Equity Research 6 September 2019 CORE Barclays Capital Inc. and/or one of its affiliates does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. PLEASE SEE ANALYST CERTIFICATION(S) AND IMPORTANT DISCLOSURES BEGINNING ON PAGE 28. Restricted - Internal BIPS of Information CB day sets up well for GSFC Next week we host 7 of our names at Barclays' flagship Global Financial Services Conference (GSFC; in NYC Sep 9-11); an ideal time to get a strategy update from the CFOs of FICO, MCO, MSCI, SPGI, TRU, VRSK; & IR at EFX. We highlight below areas of focus for us, & provide prep materials for investors (including FAQ’s for management). For TRU, EFX & FICO; we will be looking for more company-specific updates; following another productive Credit Bureau Day earlier this week… where we hosted the CFO of EFX; Head of U.S. Markets at TRU; various senior leaders at EXPN; along with some industry perspective from executives at Barclaycard US. The outlook on the industry, including macro, was constructive across the board; and at GSFC we expect to get further color on: 1) TRU’s broad-based growth initiatives – like HC (12% of USIS), Insurance (11%); emerging verticals (24%; with gaming & media highlighted as emerging opportunities) & FinTech (within Consumer Lending, which makes up 35% of Financial Services - 50% of USIS). We would also look for CFO details around confidence in FY19 guidance; with 2Q showing a return to positive momentum after a mixed 1Q. 2) EFX’s own tech-led transformation – particularly timing & flow-through of the guided cost savings; i.e. 15% of tech COGS (50% of COGS); 25% of development opex (currently $125-150M); & reducing capex by 25% (toward historical ~6% of sales). 3) FICO’s perspective on “scores” - especially timely following FHFA’s announcement requiring the mortgage market to consider alternative scores (which we think will support more VantageScore usage, but not to the detriment of FICO usage). An update on the FICO/EFX partnership & its SaaS transition will also be on top of mind for new CFO Mike Mclaughlin. Note: we also look forward to getting the CBs’ customer perspective on the macro backdrop – from the biggest lenders (ALLY, AXP, BAC, COF, C, JPM, WFC) to a full day of FinTech panels on 9/11. MCO, SPGI & MSCI have all been high flyers YTD (+53%/+52%/+56% vs. SPX +17%) as strong execution has overcome industry headwinds (declining issuance for the rating agencies; weak non-US ETF inflows for MSCI) – and based on recent HQ visits with each, the 2H set-up looks generally constructive. Issuance picked up this week, especially from IG corporates, following the typical summer lull – and we continue to be comfortable modeling ~HSD Ratings growth in 2H. Similarly, MSCI and SPGI index looks well positioned, as we have arguably been in a sweet spot recently with higher volatility (i.e. more trading volumes) without sharp equity declines. Note: Given MSCI’s discussion around iShares pricing negotiations last quarter, BLK’s comments next week will be of particular interest to us; along with the latest from exchange providers CBOE, CME, DB1, NDAQ (especially given their increasing interest in our market data space). Lastly, we have VRSK – our defensive stalwart; but where capital allocation will be a key topic with CFO Lee Shavel following the pricey Genscape acquisition (8/27), and minor divestiture in the lumpier Argus business (7/16). INDUSTRY UPDATE U.S. Business & Professional Services NEUTRAL Unchanged U.S. Business & Professional Services Manav Patnaik +1 212 526 2983 manav.patnaik@barclays.com BCI, US Gregory Bardi, CFA +1 212 526 7188 gregory.bardi@barclays.com BCI, US Ryan Leonard +1 212 526 2135 ryan.leonard@barclays.com BCI, US Restricted - Internal Barclays | BIPS of Information 6 September 2019 2 CONTENTS GFSC - Q&A AND MANAGEMENT BIOS ...................................................... 3 MCO – Decent 1H leads into easier 2H comps ...................................................................................... 3 FICO – New CFO, same long runway of opportunity............................................................................ 5 MSCI – Secular tailwinds in its favor; BLK renegotiation is a key focus area ................................. 8 TRU – Mojo back; momentum into back half of the year ................................................................ 11 SPGI – Quality set of blue-chip assets ................................................................................................... 14 VRSK – Capital Allocation Remains the Focus ..................................................................................... 17 EFX – Need to set the base for stronger growth in 2020 ....................................
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