Ladies and gentlemen, thank you for standing by and welcome to the IHS Markit First Quarter 2020 Earnings Conference Call. At this time, all participant lines are in a listen-only mode. [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.

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 materials to the IHS Markit Investor Relations website. Our discussion on the quarter based on non-GAAP measures are adjusted numbers, which excludes stock-based compensation, amortization of acquired intangibles and other items. IHS Markit believes non-GAAP results are useful in order to enhance 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 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 are 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's my pleasure to turn the call over to Lance. Lance?

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 in 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 multi-year subscriptions with high renewal rates, and 90% plus 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, I mean all of 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 multi-year plan on how we're going to plan to achieve the earnings growth that we've suggested. Over to you, Jonathan.

Great. Thank you, Lance. Q1 results were indeed very, very strong. It 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 non-recurring organic decline of 5%. This decline in non-recurring 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 three 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 non-recurring, 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% non-recurring 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 non-recurring. 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 one-time gain on the sale of AD&S 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 one-time tax payments that we had in Q4 2019. Turning to the balance sheet, our Q1 ending balance was $5.2 billion and represented a gross leverage ratio of approximately 2.9 times 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.

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 three 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 three 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 our 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 plus to an agreement in Q3, Brent would rise to the low $30's by the year-end and we'd have an average in the upper $20's, 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, a new equity issuance has been closed for most of the year. Oil markets remain uncertain, new OPEC plus agreement is delayed until the end of the year which would lead to an average price of Brent in the mid-$20's, the shutdown of auto sales in Q2 would be followed by U-shaped demand recovery with slow growth throughout the second half. Now the third scenario, which I call with my team are a worst-case scenario. Gives that the 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 plus has disintegrated, there is no sign of any agreement throughout this year, and an average price of Brent will stay in the low $20's 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 story that can entice you in to 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've 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 is 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 a next Board meeting in April, a reduction. Cash bonuses will be curtailed, workforce reductions, travel and entertainment, non-critical projects, contractor 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 in recovery. Our initiatives around climate, and regardless of this current environment, the challenges of 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 lakes, teams and people from working globally to transform our technology stack, to be able to offer new and exciting services to our customers that are already taken 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 three scenarios, as well as in the 2021 and 2022 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 2020 and further 15% in 2021. Now, with the bulk of the cut to 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 three parts; data, analytics and our insights businesses. We expect the largest negative impact to be on our data business followed by analytics, but our insights business includes market forecast, analysis; the insight business has held up very well during the last downturn, and we expect even better this time as the financial market, 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, mid-sized, 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 a $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 are stronger are still drawing 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 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's 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's organic growth to be positive low-single digits to negative low-single digits, adjusted for the events -- the one-time events cancellation in 2020. Okay, let's go to Transportation. Included in 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 representative of how the industry would perform during the normal cyclical downturn. The range of the outcomes tied to our three scenarios is wide 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 three years, just fueled by product innovation, market penetration, diversification and a very strong team. We now expect organic growth in the mid-single digits and here is 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 two-thirds 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. It's 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 improvements early in the second half with no improvement in our worst-case scenarios through to 2021. Now, finally within CMS and it's great to see CMS coming through and supporting us in this challenging time, but here our hard work is paying off. We see steady demand for our product design offerings, continued demand for our economic and country risk [ph] offerings where we provide knowledge and insights into the challenges across over 200 countries. And our health sciences team is being called on as well for advice due to 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 details on the 2020 guidance.

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 CHEMWeek [ph] events. The remaining $10 million relates to our Transportation segment due to the cancellation of our TPM 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 three scenarios to take into account different assumptions on how the virus, the price of oil, and economic situations evolve over the next few months and quarters. Our supplemental schedules detail the three scenarios with the following ranges; revenue of $4.75 billion 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 level in 2021 and 2022. Finally, we expect cash conversion of approximately 50% due to one-time 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 call for a full year stock-based comp expense of $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 one-time 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 negative impacts from the current external challenges, we do have a model that can absorb the risk in this environment, yet still deliver solid earnings growth. And with that Lance, I'll turn the call back to you.

Okay. Thanks, Jonathan. As our supplemental slide layout, 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 multi-year plan during these uncertain times and my commitment will be to continue to update you against scenario one, two, and three, 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.

[Operator Instructions] Our first question comes from Gary Bisbee with Bank of America Merrill Lynch. Your line is open.

Hi, good morning. And 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, it's taken 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?

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 one, two, three, my view is, is that the scenario one with 4% organic growth is my lowest probability scenario, and I'd say that's a 10% chance that we're 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 two, 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. Next question?

Our next question comes from Bill Warmington with Wells Fargo. Your line is open.

Hello, everyone. I wanted to -- how are you doing?

Good. We're all on virtual, so we're having to give each other a hand signal to see who is going to take your tough questions.

I know. It used to be that working for 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 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?

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

Can you hear me?

Yes.

Hey Bill. So yes, we see -- ACV, we see it trailing just a little, but only the segment. I mean, the segments that we model it for are really just the Data Business, and mostly we've taken it by customer. 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 projections on new sales early 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.

Good. Thanks, Brian. Jonathan, you wanted to add to that?

Yes, I was going to 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%.

Thanks, Jonathan. Next question.

Our next question comes from Jeff Meuler with Baird. Your line is open.

Yes. Thank you. I just -- hi, good morning. 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 the Q2 through Q4 numbers are implying something. Well, we 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? Thanks.

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.

Great, thank you. 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 worked with many retailers across the U.S. and Canada, we are seeing first-hand 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 showed, 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 they we are no longer able to operate their business in normal conditions. In terms of car makers 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.

Thanks, Edouard. Next question?

Our next question comes from Manav Patnaik with Barclays. Your line is open.

Thank you. Good morning. Hey, Lance. Good morning, guys. And thanks for the color as well, but just on the 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?

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 is a modicum of upside in terms of processing. So there is 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 for 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.

Sure. Thanks, Lance, and thanks Manav. I think Lance captured the bigger picture very well. I think when you think about our business, it's a pretty well-diversified business across the different types of financial services, customers and services and products we provide. So in volatile times like this looking for 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 Holocene [ph] equity issuance and real fits and starts and other fixed income issuance. So like -- I tend to think of it is 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 three scenarios thanks.

Thanks, Adam. Next question?

Our next question comes from Hamzah Mazari with Jefferies. Your line is open.

Hi, good morning. Thank you for the color as well. You guys spoke about the business being much more diversified, you talked of our 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 multi-year 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 costs, 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? Thank you.

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

Sure. Just a couple of comments on kind of where we are in the cycle and emphasize some things that Lance says in his earlier comments. First of all, Q4 and Q1 are our heavier renewals type of periods. So you kind of gotten through those two 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 at a customer-by-customer level. So again, I think we have far greater transparency for analytics and control kind of where we are in this cycle. Brian, anything you want to add?

No, the only thing I'll add is coming out of the last downturn, we did focus on multi-year agreement. 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.

Excellent. Thank you. Next question?

Our next question comes from Kevin McVeigh with Credit Suisse. Your line is open.

Great, thanks. Just real quick, hey, Lance, great job. Really just, well done. Just 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?

Yes. Okay, I'll start and then I'll pass to Jonathan. So we, we completed the $500 million ASR. We started a $250 million ASRs, that's been going through the quarter, which will be completed probably sometime in April. We have a -- halted any further ASRs until we see better sight into the forward marketplace. In our modeling looking forward into next year and the following year with the return to growth, we modeled in about a $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?

Yes, well, that actually covered very, very well. And the thing I'll again amplify to this, we have a very, very strong bank group, over 20 banks in that group, Atlanta [ph], we've spoken to everyone. We really frankly don't have a need to draw down a bit. So we don't have any plans at this point to do it. But again, we certainly have the liquidity there should we choose to in the future.

Thank you. Next question?

Our next question comes from Andrew Steinerman with J.P. Morgan. Your line is open.

Hi, two questions. In the 2020 guide in the third scenario, which is the plus 1%, what's your assumption around subs versus non-subs 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 2021 and 2022?

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 having 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 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 multi-year recurring revenue must have. The 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 cost 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 in 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 cost would stay out, of course, the revenue would come down and hopefully some of the newer 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 meet 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. Next question?

Our next question comes from Andrew Jeffrey with SunTrust. Your line is open.

Hey, good morning guys. Appreciate you taking the question. 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 this.

Right, that's a good question. Well -- so to me, there's two pieces of these cost take-outs. One piece of them are permanent take-outs, so as we described that's about $50 million. The second piece of this is a variable cost takeout that we'll 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 you know 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 of 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 is CARFAX to support used car listings that will be off. So, we -- there is a bunch that are variable and they'll just come back in naturally and we've modeled those in for you so you could 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've 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?

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 will naturally come back up. So 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.

Good. Thanks, Jonathan. And that probably last point was the most important is, we've got kind of four 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 really made a decision around enhanced severance and focus on any workforce reductions to ensure that nobody is 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. Next question?

Our next question comes from Alex Kramm with UBS. Your line is open.

Hey, good morning everyone. Maybe to come back to the guidance, what -- I don't think anybody has asked this question, 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.

Yes. Honestly, the way I've produced this guidance for you guys now in these scenarios, I don't really -- to me, it's a low single-digit probability to not hit that double-digit earnings growth in 2020 and 2021. Next question?

Our next question comes from Seth Weber with RBC Capital Markets. Your line is open.

Good morning, guys. Just a -- 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?

No, not at all. Actually, if I look at all of 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 [ph]. 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's 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 2022 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. Okay, next question?

Our next question comes from Shlomo Rosenbaum with Stifel. Your line is open.

Hi, thank you for taking my questions. 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, in China? How you see things play out and 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?

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 managed this through a very serious use of social distancing, hands washing, use a mask. People that don't wear the masks are shunned at in Asia and the ones that weak them are respected. We have the opposite problem here in the UK, 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 mask 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 one 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 followed 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, 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 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, push 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 we'll 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. Next question?

Our next question comes from George Tong with Goldman Sachs. Your line is open.

Hi. Thanks, good morning. I'd like to go back to the topic of cost reductions. Can you discuss the timeline 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?

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 to set 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 a 8-month impact for this year. I'll pass in full impact for next year. Jonathan?

Great. I'll just echo what you said Lance. And George, what we're seeing is, even in our worst case scenario we expect to see a couple of hundred bips of improvements from 2019 to 2020, and then continue to have 100 bips all the way through to 2022; so we're no way backing off on margins improvement commitment.

Thanks, Jonathan.

Next question?

Our next question comes from Ashish Sabadra with Deutsche Bank. Your line is open.

Thanks for taking my question. And Lance, thanks a lot for all the colors that you've provided. Maybe just a quick follow-up, as you mentioned, there is the biggest variability is on the auto or the used-car listing site, 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 the 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 growth; is that the right way to think about it?

That's exactly how we think about it. But again, if you model off of that worst case scenario, we're saying, you know, 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.

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

Excellent. Thank you. Next question?

Our next question comes from Joseph [ph] with Cantor Fitzgerald. Your line is open.

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

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 -- you know, 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 -- you know, there is going to be a built up; obviously, supply -- that needs to get tuned through in 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 want to add some additional color on that?

Yes, I think so. You know, obviously, CapEx goes down further certainly in the US and it does overseas. But I -- you know, the thing that actually helps us out is some of the oil is hedged in the US, so those small independence will stay around and try to weather the storm. So, I think -- you know, while CapEx will actually accelerate and will decelerate in that area, these companies -- you know, it's not oil goes down to $20 and these guys go out of business; so there will be a lag before we start to see curation [ph].

Thanks, Brian. Our next question?

Your next question comes from Andrew Nicholas with William Blair. Your line is open.

Hi, thanks for taking my question. How is 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 interaction? 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.

Yes. No, that's -- that's a good question. I've never been -- I have to say, I've never been 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, etcetera, 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 have 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 an 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 some early POCs [ph]. 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; you know, 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 at 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've put in for slower implementation of some of those activities, but a lot of times the customer's virtual acceptance has actually increased. And again, it's very focused. So decision-making is happening effectively. So, for a non-believer in work-from-home, I've 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. Next question?

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

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; you know, for us, it was a big decision in terms of opening it up to transparency in this detail, as well as giving you that detail into 2021 and 2022. 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, if your trust in both, myself and my management team will remain at the highest of levels. And thank you for your support. Eric?

Great, thanks for your interest in HIS Markit. This call will be accessed via replay 855-859-2056 or international dial-in at 404-537-3406. Conference ID 4656659 beginning in about two hours and running through March 31, 2020. In addition, the webcast will be archived for one year on our website. Thank you and we appreciate your interest and time.

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