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Edited Transcript of INFO earnings conference call or presentation 24-Mar-20 12:00pm GMT

Q1 2020 IHS Markit Ltd Earnings Call

London Apr 4, 2020 (Thomson StreetEvents) -- Edited Transcript of IHS Markit Ltd earnings conference call or presentation Tuesday, March 24, 2020 at 12:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Adam J. Kansler

IHS Markit Ltd. - Executive VP & President of Financial Services

* Brian Crotty

IHS Markit Ltd. - EVP of Global Energy & Natural Resources

* Edouard Tavernier

IHS Markit Ltd. - EVP of Transportation

* Eric J. Boyer

IHS Markit Ltd. - VP, IR

* Jonathan Gear

IHS Markit Ltd. - CFO & Executive VP

* Lance Uggla

IHS Markit Ltd. - Chairman & CEO

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Conference Call Participants

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* Alexander Kramm

UBS Investment Bank, Research Division - Executive Director and Equity Research Analyst of Exchanges, Ebrokers

* Andrew Charles Steinerman

JP Morgan Chase & Co, Research Division - MD

* Andrew Owen Nicholas

William Blair & Company L.L.C., Research Division - Analyst

* Andrew William Jeffrey

SunTrust Robinson Humphrey, Inc., Research Division - Director

* Ashish Sabadra

Deutsche Bank AG, Research Division - Research Analyst

* Gary Elftman Bisbee

BofA Merrill Lynch, Research Division - MD & Research Analyst

* Hamzah Mazari

Jefferies LLC, Research Division - Equity Analyst

* Jeffrey P. Meuler

Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst

* Joseph Dean Foresi

Cantor Fitzgerald & Co., Research Division - Analyst

* Keen Fai Tong

Goldman Sachs Group Inc., Research Division - Research Analyst

* Kevin Damien McVeigh

Crédit Suisse AG, Research Division - MD

* Manav Shiv Patnaik

Barclays Bank PLC, Research Division - Director & Lead Research Analyst

* Seth Robert Weber

RBC Capital Markets, Research Division - Equity Analyst

* Shlomo H. Rosenbaum

Stifel, Nicolaus & Company, Incorporated, Research Division - MD

* William Arthur Warmington

Wells Fargo Securities, LLC, Research Division - MD & Senior Equity Analyst

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Presentation

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Operator [1]

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Ladies and gentlemen, thank you for standing by and welcome to the IHS Markit First Quarter 2020 Earnings Conference Call. (Operator Instructions) Please be advised that today's conference is being recorded. (Operator Instructions) I would now like to hand the conference over to your speaker today, Eric Boyer, Senior Vice President of Investor Relations. Thank you. Please go ahead, sir.

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Eric J. Boyer, IHS Markit Ltd. - VP, IR [2]

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Good morning and thank you for joining us for the IHS Markit Q1 2020 Earnings Conference Call. Earlier this morning, we issued our Q1 earnings press release and posted supplemental material slides at the Markit Investor Relations website. Our 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. IHS Markit believes non-GAAP results are useful in order to have an understanding of our ongoing operating performance, but they are a supplement to and should not be considered in isolation from or as a substitute for GAAP financial information.

As a reminder, this conference call is being recorded and webcast and is copyrighted property of IHS Markit. Any rebroadcast of this information, whole or in part, without prior written consent of IHS Markit is prohibited.

This conference call, especially a discussion of our outlook, may contain statements about expected future events that are forward-looking subject to risks and uncertainties. Factors that could cause actual results to differ materially from expectations can be found in IHS Markit's 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 is my pleasure to turn the call over to Lance. Lance?

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Lance Uggla, IHS Markit Ltd. - Chairman & CEO [3]

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Okay. Thank you, Eric, and thank you for joining us for the IHS Markit Q1 earnings call. Before we get started, I want to direct your attention to our supplemental slides posted on our IR website, which we will be referencing today.

We're certainly living in unprecedented times with the human and economic impact of the COVID-19 pandemic, financial markets and turmoil and oil in the $20s due to both supply and demand challenges. We've analyzed the changing dynamics within our markets and we've developed a strong plan and are taking decisive cost actions while maintaining and making room for continued investment to deliver double-digit earnings growth this year and over the coming years. In times such as these, I'm committed to providing even more unparalleled transparency to all of my colleagues and to you, our shareholders.

Our markets are changing rapidly and parts of our business will be more challenged than others, but on a whole, we're extremely fortunate that our model will be resilient. This is due in large part to our diversification across end markets and within our end markets, must-have products and services, low revenue concentration across products and customers, annual multiyear subscriptions with high renewal rates and 90-plus percent recurring revenue. We've got a CapEx-light model with strong cash flow conversion, strong balance sheet, excellent liquidity and a firm-wide culture that we've honed to drive efficiencies, profit and continue to innovate even in challenging revenue environments.

Now with offices in APAC, we learned quickly how to manage the COVID-19 situation by conducting early on business impact reviews and ensuring that our IT infrastructure that we've been investing in could support all, and I mean all 16,000 employees working from home and remotely as needed, and we've certainly been tested on that.

We're also using these challenging times as an opportunity to be even more visible with our customers and our management teams through virtual calls and webinars. We have the benefit that, in this environment, our customers need to hear from us even more to help them through these kinds of uncertainty. Our experts, over 3,000 of them, are reaching thousands of our customers every single day. And we're using the current market conditions to make sure we're there for them and developing opportunities and adjusting our models to support them through these challenging times.

Overall, I feel good about our business model, how we are managing the complexity of changing global conditions. I equally feel good about how we're helping our customers during these times with essential activities.

Now Jonathan is going to go over Q1 results and then I'll go over our multiyear plans on how we're going to plan to achieve the earnings growth that we've suggested. Over to you, Jonathan.

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Jonathan Gear, IHS Markit Ltd. - CFO & Executive VP [4]

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Great. Thank you, Lance. Q1 results were indeed very, very strong, included revenue of $1.08 billion, organic growth of 6% and total revenue growth of 3%. We delivered net income of $484 million and a GAAP EPS of $1.20; adjusted EBITDA of $432 million, which is an increase of 8% normalized for the AD&S divestiture and a margin of 39.9%. And we delivered adjusted EPS of $0.66, which is an increase of $0.07 or 12% normalized for the AD&S divestiture.

Regarding revenue, our Q1 organic revenue growth of 6% included strong recurring organic growth of 7% and nonrecurring organic decline of 5%. This decline in nonrecurring was primarily driven by a tough year-on-year comp in Financial Services.

Moving on to segment performance. Our Financial Services segment drove organic growth of 7%, including 9% recurring in the quarter. All 3 subsegments delivered strong performances. Our Transportation segment delivered organic growth of 9% in the quarter. This included an excellent 12% recurring revenue growth and a decline of 1% in nonrecurring driven by the expected decline of one time in our auto business. We saw exceptional operational metrics, in particular from our CARFAX and automotiveMastermind business lines.

Our Resources segment delivered 1% organic growth, which is broken down as 1% recurring growth and 2% nonrecurring growth. Our Q1 organic ACV increased by $3 million and our trailing 12-month organic ACV remained up $24 million or 3%. Our CMS segment delivered 3% total growth, including 1% recurring and a 15% growth in nonrecurring. Our CMS total organic growth, normalized from prior year RootMetrics customer loss, was an impressive 4%.

Turning now to profits and margins. Adjusted EBITDA was $432 million, which is up $24 million or 8% versus prior year, normalized for AD&S divestiture. Our adjusted EBITDA margin was 39.9%, which is up 90 bps. Segment margins were in line with our expectations.

The adjusted EPS was $0.66 per diluted share, which is a $0.07 or 12% improvement normalized for the divestiture. Adjusted EPS also excludes the onetime gain on the sale of ADS of $372 million. Our GAAP tax rate was 1% and our adjusted tax rate was 17%.

Q1 free cash flow was $117 million. As is typical, Q1 cash was seasonally low due to bonus payments. Our trailing 12-month free cash flow was $966 million and represented a conversion rate of 54%. Now just a reminder, our trailing 12-month conversion rates were impacted by the onetime tax payments that we had in Q4 of 2019.

Turning to the balance sheet. Our Q1 ending balance was $5.2 billion and represented a gross leverage ratio of approximately 2.9x on a bank covenant basis, which is in line with our capital policy. We closed the quarter with $144 million of cash, and our Q1 undrawn revolver balance was approximately $925 million and represents a great liquidity position.

Our Q1 weighted average diluted share count was 404 million shares. We repurchased $610 million of shares in the quarter, including completing our $500 million ASR. We also launched a $250 million ASR on March 1.

And now Lance, I'll pass it back to you.

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Lance Uggla, IHS Markit Ltd. - Chairman & CEO [5]

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Okay. Thanks, Jonathan. Maybe we can all go on to mute there. We cannot predict with any certainty the length of disruption from COVID-19 and how long and deep the economic impacts are going to last. To account for this uncertainty, we are providing for a wider-than-usual range of 2020 outcomes based upon 3 scenarios that make assumptions on the macroeconomic and market-specific drivers that may impact our business over the remainder of the year, and these are laid out in the supplement.

We're also taking cost actions that will allow us to deliver double-digit earnings growth even under our worst-case revenue scenario. In all 3 scenarios, we, of course, face pressure: The reality of an economic slowdown, significantly lower oil prices and CapEx impacting our upstream Resources business, a general slowdown of new business and decision-making, a near-term shock to consumer spending impacting our auto customers as communities shut down.

Now our first scenario, which is the upper end of our guidance, requires the world to settle quickly. And in this scenario, we'd expect a Q3 recovery to begin. Under the Q3 recovery scenario, this is what you would expect to see in terms of our businesses' recovery: continued volatility that's driving demand for our pricing and valuation services; and then we'd see a recovery of equity issuances coming in the second half; lower oil prices driving OPEC+ to an agreement in Q3; Brent would rise to the low $30s by the year-end and we'd have an average in the upper $20s; new and used car buying, impacted now in Q2, would continue and then rebound in Q3.

Okay. Let's look at the second scenario. Second scenario moves recovery to Q4. Continued volatility drives demand for Financial Services solutions, but new equity issuance has been closed for most of the year. Oil markets remain uncertain. New OPEC+ agreement is delayed until the end of the year, which would lead to an average Brent -- price of Brent in the mid-20s. The shutdown of auto sales in Q2 would be followed by a U-shaped demand recovery with slow growth throughout the second half.

Now the third scenario, which I call with my team our worst-case scenario, gives us a longer global recession with no recovery expected in 2020 and recovery begins in 2021. Now I personally really believe that we've modeled here a worst-case scenario. This is a very challenged financial markets industry. Our customers are under continued profit pressure through 2020 without any normal conditions returning until 2021. OPEC+ has disintegrated. There's no sign of any agreement throughout this year, and the average price of Brent will stay in the low $20s into 2021 as well. A sustained recession in the auto industry with sales of both new and used cars impacted throughout 2020.

Now for modeling exercises, my view with this transparency that we're going to be providing you with each and every quarter and updating you against it, you can model off our worst-case scenario, which we'll call the 2021 recovery scenario. We're all working hard, and there's many great stories that can entice you into the Q3 and the Q4 recovery. And we'll keep those in mind as we update you regularly.

But as you know, we've managed IHS Markit since merger very prudently. And we are going to base our cost assumptions and our cost measures against our worst-case scenario in order to provide downside protection to be able to deliver strong profitability regardless of our revenue outcome. And we already put in process more than $250 million of 2020 costs. Many of these costs, a minimum of $50 million, are modeled as permanent cost reductions going forward. There's also a variable portion of costs that we now have levers in place that as revenue recovers, we'll be able to bring those costs back to normal levels.

I'll give you some examples of the efforts that my team and colleagues have been making globally to deliver this robust financial plan. Now of course, the variable costs that adjust with revenue, especially within the autos business, are natural levers. Those are in place.

Last night, my Board, myself, approved a set of executive salary cuts for my top 300 people, and the Board is also equally considering for our next Board meeting in April a reduction. Cash bonuses will be curtailed, workforce reductions, travel and entertainment, noncritical projects, contract or spend and a freeze on both new and replacement hiring. We're also optimizing facilities and lease negotiations, reduction in purchase expenses also being optimized.

In addition to providing double-digit earnings growth in a challenging environment, these cost reductions now are allowing us to maintain investments in each and every one of our segments at the levels we were investing at. No investments have been cut around our alternatives business, our auto enterprise Mastermind product, which the Mastermind team had a whopping 36% first quarter, really great performance and recovery.

Our initiatives around climate and regardless of this current environment, the challenges of the climate globally are not going away, and IHS Markit will be prepared to build those services as we look forward into 2021 and beyond. And then finally, our team working on a new asset management platform that will bring efficiencies in technology and operations to the asset management industry will still be fully invested.

Next, we've been investing in our data lake. Teams of people have been working globally to transform our technology stack to be able to offer new and exciting services to our customers that are already taking shape underway and revenue in the pipeline. Our investment in our transformation to the cloud will carry on fully. All of this is provided for within the plans presented in each of the 3 scenarios as well as in the 2021 and '22 guidance as you see us returning to growth.

Now let me provide you some color on how the current uncertainty may impact each of our different segments so you can understand the levers we're dealing with and equally gain confidence in the plan that we're providing you.

Let's start with Resources. We know the price of oil is under pressure from the largest disruption of global industry demand with increasing supply. Our scenarios are going to assume an average global CapEx reduction of roughly 30% in '20 and further 15% in '21. Now with the bulk of the cuts in North America, this will impact our upstream business. And remember, our upstream business is now only 60% of Resources revenue.

Remember, our upstream revenue is broken into 3 parts: data, analytics and our insights businesses. We expect the largest negative impacts to be on our data business, followed by analytics. But our insights business includes market forecast, analysis. The insights business has held up very well during the last downturn, and we expect even better this time as the financial markets, corporations, governments are all calling on us to provide information and scenarios to manage them through this difficult environment. We're well diversified this time, super majors, national oil companies, large, midsized and small independent E&P companies.

There is and going to be the most pressure among our small independents. The small independents make up only $100 million of our upstream revenue and reside within North America. And they're mostly customers of our data and analytics offerings and where they're stronger or still growing on our insights to help them with their decision-making through this tough period.

Moving to our downstream business. Now 40% of our Resources revenue and very well diversified, chemicals, power, gas, renewables, agriculture and our OPIS business, we expect these businesses to continue to produce regular growth as the customer base is very diversified and mostly non-E&P customers, in fact.

Now the E&P industry is going to remain under pressure in the coming quarters, but as a company, we're so much better positioned than the company that entered 2015. Here are some of the reasons. Our Resources business, as I said, is more balanced. Our fast-growing downstream businesses are now at 40%. They were only 15% back in 2014. Upstream revenue is only 15% of our total company versus 35% back then.

International data cancellations, which led the decline in revenue the last time, are much lower as large independents are mainly operating in the U.S. today. Our team has been through this before. They've got the playbook and we're operating with much better data and analytics due to all the investments we've made post merger in systems to help support us. Given all of this, we expect our Resources segment organic growth to be positive low single digits to negative low single digits, adjusted for the events, the onetime events cancellation in 2020.

Okay, let's go to Transportation. Including Q1, which was absolutely stellar, and I really want to congratulate the team for the results that they delivered, we've been delivering and performing at a very high level with double-digit organic revenue growth in 10 of the past 11 quarters. Now in the current environment, our Transportation business will experience headwinds, and this is discussed in our scenarios.

As regions around the world enact stay-at-home policies to deal with the virus, it's easy to know that consumers are not out buying cars. We saw this in China during their shutdown period and we're now seeing a slow recovery. The dynamic is now beginning in North America and traffic to dealerships will continue to decline significantly and put tremendous profit pressure on our dealer customers.

We do believe this is an unprecedented short-term impact to the dealerships and not represented -- representative of how the industry would perform during the normal cyclical downturn. The range of the outcomes tied to our 3 scenarios is why and growth for this segment should be between positive low single digits to negative mid-single digits.

Let's move to Financial Services, which also performed exceptionally well in Q1 and have done over the past 3 years. It is fueled by product innovation, market penetration, diversification and a very strong team. We now expect organic growth in the mid-single digits, and here's what we're assuming.

So you're going to have stable revenue across information. This is due to the high recurring revenue, and all of these products are must haves and even more so in these volatile environments. Our valuations are in full demand. Corporate actions, corporate services, all very much needed with potential growth in demand in the coming quarters.

Now processing, which has been a challenging segment, of course, is processing derivatives and secondary loan markets. But 2/3 of it is derivative processing, and the volumes -- and of course, the ticket sizes are lower and the volumes are higher due to the volatility, and we'll see some tailwinds there through the coming quarters.

We also expect, though, some weakness within solutions. This is going to be due to longer software sales cycles, lower volumes in some of the issuer services business. We expect lower volumes through Q2 for our equities, bonds and municipals, which combined are about $70 million of our annual variable revenue. In our best scenario, we start to see some improvement early in the second half with no improvement in our worst-case scenarios through to '21.

Now finally, within CMS, and it's great to see CMS coming through and supporting us in this challenging time. But here, hard work is paying off. We see steady demand for our product design offerings, continued demand for our economic and country risk offerings where we provide knowledge and insight into the challenges across over 200 countries, and our health sciences team is being called on as well for advice through the COVID-19 pandemic. All of our customers need increased support in a rapidly changing world, and we expect organic growth in CMS to be in the low single digits.

Now I'm going to turn the call back to Jonathan, who will provide detail on the 2020 guidance.

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Jonathan Gear, IHS Markit Ltd. - CFO & Executive VP [6]

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That's great. Thank you, Lance. Now relative to our original guidance, as a reminder, we previously announced the cancellation of events due to the COVID-19 health concerns. Again, as a reminder, these cancellations will negatively impact Q2 revenue by $50 million and adjusted EPS by $0.09. Approximately $40 million of the revenue impact relates to the Resources segment due to the cancellation of our CERAWeek and Chem Week events. The remaining $10 million relates to our Transportation segment due to the cancellation of our TPN, maritime and other events. We have also adjusted for the change in foreign currency exchange rates since the beginning of the year causing a negative FX impact on revenue of approximately $25 million.

In terms of our forward view for 2020, as Lance stated, due to the uncertainty, we have developed 3 scenarios to take into account different assumptions on how the virus, the price of oil and economic situation evolve over the next few months and quarters. Our supplemental schedules detail the 3 scenarios with the following ranges: revenue of [$4.275 billion] (corrected by company after the call) to $4.425 billion; organic growth of between 1% and 4% normalized for the impact of the Q2 events; adjusted EBITDA of $1.825 billion to $1.85 billion and adjusted EPS of $2.76 to $2.81. As Lance mentioned, we would direct your estimate to the lower end of these ranges at this time.

Now in terms of cost actions, we are in the process of executing approximately $250 million of 2020 costs. We do expect approximately $50 million of these costs to be permanent go-forward reductions. The variable portion of costs will return as revenue recovers in our auto businesses and salaries return to normal levels in 2021 and 2022. Finally, we expect cash conversion of approximately 50% due to onetime costs with our cost reduction efforts and working capital delays due to market conditions.

All guidance items below adjusted EBITDA are unchanged from prior guidance, except for stock-based comp. Our original guidance range called for full year stock-based comp expense of $220 million -- sorry, $220 million to $225 million. We now expect full year stock-based comp expense to be approximately $30 million higher than our original guidance due to higher employer taxes from the U.K. national insurance expense on 2020 option exercises. This represents a onetime increase in our GAAP stock-based comp expenses in 2020 and will not impact our 2021 expense level.

In terms of capital allocation, given the current market conditions, we are focused on maintaining high levels of liquidity and capital structure flexibility. We do plan to pause share buybacks and plan to maximize our capacity under our bank credit facility. However, the cash dividend we initiated and paid in Q1 will continue as planned. We maintain a very healthy and strong balance sheet, investor-grade rating, a well-positioned debt maturity ladder and a strong, diversified bank group. While there will be negative impacts from the current external challenges, we do have a model that can absorb the risk in the environment, yet still deliver solid earnings growth.

And with that, Lance, I'll turn the call back to you.

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Lance Uggla, IHS Markit Ltd. - Chairman & CEO [7]

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Okay. Thanks, Jonathan. As our supplemental slides lay out, our cost-cutting actions are going to anchor our 2020 earnings to double-digit growth regardless of which revenue scenario unfolds in the coming quarters. We're not providing formal guidance for 2021 and '22. But based upon our scenarios and cost actions, we would expect in each of those forward years organic revenue growth to return to our longer-term range of 5% to 7%, adjusted EPS growth of double digits. And as we move through the year, we'll update you on our progress with our cost actions and the conditions within our end markets against our scenarios.

Now finally, I want to thank all of my colleagues around the world who have been working tirelessly to manage the rapidly changing dynamics within our markets, local communities and to continue to serve our customers.

And to you, our shareholders, I want to thank you for your support and give you my commitment of this unparalleled level of transparency in our progress against our multiyear plan during these uncertain times. And my commitment will be to continue to update you against scenario 1, 2 and 3, our worst-case scenario, and project those into 2021 and '22 and show any adjustments needed on a quarterly basis.

Now with that, operator, we're ready for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from Gary Bisbee with Bank of America Merrill Lynch.

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Gary Elftman Bisbee, BofA Merrill Lynch, Research Division - MD & Research Analyst [2]

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Thanks for all the color, Lance and team. I appreciate it. I feel like that's a lot more than a lot of companies are giving. Obviously, taking a lot of work so we appreciate it.

Given how rapidly things are changing and frankly just how dramatically things have changed in the last 10 days, what's your confidence level around the scenarios, in particular, the worst case, and especially revenue being able to bounce back to that mid- to high-single digits so quickly if the recession coming out of this persists for a while?

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Lance Uggla, IHS Markit Ltd. - Chairman & CEO [3]

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Right. So I guess, if you have to look at the numbers, how I've worked in with the team, the first thing that I wanted to do with the team is make sure that the decisive nature of our response is early and protects us through our worst-case scenario and then sets us up very well for the recovery. But also, its protection, given the variable nature of some of those cost returns, can protect us indefinitely looking forward.

If you want to ask me about my probabilities on scenarios 1, 2, 3, my view is that the scenario 1 with 4% organic growth is my lowest probability scenario. And I'd say that's a 10% chance that we were able to deliver that scenario. That depends on the recovery time, but also, it will depend on some of the new revenue initiatives that are in place and the demands on some of our existing services that have some silver linings in difficult periods. So let's put a 10% or maximum 15% on that scenario. I'd also say that our scenario 2, with a recovery going into the end of the year, probably has a similar probability on it of 10% to 15%.

And so therefore, what really made me focus on our worst-case scenario, which I really do believe at a 95% confidence level, is more than enough to protect us through all the environments that I'm looking at in terms of the modeling today with my team. And I really wanted to put that out on the table to eliminate a lot of the shareholders' fears about the what-ifs.

So when we come back next quarter in Q2, I'll update you on those costs and I'll share with you the total revenue impacts and how we're tracking against each of those scenarios. And I think with that color, Gary, we'll be well positioned to manage through this year but also will give us a great base level to start 2021.

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Operator [4]

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Our next question comes from Bill Warmington with Wells Fargo.

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William Arthur Warmington, Wells Fargo Securities, LLC, Research Division - MD & Senior Equity Analyst [5]

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I wanted to -- how are you doing?

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Lance Uggla, IHS Markit Ltd. - Chairman & CEO [6]

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Good. We're all on virtual. So we're having to give each other hand signals to see who's going to take your tough questions.

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William Arthur Warmington, Wells Fargo Securities, LLC, Research Division - MD & Senior Equity Analyst [7]

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I know it used to be that working from home was -- there was a stigma associated with it, and the dog would bark and give you away, but I think it's pretty much the new normal in these days. So I wanted to also say I appreciate the detail around the scenario analysis. I think that's very helpful, constructive way to lay out the guidance.

I wanted to ask about the assumptions that you have around the ACV and Resources and how -- maybe you could repeat the comments around where ACV finished up in Q1 and how you think that's going to unfold in the different scenarios?

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Lance Uggla, IHS Markit Ltd. - Chairman & CEO [8]

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Okay. Well, I've got all my leadership team on here virtually, Brian, Edouard, Adam and Jonathan. So I'll pass to Brian who's worked up his models and he can answer that question directly. Brian?

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Brian Crotty, IHS Markit Ltd. - EVP of Global Energy & Natural Resources [9]

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Can you hear me? Yes? Bill, so yes, we see ACV, we see it trailing just a little, but only the segment, and the segments that we model it for, are really just the data business and mostly, we've taken it by customer. Now we've really drilled into it. And so we're really focused on the drilling segment of our customer base.

So that, coupled with saying towards the future, our -- we've taken down our projected on new sales clearly into that segment. But the nice thing is, as Lance said earlier, the business is a lot more diversified now. We're seeing a lot of strength still in our downstream businesses, which are growing high-single digits.

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Lance Uggla, IHS Markit Ltd. - Chairman & CEO [10]

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Thanks, Brian. Jonathan, you want to add to that?

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Jonathan Gear, IHS Markit Ltd. - CFO & Executive VP [11]

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Yes, I'd also give you the numbers, Bill. So as I mentioned, the Q1 organic ACV increased by $3 million and the trailing 12-month organic ACV is up $24 million or 3%.

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Lance Uggla, IHS Markit Ltd. - Chairman & CEO [12]

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Thanks, Jonathan.

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Operator [13]

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Our next question comes from Jeff Meuler with Baird.

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Jeffrey P. Meuler, Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst [14]

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I just want to confirm on transport that the figures that you gave us, the outlook figures, are for the full year in total, including, I guess, the strong growth that you saw in Q1, meaning that the Q2 through Q4 numbers are implying something lower. I just want to make sure I'm understanding that right. And then just any color you could give us within transport or autos by the different product lines and the outlook would be appreciated.

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Lance Uggla, IHS Markit Ltd. - Chairman & CEO [15]

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Okay. So the numbers are for the full year, and I have Edouard Tavernier on, and he'll give you a bit of color on the automotive and maritime segment.

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Edouard Tavernier, IHS Markit Ltd. - EVP of Transportation [16]

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Great. Thank you, Lance. Thank you, Jeff, for the question. So in terms of color, as we've said historically, our business is resilient to what I would call cyclical downturns. But this, as Lance said, is not a normal cyclical downturn. And as we work with many retailers across the U.S. and Canada, we are seeing firsthand the impact of communities shutting down on automotive retail.

So our dealer partners are hurting, they're hit by an unprecedented consumer demand shock. And as you know, we are seeing an increasing number of states that are issuing stay-at-home mandates or where entire communities are shutting down. In these conditions, dealers may no longer be able to sell vehicles. Some of them have had to close temporarily. Others have seen a dramatic decline in their revenues.

So as our Q1 earnings show, we are incredibly well positioned to support the industry going forward, and we look forward to expanding our long-term partnership with North American automotive dealers. However, in the short term, our business is being impacted by depressed levels of new business, increased levels of cancellations and in some cases, temporary price concessions to dealer partners during the month of May, when they are no longer able to operate their business in normal conditions.

In terms of carmakers and suppliers, the entire supply chain is facing challenges in the face of COVID-19 disruption, and we continue to be very well positioned to help them through this crisis, including helping them manage disruptions in their supply chains.

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Lance Uggla, IHS Markit Ltd. - Chairman & CEO [17]

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Thanks, Edouard.

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Operator [18]

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Our next question comes from Manav Patnaik with Barclays.

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Manav Shiv Patnaik, Barclays Bank PLC, Research Division - Director & Lead Research Analyst [19]

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Thanks for the color as well. But just on Financial Services assumption for the full year, I was just hoping you could help us with how much of that mid-single-digit organic growth is driven by your expectations of processing volumes helping you guys in the next couple of quarters given the volatility there?

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Lance Uggla, IHS Markit Ltd. - Chairman & CEO [20]

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Yes, I wish -- I'll let Adam speak in a moment, but I couldn't have a more conservative leadership team. And every time I say the derivatives volumes that we're starting to see here, we should see that through the rest of the year, they put them back to flat.

So in the models that we're showing you, there's a modicum of upside in terms of processing. So there's really -- the real bet is that we maintain our current business. We have a really strong pipeline and the financial markets are maintaining the need for the information, the rollout of new regulations and the demand incrementally per second and third pricing services through this volatile period. And we saw something similar in '08 and we're seeing some of that now. We have modeled out, though, that other pieces of demand, of course, will decline.

And Adam, why don't you give, like Brian and Edouard have done, just a bit of color on Financial Services in a bit more detail?

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Adam J. Kansler, IHS Markit Ltd. - Executive VP & President of Financial Services [21]

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Sure. Thanks, Lance. And thanks, Manav. I think Lance has captured the bigger picture very well. I think when you think about our business, it's a pretty well-diversified business plus the different types of financial services, customers and services and products we provide. So in volatile times like this we're looking to processing, we will see places within our processing business with outsized performance to the upside, volatility does drive credit markets in some interesting ways.

But in this moment, you're also seeing a real holdout in equity issuance and real fits and starts and other fixed income issuance. So I tend to think of it as a balanced package. There may be opportunities on the upside as we go through the year depending on how long things last and what markets look like over the next several months, you may see aggregate downside. The full year vision that we've given bakes in what we think is a conservative estimate of what would happen in each of the 3 scenarios.

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Lance Uggla, IHS Markit Ltd. - Chairman & CEO [22]

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Thanks, Adam.

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Operator [23]

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Our next question comes from Hamzah Mazari with Jefferies.

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Hamzah Mazari, Jefferies LLC, Research Division - Equity Analyst [24]

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Thank you for the color as well. You guys spoke about the business being much more diversified. You talked about downstream, upstream being lower. And also, you have sort of the downturn playbook from the last cycle. Maybe if you could touch on, are your contracts structured differently versus last cycle? Do you have more multiyear contracts? Is the cancellation notice period the same? And then just versus the last downturn playbook, is there anything different you can do on the cost side? I know you mentioned $250 million of cost and then $50 million permanent. So maybe just compare the downturn playbook you have this time, how it's different from last time. And then maybe any changes to contract structure, if at all.

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Lance Uggla, IHS Markit Ltd. - Chairman & CEO [25]

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Okay. I'll pass that to Jonathan first and then he can pass it to Brian if necessary.

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Jonathan Gear, IHS Markit Ltd. - CFO & Executive VP [26]

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Sure. I just have a couple of comments on kind of where we are in the cycle. I'll emphasize some things that Lance said in his earlier comments. First of all, Q4 and Q1 are heavier renewal cycle periods. So you've kind of gotten through those 2 periods, which obviously is helpful.

The second thing, and I'll compliment Brian and the team, they've done an excellent job of going through customer by customer, understanding their position, where they are in the renewal cycle and also where they are in the oil patch and identifying where we see potential risk really in a customer-by-customer level. So again, I think we have far greater transparency through analytics and control of kind of where we are in the cycle.

But Brian, anything you want to add?

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Brian Crotty, IHS Markit Ltd. - EVP of Global Energy & Natural Resources [27]

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No, the only thing I'll add is, coming out of the last downturn, we did focus on multiyear agreements. So we have increased our percentage. So we feel pretty good about where we are in those and we continue to sell those as well.

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Lance Uggla, IHS Markit Ltd. - Chairman & CEO [28]

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Excellent.

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Operator [29]

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Our next question comes from Kevin McVeigh with Crédit Suisse.

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Kevin Damien McVeigh, Crédit Suisse AG, Research Division - MD [30]

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Just real quick. It's a great job, really, just well done. I want to clarify, on the capital allocation, did you say, are you going to draw down on the revolver, number one? And then number two, Jonathan, on the ASR, are you going to complete that $500 million ASR or that's on hold as well?

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Lance Uggla, IHS Markit Ltd. - Chairman & CEO [31]

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Yes. Okay. I'll start, and then I'll pass to Jonathan. So we completed the $500 million ASR. we started at $250 million ASR that's been going through the quarter, which will be completed probably some time in April. We have halted any further ASRs until we see better sites into the forward marketplace.

We -- in our modeling, looking forward into next year and the following year with a return to growth, we modeled in about $1 billion of buybacks in each of those years. And we're not going to draw down on our liquidity lines. We've got a diversified bank group that's strong. And we've talked to them all, and we don't see a need to draw down on those bank lines. So that's what I'd say. Jonathan, add to that?

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Jonathan Gear, IHS Markit Ltd. - CFO & Executive VP [32]

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You actually covered very, very well. And the thing I'll again emphasize is we have a very, very strong bank group, over 20 banks in that group. As Lance said, we spoke to every one. We really frankly don't have a need to draw down on this. So we don't have any land at this point to do it. But again, we certainly have the liquidity there should we choose to in the future.

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Operator [33]

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Our next question comes from Andrew Steinerman with JPMorgan.

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Andrew Charles Steinerman, JP Morgan Chase & Co, Research Division - MD [34]

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Two questions. In the 2020 guide, in the third scenario, which is the plus 1%, what's your assumption around subs versus nonsubs organic revenue growth? And I also have a second question. What needs to happen during 2020 to set yourself up to get to that 6% to 7% organic revenue growth that you painted in '21 and '22?

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Lance Uggla, IHS Markit Ltd. - Chairman & CEO [35]

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Right. So I guess I look at our 2019 performance. I look at our Q1 performance. I look at the investments we're making in incremental growth in well demanded areas. And I look at a lot of our must-have services across all of our divisions and even the investments made to put CMS on a stronger footing. I really felt a lot of confidence going into this year of our 5% to 7% and have ample opportunity to be in that range and even at the top of that range.

As we look at this year, Andrew, this is an unparalleled situation. And I think what I've said since merger is that we were in a good position to be able to manage this company, expand margin and provide double-digit earnings growth, even if we fell down to a 4% ongoing organic revenue growth. And in this case, even in our worst-case scenario, as we fall down to 1% growth, combination of strong decisions by my team as well as putting us in a strong position next year, you can see that we've got those levers to manage the company well.

So going to your next question, which is on that 6%, a lot of what we do is multiyear recurring revenue must-have. A variable portion of our business is quite low. We're very diversified across customers and very diversified in all divisions across products. I'm not assuming that the recovery, the COVID-19 pandemic playing into that global recession continues on right through '21.

But if that's the scenario that you would like to put into our model, then I would suggest that you see a 2% to 4% revenue growth in '21 with a long protracted recession. And you'll see us maintain the variable costs that we're showing in our model in the supplementals to be rolling back in as staying out. And you'll continue to see margin expansion and double-digit earnings growth as we navigate some of the tough challenges ahead of us.

But we've got a resilient model that can respond differently than many of our peers and customers. And I think the team has really put in the efforts and the tough decisions now that are going to ensure that, if your scenario, if that's what it is, of a protracted recession into 2021 and beyond, we've already put the cost management in place to be able to manage that and the variable costs would stay out. Of course, the revenue would come down.

And hopefully, some of the new initiatives around climate, around asset management, cost reduction platforms in place, around our alternatives business that we expect will be still a key part of future financial markets. And of course, dealers trying to return to sales will need us for their incentives planning, advertising, building audiences, and I have to say I feel very committed to that forward plan. And I'm very confident that even if we do go into a protracted revenue, lower than the 6%, at a lower single-digit level, we can manage the company and deliver exceptional results. Thank you.

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Operator [36]

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Next question comes from Andrew Jeffrey with SunTrust.

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Andrew William Jeffrey, SunTrust Robinson Humphrey, Inc., Research Division - Director [37]

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Appreciate you taking the questions. Certainly, unprecedented times. Hopefully, relatively short-lived anyway. I wonder if I could dig down a little bit in the cost savings projections. As I look at my model, they're pretty significant from a margin standpoint, in absolute terms, too. I mean how comfortable are you taking out the costs that you are -- which presumably would be at an accelerated rate compared to a normal environment, that, that doesn't impair your ability to return to growth on the other side of all of this?

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Lance Uggla, IHS Markit Ltd. - Chairman & CEO [38]

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Right. That's a good question. Well, so to me, there's 2 pieces of these cost takeouts. One piece of them are permanent takeouts. So as we described, that's about $50 million.

The second piece of this is a variable cost takeout that will need to return with the revenue, but they are scaled against that return to profitability. So we have a big cost base, $4.5 billion of revenues and more than $2.5 billion of costs. So we've got a big cost base.

So to take $50 million out in terms of fixed means that we've had to dig deep and look at things that are some nice to haves, things that we're working on that weren't revenue-based initiatives but maybe were an expansion of an office, maybe they were some of the nice to haves we have around, a lot of the social activities in the firm, things around higher-priced contractors that we might have been using to accelerate our growth, which in this environment, we will look to move to our better-cost locations and bring back in-house so we're ready for that return to growth. So about $50 million, which is a couple percent of our overall cost base that we've taken out permanently.

The rest is variable. So what is that variable? Travel and entertainment. It's the salary cuts that I led with my executive team. It's our forward events calendar, which will be -- will come back slowly over time. It's our -- some of the things around our revenue that's tied -- that has a tied cost base, so marketing expense that we use in CARFAX to support used car listings that will be off.

So we -- there's a bunch that are variable, and they'll just come back in naturally. And we've modeled those in for you so you can see how that works. But we have taken out $50 million fixed. I forgot also some of the purchased expenses we've already renegotiated. We put in some -- we got 130 offices. There were several million around leases that we've either extended now at lower prices or actually decided to eliminate and carry on with a work-from-home strategy going forward.

So we've -- I think the team has done a great job on that, and I'm not worried about the $50 million. And I like the variable nature of the other costs because, as Andrew asked in the previous question, it gives me the levers to protect earnings if the revenue is slower than planned.

Jonathan, do you want to add some to that?

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Jonathan Gear, IHS Markit Ltd. - CFO & Executive VP [39]

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Sure. That is a great summary, Lance. One thing I would add is that the part of our business which is being most affected in this scenario here is our automotive business, particularly our support for marketing efforts for both used and new cars. And that happens to be the part of our business that has the most variable cost that flexes up and down with revenue. So there is a natural and significant flex down that comes naturally as our dealers need less traffic as their shops are closed. If it comes back down, they'll naturally come back up.

But I think the key thing that we've all done, as the executive team and management team has done here, we've been very focused. And as Lance mentioned in his opening remarks, we still are investing in the key growth levers and drivers that will take us into the growth in '21 and beyond.

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Lance Uggla, IHS Markit Ltd. - Chairman & CEO [40]

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Good. Thanks, Jonathan. And that probably last point was the most important is we've got kind of 4 great long-term growth levers that further diversify us and take us to new levels. And we're quite pleased to be able to announce that to our teams that we wouldn't be cutting any of those initiatives whatsoever in the forward plans because they are important to that -- our future.

The other thing that I think is important on the cost side is that we've really made a decision around enhanced severance and focus on any workforce reductions to ensure that nobody's sent home with less than a year of continuance in terms of their compensation through this tough period. And again, that's an important leadership decision that my teams collectively made.

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Operator [41]

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Our next question comes from Alex Kramm with UBS.

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Alexander Kramm, UBS Investment Bank, Research Division - Executive Director and Equity Research Analyst of Exchanges, Ebrokers [42]

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Just maybe to come back to the guidance. What -- I don't think anybody has asked this, but like what would be the thing that you would look for to not make that double-digit growth in 2020? I guess, what are the factors that could still get you below that where you just can't find any more offset? And I guess you could ask the same question about 2021 as well.

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Lance Uggla, IHS Markit Ltd. - Chairman & CEO [43]

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Yes. Honestly, the way I produced this guidance for you guys now in these scenarios, I don't really -- it's -- to me, it's a low single-digit probability to not hit that double-digit earnings growth in '20 and '21.

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Operator [44]

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Our next question comes from Seth Weber with RBC Capital Markets.

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Seth Robert Weber, RBC Capital Markets, Research Division - Equity Analyst [45]

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Just -- I guess maybe just first a clarification on the $50 million permanent cut, is that -- should we assume that, that's skewed to resource on a relative basis versus the other segments?

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Lance Uggla, IHS Markit Ltd. - Chairman & CEO [46]

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No, not at all. Actually, if I look at all our teams, they do a great job expanding margin each year. One thing you should know about our margin expansion, a lot of it has come through our attrition and then replacing attrition in near and offshore locations, which have substantive gains for our operational development, testing and other roles. So we've got 16,000 people, about 4,000 of them are in better cost of living locations. And that gives us more than probably $100,000 per person fully costed.

So we've been doing that naturally, and the teams have been expanding staff but reducing costs and adding margin by leveraging our footprint, which is now very well developed. And so a lot of what we're doing here across the whole firm is accelerating some of those initiatives. And that means we've got to look at everything across the firm, whether it's finance, HR, tech, development, whether it's product people and product development folks. We really have to leverage that footprint globally and that's across the whole firm.

Brian is already running a lean, mean energy team, which do a great job. And our view is the diversification there across upstream, midstream and downstream gives us ample opportunity to deliver great results for the firm. It's actually quite interesting. When you actually look at what's happening to us through this period as we gave you a worst-case scenario, actually, the worst-case scenario is being driven by our best-performing division, which is automotive because they have the variability around the used car and the listings businesses around CARFAX and CARFAX Canada.

So here we are in an environment where everybody is worried about our energy market performance, but the energy market performance would have been completely absorbed in the outperformance of financial markets, CMS and automotive. But it's the combination of this worst-case scenario that puts us in a place where the cost initiatives are, I think, prudent, because they put us in a very flexible position for 2020 profit delivery. But also with a variable return of expenses, we're now actually well positioned for 2021 and '22.

And I just really felt it was important to give you guys our models, which I don't think is going to be the norm across companies out there. But we basically shared with you my planning tool, how I'm managing the company, and I'm going to update you on that every quarter. And as far -- since merger, we -- I guess besides one little blip, we've never missed a single number we've given to you. So don't expect us to do that going forward. We plan to hit these numbers and hopefully be able to surprise.

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Operator [47]

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Our next question comes from Shlomo Rosenbaum with Stifel.

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Shlomo H. Rosenbaum, Stifel, Nicolaus & Company, Incorporated, Research Division - MD [48]

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And again, I appreciate the detail around the forecasting. Lance, can you talk a little bit about what you've seen so far in Asia Pac and China, how you see things play out? And how you're -- how you believe that might be applicable to what we're seeing in other areas of the world or where you think it may not be applicable?

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Lance Uggla, IHS Markit Ltd. - Chairman & CEO [49]

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Right. So it's very interesting. That's a great question and probably one that takes us a little bit away from the script and the call, but at the same time, you can see how a recovery can happen. So started in China. We sent -- everybody was sent home, working from home, we're testing our systems, we're learning about the challenges of not being able to travel into a region, trying to complete deals, close deals and make things happen.

Today, our people are mostly back in the offices and they manage this through a very serious use of social distancing, hand washing, use of masks. People that don't wear the masks are shunned at in Asia and the ones that wear them are respected. We have the opposite problem here in the U.K. and I think you have it in North America. People get a funny look if they're wearing a mask as if they're the challenge, and the ones that don't wear the masks are going to prolong the recovery.

So in Asia, we've had -- we had China recover first. Hong Kong now, our office is back and running. But again, people are very careful about their social distances and cleanliness in terms of masks and hands, but they're back working together. Actually, sales and our pipeline is actually quite strong. A bunch of new pipelines, orders and businesses coming from Japan, China, Hong Kong, Singapore. If anything, it gives you a lot of hope for our scenario 1.

But actually, I think with such a democratic society in Europe and North America, I actually think that I can't bet on the Q3 recovery. And therefore, I wanted to share with you a Q4 and even a full year lack of recovery. But if we follow the Asian path, you would quickly go to our Q3 recovery and say, "Yes, you got it right." And you do, you know as well as I do, that when I talk to many people, including the U.S. President and -- online last night, is we want to get back to work quick and soon. And not that I necessarily believe that, that's the reality, but there are still many people that don't think that staying at home and staying out of danger is going to be a way to get to a recovery and get to the other side.

So here we are. You've got a Q3 optimistic view. That's what I -- that follows the Asia path. And it follows probably what I'm starting to hear out of Italy. Although you see big numbers in Italy when I talk to colleagues and others in Milan, I start to see that people are starting to see some optimism in the control. If you don't believe -- that pushed to the Q4 recovery. And if you don't believe that, go to our worst-case scenario, lever your models off of that, bet on the earnings that I'm showing you and then you have to decide the recovery.

But what's nice about the recovery, if we don't hit the revenue, our costs are now variable rolling back in and will protect earnings. And I've got lots of levers for growth when the right opportunity comes. But right now, I want to make sure I keep the company strong, be able to pay all our people well, protect our liquidity and deliver great results for you guys.

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Operator [50]

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Our next question comes from George Tong with Goldman Sachs.

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Keen Fai Tong, Goldman Sachs Group Inc., Research Division - Research Analyst [51]

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I'd like to go back to the topic of cost reductions. Can you discuss the time line for when you expect to complete your permanent cost reductions and when you might expect to return to your prior longer-term guidance of 100 bps of annual EBITDA margin expansion?

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Lance Uggla, IHS Markit Ltd. - Chairman & CEO [52]

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Yes. Well, as you've seen, in all scenarios this year, you'll have in excess of that margin. And if you look forward into '21 and '22, we also forecast a continuation of the 100 basis points. So our view is, even though we're going to have a strong outperformance, we still have ample scope for our organizational design that we've been working on, and we expect that to continue into the future.

So my perspective, the margin story and the earnings story is really strong. This is a story about revenues that are going to come off at some unknown level. And so therefore, we need a set of cost reductions in place that will be constructed to never return and to come back and return on a variable basis with the revenue. So I feel we've got a perfect model set up for the go forward.

What I would say on the permanent reductions, the $50 million that we talked about, we are already in full execution mode, and I'd expect those to have an 8-month impact for this year. I'll pass -- and full impact for next year. Jonathan?

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Jonathan Gear, IHS Markit Ltd. - CFO & Executive VP [53]

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Great. I'll just echo what you said, Lance. And George, what we're seeing is even in our worst-case scenario, we would expect to see a couple hundred bps of improvement from '19 to '20 and then continue to have 100 bps all the way through to 2022. So we're no way backing off on margin improvement commitment.

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Lance Uggla, IHS Markit Ltd. - Chairman & CEO [54]

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Thanks, Jonathan.

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Operator [55]

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Our next question comes from Ashish Sabadra with Deutsche Bank.

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Ashish Sabadra, Deutsche Bank AG, Research Division - Research Analyst [56]

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And Lance, thanks a lot for all the color that you provided. Maybe just a quick follow-up, as you mentioned, the biggest variability is on the auto or the used car listing side, and thanks for providing a lot of color on that front. My question there was, just as we think about the cadence there, just given the variability also, is it fair to assume that you would see most impact there in the maybe second quarter? And even in the worst-case scenario, you should see that part of the business bounce back quicker than other parts of the businesses and reaccelerate fastest to growth. Is that the right way to think about it?

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Lance Uggla, IHS Markit Ltd. - Chairman & CEO [57]

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That's exactly how we think about it. But again, if you model off of that worst-case scenario we're saying, you don't have any of that recovery until next year. But our view is that bounces back very quickly. We've got a super strong model. And maybe Edouard wants to add some additional color to that.

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Edouard Tavernier, IHS Markit Ltd. - EVP of Transportation [58]

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No, I think you're spot on, Lance. Obviously, the sector is very, very responsive to consumer demand. So it will take a bigger hit right now in Q2. We've seen activity levels declined precipitously in the past 2 weeks. But obviously, we think this sector will rebound before the others because as soon as consumers move back into dealership lots, that our dealer customers, our dealer partners will require our tools and solutions. So absolutely.

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Lance Uggla, IHS Markit Ltd. - Chairman & CEO [59]

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Excellent. Thank you.

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Operator [60]

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Our next question comes from Joseph Foresi with Cantor Fitzgerald.

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Joseph Dean Foresi, Cantor Fitzgerald & Co., Research Division - Analyst [61]

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Thanks for the scenarios on the call. Just on oil, have you seen any real-time changes in oil CapEx spending? Are budgets being opened up? And what are you building in for M&A and failures or any possibility of a deal in the scenarios?

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Lance Uggla, IHS Markit Ltd. - Chairman & CEO [62]

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Yes, I'll pass it to Brian in a second. But clearly, in our worst-case scenario, we see the smaller independents really struggling, potential mergers, potential failures to pay, potential bankruptcies. So therefore, I think we -- it's $100 million of all of that revenue. And we definitely, I think, modeled appropriately for that piece of the puzzle.

We do see Shell came out with their announcements, and you can see that CapEx will be curtailed. We put actually a 30% followed by a further 15% cut on CapEx, which we think is significant given the -- there's going to be a built-up, obviously, supply that needs to get tuned through the future. But ultimately, there is a -- still a robust demand for product still longer term, and that needs to be brought out of the ground. So I think our model is fairly robust. And Brian, maybe you want to add some additional color on that.

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Brian Crotty, IHS Markit Ltd. - EVP of Global Energy & Natural Resources [63]

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Yes, I think so. Obviously, CapEx goes down further, certainly in the U.S. than it does overseas. But the thing that actually helps us out is some of the oil is hedged in the U.S. So those small independents will stay around and try to weather the storm.

So I think while CapEx will absolutely accelerate and will decelerate in that area, these companies, it's not oil goes down to $20 and these guys go out of business. So there'll be a lag before we start to see deterioration.

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Lance Uggla, IHS Markit Ltd. - Chairman & CEO [64]

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Thanks, Brian.

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Operator [65]

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Your next question comes from Andrew Nicholas with William Blair.

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Andrew Owen Nicholas, William Blair & Company L.L.C., Research Division - Analyst [66]

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How has the shift to working from home affected the various internal projects you have underway, whether it be the data lake project or the hiring practices tied to your shift of the employee base to lower-cost regions or really any other projects that might have previously relied more heavily on face-to-face interactions?

And then same topic or at least relatedly, if you could provide any color on the expected impact of virtual work on your sales force's ability to sell new business and build your pipeline, that would be helpful.

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Lance Uggla, IHS Markit Ltd. - Chairman & CEO [67]

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Yes. No, that's a good question. I've never been -- I have to say I've never been a celebrator of work from home, and so I'm learning my lessons here the proper way.

But actually, what's funny is your productivity working from home without interruptions is actually substantively improved for many. For others that have challenges in terms of children, family, et cetera, in that work from home environment, that becomes something that you have to work with. But I found productivity for myself has improved and my connection with people has been substantive. And so I'm actually very pleased, and if anything, it's made me rethink some of those policies and flexibilities that many companies would like to have.

We also have put in -- we've been in early -- we're in the middle post the Asian move. We started to look at the workplace analytics tools and tools that measure productivity. So we actually have -- have some early POCs. And I think what we can see is productivity at home is pretty damn high and people are working very hard, and our pipelines and results are showing that.

On developers and people working on projects, most of our developers sit side by side with headphones on and are in their own focused world doing their jobs. And they're quite happy to not have to commute and be able to focus on the work in hand.

We have some professional services people that actually have to go on site with our customers. And of course, this is curtailed. And so we put in for slower implementation of some of those activities. But a lot of times, the customers' virtual acceptance has actually increased. And again, it's very focused. So decision-making is happening effectively.

So for a nonbeliever in work from home, I become a believer. I find that I'm working more hours sitting here at my dining room table than I care to admit. And really, my colleagues around the world have been impressive. And I have to say that they're holding up the fort very well. But let's hope we get some social interaction back in our lives again soon.

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Operator [68]

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I'm showing no further questions. At this time, I'd like to turn the call back over to Eric Boyer for closing remarks.

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Lance Uggla, IHS Markit Ltd. - Chairman & CEO [69]

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Okay. And just before -- just before you go, Eric, I just really want to say to all of our shareholders that all of you represent and the shareholders that are on the phone, for us, it was a big decision in terms of opening it up, the transparency, in this detail as well as giving you that detail into '21 and '22.

But I did feel that in times like this, making decisions day to day, you're entrusted to invest people's money and you need to make sure that you don't have to second-guess what's happening in the companies you're investing in. So this level of transparency will be updated every single quarter until we feel we're back to a normal situation.

When we get back to the normal situation, I ask that you accept that I'll turn that light bulb off and go back to managing the company how we always did. And hopefully, your trust in both myself and my management team will remain at the highest level. And thank you for your support. Eric?

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Eric J. Boyer, IHS Markit Ltd. - VP, IR [70]

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Great. Thanks for your interest in IHS Markit. This call can be accessed via replay, (855) 859-2056; or international dial-in, (404) 537-3406, conference ID 4656659 beginning in about 2 hours and running through March 31, 2020. In addition, the webcast will be archived for 1 year on our website. Thank you and we appreciate your interest and time.

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Operator [71]

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Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.