategies to maintain high single-digit growth if unemployment rises, asking which business segments would typically contribute most.

Answer

President and CEO Todd Schneider highlighted Cintas's diverse product and service offerings and broad customer base, emphasizing flexibility through new business acquisition, cross-selling to existing customers, and M&A. Executive Vice President and COO Jim Rozakis added that deep customer understanding from frequent service visits allows Cintas to identify and fulfill additional needs, citing an example of expanding hygiene services to a uniform rental customer.

Manav Patnaik asked about Cintas' ability to convert 'no-programmers' into customers, particularly in a weakening macroeconomic environment, referencing a highway department example. He also inquired about the decline in fire protection services gross margins, specifically if it was due to SAP implementation.

Answer

Todd Schneider, President and CEO, explained that Cintas helps customers free up cash flow, save time, and smooth budgeting during uncertain periods, which accelerates the conversion of 'do-it-yourselfers.' He confirmed that the decline in fire protection services gross margins was due to additional costs associated with the SAP implementation and other strategic investments for future growth in that business.

Manav Patnaik asked about the impact of a weakening macro environment on Cintas's ability to convert 'no-programmers' (do-it-yourself customers) into clients, referencing a highway department example, and also inquired about the decline in fire protection services gross margins, specifically if it was due to SAP implementation.

Answer

President and CEO Todd Schneider explained that Cintas's value proposition helps customers free up cash flow, improve budgeting, and save time during economic pressures, accelerating the conversion of no-programmers. He confirmed that SAP implementation and other strategic investments in bench strength, operational capacity, and technology are indeed contributing to additional costs in the fire protection services business, which are crucial for long-term success.

Manav Patnaik inquired about Cintas' ability to accelerate the conversion of 'no-programmers' (do-it-yourself customers) into clients, particularly in a weakening macroeconomic environment with increased budget pressures, seeking historical examples.

Answer

Todd Schneider, President and CEO, explained that Cintas helps customers free up cash flow, manage budgets, and save time during uncertain periods, allowing them to focus on their core business. He affirmed Cintas' long-standing success in converting no-programmers. For a follow-up on fire segment gross margins, Mr. Schneider confirmed that the decline was due to additional costs from the SAP implementation and other strategic investments in the business's future growth, including operational capacity and technology.

Manav Patnaik sought further clarification on the 40 basis point reduction in the top-line guide, questioning why it was lowered if underlying expectations remained the same. He also asked about the areas of focus for the quarter's M&A activity.

Answer

CFO Mike Hansen explained the guidance change was primarily a mathematical adjustment after incorporating the Q2 results, with the implied outlook for the rest of the year remaining unchanged. CEO Todd Schneider added that M&A was active across all route-based businesses, focusing on acquiring high-quality, complementary companies.

Manav Patnaik (Barclays) inquired about the quarterly cadence of FactSet's 250 basis points gross investment for fiscal year 2026, asking how much was invested in the current quarter and if these are one-time investments or if similar levels are expected in future fiscal years.

Answer

Sanoke Viswanathan, CEO of FactSet, stated that investments are foundational (sales incentives, tech infrastructure) and growth-oriented (content, delivery, AI), with benefits expected in future years. Helen Shan, CFO, added that technology costs will increase through the year, reflecting prior investments and acquisitions, with strategic investments being back-half weighted and largely one-time in nature.

Manav Patnaik asked for clarification on the quarterly cadence of the 250 basis points gross investment impacting FactSet's FY26 margins, inquiring about the amount invested in the current quarter and whether these are one-time investments or if similar levels are expected in future fiscal years.

Answer

CEO Sanoke Viswanathan explained that investments are split into foundational elements (sales incentives, technology infrastructure for cybersecurity and resilience) and targeted growth areas (expanding data sets, deepening workflows, AI readiness). He stated that the current investment level is planned for the rest of the year, with benefits expected in future years, and longer-term investment paths are linked to strategy development. CFO Helen Shan added that cost management is progressing well, with technology costs expected to increase due to amortization and full-year run rates from acquisitions. Strategic investments are back-half weighted across headcount, software infrastructure, and professional services, with Q4 potentially impacted by performance.

Manav Patnaik asked Sanoke Viswanathan about his views on capital allocation, specifically regarding dealmaking in the context of the AI race, and asked Helen Shan for more details on FactSet's cyber investments, particularly if they are focused on internal security.

Answer

Sanoke Viswanathan, CEO, stated his priority is to deeply understand FactSet's product portfolio and roadmap, noting strong existing products and well-integrated acquisitions. He will optimize the approach between organic and inorganic growth but emphasized a prudent, disciplined approach to capital allocation, not pursuing 'growth at any cost.' He sees significant organic growth opportunities with current capabilities. Helen Shan, CFO, confirmed that cyber investments are indeed for internal security, which is crucial for AI initiatives and for safeguarding the vast number of client portfolios FactSet manages.

Manav Patnaik asked Sanoke Viswanathan about his views on capital allocation, specifically whether dealmaking would be a focus in the ongoing AI race, and followed up with Helen Shan on the nature of FactSet's cyber investments.

Answer

Sanoke Viswanathan, CEO, stated his first priority is to deeply understand FactSet's product portfolio and roadmap, noting strong existing products and innovation. He emphasized a prudent approach to investments and capital allocation, not pursuing 'growth at any cost,' and sees significant organic growth opportunities with current capabilities before prioritizing inorganic growth. Helen Shan, CFO, clarified that cyber investments are primarily for internal security, crucial for AI initiatives and safeguarding the growing number of client portfolios (over 6 million asset management and 15 million wealth portfolios).

Manav Patnaik asked Sanoke Viswanathan for his initial thoughts on FactSet's capital allocation strategy, specifically whether dealmaking would be a focus in the ongoing AI race. He also asked Helen Shan for elaboration on FactSet's investments in cybersecurity, assuming they are primarily for internal security.

Answer

Sanoke Viswanathan, CEO & Director, FactSet, stated his first priority is to understand the product portfolio and roadmap, noting strong existing products and well-integrated acquisitions. He plans to investigate client priorities and internal traction to optimize organic versus inorganic growth, emphasizing prudence in investments and capital allocation, and seeing significant organic growth opportunities. Helen Shan, CFO, FactSet, confirmed that cyber investments are for internal security, driven by the need to provide the best security for over 6 million asset management portfolios and 15 million wealth portfolios.

Manav Patnaik asked for elaboration on commentary about pricing and packaging adjustments being made to enhance competitiveness, and what specifically is being tweaked to improve conversions.

Answer

Chief Financial Officer Helen Shan explained that for new business involving competitive displacements, FactSet has proactively changed its pricing structure for specific firm types. This has led to higher volume at a lower price realization but resulted in overall increased ASV. She also noted that enterprise solutions are being leveraged effectively during renewals.

Manav Patnaik of Barclays requested elaboration on management's remarks about tweaking pricing and packaging to enhance competitiveness, asking what specific changes are being made to improve deal conversions.

Answer

CFO Helen Shan explained that in a competitive environment, especially for new business involving displacements, they have adopted a more proactive pricing structure for specific firm types. This has led to lower price realization in some cases but has been offset by higher volume, resulting in an overall increase in ASV, particularly in the Americas and EMEA.

Manav Patnaik inquired about the strong performance in the CGS (Content and Technology Solutions) segment, asking for details on CUSIP's growth rate and its contribution to the business.

Answer

Executive Frederick Snow stated that FactSet does not break out CUSIP's performance separately but confirmed it was the primary driver of the 6% aggregate growth in the Partners & CGS business line. He noted that CUSIP's strength offset some ASV losses in other traditional partnerships and praised the CUSIP team's execution and pace of new development.

Manav Patnaik asked for clarification on NIQ's data acquisition strategy, specifically the balance between purchased and self-collected data, and the unique context NIQ adds to this data.

Answer

CEO Jim Peck highlighted NIQ's extensive data moat, emphasizing the difficulty of replicating their collection from thousands of sources, including retailers, field auditors, and consumer panels. He stressed the critical role of cleaning, coding, and adding metadata to ensure accuracy for high-stakes client decisions, and noted AI's role in efficient innovation. CFO Mike Burwell added that 2026 momentum is positive, with more details to follow.

Manav Patnaik asked about FICO's recent discussions with the FHFA, Director Pulte's favorable tweets regarding FICO's actions, and the potential approval timeline for FICO 10T.

Answer

CEO Will Lansing confirmed constructive conversations with the FHFA, noting the positive reception to FICO's direct distribution program for increasing competition. He stated FICO 10T is with the GSEs, and while an exact release date isn't available, FICO is confident in its eventual release.

Manav Patnaik asked about FICO's recent discussions with the FHFA, Director Pulte's favorable tweets, the next steps, and the potential approval timeline for FICO 10T.

Answer

CEO Will Lansing stated that FICO has been engaged in constructive conversations with the FHFA, noting that the direct distribution program aligns with the director's push for increased competition. He confirmed that FICO 10T is with the GSEs and they are working towards its release, though an exact date cannot be provided.

Manav Patnaik from Barclays Investment Bank inquired about the current adoption of FICO Score 10T, including customer numbers and pipeline strength, and asked about a one-off insurance core product renewal.

Answer

CEO Will Lansing confirmed a strong pipeline for FICO 10T with customers actively using it, noting that system retooling is modest. CFO Steve Weber described the insurance renewal as a one-off, multi-year license deal recognized in the quarter.

Manav Patnaik of Barclays inquired about FICO's decision to maintain guidance despite a strong quarter, asking if macro uncertainty was the primary factor. He also sought context on the software segment's performance, particularly the platform's reacceleration and the decline in non-platform revenue.

Answer

CEO Will Lansing confirmed that holding guidance was a conservative move due to macroeconomic uncertainty, stating there is ample time to raise it later. He attributed the non-platform software performance to lower growth in CCS usage, reflecting customer conservatism, but expressed confidence in the platform's healthy pipeline and future reacceleration.

Manav Patnaik of Barclays asked why FICO maintained its fiscal guidance despite a strong quarter and inquired about the software segment's performance, specifically the deceleration in platform growth and the decline in non-platform revenue.

Answer

CEO Will Lansing explained that the decision to reiterate guidance stems from a conservative stance amid macroeconomic uncertainty. He affirmed the software business remains healthy, attributing the non-platform dip to lower growth in Customer Communication Services (CCS) usage as clients act more conservatively, rather than a fundamental issue with the business.

Manav Patnaik asked about future pricing potential for mortgage scores, given FICO's small share of closing costs, and also requested an update on the strategic position and investment plans for the software business.

Answer

CEO William Lansing confirmed that FICO sees continued opportunity for mortgage score price increases due to the tremendous value it provides. Regarding the software business, he stated they are in the "very, very early innings" of penetrating the market, with significant runway for growth. Mr. Lansing affirmed that FICO will continue investing in the platform's features, distribution, and partner ecosystem, while also reengineering for scalability, which should improve margins over time.

Manav Patnaik asked for a sense of the sizing and growth rates of Thomson Reuters' workflow business, particularly in the context of high valuations and growth rates cited by legal tech competitors, and sought an update on the M&A market for potentially larger deals, including factors like valuation and timing.

Answer

CEO Steve Hasker stated that Co-Counsel is at least on par or outpacing newer competitors in the workflow space, differentiating through content integration and editorial expertise. Regarding M&A, Steve Hasker expressed satisfaction with tuck-in acquisitions and identified risk, fraud, compliance (building on CLEAR), and indirect tax/e-invoicing (Pagero) as areas for potentially larger deals. He noted that assets of interest are currently fully valued, requiring an adjustment for shareholder value creation. CFO Mike Eastwood added that international opportunities are also being selectively explored.

Manav Patnaik asked for a sense of the sizing and growth rates of Thomson Reuters' workflow business in the AI assistance space, and an update on the M&A strategy, particularly for larger deals.

Answer

CEO Steve Hasker stated that Co-Counsel is at least on par or outpacing newer competitors in the workflow space, differentiating through content integration and editorial expertise. Regarding M&A, Steve Hasker noted satisfaction with tuck-in acquisitions and a continued focus on opportunities in risk, fraud, compliance, and indirect tax/e-invoicing, but larger assets remain fully valued. CFO Mike Eastwood added that international assets are also being selectively considered.

Manav Patnaik of Barclays Investment Bank asked for a comparison of Thomson Reuters' AI product suite against competitors, including startups and traditional rivals forming new partnerships, to understand how far ahead the company is with its innovations.

Answer

CEO Steve Hasker asserted that Thomson Reuters is ahead of competitors in Tax & Accounting AI and differentiated in Legal by its proprietary content (Westlaw, Practical Law) and its single, integrated solution strategy. Chief Product Officer David Wong emphasized that the 'Deep Research' capability in Westlaw sets a new market standard, as it's an agentic AI trained specifically for legal research workflows, unlike more generic AI solutions.

Manav Patnaik from Barclays inquired about the growth profile of the 68% of products not in the high-growth bucket and the strategy to accelerate them. He also asked for an update on the company's government business exposure.

Answer

CFO Mike Eastwood detailed that of the 68% 'other' product bucket, 20-25% grows below 5% and 40-42% grows between 5-10%. CEO Steve Hasker explained the strategy to accelerate these products involves injecting GenAI capabilities to expand their role in customer workflows. Regarding the government business, Eastwood stated it represents about 8% of total revenue, with no material impacts to date, and highlighted opportunities in efficiency, national security, and fraud prevention.

Manav Patnaik of Barclays questioned whether the current wave of generative AI product rollouts by Thomson Reuters and its competitors could lead to significant market share shifts.

Answer

CEO Steve Hasker responded that it is too early to determine if share shifts will occur. He emphasized that Thomson Reuters is focused on creating more value for its customers by expanding its value proposition beyond traditional metrics. While respectful of competition, Hasker expressed strong confidence in the company's current position and investment trajectory.

Manav Patnaik asked for clarification on the proportion of Gartner's total business and tech vendor segment impacted by tariffs. He also sought to understand the discrepancy between reported double-digit pipeline growth and new business being down 4%.

Answer

CFO Craig Safian stated that approximately 40% of Gartner's total contract value is in tariff-affected industries, and for the tech vendor segment, this figure is likely between 20-30%. He explained that while the significant pipeline growth indicates strong demand, the selling environment remains challenging, characterized by longer sales cycles and higher levels of approval. Despite these headwinds, he expressed confidence that the robust pipeline, particularly during the largest conference season, will convert into new business.

Manav Patnaik asked for clarification on the mix of Gartner's total business that is tariff-impacted, and specifically within tech vendors. He also asked to bridge the gap between reported double-digit pipeline growth and new business being down 4%.

Answer

Craig Safian (CFO, Gartner) stated that about 40% of total contract value is tariff-affected, and within tech vendors, it's likely 20-30%. He explained that while pipeline is up significantly, reinforcing demand, the selling environment remains challenging with longer sales cycles and higher approval levels. The strong pipeline, especially during the largest conference season, is promising for future new business conversion.

Manav Patnaik questioned why GTS sales headcount growth is planned for only mid-single digits and what it would take to return to double-digit growth. He also asked if the opportunistic buyback stance was influenced by a potential M&A pipeline.

Answer

Executive Eugene Hall explained that for GTS, they believe they can drive growth through both improved productivity, particularly on the tech vendor side, and new headcount. CFO Craig Safian clarified that their strong cash position makes buybacks and M&A an 'and' not an 'or' decision. He stated the buyback strategy is not influenced by the M&A pipeline, which focuses on small to medium tuck-in acquisitions.

Manav Patnaik asked for a reminder of the fourth quarter's importance for sales and renewals, and questioned why the sales headcount hiring strategy was not more aggressive given the positive outlook.

Answer

CFO Craig Safian confirmed Q4 is significant, generating roughly 50% of annual Net Contract Value Increase (NCVI) and 40% of new business. CEO Gene Hall explained that the hiring pace is deliberately managed to align with their operational capability to effectively onboard, train, and develop new talent, preferring a steady acceleration over a large step-change that could strain the system.

Manav Patnaik asked about the future role of AI in expanding Market Intelligence margins, considering the historical competitiveness of the area and S&P Global's continuous investment.

Answer

Martina Cheung, President and CEO, explained AI's dual benefit for growth (rapid innovation, add-ons like ADI for iLEVEL, new products like Pronto NLP filings, new distribution channels via hyperscale partners and IBM) and productivity. Eric Aboaf, CFO and EVP, detailed productivity gains from consolidating data operations into an Enterprise Data Office (6,000 MI employees moved), reducing redundancies, and using AI-driven tools for content creation in Commodity Insights, resulting in "multiple millions of dollars of savings" this year.

Manav Patnaik questioned the future role of AI in expanding Market Intelligence margins, considering its competitive landscape and the company's historical investment in AI.

Answer

Martina Cheung, President and CEO, stated that historical AI investments position S&P Global well for economic innovation, driving both growth through product development (e.g., ADI for iLEVEL, Pronto NLP) and new distribution channels (e.g., IBM partnership). Eric Aboaf, CFO and EVP, highlighted productivity benefits from AI, such as consolidating data operations into an Enterprise Data Office, using AI-driven content workflow tools, and leveraging AI for content creation in Commodity Insights, which has already generated millions in savings and contributed to margin expansion.

Manav Patnaik requested more color on the sanctions impacting Commodity Insights revenue and questioned the long-term strategic fit of the low-growth upstream data business within the portfolio.

Answer

CFO Eric Aboaf specified that recent EU and UK sanctions create a manageable 1-2 percentage point headwind for the price assessments business in the second half. He defended the upstream business, stating that recent softness is due to client consolidation (M&A) and that the business is highly integrated with the full suite of Commodity Insights offerings, making it strategically important.

Manav Patnaik requested more color on the revenue impact from sanctions in Commodity Insights and questioned the long-term strategic fit of the low-growth upstream data business within the portfolio.

Answer

CFO Eric Abouaf clarified that recent sanctions from the EU and UK are expected to have a contained impact, creating a 1-2 percentage point headwind for the price assessments business in the second half. Regarding upstream, he explained that the softness is due to significant client consolidation in the energy sector. He defended its strategic fit, noting the data is heavily integrated with other offerings like price assessments and is crucial for serving the full needs of major energy clients.

Manav Patnaik sought confirmation that S&P Global is not yet seeing major changes in customer behavior, with a particular focus on its subscription-based businesses.

Answer

CEO Martina Cheung confirmed this is accurate for the subscription businesses, which provide a 'ballast' in the current environment. She noted that S&P Global is well-positioned for vendor consolidation opportunities and has seen a significant year-over-year uptick in platform usage, indicating strong customer engagement and reliance on their data.

Manav Patnaik of Barclays inquired about potential future divestitures within the Market Intelligence portfolio and sought clarification on strong Q4 ACV growth despite mentions of competition and pricing pressure.

Answer

President and CEO Martina Cheung stated that S&P Global continuously reviews its portfolio for optimization. She clarified that the comment on pressure related to earlier 2024 quarters, while Q4 saw strong retention, the lowest cancels in over a year, and good competitive wins. The improving ACV in Q4 sets up for gradual improvement in 2025 as the company laps the earlier cancellations.

Manav Patnaik inquired about Martina Cheung's perspective on portfolio simplification for the broader company, extending beyond the Market Intelligence segment.

Answer

Incoming President and CEO Martina Cheung emphasized that the new leadership team will maintain the company's historical discipline in capital management and shareholder returns. She stated that they will continuously evaluate the portfolio through a strategic lens, assessing M&A and divestiture opportunities to ensure they are the right owners of their businesses and are prioritizing investments effectively.

Manav Patnaik from Barclays inquired about Clarivate's AI initiatives, specifically asking about the balance between workflow-side innovations and content-side innovations, and the extent of proprietary content supporting these workflows across different divisions.

Answer

Matti Tov, CEO, clarified that a significant portion of AI innovations supports information services and discovery products like Web of Science and Derwent Innovation. He confirmed that Clarivate possesses substantial proprietary data, collected, acquired, or leased, which is then processed, indexed, and presented to customers. While some AI automation exists for workflow solutions, the majority of innovation is directed towards informational services offerings.

Manav Patnaik from Barclays asked about Clarivate's IP business, specifically the timing of the rebound in the patent annuity market, how the company can capitalize on AI-related opportunities, and its exposure to China, where Gen AI patent activity is reportedly high.

Answer

Jonathan Collins, EVP & CFO, explained that new patent filings typically take a few years to translate into renewal revenue. He noted that the surge in AI-related patents is a positive long-term trend for the business. While a disproportionate number of these filings are in Asia, particularly China, Collins confirmed that the uptick is a global phenomenon that will benefit Clarivate across regions over the next few years.

Manav Patnaik from Barclays asked about the IP business, including the timing of the patent annuity market rebound, capitalizing on AI opportunities, and exposure to high AI patent activity in China.

Answer

EVP & CFO Jonathan Collins explained that new AI-related patent filings take a few years to impact renewal revenues. He noted that while there is a disproportionate volume of AI patent filings in Asia, particularly China, the trend is global and is expected to create a favorable tailwind for the business over the next few years.

Manav Patnaik inquired about Clarivate's total exposure to government spending, including both direct federal and state contracts and indirect funding for its academic and government clients.

Answer

CEO Matti Shem Tov acknowledged that a small percentage of revenue comes from U.S. government spending and that significant cuts could create exposure. However, he expressed long-term optimism, citing his 20 years of experience seeing the academia business successfully navigate numerous economic cycles.

Manav Patnaik questioned the rationale of keeping the three disparate segments together as a public company during a complex turnaround, asking about Board discussions on the topic.

Answer

CEO Matti Shem Tov defended the three-segment structure, citing shared characteristics in data, analytics, SaaS delivery, and technology infrastructure. While acknowledging the premise of the question, he stated it was 'too early to comment' further, implying the topic is under consideration.

Manav Patnaik inquired about the AccuLynx acquisition, specifically the FTC review process, the confidence in its closure given the raised debt, and how the strategic agreement with ServiceTitan, a competitor, plays into the situation.

Answer

CFO Elizabeth Mann confirmed the FTC is reviewing the deal and Verisk is working collaboratively. She clarified that ServiceTitan is not considered the main competitor of AccuLynx and integrates through the Exactware platform.

Manav Patnaik inquired about the AccuLynx acquisition, seeking more details on the FTC review process and any specific issues in question, especially given the debt raised for the deal. He also asked how Verisk's strategic agreement with ServiceTitan, a perceived competitor, factors into the acquisition dynamics.

Answer

Elizabeth Mann, Verisk's Chief Financial Officer, stated that the FTC is reviewing the deal and Verisk is working collaboratively and expeditiously towards approval. She clarified that ServiceTitan is a partner through the Xactware platform and not considered the main competitor of AccuLynx.

Manav Patnaik from Barclays Investment Bank inquired about the strategic implications of the AccuLinks acquisition, asking if it alters competitive dynamics and requesting details on potential revenue and cost synergies.

Answer

CEO Lee Shavel explained that AccuLinks extends Verisk's network capabilities in property estimating solutions, highlighting significant customer overlap and immediate cross-sell opportunities. He also noted the value of AccuLinks' precise roofing data for insurers. CFO Elizabeth Mann added that the acquisition is focused on revenue growth and investment rather than cost-cutting synergies.

Representing Manav Patnaik, an analyst from Barclays asked about M&A opportunities, including the potential for lower valuations and the key areas Verisk aims to augment.

Answer

President and CEO Lee Shavel acknowledged that the M&A environment has improved due to market uncertainty. He stated Verisk seeks products that add value to the insurance industry, which Verisk can enhance through its distribution or data integration. He cited the recent acquisition of Simplitium as an example of this active, value-focused strategy.

An associate for Manav Patnaik asked about the ongoing benefit from converting transactional revenue to subscription contracts and the remaining runway for these conversions in 2025.

Answer

CFO Elizabeth Mann clarified that the impact from one specific large contract conversion will continue through mid-Q2 2025. She added that conversions in the Anti-Fraud business will also provide a tailwind through the first half of the year. More broadly, she suggested that as customers increasingly recognize value, this trend could be a sustained tailwind for subscription revenue.

Manav Patnaik requested more specific examples of how Core Lines Reimagine is improving renewals beyond just price increases, asking about any potential volume component.

Answer

Chief Financial Officer Elizabeth Mann clarified that there isn't a direct volume component. Instead, the growth is driven by clients adding new data sets, particularly in the underwriting data and analytics solutions business. She also cited affiliated growth products, such as 'electronic ratings content' and 'ratings as a service,' as the types of additions clients are making during renewals.

Manav Patnaik asked about the 85% core business growing at 4% and how long it would take for the growth engines to become large enough to significantly impact overall revenue growth, aiming for better top-line performance.

Answer

Christophe Beck, Ecolab's Chairman and CEO, explained that the company's diverse portfolio means not all markets perform strongly simultaneously. He noted that the growth engines are currently growing at 12% or more in operating income, and with the AVEVA acquisition, Global High-Tech will become even larger. Beck projected that growth engines, currently about 20% of the company's $3 billion sales, could become 30-40% in a few years, significantly shifting the company's growth profile over time.

Manav Patnaik asked about the timeline for Ecolab's growth engines to become a significant enough portion of the business to materially impact overall revenue growth, given that 85% of the core business is growing at 4%.

Answer

Christophe Beck, Chairman and CEO of Ecolab, explained that while the company's broad market exposure means not all segments perform strongly simultaneously, the focus is on reducing the drag from underperforming businesses. He noted that the 85% core business is growing at 4% with mid-teens operating income growth, and the growth engines are expanding at 12% or more. Beck anticipates that as growth engines, currently about 20% of the company at $3 billion, continue to grow double-digit, they could become 30-40% of the company in a few years, thereby shifting the overall growth profile.

Manav Patnaik from Barclays Investment Bank inquired about pricing trends, noting the 2% realization and asking for the expected impact of the new trade surcharge in the second half of the year.

Answer

Christophe Beck, Chairman & CEO, stated he is pleased with the 2% value pricing achieved in Q1 and Q2. He confirmed the new U.S. trade surcharge is being implemented successfully and expects total pricing to accelerate closer to 3% in Q3 and Q4, supported by strong value delivery and customer retention.

Manav Patnaik from Barclays asked for an update on the demand environment since mid-March, questioning if conditions had worsened and how this translates into volume assumptions for the remainder of the year.

Answer

Christophe Beck, Chairman and CEO, stated that after a dip in demand in late February, particularly in heavier industries, the situation has stabilized at that lower level. While he views this as reasonably good news, he assumes demand will remain soft for the rest of the year. Beck emphasized that Ecolab is on offense, focusing on new business generation, which was a record in Q1, to create its own tailwinds and ensure positive volume growth in 2025.

Manav Patnaik asked for the current size of the Ecolab Digital business and how intertwined it is with the broader One Ecolab initiative.

Answer

Christophe Beck, Chairman and CEO, revealed that Ecolab Digital is a business with several hundred million dollars in sales, with precise figures to be disclosed starting in Q1 2025. He described it as a high-growth, high-margin opportunity monetized via equipment leases, software subscriptions, and data consumption. Beck confirmed it is "very clearly intertwined" with the One Ecolab initiative, as its connected systems provide the data foundation for the Ecolab 3D platform.

Manav Patnaik asked about MSCI's strategic approach to private credit, including identifying data white spaces and the integral role of the Moody's partnership.

Answer

Henry Fernandez (Chairman and CEO, MSCI) expressed strong bullishness on private credit, citing it as a secular trend. He detailed MSCI's innovations, including a proprietary private credit database, Moody's credit risk models for credit assessments, a private credit taxonomy, factor risk models, and the launch of numerous private credit indices, emphasizing MSCI's role as a trusted transparency provider.

Manav Patnaik asked about MSCI's strategic approach to private credit, including addressing data scarcity, identifying missing white spaces, and the significance of the Moody's partnership in this evolving market.

Answer

Henry Fernandez, Chairman and CEO, MSCI, expressed strong bullishness on private credit, highlighting it as a secular trend. He detailed MSCI's innovations, including developing terms and conditions for a proprietary private credit database, creating credit assessments with Moody's licensed models, launching a private credit taxonomy for market risk, and introducing numerous private credit indices. He emphasized MSCI's role as a trusted source for transparency tools in this space.

Manav Patnaik inquired about the strategy to re-accelerate growth within the asset manager client segment, which has remained stable in the mid-single-digit range amid industry-wide budget pressures.

Answer

Chairman & CEO Henry Fernandez outlined a two-pronged strategy. First, to accelerate growth in the non-active asset manager segments (banks, hedge funds, asset owners, wealth), which collectively grow at 11.5%. Second, to maintain or gradually improve growth with asset managers, which is challenging due to industry pressures. He highlighted active ETFs as a key innovation and growth opportunity for this segment.

Manav Patnaik asked for a reminder of MSCI's 'downturn playbook' and the range of outcomes the company is preparing for in the current environment.

Answer

Chief Financial Officer Andrew Wiechmann detailed several expense management levers MSCI can use. These include incentive compensation, which has a ~$20 million annual impact for a 10% swing in performance; flexing non-comp expenses like professional fees for a ~$20 million annualized impact; and controlling the pace of hiring, which can also have a ~$20 million annual impact. He noted that if market levels remain flat, expenses would be at the low end of the current guidance.

Manav Patnaik asked for context on the 'exciting year ahead' comment, seeking details on the current environment for client budgets and cancellation trends compared to the previous year.

Answer

CFO Andrew Wiechmann explained that rising equity markets are creating a more constructive environment for client buying behavior, particularly in the U.S. He added that excitement also stems from traction with innovations like custom indexes and front-office analytics. While some pressures remain on active managers in Europe, he does not expect the same level of cancellations seen in the prior year's first quarter.

Manav Patnaik asked about the recent senior management changes in the ESG & Climate and Private Assets segments, questioning if they signal a change in strategy.

Answer

Chairman and CEO Henry Fernandez clarified that the hires are a continuation of a strategy to strengthen leadership in key long-term growth areas. He emphasized that private assets are transforming global finance and that ESG and Climate investing are durable, secular trends, despite current cyclical softness. The new executives, Luke Flammer and Richard Madison, are expected to scale these businesses and develop new capabilities.

Manav Patnaik of Barclays Investment Bank requested an update on TransUnion's exposure to the FinTech sector, its performance, and the extent to which this customer category is driving the company's overall positive business momentum.

Answer

President and CEO Chris Cartwright confirmed that FinTechs are a significant and well-performing part of the consumer lending vertical, which is benefiting from renewed funding and strong consumer demand for loan consolidation. However, he stressed that while FinTech is a key contributor, the company's strong growth is broad-based and evident across all of its financial services subcategories.

Manav Patnaik of Barclays asked for an update on TransUnion's FinTech exposure and to what extent that customer category is driving the company's positive business momentum.

Answer

President and CEO Chris Cartwright confirmed that FinTechs are a significant and recovering part of the consumer lending category, benefiting from a stable funding environment and strong consumer demand for debt consolidation. However, he emphasized that TransUnion's strong performance is broad-based across all financial services subcategories and not solely dependent on the FinTech recovery.

Manav Patnaik asked for management's perspective on two M&A events: the Capital One-Discover merger's impact on TransUnion, and the acquisition of TruWork by Checker, including TransUnion's equity stake.

Answer

President and CEO Christopher Cartwright stated that both Capital One and Discover are significant clients, and TransUnion will be highly engaged in supporting them through the merger. Regarding TruWork, he confirmed TransUnion rolled its minority equity stake into the combined entity with Checker (also a client) and will continue its data distribution partnership.

Manav Patnaik referenced a presentation slide showing below-trend lending volumes and asked for a quantification of the potential business impact if volumes returned to historical norms. He also noted that card and personal loan volumes appear to be above pre-COVID levels.

Answer

CEO Christopher Cartwright declined to provide a specific value but emphasized that a rebound in credit volumes represents a material opportunity for both revenue and profit. He explained that a mix shift back toward higher-margin credit origination products would have a substantial positive impact on profitability due to high incremental margins.

Manav Patnaik of Barclays PLC asked for the rationale behind the expected drop in capital expenditures from 8% of revenue to a sustainable 6% by 2026, questioning how this is achievable given the ongoing need for investment in technology and data.

Answer

President and CEO Christopher Cartwright and EVP and CFO Todd Cello explained the reduction is driven by technology transformation effectiveness. Cello clarified that migrating applications to the cloud eliminates the need for capitalized hardware and software purchases, shifting costs to opex. Cartwright added that consolidating onto a single global platform (OneTru) means fewer systems to maintain, creating leverage for both earnings and innovation.

Manav Patnaik questioned the visibility and assumptions for the EWS government business in the second half, given past guidance revisions, and asked for elaboration on the share shifts impacting the criminal data business within the Talent segment.

Answer

CEO Mark Begor reiterated that the government business faces near-term volatility from prior administration changes to federal-state cost-sharing, making it prudent to handicap the H2 outlook. CFO John Gamble clarified the criminal data issue was due to a large customer of an Equifax client switching to a background screener that does not use Equifax for court records, noting it's a low-margin part of the business.

Manav Patnaik sought to confirm that the 200 basis point growth headwind assumes flat mortgage and hiring markets and asked for clarification on the 2025 cadence for the government business.

Answer

CEO Mark Begor and CFO John Gamble confirmed the headwind calculation assumes a flat market scenario. Regarding the government business, they cited tough comps and a change in the CMS reimbursement program impacting the first half of 2025, but expect a return to double-digit growth in the second half, aided by a large SSA contract and pricing escalators.

Manav Patnaik questioned Equifax's guidance philosophy, asking why guidance was lowered despite an improving mortgage market, a reversal of historical patterns. He also asked for early examples from other divisions' tech transformations that provide confidence for USIS's post-migration performance.

Answer

CEO Mark Begor stated there is no change in their guidance philosophy, which aims for transparency and to set achievable targets. He attributed the Q4 guidance reduction primarily to weakness in the EWS employer business, related to the cessation of Employee Retention Credits (ERC) and slower state adoption of Work Opportunity Tax Credits (WOTC). Regarding the tech transformation, Begor highlighted USIS's improving Vitality Index, future cost savings, expected market share gains, and the development of unique "only Equifax" products that combine EWS income data with USIS credit files.

An associate for Manav Patnaik asked about the key factors providing confidence in the full-year guidance and what would drive results to the high or low end of the range, and also inquired about the contract timing for recent enterprise bookings.

Answer

CFO Steven Marks explained that confidence stems from controllable factors like new logo wins, upsell/cross-sell, and high retention, with the main variable being underlying base volumes. He noted the guidance maintains a conservative posture for macro uncertainty. He also clarified that the 78 enterprise bookings are ratable throughout the year and that the record dollar volume in Q1 helps de-risk the second half.

Speaking on behalf of Manav Patnaik, Ronan Kennedy asked for details on the source of accelerated cost synergies and inquired about any significant positive or negative surprises encountered during the Sterling integration process.

Answer

CFO Steven Marks explained that synergy acceleration was broad-based across the P&L, allowing the company to action over 50% of its target within six months. CEO Scott Staples identified the strong cultural match between the two organizations as the biggest positive surprise. He noted that while Sterling's lower margin profile is a known challenge, they have a clear plan for improvement.

Manav Patnaik inquired about the integration plan for the various technology platforms and whether new innovations were contingent on back-end consolidation. He also asked how the combined company expects to perform in a 'normal' pre-pandemic environment, given the limited public history of both companies.

Answer

CEO Scott Staples emphasized that the company will not force-migrate clients from their existing platforms, as synergies do not depend on it. The strategy is to keep the 'better of the two' products to ensure no customer disruption. He reiterated the company's long-term growth algorithm of 8-10% and noted that all components (upsell, new logos, attrition) are performing as expected, with only base growth currently fluctuating due to the macro environment.

Princy Thomas, on for Manav Patnaik, asked about the sustainability of the Q1 full-service margin of approximately 7%, the outlook for Q2, the quantifiable drag from the U.K. business, and the net new center opening forecast.

Answer

CFO Elizabeth Boland clarified the Q1 margin was 6.5% and projected a full-year margin improvement of about 125 basis points, with Q1's strength tapering as they lap prior-year U.K. improvements. She quantified the U.K. headwind at roughly 100 basis points on full-service margins and reaffirmed the outlook for a net neutral change in center count for the year (approx. 25 openings and 25 closures).

Manav Patnaik inquired about the specific components of the 6% to 8% full-service revenue growth guidance for 2025, seeking a breakdown of pricing, enrollment, and net closure impacts. He also requested the full-year operating margin outlook for each of the three business segments.

Answer

CFO Elizabeth Boland provided a detailed breakdown for the 2025 full-service growth outlook, projecting a 4-5% price increase, 2.5-3.5% enrollment growth, and a modest 0.5% drag from net center closures, alongside a 1.5% headwind from foreign exchange. For segment margins, she guided for full-service to improve by about 150 basis points to the mid-single-digit range, Backup Care to remain strong in the high end of the 25-30% range, and Educational Advisory to be in the mid-to-high teens.

Manav Patnaik requested a detailed breakdown of the low single-digit enrollment growth, specifically asking for U.S. versus international trends and infant versus older age group performance. He also asked for an early outlook on key drivers for 2025.

Answer

CFO Elizabeth Boland explained that enrollment growth was consistent across both domestic and international markets. She noted that infant and toddler enrollment growth has come more in line with preschool, which is why it wasn't singled out. For 2025, she indicated an expectation for continued low-single-digit enrollment growth, pricing increases tapering to around 4%, and backup care growth normalizing to a 10-12% range.

Manav Patnaik of Barclays asked a broad question about private credit, inquiring where its impact might appear beyond structured finance and how to balance the growth opportunity with negative market headlines.

Answer

CEO Robert Fauber detailed that private credit's impact is seen in structured finance, fund finance (ratings on BDCs and asset managers), and as a significant driver of first-time mandates in the Financial Institutions Group (FIG). He acknowledged potential asset quality issues but highlighted the new MSCI partnership as a major opportunity to provide credit scoring tools to investors in the space, meeting a critical need for transparency.

Manav Patnaik of Barclays PLC asked for clarification on Moody's medium-term guidance, questioning if the projections, particularly for Moody's Analytics (MA), were primarily organic and what role M&A was expected to play.

Answer

CFO Noemie Heuland confirmed that the medium-term target for MA's Annual Recurring Revenue (ARR) growth of 9% to 10% is mostly organic. She noted that the contribution from M&A has been lower than initially anticipated when the targets were first set, partly due to a different interest rate environment.

Manav Patnaik pointed out the widening gap between Moody's Analytics' reported revenue growth and its ARR growth, asking for an explanation and how to think about the dynamic heading into 2025.

Answer

CFO Noemie Heuland clarified that recurring revenue, which is 95% of the MA total, grew 9% in line with ARR. The lower overall reported revenue growth of 7% was due to a strategic de-emphasis and double-digit decline in non-recurring transactional revenue. CEO Robert Fauber added that a tougher comparison to the prior year, when onetime revenue grew, also contributed to the gap.

Manav Patnaik questioned the timing of the recent cost-cutting actions, noting the company's historical tendency to be late in making such moves, and asked what specific changes in client behavior prompted this decision. He also requested information on the financial contribution from a recent acquisition.

Answer

Executive M. Waddell responded that a continuation of client cautiousness, driven by renewed economic and trade policy uncertainty, suggested the challenging environment would persist longer than previously hoped, making it the right time to act. Regarding the M&A, Waddell described it as a 'very small transaction' involving the acquisition of a 50-consultant financial services firm in France, which adds new capabilities.

Manav Patnaik of Barclays asked for details on Protiviti's usage of Robert Half's temporary staffing services and whether this trend serves as a leading indicator. He also questioned how the positive business optimism reconciles with persistent macroeconomic headwinds like high inflation and interest rates.

Answer

Executive M. Waddell highlighted the strong collaboration, stating that Protiviti's revenue from contractors sourced via Talent Solutions grew 18% in Q4, far outpacing Protiviti's overall growth. On the economic outlook, Waddell explained that the surge in business confidence encompasses a net assessment of all factors, including tax rates and regulation, resulting in a very positive outlook. He confirmed the improved tone in client conversations, even if it hasn't yet converted to placements.

Manav Patnaik inquired about the weakness in permanent recruitment, asking if it was a sign of impending layoffs and at what point the company would decide to resize its own cost base more aggressively due to heightened uncertainty.

Answer

CEO Jonas Prising clarified that the pullback in permanent hiring is a traditional response to employer caution and is primarily focused on lower-skilled roles, while demand for specialized and technical skills remains good. He explained that the company continuously evaluates its cost base on a country-by-country basis, balancing cost control with the need to maintain service levels and capture market share, as evidenced by the recent significant actions taken in Northern Europe.

Speaking for Manav Patnaik from Barclays, Ronan Kennedy followed up on the auto claims issue, asking if the impact could be ongoing rather than a one-time event. He also requested an update on the progress of back-office modernization and the timeline for reinvesting administrative savings into growth initiatives.

Answer

CFO Ken Krause acknowledged that predicting claims is difficult and that volatility has been a factor since the post-COVID period, though they are actively implementing mitigation measures. On modernization, Krause confirmed that since 2022, approximately 50 basis points of administrative cost savings have fully funded the increase in selling and marketing expenses, stating they are still in the early stages of this long-term efficiency journey.

An analyst on behalf of Manav Patnaik requested quantification of cost-saving initiatives, details on CapEx focus areas given underutilized capacity, and an assessment of the company's progress in technology adoption.

Answer

CEO Kim Scott confirmed that significant cost actions, including headcount reductions, have already been taken to support fiscal 2025 commitments. CFO Rick Dillon added that CapEx is focused on plant operating efficiencies, not new buildings. Scott assessed that while the core IT platform is solid, the company is 'just getting started' on plant automation and layout optimization.

Manav Patnaik requested color on Q4 trends and asked for a reminder of the company's pricing strategy, including its timing and relationship to wage inflation.

Answer

CFO Anthony Amandi indicated that Q3 and early back-to-school results were in line with full-year expectations. He reiterated that the pricing strategy aims for a 50-100 basis point spread above wage growth, with new rates taking effect January 1 for new students and in September for remaining students.