Q1 2021 IHS Markit Ltd Earnings Call

March 23, 2021

Ladies and gentlemen, thank you for standing by and welcome to the Q1 2021, H I, Yes, I get earnings conference call. At this time all participants are in a listen only mode. After the speaker presentation there'll be a question and answer session to ask a question. During the session you will need to press star one on your telephone please.

On that day.

The conference is being recorded for you require any further assistance. Please press star Zero I would now like to hand, the conference over to your Speaker today, Eric Boyer head of Investor Relations. Please go ahead.

Good morning, and thank you for joining us for the IHS Markit Q1, 2021 earnings Conference call earlier. This morning, we issued our Q1 earnings press release and posted supplemental materials for the IHS Markit Investor Relations website for discussion on the quarter are based on non-GAAP measures or adjusted numbers, which exclude stock based compensation amortization of acquired intangibles and other items I just markit believes.

Non-GAAP results are useful in order to enhance understanding of our ongoing operating performance, but they are now 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 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.

Subject to risks and uncertainties factors that could cause actual results to differ materially from expectations can be found in IHS markit filings with the SEC and on the IHS Markit website. After our prepared remarks, Lance Uggla, chairman and CEO and Jonathan gear, EVP and Chief Financial Officer will be available to take your questions with that it's my pleasure to turn the call over to Lance.

Thank you Eric and just before we start the call. We do have a moment of silence for all of those who have passed from.

From Covid over the past year and this has taken place at the moment in our our U K offices and I'd, just like to pause for a moment here.

To respect all of those that are passed and people that we know and love and for.

Friends and family debt.

May have.

And passed away through the pandemic. So if we could just take a moment to silence in that.

Yeah.

Okay. Thank you.

Eric and thank you for joining us for the IHS Markit Q1 earnings call. We started the year with a very strong set of Q1 results, which provides a great foundation for the full year.

Q1 revenue was 1.12 billion with organic growth of 3% adjusted EBITDA at $467 million and margin of 41, 7% up 180 basis points year over year.

And adjusted EPS of <unk> 71 up 8% over the prior year. Overall, we are pleased with the start of our year and now expect to deliver results in the upper half of our 2021 guidance.

In terms of our core industry verticals, let me first start with our financial services segment, which had record organic growth of 10% in Q1.

Within financial services.

Information had another quarter of solid organic growth of 6% main contributors included increased demand for our pricing reference data and valuation services as well as continued growth in our S FTR reporting platform and industry businesses.

Solutions had a very strong quarter.

Quarter with 15% organic growth driven by solid performance across our solutions businesses.

Increased capital markets issuance and greater adoption of our corporate actions private markets and Reg and compliance offerings were all significant contributors.

We continue to expect solutions to be a large growth contributor for the full year.

Finally, our approach testing business grew 6% organically with strength and loans and derivatives performance as perfect as expected.

For the full year, we now expect financial services to be in the higher end of our 6% to 8% targeted organic growth range.

I just want to congratulate the team on that record 10% quarter. That's the first time since.

Uh huh.

Market went public and the IHS markit together that we had a 10% quarter. So congratulations to everybody.

Moving on to transportation, which had organic revenue growth improved to 4% in Q1.

As expected, we continue to see the rebound across our businesses at varying speeds.

We're particularly pleased to see our recurring revenue growth improved to 8% in the quarter.

Our dealer facing facing businesses experienced strong growth across car facts in automotive mastermind with revenue growth rates approaching pre COVID-19 levels.

New business was strong across the portfolio in Q1, and we remain confident about the outlook for the rest of the year.

Also in transportation, our maritime and trade business had a very good start to the year, which was in line with our expectations. We also hosted a successful virtual TPM conference in March we expect strong new business and retention performance will drive an acceleration of recurring revenue growth through the rest of the year.

For the full year, we now expect transportation organic growth to be in the 13% to 15% range, which is up from our original 12% to 15%.

Moving on to resources, where organic decline was negative 10% in Q1.

Our resources business is playing out as expected in 2020, given the industry conditions, we put into place a number of drivers that should help us return to growth in 2022.

As expected our ACB has bottomed in Q1 and expect for it to slowly recover through the rest of the year, which bodes well for 2022 recurring revenue.

Our downstream organic revenue growth performed as expected and should accelerate through the rest of the year.

In the beginning of March we held our share of week conference, which had over 19000 participants.

Even with the virtual event, we were able to bring together leaders in the energy industry World governments finance and technology to discuss the future of energy.

Also hosted a successful virtual world petrochemical conference.

In 2021.

Can you do you expect organic revenue results within resources to improve compared to 2020 and to be down year over year in low single digits upstream improves and downstream continues its growth trajectory.

Finally, CMS organic revenue growth was in line with our expectations of negative 1% for the quarter, we expect improving results across product design TMT and ECR to continue through the year for the full year, we still expect CMS to deliver mid single digit organic.

<unk>.

Now on March 11th to shareholders of both IHS Markit in S&P global overwhelmingly voted to approve the merger.

We are working with the relevant regulatory bodies and still expect a second half close.

And now I will turn the call over to Jonathan.

Great. Thanks, Lance Q1 results included revenue of one Dot one 2 billion, which represents organic growth of 3% and total revenue increase of 4% with recurring growth of 4% net income of $149 million and GAAP EPS of <unk> 37 says.

Our adjusted EBITDA of 467 billion, an increase of 8% with margins of 41, 7%. This represents margin expansion of 180 basis points.

And we also delivered adjusted EPS of <unk> 71, an increase of 8%.

Regarding revenue our Q1 organic.

Growth of 3% included a recurring organic growth of 4% and non recurring organic decline of 7%. This decline in nonrecurring was primarily driven by lower automotive OEM activities lower energy consulting activities and transactional content purchases for upstream in product design when.

Compare to Q1 of last year.

Moving on to segment performance, our financial services segment drove organic growth of 10%, including 9% recurring in the quarter.

Solutions in particular had strong performance delivering 15% organic growth primarily from strength in equity capital markets corporate actions, and Reg and compliance offerings and strengthen our core portfolio.

Monitoring management tools, while information and processing each had a 6% organic increase driven by pricing and valuations and loan markets activities respectively.

Our transportation segment delivered organic growth of 4% in the quarter. This included growth of 8% recurring as Q1 had strong growth within our car facts for the automotive mastermind businesses.

Non recurring revenue declined by 8%, primarily driven by continued lower activity at digital marketing and recall.

Our resource for the segment had 10% organic decline, which is comprised of 9% per current decline at 20% non recurring decline.

Q1, organic ATP decreased by 7 billion in the quarter and our trailing 12 month organic ACB is down 11% as we have largely cycled through our subscription renewals since the North American energy market was severely impacted at the end of Q1 last year.

Our CMS segment had 1% organic decline, including 2% increase recurring and a decline of 25% nonrecurring.

Moving now to profit and margins adjusted EBITDA was 467 billion up $35 million versus prior year.

Adjusted EBITDA grew 8% with a margin of 41, 7%.

180 basis points.

Moving on for segments financial Services' adjusted EBITDA was 233 billion with a margin of 48, 1% up 100 basis points.

Services margin was driven by strong revenue growth, while supporting continued investment.

Transportation adjusted EBITDA was 147 billion with March net 47, 1% up 740 basis points, we do expect margins to moderate in forward quarters, as we see more expense tied to revenue growth.

Resources adjusted EBITDA was 74 million with a margin of 36, 6% a decrease of 340 basis points as a result of lower revenue.

CMS adjusted EBITDA was $26 million with a margin of 21, 5% down 250 basis points. This quarter decrease was primarily driven by mixed shift, which we expect to improve during the year.

Adjusted EPS was <unk> 71 cents per diluted share an increase of 8% our GAAP tax rate was 17% and our adjusted tax rate was 20%.

Q1 free cash flow was 170 $172 million as a reminder, Q1 is seasonally our lowest free cash flow quarter.

Turning to the balance sheet, our Q1, ending debt balance was $5 1 billion and.

And represented a gross leverage ratio of approximately $2 seven times on a bank covenant basis at $2 six times net of cash.

We closed the quarter with $172 million of cash and our Q1 Undrawn revolver balance was approximately one <unk> 022 billion.

Our Q1 weighted average diluted share count was 401 billion shares as we mentioned in Q for the merger agreement with S&P Global restricts our ability to purchase our shares and therefore, our share repurchase program is currently suspended.

For that for the repurchase of shares associated with tax withholding requirements for share based compensation.

Moving to guidance, we had a great start to the year and now expect to deliver results in the upper half of our 2021 revenue adjusted EBITDA and adjusted EPS guidance ranges, which include the following.

Revenue of $4 535 to $4 65 billion with organic revenue growth of 6% to 8%.

<unk> recurring organic growth of 6% to 7%.

Adjusted EBITDA of 2 billion to $2 zero 3 billion with adjusted EBITDA margin expansion of 100 basis points when adjusted for FX.

And adjusted EPS at <unk> Dot one one to three dot one six.

Finally, we expect cash conversion in the mid <unk> as we lap our 2021 time cash impacts and with that I will turn the call back over to Lance.

Great. Thanks, Jonathan.

A great start to 2021, which puts us on track to deliver strong full year results I want to thank our colleagues for their continued focus and dedication during the challenges of the pandemic and as we work towards closing the exciting merger with S&P global.

With that we're ready to open up for questions.

Thank you operator asking.

As a reminder to ask a question you will need to press star one on your telephone to withdraw it.

From Crystal Keith Please stand, while we compile the Q&A roster.

Our first question comes from Kevin Mcveigh with Credit Suisse. You May proceed with your question.

Okay.

Great. Thanks, so much credit.

As we've done on the great results.

Jonathan can you unpack, maybe just within financial services, you gave really good detail there but.

10% organic growth overall, but we've just really outsized growth in non recurring and wanted to get a sense of given.

Given that strength does that impact the overall business as you think about it over the balance of the year both on the non recurring.

For more efficiency for us.

Sure.

Yes.

Is that a structural step up as you think about the pace.

So where you you're referring to financial services, 10% organic growth.

That's right.

Yes to just take the breakdown, okay I'll pass that to add he can be a bit of a.

Breakdown of the 10% and where the where the real strong parts are and what he sees on the go forward as well Adam.

Sure. Thanks.

So yes, we're obviously very pleased with the quarter.

And we built we built strong platforms and strong capabilities in a few markets that are really seeing strength through Q1, we do expect some of that strength to continue throughout the year, particularly in equity capital markets. So a very strong first quarter second quarter continues to continues to look strong we'll see what the balance of the year brings.

Similarly in some of the lowest markets, we've seen strength as well.

We feel pretty good about our core businesses. They continue to grow at the rates that we targeted.

Some cases towards the higher ends of those targets.

With the addition of strong capital markets that gives us the opportunity to deliver a double digit quarter like we did here.

I'd Love to say, we will continue that into the future, we'll we'll see what the future brings but.

It's about just really about positioning positioning our products to take advantage of those opportunities when the markets are strong.

Okay. Thanks, Adam also the private markets performance and performance generally across solutions as asset managers are assessing their cost structures has really been a.

A strong tailwind for the team and it's great to see the solutions teams back to 15%, which we hadn't seen for a while so great great results all around net.

Question.

Thank you. Our next question comes from Manav Patnaik with Barclays. You May proceed with your question.

Thank you good morning, Lance I was hoping you could help just.

Provide some of the key takeaways from seara weak when you look out over the next.

A couple of years, maybe three to five years is obviously a lot of moving into that was hoping.

Some of those insights could help us.

Figure out what the trajectory for resources.

Yeah, Okay, no that's a great question Manav.

So the first off I guess when you look at the agenda for Cerro week.

You see a strong.

Formation of discussion and Plenaries around energy transition, which is a step away from the big discussion around climate change and.

When you think about how the world's responding now.

With the new Biden administration.

With the top 26 coming up.

Real strong.

Support.

For the one five degree pathway and I think that positions IHS markets energy team very very well for.

The energy transition associated growth, that's going to come as the industrial participants start to shift gears and look for how they might participate.

In in their businesses.

With respect to energy transition that being said it was pretty clear from the cera week discussions that 100 million barrels a day is still a level of demand post COVID-19 that is.

In the crosshairs of what needs to be supplied and therefore, our upstream business, we will need to continue to support and play an important role in the provision of.

Fossil fuels needed as the world's transitioning towards 2050, so I think we I think we win both ways.

Thought leadership player in the upstream to support the required supply.

And a team that's working very hard to transition itself.

Through.

The solar wind hydrogen.

Storage solutions.

And a variety of other activities that are <unk> are expected to decarbonize our world. So I think were.

We're doing a good job I think Sarah weak to me really.

Sung a story of energy transition is stronger than it ever has and I think we're well positioned to get the new growth.

And to maintain our contracts that we've managed through 2022.

Longer term and a bit lower price and so we will see the slightly negative impact through this year.

And I would expect.

Mid single digit growth as we go into.

22, Brian do you want to add to that at all.

Yes, I think I think the team did a great job taking.

Physical event and migrating it to a virtual event.

And we're looking forward in October to having a physical event in India and of course next March.

But I think I think you hit all the high points.

Energy transition ESG clean tech carbon capture all of the space.

Looking forward to we're in a good position to help them.

Okay. Thanks.

Thanks, Okay. Thanks, Manav next question.

Thank you for our next question comes from Gary Bisbee with.

Think of America you May proceed with your question.

Hey, guys good morning.

Question I continue to get asked most as it relates to the pending merger is just for a bit more granular color on synergies within some of the segments I guess with with Adam slated to run market intelligence I Wonder.

If he's got any more thoughts or Lance you do just to give us a little more color on where you see the big opportunities emerging your financial business with.

And S&P.

Either on the cost side or maybe more importantly on the revenue side. Thank you.

Well, maybe I'll just start and then hand that to Adam given these rate and engaged in that.

Current euro integration discussions.

One thing I can say is that the cost side of the equation has been very well mapped out teams are aligned and my view is that that's the that's the low hanging fruit over the next.

Couple of years and both teams are very <unk>.

Focused on making sure they can deliver the results the exciting side of course is the.

The revenue opportunities that Doug and I spoke about and.

We see substantive opportunity for revenue synergies and the teams have started to map about their meeting regularly and maybe for financial services to start Adam you want to chat and you can probably add the index side in as well.

Yeah, and I really would refer you back to when lands and Doug talked about it in the merger and those core areas that were identified upfront continue to be.

The core areas of opportunity, whether it's in bringing bringing together multi asset class benchmarks in our index franchise.

The scale of data assets that we can make available to customers in a more efficient delivery to those customers the combined ESG capabilities and assets of the business.

Strong ability to play a role in private markets and an area of growing quite rapidly.

Our deep knowledge of underlying company financials as well as the tools that are used by the private equity private credit industry to manage their portfolios.

And of course, a significant set of data and capabilities around credit risk looking into the supply chain of customers. So all of the areas that were identified upfront as we've gone through and get more extended period of discovery proven out to be quite significant opportunities for us forward I think in the coming months.

The teams will update publicly our views on synergies.

Still early to do that and we're still in a regulatory approval period and still in the discovery phase but.

It's as we've dug in more and more all of the expectations that we had had.

Proven out.

Thank you.

Our next question.

Thank you. Our next question comes from Jeff Mueller with Baird. You May proceed with your question, yes. Thank you.

Question on transport so the recurring looks particularly good to me given that it's still a tough comp and I think you effectively lost a year of your price lift in that business. So.

Is that the broader <unk>.

<unk> product suite, that's resulting in more cross selling or what's driving that and then on digital marketing is it environmental sector from your perspective, where they just haven't leaned back in yet or is there some initiatives to improve the positioning of your business that we should be watching for.

Edward.

Alright, and hi, Jeff. Thanks for your question and Youre right. The story of the quarter is all recurring revenue growth, we're very happy with it.

Developing according to plan and it shows the strength of the underlying business any food strength in cloud.

What's driving it I think it's the all core products right. So if you look at the carfax offerings. If you look at the Master mind offerings. If you look at some of our core subscription products like supply chain and technology. All of these businesses are growing significantly and are now showing kind of good resilience.

In the first quarter.

On the digital marketing side.

So what we're seeing is advertising spending is coming back relative to where it close two or three quarters ago, but it has not yet resumed to pre COVID-19 levels. Why is that a couple of reasons, but one of the big ones is low inventories in the supply chain is still catching up and trying to rebuild inventory levels.

In particular in the North American markets.

Inventories are low advertising spend tends to be lower and we're still seeing this in the industry today, and we will see subdued inventory levels for the next couple of quarters at least.

And Thats why advertising spend in digital marketing spend is still not quite where we would like it to be.

We all see and strengthening the business we are activities for higher than it was two quarters ago. So we expect digital marketing to be stronger as the year goes by.

Thanks.

Yeah.

Thanks, Edward next question.

Thank you for our next question comes from Alex Kramm with UBS. You May proceed with your question.

Hey, good morning, a quick one on the on the updated guidance.

It sounds to me like financials in automotive doing a little bit better and then the other businesses kind of inline with expectations can you also talk about how FX has impacted.

Your outlook change.

Got a small.

Benefit in the first quarter, but since then I think some of the major currencies have moved in opposite directions. So just wondering how much if any FX benefits are driving the guidance for that to the higher end of the range.

Sure. This is Jonathan I'll jump in net asset question, we certainly are getting some benefit of FX at the top line our revenue.

That'll that'll impact some of the for.

For the worried for saying about guidance about guidance being at the upper end of the range. However, a lot of that that is a good core operational improvement that we're seeing from Fas.

T Z from transportation and also the.

As the outlook for the rest of the year for both resources from CMS should also note because you know we get a benefit from.

At the top end from FX, It does impact our expenses and so the <unk>. The improvement you are seeing from EBITDA is really a reflection of both of FX impact for both revenue and expenses. So the EBITDA at EPS flow through as I would call core operational improvement.

Thanks, Dan.

Thank you.

Thanks.

Next question.

Thank you. Our next question comes from Andrew Steinman with Jpmorgan. You May proceed with your question Hi within resources could you tell us if they are non subs business like the energy consulting business and other non subs business has lifted off the bottom yet and kind of what is the nature of of what IHS.

Is doing for the industry as the industry recovers.

In terms of non subs.

Yes, Hi, this is Brian so yes.

So the consulting business is already bouncing back.

When we look out for where we're going to be having double digit growth even in upstream consulting which is a good sign for us because usually when consulting bounces back then you have your subscriptions following.

Okay. Thank you.

Next question.

Thank you. Our next question comes from Hamzah <unk> with Jefferies. You May proceed with your question.

Hey, good morning. Thank you. My question was just around the the markets served JV with CME.

Do you have that listed as assets for sale.

Any mechanics, we should be thinking about on that particular, JV and as it relates to sort of the larger merger. Thank you.

Yeah.

Adam you want to answer that one.

Yes, that's a combination that we've talked about for a couple of years and looking to pull together some of the core assets in the industry around.

Post trade processing and really not not related to the merger it wasn't done in anticipation or in connection with that it was really really part of a larger strategy around maximizing the value of that asset set.

It will it will continue to be an important part of the business will look to continue to leverage it in terms of datasets and opportunities that will come out of making that process much more efficient for our customers and those joint offerings.

So I think it continues to be complementary to the combined business, but no direct connection.

Thanks, Adam next question.

Thank you. Our next question comes from Ashish <unk> with Deutsche Bank. You May proceed with your question.

Thanks for taking my question and congrats on a solid quarter just a question on the whole best margin expansion that we saw in the quarter.

We've seen several quarters of margin expansion. My question was are there further opportunities for cost takeout and accelerates for margin expansion and this is more through some structural changes other than IHS markit itself.

<unk>.

Maybe I can start Jonathan and then you can add so first off.

We have a strong view.

At IHS, Markit and that will carry on with the strategic merger that.

There is a.

Our opportunity to continue to see resources, especially through this new understanding of the virtually virtual world to see resources.

In some of the better cost locations that we operate in and that can be within the within North America within South America, India Eastern Europe Europe.

In the far east all of all of our major centers are.

Close proximity to some better cost.

On our offshore locations so location plays a big role.

Thing Thats, playing an increasing Lee big role is technology and the use of technology.

For two to manage.

Our.

Our more offer operationally focused jobs and that also gives US a continued opportunity for margin expansion. So as we look forward.

We see that 100 basis points of margin a year.

As one that we can continue to support and.

And there'll be opportunity for margin expansion in the combination as well Jonathan do you want to add to that at all.

No. That's I think you covered it really really well I guess the other thing I would just add on top of the cost leverage that for all of this Robert polling is of course, we get the natural benefit of the scalability of our revenue as it comes through which helps with that lift but at last you said it well I think we see a very clear path to 100 basis points at that suggests it for this year.

Okay. Thank you. Thank you next question.

Thank you. Our next question comes from Shlomo Rosenbaum with.

Stifel. You May proceed with your question.

Hi, Good morning. Thank you for taking my question, Hey, Lance can you give us a little more insight on how the sales are going from the data lake going commercial and how the new product innovation is going some of the stuff that you've been building to kind of generate the flywheel momentum.

For years into the future there is there any like.

Quantitative info you can share if not just qualitatively.

Yes, what I, what I can say is is that if.

Adam Edward or Brian want to add anything after this they can.

What I've been impressed with is.

The pipeline the growing pipeline and connectivity.

Two the data Lake and the assessment of the data Lake is a new way to consume data from us more efficiently, but also.

Two.

To reach some broader.

Contracts, especially around the hedge fund community where.

Quantitative and qualitative decision making from.

Vast quantities of data.

Some of the bigger hedge funds that have those tools and have those capabilities.

We're also seeing some.

Mid sized vendors.

Vendors.

Friends, who have been grappling with their own construct of a data lake.

They can leverage us as a as a.

<unk> technology platform.

Two.

Be able to not just provide them our data but.

I will provide the connectivity for the <unk>.

An even distribution.

Some very strong discussions that.

Our for US starting to lead to revenue there was paying customers for the data Lake now and that starts to grow.

Where do you want to add to that how youre using it within automotive and then maybe Adam you might wanted to the same on the F. S. Edward.

Yes, sure Lawrence and I will address the broader point about kind of innovation product innovation. I think is that is the story right of the past three acute for three or four years, we measure internally, we use a metric we call with the vitality index I don't think we publish it but we measure the contribution of new products to our growth.

And for Division like transportation that contribution has increased year after year over the past five years, new products in high growth products, an increase in parts of all kinds of revenue overall revenue growth.

Give you an example, right.

Concrete terms, if you look at our Maui common trade business. It's always owned a number of incredibly valuable kind of legacy data assets, but over the past three years. It has repositioned essentially a data business into a solutions business targets in risk management workflows trade compliance workflow.

Those commodity is on VIX workflows.

And through this transformation has it become essentially a high single digit growth business. A lot of these innovations has been enabled by the data Lake, which strongly reduces the product development lifecycle. So suddenly a good innovation story that I have.

Adam if you want to ask on Covid.

Yes, I guess, what I would add is we've been pretty excited about the uptake and adoption of our catalog, which allows customers to integrate our data sets over 500 datasets in the data Lake today.

Into their own data sets, but we're seeing that uptake not just in asset managers, but also incorporates banks and obviously you have other parts of the of the buy side.

One of the interesting aspects of their discovery of our datasets as the vast amount of what you would call alternative data that's within those datasets, which we've always believed had strong value.

And as more and more clients adopt our catalog and ability to access the data Lake that's that seems to be proving out.

We do have paying customers today, and we can see the pipeline forward.

We're also particularly excited about how that will come together as we.

Down the road finalized S&P merger and think about their marketplace and how all of these data sets can come together in a really efficient and exciting way for our customers.

Thanks, Adam Brian do you want to add from energy.

Some of the initiatives, you're using the data lake for and how it is starting to drive.

Opportunity.

Sure Yeah. So first of all just to support what you said, so we do see a nice pipeline of especially chemical companies and banks and companies looking into the data Lake for solutions.

Solutions that perhaps can get.

For places like.

Edward said, when we're looking at developing kind of clean energy clean Tech products go into the late.

Take information both from what we're doing with other.

Customers are doing so.

A good place, where we can shorten the product development life cycles to build out things like emissions.

And our customers' interest.

Okay. Thank you and just to remind everybody when I think back to the IHS Markit merger, we said two things about building out the data lake over the coming years, one that it would give us efficiencies in terms of managing our own content, which we see through margin expansion, but secondly that would give us opportunities.

For distribution combination of datas with customers and third parties and give us a real competitive edge in our ability to sell and distribute our content.

The piece that I think is additive to all of that that we're starting to learn about us more that there are significant numbers of larger customers, who want to be able to interrogate large datasets.

Two identify decision making signals and.

And decision points and Thats been leading us to some of the bigger quantitative hedge funds, but it also exists within the corporate world for analytics and analysis. So I think.

We're we're well on our way.

To gaining the efficiencies and we're starting to see the revenue follow through as well. So a good story next question. Please.

Thank you. Our next question comes from George Tong with Goldman Sachs. You May proceed with your question.

Hi, Thanks, good morning in the <unk>.

Transportation business dealers saw strong growth in automotive mastermind and car facts can you discuss strength that youre seeing among your OEM customers.

You have hydro ex this is Edward.

For the OEM customers last year had a slightly different cycle for the dealers in the sense debt.

In Q2, they were operating sort of more normally but if you will the COVID-19 crisis really hit them in Q3, and they're still recovering from this so today. They are doing much better as you know demand for vehicles is picking up significantly in the U S and globally in 2021.

These production the one caveat I would bring us the supply chain is still adjusting to this post COVID-19 world. So some.

Some of those supply chain issues have been well documented in particular, the semiconductor shortages and they have led us to revise our 2021 for cost down by half a million vehicles. So that that is a temporary kind of shrunk, but it is a short nonetheless, and it's slowing down the recovery of inventories.

And then in <unk>.

Western markets and there are some other challenges right. So there was about of severe weather in the southern U S. A few weeks ago that has actually created a shortfall of chemical feedstocks. That's also impacting the supply chain. There was a fire last week in Japan, and then major semiconductor plant. So all of these are sort of impact on our customers' them, but.

In the end that is delaying the recovery, but the recovery is coming back.

We're in a good place in the sense that we are supporting Oems and suppliers with some of these secular structural transformations in the industry and those are multiyear transformations and I'll take the non solutions are critical to helping them, so slower recovery, but recovery Nonetheless, and the outlook for the industry is positive.

Thanks, Edward got it for our next question.

Thank you. Our next question comes from Toni Kaplan with Morgan Stanley You May proceed with your question.

Thank you sort of a long term question for you Lance.

For your business spans a number of end markets that are calling serious significant industry changes you've talked about the energy transition and also within transportation there seems to be a shift more towards technology long term and I know, you're providing companies with solutions to help them with these changes and shifting their strategy.

I guess can you just talk about you know what this means within IHS.

Is this does this mean selling different products to your existing customers as these changes take place.

Do the traditional datasets become sort of less use but new datasets receive more demand and does this enable them more upselling.

Two existing customers, but also <unk>.

Opportunities to get new customers, maybe technology players et cetera, as these changes take place so anything any color there would be helpful. Thanks.

That's a good that's a good question and one that.

Definitely encompasses our our strategic vision and.

For all my team.

Theyre very focused on it.

Impact of the changing marketplaces around us that are being driven by either technology or a quest for decarbonization and therefore.

Participating in.

Sure.

It changed a net zero world as we look forward. So you have to take those and go or are we going to be able to participate and take revenue from that and adjust our business positively or.

Are we going to find that we get disintermediation because some of the revenue streams will will shrink. So our strategy is very very clear. If you look in transportation, you're seeing it right now in maritime and trade and you see it in our strong automotive recovery and that is.

Is that when.

When you look at those revenue streams and you dig into them you start to see how they're shifting.

Their customer base to new solutions, new platforms, and new decision, making tools and within automotive.

We are an independent.

Supplier of information that helps people make decisions and the world. The automotive world has gotten more complex and it'll continue to get more complex as.

As we look forward.

Given this drive towards net net zero.

So I feel like the information sets around automotive are very buoyant and participating in forecasting and good or bad markets is a good thing. The second thing I'd say is that mastermind when we acquired mastermind I think it was around <unk>.

$80 million of revenue, it's now running towards $120 million this year.

And.

That's getting driven because edwards and his team have taken the mastermind platform married it with Polk data married it with car facts data.

Cook for.

All views for the Oems and the Oems for the first time are saying geez why do I want to provide a incentive that blankets. The U S. One of them like target market it right down to post codes.

Or even right down to individual and that's where the mastermind platform, which is called an enterprise mastermind is adapting to this new digital world and even a world where there is less dealerships in the car just land in your driveway.

So we want to participate in that and the team's doing a great job shifting.

There's some other ones in around automotive, but I'll shift for a second maritime there. The shift is the new services, it's supply chain it's decarbonization.

You've got all the maritime fleet information all of your suppliers that are trying to be ESG compliant need to know what's the carbon footprint of the delivery of my goods and so we're now producing a full <unk>.

Carbon fleet analysis for.

For.

For our customers and that's a growth area, that's being driven from the data Lake.

New technology, it's just.

Old products adapting to new worlds and making sure. We're participating if you go over to energy I think we've covered that energy.

We're going to have to make sure that we maintain the upstream.

$250 million to $300 million of revenue.

And the rest of the revenue we're going to have to grow.

As the energy markets transition and we're very well positioned we do consulting around all those services. That's helpful. We know where the assets are so that's helpful for global warming, we know where the pipelines are the distribution. We have a lot of data that plays into the new world and we're transitioning in.

Growing our solar.

Wind hydrogen.

Battery storage businesses and.

This is this is a growth market. So it's going to be tough for the energy folks. This is going to be a year, where it's tough because we gave discounts last year and they got to recover.

Into next year, but I think that by the time they get to 'twenty two they might be the darlings again in the company and you'll see somebody else.

On their backs.

And then financial services.

I think we're in all the right growth markets. So there I feel real good about it and I don't want to leave CMS out because sometimes we do but root metrics, which is small I know, but they are in <unk> and <unk> is important and if you go over to the CMS product design folks there and their pipeline is all about digital transformation.

Formation and focusing on the vast amounts of specs and standards that need to be added together to in house.

Documentation for engineers to make decisions and where we're playing that game with our.

Our digital platform and we have got great pipeline, because we can save people money. So net net I think for great great people, Great company, we're well positioned to get our share.

<unk> always is as IHS Markit now S&P global will they get their share of the growth in terms that are substantive and my my bet is yes of course, they will day, there are filled with great people and great customers and therefore, there's lots to do.

Thank you.

Your next question.

Thank you for our next question comes from Jeff Silber with BMO capital markets. You May proceed with your question.

Thanks, so much at the beginning of the call you mentioned the very successful Cera week.

I'm just curious how these virtual events compare to your in person events in terms of economics from profitability and going forward. What do you think your strategy is going to be on the event side.

Well what I can tell you is is that the team. The team has found that they can profitably manage virtual conferences, so they've done that.

You have three of those T P M.

Well Petro chemical conference in Cerro week, and all of them had record audiences, so debt and the audiences can be record because.

Everybody is online virtual lease.

Yes.

For 5000 physical.

The conference seats, you can have.

Tens of thousands of virtual seats.

People are willing to pay for top.

Q1 2021 IHS Markit Ltd Earnings Call

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