McGraw Hill Financial, Inc. (MHFI)

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McGraw Hill Financial Inc (MHFI)

McGraw Hill Financial at the Barclays Global Financial Services Conference

September 09, 2013 10:00 a.m. ET


Jack Callahan – EVP, CFO


Manav Patnaik – Barclays Capital


Manav Patnaik – Barclays Capital

Okay. All right. Good morning, everybody. Thank you all for coming. My name is Manav Patnaik. I'm with Barclays Capital. I‘m the research analyst covering McGraw Hill. I am just going to introduce our speakers today. We have Jack Callahan, who is the CFO, and we also have Chip Merritt, who is the Investor Relations Head, sitting; will probably answer some questions as well. So, I am going to stop talking; and Jack, just let you take it away.

Jack Callahan

Thank you, Manav. It's a pleasure to be here this morning. I was just commenting to him that maybe it's a testament that we've made some progress in the evolution of – from McGraw Hill Companies to McGraw Hill Financial – that we actually got invited to this conference, because I don't think we ever would have been in the past. So it's wonderful to have this opportunity to talk about the new Company.

Before I do start the presentation, I need to make a few opening required comments. On a couple of the slides, we will use some adjusted numbers, very consistent with our most recent practice of isolating the one-time costs that are associated with the separation of the companies. This is the same perspective that we use internally to manage the business. And then, secondly, I will make a couple of forward-looking statements. There are some risks that clearly will impact those possible – actual results, and you can refer to our SEC filings to give you more specifics on that.

So, let me start. 2013 is, without question, a year of transition for us at McGraw Hill Financial; perhaps, arguably, one of the greatest years of transition in the 125-year history of the Company. We are becoming a new Company, a new Company that I know personally; I am very excited to have an opportunity to be part of, and to shape going forward.

And so what I would like to do this morning is just to give you a little bit of an update about what some of the major drivers are of the creation of this new Company; spend a few moments telling you why we believe we are very well positioned in terms of our ability to drive sustained, profitable growth going into the future. And then, I would like to spend the remaining time just to dive into the portfolio to give you a little bit more detail on our first-half performance, and a few comments on balance-of-year outlook.

Let me start by summarizing a couple of points on how we are becoming a new Company. First, the significant realignment of our portfolio is largely complete. Earlier in the third quarter, we announced the sale of Aviation Week to Penton Media. Aviation Week represents the last sort of pure publishing asset that we had in the portfolio.

But if you look back all the way to 2010, and before we announced the Growth and Value Plan, and the goal to set up two separate, independent companies – McGraw Hill Education and McGraw Hill Financial. You can see that we have divested well over 40% of our portfolio. And these asset sales – and I'll talk more about how they strengthen us strategically, in terms of focus and then relationship – they have also used divestitures. They've also done some very nice things to strengthening our balance sheet. It has supported a step up return of capital to shareholders, but we are really excited about what now we can do as McGraw Hill Financial.

Now that the separation is complete, and this Growth and Value Plan is largely complete, we are now intent on building out the promise of McGraw Hill Financial, which is based on our vision of building the leading brands in ratings, benchmarks, and analytics, providing essential intelligence to the markets. We are introducing some more of a common look and feel, brand architecture, to the Company, that I think better communicates the similarities of inner relationships across the portfolio.

And we will have more to talk about in the future, and I'll make a few statements on it today. If you like – if you don't – I'd love your feedback on the branding. Our Head of Corporate Communications is here, Ted Smyth. He is in the middle of the room. So, you can pass along your thoughts on the new look as we end today's program.

The other thing that is underway is not just the portfolio has changed, and we have a new look. We are also on the verge of new leadership. Doug Peterson joined the Board of Directors earlier in July. He joined as the President of S&P Ratings back in the summer of 2011. He assumes the CEO position as of November 1. And I, personally, from what I already can see, is I think this transition from Terry McGraw to Doug is going to be seamless.

I personally am very excited to have this opportunity to work with Doug. He brings a great background in global leadership. He spent a good deal of his time outside of the United States. He obviously has a very deep expertise in financial services, which is the more focused company we have become. And I can tell you, he has been a wonderful steward to the S&P Ratings business, through some challenging times over the last two-plus years, and is going to be a very engaging and personable leader to work with.

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